<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
FORM S-1 REGISTRATION NO. 333-
FORM S-3 REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
<TABLE>
<S> <C>
AS TO THE UNITS: AS TO THE GUARANTEES:
FORM S-1 FORM S-3
REGISTRATION STATEMENT REGISTRATION STATEMENT
UNDER UNDER
THE SECURITIES ACT OF 1933 THE SECURITIES ACT OF 1933
------------------------ ------------------------
THERMO FIBERGEN INC. THERMO ELECTRON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER) CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) ORGANIZATION)
------------------------ ------------------------
3554
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE
NUMBER)
04-3311544 04-2209186
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
81 WYMAN STREET
8 ALFRED CIRCLE P.O. BOX 9046
BEDFORD, MASSACHUSETTS 01730 WALTHAM, MASSACHUSETTS 02254-9046
(617) 275-3600 (617) 622-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
------------------------
SANDRA L. LAMBERT, SECRETARY
THERMO FIBERGEN INC. AND
THERMO ELECTRON CORPORATION
81 WYMAN STREET
P. O. BOX 9046
WALTHAM, MA 02254-9046
(617) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE FOR BOTH REGISTRANTS)
------------------------
COPIES TO:
<TABLE>
<S> <C>
SETH H. HOOGASIAN, ESQUIRE EDWIN L. MILLER, JR., ESQUIRE
VICE PRESIDENT AND GENERAL COUNSEL TESTA, HURWITZ & THIBEAULT, LLP
THERMO FIBERGEN INC. 125 HIGH STREET
AND THERMO ELECTRON CORPORATION BOSTON, MASSACHUSETTS 02110
81 WYMAN STREET (617) 248-7000
WALTHAM, MASSACHUSETTS 02254-9046
(617) 622-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement has become effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
============================================================================================================
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Units................................................... $54,544,500 $18,809
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value............................ None(2)
- ------------------------------------------------------------------------------------------------------------
Redemption Rights....................................... -- None(2)
- ------------------------------------------------------------------------------------------------------------
Thermo Electron Corporation Guarantees.................. -- None(2)
============================================================================================================
<FN>
(1) Calculated pursuant to Rule 457(o).
(2) The Units are comprised of the Common Stock and the Redemption Rights. No
separate consideration will be received for the Common stock, the Redemption
Rights or the Guarantees.
</TABLE>
----------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE> 2
THERMO FIBERGEN INC.
<TABLE>
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-1 AND PROSPECTUS
<CAPTION>
ITEM LOCATION IN PROSPECTUS
- ---- ----------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.. Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages;
Additional Information; Reports to
Security Holders
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors; The
Company
4. Use of Proceeds........................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page; Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered.............................. Outside Front Cover Page; Capitalization;
Description of Securities; Certain Federal
Income Tax Consequences
10. Interests of Named Experts and Counsel.... Experts; Legal Opinions
11. Information with Respect to the
Registrant.............................. Cover Page; Prospectus Summary; The Company;
Risk Factors; Dividend Policy;
Capitalization; Selected Financial
Information; Management's Discussion and
Analysis of Results of Operations and
Financial Condition; Business;
Relationship with Thermo Electron and
Thermo Fibertek; Management; Security
Ownership of Certain Beneficial Owners and
Management; Description of Securities;
Shares Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED JULY 3, 1996
PROSPECTUS
3,100,000 UNITS
(EACH UNIT CONSISTING OF ONE SHARE OF
COMMON STOCK AND ONE REDEMPTION RIGHT)
OF
THERMO FIBERGEN INC.
------------------------
REDEMPTION PAYMENTS GUARANTEED ON A SUBORDINATED BASIS BY
THERMO ELECTRON CORPORATION
------------------------
All of the units offered hereby (the "Units") are being sold by Thermo
Fibergen Inc. ("Thermo Fibergen" or the "Company"), a wholly owned subsidiary of
Thermo Fibertek Inc. ("Thermo Fibertek"), which is a majority-owned subsidiary
of Thermo Electron Corporation ("Thermo Electron"). Each Unit consists of one
share of common stock, par value $.01 per share (the "Common Stock"), of the
Company and one Redemption Right ("Redemption Rights") (the Units, Common Stock,
Redemption Rights and the Guarantees (as defined below) are hereinafter
collectively referred to as the "Securities"). Each Redemption Right entitles
the holder to sell one share of the Company's Common Stock to the Company during
the month of September 20 (the "First Redemption Period") and during the month
of September 20 (the "Second Redemption Period"), for an amount of cash equal
to (the "Redemption Price"). The Company's obligations with
regard to the Redemption Rights are guaranteed on a subordinated basis by Thermo
Electron. The Common Stock and the Redemption Rights will trade together as
Units until the 90th day after the date of this Prospectus, after which date the
Common Stock and the Redemption Rights will trade separately. The Redemption
Rights will expire if at any time after the 90th day after the date of this
Prospectus and (i) prior to the beginning of the First Redemption Period or (ii)
after the end of the First Redemption Period and prior to the beginning of the
Second Redemption Period, the closing price of the Common Stock as reported on
the principal trading market for the Common Stock has been at least 150% of the
Redemption Price, as adjusted, for 20 of any 30 consecutive trading days. See
"Description of Securities."
Following the offering, Thermo Fibertek will own approximately 76.3% of the
outstanding shares of Common Stock of the Company (assuming no exercise of the
Underwriters' over-allotment option).
Prior to this offering, there has been no public market for the Units, the
Common Stock or the Redemption Rights. It is currently estimated that the
initial public offering price will be $12.75 per Unit. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. Application has been made to list the Units, the Common
Stock and the Redemption Rights on the American Stock Exchange.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
===========================================================================================================
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) COMPANY(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit.................................... $ $ $
- -----------------------------------------------------------------------------------------------------------
Total(3).................................... $ $ $
===========================================================================================================
<FN>
(1) The Company, Thermo Fibertek and Thermo Electron have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $350,500.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 465,000 Units solely to cover over-allotments, if any. If
this option is fully exercised, the total price to the public would be
$ , the total underwriting discounts and commissions would be
$ and the total proceeds to the Company before estimated expenses
would be $ . See "Underwriting."
</TABLE>
------------------------
The Securities offered by this Prospectus are offered by the Underwriters
subject to prior sale, to withdrawal, cancellation or modification of the offer
without notice, to delivery to and acceptance by the Underwriters and to certain
further conditions. It is expected that delivery of the Units will be made in
New York, New York on or about , 1996.
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET
OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------
FOR UNITED KINGDOM PURCHASERS: THE SECURITIES MAY NOT BE OFFERED OR SOLD IN
THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM
IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS, WHETHER AS
PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO
THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS PROSPECTUS MAY ONLY BE ISSUED
OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) (NO. 2) ORDER 1995 OR IS A PERSON TO WHOM THE
PROSPECTUS MAY OTHERWISE LAWFULLY BE PASSED ON.
BIODAC IS A REGISTERED TRADEMARK OF THE COMPANY. ALL OTHER TRADEMARKS OR
TRADE NAMES REFERRED TO IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE
OWNERS.
2
<PAGE> 5
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Units, the Common Stock
and/or the Redemption Rights offered hereby with annual reports containing
financial statements audited by an independent public accounting firm and with
quarterly reports containing unaudited summary financial statements for each of
the first three quarters of each fiscal year.
ADDITIONAL INFORMATION
The Company and Thermo Electron have filed with the Securities and Exchange
Commission (the "Commission") a combined registration statement on Form S-1 and
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company, Thermo Electron, the Units and
the Guarantees, reference is made to the Registration Statement, copies of which
may be obtained upon payment of the fees prescribed by the Commission from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices at 7 World Trade Center,
New York, New York 10048 and at 500 West Madison Street, Chicago, Illinois
60661. The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company and Thermo Electron.
The address of such site is http://www.sec.gov.
Thermo Electron is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, New York, New York 10048
and at 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The common stock
of Thermo Electron is listed on the New York Stock Exchange, and the reports,
proxy statements and other information filed by Thermo Electron with the
Commission can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Thermo Electron with the
Commission are incorporated in this Prospectus by reference:
(a) Thermo Electron's Annual Report on Form 10-K for the year ended
December 30, 1995;
(b) Thermo Electron's Quarterly Report on Form 10-Q for the quarter ended
March 30, 1996;
(c) Thermo Electron's Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 9, 1996, with respect to the
issuance of its 4 1/4% Convertible Subordinated Debentures due 2003;
(d) Thermo Electron's Current Report on Form 8-K filed with the Securities
and Exchange Commission on January 26, 1996, with respect to the
adoption of a Shareholder Rights Plan on January 19, 1996;
(e) Thermo Electron's Current Report on Form 8-K filed with the Securities
and Exchange Commission on April 19, 1996, with respect to its
guarantees of obligations under Thermo TerraTech Inc.'s 4 5/8%
Convertible Subordinated Debentures; and
(f) The description of Thermo Electron's common stock which is contained in
Thermo Electron's Registration Statement on Form 8-A, filed under the
Exchange Act, as amended.
3
<PAGE> 6
<TABLE>
In March 1996, Thermo Electron declared a three-for-two stock split in the
form of a 50% stock dividend, paid on June 5, 1996, to shareholders of record as
of May 22, 1996. The share and per share data as reported in Thermo Electron's
Annual Report on Form 10-K for the year ended December 30, 1995 and Quarterly
Report on Form 10-Q for the quarter ended March 30, 1996, incorporated herein by
reference, have not been restated to reflect the stock split. Shares of Thermo
Electron Common Stock outstanding as of March 30, 1996, on a pro forma basis to
reflect the stock split, would have been 135,990,300. The following table
presents earnings per share and weighted average shares as previously filed and
as amended to reflect the stock split:
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ---------------------
----------------------------- APRIL 1, MARCH 30,
1993 1994 1995 1995 1996
------- ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
AS PREVIOUSLY FILED
Earnings per Share:
Primary.................................... $ 1.11 $ 1.35 $ 1.67 $ .37 $ .46
Fully diluted.............................. $ 1.00 $ 1.20 $ 1.48 $ .32 $ .41
Weighted Average Shares:
Primary.................................... 69,468 77,667 83,656 80,582 88,328
Fully diluted.............................. 87,079 100,819 105,402 104,436 116,214
AS AMENDED
Earnings per Share:
Primary.................................... $ .74 $ .90 $ 1.12 $ .24 $ .31
Fully diluted.............................. $ .67 $ .80 $ .98 $ .22 $ .27
Weighted Average Shares:
Primary.................................... 104,203 116,500 125,483 120,873 132,492
Fully diluted.............................. 130,618 151,229 158,103 156,654 174,321
</TABLE>
All reports or proxy statements filed by Thermo Electron pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein modifies, supersedes
or replaces that statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Thermo Electron undertakes to provide without charge to each person to whom
a copy of this Prospectus has been delivered, on the written or oral request of
such person, a copy of any or all of the documents that have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests for such copies should be directed to: Sandra L. Lambert,
Secretary, Thermo Electron Corporation, 81 Wyman Street, P. O. Box 9046,
Waltham, Massachusetts 02254-9046 (telephone number: (617) 622-1000).
4
<PAGE> 7
- -------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise indicated, all information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised. Investors should carefully consider the information set forth under
the heading "Risk Factors."
THE COMPANY
Thermo Fibergen Inc. (the "Company") was established as a subsidiary of
Thermo Fibertek Inc. ("Thermo Fibertek") to develop and commercialize equipment
and systems to recover valuable materials from increasing volumes of pulp
residue generated by plants that produce recycled pulp and paper. The Company
intends to finance, build and operate recovery plants on sites at, or
immediately adjacent to, recycled pulp mills, employing a proprietary process to
treat pulp residue. The Company's plants will recover and clean long cellulose
fibers for resale to pulp mills, and will process the remaining recoverable
components of pulp residue, such as fines (very short fibers not usable for
papermaking) and minerals, into saleable products. The Company's GranTek Inc.
subsidiary ("GranTek") recently acquired substantially all of the assets,
subject to certain liabilities, of Granulation Technology, Inc. and Biodac, a
division of Edward Lowe Industries, Inc. (collectively, "GT/ELI"). GranTek
employs patented technology to produce absorbent granules from pulp residue.
These granules, marketed under the trade name BIODAC, are currently used as a
carrier to deliver chemicals for agricultural, lawn and garden, and other needs.
GranTek's Green Bay, Wisconsin, plant currently produces more than 30,000 tons
of BIODAC per year.
Environmental concerns and other factors have led to an increase in the use
and production of recycled paper in recent years. However, paper companies that
increase the use of recycled paper as a source of their papermaking fiber
experience substantial increases in their pulp residue. These increases result
from the pulp de-inking, filtering and cleaning process, in which approximately
25% of the recycled fiber entering a pulp mill is lost to the waste stream, and
must be disposed of at a substantial cost. According to industry estimates, the
North American pulp and paper industry spent an estimated $1 billion to treat
and dispose of approximately 10 million tons of pulp residue in 1993. The
Company believes that worldwide expenditures to treat and dispose of pulp
residue in 1993 were approximately $2.6 billion.
The Company's strategy is to generate revenues from several sources. First,
the Company will seek to enter into long-term contracts with pulp and paper
mills under which the Company will charge the customer a tipping fee to accept
the customer's pulp residue. Second, the Company intends to sell much of the
clean long fibers it recovers directly back to the customer for use in the
papermaking process. Third, the Company will apply existing technologies, such
as its granulation technologies, and expects to develop new technologies, to
maximize the value of the other recoverable components of the pulp residue, such
as fines and minerals, for sale into other markets. For example, the Company
intends to further develop GranTek's technology to produce granules for oil and
grease absorbents as well as for specialty absorbents, such as for the cat box
filler market.
The Company anticipates that the tipping fees it receives will generally be
competitive with the pulp mills' current disposal costs. The Company believes
that pulp mills will prefer to dispose of their residue streams by paying the
Company a tipping fee for a number of reasons. Disposal of residue with the
Company will provide pulp mills with a long-term disposal solution and will
eliminate concerns over long-term capacity constraints at their landfills; will
relieve the pulp mills of the responsibility for complying with changing
treatment and disposal regulations; and will allow pulp mills to reduce their
capital investments in dewatering and treatment equipment, and to focus their
resources on the manufacture of paper.
The Company is actively developing a process to recover long fibers from
pulp residues, and expects to complete the construction of a mobile pilot
recovery system in 1996. The Company expects that its first commercial plants
will feature only GranTek's technology to process pulp residue into absorbent
granules. The Company's strategy is to introduce this technology to pulp mill
customers, to construct its plants and to enter into long-term contracts with
such customers, and then, upon the completion of development, to retrofit
existing GranTek plants with the Company's long fiber-recovery technology. The
Company will also explore the construction of plants in certain niche markets
that may feature only the Company's long fiber-recovery technology. The Company
expects to begin construction of its first commercial recovery plant employing
its long fiber-recovery technology before the end of 1997.
- -------------------------------------------------------------------------------
5
<PAGE> 8
- --------------------------------------------------------------------------------
<TABLE>
THE OFFERING
<S> <C>
Units Offered(1)..................... 3,100,000
Common Stock to be Outstanding after
the Offering(1)(2)................. 13,100,000
Proposed AMEX Symbol for the Units... TFGU
Proposed AMEX Symbol for the Common
Stock.............................. TFG
Proposed AMEX Symbol for the
Redemption Rights.................. TFGR
Scheduled Optional Redemptions....... The holder of a Redemption Right may require the
Company to redeem one share of Common Stock for an
amount of cash equal to during the month of
September 20 and the month of September 20 . The
Redemption Rights will expire if at any time after
the 90th day after the date of this Prospectus and
(i) prior to the beginning of the First Redemption
Period or (ii) after the end of the First Redemption
Period and prior to the beginning of the Second
Redemption Period, the closing price of the Common
Stock has been 150% of the Redemption Price, as
adjusted, for 20 of any 30 consecutive trading days.
Thermo Electron Guarantees........... Redemption payments have been guaranteed on a
subordinated basis by Thermo Electron.
Use of Proceeds...................... General corporate purposes, including funding the
development and commercialization of the Company's
fiber-recovery system, and for acquisitions.
Federal Tax Consequences............. Special tax considerations may apply to an investment
in the Units. Investors should read carefully
"Certain Federal Income Tax Consequences" and are
advised to consult with their own tax advisors
regarding the consequences of an investment in the
Units.
<FN>
- ---------------
(1) Each Unit consists of one share of Common Stock and one Redemption Right.
The Common Stock and the Redemption Rights will trade together as Units
until the 90th day after the date of this Prospectus, after which date the
Common Stock and the Redemption Rights will trade separately.
(2) Does not include 825,000 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans. No options to purchase shares
of Common Stock had been granted or were outstanding under the Company's
stock-based compensation plans as of July 2, 1996. See "Capitalization,"
"Management -- Compensation of Directors" and "-- Compensation of Executive
Officers" and Note 5 to Financial Statements of the Company.
</TABLE>
- -------------------------------------------------------------------------------
6
<PAGE> 9
<TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
PRO FORMA COMBINED(2)
------------------------
THREE MONTHS TWELVE THREE
ENDED(1) MONTHS MONTHS
FISCAL YEAR -------------------- ENDED ENDED
------------------------------------- APRIL 1, MARCH 30, DECEMBER 30, MARCH 30,
1992(1) 1993 1994 1995 1995 1996 1995 1996
------- ------- ------- ------- -------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues.............. $ -- $ -- $ -- $ -- $ -- $ -- $ 4,233 $ 1,579
Gross Profit.......... -- -- -- -- -- -- 952 341
Research and
Development
Expenses............ 147 106 128 601 137 203 904 263
Operating Loss........ (147) (106) (128) (601) (137) (203) (2,690) (507)
Interest Income (Expense)
and Other Income.... -- -- -- -- -- 99 (1,469) 704
Net Income (Loss)..... (147) (106) (128) (601) (137) (104) (4,159) 197
Earnings (Loss) per
Share(3)............ (.01) (.01) (.01) (.06) (.01) (.01) (.42) .02
Weighted Average
Shares.............. 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
<CAPTION>
MARCH 30, 1996
------------------------
PRO FORMA AS
COMBINED(4) ADJUSTED(5)
------------ ---------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital................................................................... $ 1,257 $37,862
Total Assets...................................................................... 13,104 49,709
Common Stock Subject to Redemption................................................ -- 36,605
Shareholder's Investment.......................................................... 12,490 12,490
<FN>
- ---------------
(1) Derived from unaudited financial statements.
(2) The pro forma combined statement of operations data was derived from the pro
forma combined condensed statements of operations included elsewhere in this
Prospectus. The pro forma combined statement of operations data sets forth
the results of operations for the twelve months ended December 30, 1995 and
the three months ended March 30, 1996, as if the acquisition of GT/ELI had
occurred on January 1, 1995.
(3) Pursuant to Securities and Exchange Commission requirements, earnings (loss)
per share have been presented for all periods. Weighted average shares for
all periods include 10,000,000 shares issued to Thermo Fibertek in
connection with the initial capitalization of the Company.
(4) The pro forma combined balance sheet data as of March 30, 1996 is derived
from the pro forma condensed balance sheet included elsewhere in this
Prospectus, which was prepared as if the acquisition of GT/ELI had occurred
on March 30, 1996.
(5) Adjusted to reflect the sale by the Company of 3,100,000 Units offered
hereby at an assumed initial public offering price of $12.75 per Unit, after
deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company.
</TABLE>
- -------------------------------------------------------------------------------
7
<PAGE> 10
RISK FACTORS
An investment in the Units offered hereby involves a high degree of risk.
Accordingly, the following factors should be carefully considered in evaluating
the Company and its business before purchasing any of such Units.
Operating Losses. The Company has not been profitable since its inception
as a division of Thermo Fibertek on December 29, 1991. As of March 30, 1996, the
cumulative operating losses of the Company were approximately $1,185,000. The
Company expects to continue to incur operating losses for at least the next
several years.
Uncertainty of Product Development. The Company's fiber-recovery system
incorporates new technology currently under development. The Company has not yet
completed the development of its mobile pilot fiber-recovery system and has not
yet begun the commercial production of full-scale fiber-recovery systems. No
assurance can be given that these development efforts will be successful.
Failure to successfully develop the Company's recovery equipment and system
would have a material adverse effect on the business of the Company. The
Company's success will depend to some degree on its ability to identify and
develop technologies to maximize the value of the components of pulp residue,
such as minerals, for sale into other markets. There can be no assurance that
the Company will succeed in obtaining or developing any such technologies.
Failure of the Company to obtain or develop such technologies, or to develop
active markets for the components of the pulp residue it processes, would both
increase the Company's ultimate waste-disposal costs and reduce the Company's
anticipated revenue stream. Accordingly, such a failure would have a material
adverse effect on the business of the Company.
Risks of Uncertain Market Acceptance. The Company's proposed
fiber-recovery process and market approach are significantly different from
processing and disposal methods that are currently available commercially. There
is a substantial risk with any new technology that the marketplace may not
accept or be receptive to the potential benefits of such technology. Market
acceptance of the Company's proposed services and products will depend, in large
part, upon the ability of the Company to demonstrate the economic advantage of
its system over available alternatives. There can be no assurance that the
Company's services will be accepted by the pulp and paper industry, that any
products the Company may develop from the recoverable components of papermaking
residues will be accepted in their respective markets or that the Company will
be able to sell such products, if accepted, at commercially viable prices.
Failure of either the Company's technology to gain market acceptance by the pulp
and paper industry or of any such products to gain market acceptance generally
would have a material adverse effect on the business of the Company.
Lack of Operating History and Management. The Company has no operating
history other than research and development relating to its fiber-recovery
equipment and process and the business recently acquired by its GranTek
subsidiary. The Company expects to hire several additional employees within the
next year, all of whom are expected to be engaged in research and development
and/or sales and marketing. No assurance can be given that management
experienced in building a research and development or manufacturing
organization, or additional skilled personnel necessary to successfully
commercialize and expand the Company's business and operations, can be recruited
and retained. Failure of the Company to achieve these objectives would have a
material adverse effect on the business of the Company. See "Business --
Employees."
Risks Associated with Protection, Defense and Use of Proprietary Technology
and Intellectual Property. The Company holds several United States and foreign
patents relating to various aspects of the processing and use of cellulose-based
granular materials, and Thermo Fibertek holds one United States patent and
several foreign patents, and expects to file additional United States patent
applications in the near future, relating to the "scalping" technology that is a
key component of the Company's fiber-recovery system. Proprietary rights
relating to the Company's technology 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. Moreover, although the
Company is developing methods to separate the various components of the residue
stream for which it believes that it may be able to obtain patent protection,
there can be no assurance that patents will issue from any pending or future
patent applications owned by or licensed to the
8
<PAGE> 11
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 services or 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. 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. See
"Business -- Intellectual Property."
Commodity Price Risks. The Company expects to recover high quality long
fibers from the residue streams of pulp and paper mills and to sell them back to
mills under long-term contracts. The prices at which the Company may be able to
sell such fibers will depend on several factors, including the prevailing prices
for both finished paper products and wastepaper. These prices tend to be
cyclical and to vary according to paper type. The Company also anticipates that
it will seek to sell other recoverable components of the residue streams, such
as fines, wastewater and minerals. The Company will be exposed to commodity
price risk during the period that it has title to these products held in
inventory. Prices of these commodities can be volatile, and no assurance can be
given that the Company will be able to sell recovered components at a profit.
Future Capital Needs; Project Financing; Dependence on Capital
Markets. The Company anticipates that the net proceeds of this offering,
together with interest income earned on such net proceeds, will constitute a
large percentage of the Company's development and initial commercialization
budgets. To the extent that such net proceeds and such interest income, together
with the Company's future operating income, if any, are insufficient to fund the
development and commercialization of the Company's fiber-recovery system, the
Company may be required to raise additional funds through public or private
financings. See "Use of Proceeds." The Company's future capital requirements
will depend on many factors, including continued progress in its research and
development program, the magnitude of such program, competing technological and
market developments, the cost of manufacturing activities and the Company's
ability to market its services and products successfully. Any equity or debt
financings, if available at all, may be on terms that are not favorable to the
Company and, in the case of equity financings, could result in dilution to the
Company's stockholders. If adequate funds are not available, the Company may be
required to curtail development and commercialization of its fiber-recovery
technology.
In addition, the Company expects to seek to finance each of its recovery
plants in a manner that is substantially nonrecourse to the Company. To minimize
its equity commitment, the Company will be required to borrow substantial
amounts from third party lenders. These borrowings typically would be secured
only by the recovery plant assets and/or by the capital stock of a subsidiary
operating such plant. If the Company were unable to repay the principal of, and
all interest on, such borrowings, the lender would have the right to foreclose
on, and obtain title to, such assets or capital stock. The Company anticipates
that it will require substantial financing to fund both the equity and debt
components of future plants. The ability to finance the Company's recovery
plants on a nonrecourse basis will depend on a number of factors, including
interest coverage ratios, the length and terms of the Company's contracts with
pulp mill customers and the perception of technology risks by lenders. The
Company has had no discussions with potential lenders, and no assurance can be
given that financing for future plants will be available on acceptable terms, or
at all. Any failure by the Company to obtain adequate amounts of project
financing on acceptable terms would have a material adverse effect on the future
growth of the Company.
9
<PAGE> 12
Competition. The Company expects to encounter intense competition in the
sale of its services and products. The Company expects that its principal
competitors will be landfills, which currently have a collective 70% market
share in North America and approximately 40% in Europe. In addition, many pulp
mills have already made substantial investments in dewatering and drying
equipment to reduce their landfill costs. Mills are familiar with such methods
and may be reluctant to switch to a new solution unless the Company demonstrates
significant cost savings to them. Several large waste-management companies have
increased their marketing activities to provide landfill disposal services to
the pulp and paper industry. Certain competitors are seeking to develop similar
technologies and services to treat and process pulp residues. No assurance can
be given that these technologies may not be superior to those of the Company or
that they may not make the Company's technology obsolete. Some of these
competitors may 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 services and
products than the Company. There can be no assurance that the Company's current
technology, technology under development or ability to discover new technologies
will be sufficient to enable it to compete effectively with its competitors. See
"Business -- Competition."
Risk of Dependence on Pulp Mill Customers. Each of the Company's
fiber-recovery plants will rely upon long-term agreements with a single pulp
mill customer for its pulp residue and tipping fee revenue. The failure of any
one pulp mill customer to fulfill its contractual obligations could have a
substantial negative impact on the Company. No assurance can be given that a
particular pulp mill will not be unwilling or unable, at some time, to make
required payments under, or to otherwise honor, its agreements with the Company.
GranTek's pulp residue is obtained from a single paper mill located near its
Wisconsin plant, under which such mill has the exclusive right to supply such
residue to GranTek's plant. The contract terminates on December 26, 1997,
subject to successive mutual two-year extensions. Although the Company believes
that GranTek's relationship with such mill is good, no assurance can be given
that such mill will agree to renew the contract upon its termination in December
1997.
Environmental and Regulatory Risks. Federal, state and local environmental
laws govern air emissions and discharges into water, as well as the generation,
transportation, storage, treatment and disposal of solid and hazardous waste.
These laws establish standards governing most aspects of the construction and
operation of the Company's facilities, and often require multiple governmental
permits before these facilities can be constructed, modified or operated. There
can be no assurance that all required permits will be issued for the Company's
recovery plants, or that the requirements for continued permitting under
environmental regulatory laws and policies governing their enforcement may not
change, requiring new technology or stricter standards for the control of
discharges of air or water pollutants or for solid or hazardous waste handling
and disposal. Such future developments could affect the manner in which the
Company constructs and operates its plants and could require significant
additional expenditures to achieve compliance with such requirements. It is
possible that compliance may not be technically or economically feasible.
Changes in these regulations could also affect the characteristics of the waste
generated by pulp and paper mills. As a result, it is possible that disposal of
pulp residue could be accomplished in a manner that may not involve the
Company's facilities or that would require the Company to purchase pulp residue.
Federal, state and local laws also frequently impose liability on the
present and former owners or operators of facilities that release hazardous
substances into the environment. Furthermore, companies may be required by law
to provide financial assurances for operating facilities in order to ensure
their performance of obligations is in compliance with applicable laws and
regulations. Similar liability may be imposed upon the generators and
transporters of waste which contains hazardous substances. In the United States,
such liability stems primarily from the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") and similar state
equivalents and the Resource Conservation and Recovery Act of 1976 ("RCRA") and
similar state equivalents. CERCLA imposes joint and several liability for the
costs of remediation and natural resource damages on the owner or operator of a
facility from which there is a release or a threat of a release of a hazardous
substance into the environment and on the generators and transporters of those
hazardous substances. Under RCRA and equivalent state laws, regulatory
authorities may require, pursuant to administrative order or as a condition of
an operating permit, that the owner or operator of a
10
<PAGE> 13
regulated facility take corrective action with respect to contamination
resulting from past or present operations. Such laws also require that the owner
or operator of regulated facilities provide assurance that funds will be
available for the closure and post-closure care of its facilities.
GranTek emits into the atmosphere from its Green Bay, Wisconsin, facility
approximately 4.5 pounds per year of polychlorinated biphenyls ("PCBs"), as well
as certain other hazardous pollutants such as formaldehyde, benzene and volatile
organic compounds ("VOCs"). Applicable Wisconsin regulations limit PCB emissions
to 0.5 pounds per year unless the generator can demonstrate that it is using the
best available control technology to limit emissions. GranTek has been issued an
air operating permit by the Wisconsin Department of Natural Resources (the
"WDNR"). GranTek's operating permit and its application for a new Title V
operating permit both require GranTek to reduce PCB and VOC emissions and to
file bi-annual reports on the amount of PCBs being emitted. In August 1995,
GranTek submitted materials to the WDNR asserting that no technologically or
economically feasible methods to reduce PCB or VOC emissions from its facility
can be implemented at the present time and, accordingly, requesting that GranTek
be relieved of its obligation to reduce emissions. As of the date of this
Prospectus, GranTek has received no response from the WDNR. Although the Company
believes that the WDNR will accept GranTek's findings, and although GranTek's
facility is currently fully permitted by Wisconsin regulatory authorities, no
assurance can be given that the WDNR will not require GranTek to reduce or
eliminate its emissions, that such compliance will not require the Company to
make significant expenditures or that such compliance will be technically or
economically feasible.
The pulp residue processed by GranTek contains trace amounts of PCBs,
dioxins, furans and other metals, residual amounts of which are also found in
GranTek's BIODAC product. Although these substances are present in residual
quantities below the maximum levels currently permitted under applicable federal
and state regulations, no assurance can be given that such regulations may not
be made more stringent in the future, that pulp residue containing such
substances may not be regulated as a hazardous waste under RCRA or that federal
or state regulations may not in the future prohibit the use of materials
containing these substances in agricultural applications.
The Company may be required as a practical matter to assume all
environmental liabilities associated with the treatment and final disposal of
all components of the pulp mills' residue stream that cannot be returned to
mills or sold elsewhere. The Company will endeavor to operate its business to
minimize its exposure to environmental liabilities. In entering into contracts
with customers, the Company will seek to maximize its insulation from
environmental liabilities associated with paper mill waste streams by
controlling the content of the waste streams it will accept and by preventing
customers from sending any waste streams containing hazardous components to the
Company's facilities. Any such disposal of hazardous waste could cause the
Company to be responsible for the clean-up or remediation of the disposal site
in the future under CERCLA, RCRA and similar state laws. No assurance can be
given that claims for environmental liabilities may not be asserted against the
Company. See "Business -- Government Regulation."
Risk of Uncertain Tax Treatment. Due to the unique characteristics of the
Securities offered hereby, the tax treatment of the Securities is uncertain.
Investors are urged to consult their own tax advisors with regard to an
investment in the Securities. See "Certain Federal Income Tax Consequences."
Potential Conflicts of Interest. The Company may be subject to potential
conflicts of interest from time to time as a result of its relationship with
Thermo Fibertek and Thermo Electron. For example, conflicts may arise in the
development and licensing of technology by Thermo Fibertek to the Company and
the manufacture of components of the Company's fiber-recovery systems by Thermo
Fibertek for sale to the Company. Although it is the policy of Thermo Electron
that all transactions among Thermo Electron and its subsidiaries be made on
terms comparable to those that could be obtained in an arm's-length transaction,
these negotiations will be subject to the potential conflicts associated with
related party transactions. See "Relationship with Thermo Electron and Thermo
Fibertek." For financial reporting purposes, the Company's financial results are
included in Thermo Fibertek's and Thermo Electron's consolidated financial
statements. Certain officers of the Company are also officers of Thermo
Fibertek, Thermo Electron and/or other subsidiaries of Thermo Electron. Such
officers will devote only a portion of their working time to the affairs of the
Company. Further, it is an essential element of Thermo Electron's career
development program that successful executives and managers be considered for
positions of increased responsibility anywhere within the
11
<PAGE> 14
Thermo Electron family of companies. While the Company may also benefit from
this policy, there can be no assurance that its current executives and managers
will not assume other positions within the Thermo Electron family of companies,
causing them to be unavailable to serve the Company, or to reduce the amount of
time that they devote to the affairs of the Company. The members of the Board of
Directors and officers of the Company who are also affiliated with Thermo
Fibertek or Thermo Electron will consider not only the short-term and the
long-term impact of operating decisions on the Company, but also the impact of
such decisions on the consolidated financial results of Thermo Fibertek and
Thermo Electron. In some cases the impact of such decisions could be
disadvantageous to the Company while advantageous to Thermo Fibertek or Thermo
Electron, or vice versa. The Company is also a party to various agreements with
Thermo Electron that may limit the Company's operating flexibility. See
"Relationship with Thermo Electron and Thermo Fibertek."
Control by Thermo Fibertek. The Company's shareholders do not have the
right to cumulate votes for the election of directors. Thermo Fibertek, which
will own approximately 76.3% of the voting stock of the Company after this
offering and which currently intends to maintain a majority interest in the
Company in the future, has the power to elect the entire Board of Directors of
the Company and to approve or disapprove any corporate actions submitted to a
vote of the Company's shareholders. See "Relationship with Thermo Electron and
Thermo Fibertek" and "Security Ownership of Certain Beneficial Owners and
Management."
No Prior Public Market; No Assurance of Active Trading Markets. Prior to
this offering, there has been no public market for the Units, for the Common
Stock or for the Redemption Rights, and there can be no assurance that active
trading markets will develop or be sustained after this offering. The offering
price for the Units will be determined by negotiations between the Company and
the Representatives of the Underwriters and may not be indicative of future
market prices. See "Underwriting" for a discussion of the factors to be
considered in determining the offering price. Many factors, including the risk
factors contained in this Prospectus and the volatility of the overall stock
market, could have a significant impact on the future market prices of the
Units, the Common Stock and the Redemption Rights, and there can be no assurance
that the Units, the Common Stock and/or the Redemption Rights will trade at
levels above the offering price.
Shares Eligible for Future Sale and the Potential Adverse Impact on the
Market Price for the Common Stock. The 10,000,000 shares of Common Stock owned
by Thermo Fibertek will become eligible for sale under Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act") commencing
in February 1998. In addition, as long as Thermo Fibertek is able to elect a
majority of the Company's Board of Directors, it will be able to cause the
Company at any time to register all or a portion of the Common Stock owned by
Thermo Fibertek under the Securities Act at any time. Thermo Fibertek and the
Company have agreed not to sell any shares of Common Stock within a 180-day
period after the date of this Prospectus without the consent of the
Representatives of the Underwriters, other than (i) shares of Common Stock to be
sold to the Underwriters in this offering, (ii) the issuance of options and
sales of shares of Common Stock pursuant to existing stock-based compensation
plans, (iii) shares of Common Stock which may be sold to Thermo Fibertek, and
(iv) the issuance of shares of Common Stock as consideration for the acquisition
of one or more businesses (provided that such Common Stock may not be resold
prior to the expiration of the 180-day period referenced above). The Company has
reserved 825,000 shares of Common Stock for issuance under its stock-based
compensation plans. As of July 2, 1996, no options to purchase shares of Common
Stock were outstanding. Additional shares of Common Stock issuable upon exercise
of options which may be granted under the Company's stock-based compensation
plans will become available for future sale in the public market at prescribed
times. Sales of a significant number of shares of Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock. See "Shares Eligible for Future Sale," "Relationship with Thermo
Electron and Thermo Fibertek" and "Underwriting."
Immediate and Substantial Dilution. Purchasers of the Units offered hereby
will incur an immediate and substantial dilution in the net tangible book value
per share of the Common Stock from the offering price. See "Dilution."
Lack of Dividends. The Company has never paid any cash dividends on its
Common Stock. The Board of Directors anticipates that for the foreseeable future
the Company's earnings, if any, will be retained for use in the business and
that no cash dividends will be paid on the Common Stock.
12
<PAGE> 15
THE COMPANY
The Company operated as a division of Thermo Fibertek beginning on December
29, 1991 until its incorporation as a Delaware corporation in February 1996. In
connection with the Company's incorporation, Thermo Fibertek transferred to the
Company all of the assets and business relating to the development of its
fiber-recovery system, together with $12,500,000 in cash, in exchange for
10,000,000 shares of the Company's Common Stock and the assumption by the
Company of the liabilities relating to such business. The Company's principal
executive offices are located at 8 Alfred Circle, Bedford, Massachusetts 01730,
and its telephone number is (617) 275-3600.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units offered by the
Company pursuant to this offering are estimated to be $36,605,000 ($42,149,000
if the Underwriters' over-allotment option is exercised in full), assuming an
initial public offering price of $12.75 per Unit and after deducting estimated
underwriting discounts and commissions and offering expenses. The Company
intends to use such net proceeds for general corporate purposes, including
funding the development and commercialization of its pulp residue recovery
system, and for acquisitions. However, the Company currently has no commitments
or agreements in principle with respect to any acquisition. Pending these uses,
the Company expects to invest the net proceeds primarily in investment grade
interest or dividend bearing instruments, either directly by the Company or
pursuant to a repurchase agreement with Thermo Electron. See "Relationship with
Thermo Electron and Thermo Fibertek."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
13
<PAGE> 16
<TABLE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 30, 1996, (i) stated on a pro forma basis to reflect the July 3, 1996
acquisition of substantially all of the assets, subject to certain liabilities
of GT/ELI, and (ii) as adjusted to reflect the issuance and sale of the Units
offered hereby at an assumed initial public offering price of $12.75 per Unit,
after deducting estimated underwriting discounts and commissions and offering
expenses payable by the Company.
<CAPTION>
MARCH 30, 1996
--------------------------
PRO FORMA
COMBINED AS ADJUSTED
---------- -----------
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Common Stock Subject to Redemption ($39,525 redemption value as
adjusted); 3,100,000 shares issued and outstanding as adjusted.... $ -- $ 36,605
---------- ----------
Shareholder's Investment:
Common stock, $.01 par value, 25,000,000 shares authorized;
10,000,000 shares issued and outstanding(1)................... 100 100
Capital in excess of par value................................. 12,400 12,400
Deficit accumulated during the development stage subsequent to
capitalization of the Company................................. (10) (10)
---------- ----------
Total Shareholder's Investment............................ 12,490 12,490
---------- ----------
Total Capitalization (Common Stock Subject to
Redemption and Shareholder's Investment)........... $ 12,490 $ 49,095
========== ==========
<FN>
- ---------------
(1) Does not include 825,000 shares of Common Stock reserved for issuance under
the Company's stock-based compensation plans. No options to purchase shares
of Common Stock had been granted and were outstanding under the Company's
stock-based compensation plans as of July 2, 1996. See "Management --
Compensation of Directors" and "-- Compensation of Executive Officers" and
Note 5 of Notes to Financial Statements of the Company.
</TABLE>
14
<PAGE> 17
<TABLE>
DILUTION
As of March 30, 1996, the Company had a net tangible book value of
$7,158,000, or $.72 per share, stated on a pro forma basis to reflect the July
3, 1996 acquisition of GT/ELI (see pro forma combined condensed balance sheet
included elsewhere in this Prospectus). Net tangible book value per share is
determined by dividing net tangible book value (total tangible assets less total
liabilities) of the Company by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 3,100,000 Units offered hereby
at an assumed initial public offering price of $12.75 per Unit and the receipt
of the estimated net proceeds therefrom, the pro forma net tangible book value
of the Common Stock as of March 30, 1996 would have been $43,763,000, or $3.34
per share. This represents an immediate increase in net tangible book value of
$2.62 per share to the existing shareholder and an immediate dilution in net
tangible book value of $9.41 per share to investors purchasing Units in this
offering. See "Risk Factors -- Immediate and Substantial Dilution." The
following table illustrates this per share dilution:
<S> <C> <C>
Assumed price to public.......................................... $12.75
------
Pro forma net tangible book value per share as of March 30,
1996, before offering..................................... $ .72
------
Increase in net tangible book value per share attributable
to payments by new investors.............................. 2.62
------
Pro forma net tangible book value per share as of March 30, 1996,
after offering(1)(2)........................................... 3.34
------
Dilution per share to new investors(1)(2)........................ $ 9.41
======
<FN>
- ---------------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the offering would be $3.63,
resulting in an immediate dilution of $9.12 per share to investors
purchasing Units in this offering.
(2) Pro forma net tangible book value per share after the offering is calculated
assuming the redemption rights have expired and, therefore, assuming the
Common Stock Subject to Redemption would be transferred to Shareholder's
Investment.
</TABLE>
<TABLE>
The following table sets forth on a pro forma basis as of March 30, 1996,
the differences between Thermo Fibertek, the present shareholder, and new
investors with respect to the number of shares of Common Stock acquired, the
total consideration paid and the average consideration paid per share (at an
assumed initial public offering price of $12.75 per share):
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Thermo Fibertek(1)..................... 10,000,000 76.3% 12,500,000 24.0% $ 1.25
New Investors.......................... 3,100,000 23.7 39,525,000 76.0 12.75
---------- ----- ---------- -----
Total............................. 13,100,000 100.0% 52,025,000 100.0%
========== ===== ========== =====
<FN>
- ---------------
(1) Represents the book value of net assets transferred by Thermo Fibertek to
the Company in exchange for 10,000,000 shares of the Company's Common Stock.
</TABLE>
15
<PAGE> 18
SELECTED FINANCIAL INFORMATION
<TABLE>
The selected financial information presented below for the fiscal year
ended January 1, 1994 and as of and for the fiscal years ended December 31, 1994
and December 30, 1995 has been derived from the Company's Financial Statements,
which have been audited by Arthur Andersen LLP, independent public accountants,
as indicated in their report included elsewhere in this Prospectus. This
information should be read in conjunction with the financial statements and
related notes included elsewhere in this Prospectus. The selected financial
information as of and for the fiscal year ended January 2, 1993, as of January
1, 1994, and for the three-month periods ended April 1, 1995 and March 30, 1996,
has not been audited but, in the opinion of the Company, includes all
adjustments (consisting only of normal, recurring adjustments) necessary to
present fairly such information in accordance with generally accepted accounting
principles applied on a consistent basis. Results for the three-month period
ended March 30, 1996 are not necessarily indicative of results for the entire
year.
<CAPTION>
PRO FORMA
COMBINED(1)
--------------------
THREE MONTHS TWELVE THREE
ENDED MONTHS MONTHS
FISCAL YEAR -------------------- ENDED ENDED
------------------------------------ APRIL 1, MAR. 30, DEC. 30, MAR. 30,
1992 1993 1994 1995 1995 1996 1995 1996
------ ------ ------ ------ -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $ -- $ -- $ -- $ -- $ -- $ -- $ 4,233 $ 1,579
------- ------- ------- ------- ------- ------- ------- -------
Costs and Operating Expenses:
Cost of revenues....................... -- -- -- -- -- -- 3,281 1,238
Selling, general and administrative
expenses............................. -- -- -- -- -- -- 2,738 585
Research and development expenses...... 147 106 128 601 137 203 904 263
------- ------- ------- ------- ------- ------- ------- -------
147 106 128 601 137 203 6,923 2,086
------- ------- ------- ------- ------- ------- ------- -------
Operating Loss........................... (147) (106) (128) (601) (137) (203) (2,690) (507)
Interest Income (Expense)................ -- -- -- -- -- 99 (1,469) 4
Other Income............................. -- -- -- -- -- -- -- 700
------- ------- ------- ------- ------- ------- ------- -------
Income (Loss) Before Income Taxes........ (147) (106) (128) (601) (137) (104) (4,159) 197
Income Taxes............................. -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Net Income (Loss)........................ $ (147) $ (106) $ (128) $ (601) $ (137) $ (104) $(4,159) $ 197
======= ======= ======= ======= ======= ======= ====== =======
Earnings (Loss) per Share(2)............. $ (.01) $ (.01) $ (.01) $ (.06) $ (.01) $ (.01) $ (.42) $ .02
======= ======= ======= ======= ======= ======= ======= =======
Weighted Average Shares(2)............... 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
======= ======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital........................ $ -- $ -- $ -- $ -- $ -- $12,484 $ 1,257
Total Assets........................... -- -- -- -- -- 12,506 13,104
Shareholder's Investment............... -- -- -- -- -- 12,490 12,490
<FN>
- ---------------
(1) The pro forma combined statement of operations data was derived from the pro
forma combined condensed statements of operations included elsewhere in this
Prospectus. The pro forma combined statement of operations data sets forth
the results of operations for the twelve months ended December 30, 1995 and
the three months ended March 30, 1996, as if the acquisition of the assets
of GT/ELI had occurred on January 1, 1995. The pro forma combined balance
sheet data is derived from the pro forma condensed balance sheet included
elsewhere in this Prospectus, which was prepared as if the acquisition of
substantially all of the assets, subject to certain liabilities, of GT/ELI
had occurred on March 30, 1996.
(2) Pursuant to Securities and Exchange Commission requirements, earnings (loss)
per share have been presented for all periods. Weighted average shares for
all periods include 10,000,000 shares issued to Thermo Fibertek in
connection with the capitalization of the Company.
</TABLE>
16
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company operated as a division of Thermo Fibertek beginning December
29, 1991 until its incorporation in February 1996. Prior to its acquisition of
GT/ELI, the Company was in the development stage and its principal business
consisted of conducting research and development for the development and
commercialization of equipment and systems to recover valuable materials from
pulp residue generated by plants that produce recycled pulp and paper.
RESULTS OF OPERATIONS
First Three Months Ended March 30, 1996 Compared With First Three Months Ended
April 1, 1995
No revenues were recorded during either period as the Company was in the
development stage, and its principal business consisted of conducting research
and development associated with the development of the Company's fiber-recovery
system.
Research and development expenses increased to $203,000 in the first three
months of 1996 from $137,000 in the corresponding period in 1995 due to the
acceleration of the Company's research and development efforts associated with
the development of the Company's fiber-recovery system. The Company expects that
its spending on research and development will continue to increase.
Interest income in the first three months of 1996 represents interest
earned on cash received in connection with the initial capitalization of the
Company in February 1996.
1995 Compared With 1994
No revenues were recorded during either period as the Company was in the
development stage, and its principal business consisted of conducting research
and development associated with the development of the Company's fiber-recovery
system.
Research and development expenses increased to $601,000 in 1995 from
$128,000 in 1994 due to the acceleration of the Company's research and
development efforts associated with the development of the Company's
fiber-recovery system, increased personnel and higher engineering consulting
expenses.
1994 Compared With 1993
No revenues were recorded during either period as the Company was in the
development stage, and its principal business consisted of conducting research
and development associated with the development of the Company's fiber-recovery
system.
Research and development expenses increased to $128,000 in 1994 from
$106,000 in 1993 due to the acceleration of the Company's research and
development efforts associated with the development of the Company's
fiber-recovery system.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $12,484,000 at March 30, 1996, compared with no working
capital at December 30, 1995. During the three months ended March 30, 1996,
$88,000 was used for operating activities. In connection with the capitalization
of the Company on February 12, 1996, Thermo Fibertek transferred $12,500,000 in
cash to the Company. During 1996, the Company plans to make expenditures of
approximately $1.1 million for property, plant and equipment.
On July 3, 1996, the Company's GranTek subsidiary acquired substantially
all of the assets, subject to certain liabilities, of GT/ELI for approximately
$12,000,000 in cash, subject to a post-closing adjustment based upon the net
asset value of GT/ELI as of the closing date.
17
<PAGE> 20
Working capital at March 30, 1996, on a pro forma basis, assuming the
acquisition of the net assets of GT/ELI had occurred on that date, would have
been $1,257,000. (See the combined condensed pro forma balance sheet included
elsewhere in this Prospectus.)
The Company anticipates it will require significant amounts of cash to
complete the commercialization of its fiber-recovery system and to pursue the
acquisition of complementary businesses and technologies. The Company expects
that it will finance such acquired businesses through a combination of internal
funds, including the net proceeds from the sale of Units offered hereby,
additional debt or equity financing and/or short-term borrowings from Thermo
Fibertek and Thermo Electron, although there is no agreement with Thermo
Fibertek or Thermo Electron under which such parties would be obligated to lend
funds to the Company. The Company believes that its existing resources, together
with the proceeds from this offering, will be sufficient to meet the Company's
capital requirements for at least the next 24 months.
18
<PAGE> 21
BUSINESS
The Company was established as a subsidiary of Thermo Fibertek to develop
and commercialize equipment and systems to recover valuable materials from
increasing volumes of pulp residue generated by plants that produce recycled
pulp and paper. The Company intends to finance, build and operate recovery
plants on sites at, or immediately adjacent to, recycled pulp mills, employing a
proprietary process to treat pulp residue. The Company's plants will recover and
clean long cellulose fibers for resale to pulp mills and will process the
remaining recoverable components of pulp residue, such as fines (very short
fibers not usable for papermaking) and minerals, into saleable products. The
Company's GranTek subsidiary recently acquired substantially all of the assets,
subject to certain liabilities, of GT/ELI. GranTek employs patented technology
to produce absorbent granules from pulp residue. These granules, marketed under
the trade name BIODAC, are currently used as a carrier to deliver chemicals for
agricultural, lawn and garden, and other needs. GranTek's Green Bay, Wisconsin,
plant currently produces more than 30,000 tons of BIODAC per year.
The Company's strategy is to generate revenues from several sources. First,
the Company will seek to enter into long-term contracts with pulp and paper
mills under which the Company will charge the customer a tipping fee to accept
the customer's pulp residue. Second, the Company intends to sell much of the
clean long fibers it recovers directly back to the customer for use in the
papermaking process. Third, the Company will apply existing technologies, such
as its granulation technologies, and expects to develop new technologies, to
maximize the value of the other recoverable components of the pulp residue, such
as fines and minerals, for sale into other markets. For example, the Company
believes that GranTek's technology can be used to produce granules for oil and
grease absorbents as well as for specialty absorbents, such as for the cat box
filler market.
The Company is actively developing a process to recover long fibers from
pulp residues, and expects to complete the construction of a mobile pilot
recovery system in 1996. The Company expects that its first commercial plants
will feature only GranTek's technology to process pulp residue into absorbent
granules. The Company's strategy is to introduce this technology to pulp mill
customers, to construct its plants and to enter into long-term contracts with
such customers, and then, upon the completion of development, to retrofit
existing GranTek plants with the Company's long fiber-recovery technology. The
Company will also explore the construction of plants in certain niche markets
that may feature only the Company's long fiber-recovery technology.
INDUSTRY BACKGROUND
Paper is composed primarily of a mat of cellulose fibers. The fiber mat is
created from a pulp of either virgin cellulose materials such as wood, or from
recovered cellulose materials such as wastepaper. The principal goal of
converting wastepaper into a fiber slurry that can be used in conventional
papermaking machines is the removal of debris and impurities. This stock
preparation process involves multiple steps, including screening, de-inking and
washing. At the completion of the stock preparation process, the slurry is ready
for introduction into a standard papermaking machine. Fiber that would otherwise
be used to make recycled paper is lost at each step of the stock preparation
process. In total, approximately 25% of the recycled fiber entering a pulp mill
is lost in the process, contributing to approximately eight times more waste
when using recycled pulp than when using virgin pulp, all of which must be
disposed of at a substantial cost. Moreover, the substantial increase in the
waste stream is expected to correspondingly reduce the useful life of pulp and
paper mills' existing landfills. The Company believes, therefore, that the
increasing use of recycled pulp will generate corresponding pressures on these
mills to seek new solutions for their waste residue problems.
Environmental concerns and other factors in recent years have resulted in
the production of paper from recovered materials growing at a much faster rate
than production from virgin pulp. The use of wastepaper as a raw material has
already surpassed the use of virgin cellulose in some parts of the world. The
average recycled content for all paper grades produced in the United States has
grown from 15% in 1992 to more than 25% in 1995. Industry sources believe that
the market for recycled content will continue to grow, particularly in the
United States, which lags behind the world average of approximately 35% recycled
content.
19
<PAGE> 22
Pulp residue has historically been disposed of in landfills, particularly
in North America. As it leaves the pulp machine, the residue is composed of
approximately 98% water and 2% solids. After adding polymer flocculants to
clarify the water content and forcing the residue through a belt press and other
equipment to reduce the water content to approximately 65%, most pulp mills in
the United States dispose of this residue in privately owned landfills at an
average fully burdened cost of approximately $100 per ton. This figure includes
the cost to operate the press and other equipment that removes water content;
the cost of the polymer flocculant; transportation costs; and actual landfill
costs. In certain parts of Europe and in Japan, landfill tipping fees and
transportation costs are several times those in the United States, due to
stricter regulations and limited landfill space. In addition, although some
residue is incinerated, the Company believes that compliance with increasingly
strict emissions standards under the United States Clean Air Act and similar
state and local laws is making this alternative less attractive. Moreover, the
ash resulting from incineration, which may weigh as much as one-half of the
pre-incinerated residue, remains to be disposed of at an additional cost.
According to industry estimates, the North American pulp and paper industry
spent an estimated $1 billion to treat and dispose of approximately 10 million
tons of pulp residue in 1993. This volume represented the equivalent of
approximately 10% of all of the municipal solid waste generated annually in the
United States. The Company believes that worldwide expenditures to treat and
dispose of pulp residue in 1993 were approximately $2.6 billion, of which
approximately $850 million was spent in Europe, $650 million was spent in
Australia and Asia, and $100 million was spent in the rest of the world.
The Company believes that several factors will cause the costs of disposing
of pulp residue in landfills, particularly in Europe and Asia, to increase in
the future. First, as the demand for recycled fiber increases, mills are tending
to use lower-quality wastepaper, while still attempting to produce the
high-grade pulp necessary to make high-quality recycled paper with the strength
and brightness of virgin paper. Lower-quality paper requires additional
processing, which results in still further increases in the volume of residue
generated to produce the same amount of recycled paper. Second, due to the
relatively larger waste streams generated from using recycled fiber compared to
those of virgin fiber, the Company believes that pulp and paper companies'
existing landfill space will be consumed more rapidly than originally expected.
Third, landfills are increasingly the subject of federal and state regulations,
such as Subtitle D of the Federal Resource Conservation and Recovery Act of 1976
("RCRA"), which imposes numerous requirements on new landfills, including the
requirement that they be lined. These regulatory burdens, coupled with the
difficulty in siting new landfills due to community opposition, will continue to
make landfilling an increasingly expensive option for pulp and paper mills. As a
result of these factors, pulp and paper mills are increasingly seeking
alternative methods to solve their disposal problems.
STRATEGY
The Fibergen Process
The Company's recovery and manufacturing process begins at the recycled
pulp mill, which is expected to pump its residue to a plant owned and operated
by the Company on a site at, or immediately adjacent to, the mill. The Company
expects that its commercial plants will generally consist of a single
steel-shell building constructed on a concrete pad, occupying approximately two
acres of land. The Company intends first to employ a proprietary process to
recover and clean the long cellulose fibers, and to sell much of the clean long
fibers it recovers directly back to the customer for use in the papermaking
process. A key component of the Company's fiber-recovery system is a proprietary
"scalping" technology under development by Thermo Fibertek. Scalpers currently
manufactured by Thermo Fibertek are already being used to recover reusable paper
fibers from waste streams. At one mill, these scalpers recovered more than 15
tons per day of reusable fiber from a waste stream of approximately 50 tons per
day.
The Company will then process the remaining fibers and minerals into
saleable products, such as BIODAC, for use in the agricultural carrier, oil and
grease absorbent, cat box filler and other markets. Employing GranTek's
proprietary granulation technology, after the long fibers are removed, the
remaining residue is dried and processed into granules of optimum bulk density
for use in a variety of agricultural, lawn
20
<PAGE> 23
and garden, and industrial needs. GranTek's granulation technology can also
process long fibers into BIODAC at plants in which the Company elects not to
deploy its long fiber-recovery technology.
[INSERT CAMERA-READY ILLUSTRATION HERE - SEE APPENDIX]
Sources of Revenue
The Company's strategy is to generate revenues from several sources.
Tipping Fees. The Company will seek to enter into long-term contracts with
pulp and paper mills under which the Company will charge the customer a tipping
fee to accept the customer's pulp residue. The Company anticipates that the
tipping fees it receives will generally be competitive with the mills' current
disposal costs. The Company believes that pulp mills will prefer to dispose of
their residue streams by paying the Company a tipping fee for a number of
reasons. Disposal of residue with the Company will provide pulp mills with a
long-term disposal solution and will eliminate concerns over long-term capacity
constraints at their landfills; will relieve the pulp mills of the
responsibility of complying with changing treatment and disposal regulations;
and will allow pulp mills to reduce their capital investments in dewatering and
treatment equipment, and to focus their resources on the actual manufacture of
paper.
Sale of Recovered Long Fibers. The Company intends to sell much of the
clean long fibers it recovers directly back to the customer for use in the
papermaking process. Long fibers may also be sold to mills other than those from
which they originated, and may be sold for non-papermaking uses, such as for
chip board and other composite building materials. The Company believes that the
direct access to clean long fiber will benefit the customer by further reducing
the customer's operating costs, and will benefit the Company by providing a
second source of revenue and reducing the Company's final disposal costs. The
prices at which the Company may be able to sell the clean long fibers to mills
will depend on several factors, including the cleanliness of the recovered fiber
and the prevailing prices for recycled pulp and wastepaper. These prices tend to
be cyclical and to vary according to paper type.
Sale of Other Recoverable Components. The Company will apply existing
technologies, such as its granulation technologies, and expects to develop new
technologies, to maximize the value of the other recoverable components of the
pulp residue, such as fines and minerals, for sale into other markets. The
business recently acquired by the Company's GranTek subsidiary complements the
Company's approach of developing new markets for the components of pulp residue.
GranTek has developed and patented a technology to produce premium absorbent
granules from such residue. These granules, marketed under the trade name
BIODAC, are sold in bulk to chemical companies for use as a carrier to deliver
chemicals for agricultural, lawn and garden, and other needs. The Company
intends to further develop GranTek's technology to produce granules for oil and
grease absorbents as well as for specialty absorbents, such as for the cat box
filler market. The Company's strategy is to integrate GranTek's process into its
fiber-recovery plants, allowing the Company to recover long cellulose fibers and
to granulate fibers and minerals into products to meet a variety of
agricultural, lawn and garden, and industrial needs.
21
<PAGE> 24
Site Development
According to industry sources, there are approximately 100 recycled pulp
mills in the United States. The Company believes that there are at least as many
such mills in Europe and that the trend is for additional such mills to be built
in the future. The Company intends to select sites for its first plants based on
identified criteria, such as the volume, quality and composition of the
customer's residue stream; the cost and availability of alternative disposal
methods; regional disposal fees; access to markets for the recovered components;
and the local regulatory environment and community concerns. The Company will
tend to focus its efforts on niche areas in which disposal and/or transportation
costs are relatively high. Although the Company will evaluate opportunities
worldwide, it currently expects that its first plants will be located in
selected areas of Europe and the United States. The Company expects to focus its
development efforts in Germany, where landfill costs in certain areas can be as
high as $560 per ton. Moreover, the federal government of Germany has recently
enacted legislation that will prohibit, after 2005, the landfilling of any
substance with a liquid or organic content in excess of 5%. This legislation,
which is being replicated on an accelerated basis at the local level in several
regions of Germany, would in effect prohibit the disposal of papermaking
residues in landfills. The Company anticipates that it will construct subsequent
plants in other European locations, where landfill costs are also higher, and
the environmental laws more restrictive, than in the United States.
The Company expects to seek to finance each of its recovery plants on a
substantially nonrecourse basis through borrowings from third party lenders.
These borrowings typically would be secured only by the recovery plant assets
and/or by the capital stock of a subsidiary operating such plant. See "Risk
Factors -- Future Capital Needs; Project Financing; Dependence on Capital
Markets." The development of each site will require the Company to obtain
numerous approvals, licenses and permits. Adverse decisions by governmental
authorities with respect to permit applications submitted by the Company may
result in abandonment or delay of proposed projects. Because the Company will
generally be seeking permits to operate its facilities on or adjacent to
permitted pulp and paper mills, however, and because the Company will be
reducing or eliminating the pulp residue that would otherwise be landfilled or
incinerated, the Company believes that it will generally be able to obtain such
permits without undue difficulty. See " --Government Regulation," below, and
"Risk Factors -- Environmental and Regulatory Risks."
End-Use Markets
The Company currently produces BIODAC, an agricultural carrier that is
dust-free and is uniform in particle size, absorptivity and bulk density. BIODAC
is chemically neutral to a range of pesticides and breaks down into elements
naturally occurring in the soil. BIODAC is sold in bulk to chemical companies
for use as a carrier to deliver chemicals for agricultural, lawn and garden, and
other needs. The Company believes that the total United States market for
agricultural carriers is in excess of $40 million and 395,000 tons per year. The
Company intends to further develop GranTek's technology to produce granules for
oil and grease absorbents as well as for specialty absorbents, such as for the
cat box filler market. The Company believes that the total United States market
for oil and grease absorbents is in excess of $37 million and 575,000 tons per
year, and that the total United States market for cat box filler is in excess of
$150 million and 1.5 million tons per year. The Company believes that the
dust-free and uniform nature of its BIODAC granules will be a competitive
advantage as it enters these markets.
Recovered minerals can currently also be sold in several low-value
industrial markets, such as for cement kiln feedstock, landfill cover and
composting filler. However, the Company expects to develop new technologies to
maximize the value of inorganic mineral particles, such as calcium carbonate,
kaolin clay and titanium dioxide, recovered from the pulp residue for sale into
newly developed, higher-value markets. The Company believes that the market
value of these mineral particles may be as high as $200 per ton for use as paper
fillers, coatings and brighteners. However, since the process to separate and
brighten these particles for paper fillers has not yet been developed, the cost
to process these materials is not currently known. The Company also expects to
process pulp plant waste water and to return the treated water to the plants for
use in the papermaking process. See "Risk Factors -- Uncertainty of Product
Development."
22
<PAGE> 25
TECHNOLOGY; RESEARCH AND DEVELOPMENT
The Company is developing a proprietary process to recover long cellulose
fibers from pulp residue. This process has been successfully tested, and the
Company expects to complete the construction of a mobile pilot recovery system
in 1996. The Company intends to take this pilot system directly to prospective
customers for demonstrations using the pulp mills' own residue streams. During
this period, the Company will continue to modify its technology and will also
determine where to build its first permanent facilities. The Company expects to
begin construction of its first commercial recovery plant employing its long
fiber-recovery technology before the end of 1997.
Prior to its recent acquisition of the GT/ELI business by GranTek,
substantially all of the Company's operations were related to research and
development of the Company's fiber-recovery technology. The Company spent
$106,000, $128,000, $601,000 and $203,000 on research and development of this
technology in fiscal 1993, 1994 and 1995, and the first three months of fiscal
1996, respectively.
The Company's research and development efforts are currently focused on
developing and improving its fiber-recovery process. Modifications to existing
equipment are also under consideration to improve washing and de-inking
capability. The Company is also exploring cost-effective processes to produce
higher value products from the separated fines and mineral residue.
GranTek's Facility
GranTek operates a fully permitted manufacturing plant in Green Bay,
Wisconsin, at which it processes residue provided by a nearby paper mill into
approximately 30,000 tons of BIODAC per year. The plant currently operates 24
hours per day, five days per week. A fully permitted pilot plant is located
within GranTek's main manufacturing plant. This pilot plant is permitted to
process 24 tons of material per day, and has been used to develop many of the
innovations implemented in GranTek's main plant. The Company believes that this
pilot plant will give the Company the ability to process waste streams from
other paper mills under operating conditions in quantities sufficient to
determine both final product and operating characteristics and costs, as well as
to develop new technologies.
Under GranTek's contract with the paper mill, and subject to certain de
minimis exceptions, such mill has the exclusive right to supply pulp residue to
GranTek's commercial plant. In exchange, such mill is required to use its best
efforts to provide GranTek with GranTek's pulp residue requirements (up to a
maximum of 250 tons per day). The contract permits such mill's pulp residue to
contain up to 25 parts per million of polychlorinated biphenyls ("PCBs"). This
amount is well below amounts of PCBs permitted by applicable regulations.
GranTek is required to indemnify such mill against any environmental liability
that may arise from GranTek's use of the residue in any consumer or agricultural
product. However, GranTek may terminate the contract in the event that the
residue is determined to contain hazardous waste in excess of amounts permitted
by applicable regulations. The contract terminates on December 26, 1997, subject
to successive mutual two-year extensions.
GranTek is presently engaged in research and development of an absorbent
product that, if successful, would provide an opportunity to enter the general
oil and grease absorbent market, specialty absorbent market and the cat box
filler market.
INTELLECTUAL PROPERTY
The Company's success will depend in part on the strength and protection of
its proprietary methodologies and designs and other proprietary intellectual
property rights. The Company relies on a combination of patent, trade secret,
nondisclosure and other contractual arrangements, and copyright and trademark
laws, to protect its proprietary rights. The Company seeks to limit access to
and distribution of its proprietary information. There can be no assurance that
the steps taken by the Company in this regard will be adequate to deter
misappropriation of its proprietary information, that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights, or that competitors will not be able to develop
similar technologies independently.
23
<PAGE> 26
The Company currently holds six issued United States patents, expiring at
various dates ranging from 2002 to 2003, relating to various aspects of the
processing of cellulose-based granular materials and the use of such materials
in the agricultural, general absorbent, oil absorbent and cat box filler
markets. The Company also has 11 foreign counterparts to its U.S. patents in
Canada and in various European countries, and has six additional patents pending
in three European countries. In addition, Thermo Fibertek holds one United
States patent, expiring in 2011, and expects to file additional United States
patent applications in the near future, relating to the "scalping" technology
that is a key component of the Company's fiber-recovery system.
In 1994, GranTek's newly acquired business, GT/ELI, initiated litigation in
United States District Court against two companies after they announced their
intent to jointly market a cellulose-based absorbent granule. This litigation,
in which GT/ELI alleged that the defendants were infringing two of GT/ELI's
patents, was resolved in February 1996, when the defendants agreed to enter a
judgment holding that the two patents were valid and enforceable and enjoining
the defendants from the manufacture, use or sale of particles that contain
cellulosic fibrous materials of certain bulk density ranges for use as a carrier
for any agricultural, row crop, home lawn and garden, professional turf,
ornamental plant or horticultural purpose. GT/ELI has granted these companies
nonexclusive licenses under these patents to sell cellulose-based granules
produced at an existing site for sale in the oil and grease absorbent and cat
box filler markets.
The Company believes that its technology, services, products and other
proprietary rights do not infringe on the proprietary rights of third parties.
There can be no assurance, however, that third parties will not assert
infringement claims in the future. See "Risk Factors -- Risks Associated with
Protection, Defense and Use of Proprietary Technology and Intellectual
Property."
COMPETITION
The Company expects that its principal competitors for access to pulp
residues will be landfills, which currently have a collective 70% market share
in North America and approximately 40% in Europe. The Company believes, however,
that landfill costs will tend to increase over time and that regulations
governing landfills will become more strict, particularly in Europe and Japan.
The balance of the pulp residues produced in the United States and Europe are
currently incinerated or are used to manufacture composting materials, egg
cartons and other low-value, industrial products.
Several large waste-management companies have increased their marketing
activities to provide landfill disposal services to the pulp and paper industry.
Although the Company does not believe that these companies are able to provide a
residue processing capability, the Company can expect that, if its technology is
successful, others will seek to develop similar technologies and products that
may be superior to those of the Company. As other companies attempt to provide
landfill services and/or residue processing capability to the pulp and paper
industry, the Company expects to encounter increasing competition.
The Company believes that its approach to the management of environmental
problems associated with pulp residue from pulp and paper mills and its ability
to take advantage of Thermo Fibertek's name recognition, financial strength and
experience constitute significant competitive advantages.
The Company believes that GranTek is currently the only producer of
cellulose-based agricultural carriers. GranTek's principal competitors in the
United States are producers of clay-based agricultural carriers for row crops
and professional turf protection, including Oil-Dri Corporation of America,
Floridin/Engelhard, Aimcor and American Colloid, and producers of corn cob
granules traditionally used in the home, lawn and garden and professional turf
markets, including The Andersons, Mt. Pulaski, Green Products, Independence Cob
and Junior Weisner. GranTek's principal competitive advantages are that BIODAC
contains virtually no dust and is more uniform in particle size distribution and
bulk density than are clay-based and corn cob granular carriers.
As the Company attempts to develop new markets for the components of the
pulp residue it processes, the Company will encounter competition from
established companies within those markets. Some of these competitors may have
substantially greater financial, marketing and other resources than those of the
24
<PAGE> 27
Company, and the Company expects that such competition may be intense. See "Risk
Factors -- Competition."
EMPLOYEES
As of July 3, 1996, the Company had 29 employees, of whom six were engaged
in research and development, 15 were engaged in residue processing and
manufacturing, two were engaged in sales and marketing, and six were engaged in
general management. Of these 29 employees, 21 were employed by GranTek. Several
of the Company's employees were previously involved in product development for
Thermo Fibertek. The Company expects to hire additional employees within the
next year, all of whom are expected to be engaged in research and development
and/or sales and marketing. No assurance can be given that management
experienced in building a research and development or manufacturing
organization, or additional skilled personnel necessary to successfully
commercialize and expand the Company's business and operations, can be recruited
and retained. See "Risk Factors -- Lack of Operating History and Management."
None of the Company's employees is represented by a labor union, and the Company
considers its relations with its employees to be good.
FACILITIES
The Company leases a 6,000-square foot, stand-alone building in Bedford,
Massachusetts, at which it is developing its mobile pilot recovery system. This
lease expires in April 2001, subject to the Company's option to extend the lease
for two three-year terms. The Company also has the right to terminate the lease
without penalty in April 1999.
GranTek owns approximately 3.3 acres of land in Green Bay, Wisconsin, on
which its processing plant is situated. GranTek's corporate office occupies 800
square feet in Cassopolis, Michigan, which is occupied under a lease expiring in
October 1996. The Company expects to relocate GranTek's corporate office prior
to or upon the expiration of such lease.
The Company believes that its facilities are adequate for its current
operations.
GOVERNMENT REGULATION
The Company's operations are subject to significant government regulation,
including stringent environmental laws and regulations. Among other things,
these laws and regulations impose requirements to control air, soil and water
pollution, and regulate health, safety, zoning and land use and the handling and
transportation of industrial by-products and waste materials. These requirements
may also be imposed as conditions of operating permits or licenses that are
subject to renewal, modification or revocation. This regulatory framework
imposes significant compliance burdens and costs on the Company. Notwithstanding
the burdens of this compliance, the Company believes that its business prospects
are enhanced by the enforcement of environmental laws and regulations by
government agencies.
Among the principal laws governing the Company's operations are the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
and its similar state equivalents and RCRA. CERCLA imposes joint and several
liability for the costs of remediation and natural resource damages on the owner
or operator of a facility from which there is a release or a threat of a release
of a hazardous substance into the environment and on the generators and
transporters of those hazardous substances. RCRA provides a comprehensive
framework for the regulation of the generation, transportation, treatment,
storage and disposal of hazardous waste. Under RCRA and equivalent state laws,
regulatory authorities may require, pursuant to administrative order or as a
condition of an operating permit, that the owner or operator of a regulated
facility take corrective action with respect to contamination resulting from
past or present operations. The intent of RCRA is to control hazardous wastes
from the time they are generated until they are properly recycled or treated and
disposed. Such laws also require that the owner or operator of regulated
facilities provide assurance that funds will be available for the closure and
post closure care of its facilities. Because Subtitle D of RCRA imposes strict
requirements on landfills, such as the
25
<PAGE> 28
requirement that new landfills must be lined, RCRA creates an incentive for pulp
mills to use residue-management technologies such as those offered by the
Company.
GranTek emits into the atmosphere from its Green Bay, Wisconsin, facility
approximately 4.5 pounds per year of PCBs, as well as certain other hazardous
pollutants such as formaldehyde, benzene and volatile organic compounds
("VOCs"). Applicable Wisconsin regulations limit PCB emissions to 0.5 pounds per
year unless the generator can demonstrate that it is using the best available
control technology to limit emissions. GranTek has been issued an air operating
permit by the Wisconsin Department of Natural Resources (the "WDNR"). GranTek's
operating permit and its application for a new Title V operating permit both
require GranTek to reduce PCB and VOC emissions and to file bi-annual reports on
the amount of PCBs being emitted. In August 1995, GranTek submitted materials to
the WDNR asserting that no technologically or economically feasible methods to
reduce PCB or VOC emissions from its facility can be implemented at the present
time and, accordingly, requesting that GranTek be relieved of its obligation to
reduce emissions. As of the date of this Prospectus, GranTek has received no
response from the WDNR. Although the Company believes that the WDNR will accept
GranTek's findings, no assurance can be given that the WDNR will not require
GranTek to comply with applicable emissions limitations, that such compliance
will not require the Company to make significant expenditures or that such
compliance will be technically or economically feasible.
The pulp residue processed by GranTek contains trace amounts of PCBs,
dioxins, furans and other metals, residual amounts of which are also found in
GranTek's BIODAC product. Although these substances are present in residual
quantities below the maximum levels currently permitted under RCRA and
applicable federal and state regulations, no assurance can be given that such
regulations may not be made more stringent in the future, that pulp residue
containing such substances may not be regulated as a hazardous waste under RCRA
or that federal or state regulations may not in the future prohibit the use of
materials containing these substances in agricultural applications. Changes in
these regulations could also affect the characteristics of the waste generated
by pulp and paper mills. As a result, it is possible that disposal of pulp
residue could be accomplished in a manner that may not involve the Company's
facilities or that would require the Company to purchase pulp residue.
GranTek's BIODAC agricultural carrier is subject to regulation under the
federal Insecticide, Fungicide and Rodenticide Act, which, among other things,
empowers the Environmental Protection Agency to establish and enforce acceptable
tolerance levels for agricultural chemicals. In 1989, however, at GranTek's
request, the Environmental Protection Agency granted an exemption from the
requirement that a tolerance be established for de-inked paper fiber used as a
carrier in pesticide formulations applied to growing crops.
The governmental regulatory process requires the Company to obtain and
retain numerous approvals, licenses and permits to conduct its operations, any
of which may be subject to revocation, modification or denial. Operating permits
need to be renewed periodically and may be subject to revocation, modification,
denial or non-renewal for various reasons, including failure of the Company to
satisfy regulatory concerns. Adverse decisions by governmental authorities on
permit applications submitted by the Company may result in abandonment or delay
of projects, premature closure of facilities or restriction of operations, all
of which could have a material adverse effect on the Company's business and
prospects. See "Risk Factors -- Environmental and Regulatory Risks."
26
<PAGE> 29
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO FIBERTEK
The Company was organized in February 1996 as a wholly owned subsidiary of
Thermo Fibertek. Thermo Fibertek has contributed all of the assets and business
relating to the development of its fiber-recovery system, together with
$12,500,000 in cash, to the Company in exchange for 10,000,000 shares of Common
Stock of the Company.
The Company expects to purchase a key component of its fiber-recovery
process from Thermo Fibertek at prices and on terms comparable to those that
could be obtained in arm's-length transactions. The Company does not expect to
have the right to manufacture this component itself unless Thermo Fibertek
ceases to manufacture it. Thermo Fibertek has agreed not to sell this component
or any other technology or products proprietary to Thermo Fibertek for use in
competition with the Company, but may sell such technology and products for uses
other than for pulp residue recovery. See "Risk Factors -- Potential Conflicts
of Interest". The Company expects that other components for its recovery system
can be purchased or licensed from third parties on commercially reasonable
terms.
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created publicly and/or privately held majority owned
subsidiaries. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Fibertek develops, manufactures and markets a range of equipment and
accessory products for the domestic and international paper and paper-recycling
industries. Thermo Fibertek's products include de-inking systems,
stock-preparation equipment, and water-management systems. For its fiscal years
ended December 31, 1994 and December 30, 1995 and for the three months ended
March 30, 1996, Thermo Fibertek had consolidated revenues of $162,625,000,
$206,743,000 and $48,980,000, respectively, and consolidated net income of
$10,894,000, $20,249,000 and $5,206,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, paper-recycling
and papermaking equipment, alternative-energy systems, industrial process
equipment and other specialized products. Thermo Electron and its subsidiaries
also provide environmental and metallurgical services and conduct advanced
technology research and development. For its fiscal years ended December 31,
1994 and December 30, 1995 and for the three months ended March 30, 1996, Thermo
Electron had consolidated revenues of $1,729,191,000, $2,207,417,000 and
$635,094,000, respectively, and consolidated net income of $104,711,000,
$140,080,000 and $40,442,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries, including the Company,
recognize that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo Electron
and each of the Thermo Subsidiaries, including the Company, has adopted the
Thermo Electron Corporate Charter (the "Charter") to define the relationships
and delineate the nature of such cooperation among themselves. The purpose of
the Charter is to ensure that (1) all of the companies and their stockholders
are treated consistently and fairly, (2) the scope and nature of the cooperation
among the companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4) Thermo Electron
and the Thermo Subsidiaries, in the aggregate, are able to obtain the most
favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the
27
<PAGE> 30
"Thermo Group") to external financing sources, ensuring compliance with external
financial covenants and internal financial policies, assisting in the
formulation of long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also provide guarantees
of debt obligations of the Thermo Subsidiaries or may obtain external financing
at the parent level for the benefit of the Thermo Subsidiaries. In certain
instances, the Thermo Subsidiaries may provide credit support to, or on behalf
of, the consolidated entity or may obtain financing directly from external
financing sources. Under the Charter, Thermo Electron is responsible for
determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to borrowings
of Thermo Electron or other members of the Thermo Group, and for apportioning
such constraints within the Thermo Group. In addition, Thermo Electron
establishes certain internal policies and procedures applicable to members of
the Thermo Group. The cost of the services provided by Thermo Electron to the
Thermo Subsidiaries is covered under existing corporate services agreements
between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. Beginning in
fiscal 1996, the Company will pay an annual fee for these services equal to 1.0%
of the Company's revenues. The fee may be changed by mutual agreement of the
Company and Thermo Electron. The Company was not charged for these services in
fiscal 1992, 1993, 1994 or 1995 because the Company recorded no revenues during
these periods and the amount of services received was not material. Management
believes that the charges under the Services Agreement are reasonable and that
the terms of the Services Agreement are representative of the expenses the
Company would incur on a stand-alone basis. For additional items such as
employee benefit plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Company based on charges attributable to the Company. The
Services Agreement automatically renews for successive one-year terms, unless
canceled by the Company upon 30 days' prior notice. In addition, the Services
Agreement terminates automatically in the event the Company ceases to be a
member of the Thermo Group or ceases to be a participant in the Charter. In the
event of a termination of the Services Agreement, the Company will be required
to pay a termination fee equal to the fee that was paid by the Company for
services under the Services Agreement for the nine-month period prior to
termination. Following termination, Thermo Electron may provide certain
administrative services on an as-requested basis by the Company or as required
in order to meet the Company's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge the Company a fee equal to the market
rate for comparable services if such services are provided to the Company
following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermo Fibertek
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns.
28
<PAGE> 31
Under current law, the Company will be included in such tax returns so long as
Thermo Electron owns at least 80% of the outstanding common stock of Thermo
Fibertek and Thermo Fibertek owns at least 80% of the outstanding Common Stock
of the Company. Immediately following this offering, Thermo Fibertek will own
less than 80% of the Company's outstanding Common Stock and the Company will not
be included in Thermo Electron's consolidated federal and state income tax
returns for periods commencing thereafter.
MASTER GUARANTEE REIMBURSEMENT AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement Agreement
with Thermo Electron which provides that the Company will reimburse Thermo
Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf, including
the Guarantees of the Redemption Rights. Thermo Fibertek has entered into a
similar agreement with Thermo Electron with regard to the Company's obligations
which are guaranteed by Thermo Electron. The Company has also entered into a
Master Guarantee Reimbursement Agreement with Thermo Fibertek which provides
that the Company will reimburse Thermo Fibertek for any costs it incurs in the
event that Thermo Fibertek is required to pay Thermo Electron or any other party
pursuant to any guarantees or other commitments Thermo Fibertek issues or enters
into on the Company's behalf.
MISCELLANEOUS
Currently, Thermo Fibertek beneficially owns 100% of the outstanding shares
of Common Stock. Thermo Fibertek intends to maintain a majority ownership of the
Company. This may require the purchase by Thermo Fibertek of additional shares
of Common Stock from time to time as the number of outstanding shares issued by
the Company increases. These purchases may be made either on the open market or
directly from the Company.
The Company's cash equivalents may be invested in a repurchase agreement
with Thermo Electron, pursuant to which the Company in effect lends cash to
Thermo Electron, which Thermo Electron collateralizes with investments
principally consisting of corporate notes, United States government agency
securities, money market funds, commercial paper, and other marketable
securities, in the amount of at least 103% of such obligation. The Company's
funds subject to the repurchase agreement will be readily convertible into cash
by the Company and have an original maturity of three months or less. The
repurchase agreement earns a rate based on the Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter.
29
<PAGE> 32
MANAGEMENT
<TABLE>
The Directors and executive officers of the Company are as follows:
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William A. Rainville.................... 54 Chairman of the Board and Director
Dr. Yiannis A. Monovoukas............... 35 President, Chief Executive Officer and Director
John N. Hatsopoulos..................... 61 Vice President, Chief Financial Officer and Director
Paul F. Kelleher........................ 53 Chief Accounting Officer
Jonathan W. Painter..................... 37 Treasurer and Director
Anne T. Barrett......................... 66 Director
</TABLE>
- ---------------
All of the Company's Directors are elected annually and hold office until
their respective successors are elected and qualified. Executive officers are
elected annually by the Board of Directors and serve at its discretion. Mr.
Hatsopoulos and Mr. Kelleher are employees of Thermo Electron and certain of its
subsidiaries other than the Company, but devote such time to the affairs of the
Company as the Company's needs reasonably require from time to time. Mr.
Rainville is also President and Chief Executive Officer of Thermo Fibertek, and
is responsible for certain operations within Thermo Fibertek that are not
related to the Company's operations.
Mr. William A. Rainville has been Chairman of the Board and a Director of
the Company since its incorporation in February 1996. Mr. Rainville has been
President and Chief Executive Officer of Thermo Fibertek since its inception in
November 1991 and a Director of Thermo Fibertek since January 1992. From 1984
until January 1993, Mr. Rainville was President and Chief Executive Officer of
Thermo Electron Web Systems Inc., a subsidiary of Thermo Fibertek. He has been a
Senior Vice President of Thermo Electron since March 1993 and a Vice President
since 1986. Mr. Rainville is also a director of Thermo Fibertek, Thermo Ecotek
Corporation, Thermo TerraTech Inc. and Thermo Remediation Inc.
Dr. Yiannis A. Monovoukas has been President, Chief Executive Officer and a
Director of the Company since its incorporation in February 1996. Dr. Monovoukas
has been a Corporate Business Analyst since he joined Thermo Electron in July
1995. From 1993 through June 1995, Dr. Monovoukas was a graduate student at the
Harvard Business School. From 1990 until 1993 he was a staff scientist/engineer
with Raychem Corporation, a materials science company, which he joined upon
completion of a Ph.D. program in chemical engineering at Stanford University.
John N. Hatsopoulos has been a Vice President, Chief Financial Officer and
a Director of the Company since its incorporation in February 1996. Mr.
Hatsopoulos has been a Vice President and Chief Financial Officer of Thermo
Fibertek since its inception in November 1991, the Chief Financial Officer of
Thermo Electron since 1988 and an Executive Vice President of Thermo Electron
since 1986. He is also a Director of Thermedics Inc., Thermo Ecotek Corporation,
Thermo Fibertek, Thermo Instrument Systems Inc., Thermo Power Corporation,
Thermo TerraTech Inc., ThermoTrex Corporation, Thermo Optek Corporation,
ThermoQuest Corporation, Thermo Sentron Inc., Trex Medical Corporation and
Lehman Brothers Funds, Inc., an open-end investment management company.
Paul F. Kelleher has been the Chief Accounting Officer of the Company since
its incorporation in February 1996. Mr. Kelleher has been Vice President,
Finance of Thermo Electron since 1987 and served as its Controller from 1982 to
January 1996. He is a director of ThermoLase Corporation.
Jonathan W. Painter has been Treasurer and a Director of the Company since
its inception in February 1996. Mr. Painter has been Treasurer of Thermo
Electron since August 1994 and Treasurer of Thermo Fibertek since October 1994.
Mr. Painter had served as Director of Strategic Planning of Thermo Fibertek from
February 1993 through August 1994. Prior to that time, Mr. Painter was Associate
General Counsel of Thermo Electron and its subsidiaries.
30
<PAGE> 33
Anne T. Barrett has been a Director of the Company since July 1996. Ms.
Barrett has been an independent consultant on investor relations and
communications matters since her retirement in November 1993. Prior to that
time, Ms. Barrett was Director of Corporate Communications for Thermo Electron
for more than five years.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company, Thermo Fibertek or Thermo
Electron receive an annual retainer of $2,000 and a fee of $1,000 per day for
attending meetings of the Board of Directors and $500 per day for participating
in meetings of the Board of Directors held by means of conference telephone and
for participating in certain meetings of committees of the Board of Directors.
Payment of Directors fees is made quarterly.
Messrs. Rainville, Monovoukas, Hatsopoulos and Painter are all employees of
Thermo Electron companies and do not receive any cash compensation from the
Company for their services as Directors. Directors are also reimbursed for
reasonable out-of-pocket expenses incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Electron; or (b) the failure of
the persons serving on the Board of Directors immediately prior to any contested
election of directors or any exchange offer or tender offer for the Common Stock
or the common stock of Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. The Company has reserved 25,000 shares under this plan. The
Deferred Compensation Plan will not become effective until completion of an
initial public offering. No units have been accumulated under this plan.
Directors Stock Option Plan. The Company has adopted a directors stock
option plan (the "Plan") providing for the grant of stock options to purchase
shares of the Common Stock to outside Directors (Directors who are not employees
of the Company or any of its affiliates) as additional compensation for their
service as Directors. The Plan provides for the grant of stock options upon a
Director's initial appointment and, beginning in 2000, awards options to
purchase 1,000 shares annually to eligible Directors, provided the Company's
Common Stock is then publicly traded. A total of 200,000 shares of Common Stock
have been reserved for issuance under the Plan.
Under the Plan, each eligible Director will be granted an option to
purchase 20,000 shares of Common Stock upon the later of the Director's
appointment or election, or the completion of an initial public offering or
private placement of shares of Common Stock of the Company primarily to
independent investors. In addition, each new director initially joining the
Board of Directors in 1996 will be granted an option to purchase 20,000 shares
of Common Stock. The size of the award to new Directors appointed to the Board
of Directors after 1996 is reduced by 5,000 shares in each subsequent year.
Directors initially joining the Board of Directors after 1999 would not receive
an option grant upon their appointment or election to the Board of Directors,
but would be eligible to participate in the annual option awards described
below. Options evidencing initial grants to Directors vest and are exercisable
upon the fourth anniversary of the grant date, unless the Common Stock
underlying the option grant is registered under Section 12 of the Securities
Exchange Act of 1934, as amended ("Section 12 Registration") prior to the fourth
anniversary of the grant date. In the event that the effective date of Section
12 Registration occurs prior to the fourth anniversary of the grant date, then
the option becomes exercisable (on the later of 90 days after Section 12
Registration or six months after the grant date) and the shares acquired upon
exercise will be subject to restrictions on transfer and the right of the
Company to repurchase such shares at the exercise price in the event the
Director ceases to serve as a Director
31
<PAGE> 34
of the Company or any other Thermo Electron company. In such event, the
restrictions and repurchase rights shall lapse or be deemed to have lapsed in
equal annual installments of 5,000 shares, starting with the first anniversary
of the grant date, provided the Director has continuously served as a Director
of the Company or any other Thermo Electron company since the grant date. These
options expire on the fifth anniversary of the grant date, unless the Director
dies or otherwise ceases to serve as a Director of the Company or any other
Thermo Electron company prior to that date.
Commencing in 2000, eligible Directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business on
the date of each annual meeting of stockholders of the Company to each Director
then holding office, commencing with the annual meeting to be held in 2000.
Options evidencing annual grants may be exercised at any time from and after the
six-month anniversary of the grant date of the option and prior to the
expiration of the option on the third anniversary of the grant date. Shares
acquired upon exercise of the options would be subject to repurchase by the
Company at the exercise price if the recipient ceased to serve as a Director of
the Company or any other Thermo Electron company prior to the first anniversary
of the grant date.
The exercise price for options granted under the Plan is determined by the
average of the closing prices reported by the American Stock Exchange (or other
principal exchange in which the Common Stock is then traded) for the five
trading days immediately preceding and including the date the option is granted
or, if the shares underlying the option are not so traded, at the last price
paid per share by independent investors in an arms-length transaction with the
Company prior to the option grant.
As of July 2, 1996, no options to purchase Common Stock had been granted
under the Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer for the fiscal year ended December 30, 1995. No other executive officer
of the Company who held office at the end of fiscal 1995 met the definition of
"highly compensated" within the meaning of the Securities and Exchange
Commission's executive compensation disclosure rules for this period.
The Company is required to appoint certain executive officers and full-time
employees of Thermo Electron as executive officers of the Company, in accordance
with the Thermo Electron Corporate Charter. The compensation for these executive
officers is determined and paid entirely by Thermo Electron. The time and effort
devoted by these individuals to the Company's affairs is provided to the Company
under the Services Agreement between the Company and Thermo Electron.
Accordingly, the compensation for these individuals is not reported in the
following table. See "Relationship with Thermo Electron and Thermo Fibertek."
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
---------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTIONS (NO. OF
FISCAL ------------------- SHARES AND
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPANY)(1)
--------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Yiannis A. Monovoukas
President and Chief Executive Officer(2)............. 1995 $39,583(2) -- 11,250(TMO)
</TABLE>
32
<PAGE> 35
- ---------------
(1) Dr. Monovoukas has been granted options to purchase shares of common stock
of Thermo Electron (designated in the table as TMO) as part of Thermo
Electron's stock option program. Information with respect to options to
purchase such stock reflects a three-for-two split of such stock effected in
June 1996.
(2) Dr. Monovoukas was appointed President and Chief Executive Officer of the
Company in February 1996. Prior to that time, he served as a Corporate
Business Analyst for Thermo Electron since joining Thermo Electron in July
1995. Reported in the table under "Salary" is the salary paid in 1995 to Dr.
Monovoukas for his service as Corporate Business Analyst of Thermo Electron,
which was paid at an annualized rate of $95,000 and is representative of the
salary to be paid in 1996 for his service as President and Chief Executive
Officer of the Company. None of the bonus paid to Dr. Monovoukas with
respect to 1995 performance was attributable to his service as President and
Chief Executive Officer of the Company.
Stock Options Granted During Fiscal 1995
<TABLE>
The following table sets forth information concerning individual grants of
stock options made during fiscal 1995 to the Company's chief executive officer.
It has not been the Company's policy in the past to grant stock appreciation
rights, and no rights were granted during fiscal 1995.
OPTION GRANTS IN FISCAL 1995
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SHARES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ----------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Yiannis A.
Monovoukas.......... 11,250(TMO) 0.9%(3) $28.23 7/24/02 $129,263 $301,275
<FN>
- ---------------
(1) Only options to purchase shares of the common stock of Thermo Electron
(designated in the table as TMO) were granted in 1995 to Dr. Monovoukas.
Such options are immediately exercisable. The shares acquired upon exercise
are subject to repurchase by Thermo Electron at the exercise price if Dr.
Monovoukas ceases to be employed by Thermo Electron or another Thermo
Electron company. Thermo Electron may exercise its repurchase rights within
six months after the termination of Dr. Monovoukas' employment. The
repurchase rights generally lapse ratably over a five-year period, provided
that the optionee continues to be employed by Thermo Electron or another
Thermo Electron company. Thermo Electron may permit Dr. Monovoukas to
exercise options and satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the options if exercised at the end of the option term. These
gains are based on assumed rates of stock appreciation of 5% and 10%,
compounded annually from the date the options were granted to their
expiration date. The gains shown are net of the option exercise price, but
do not include deductions for taxes or other expenses associated with the
exercise. Actual gains, if any, on stock option exercises will depend on the
future performance of common stock underlying the options, the
optionholder's continued employment through the option period and the date
on which the options are exercised.
(3) These options were granted under a stock option plan maintained by Thermo
Electron and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
</TABLE>
33
<PAGE> 36
Stock Options Exercised During Fiscal 1995 and Fiscal Year-end Option Values
<TABLE>
The following table reports certain information regarding stock option
exercises during fiscal 1995 and outstanding stock options held at the end of
fiscal 1995 by the Company's chief executive officer. No stock options were
exercised, and no stock appreciation rights were exercised or were outstanding
during fiscal 1995.
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND
FISCAL 1995 YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF
SHARES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL FISCAL
YEAR-END YEAR-END
----------------- ------------
EXERCISABLE/ EXERCISABLE/
NAME COMPANY UNEXERCISABLE(1) UNEXERCISABLE
---- ------- ----------------- ------------
<S> <C> <C> <C>
Yiannis A. Monovoukas.................... Thermo Electron 11,250/- $72,413/-
<FN>
- ---------------
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable. The shares acquired upon exercise of the options
reported in the table are subject to repurchase by the granting corporation
at the exercise price if the optionee ceases to be employed by such
corporation or another Thermo Electron company. The granting corporation may
exercise its repurchase rights within six months after the termination of
the optionee's employment. The repurchase rights generally lapse ratably
over a five-year period, provided that the optionee continues to be employed
by the granting corporation or another Thermo Electron company.
</TABLE>
34
<PAGE> 37
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 2, 1996 with respect to each person who was
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock.
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- ----------------------- ----------------
<S> <C> <C>
Thermo Fibertek Inc.(1).................................... 10,000,000 shares 100%
81 Wyman Street
Waltham, Massachusetts 02254-9046
<FN>
- ---------------
(1) Thermo Fibertek is an 81.4%-owned subsidiary of Thermo Electron and,
therefore, Thermo Electron may be deemed to be a beneficial owner of the
shares of Common Stock beneficially owned by Thermo Fibertek. Thermo
Electron disclaims beneficial ownership of these shares. After the sale of
the Common Stock in this offering, Thermo Fibertek will own approximately
76.3% of the outstanding Common Stock (73.7% if the Underwriters'
over-allotment option is exercised in full).
</TABLE>
MANAGEMENT
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 30, 1996 as well as information
regarding the beneficial ownership of the Common Stock and the common stock of
Thermo Fibertek and Thermo Electron, as of March 30, 1996, with respect to (i)
each Director, (ii) each executive officer named in the summary compensation
table above, and (iii) all Directors and current executive officers as a group.
<CAPTION>
THERMO THERMO THERMO ELECTRON
NAME(1) FIBERGEN INC.(2) FIBERTEK INC.(3) CORPORATION(4)
------- ---------------- ---------------- ---------------
<S> <C> <C> <C>
William A. Rainville............................. 0 506,713 300,893
Dr. Yiannis A. Monovoukas........................ 0 31,500 11,450
John N. Hatsopoulos.............................. 0 173,655 646,317
Jonathan W. Painter.............................. 0 103,515 35,673
Anne T. Barrett.................................. 0 3,450 10,187
All Directors and current executive officers as a
group (6 persons).............................. 0 902,608 1,145,777
<FN>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Fibertek and Thermo Electron beneficially owned
consist of shares owned by the indicated person or by that person for the
benefit of minor children, and all share ownership includes sole voting and
investment power.
(2) No Director or executive officer beneficially owned more than 1% of the
Common Stock outstanding as of such date, and all Directors and executive
officers as a group beneficially owned less than 1% of the Common Stock
outstanding as of such date.
(3) The shares of common stock of Thermo Fibertek have been adjusted to reflect
a three-for-two stock split effected on June 26, 1996. Shares of the common
stock of Thermo Fibertek beneficially owned by Mr. Rainville, Dr.
Monovoukas, Mr. Hatsopoulos, Mr. Painter and all Directors and executive
officers as a group include 495,000, 30,000, 97,200, 103,500 and 799,950
shares, respectively, that such person or group has the right to acquire
within 60 days of March 30, 1996, through the exercise of stock options.
Shares beneficially owned by Ms. Barrett consist of shares held by a trust
of which Ms. Barrett is a trustee. No Director or executive officer
beneficially owned more than 1% of the common stock of Thermo Fibertek
outstanding as of March 30, 1996; all Directors and executive officers as a
group beneficially owned 1.5% of such common stock outstanding as of such
date.
(4) The shares of common stock of Thermo Electron have been adjusted to reflect
three-for-two stock splits effected on May 25, 1995 and June 5, 1996. Shares
of the common stock of Thermo Electron beneficially
</TABLE>
35
<PAGE> 38
owned by Mr. Rainville, Dr. Monovoukas, Mr. Hatsopoulos, Mr. Painter and all
Directors and executive officers as a group include 199,198, 11,250,
342,735, 31,495 and 677,302 shares, respectively, that such person or group
has the right to acquire within 60 days of March 30, 1996, through the
exercise of stock options. Shares beneficially owned by Mr. Hatsopoulos, Mr.
Painter and all Directors and executive officers as a group include 18,375,
391 and 19,994 full shares, respectively, allocated through March 30, 1996
to their respective accounts maintained pursuant to Thermo Electron's
employee stock ownership plan ("ESOP"). The trustees of the ESOP, who have
investment power over its assets, are Mr. Hatsopoulos and Mr. Peter
Pantazelos. Shares beneficially owned by Mr. Hatsopoulos include 168,750
shares held by a QTIP trust of which Mr. Hatsopoulos is a trustee. Shares
beneficially owned by Ms. Barrett include 4,847 shares held by a trust of
which Ms. Barrett is a trustee. No Director or executive officer nor all
Directors and executive officers as a group beneficially owned more than 1%
of the common stock of Thermo Electron outstanding as of March 30, 1996.
36
<PAGE> 39
INFORMATION CONCERNING THERMO ELECTRON
Thermo Electron develops, manufactures and markets environmental monitoring
and analysis instruments, biomedical products including heart-assist systems,
mammography systems and respiratory care products, paper-recycling and
papermaking equipment, alternative-energy systems, industrial process equipment,
and other specialized products. Thermo Electron also provides environmental and
metallurgical services and conducts advanced technology research and
development. Thermo Electron performs its business through its divisions and
wholly owned subsidiaries, as well as majority-owned subsidiaries that are
partially owned by the public or by private investors.
Thermo Electron has developed leading market positions in many lines of
business, including environmental monitoring and analysis instruments,
mammography systems, biomass power plants, and paper-recycling equipment and
papermaking accessories. Thermo Electron is currently seeking to establish
leading market positions in the fields of left ventricular-assist devices,
explosives-detection systems, thermal soil-remediation services and dedicated
natural gas engines. Thermo Electron is developing new products in its Advanced
Technologies segment, as well as other segments.
A key element in Thermo Electron's growth has been its ability to
commercialize innovative products and services emanating from research and
development activities conducted at Thermo Electron's various subsidiaries and
divisions. Thermo Electron's strategy has been to identify business
opportunities arising from social, economic and regulatory issues and to seek a
leading market share through the application of proprietary technology. As part
of this strategy, Thermo Electron continues to focus on the acquisition of
complementary businesses that can be integrated into existing core businesses to
leverage Thermo Electron's access to new markets.
Thermo Electron believes that maintaining an entrepreneurial atmosphere is
essential to continuing its growth and development. In order to preserve this
environment, Thermo Electron adopted the strategy of having certain subsidiaries
sell a minority interest to outside investors. Thermo Electron believes that
this strategy provides additional motivation and incentives for the management
of the subsidiaries through the establishment of subsidiary-level stock options,
as well as capital to support the subsidiaries' growth. Thermo Electron's wholly
owned and majority-owned subsidiaries are provided with centralized strategic
planning, corporate development, administrative, financial and other services
that would not be available to many independent companies of similar size. As of
June 30, 1996, Thermo Electron had 20 subsidiaries that have sold minority
equity interests, 16 of which are publicly traded.
Thermo Electron, a Delaware corporation, was incorporated in 1956,
completed its initial public offering in 1967, and was listed on the New York
Stock Exchange in 1980. The principal executive office of Thermo Electron is
located at 81 Wyman Street, Waltham, Massachusetts 02254-9046 (telephone:
617-622-1000).
37
<PAGE> 40
DESCRIPTION OF SECURITIES
The following is a brief description of the principal terms applicable to
the Units, the authorized shares of the Company's Common Stock, $.01 par value,
and the Redemption Rights, as well as a description of the Guarantees.
UNITS
Each Unit being offered by the Company consists of one share of Common
Stock and one Redemption Right. The Common Stock and the Redemption Rights will
trade together as Units on the American Stock Exchange until the 90th day after
the date of this Prospectus, after which date the Common Stock and the
Redemption Rights will trade separately. The value of the Redemption Rights will
generally have an inverse relationship to the value of the Common Stock. As the
market price of the Common Stock rises, the value represented by the Redemption
Rights generally will decrease, reflecting generally the increased spread
between the market price of a share of Common Stock deliverable upon exercise of
a Redemption Right and the price at which the Company is obligated to redeem the
Common Stock pursuant to the Redemption Rights. Conversely, decreases in the
market price of the Common Stock generally will increase the value of the
Redemption Rights.
COMMON STOCK
The Company has 25,000,000 shares of Common Stock authorized for issuance,
of which 10,000,000 are issued and outstanding. Each share of Common Stock is
entitled to pro rata participation in distributions upon liquidation and to one
vote on all matters submitted to a vote of stockholders. Dividends may be paid
to the holders of Common Stock when and if declared by the Board of Directors
out of funds legally available therefor. Holders of Common Stock have no
preemptive or similar rights. The outstanding shares of Common Stock are, and
the shares offered hereby when issued will be, legally issued, fully paid and
nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Prior to this offering, Thermo Fibertek owned
10,000,000 shares of Common Stock, which represented 100% of the outstanding
Common Stock. Upon completion of this offering, Thermo Fibertek (and Thermo
Electron through its majority ownership of Thermo Fibertek) will continue to
beneficially own a majority of the outstanding Common Stock, and will have the
power to elect all of the members of the Company's Board of Directors.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts or omissions, which involve intentional misconduct or a
knowing violation of law. The Company's Certificate of Incorporation also
contains provisions to indemnify the Directors and officers of the Company to
the fullest extent permitted by the General Corporation Law of Delaware. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as Directors and officers.
REDEMPTION RIGHTS
General
The holder of a Redemption Right may require the Company to redeem one
share of Common Stock for an amount of cash equal to (the "Redemption
Price") during the month of September 20 (the "First Redemption Period") and
during the month of September 20 (the "Second Redemption Period"). The First
Redemption Period and the Second Redemption Period are collectively referred to
herein as the "Redemption Periods."
38
<PAGE> 41
Exercise of Rights
Notice of commencement of each Redemption Period will be published in the
Wall Street Journal, and will be mailed to holders of record of the Redemption
Rights, not less than 15 nor more than 45 days prior to the commencement of such
Redemption Period. To be redeemed, certificates for shares of Common Stock must
be received at the office of the Company or its agent, as specified in the
notice, along with certificates for Redemption Rights duly executed indicating
the number of shares being tendered for redemption during the Redemption Period.
The Company or its agent after the end of the Redemption Period will promptly
return to each shareholder a certificate for all shares and Redemption Rights
surrendered but not redeemed and will mail to each shareholder a check in
consideration for the shares that were redeemed. Shareholders who elect to
redeem their shares will be entitled to revoke their election by delivering a
written notice of such revocation to the agent or to the Company as specified in
the notice prior to the end of the Redemption Period.
The Company's obligation to make such redemptions would be deferred to the
extent that such redemptions are made at a time when the Company's capital is
impaired or when such redemptions would cause any impairment of the Company's
capital or if such redemptions are otherwise prohibited by law. These provisions
do not affect the guarantee by Thermo Electron of the Company's redemption
obligations.
Adjustments
Both the consideration payable by the Company upon redemption of the shares
of Common Stock and the number of shares of Common Stock which are subject to
redemption are subject to adjustment upon the occurrence of certain events,
including (i) the issuance of Common Stock as a dividend or the distribution of
a security or right convertible into or exchangeable for shares of Common Stock
to all of the holders of Common Stock, (ii) a subdivision or combination of the
Company's outstanding Common Stock and (iii) the issuance by reclassification or
reorganization of the outstanding shares of Common Stock.
Expiration of Redemption Rights
The Redemption Rights will expire and become worthless in the event that,
at any time after the 90th day after the date of this Prospectus and (i) prior
to the beginning of the First Redemption Period or (ii) after the end of the
First Redemption Period and prior to the beginning of the Second Redemption
Period, the closing price of the Common Stock as reported on the principal
trading market for the Common Stock has been at least 150% of the Redemption
Price, as adjusted as provided above, for 20 of any 30 consecutive trading days,
provided that neither Thermo Electron nor any of its subsidiaries have purchased
any shares of Common Stock on any of such days.
Covenants of the Company and Thermo Electron
Pursuant to the Guarantee Agreement described below, the Company and Thermo
Electron have covenanted that they will not, without the consent of the holders
of a majority of the Redemption Rights other than Thermo Electron and its
subsidiaries: (i) merge or consolidate the Company with or into Thermo Electron
or any subsidiary of Thermo Electron, or sell substantially all of the Company's
assets to Thermo Electron or any such subsidiary, without receiving an opinion
addressed to the Board of Directors of the Company from an independent
investment bank or other appraiser as to the fairness of such a transaction from
a financial point of view to the shareholders of the Company, or (ii) take any
voluntary action to avoid or seek to avoid the observance or performance of any
of the terms of the redemption obligations described in this Prospectus. In
addition, the Company and Thermo Electron have covenanted that neither Thermo
Electron nor any of its affiliates will purchase any shares of Common Stock in
the open market, other than upon the redemption of such Common Stock as
described in this Prospectus, from and after the date on which notice of the
commencement of a Redemption Period is published in the Wall Street Journal and
until the end of such Redemption Period. While any Redemption Rights are
outstanding, the Company may (i) reorganize or reclassify its Common Stock, (ii)
merge or consolidate with another corporation or other legal entity or (iii)
sell or transfer all or substantially all of its business or assets only if
adequate provision is made so that the
39
<PAGE> 42
Redemption Rights are adjusted so as to preserve the economic benefits thereof
to the holders, as determined by the Board of Directors of the Company in its
reasonable discretion.
THE GUARANTEES
The Company, Thermo Electron and the Representatives of the Underwriters
(as defined below) have entered into a Guarantee Agreement, pursuant to which
Thermo Electron has agreed to guarantee, on a subordinated basis, the due and
punctual performance by the Company of its redemption obligations described
above. The text of the Guarantees will be endorsed on each certificate
representing Redemption Rights offered hereby. The Guarantee Agreement may not
be amended in a way that will dilute or impair the Redemption Rights described
above without the consent of the holders of two-thirds of the then-outstanding
Redemption Rights other than Thermo Electron and its subsidiaries.
Subordination of Guarantees
The obligations represented by the Guarantees will be subordinated in right
of payment to the prior payment in full of all Senior Indebtedness of Thermo
Electron. Senior Indebtedness of Thermo Electron is defined for this purpose as
the principal of, premium, if any, and interest and other amounts due on or with
respect to the following, whether outstanding at the date of execution of the
Guarantee Agreement or thereafter incurred or created: (a) indebtedness of
Thermo Electron for money borrowed by Thermo Electron (including, without
limitation, purchase money obligations), whether or not evidenced by debentures,
bonds, notes or other corporate debt securities or similar instruments issued by
Thermo Electron (including the principal of, premium, if any, and interest on
Thermo Electron's 5% Senior Convertible Debentures due 2001 and 4 5/8% Senior
Convertible Debentures due 1997); (b) obligations to reimburse any bank or other
person in respect of amounts paid under letters of credit; (c) leases of real
property, equipment or other assets, which leases are capitalized in Thermo
Electron's financial statements in accordance with generally accepted accounting
principles; (d) commitment, standby and other fees due and payable to financial
institutions with respect to credit facilities available to Thermo Electron; (e)
obligations of Thermo Electron under interest rate or currency swaps, floors,
caps or other similar arrangements intended to hedge interest rates or currency
exposure; (f) indebtedness secured by any mortgage, pledge, lien or other
encumbrance on property which is owned or held by Thermo Electron subject to
such mortgage, pledge, lien or encumbrance, whether or not the indebtedness
secured thereby shall have been assumed by Thermo Electron; (g) obligations of
Thermo Electron constituting guarantees of indebtedness of or joint obligations
with another or others which would be included in the preceding clauses (a),
(b), (c), (d), (e) or (f) (including Thermo Electron's guarantee of the
principal of, premium, if any, and interest on the 3 3/4% Senior Convertible
Debentures due 2000 of Thermo Instrument Systems Inc.); and (h) modifications,
renewals, extensions or refundings of any of the indebtedness, leases, fees or
obligations referred to in the preceding clauses (a), (b), (c), (d), (e), (f) or
(g) or debentures, notes or other evidences of indebtedness issued in exchange
therefor; provided that Senior Indebtedness shall not include any particular
indebtedness, lease, fee or obligation, modification, renewal, extension or
refunding or exchanged securities if, under the express provisions of the
instrument creating or evidencing the same, or pursuant to which the same is
outstanding, such indebtedness, lease, fee or obligation or such modification,
renewal, extension or refunding thereof or exchanged securities are stated to be
not superior in right of payment to the Guarantees. Most of Thermo Electron's
assets are owned by its subsidiaries. Thermo Electron's rights as a shareholder
and the rights of its creditors, including holders of the Redemption Rights, to
participate in the assets of any subsidiary upon the latter's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors. At March 30, 1996, the aggregate amount of Senior Indebtedness and
indebtedness of subsidiaries not constituting Senior Indebtedness (but to which
the Guarantees are effectively subordinated) was approximately $597,895,000.
The obligations represented by the Guarantees will rank pari passu with
Thermo Electron's obligations with respect to its outstanding 4 1/4% Convertible
Subordinated Debentures due 2003 and the 4 7/8% Convertible Subordinated
Debentures due 1997. In addition, the obligations represented by the Guarantees
will rank pari passu with Thermo Electron's subordinated guarantees of the
principal, premium, if any, and interest on the Non-Interest Bearing Convertible
Subordinated Debentures due 2003 issued by Thermedics Inc., the Non-
40
<PAGE> 43
Interest Bearing Convertible Subordinated Debentures due 2001 issued by Thermo
Ecotek Corporation, the 6 1/2% Convertible Subordinated Debentures due 1997 and
the 4 5/8% Convertible Subordinated Debentures due 2003 issued by Thermo
TerraTech Inc., the 6 5/8% Convertible Subordinated Debentures due 2001 issued
by Thermo Instrument Systems Inc., the Non-Interest Bearing Convertible
Subordinated Debentures due 1997 issued by Thermo Cardiosystems Inc., the 3 3/4%
Convertible Subordinated Debentures due 2000 issued by Thermo Voltek Corp., the
4 7/8% Convertible Subordinated Debentures due 2000 issued by Thermo Remediation
Inc., the 5% Convertible Subordinated Debentures due 2000 issued by ThermoQuest
Corporation and the 5% Convertible Subordinated Debentures due 2000 issued by
Thermo Optek Corporation. In addition, the obligations represented by the
Guarantees will rank pari passu with Thermo Electron's subordinated guarantee of
the obligations to redeem the common stock of ThermoLyte Corporation. The
obligation of ThermoLyte Corporation to redeem its common stock requires
ThermoLyte Corporation at the option of the holders to redeem up to an aggregate
of approximately 1,845,000 shares of its common stock for $10.00 per share at
the end of 1998 and 1999. As of March 30, 1996, stated on a pro forma basis to
reflect the May 1996 issuance by Thermo TerraTech Inc. of $115,000,000 principal
amount of 4 5/8% Convertible Subordinated Debentures due 2003 and by Thermedics
Inc. of $55,000,000 principal amount of Non-Interest Bearing Convertible
Subordinated Debentures due 2003, the aggregate outstanding principal amount of
the above obligations was approximately $963,566,000.
In the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization or other similar proceedings in
connection herewith, relative to Thermo Electron or to its creditors as such, or
to its property, or in the event of any proceedings for voluntary liquidation,
dissolution or other winding up, of Thermo Electron, or in the event of any
assignment for the benefit of creditors of Thermo Electron or any marshaling of
assets of Thermo Electron, the holders of all Senior Indebtedness of Thermo
Electron will be entitled to receive payment in full of the principal of and
premium, if any, and interest, including interest accruing after the
commencement of any such proceeding, on all Senior Indebtedness of Thermo
Electron, before holders of the Common Stock offered hereby will be entitled to
receive any payment in respect of the Guarantees. Upon the maturity of any
Senior Indebtedness of Thermo Electron by lapse of time, acceleration or
otherwise, such Senior Indebtedness of Thermo Electron shall first be paid in
full (to the same extent as provided in the preceding sentence) or provided for
before any payment is made by Thermo Electron, directly or indirectly, with
respect to the Redemption Rights. Upon the occurrence of any event of default
with respect to any Senior Indebtedness of Thermo Electron, as defined therein
or in the instrument under which it is outstanding, permitting the holders to
accelerate the maturity thereof, then, unless and until such event of default
shall have been cured or waived or shall have ceased to exist, no payment shall
be made by Thermo Electron, directly or indirectly, with respect to the
Redemption Rights. By reason of such subordination, in the event of insolvency,
creditors of Thermo Electron that are not holders of Senior Indebtedness of
Thermo Electron may recover less, ratably, than holders of Senior Indebtedness
of Thermo Electron and may recover more, ratably, than the holders of the
Guarantees.
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<PAGE> 44
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Because of the unique features of the Units, it is not feasible to provide
a definitive discussion of the characterization of the Common Stock for federal
income tax purposes, or of the federal income tax consequences of the purchase,
ownership and disposition of Units, Common Stock and Redemption Rights. The
discussion below represents the Company's view of the possible federal income
tax consequences of the purchase, ownership and disposition of the Securities
based on what the Company believes are the most likely characterizations of the
Common Stock and is provided for general information purposes only. It is
possible that characterizations other than those discussed might apply and that
the federal income tax consequences may accordingly be different than those
discussed.
Purchasers are urged to consult their own tax advisors with regard to an
investment in the Units and as to the particular tax consequences to them
(including the effect and applicability of state, local, foreign and other tax
laws) for the purchase, ownership and disposition (including a disposition
pursuant to exercise of a Redemption Right) of Common Stock.
TREATMENT OF COMMON STOCK AS EQUITY
The Company intends to treat the Common Stock as equity for federal income
tax purposes. For financial accounting purposes the Common Stock will be treated
as Common Stock subject to redemption until the expiration of the Redemption
Rights.
Whether the Common Stock is in fact determined to be equity for federal
income tax purposes during the period prior to the expiration of the Redemption
Rights is a question of fact, and no one factor is conclusive. Although no
definitive set of relevant factors exists, Section 385 of the Internal Revenue
Code of 1986, as amended (the "Code"), lists five factors that "may" be taken
into account in regulations, yet to be issued, setting forth rules for
determining whether an interest in a corporation is to be treated as equity or
debt for federal income tax purposes. These factors are (1) whether there is a
written unconditional promise to pay on demand or on a specified date a sum
certain in money in return for an adequate consideration in money or money's
worth, and to pay a fixed rate of interest, (2) whether there is a subordination
to or preference over any indebtedness of the corporation, (3) the ratio of debt
to equity of the corporation, (4) whether there is convertibility into the stock
of the corporation, and (5) the relationship between holdings of stock in the
corporation and the holdings of the interest in question. The Internal Revenue
Service has indicated that the intent of the parties in creating the instrument
is a factor that may be taken into account as well.
An analysis of these factors indicates that it is likely, although not
certain, that the Common Stock will, in fact, be treated as equity for tax
purposes even prior to the expiration of the Redemption Rights. The Company is
obliged to redeem the Common Stock for a fixed amount of money upon exercise of
Redemption Rights at essentially predetermined dates, raising the possibility
that the Common Stock will during that time period be treated as convertible
debt. However, no provisions for interest payments or guaranteed dividends of
any sort are made. The Company is also prohibited from redeeming the Common
Stock to the extent that such redemptions are made at a time when the Company's
capital is impaired or when such redemptions would cause any impairment of the
Company's capital or if such redemptions are otherwise prohibited by law. Under
those circumstances, the Common Stock may be purchased by Thermo Electron
pursuant to the Guarantee in what will generally not be a redemption.
Furthermore, the Common Stock will be subordinated to all indebtedness of the
Company, the stock is voting stock, there are no "conversion" rights other than
a possible "deemed" conversion at the time of expiration of the Redemption
Periods, and, finally, the parties intend to create an equity interest
notwithstanding the contrary treatment for financial accounting purposes.
The discussion that follows is premised on the characterization of the
Common Stock as equity and not as convertible debt. If the Common Stock were to
be treated as debt, certain other considerations would apply. For example,
distributions of property by the Company with respect to the Common Stock would
be treated as interest, and not dividends, and so would not be eligible for the
dividends received deduction. Similarly, redemptions by the Company of the
Common Stock would not be subject to the rules of Section 302 of the Code, as
discussed below, but would instead be treated as payments of principal and
interest.
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<PAGE> 45
SALE OF COMMON STOCK AND REDEMPTION RIGHTS
In general, gain or loss will be recognized upon a sale of a share of
Common Stock or a Redemption Right. When the Common Stock and the associated
Redemption Right are "decoupled" and may be sold or otherwise disposed of
separately, the event of "decoupling" will not by itself cause the holder to
recognize gain or loss. The sale of Common Stock or Redemption Rights, whether
as a Unit or separately, will cause gain or loss to be recognized only with
respect to the Common Stock or Redemption Rights sold. The amount of such gain
or loss will be the difference between the amount received in exchange for the
Common Stock or Redemption Rights sold and the holder's adjusted basis in the
Common Stock or Redemption Rights sold. The holder's tax basis in a share of
Common Stock and the associated Redemption Right will be determined by
allocating the purchase price paid per Unit between the Common Stock and the
associated Redemption Right on the basis of the fair market value of each on the
date of issuance. Where the Common Stock and the associated Redemption Right are
sold together (e.g., as a Unit within the 90-day period before they are
"decoupled"), the precise allocation of basis would not generally alter the net
amount of gain or loss to the holder. The sale of Common Stock or Redemption
Rights will cause gain or loss to be recognized only with respect to the Common
Stock or Redemption Rights sold.
Such gain or loss will generally be treated as capital gain or loss if the
Common Stock or Redemption Right sold was held as a capital asset. Such gain or
loss will be long term capital gain or loss if the Common Stock or Redemption
Right sold was held for more than one year, and short term capital gain or loss
if it has been held for one year or less.
Upon the lapse of a Redemption Right acquired on the same day as a share of
Common Stock identified as intended to be used in exercising such Redemption
Right, the cost of the Redemption Right (determined as described above with
respect to allocation of basis) will be added to the tax basis of such Common
Stock. Upon the lapse of a Redemption Right acquired at any other time, the
holder thereof will be treated as if the Redemption Right were sold or exchanged
on the date of such lapse.
CONSEQUENCES OF OWNERSHIP OF THE REDEMPTION RIGHTS
In general, gain or loss will be recognized upon the sale of a Redemption
Right. Such gain or loss will generally be treated as capital gain if the Common
Stock owned by the holder is a capital asset in the hands of the holder (or if
such Common Stock would be held as a capital asset by such holder if acquired by
him). For these purposes, the tax basis of a Redemption Right will be determined
by allocating the purchase price paid per Unit between the Redemption Right and
the associated share of Common Stock on the basis of the fair market value of
each on the date of issuance.
Upon the lapse of a Redemption Right acquired on the same day as a share of
Common Stock identified as intended to be used in exercising such Redemption
Right, the cost of the Redemption Right will be added to the tax basis of such
Common Stock. Upon the lapse of a Redemption Right acquired at any other time,
the holder thereof will be treated as if the Redemption Right were sold or
exchanged on the date of such lapse.
SHORT SALE AND STRADDLE RULES
While the holding period of a share of Common Stock normally commences on
the date that it is acquired, under certain circumstances the holding period may
be suspended. It is possible that the right to cause the Company to redeem the
Common Stock will be characterized for federal income tax purposes as an option
to sell the Common Stock. In that case, it is possible that the short sale rules
of Section 1233 of the Code would apply, resulting in, among other possible
results, suspension of the holding period of each share of Common Stock until
the expiration of the Second Redemption Period (i.e., September 30, 20 ) with
respect to that share. However, Section 1233(c) of the Code and the Treas. Reg.
sec. 1.1233-1(c)(3) provide that, if the Common Stock is identified by
appropriate entries in the holder's records within fifteen days after the date
of its acquisition as subject to such option, the rules of Section 1233(b),
including the holding period suspension rules, will not apply.
It is also possible that the Common Stock may also be considered to be a
tax straddle subject to the rules of Section 1092 of the Code, if the equity
aspect of the Common Stock and the Redemption Rights were
43
<PAGE> 46
considered to be "offsetting positions" for this purpose. The tax straddle rules
would apply only if both (a) the Common Stock is considered to be actively
traded, and (b) the Redemption Rights are considered to be either "options" with
respect to the Common Stock or (under regulations yet to be issued) a position
with respect to substantially similar or related property. If the Common Stock
is considered to be a tax straddle, Temporary Treasury Regulations provide that
the holding period of a share of Common Stock generally will not begin earlier
than the expiration of the Second Redemption Period with respect to that share.
In addition, under Code Section 263(g), interest and carrying charges relating
to a tax straddle are not deductible and must be capitalized and added to basis.
DIVIDENDS; DIVIDENDS RECEIVED DEDUCTION
The Company has never paid any cash dividends on its Common Stock, and
anticipates that no dividends will be paid in the foreseeable future. See "Risk
Factors -- Lack of Dividends." A distribution of property by the Company to its
shareholders will be treated as a dividend only to the extent of its accumulated
earnings and profits or its earnings and profits in the taxable year in which
such distributions occur. The Company at present has no earnings and profits.
Any distribution of property by the Company that is not a dividend would be
treated first as a return of basis to the shareholder, and then as gain from the
sale or exchange of property.
To the extent that the Company does have earnings and profits and does make
dividend distributions with respect to shares of Common Stock, corporate holders
would generally be eligible for the dividends received deduction. This deduction
generally equals 70% of the amount received as dividends, although corporations
owning 20% or more of the stock of the Company are eligible for an 80%
deduction. Corporate holders would be eligible for the dividends received
deduction only if, among other things, the Common Stock is held for more than 45
days. Under Section 246(c) of the Code, the holding period of Common Stock will
be suspended for any periods for which the holder has, among other things, (i)
an option to sell such Common Stock or (ii) under regulations to be prescribed
by the Treasury a diminished risk of loss by holding one or more other positions
with respect to substantially similar or related property. It is possible that
the Redemption Rights would be considered an option or other position triggering
the suspension of the holding period under Section 246(c).
For corporate holders of Common Stock, Section 246A of the Code reduces the
dividends received deduction in the case of "debt-financed portfolio stock."
Debt-financed portfolio stock is defined as portfolio stock, such as the Common
Stock, acquired or carried by the corporate holder with indebtedness that is
"directly attributable" to the investment in such stock. The reduction is
generally a fraction, the numerator of which is the amount of the holder's
indebtedness attributable to such stock and the denominator of which is the
holder's adjusted tax basis in the stock.
In addition, any such dividends received by corporate holders would be
subject to the provisions of Section 1059 of the Code relating to "extraordinary
dividends" if the Common Stock with respect to which the dividend is considered
paid has not been held for more than two years and the amount of the dividend is
considered extraordinary. For this purpose, the holding period of the Common
Stock will be considered suspended under rules similar to those applicable to
the determination of the availability of the dividends received deduction. In
general, a dividend paid with respect to common stock is treated as an
extraordinary dividend if it equals or exceeds ten percent of the shareholder's
adjusted basis in the stock. Dividends that have ex-dividend dates within 85
consecutive days are aggregated for this purpose. An aggregation period of one
year applies if the aggregated dividends exceed 20 percent of the shareholder's
basis. In addition, except as may be provided in regulations yet to be
promulgated, Section 1059(e)(1) of the Code provides that the extraordinary
dividend rules of Section 1059 will apply to any redemption of Common Stock of
the Company that is not pro rata as to all shareholders. If a dividend is
subject to the rules of Section 1059, the tax basis of the holder's remaining
Common Stock will be reduced by the "non-taxed portion" of the dividend. If the
non-taxed portion exceeds the tax basis, such excess will be treated as gain
from the sale of Common Stock upon disposition of that Common Stock.
44
<PAGE> 47
CONSEQUENCES OF THE REDEMPTION OF COMMON STOCK
The amount of cash received by a holder of Common Stock on the redemption
of that Common Stock by the Company will be treated either (i) as a distribution
by the Company in exchange for its stock, in which case the holder will
recognize gain or loss measured by the difference between the amount realized
and the holder's tax basis for the Common Stock surrendered or (ii) as a
distribution of property to which Section 301 applies (that is, as a dividend,
to the extent of the Company's earnings and profits; see "Dividends; Dividends
Received Deduction," above). For this purpose, the determination of whether the
distribution will be treated as an exchange for stock or as a Section 301
distribution will be made in accordance with the provisions of Section 302 of
the Code, as explained below.
Under Section 302 of the Code, a holder will not be treated as having
received a Section 301 distribution upon the redemption of Common Stock if (1)
the redemption results in the complete termination of the holder's interest in
the Company, (2) the holder's percentage ownership of the outstanding Common
Stock of the Company (and voting stock if any voting stock other than Common
Stock is outstanding) immediately after such redemption is less than 80% of such
holder's percentage ownership of the total of such outstanding stock immediately
before the redemption, or (3) the distribution from the Company upon such
redemption is not "essentially equivalent to a dividend" based on the individual
holder's particular facts and circumstances. For purposes of making these
determinations, the holder's percentage ownership will in general be calculated
by taking into account all shares owned by him, including those deemed to be
owned by him pursuant to Section 318 of the Code. Section 318 of the Code
provides that in applying the above rules, a holder is considered to own shares
directly or indirectly owned by certain members of his family or certain related
entities and to own shares with respect to which he holds options.
For a redemption of Common Stock to qualify as "not essentially equivalent
to a dividend," it must result in a "meaningful reduction" in the holder's
percentage interest in the Company. The Internal Revenue Service has indicated
in a published ruling that any reduction in percentage interest of a small
stockholder in a publicly held corporation who exercises no control over
corporate affairs may constitute such a "meaningful reduction," although in
another ruling the Internal Revenue Service has indicated that under
circumstances that may correspond to certain redemptions made under the terms of
this offering no "meaningful reduction" will be found despite a reduction in a
shareholder's percentage interest in the Company. Specifically, an actual
reduction in percentage interest is required, and if a distribution results in
no reduction or an increase in percentage interest, the distribution proceeds
will, in general, be treated as a dividend. In applying these rules, other
transactions that are part of an overall plan may be taken into account. In view
of the terms of this offering, a redemption can result in an increase in a
holder's percentage interest in the Company by reason of redemptions effected
simultaneously by other holders of the Company's Common Stock. This result could
occur, for example, if a shareholder owning a small number of shares tendered a
relatively small percentage (e.g., 1%) of his Common Stock during the Redemption
Period while other shareholders, in the aggregate, tendered a much larger
percentage (e.g., 30%). Although, in such cases, holders could avoid dividend
treatment by selling Common Stock rather than redeeming it, there can be no
assurance that there will be a market for the Common Stock or that if such a
market exists the proceeds received will not be substantially less than those
that would be received by redemption.
In the event that, upon the tendering of Common Stock during a Redemption
Period, Thermo Electron is required to acquire the tendered Common Stock
pursuant to the terms of the Guarantee, it is probable that no redemption of the
tendered Common Stock will be deemed to have occurred (absent circumstances in
which the selling holder is deemed to be in control of the Company and Thermo
Electron). If Thermo Electron is the purchaser, the holder will probably be
deemed to have disposed of the Common Stock through a sale or exchange, the
consequences of which are discussed in "Sale of Common Stock and Redemption
Rights" above.
If a redemption is not treated as a Section 301 distribution, any gain or
loss recognized will be capital gain or loss if the redeemed Common Stock is
held as a capital asset. Such gain or loss will be long term or short term
depending on the holding period of such Common Stock. See "Sale of Common Stock
and Redemption Rights" above.
45
<PAGE> 48
If (i) redemptions during a Redemption Period are treated as dividends,
(ii) the redemptions are considered to be part of a plan of periodic redemptions
and not as isolated transactions within the meaning of Treas. Reg.
sec.1.305-3(b)(3), and (iii) the Common Stock is not considered to be part of a
security arrangement within the meaning of Treas. Reg. sec.1.305-3(e) Example
(14), then the holders of Common Stock whose proportionate interests in the
earnings and profits of the Company increase as the result of the redemptions
would be treated as having received deemed dividend income under the rules of
Sections 305(b)(2) and 305(c) of the Code. The amount of such deemed
distribution to each such holder would be measured by the fair market value of
the number of shares that would have been distributed to such holder had the
Company sought to increase that holder's interest by the actual amount of the
increase, assuming that the other shareholders' interests in the Company
remained constant. See Treas. Reg. sec.1.305-3(e) Examples (8) and (9).
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 13,100,000 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option). The shares issued in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by affiliates of the Company, as that term is
defined in Rule 144 under the Securities Act, may generally only be resold in
compliance with applicable provisions of Rule 144.
Of such 13,100,000 outstanding shares, 10,000,000 shares will be owned by
Thermo Fibertek. Thermo Fibertek has agreed that, without the prior written
consent of the Representatives (as defined below under the caption
"Underwriters"), it will not offer, sell, grant any option to purchase or
otherwise dispose of any shares of the Common Stock within 180 days after the
date of this Prospectus, other than (i) shares of Common Stock to be sold to the
Underwriters in this offering, (ii) the issuance of options and sales of shares
of Common Stock pursuant to existing stock-based compensation plans, (iii)
shares of Common Stock which may be sold to Thermo Fibertek, and (iv) the
issuance of shares of Common Stock as consideration for the acquisition of one
or more businesses (provided that such Common Stock may not be resold prior to
the expiration of the 180-day period referenced above). Upon expiration of this
lock-up agreement, Thermo Fibertek may sell its shares of Common Stock in an
offering registered under the Securities Act or pursuant to an exemption from
such registration. So long as Thermo Fibertek is able to elect a majority of the
Board of Directors it will be able to cause the Company at any time to register
under the Securities Act all or a portion of the Common Stock owned by Thermo
Fibertek or its affiliates, in which case it would be able to sell such shares
without restriction upon effectiveness of the registration statement.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least two years is entitled to sell, within any three-month period, a number of
such shares that does not exceed the greater of (i) 1% of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date of the notice filed
pursuant to Rule 144. Sales under Rule 144 are also subject to certain manner of
sale restrictions and notice requirements and to the availability of current
public information about the Company. In addition, a person who is deemed an
"affiliate" of the Company must comply with Rule 144 in any sale of shares of
Common Stock not covered by a registration statement (except, in the case of
registered shares acquired by the affiliate on the open market, for the holding
period requirement). A person (or person whose shares are aggregated) who is not
deemed an "affiliate" of the Company and who has beneficially owned restricted
shares for at least three years is entitled to sell such shares under Rule
144(k) without regard to the volume, notice and other limitations of Rule 144.
In meeting the two and three year holding periods described above, a holder of
restricted shares can include the holding periods of a prior owner who was not
an affiliate.
The Company has reserved 825,000 shares for grants under its existing
stock-based compensation plans. As of July 2, 1996, no options to purchase
shares of Common Stock were outstanding under such plans. The Company intends to
file registration statements under the Securities Act to register all shares of
Common
46
<PAGE> 49
Stock issuable under such plans. Shares covered by these registration statements
will be eligible for sale in the public market after the effective date of such
registration statements.
Each of the Company, Thermo Fibertek and Thermo Electron has agreed that it
will not offer, sell, grant any option to purchase or otherwise dispose of any
shares of Common Stock (except for the grant of options and the sale of shares
of Common Stock pursuant to stock-based compensation plans, sales to Thermo
Fibertek and the issuance of shares as consideration for the acquisition of one
or more businesses (provided that such shares may not be resold prior to the
expiration of 180 days after the date of this Prospectus)) within 180 days after
the date of this Prospectus, without the prior consent of the Representatives of
the Underwriters.
Prior to this offering there has been no public market for the Common
Stock. The effect, if any, of public sales or the availability of shares for
sale at prevailing market prices cannot be predicted. Nevertheless, sales of
substantial amounts of shares in the public market could adversely affect
prevailing market prices.
47
<PAGE> 50
UNDERWRITING
<TABLE>
Subject to the terms and conditions set forth in the Underwriting
Agreement, each of the Underwriters named below, for whom NatWest Securities
Limited, Lehman Brothers Inc. and Oppenheimer & Co., Inc. are acting as
Representatives (the "Representatives"), has severally agreed to purchase from
the Company the following respective number of Units at the public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:
<CAPTION>
UNDERWRITER NUMBER OF UNITS
----------- ---------------
<S> <C>
NatWest Securities Limited.................................
Lehman Brothers Inc........................................
Oppenheimer & Co., Inc.....................................
---------
Total................................................. 3,100,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. The nature of the
Underwriters' obligations is that they are committed to purchase all Units
offered hereby if any such Units are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the Units directly to the public at the public offering price
set forth on the cover page of this Prospectus, and to certain selected dealers
(who may include the Underwriters) at such price less a selling concession not
in excess of $ per Unit. The Underwriters may allow and such dealers
may re-allow a concession not in excess of $ per Unit to certain other
dealers (who may include the Underwriters). After commencement of the offering
to the public, the public offering price and other selling terms may be changed
by the Representatives. The Representatives have informed the Company that the
Underwriters do not intend to confirm sales of Units to any accounts over which
they exercise discretionary authority.
The Company has granted to the several Underwriters an option, exercisable
not later than 30 days after the date of this Prospectus, to purchase up to
465,000 additional Units at the public offering price, less the aggregate
underwriting discounts and commissions, set forth on the cover page of this
Prospectus, solely to cover over-allotments. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of such Units proportionate to such
Underwriter's initial commitment.
The Underwriting Agreement provides that the Company, Thermo Fibertek and
Thermo Electron will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
that the Underwriters may be required to make in respect thereof.
The Company, Thermo Fibertek and Thermo Electron have also agreed that they
will not, without the Representatives' prior written consent, offer, sell, grant
any options to purchase or otherwise dispose of any shares of Common Stock
within 180 days after the date of this Prospectus, other than (i) the shares of
Common Stock to be sold to the Underwriters in this offering, (ii) the issuance
of options and sales of Common Stock pursuant to currently existing stock-based
compensation plans, (iii) sales of shares to Thermo Fibertek, and (iv) the
issuance of shares of Common Stock as consideration for the acquisition of one
or more businesses (provided that such Common Stock may not be resold prior to
the expiration of the 180-day period referenced above). See "Shares Eligible for
Future Sale" and "Risk Factors -- Shares Eligible for Future Sale."
Certain of the Underwriters from time to time have performed various
investment banking services for Thermo Electron and its subsidiaries.
48
<PAGE> 51
NatWest Securities Limited, a United Kingdom broker-dealer and a member of
the Securities and Futures Authority Limited, has agreed that, as part of the
distribution of the Units offered hereby and subject to certain exceptions, it
will not offer or sell any Units within the United States, its territories or
possessions or to persons who are citizens thereof or residents therein. The
Underwriting Agreement does not limit sales of Units offered hereby outside of
the United States.
NatWest Securities Limited has also represented and agreed that (i) it has
not offered or sold and will not offer or sell any Units to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, managing, holding or disposing of investments (as principal or agent)
for the purpose of their businesses or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 or the
Financial Services Act 1986 (the "Act"), (ii) it has complied and will comply
with all applicable provisions of the Act with respect to anything done by it in
relation to the Units in, from or otherwise involving the United Kingdom; (iii)
it has only issued or passed on and will only issue or pass on, in the United
Kingdom any document received by it in connection with the issue of the Units,
other than any document which consists of or any part of listing particulars,
supplementary listing particulars or any other document or instrument required
or permitted to be published by listing rules under Part IV of the Act, to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) (No. 2) Order 1995 or is a person
to whom the document may otherwise be lawfully issued or passed on.
Prior to this offering there has been no public market for the Units, the
Common Stock or the Redemption Rights. The initial public offering price for the
Units will be determined by negotiation among the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price will be prevailing market and economic conditions,
estimates of the business potential and prospects of the Company, the state of
the Company's business operations, an assessment of the Company's management,
the consideration of the above factors in relation to market valuations of
companies in related businesses and other factors deemed relevant. The estimated
initial public offering price range set forth on the cover page of this
preliminary prospectus is subject to change as a result of market conditions and
other factors.
LEGAL OPINIONS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company and Thermo Electron by Seth H. Hoogasian, Esq.,
General Counsel of the Company, Thermo Fibertek and Thermo Electron, and certain
legal matters will be passed upon for the Underwriters by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts. Mr. Hoogasian owns or has the right to
acquire 51,750 shares of common stock of Thermo Fibertek and 115,327 shares of
common stock of Thermo Electron.
EXPERTS
The financial statements of the Company and Thermo Electron included or
incorporated by reference in this Prospectus and the financial statement
schedule incorporated by reference in the Registration Statement of which this
Prospectus forms a part have been audited by Arthur Andersen LLP, independent
public accountants, to the extent and for the periods as indicated in their
reports with respect thereto, and are included or incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports. Reference is made to said report with respect
to Thermo Electron's financial statements which includes an explanatory fourth
paragraph with respect to the change in method of accounting for investments in
debt and marketable equity securities in 1994 as discussed in Note 2 to the
financial statements.
The financial statements of Granulation Technology, Inc. and Biodac, a
division of Edward Lowe Industries, Inc., included in this Prospectus have been
audited by Crowe, Chizek and Company LLP, independent public accountants, to the
extent and for the periods as indicated in their reports with respect thereto,
and are included herein in reliance upon the authority of said firm as experts
in accounting and auditing in giving said reports.
49
<PAGE> 52
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
THERMO FIBERGEN INC.
Report of Independent Public Accountants......................................... F-2
Statement of Operations for the years ended January 1, 1994, December 31, 1994,
December 30, 1995, Inception through December 30, 1995 and for the three months
ended April 1, 1995 and March 30, 1996.......................................... F-3
Balance Sheet as of December 31, 1994, December 30, 1995 and March 30, 1996...... F-4
Statement of Cash Flows for the years ended January 1, 1994, December 31, 1994
and December 30, 1995 and for the three months ended April 1, 1995 and March 30,
1996............................................................................ F-5
Statement of Shareholder's Investment for the years ended January 1, 1994,
December 31, 1994 and December 30, 1995 and for the three months ended March 30,
1996............................................................................ F-6
Notes to Financial Statements.................................................... F-7
GRANULATION TECHNOLOGY, INC. AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
Report of Independent Auditors................................................... F-11
Combined Statement of Operations for the years ended September 30, 1993, 1994 and
1995 and for the six months ended March 31, 1995 and 1996....................... F-12
Combined Balance Sheet as of September 30, 1994, 1995 and March 30, 1996......... F-13
Combined Statement of Cash Flows for the years ended September 30, 1993, 1994 and
1995 and for the six months ended March 31, 1995 and 1996....................... F-14
Combined Statement of Shareholder's Equity (Deficit) for the years ended
September 30, 1993, 1994 and 1995 and for the six months ended March 31, 1996... F-15
Notes to Combined Financial Statements........................................... F-16
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS OF THERMO FIBERGEN INC. AND
GRANULATION TECHNOLOGY, INC. AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
(UNAUDITED)
Pro Forma Combined Condensed Statement of Operations for the twelve months ended
December 30, 1995............................................................... F-20
Pro Forma Combined Condensed Statement of Operations for the three months ended
March 30, 1996.................................................................. F-21
Pro Forma Combined Condensed Balance Sheet as of March 30, 1996.................. F-22
Notes to Pro Forma Combined Condensed Financial Statements....................... F-23
</TABLE>
F-1
<PAGE> 53
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Fibergen Inc.:
We have audited the accompanying balance sheet of Thermo Fibergen Inc. (a
Delaware corporation in the development stage and 100%-owned subsidiary of
Thermo Fibertek Inc.) as of December 30, 1995 and December 31, 1994, and the
related statements of operations, shareholder's investment, and cash flows for
each of the three years in the period ended December 30, 1995, and the statement
of operations and cash flows for the period from inception (December 29, 1991)
through December 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Thermo Fibergen Inc. as of
December 30, 1995 and December 31, 1994, and the results of its operations and
cash flows for each of the three years in the period ended December 30, 1995 and
for the period from inception through December 30, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 3, 1996
F-2
<PAGE> 54
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
INCEPTION THREE MONTHS ENDED
THROUGH -----------------------
DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1995 1996
------- ------- ------- ------------ -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Costs and Operating Expenses:
Research and development
expenses................ $ 106 $ 128 $ 601 $ 982 $ 137 $ 203
------- ------- ------- ------- ------- -------
Operating Loss................. (106) (128) (601) (982) (137) (203)
Interest Income................ -- -- -- -- -- 99
------- ------- ------- ------- ------- -------
Loss Before Income Taxes....... (106) (128) (601) (982) (137) (104)
Income Taxes (Note 3).......... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
NET LOSS....................... $ (106) $ (128) $ (601) $ (982) $ (137) $ (104)
======= ======= ======= ======= ======= =======
LOSS PER SHARE................. $ (.01) $ (.01) $ (.06) $ (.10) $ (.01) $ (.01)
======= ======= ======= ======= ======= =======
WEIGHTED AVERAGE SHARES........ 10,000 10,000 10,000 10,000 10,000 10,000
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 55
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
MARCH 30,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash................................................... $ -- $ -- $12,500
------- ------- -------
Machinery and Equipment, at Cost............................ -- -- 6
Less: Accumulated Depreciation............................ -- -- --
------- ------- -------
-- -- 6
------- -------
$ -- $ -- $12,506
======= ======= =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Due to parent company (Note 8)......................... $ -- $ -- $ 16
------- ------- -------
Shareholder's Investment (Notes 4 and 5):
Net parent company investment.......................... -- -- --
Common stock, $.01 par value, 25,000,000 shares
authorized; 10,000,000 shares issued and
outstanding.......................................... -- -- 100
Capital in excess of par value (includes deficit
accumulated during the development stage through the
date of capitalization of $1,076).................... -- -- 12,400
Deficit accumulated during the development stage
subsequent to capitalization of the Company.......... -- -- (10)
------- ------- -------
-- -- 12,490
------- ------- -------
$ -- $ -- $12,506
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 56
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
INCEPTION THREE MONTHS ENDED
THROUGH ---------------------
DECEMBER 30, APRIL 1, MARCH 30,
1993 1994 1995 1995 1995 1996
----- ----- ----- ------------ -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net loss............................ $(106) $(128) $(601) $(982) $(137) $ (104)
Adjustment to reconcile net loss to
net cash used operating
activities:
Change in due to parent company
and affiliates.............. -- -- -- -- -- 16
----- ----- ----- ----- ----- -------
Net cash used in operating
activities................ (106) (128) (601) (982) (137) (88)
----- ----- ----- ----- ----- -------
Investing Activities:
Purchases of machinery and
equipment........................ -- -- -- -- -- (6)
----- ----- ----- ----- ----- -------
Financing Activities:
Transfers from parent company....... 106 128 601 982 137 94
Cash transfer from parent company in
connection with capitalization of
the Company...................... -- -- -- -- -- 12,500
----- ----- ----- ----- ----- -------
Net cash provided by
investing activities...... 106 128 601 982 137 12,594
----- ----- ----- ----- ----- -------
Increase in Cash and Cash
Equivalents......................... -- -- -- -- -- 12,500
Cash and Cash Equivalents at Beginning
of Period........................... -- -- -- -- -- --
----- ----- ----- ----- ----- -------
Cash and Cash Equivalents at End
of Period........................... $ -- $ -- $ -- $ -- $ -- $12,500
===== ===== ===== ===== ===== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 57
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
STATEMENT OF SHAREHOLDER'S INVESTMENT
(IN THOUSANDS)
<CAPTION>
DEFICIT ACCUMULATED
CAPITAL DURING THE
NET COMMON IN DEVELOPMENT STAGE
PARENT STOCK, EXCESS SUBSEQUENT TO
COMPANY $.01 PAR OF PAR CAPITALIZATION
INVESTMENT VALUE VALUE OF THE COMPANY
-------- -------- -------- -------------------
<S> <C> <C> <C> <C>
BALANCE JANUARY 2, 1993.................. $ -- $ -- $ -- $ --
Net loss................................. (106) -- -- --
Net transfer from parent company......... 106 -- -- --
-------- ---- ------- ----
BALANCE JANUARY 1, 1994.................. -- -- -- --
Net loss................................. (128) -- -- --
Net transfer from parent company......... 128 -- -- --
-------- ---- ------- ----
BALANCE DECEMBER 31, 1994................ -- -- -- --
Net loss................................. (601) -- -- --
Net transfer from parent company......... 601 -- -- --
-------- ---- ------- ----
BALANCE DECEMBER 30, 1995................ -- -- -- --
(UNAUDITED)
Net loss prior to capitalization of
Company................................ (94) -- -- --
Net transfer from parent company......... 94 -- -- --
Cash transfer from parent company in
connection with capitalization of the
Company................................ 12,500 -- -- --
Capitalization of Company................ (12,500) 100 12,400 --
Net loss after capitalization of
Company................................ -- -- -- (10)
-------- ---- ------- ----
BALANCE MARCH 30, 1996................... $ -- $100 $12,400 $(10)
======== ==== ======= ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 58
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Thermo Fibergen Inc. (the "Company") was established as a subsidiary of
Thermo Fibertek Inc. ("Thermo Fibertek") to develop and commercialize equipment
and systems to recover valuable materials from pulp residue generated by plants
that produce recycled pulp and paper. The Company is in the development stage,
has yet to generate any revenues, and has no assurance of future revenues. To
the Company's knowledge, no Company has yet developed commercially stable
products using the proposed technology. Even if successful, substantial time
will pass before significant revenues might be realized. Further, during the
period required to develop the commercial product, the Company may require
additional funds that may not be available to it. Research and development began
on December 29, 1991 (the date of inception).
Relationship with Thermo Fibertek and Thermo Electron Corporation
The Company was incorporated on February 12, 1996 as a wholly owned
subsidiary of Thermo Fibertek, at which time Thermo Fibertek was an 81%-owned
subsidiary of Thermo Electron Corporation ("Thermo Electron"). Thermo Fibertek
transferred to the Company all of the assets and business relating to the
development of its fiber-recovery system, together with $12,500,000 in cash, in
exchange for 10,000,000 shares of the Company's common stock, representing all
of such stock outstanding.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1993, 1994 and 1995 are for the fiscal years ended January 1,
1994, December 31, 1994 and December 30, 1995, respectively.
Income Taxes
The Company and Thermo Fibertek entered into a tax allocation agreement
under which the Company and Thermo Fibertek are included in Thermo Electron's
consolidated federal and state income tax returns. If Thermo Fibertek's equity
ownership of the Company were to drop below 80%, the Company would be required
to file its own income tax returns.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities calculated
using enacted tax rates in effect for the year in which the differences are
expected to be reflected in the tax return.
Earnings per Share
Pursuant to Securities and Exchange Commission requirements earnings per
share have been presented for all periods. Weighted average shares for all
periods include 10,000,000 shares issued to Thermo Fibertek in connection with
the capitalization of the Company.
Cash and Cash Equivalents
Prior to its incorporation in February 1996, the Company's cash
disbursements were combined with other Thermo Fibertek corporate cash balances.
Subsequent to the Company's incorporation, 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
F-7
<PAGE> 59
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
investments principally consisting of U.S. government agency securities,
corporate notes, commercial paper, 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 and have an original maturity of three months or less. The
repurchase agreement earns a rate based on the Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter. Cash equivalents are
carried at cost, which approximates market value.
Machinery 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 life of its machinery and equipment which is five years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements
The financial statements as of March 30, 1996 and for the three-month
periods ended April 1, 1995 and March 30, 1996, are unaudited but, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair presentation of results for these interim periods. The
results of operations for the three-month period ended March 30, 1996 are not
necessarily indicative of the results to be expected for the entire year.
2. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plan
Substantially all of the Company's employees are eligible to participate in
an employee stock purchase plan sponsored by Thermo Fibertek. Prior to the
November 1995 plan year, shares of Thermo Fibertek's and Thermo Electron's
common stock could be purchased at the end of a 12-month plan year at 85% of the
fair market value at the beginning of the plan year, and the shares purchased
were subject to a one-year resale restriction. Effective November 1, 1995, the
applicable shares of common stock may be purchased at 95% of the fair market
value at the beginning of the plan year, and the shares purchased will be
subject to a six-month resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages. Prior to
November 1993, the Company's eligible employees participated in an employee
stock purchase plan sponsored by Thermo Electron.
F-8
<PAGE> 60
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INCOME TAXES
<TABLE>
The benefit for income taxes differs from the amounts calculated by
applying the statutory federal income tax rate of 35% to loss before taxes due
to the following:
<CAPTION>
INCEPTION
THROUGH
DECEMBER 30,
1993 1994 1995 1995
------- ------- ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income tax benefit at statutory rate................ $ 37 $ 45 $ 210 $ 342
Differences resulting from:
Net operating loss valuation allowance provided..... (37) (45) (210) (342)
---- ---- ----- -----
$ -- $ -- $ -- $ --
==== ==== ===== =====
</TABLE>
<TABLE>
Prepaid income taxes consist of the following:
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carryforwards............................. $ 132 $ 342
Less: Valuation allowance.................................... (132) (342)
----- -----
$ -- $ --
===== =====
</TABLE>
Due to cumulative losses, a valuation allowance equal to total net deferred
tax assets has been established.
4. 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 to the
Company. Thermo Electron will assess the Company an annual fee based upon the
Company's revenues. The Company was not charged for these services in 1993, 1994
and 1995 since no revenues were recorded by the Company during these periods and
the amount of services received was not material. Beginning in fiscal 1996, the
Company will pay an annual fee equal to 1.0% 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 incur 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.
5. SUBSEQUENT EVENTS
Acquisition
On July 3, 1996, the Company's newly formed GranTek subsidiary acquired
substantially all of the assets, subject to certain liabilities, of Granulation
Technology, Inc. ("GranTech") and Biodac, a division of Edward Lowe Industries,
Inc. ("Biodac" and collectively, "GranTech and Biodac") for approximately
$12,000,000 in cash, subject to a post-closing adjustment based upon the net
asset value of GranTech and Biodac as of the
F-9
<PAGE> 61
THERMO FIBERGEN INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
closing date. The Company will account for the acquisition using the purchase
method of accounting. The cost exceeded the estimated fair value of the acquired
net assets by approximately $3,332,000 which will be amortized over 20 years.
The allocation of the purchase price will be based on estimates of the fair
value of net assets acquired. Pro forma information for the Company and GranTech
and Biodac is available elsewhere in this Prospectus.
GranTech converts the sludge produced by recycled pulp and paper mills into
granules that can be used as absorbents for oil and grease, as cat-box fillers
and as carriers for agricultural chemicals. GranTech produces an agricultural
carrier marketed as BIODAC[Registered Trademark], which is sold exclusively by
Biodac.
Stock-based Compensation Plans
On July 2, 1996, the Company adopted a stock-based compensation plan for
its key employees, directors, and others, which permits the grant of a variety
of stock and stock-based awards as determined by the human resources committee
of the Company's Board of Directors (the Board Committee), including restricted
stock, stock options, stock bonus shares or performance-based shares. The option
recipients and the terms of options granted under this plan are determined by
the Board Committee. Options generally vest and become immediately exercisable
on the ninth anniversary of the grant date, unless the Company's common stock
becomes publicly traded prior to such date. In such an event options become
exercisable 90 days after the Company becomes subject to the Securities Exchange
Act of 1934, 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 are deemed to have lapsed ratably over periods ranging from five to
ten years after the first anniversary of the grant date, depending on the term
of the option, which generally ranges from ten to twelve years. Nonqualified
stock options may be granted at any price determined by the Board Committee,
although incentive stock options must be granted at not less than fair market
value of the Company's stock on the date of grant. As of July 2, 1996, no
options to purchase shares of the Company's common stock have been granted under
this plan. The Company also has a directors' stock option plan, adopted on July
2, 1996, that provides for the grant of stock options to outside directors
pursuant to a formula approved by the Company's shareholders. Options granted
under this plan will have the same general terms as options granted under the
stock-based compensation plan described above, except that the restrictions and
repurchase rights generally are deemed to have lapsed ratably over a four-year
period and the option term is five years. As of July 2, 1996, no options to
purchase shares of the Company's common stock have been granted under this plan.
In addition to the Company's stock-based compensation plans, certain officers
and key employees may also participate in the stock-based compensation plans of
Thermo Electron or its other majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
Reserved Shares
At July 2, 1996, the Company had reserved 825,000 unissued shares of its
common stock for possible issuance under stock-based compensation plans.
F-10
<PAGE> 62
REPORT OF INDEPENDENT AUDITORS
Board of Trustees Edward Lowe Foundation, Inc.,
Granulation Technology, Inc. and Biodac, a division of
Edward Lowe Industries, Inc.:
We have audited the accompanying combined balance sheet of Granulation
Technology, Inc. and Biodac, a division of Edward Lowe Industries, Inc. as of
September 30, 1994 and 1995, and the related combined statements of operations
and shareholder's equity (deficit) and cash flows for each of the three years in
the period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined 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 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Granulation
Technology, Inc. and Biodac, a division of Edward Lowe Industries, Inc. as of
September 30, 1994 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
CROWE, CHIZEK AND COMPANY LLP
South Bend, Indiana
July 2, 1996
F-11
<PAGE> 63
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
<TABLE>
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------- ---------------------
1993 1994 1995 1995 1996
------- ------- ------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 4,709 $ 3,670 $ 4,233 $2,361 $2,750
Costs and Operating Expenses:
Cost of revenues............................ 3,287 3,234 3,188 1,620 2,189
Selling, general and administrative
expenses................................. 995 988 2,410 377 1,524
Research and development expenses........... 367 281 303 129 110
------- ------- ------- ------ ------
4,649 4,503 5,901 2,126 3,823
------- ------- ------- ------ ------
Operating Income (Loss)....................... 60 (833) (1,668) 235 (1,073)
Other Income (Note 6)......................... -- -- -- -- 700
Interest Expense (Note 3)..................... (1,042) (1,140) (1,469) (697) --
------- ------- ------- ------ ------
Net Loss (Note 4)............................. $ (982) $(1,973) $(3,137) $ (462) $ (373)
======= ======= ======= ====== ======
</TABLE>
See accompanying notes to combined financial statements.
F-12
<PAGE> 64
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
<TABLE>
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1994 1995 1996
------------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash..................................................... $ -- $ 43 $ --
Accounts receivable...................................... 305 298 926
Inventories.............................................. 683 695 352
Federal income tax deposit............................... 163 -- --
Other current assets..................................... 11 1 --
-------- -------- --------
Total current assets.................................. 1,162 1,037 1,278
-------- -------- --------
Property, plant and equipment:
Land and improvements.................................... 267 267 267
Buildings and improvements............................... 4,412 4,375 4,482
Machinery and equipment.................................. 7,419 7,282 7,200
Office furniture and equipment........................... 53 59 59
-------- -------- --------
12,151 11,983 12,008
Accumulated depreciation and amortization................ 4,512 5,513 6,113
-------- -------- --------
7,639 6,470 5,895
-------- -------- --------
Other Assets:
Cash surrender value of life insurance................... 28 37 41
Patents, net of accumulated amortization of $146, $182
and $172.............................................. 152 116 126
-------- -------- --------
180 153 167
-------- -------- --------
$ 8,981 $ 7,660 $ 7,340
======== ======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Notes payable -- shareholder (Note 3).................... $ 16,048 $ -- $ --
Accounts payable......................................... 137 81 188
Salaries, wages and bonus payable........................ 57 54 15
Accrued property taxes................................... 121 100 92
Accrued legal expenses (Note 6).......................... -- 999 64
Other accrued expenses................................... -- -- 50
Interest payable (Note 3)................................ 1,663 -- --
-------- -------- --------
Total current liabilities............................. 18,026 1,234 409
-------- -------- --------
Shareholder's Equity (Deficit):
Common stock, $1.00 par value: 20,000 shares authorized
and 10,000 shares outstanding......................... 10 10 10
Additional paid-in capital (Note 3)...................... 1,386 20,565 20,565
Accumulated deficit...................................... (11,292) (12,844) (13,313)
Divisional equity (deficit).............................. 851 (1,305) (331)
-------- -------- --------
(9,045) 6,426 6,931
-------- -------- --------
$ 8,981 $ 7,660 $ 7,340
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-13
<PAGE> 65
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
<TABLE>
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss....................................... $ (982) $(1,973) $(3,137) $(462) $(373)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization.............. 1,168 1,231 1,242 631 591
Provision for obsolete inventory........... -- -- 150 -- --
Provision for warranty reserve............. -- -- -- -- 50
Increase in cash surrender value of life
insurance............................... (9) (9) (9) (4) (4)
Loss on disposal of equipment.............. -- -- 38 -- --
Changes in current accounts:
Accounts receivable..................... 978 (32) 7 (903) (628)
Inventories............................. (289) 112 (162) (37) 343
Due from related party.................. 96 -- -- -- --
Federal income tax deposit.............. -- (163) 163 -- --
Other current assets.................... 7 -- 10 1 1
Accounts payable........................ (385) (51) (56) 3 107
Salaries, wages and bonus payable....... (47) (26) (3) (27) (39)
Accrued property taxes.................. 17 (1) (21) (10) (8)
Accrued legal fees...................... -- -- 999 -- (935)
Interest payable........................ (558) 1,140 1,469 697 --
------ ------- ------- ----- -----
Net cash provided by (used in)
operating activities................ (4) 228 690 (111) (895)
------ ------- ------- ----- -----
Cash Flows from Investing Activities:
Proceeds from sale of equipment................ -- -- 7 -- --
Capital expenditures........................... (452) (336) (83) (69) (26)
------ ------- ------- ----- -----
Net cash used in investing
activities.......................... (452) (336) (76) (69) (26)
------ ------- ------- ----- -----
Cash Flows from Financing Activities:
Borrowings from shareholder.................... 200 -- -- -- --
Net transfer (to) from parent company.......... 238 76 (571) 180 878
------ ------- ------- ----- -----
Net cash provided by (used in)
financing activities................ 438 76 (571) 180 878
------ ------- ------- ----- -----
Increase (Decrease) in Cash...................... (18) (32) 43 -- (43)
Cash at Beginning of Period...................... 50 32 -- -- 43
------ ------- ------- ----- -----
Cash at End of Period............................ $ 32 $ -- $ 43 $ -- $ --
====== ======= ======= ===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for interest....... $1,600 $ -- $ -- $ -- $ --
During the year ended September 30, 1995, debt
of $16,048 and accrued interest of $3,131 was
contributed to equity.
</TABLE>
See accompanying notes to combined financial statements.
F-14
<PAGE> 66
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
<TABLE>
COMBINED STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<CAPTION>
COMMON STOCK ADDITIONAL DIVISIONAL
---------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT) TOTAL
------ ------ ---------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1992........ 10,000 $10 $ 1,386 $ (8,024) $ 224 $(6,404)
Net loss -- -- -- (1,134) 152 (982)
Net transfer from parent
company......................... -- -- -- -- 238 238
------ --- ------- -------- ------- -------
BALANCE AT SEPTEMBER 30, 1993..... 10,000 10 1,386 (9,158) 614 (7,148)
Net loss -- -- -- (2,134) 161 (1,973)
Net transfer from parent
company......................... -- -- -- -- 76 76
------ --- ------- -------- ------- -------
BALANCE AT SEPTEMBER 30, 1994..... 10,000 10 1,386 (11,292) 851 (9,045)
Net loss.......................... -- -- -- (1,552) (1,585) (3,137)
Net transfer to parent company.... -- -- -- -- (571) (571)
Contributed debt to equity........ -- -- 19,179 -- -- 19,179
------ --- ------- -------- ------- -------
BALANCE AT SEPTEMBER 30, 1995..... 10,000 10 20,565 (12,844) (1,305) 6,426
<CAPTION>
(UNAUDITED)
Net loss.......................... -- -- -- (469) 96 (373)
Net transfer from parent
company......................... -- -- -- -- 878 878
------ --- ------- -------- ------- -------
BALANCE AT MARCH 31, 1996......... 10,000 $10 $20,565 $(13,313) $ (331) $ 6,931
====== === ======= ======== ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-15
<PAGE> 67
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The combined financial statements include the operations of Granulation
Technology, Inc. and Biodac, a division of Edward Lowe Industries, Inc. ("parent
company"). Both GranTech and Edward Lowe Industries, Inc. are owned 100% by the
Henry Edward Lowe Amended and Restated Irrevocable Trust. The financial
statements include the complete operations of GranTech and the divisional
activity of Biodac which includes accounts receivable, inventory, patents,
accounts payable, divisional equity (deficit) and related operations associated
with the selling and marketing of the product manufactured by GranTech.
Divisional equity (deficit) represents the parent company's net investment in
Biodac. Material intercompany accounts and transactions have been eliminated.
Nature of Operations
Granulation Technology, Inc. ("GranTech") produces, from paper mill sludge,
cellulosic based granules, sold under the BIODAC(R) trademark, for the
agricultural, lawn and garden markets. The main manufacturing plant is located
in Green Bay, Wisconsin. The corporate office is located in Cassopolis,
Michigan. After the product is manufactured, it is stored in the facility in
Green Bay until shipment. Biodac, a division of Edward Lowe Industries, Inc., is
a related company and under an agreement with GranTech, is the sole distributor
and marketer of GranTech manufactured products. The Company's products are
primarily sold in the United States. The patents and trademarks which encompass
both the manufacturing process and the use of such products are owned by Biodac.
GranTech and Biodac collectively will be referred to as the Company.
Market Concentration
Products are sold primarily in the agricultural, lawn and garden markets
and the Company has four major customers with large concentrations of revenue
and accounts receivable. Management does not believe that this concentration of
credit risk has or will have a significant negative impact on the Company.
<TABLE>
Revenue for fiscal years ended September 30:
<CAPTION>
CUSTOMER 1993 1994 1995
-------- ---- ---- ----
<S> <C> <C> <C>
A 52% 45% 47%
B 20% 25% 18%
C 12% 11% 12%
D 6% 10% 11%
</TABLE>
<TABLE>
Accounts receivable as of September 30:
<CAPTION>
CUSTOMER 1994 1995
-------- ---- ----
<S> <C> <C>
A 1% 6%
B 29% --%
C 20% 20%
D 22% 35%
</TABLE>
Use of Estimates in the Preparation of Financial Statements
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
F-16
<PAGE> 68
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
The financial statements contain no allowance for doubtful accounts since
management expects that receivables are fully collectible.
Inventory
Inventory is recorded at the lower of cost (on a first-in, first-out basis
determined on average cost of production) or market method.
Property, Plant and Equipment
<TABLE>
Maintenance and repair expenditures that are normal and recurring are
charged against income in the period incurred. Expenditures which materially
improve or extend the useful lives of existing properties are capitalized and
depreciated over their useful lives. Depreciation is provided on the various
classes of depreciable assets using straight-line and accelerated methods based
on their estimated useful lives as follows:
<S> <C>
Land improvements 15 years
Buildings and improvements 40 years
Machinery and equipment 5-7 years
Office furniture and equipment 5-7 years
</TABLE>
Patents
Patent costs are included in other assets and are amortized on a straight
line basis over the life of the patents. Two patents expire in 2003, while the
other patent expires in 2002.
Interim Financial Statements
The financial statements as of March 31, 1996 and for the six-month periods
ended March 31, 1995 and 1996, are unaudited but, in the opinion of management,
reflect all adjustments of a normal recurring nature necessary for a fair
presentation of results for these interim periods. The results of operations for
the six-month period ended March 31, 1996 are not necessarily indicative of the
results to be expected for the entire year.
2. INVENTORY
<TABLE>
Inventory is comprised of the following as of September 30, 1994 and 1995:
<CAPTION>
1994 1995
---- -----
(IN THOUSANDS)
<S> <C> <C>
Supplies $ 6 $ 6
Finished goods 677 689
---- ----
$683 $695
==== ====
</TABLE>
F-17
<PAGE> 69
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. NOTE PAYABLE -- SHAREHOLDER
As of September 30, 1994, GranTech had unsecured promissory notes with the
Company's shareholder totaling $16,048,000. The notes, which were dated from
January 27, 1989 through October 27, 1992, were payable upon demand with
interest due monthly at fifty basis points over the CitiBank prime money rate.
As of September 29, 1995, the outstanding debt of $16,048,000 plus accrued
interest of $3,131,000 was contributed to paid in capital.
4. INCOME TAXES
Granulation Technology, Inc. and Edward Lowe Industries, Inc. have both
individually elected, with the consent of its shareholder, to be taxed as S
corporations under the Internal Revenue Code and similar sections of state
income tax laws (where applicable) which provide that, in lieu of corporation
income taxes, the shareholder will be taxed on the Company's taxable income.
There is no provision for income taxes for the years ended September 30, 1993,
1994 and 1995.
5. CONTRACTS AND COMMITMENTS
GranTech has entered into the following agreements with various parties:
A multiple year supply agreement with a nearby paper mill, dated
December 26, 1989 and amended March 5, 1990, whereby the mill will supply
paper sludge to GranTech, at no cost to GranTech other than the mill's
incremental disposal costs. These incremental expenses are defined in the
contract to represent expenses in excess of current landfill disposal
costs. During 1995, the term was extended for two successive additional
terms of two years each, commencing December 26, 1997. Either party may
terminate this amended agreement.
An employment agreement with GranTech's president effective January 1,
1989 through September 30, 1996 with extension options available. The
agreement specifies the president's salary, discretionary bonus, benefits,
severance and noncompete aspects of his employment. The agreement includes
certain provisions relative to the sale or disposition of the business of
GranTech, which would require GranTech to pay additional compensation of
2 1/2 times his base salary. No provision for this liability has been
recorded as of September 30, 1995.
A September 1992 supply agreement with American Cyanamid Company
("American Cyanamid") was renewed through December 31, 1996 and is
renewable from year to year thereafter until either party terminates the
agreement. The BIODAC(R) products are sold to American Cyanamid, at a fixed
price, for its exclusive use as a granular carrier with certain chemicals
and cannot be sold to others for use with the same chemicals.
Effective October 1, 1995, GranTech and Biodac entered into a four
year supply agreement with The Solaris Group, a unit of Monsanto Company.
The Company is to supply a specific product, known as BIODAC(R) HLG-SR, to
The Solaris Group for use in the consumer home, lawn and garden markets in
the United States and Canada. The price per ton is fixed for the period
October 1, 1995 through September 30, 1997 and thereafter adjusted based
upon changes in natural gas and electricity prices. The contract is subject
to a one year extension.
The Company uses certain sales agents and employees to sell its products.
Biodac division has a sales agency agreement with Ontario 361267 Ltd. d/b/a The
Consulting Group dated October 1, 1995, to pay a 5% commission on gross sales as
the exclusive sales agent for the Canadian provinces. Sales are subject to the
commission if the products are shipped into Canada or sold to a U.S. customer
having a presence in Canada.
F-18
<PAGE> 70
GRANULATION TECHNOLOGY, INC.
AND BIODAC, A DIVISION OF EDWARD LOWE INDUSTRIES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
The agreement is for a one year term and includes an automatic renewal for
additional terms of one year until either party terminates the agreement.
6. GAIN CONTINGENCY
In December 1994, Biodac filed suit against a company for patent
infringement. On February 21, 1996, this matter was resolved. A consent decree
and settlement agreement were executed by all parties. Settlement of $700,000
was received in February 1996 and has been recorded as of the date of receipt.
As of September 30, 1995, no contingent gain was recorded. Legal and
professional fees incurred relative to the suit for the year ended September 30,
1995 were approximately $1,654,000 and were recorded as selling, general and
administrative expenses. No fees were incurred relative to this suit prior to
the year ended September 30, 1995.
7. SUBSEQUENT EVENT
On July 2, 1996, an asset purchase agreement was signed to sell
substantially all of the assets of the Company, subject to certain liabilities,
to Thermo Fibergen Inc., for approximately $12,000,000 in cash, subject to a
post-closing adjustment based upon the net asset value of the Company as of the
closing date.
F-19
<PAGE> 71
THERMO FIBERGEN INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 30, 1995
(UNAUDITED)
On July 3, 1996, Thermo Fibergen Inc. (the "Company") acquired
substantially all of the assets, subject to certain liabilities, of Granulation
Technology, Inc. and Biodac, a division of Edward Lowe Industries, Inc.
(collectively "GranTech and Biodac") for approximately $12,000,000 in cash,
subject to a post-closing adjustment. The Company will account for this
acquisition using the purchase method of accounting.
<TABLE>
The following unaudited pro forma combined condensed statement of
operations sets forth the results of operations for the twelve months ended
December 30, 1995, as if the acquisition of GranTech and Biodac, which is
assumed to be financed with the $12,500,000 in cash received by the Company in
connection with its capitalization, had occurred on January 1, 1995. GranTech
and Biodac have a fiscal year end which differs from the Company's fiscal year
end. The pro forma combined financial statements below combine the historical
September 30 fiscal year end financial statements of GranTech and Biodac and the
calendar year end financial statements of the Company. The results of operations
of GranTech and Biodac for the three months ended December 31, 1995 have not
been included in the pro forma combined condensed statement of operations.
GranTech and Biodac revenues and net loss were $1,171,000 and $854,000,
respectively, for the three months ended December 31, 1995. The pro forma
results of operations are not necessarily indicative of future operations or the
actual results that would have occurred had the acquisition of GranTech and
Biodac been made on January 1, 1995. This statement should be read in
conjunction with the accompanying notes, the pro forma combined condensed
balance sheet and the respective historical financial statements and related
notes of the Company and GranTech and Biodac appearing elsewhere in this
Prospectus.
<CAPTION>
HISTORICAL
---------------------- PRO FORMA
THERMO GRANTECH -----------------------
FIBERGEN AND BIODAC ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues........................................... $ -- $ 4,233 $ -- $ 4,233
------- ------- ----- -------
Costs and Operating Expenses:
Cost of revenues................................. -- 3,188 93 3,281
Selling, general and administrative expenses..... -- 2,410 328 2,738
Research and development expenses................ 601 303 -- 904
------- ------- ----- -------
601 5,901 421 6,923
------- ------- ----- -------
Operating Loss..................................... (601) (1,668) (421) (2,690)
Interest Expense................................... -- 1,469 -- 1,469
------- ------- ----- -------
Loss Before Income Taxes........................... (601) (3,137) (421) (4,159)
Income Taxes....................................... -- -- -- --
------- ------- ----- -------
NET LOSS........................................... $ (601) $(3,137) $(421) $(4,159)
======= ======= ===== =======
LOSS PER SHARE..................................... $ (.06) $ (.42)
======= =======
WEIGHTED AVERAGE SHARES............................ 10,000 10,000
======= =======
</TABLE>
F-20
<PAGE> 72
THERMO FIBERGEN INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996
(UNAUDITED)
<TABLE>
The following unaudited pro forma combined condensed statement of
operations sets forth the results of operations for the three months ended March
30, 1996, as if the acquisition of GranTech and Biodac, which is assumed to be
financed with the $12,500,000 in cash received by the Company in connection with
its initial capitalization, had occurred on January 1, 1995. The pro forma
results of operations are not necessarily indicative of future operations or the
actual results that would have occurred had the acquisition of GranTech and
Biodac been made on January 1, 1995. This statement should be read in
conjunction with the accompanying notes, the pro forma combined condensed
balance sheet and the respective historical financial statements and related
notes of the Company and GranTech and Biodac appearing elsewhere in this
Prospectus.
<CAPTION>
HISTORICAL
---------------------- PRO FORMA
THERMO GRANTECH -----------------------
FIBERGEN AND BIODAC ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues........................................... $ -- $1,579 $ -- $ 1,579
------- ------ ----- -------
Costs and Operating Expenses:
Cost of revenues................................. -- 1,238 -- 1,238
Selling, general and administrative expenses..... -- 500 85 585
Research and development expenses................ 203 60 -- 263
------- ------ ----- -------
203 1,798 85 2,086
------- ------ ----- -------
Operating Loss..................................... (203) (219) (85) (507)
Interest Income.................................... 99 -- (95) 4
Other Income....................................... -- 700 -- 700
------- ------ ----- -------
Income (Loss) Before Income Taxes.................. (104) 481 (180) 197
Income Taxes....................................... -- -- -- --
------- ------ ----- -------
NET INCOME (LOSS).................................. $ (104) $ 481 $(180) $ 197
======= ====== ===== =======
EARNINGS (LOSS) PER SHARE.......................... $ (.01) $ .02
======= =======
WEIGHTED AVERAGE SHARES............................ 10,000 10,000
======= =======
</TABLE>
F-21
<PAGE> 73
THERMO FIBERGEN INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 30, 1996
(UNAUDITED)
<TABLE>
The following unaudited pro forma combined condensed balance sheet sets
forth the financial position as of March 30, 1996, to reflect the acquisition of
GranTech and Biodac as if the acquisition had occurred on March 30, 1996. This
statement should be read in conjunction with the accompanying notes, the pro
forma combined condensed statements of operations and the respective historical
financial statements and related notes of the Company and GranTech and Biodac
appearing elsewhere in this Prospectus.
<CAPTION>
HISTORICAL
---------------------- PRO FORMA
THERMO GRANTECH -----------------------
FIBERGEN AND BIODAC ADJUSTMENTS COMBINED
-------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $12,500 $ -- $(12,000) $ 500
Accounts receivable, net -- 926 -- 926
Inventories -- 352 93 445
------- -------- -------- -------
12,500 1,278 (11,907) 1,871
------- -------- -------- -------
Property, Plant and Equipment, Net 6 5,895 -- 5,901
------- -------- -------- -------
Patents and Other Assets -- 167 1,833 2,000
------- -------- -------- -------
Cost in Excess of Net Assets of Acquired
Companies -- -- 3,332 3,332
------- -------- -------- -------
$12,506 $ 7,340 $ (6,742) $13,104
======= ======== ======== =======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
Current Liabilities:
Accounts payable $ -- $ 188 $ -- $ 188
Other accrued expenses -- 221 189 410
Due to parent company and affiliates 16 -- -- 16
------- -------- -------- -------
16 409 189 614
------- -------- -------- -------
Shareholder's Investment:
Common stock 100 10 (10) 100
Capital in excess of par value 12,400 20,565 (20,565) 12,400
Deficit accumulated during the development
stage subsequent to capitalization of the
Company (10) -- -- (10)
Accumulated deficit -- (13,313) 13,313 --
Divisional equity -- (331) 331 --
------- -------- -------- -------
12,490 6,931 (6,931) 12,490
------- -------- -------- -------
$12,506 $ 7,340 $ (6,742) $13,104
======= ======== ======== =======
</TABLE>
F-22
<PAGE> 74
THERMO FIBERGEN INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
NOTE 1 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 30, 1995 (In
thousands, except in text)
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 30, 1995
-------------------
DEBIT (CREDIT)
<S> <C>
COST OF REVENUES
Increase in the finished goods inventory of GranTech and Biodac to the
estimated selling price, less the sum of the costs of disposal and
a reasonable profit allowance for the Company's selling efforts.... $ 93
-----
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Elimination of service fees charged to GranTech and Biodac by Edward
Lowe Industries, Inc............................................... (158)
Service fee of 1.20% of the revenues of GranTech and Biodac for
services provided under a services agreement between the Company
and Thermo Electron................................................ 51
Amortization over 7 years of the increase in the recorded amount of
patents as a result of the acquisition of GranTech and Biodac...... 268
Amortization over 20 years of cost in excess of net assets of acquired
companies created by the acquisition of GranTech and Biodac........ 167
-----
328
-----
</TABLE>
<TABLE>
NOTE 2 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 30, 1996 (In thousands,
except in text)
<CAPTION>
THREE MONTHS ENDED
MARCH 30, 1996
------------------
DEBIT (CREDIT)
<S> <C>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Elimination of service fees charged to GranTech and Biodac by Edward
Lowe Industries, Inc................................................ $(40)
Service fee of 1.0% of the revenues of GranTech and Biodac for services
provided under a services agreement between the Company and Thermo
Electron............................................................ 16
Amortization over 7 years of the increase in the recorded amount of
patents as a result of the acquisition of GranTech and Biodac....... 67
Amortization over 20 years of cost in excess of net assets of acquired
companies created by the acquisition of GranTech and Biodac......... 42
----
85
----
INTEREST INCOME
Decrease in interest income attributable to the lower cash position as
a result of the acquisition of GranTech and Biodac.................. (95)
----
</TABLE>
F-23
<PAGE> 75
THERMO FIBERGEN INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
NOTE 3 -- PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONDENSED BALANCE SHEET
(In thousands)
<CAPTION>
DEBIT (CREDIT)
--------------
<S> <C>
CASH AND CASH EQUIVALENTS
Cash payment to acquire GranTech and Biodac.................................. $(12,000)
--------
INVENTORIES
Increase in the finished goods inventory of GranTech and Biodac to the
estimated selling price, less the sum of the costs of disposal and a
reasonable profit allowance for the Company's selling efforts............. 93
--------
PATENTS AND OTHER ASSETS
Decrease in other assets for asset of GranTech and Biodac not acquired....... (41)
Increase in patents of GranTech and Biodac to estimated fair market value.... 1,874
--------
1,833
--------
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
Excess of cost over the fair value of the net assets acquired of GranTech and
Biodac.................................................................... 3,332
--------
OTHER ACCRUED EXPENSES
Decrease in other accrued expenses of GranTech and Biodac for liabilities not
assumed................................................................... 11
Estimated accrued acquisition expenses for exit costs........................ (200)
--------
(189)
--------
SHAREHOLDER'S INVESTMENT
Elimination of GranTech and Biodac's equity accounts......................... 6,931
--------
</TABLE>
F-24
<PAGE> 76
===============================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THERMO ELECTRON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Reports to Security Holders.............. 3
Additional Information................... 3
Incorporation of Certain Documents by
Reference.............................. 3
Prospectus Summary....................... 5
Risk Factors............................. 8
The Company.............................. 13
Use of Proceeds.......................... 13
Dividend Policy.......................... 13
Capitalization........................... 14
Dilution................................. 15
Selected Financial Information........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 17
Business................................. 19
Relationship with Thermo Electron and
Thermo Fibertek........................ 27
Management............................... 30
Security Ownership of Certain
Beneficial Owners and Management....... 35
Information Concerning Thermo Electron... 37
Description of Securities................ 38
Certain Federal Income Tax Consequences.. 42
Shares Eligible for Future Sale.......... 46
Underwriting............................. 48
Legal Opinions........................... 49
Experts.................................. 49
Index to Financial Statements............ F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
3,100,000 UNITS
(EACH UNIT CONSISTING OF ONE SHARE
OF COMMON STOCK AND ONE
REDEMPTION RIGHT)
THERMO FIBERGEN INC.
------------------
REDEMPTION PAYMENTS GUARANTEED
ON A SUBORDINATED BASIS BY
THERMO ELECTRON CORPORATION
------------------
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS
OPPENHEIMER & CO., INC.
, 1996
================================================================================
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
FORM S-1 ITEM 13.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
FORM S-3 ITEM 14.
<TABLE>
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission (the "Commission") registration fee
and the NASD filing fee.
<S> <C>
Securities and Exchange Commission registration fee............ $ 18,809
NASD filing fee................................................ 5,955
American Stock Exchange listing fee............................ 37,500
Legal fees and expenses........................................ 20,000
Accounting fees and expenses................................... 60,000
Blue Sky fees and expenses (including legal fees).............. 10,000
Printing and engraving expenses................................ 120,000
Transfer agent fees............................................ 5,000
Miscellaneous.................................................. 73,236
--------
Total................................................ $350,500
========
</TABLE>
FORM S-1 ITEM 14.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
FORM S-3 ITEM 15.
The Delaware General Corporation Law and the Registrants' Certificates of
Incorporation and By-Laws limit the monetary liability of directors to the
Company, Thermo Electron and their respective stockholders and provide for
indemnification of the their respective officers and directors for liabilities
and expenses that they may incur in such capacities. In general, officers and
directors are indemnified with respect to actions taken in good faith in a
manner reasonably believed to be in, or not opposed to, the best interests of
the Company or Thermo Electron, as the case may be, and with respect to any
criminal action or proceeding, actions that the indemnitee had no reasonable
cause to believe were unlawful. The Registrants also have indemnification
agreements with their respective directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to the Company's
Certificate of Incorporation, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and 10.14
hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Company, against
certain liabilities which might be incurred in connection with the performance
of their duties.
Under Section 6 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrants against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1 hereto.
FORM S-1 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On February 12, 1996, the Company issued 1,000 shares (10,000,000 shares
after giving effect to a 10,000-for-one stock split effected on June 26, 1996)
of Common Stock to Thermo Fibertek in consideration of the contribution of
certain assets to the capital of the Company at the time of the incorporation of
the Company. Exemption from registration of this transaction is claimed under
Section 4(2) of the Securities Act.
II-1
<PAGE> 78
FORM S-1 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FORM S-3 ITEM 16. EXHIBITS
(a) EXHIBITS
See the Exhibit Indexes included immediately preceding the exhibits to this
Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or are not
required under Regulation S-X.
FORM S-1 ITEM 17.
UNDERTAKINGS
FORM S-3 ITEM 17.
(a) The undersigned Registrants hereby undertake to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
for the Securities in such denominations and registered in such names as
required by the Underwriters to permit prompt delivery to each purchaser.
(b) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Thermo Electron hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of Thermo Electron's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(d) The undersigned Registrants hereby undertake that, insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrants
pursuant to the provisions contained in the Certificates of Incorporation and
By-Laws of the Registrants and the laws of the State of Delaware, or otherwise,
the Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
either of the Registrants of expenses incurred or paid by a director, officer or
controlling person of the respective Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants will,
unless in the opinion of counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act, the undersigned
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waltham,
Commonwealth of Massachusetts, on this 3rd day of July, 1996.
THERMO FIBERGEN INC.
By: /s/ YIANNIS A. MONOVOUKAS
----------------------------------
YIANNIS A. MONOVOUKAS
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Waltham, Commonwealth of Massachusetts, on this
3rd day of July, 1996.
THERMO ELECTRON CORPORATION
By: /s/ GEORGE N. HATSOPOULOS
----------------------------------
GEORGE N. HATSOPOULOS
President and Chief Executive
Officer
II-3
<PAGE> 80
POWERS OF ATTORNEY AND SIGNATURES
AS TO THE COMPANY:
We, the undersigned officers and directors of Thermo Fibergen Inc., hereby
constitute and appoint John N. Hatsopoulos, Paul F. Kelleher, Seth H. Hoogasian,
Sandra L. Lambert and Jonathan W. Painter, and each of them singly, our true and
lawful attorneys with full powers of substitution, to sign for us and in our
names in the capacities indicated below, the Registration Statement on Form S-1
filed herewith and any and all pre-effective amendments to said Registration
Statement (including any subsequent Registration Statement for the same offering
which may be filed under Rule 462(b)), and generally to do all such things in
our names and on our behalf in our capacities as officers and directors to
enable Thermo Fibergen Inc. to comply with the provisions of the Securities Act
and all requirements of the Securities and Exchange Commission, hereby ratifying
and confirming our signatures as they may be signed by our said attorneys, or
any of them, to said Registration Statement and any and all amendments thereto.
<TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ YIANNIS A. MONOVOUKAS President, Chief Executive July 3, 1996
- ------------------------------------------ Officer and Director
YIANNIS A. MONOVOUKAS (Principal Executive
Officer)
/s/ JOHN N. HATSOPOULOS Vice President, Chief July 3, 1996
- ------------------------------------------ Financial Officer and
JOHN N. HATSOPOULOS Director (Principal
Financial Officer)
/s/ PAUL F. KELLEHER Chief Accounting Officer July 3, 1996
- ------------------------------------------ (Principal Accounting
PAUL F. KELLEHER Officer)
/s/ WILLIAM A. RAINVILLE Chairman of the Board and July 3, 1996
- ------------------------------------------ Director
WILLIAM A. RAINVILLE
/s/ JONATHAN W. PAINTER Director July 3, 1996
- ------------------------------------------
JONATHAN W. PAINTER
/s/ ANNE T. BARRETT Director July 3, 1996
- ------------------------------------------
ANNE T. BARRETT
</TABLE>
II-4
<PAGE> 81
AS TO THERMO ELECTRON:
We, the undersigned officers and directors of Thermo Electron Corporation,
hereby constitute and appoint John N. Hatsopoulos, Paul F. Kelleher, Seth H.
Hoogasian, Sandra L. Lambert and Jonathan W. Painter, and each of them singly,
our true and lawful attorneys with full powers of substitution, to sign for us
and in our names in the capacities indicated below, the Registration Statement
on Form S-3 filed herewith and any and all pre-effective amendments to said
Registration Statement (including any subsequent Registration Statement for the
same offering which may be filed under Rule 462(b)), and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable Thermo Electron Corporation to comply with the provisions of
the Securities Act and all requirements of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys, or any of them, to said Registration Statement and any
and all amendments thereto.
<TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE N. HATSOPOULOS President, Chief Executive Officer, July 3, 1996
- ------------------------------------------ Chairman of the Board and
GEORGE N. HATSOPOULOS Director (Principal Executive
Officer)
/s/ JOHN N. HATSOPOULOS Executive Vice President and July 3, 1996
- ------------------------------------------ Financial Officer (Principal
JOHN N. HATSOPOULOS Financial Officer)
/s/ PAUL F. KELLEHER Vice President, Finance (Principal July 3, 1996
- ------------------------------------------ Accounting Officer)
PAUL F. KELLEHER
/s/ JOHN M. ALBERTINE Director July 3, 1996
- ------------------------------------------
JOHN M. ALBERTINE
/s/ PETER O. CRISP Director July 3, 1996
- ------------------------------------------
PETER O. CRISP
/s/ ELIAS P. GYFTOPOULOS Director July 3, 1996
- ------------------------------------------
ELIAS P. GYFTOPOULOS
/s/ FRANK JUNGERS Director July 3, 1996
- ------------------------------------------
FRANK JUNGERS
/s/ ROBERT A. MCCABE Director July 3, 1996
- ------------------------------------------
ROBERT A. MCCABE
/s/ FRANK E. MORRIS Director July 3, 1996
- ------------------------------------------
FRANK E. MORRIS
/s/ DONALD E. NOBLE Director July 3, 1996
- ------------------------------------------
DONALD E. NOBLE
/s/ HUTHAM S. OLAYAN Director July 3, 1996
- ------------------------------------------
HUTHAM S. OLAYAN
/s/ ROGER D. WELLINGTON Director July 3, 1996
- ------------------------------------------
ROGER D. WELLINGTON
</TABLE>
II-5
<PAGE> 82
<TABLE>
EXHIBIT INDEX
TO THERMO FIBERGEN INC.'S REGISTRATION STATEMENT ON FORM S-1
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
1 Form of Underwriting Agreement...............................................
3.1 Certificate of Incorporation of the Company, as amended......................
3.2 By-Laws of the Company.......................................................
*4.1 Form of Guarantee of Thermo Electron.........................................
*4.2 Guarantee Agreement among the Company, Thermo Electron and the
Representatives of the Underwriters..........................................
*4.3 Form of Unit Certificate.....................................................
*4.4 Specimen Common Stock Certificate............................................
*4.5 Specimen Redemption Right Certificate........................................
*5 Opinion of Seth H. Hoogasian with respect to the validity of the Units,
Common Stock and Redemption Rights being offered.............................
*10.1 Asset Transfer Agreement dated as of July 2, 1996 between Thermo Fibertek
Inc. and the Company.........................................................
*10.2 Technology Purchase Agreement dated as of July 2, 1996 between Thermo
Fibertek Inc. and the Company................................................
10.3 Corporate Services Agreement dated July 2, 1996, between Thermo Electron and
the Company..................................................................
10.4 Thermo Electron Corporate Charter, as amended and restated effective January
3, 1993 (filed as Exhibit 10.1 to Thermo Electron's Annual Report on Form
10-K for the fiscal year ended January 2, 1993 [File No. 1-8002] and
incorporated herein by reference)............................................
10.5 Tax Allocation Agreement dated as of July 2, 1996 between Thermo Fibertek
Inc. and the Company.........................................................
10.6 Master Repurchase Agreement dated as of July 2, 1996 between Thermo Electron
and the Company..............................................................
10.7 Master Guarantee Reimbursement Agreement dated as of July 2, 1996 among
Thermo Electron, Thermo Fibertek and the Company.............................
10.8 Master Guarantee Reimbursement Agreement dated as of July 2, 1996 between
Thermo Fibertek Inc. and the Company.........................................
10.9 Lease dated as of April 12, 1996, by and between Al and Lee Realty and the
Company......................................................................
10.10 [Reserved]...................................................................
10.11 Equity Incentive Plan of the Company.........................................
10.12 Deferred Compensation Plan for Directors of the Company......................
10.13 Directors Stock Option Plan of the Company...................................
10.14 Form of Indemnification Agreement for Officers and Directors of the Company.
In addition to the stock-based compensation plans of the Company, the
executive officers of the Company may be granted awards under stock-based
compensation plans of Thermo Electron and its subsidiaries, for services
rendered to the Company or to such affiliated corporations. Such plans were
filed as Exhibits 10.19 through 10.21 and 10.24 through 10.47 to the Annual
Report on Form 10-K of Thermo Fibertek for the fiscal year ended December 30,
1995 [File No. 11406] and are incorporated herein by reference...............
21 Subsidiaries of the Company..................................................
23.1 Consent of Arthur Andersen LLP...............................................
23.2 Consent of Arthur Andersen LLP...............................................
23.3 Consent of Crowe, Chizek and Company LLP.....................................
23.4 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)...................
24 Power of Attorney (See Signature Page of this Registration Statement)........
27 Financial Data Schedule......................................................
<FN>
- ---------------
* To be filed by amendment.
</TABLE>
<PAGE> 83
<TABLE>
EXHIBIT INDEX
TO THERMO ELECTRON CORPORATION'S REGISTRATION STATEMENT ON FORM S-3
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<S> <C> <C>
**1 Form of Underwriting Agreement..............................................
**4.1 Form of Guarantee of Thermo Electron........................................
**4.2 Guarantee Agreement between the Company, Thermo Electron and the
Representatives of the Underwriters.........................................
*5 Opinion of Seth H. Hoogasian with respect to the validity of the Guarantees
being offered...............................................................
**23.2 Consent of Arthur Andersen LLP..............................................
23.3 Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)..................
24 Power of Attorney (See Signature Page of this Registration Statement).......
<FN>
- ---------------
* To be filed by amendment.
** Filed as an exhibit with the corresponding exhibit number to Thermo Fibergen
Inc.'s Registration Statement on Form S-1 combined with this Registration
Statement on Form S-3.
</TABLE>
<PAGE> 84
APPENDIX
The graphic on page 21 of the Prospectus illustrates the Company's process to
treat pulp residue generated by plants that produce recycled pulp and paper.
<PAGE> 1
Exhibit 1
TH&T DRAFT 7/2/96
3,100,000 Units
THERMO FIBERGEN INC.
(Each Unit Consisting of One Share of
Common Stock and One Redemption Right)
UNDERWRITING AGREEMENT
_____________, 1996
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
OPPENHEIMER & CO., INC.
As Representatives of the several
Underwriters named in Schedule I hereto
c/o NatWest Securities Limited
135 Bishopsgate
London EC2M3UR
England
Dear Sirs:
Thermo Fibergen Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several underwriters named in Schedule I hereto (the
"Underwriters") 3,100,000 Units (the "Firm Units"), each Unit consisting of one
share of Common Stock, $0.01 par value, of the Company (such class of stock
being herein called the "Common Stock") and one redemption right to require the
Company to repurchase one share of Common Stock, as further described in the
Prospectus referred to below. In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Units, the Company
proposes to grant to the Underwriters an option to purchase up to an additional
465,000 Units (the "Option Units").
The Company currently is a wholly owned subsidiary of Thermo Fibertek
Inc., a Delaware corporation ("Fibertek"), which is, in turn, a majority-owned
subsidiary of Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"). The Redemption Rights are guaranteed on a subordinated basis by
Thermo Electron (such guarantees being referred to herein
<PAGE> 2
as the "Guarantees"). To the extent provided herein and for good and valuable
consideration, each of Fibertek and Thermo Electron has become a party to this
Underwriting Agreement.
The Firm Units and any Option Units purchased pursuant to this
Agreement are referred to herein as the "Units"; the shares of Common Stock
which issuable as part of the Units are referred to herein as the "Shares"; the
redemption rights which are issuable as part of the Units are referred to herein
as the "Redemption Rights"; and the Units, the Shares, the Redemption Rights and
the Guarantees are referred to herein together as the "Securities".
This is to confirm the agreement concerning the purchase of the Units
from the Company by the Underwriters. You represent and warrant that you are
acting as the representatives (the "Representatives") of the Underwriters and
that you have been authorized by each of the other Underwriters to enter into
this Underwriting Agreement on its behalf and to act for it in the manner herein
provided.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, FIBERTEK AND THERMO
ELECTRON. The Company, Fibertek and Thermo Electron jointly and severally
represent and warrant to, and agree with, each Underwriter as follows. The
following representations, warranties and agreements shall be deemed to apply to
each Subsidiary (as defined in Section 13) of the Company, if any, unless the
context does not permit:
(a) A joint registration statement of the Company and Thermo Electron
on Form S-1 (File No. 333- ) and Form S-3 (File No. 333- ) with
respect to the Securities (i) has been prepared by the Company and Thermo
Electron in material conformity with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) has been filed with the
Commission under the Securities Act and (iii) has become effective under
the Securities Act. If any post-effective amendment to such registration
statement has been filed with the Commission prior to the execution and
delivery of this Agreement, the most recent such amendment has been
declared effective by the Commission. Copies of such registration
statement as amended to date have been delivered by the Company to the
Representatives, and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to the Commission's Electronic Data Gathering, Analysis and
Retrieval System ("EDGAR"), except to the extent permitted by Regulation
S-T. For purposes of this Agreement, "Effective Time" means the date and
the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission; "Effective Date" means the date of the Effective Time;
"Preliminary Prospectus" means each prospectus included in such
registration statement, or amendments thereof, before it became effective
under the Securities Act and any prospectus filed with the Commission by
the Company pursuant to Rule 424(a) of the Rules and Regulations;
"Registration Statement" means such registration statement, as amended at
the Effective Time, and including all information deemed to be a part
thereof as of the Effective Time pursuant to paragraph (b) of Rule 430A of
the Rules and
2
<PAGE> 3
Regulations together with any registration statement filed by the Company
and Thermo Electron pursuant to Rule 462(b) of the Rules and Regulations;
and "Prospectus" means (i) the form of prospectus relating to the Units,
as first filed pursuant to paragraph (1) or (4) of Rule 424(b) of the
Rules and Regulations, or (ii) the term sheet or abbreviated term sheet
described in Rule 434(b) of the Rules and Regulations, as first filed
pursuant to paragraph (7) of Rule 424(b) of the Rules and Regulations
together with the last preliminary prospectus included in the Registration
Statement filed prior to the Effective Time or filed pursuant to Rule
424(a) of the Rules and Regulations that is delivered by the Company to
the Underwriters for delivery to purchasers of the Units. Reference made
herein to any Preliminary Prospectus or to the Prospectus or to the
Registration Statement, or to any amendment or supplement to any of the
foregoing, shall be deemed to refer to and include any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Securities Act, as of the date of such Preliminary Prospectus or the
Prospectus or the Registration Statement (or amendment or supplement), as
the case may be, and any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any document filed under the Securities Exchange Act of 1934 (the
"Exchange Act") after the date of such Preliminary Prospectus or the
Prospectus, as the case may be, and incorporated by reference in such
Preliminary Prospectus or the Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed
to include any annual report of the Company filed with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act after the Effective
Time that is incorporated by reference in the Registration Statement.
Reference made herein to any statement or document "given" or "included",
or words of similar meaning, in any of the foregoing documents shall be
deemed to include the documents incorporated by reference therein. In
addition, for purposes of this Agreement, all references to the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement to any of the foregoing, shall be deemed to
include the respective copies thereof filed with the Commission pursuant
to EDGAR. The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus
(b) The Registration Statement contains, and any post-effective
amendment to the Registration Statement filed with the Commission after
the Effective Time, the Prospectus and the Prospectus as amended or
supplemented will contain, all statements which are required by the
Securities Act and the Rules and Regulations; at the time of filing
thereof, any Preliminary Prospectus did not, and on the Effective Date,
the Registration Statement did not, and any post-effective amendment to
the Registration Statement filed with the Commission after the Effective
Time, the Prospectus and the Prospectus as amended or supplemented will
not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; provided that the Company, Fibertek and
Thermo Electron make no representation or warranty as to information
contained in or omitted from the Registration Statement, the Preliminary
Prospectus or the Prospectus in reliance upon, and in conformity with,
written information furnished to the Company by you, or by any Underwriter
through you, specifically for inclusion therein. The documents
incorporated by reference in the
3
<PAGE> 4
Prospectus, when they were filed with the Commission, conformed in all
material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder; and any further documents so
filed and incorporated by reference in the Prospectus, when such documents
are filed with the Commission will conform in all material respects to the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. There
is no contract or document required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which is not described or filed as required.
(c) The accounting firms whose reports appear in the Prospectus are
independent certified public accountants as required by the Securities Act
and the Rules and Regulations. The historical and pro forma financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Prospectus
present fairly, in all material respects, the financial condition, results
of operations and cash flows of the entities purported to be shown
thereby, on a historical or pro forma basis as applicable, at the dates
and for the periods indicated and have been prepared in accordance with
generally accepted accounting principles and in accordance with Regulation
S-X of the Rules and Regulations.
(d) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification necessary
except where the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its Subsidiaries taken
as a whole; and, except as described in the Prospectus, the Company holds
all material licenses, certificates and permits from governmental
authorities necessary for the conduct of its business as described in the
Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable. The Redemption Rights have been duly and validly
authorized, and, when duly executed, issued and delivered as contemplated
hereby and upon payment for the Units as provided herein, will be validly
issued and outstanding, and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and by general equity principles and except as
described in the Prospectus (with respect to certain provisions of
Delaware law). Other than as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any Securities pursuant to the
Company's corporate charter, by-laws or other governing documents or any
agreement or
4
<PAGE> 5
other instrument to which the Company is a party or by which it may be
bound. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated by this Agreement gives rise to
any rights, other than those which have been waived or satisfied and other
than as described in the Prospectus, for or relating to the registration
of any shares of Common Stock or other securities of the Company. The
capitalization of the Company is as set forth in the Prospectus as of the
date shown, and the Units, the Shares and the Redemption Rights conform to
the description thereof contained in the Prospectus. All of the
outstanding shares of capital stock of each Subsidiary (as defined in
Section 13) of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and are owned directly or indirectly by
the Company, free and clear of any claim, lien, encumbrance, security
interest, restriction upon voting or transfer or any other claim of any
third party.
(f) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse
change in, or any adverse development which materially affects, the
condition (financial or other), results of operations, business or
prospects of the Company and its Subsidiaries on a consolidated basis from
the date as of which information is given in the Prospectus.
(g) The Company is not, and would not be with the giving of notice or
lapse of time or both, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions
contemplated hereby result in a violation of, or constitute a default
under, the corporate charter, by-laws or other governing documents of the
Company, or any material agreement, indenture or other instrument to which
the Company is a party or by which it is bound, or to which any of its
properties is subject, nor will the performance by the Company of its
obligations hereunder violate any existing law, rule, administrative
regulation or decree of any court or any governmental agency or body
having jurisdiction over the Company or any of its properties, or result
in the creation or imposition of any lien, charge, claim or encumbrance
upon any property or asset of the Company, which would be material to the
Company and its Subsidiaries taken as a whole. Except for permits and
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any U.S. court, governmental agency or body or
any financial institution is required in connection with the consummation
by the Company of the transactions contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered by
the Company.
(i) The Company owns, or has valid rights to use, all items of real and
personal property which are material to the business of the Company and
its Subsidiaries taken as a whole, free and clear of all liens,
encumbrances and claims which may materially interfere with the business,
properties, financial condition or results of operations of the Company
and its Subsidiaries on a consolidated basis.
5
<PAGE> 6
(j) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or Fibertek or Thermo
Electron is a party or to which any property of the Company is subject or
which is pending or, to the knowledge of the Company, Fibertek or Thermo
Electron, contemplated against the Company, Fibertek or Thermo Electron
that is required to be disclosed in the Prospectus and that is not so
disclosed.
(k) The Company is not in violation of any law, ordinance, governmental
rule or regulation or court decree to which it is subject, which violation
could have a material adverse effect on the condition (financial or
other), results of operations, business or prospects of the Company and
its Subsidiaries on a consolidated basis.
(l) Except as disclosed in the Prospectus, the Company owns or
possesses adequate licenses or other rights to use all intellectual
property rights, including patents and trademarks, necessary to conduct
its business as described or referred to in the Prospectus, except where
such failure, singularly or in the aggregate, would not have a material
adverse effect on the Company and its Subsidiaries on a consolidated
basis, and, except as disclosed in the Prospectus, neither Thermo
Electron, Fibertek nor the Company has received any notice of infringement
of or conflict with (or knows of any such infringement of or conflict
with) rights or claims of others with respect to any patents, trademarks,
service marks, trade names, copyrights or know-how, that if the subject of
an unfavorable decision, ruling or finding, would result in a material
adverse effect upon the Company and its Subsidiaries on a consolidated
basis, and, except as disclosed in the Prospectus, all products or
processes referred to in the Prospectus and relating to the business of
the Company now conducted by it do not infringe upon or conflict with any
right or patent, or with any discovery, invention, product or process
which is the subject of any patent application known to the Company,
Fibertek or Thermo Electron, in a manner which would materially and
adversely affect the Company and its Subsidiaries on a consolidated basis.
(m) Each of the Corporate Services Agreement between the Company and
Thermo Electron (the "Services Agreement"), and the other agreements
between the Company and Fibertek or Thermo Electron pursuant to which the
Company was initially organized and capitalized (collectively, the
"Organization Agreements"), and the Tax Allocation Agreement between
Thermo Electron and the Company (all of the foregoing agreements being
referred to herein as the "Inter-corporate Agreements") has been duly and
validly authorized, executed and delivered by the Company and is the valid
and binding agreement of the Company enforceable in accordance with its
terms, except as provided by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (collectively, "applicable
bankruptcy laws"). The execution, delivery and performance of the
Inter-corporate Agreements by the Company, the consummation of the
transactions therein contemplated and compliance with the terms thereof do
not and will not result in a violation of, or constitute a default under,
the corporate charter, by-laws or other governing documents of the
Company, or any agreement, indenture or other instrument to which the
Company is a party or by which it is
6
<PAGE> 7
bound, or to which any of its properties is subject, and do not and will
not violate any existing law, rule, administrative regulation or decree of
any court or any governmental agency or body having jurisdiction over the
Company or any of its properties, or result in the creation or imposition
of any lien, charge, claim or encumbrance upon any property or asset of
the Company, which would be material to the Company and its Subsidiaries
taken as a whole. No consent, approval, authorization or order of any
court, governmental agency or body or financial institution is required in
connection with the consummation of the transactions contemplated by such
Inter-corporate Agreements.
(n) Neither the Company nor Thermo Electron nor Fibertek or any other
Subsidiary of Thermo Electron has taken and none of such companies shall
take, directly or indirectly, any action designed to cause or result in,
or which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any of the
Securities to facilitate the sale or resale of the Units.
(o) The Units, the Shares and the Redemption Rights have been approved
for listing on the American Stock Exchange, subject only to official
notice of issuance.
1A. REPRESENTATIONS AND WARRANTIES OF FIBERTEK AND THERMO ELECTRON.
Fibertek and Thermo Electron each represent and warrant to, and agree with, each
Underwriter that:
(a) Each of Fibertek and Thermo Electron has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority
(corporate and other) to own or lease its properties and conduct its
business, and is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the business conducted by it
or the location of the properties owned or leased by it makes such
qualification necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on Thermo Electron
and its Subsidiaries taken as a whole.
(b) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
Subsidiaries taken as a whole, from the date as of which information is
given in the most recent quarterly or annual report filed by Thermo
Electron pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except any as may have been disclosed to the public.
(c) Except as may be described in their filings under the Exchange Act,
neither Fibertek nor Thermo Electron is, nor with the giving of notice or
lapse of time or both would be, in violation of or in default under, nor
will the execution or delivery hereof or consummation of the transactions
contemplated hereby, including the issuance of the Guarantees by Thermo
Electron, result in a violation of, or constitute a default under, the
corporate charter, by-laws or other governing documents of Fibertek or
Thermo Electron, or any material agreement, indenture or other instrument
to which Fibertek or Thermo Electron is a party or by which any of them is
bound, or to which any of their properties is subject,
7
<PAGE> 8
nor will the performance by Fibertek or Thermo Electron of its obligations
hereunder, including the issuance of the Guarantees by Thermo Electron,
violate any existing law, rule, administrative regulation or decree of any
court or any governmental agency or body having jurisdiction over Fibertek
or Thermo Electron or any of their respective properties, or result in the
creation or imposition of any lien, charge, claim or encumbrance upon any
property or asset of Fibertek or Thermo Electron, which would be material
to Thermo Electron and its Subsidiaries taken as a whole. Except for
permits and similar authorizations required under the Securities Act and
the securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by
Fibertek and Thermo Electron of the transactions contemplated by this
Agreement, including the issuance by Thermo Electron of the Guarantees.
(d) This Agreement has been duly authorized, executed and delivered by
Fibertek and Thermo Electron.
(e) Fibertek owns, and will own as of each Closing Date (as defined
below), of record and beneficially, the number of shares of Common Stock
of the Company set forth in the Prospectus, free and clear of any liens,
encumbrances, claims or restrictions, except that certain of such shares
are reserved for issuance pursuant to stock option and other benefit plans
under which options to purchase Common Stock of the Company owned by
Fibertek are granted to certain employees, directors or consultants of
Thermo Electron and its Subsidiaries.
(f) The most recent Annual Report on Form 10-K of Fibertek and of
Thermo Electron and any subsequent reports filed pursuant to the Exchange
Act complied as of the date thereof in all material respects with the
Exchange Act and the rules and regulations thereunder.
(g) The transfer by Fibertek to the Company of certain stock and/or
assets, as described in the Prospectus and in the Organization Agreements,
has been completed by all required corporate and other action. Each of the
Inter-corporate Agreements to which Fibertek is a party has been duly and
validly authorized, executed and delivered by Fibertek and is the valid
and binding agreement of Fibertek enforceable in accordance with its
terms, except as provided by applicable bankruptcy laws. The execution,
delivery and performance of each of the Inter-corporate Agreements to
which Fibertek is a party by Fibertek, the consummation of the
transactions therein contemplated and compliance with the terms thereof do
not and will not result in a violation of, or constitute a default under,
the corporate charter, by-laws or other governing documents of Fibertek,
or any agreement, indenture or other instrument to which Fibertek is a
party or by which it is bound, or to which any of its properties is
subject, and do not and will not violate any existing law, rule,
administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over Fibertek or any of its properties,
or result in the creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of Fibertek, which would
8
<PAGE> 9
be material to Fibertek. No consent, approval, authorization or order of
any court, governmental agency or body or financial institution is
required in connection with the consummation by Fibertek of the
transactions contemplated by the Inter-corporate Agreements to which
Fibertek is a party, except such as have been obtained.
(h) The Guarantees have been duly and validly authorized, and, when
duly executed, issued and delivered as contemplated hereby and upon
payment for the Units as provided herein, will be validly issued and
outstanding, and will constitute valid and legally binding obligations of
Thermo Electron enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and by general equity principles. The Guarantees conform
in all material respects to the description thereof contained in the
Prospectus. The Services Agreement and the Tax Allocation Agreement have
been duly and validly authorized, executed and delivered by Thermo
Electron and are the valid and binding agreements of Thermo Electron,
enforceable in accordance with their terms.
1B. REPRESENTATIONS AND WARRANTIES OF NATWEST SECURITIES LIMITED.
NatWest Securities Limited represents and agrees that (i) it has not offered or
sold and will not offer or sell any Units to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995 or the Financial Services Act
1986 (the "Act"), (ii) it has complied and will comply with all applicable
provisions of the Act with respect to anything done by it in relation to the
Units in, from or otherwise involving the United Kingdom and (iii) it has only
issued or passed on, and will only issue or pass on, in the United Kingdom any
document received by it in connection with the issue of the Units, other than
any document which consists of or any part of listing particulars, supplementary
listing particulars or any other document required or permitted to be published
by listing rules under Part IV of the Act, to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) (No. 2) Order 1995 or is a person to whom the
document may otherwise lawfully be issued or passed on.
2. PURCHASE OF THE UNITS BY THE UNDERWRITERS. (a) Subject to the terms
and conditions and upon the basis of the representations and warranties herein
set forth, the Company agrees to issue and sell to the Underwriters the Firm
Units and each of the Underwriters agrees, severally and not jointly, to
purchase at a price of ______ per Unit, the number of Firm Units set forth
opposite such Underwriter's name in Schedule I hereto. The Underwriters agree to
offer the Firm Units to the public as set forth in the Prospectus.
(b) The Company hereby grants to the Underwriters an option to
purchase from the Company, solely for the purpose of covering over-allotments in
the sale of Firm Units, all or any portion of the Option Units for a period of
thirty (30) days from the date hereof at the purchase price per Unit set forth
above. Option Units shall be purchased from the Company,
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<PAGE> 10
severally and not jointly, for the accounts of the several Underwriters in
proportion to the number of Firm Units set forth opposite such Underwriter's
name in Schedule I hereto, except that the respective purchase obligations of
each Underwriter shall be adjusted by the Representatives so that no Underwriter
shall be obligated to purchase Option Units other than in 100-share quantities.
3. DELIVERY OF AND PAYMENT FOR THE UNITS. Delivery of certificates for
the Shares and the Redemption Rights comprising the Firm Units and certificates
for the Shares and the Redemption Rights comprising the Option Units, if the
option to purchase the same is exercised on or before the second Business Day
(as defined in Section 13 hereof) prior to the First Closing Date (as defined
below), to be purchased by the Underwriters from the Company and payment
therefor shall be made at the offices of Testa, Hurwitz & Thibeault, LLP, 125
High Street, Boston, Massachusetts 02110 (or such other place as mutually may be
agreed upon), at 10:00 A.M., Eastern time, on the third business day after the
date of this Agreement (the "First Closing Date").
The option to purchase Option Units from the Company granted in Section
2 hereof may be exercised during the term thereof by written notice to the
Company from the Representatives. Such notice shall set forth the aggregate
number of Option Units as to which the option is being exercised and the time
and date, not earlier than either the First Closing Date or the second Business
Day after the date on which the option shall have been exercised nor later than
the third Business Day after the date of such exercise, as determined by the
Representatives, when the Option Units are to be delivered (the "Option Closing
Date"). Delivery and payment for such Option Units are to be at the offices set
forth above for delivery and payment of the Firm Units. (The First Closing Date
and the Option Closing Date are herein individually referred to as a "Closing
Date" and collectively referred to as the "Closing Dates.")
Delivery of certificates for the Units shall be made by or on behalf of
the Company to you, for the respective accounts of the Underwriters, against
payment by you, for the several accounts of the Underwriters, of the purchase
price therefor by certified or official bank check payable in New York Clearing
House funds to the order of the Company. The certificates for the Units shall be
registered in such names and denominations as you shall have requested at least
two full Business Days prior to the applicable Closing Date, and shall be made
available for checking and packaging at a location in New York, New York as may
be designated by you at least one full Business Day prior to such Closing Date.
Time shall be of the essence and delivery at the time and place specified in
this Agreement is a further condition to the obligations of each Underwriter.
4. COVENANTS OF THE COMPANY, FIBERTEK AND THERMO ELECTRON. The Company,
Fibertek and Thermo Electron, jointly and severally, covenant and agree with
each Underwriter that:
(a) The Company and Thermo Electron shall comply with the provisions
of, and make all requisite filings with the Commission pursuant to, Rule
430A and Rule 424(b) of the Rules and Regulations and shall notify you
promptly (in writing, if requested) of all
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<PAGE> 11
such filings. The Company shall notify you promptly of any request by the
Commission for any amendment of or supplement to the Registration
Statement or the Prospectus or for additional information; the Company and
Thermo Electron shall prepare and file with the Commission, promptly upon
your request, any amendments or supplements to the Registration Statement
or the Prospectus which, in your opinion, may be necessary or advisable in
connection with the distribution of the Units; and the Company and Thermo
Electron shall not file any amendment or supplement to the Registration
Statement or the Prospectus, which filing is not consented to by you after
reasonable notice thereof, such consent not to be unreasonably withheld or
delayed. The Company shall advise you promptly of its receipt of notice of
the issuance by the Commission or any state or other regulatory body of
any stop order or other order suspending the effectiveness of the
Registration Statement, suspending or preventing the use of any
Preliminary Prospectus or the Prospectus or suspending the qualification
of the Units for offering or sale in any jurisdiction, or of the
institution of any proceedings for any such purpose; and the Company and
Thermo Electron shall use their best efforts to prevent the issuance of
any stop order or other such order and, should a stop order or other such
order be issued, to obtain as soon as possible the lifting thereof.
(b) The Company shall furnish to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration Statement
as originally filed and each amendment thereto filed with the Commission,
including all consents and exhibits filed therewith, and shall furnish to
the Underwriters such number of conformed copies of the Registration
Statement, as originally filed and each amendment thereto (excluding
exhibits other than this Agreement), the Prospectus and all amendments and
supplements to any of such documents and any document incorporated by
reference in the Prospectus, in each case as soon as available and in such
quantities as the Representatives may from time to time reasonably
request. To the extent applicable, the copies of the Registration
Statement and each amendment thereto (including all exhibits filed
therewith), any Preliminary Prospectus or Prospectus (in each case, as
amended or supplemented) furnished to the Representative and counsel to
the Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(c) Within the time during which a prospectus relating to the Units is
required to be delivered under the Securities Act, the Company and Thermo
Electron shall comply with all requirements imposed upon them by the
Securities Act, as now and hereafter amended, and by the Rules and
Regulations, as from time to time in force, so far as is necessary to
permit the continuance of sales of or dealings in the Units as
contemplated by the provisions hereof and by the Prospectus. If during
such period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances then existing, not misleading,
or if during such period it is necessary to amend the Registration
Statement or to supplement the Prospectus in order to comply with the
Securities Act or to file any document under the Securities Act or the
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<PAGE> 12
Exchange Act, the Company shall promptly notify you and the Company and
Thermo Electron shall amend the Registration Statement or supplement the
Prospectus or file such document (at their expense) so as to correct such
statement or omission or to effect such compliance.
(d) The Company and Thermo Electron shall take or cause to be taken all
necessary action and furnish to whomever you may direct such information
as may be required in qualifying the Units for sale under the laws of such
jurisdictions as you shall designate, and to continue such qualifications
in effect for as long as may be necessary for the distribution of the
Units; except that in no event shall the Company be obligated in
connection therewith to qualify as a foreign corporation or to execute a
general consent to service of process.
(e) The Company and Thermo Electron shall make generally available to
their security holders (and shall deliver to the Representatives), in the
manner contemplated by Rule 158(b) of the Rules and Regulations or
otherwise, as soon as practicable but in any event not later than 45 days
after the end of its fiscal quarter in which the first anniversary date of
the Effective Date occurs, an earnings statement satisfying the
requirements of Section 11(a) of the Securities Act and covering a period
of at least 12 consecutive months beginning after the Effective Date.
(f) The Company, Fibertek and Thermo Electron shall not, during the
180-day period following the date of the Prospectus, except with your
prior written consent, offer for sale, sell or otherwise dispose of,
directly or indirectly, any shares of Common Stock (except for the
issuance of shares of Common Stock pursuant to existing stock option,
purchase and compensation plans, or upon conversion of any currently
outstanding convertible securities described in the Prospectus, sales of
shares of Common Stock by the Company to Fibertek or the issuance of
shares of Common Stock as consideration for the acquisition of one or more
businesses provided that such Common Stock may not be resold prior to the
expiration of such 180-day period), or sell or grant options, rights or
warrants with respect to any shares of Common Stock (other than the grant
of options pursuant to existing stock option, purchase and compensation
plans), otherwise than in accordance with this Agreement or as
contemplated in the Prospectus. The Company, Fibertek and Thermo Electron
will not permit any employee stock option, director stock option or other
stock option to purchase Common Stock of the Company granted by it to be
exercised, and the Common Stock issued upon exercise of the stock option
to be sold, prior to the expiration of the 180-day period following the
date of this Prospectus, without your prior written consent.
(g) The Company shall take such steps as shall be necessary to ensure
that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of such term under the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
(h) Whether or not this Agreement is terminated or the sale of the
Units to the Underwriters is consummated, the Company shall pay or cause
to be paid (A) all expenses (including stock transfer taxes) incurred in
connection with the delivery to the several
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<PAGE> 13
Underwriters of the Units, (B) all fees and expenses (including, without
limitation, fees and expenses of the Company's and Thermo Electron's
accountants and counsel, but excluding fees and expenses of counsel for
the Underwriters) in connection with the preparation, printing, filing,
delivery and shipping of the Registration Statement (including the
financial statements therein and all amendments and exhibits thereto),
each Preliminary Prospectus, the Prospectus and any amendments or
supplements of the foregoing and the printing, delivery and shipping of
this Agreement and other underwriting documents, including, but not
limited to, any Underwriters' Questionnaires, Underwriters' Powers of
Attorney, Blue Sky Memoranda, Agreements Among Underwriters and Selected
Dealer Agreements, (C) all filing fees and fees and disbursements of
counsel to the Underwriters incurred in connection with qualification of
the Units under state securities laws as provided in Section 4(d) hereof,
(D) the filing fee of the National Association of Securities Dealers,
Inc., (E) any applicable listing or other fees, (F) the cost of printing
certificates representing the Shares and the Redemption Rights comprising
the Units (including the Guarantees endorsed thereon), (G) the cost and
charges of any transfer agent or registrar, and (H) all other costs and
expenses incident to the performance of its obligations hereunder for
which provision is not otherwise made in this Section. It is understood,
however, that, except as provided in this Section, Section 6 and Section 8
hereof, the Underwriters shall pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes due upon resale
of any of the Units by them and any advertising expenses incurred in
connection with any offers they may make. If the sale of the Units
provided for herein is not consummated by reason of any failure, refusal
or inability on the part of the Company, Fibertek or Thermo Electron to
perform any agreement on its part to be performed or because any other
condition of the Underwriters' obligations hereunder is not fulfilled or
if the Underwriters shall decline to purchase the Units for any reason
permitted under this Agreement, the Company shall reimburse the several
Underwriters for all reasonable out-of-pocket disbursements (including
fees and disbursements of counsel) incurred by the Underwriters in
connection with any investigation or preparation made by them in respect
of the marketing of the Units or in contemplation of the performance by
them of their obligations hereunder.
(i) The Company shall on or prior to each Closing Date use its best
efforts to cause the Units (and the Shares and Redemption Rights
comprising the Units) to be purchased on such date by the Underwriters to
be approved for listing on the American Stock Exchange, subject only to
official notice of issuance, and shall take such action as shall be
necessary to comply with the rules and regulations of the American Stock
Exchange with respect to such Securities.
(j) During a period of five years from the Effective Date, the Company
and Thermo Electron shall furnish to the Representatives copies of all
reports or other communications furnished to shareholders and copies of
any reports or financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company or Thermo Electron is listed. To the extent
applicable, such reports or documents shall be identical to the
electronically transmitted copies thereof filed
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<PAGE> 14
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters hereunder are subject to the accuracy, as of the date
hereof and each Closing Date (as if made at such Closing Date), of the
representations and warranties of the Company, Fibertek and Thermo Electron
contained herein, to the performance by the Company, Fibertek and Thermo
Electron of their respective obligations hereunder and to the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission
in a timely fashion in accordance with Section 4(a) hereof, all post-effective
amendments to the Registration Statement shall have become effective, all
filings required by Rule 430A and Rule 424 of the Rules and Regulations shall
have been made and no such filings shall have been made without the consent of
the Representatives; no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto shall have been
issued; no proceedings for the issuance of any such order shall have been
initiated or threatened; and any request of the Commission for additional
information (to be included in the Registration Statement or the Prospectus or
otherwise) shall have been disclosed to you and complied with to your
satisfaction.
(b) No Underwriter shall have been advised by the Company,
Fibertek or Thermo Electron or shall have discovered and disclosed to the
Company that the Registration Statement, or the Prospectus or any amendment or
supplement thereto, contains an untrue statement of fact which in your
reasonable opinion, or in the reasonable opinion of counsel for the
Underwriters, is material, or omits to state a fact which, in your reasonable
opinion, or in the reasonable opinion of counsel to the Underwriters, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) On or prior to each Closing Date, you shall have received
from Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters, such opinion
or opinions with respect to corporate proceedings by the Company, Fibertek and
Thermo Electron, the form of the Registration Statement and Prospectus (other
than financial statements and other financial or statistical data), the validity
of the Securities, and other related matters as you may reasonably request and
such counsel shall have received such documents and information as they
reasonably request to enable them to pass upon such matters.
(d) On each Closing Date there shall have been furnished to
you the opinion (addressed to the Underwriters) of Seth H. Hoogasian, Esq.,
General Counsel of Thermo Electron, Fibertek and the Company, dated such Closing
Date and in form and substance satisfactory to counsel for the Underwriters, to
the effect that:
(i) Each of the Company and its Significant Subsidiaries has been duly
organized and is validly existing as a corporation in good standing under
the laws of the jurisdiction of its incorporation, with full corporate
power and authority to own or lease its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business and
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<PAGE> 15
is in good standing in each jurisdiction in which the character of the
business conducted by it or the location of the properties owned or leased
by it makes such qualification necessary, except where the failure to so
qualify or be in good standing would not have a material adverse effect on
the Company and its Subsidiaries taken as a whole.
(ii) Each of Thermo Electron and its Significant Subsidiaries (as
defined in Section 13) has been duly organized and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business as described in the Prospectus, and is
duly qualified to do business and is in good standing in each jurisdiction
in which the character of the business conducted by it or the location of
the properties owned or leased by it makes such qualification necessary,
except where the failure to so qualify or be in good standing would not
have a material adverse effect on Thermo Electron and its Subsidiaries
taken as a whole.
(iii) All of the outstanding shares of Common Stock have been and the
Shares, upon issuance and delivery and payment therefor in the manner
herein described, will be, duly authorized, validly issued, fully paid and
nonassessable. The authorized, issued and outstanding Common Stock is as
set forth in the Prospectus. The Redemption Rights have been duly and
validly authorized, and, when duly executed, issued and delivered as
contemplated hereby and upon payment for the Units as provided herein,
will be validly issued and outstanding, and will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and by general equity principles,
and subject to the restrictions under Section ____ of the General
Corporation Law of the State of Delaware. The Guarantees have been duly
and validly authorized, and, when duly executed, issued and delivered as
contemplated hereby and upon payment for the Units as provided herein,
will be validly issued and outstanding, and will constitute valid and
legally binding obligations of Thermo Electron enforceable in accordance
with their terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general equity
principles. There are no preemptive or other rights to subscribe for or to
purchase, or any restriction upon the voting or transfer of, any of the
Securities pursuant to the Company's corporate charter, by-laws, other
governing documents, or any agreement or other instrument known to such
counsel to which the Company or a Subsidiary thereof is a party or by
which the Company or a Subsidiary thereof may be bound or to which any of
their respective properties is subject; and, to the best of such counsel's
knowledge, neither the filing of the Registration Statement nor the
offering or sale of the Units as contemplated by this Agreement gives rise
to any rights for or relating to the registration of any shares of Common
Stock except such as have been waived or satisfied, other than as
described in the Prospectus. The Securities conform in all material
respects to the description thereof contained in the Prospectus. All of
the outstanding shares of capital stock of each Subsidiary of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and are owned directly or indirectly by the Company free and
clear of any
15
<PAGE> 16
claim, lien, encumbrance or security interest known to such counsel
(except for certain obligations of the Company pursuant to stock and
employee benefit plans maintained for the benefit of employees, officers,
directors and consultants of the Company and its Subsidiaries).
(iv) Each of the Company and its Subsidiaries is not, nor with the
giving of notice or lapse of time or both would be, in violation of or in
default under, nor will the execution or delivery hereof or consummation
of the transactions contemplated hereby result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of the Company or any of its Subsidiaries or, to the
best knowledge of such counsel, any material agreement, indenture or other
instrument to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries may be bound, or to which
any of the properties of the Company or any of its Subsidiaries is
subject, nor, to best of such counsel's knowledge, will the performance by
the Company of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its
Subsidiaries or the properties of the Company or any of its Subsidiaries,
or, to the best knowledge of such counsel, result in the creation or
imposition of any lien, charge, claim or encumbrance upon the properties
or assets of the Company or any of its Subsidiaries which would be
material to the Company and its Subsidiaries taken as a whole. Except for
permits and similar authorizations required under the Securities Act and
the securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by
the Company, Fibertek or Thermo Electron of the transactions contemplated
by this Agreement.
(v) Each of Thermo Electron and its Significant Subsidiaries is not,
nor with the giving of notice or lapse of time or both would be, in
violation of or in default under, nor will the execution or delivery
hereof or consummation of the transactions contemplated hereby result in a
violation of, or constitute a default under, the corporate charter,
by-laws or other governing documents of Thermo Electron or any of its
Significant Subsidiaries or, except as described in the Exchange Act
filings of Fibertek and Thermo Electron, to the best knowledge of such
counsel, any material agreement, indenture, or other instrument to which
Thermo Electron or any of its Significant Subsidiaries is a party or by
which Thermo Electron or any of it Significant Subsidiaries may be bound,
or to which any of the properties of Thermo Electron or any of its
Significant Subsidiaries is subject, nor will the performance by Thermo
Electron of its obligations hereunder, including the issuance of the
Guarantees, violate any existing law, rule, administrative regulation or
decree of any court or any governmental agency or body having jurisdiction
over Thermo Electron or any of its Significant Subsidiaries or the
properties of Thermo Electron or any of its Significant Subsidiaries, or,
to the best knowledge of such counsel, result in the creation or
imposition of any lien, charge, claim or encumbrance upon the properties
or assets of Thermo Electron or any of its Significant Subsidiaries, which
would be material to Thermo Electron and its Subsidiaries taken as a
whole.
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<PAGE> 17
(vi) This Agreement has been duly authorized, executed and delivered by
the Company, Fibertek and Thermo Electron.
(vii) Each of the Inter-corporate Agreements has been duly authorized,
executed and delivered by Fibertek and Thermo Electron, as the case may
be, and is the valid and binding agreement of each of Fibertek and Thermo
Electron, enforceable in accordance with its terms except as provided by
applicable bankruptcy laws. The execution, delivery and performance of
each of the Inter-corporate Agreements by each of the parties thereto, the
consummation of the transactions therein contemplated and compliance with
the terms thereof do not and will not result in a violation of, or
constitute a default under the corporate charter, by-laws or other
governing documents of Fibertek or Thermo Electron, or any material
agreement, indenture or other instrument known to such counsel to which
Fibertek or Thermo Electron is a party or by which either of them is
bound, or to which any of their properties is subject and do not and will
not violate any existing law, rule, administrative regulation or decree of
any court or any governmental agency or body having jurisdiction over
Fibertek or Thermo Electron or any of their properties, or, to the best of
such counsel's knowledge, result in the creation or imposition of any
lien, charge, claim or encumbrance upon any property or asset of Fibertek
or Thermo Electron, which would be material to Fibertek or Thermo Electron
and their respective Subsidiaries taken as a whole. Except for permits and
similar authorizations required under the Securities Act and the
securities or "Blue Sky" laws of certain jurisdictions and for such
permits and authorizations as have been obtained, no consent, approval,
authorization or order of any court, governmental agency or body or, to
the knowledge of such counsel, financial institution is required in
connection with the consummation by Fibertek and Thermo Electron of the
transactions contemplated by the Inter-corporate Agreements.
(viii) The Registration Statement and all post-effective amendments
thereto have become effective under the Securities Act and, to the best of
such counsel's knowledge, no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending before or contemplated by the
Commission. All filings required by Rule 424 and Rule 430A of the Rules
and Regulations have been made; the Registration Statement as of the
Effective Date, and the Prospectus and any amendment or supplement thereto
as of their respective dates, complied as to form in all material respects
with the requirements of the Securities Act and the Rules and Regulations
(it being understood that such counsel need express no opinion on the
financial statements or other financial and statistical data included
therein); and the documents incorporated by reference in the Prospectus,
when they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder (it being understood that
such counsel need express no opinion on the financial statements or other
financial and statistical data included therein). Such counsel has no
reason to believe that (i) the Registration Statement, as of its Effective
Date, or any amendment thereto, at the time it became effective contained
any untrue statement of a material fact or omitted to state any
17
<PAGE> 18
material fact required to be stated therein or necessary in order to make
the statements therein not misleading, or (ii) the Prospectus or any
supplement or amendment thereto, on such Closing Date or at the time such
Prospectus or supplement or amendment thereto was issued, contains or
contained any untrue statement of a material fact or omits or omitted to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need express no opinion with respect to the financial statements
or other financial and statistical data included in the Registration
Statement and the Prospectus).
(ix) To the best knowledge of such counsel, all descriptions in the
Prospectus of statutes, regulations, legal or governmental proceedings,
contracts and other documents are accurate in all material respects, and
fairly present in all material respects the information required to be
shown and such counsel does not know of any contracts or documents of a
character required to be summarized or described therein or to be filed as
exhibits thereto that are not so summarized, described or filed, nor does
such counsel know of any pending or threatened litigation or any
governmental proceeding, statute or regulation required to be described in
the Prospectus that is not so described.
In rendering the foregoing opinion, counsel may rely, as to matters of
fact, upon certificates of officers of the Company, Fibertek and Thermo Electron
and certificates of public officials. Certificates so relied upon shall be
furnished to you and shall be satisfactory to you and your counsel.
(e) There shall have been furnished to you a certificate,
dated such Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of the Company to the effect that:
(i) the representations and warranties of the Company contained in this
Agreement are true and correct, as if made at and as of such Closing Date, and
the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to such Closing
Date; (ii) no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
initiated or, to the knowledge of the signers of such certificate, threatened;
(iii) all filings required by Rule 424 and Rule 430A of the Rules and
Regulations have been made; (iv) the signers of said certificate have carefully
examined the Registration Statement and the Prospectus, and any amendments or
supplements thereto and such documents contain all statements and information
required to be included therein, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and (v) since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been so set forth.
(f) There shall have been furnished to you certificates, dated
such Closing Date and addressed to you, signed by the President or a Vice
President and by the Treasurer or Secretary of each of Fibertek and Thermo
Electron to the effect that: (i) the representations and warranties of Thermo
Electron or Fibertek (as applicable) contained in this Agreement are true
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<PAGE> 19
and correct, as if made at and as of such Closing Date, and Thermo Electron and
Fibertek (as applicable) has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to such
Closing Date; (ii) the signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, and such documents contain all statements and information required to
be included therein and do not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; and (iii) since the effective date
of the Registration Statement, there has occurred no event required to be set
forth in an amendment or supplement to the Registration Statement or the
Prospectus which has not been so set forth.
(g) Since the Effective Time, neither the Company nor any of
the Subsidiaries of the Company shall have sustained any loss by fire, flood,
accident or other calamity, or shall have become a party to or the subject of
any litigation, which is material to the Company and its Subsidiaries taken as a
whole, nor shall there have been a material adverse change in the general
affairs, operations, business, prospects, key personnel, capitalization,
financial condition or net worth of the Company and its Subsidiaries taken as a
whole, whether or not arising in the ordinary course of business, which loss,
litigation or change, in your judgment, shall render it inadvisable to proceed
with the payment for and delivery of the Units.
(h) On the date of this Agreement and on each Closing Date you
shall have received a letter from each accounting firm whose report appears in
the Prospectus, dated the date of this Underwriting Agreement or such Closing
Date, as the case may be, and addressed to you, confirming that they are
independent certified public accountants within the meaning of the Securities
Act and the applicable published Rules and Regulations, and stating, as of the
date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of each such letter), the conclusions and findings of each
such firm with respect to the financial information and other matters covered by
its letter delivered to you concurrently with the execution of this Agreement,
and with respect to each letter delivered on a Closing Date confirming the
conclusions and findings set forth in such prior letter.
(i) You shall have been furnished with such additional
documents and certificates as you or counsel for the Underwriters may reasonably
request.
(j) The Units (and the Shares and Redemption Rights comprising
the Units) to be purchased on such Closing Date by the Underwriters shall be
approved for listing on the American Stock Exchange, subject only to official
notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you and to counsel for the Underwriters. The Company,
Fibertek and Thermo Electron shall furnish to you such conformed copies of such
opinions, certificates, letters and other documents as you shall reasonably
request. If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement, this Agreement and all
obligations of the
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<PAGE> 20
Underwriters hereunder may be canceled at, or at any time prior to, such Closing
Date, by you. Any such cancellation shall be without liability of the
Underwriters to the Company, Fibertek or Thermo Electron. Notice of such
cancellation shall be given to the Company in writing, or by telegraph or
telephone and confirmed in writing.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, Fibertek and Thermo Electron, jointly and severally,
shall indemnify and hold harmless each Underwriter against any loss, claim,
damage or liability (or any action in respect thereof), joint or several, to
which such Underwriter may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement made by the Company, Fibertek or Thermo Electron in
Section 1 hereof or by Fibertek or Thermo Electron in Section 1A hereof, or (ii)
any untrue statement or alleged untrue statement of a material fact contained
(A) in the Registration Statement, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement to any thereof, or (B) in any "Blue Sky"
application or other document executed by the Company specifically for that
purpose or based upon any written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the Securities
under the securities laws thereof (any such application, document or information
being hereinafter called "Blue Sky Information"), or (iii) the omission or
alleged omission to state in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement to any thereof, or in
any Blue Sky Information a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iv) any act or
failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Securities or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (ii) or (iii) above (provided that the Company, Fibertek and
Thermo Electron shall not be liable under this clause (iv) to the extent that it
is determined in a final judgment by a court of competent jurisdiction that such
loss, claim, damage, liability or action resulted directly or indirectly from
any such acts or failures to act undertaken or omitted to be taken by such
Underwriter through its gross negligence or willful misconduct); and shall
reimburse each Underwriter promptly after receipt of invoices from such
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending against or appearing
as a third-party witness in connection with any such loss, claim, damage,
liability or action, notwithstanding the possibility that payments for such
expenses might later be held to be improper, in which case the person receiving
them shall promptly refund them; provided, however, that the Company, Fibertek
and Thermo Electron shall not be liable in any such case to the extent, but only
to the extent, that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company through you by or on behalf of any
Underwriter specifically for use in the preparation of the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement to any thereof, or any Blue Sky Information; and provided, further,
that as to any Preliminary Prospectus this indemnity agreement shall not inure
to the benefit of any Underwriter on account of any loss,
20
<PAGE> 21
claim, damage, liability or action arising from the sale of Units to any person
by that Underwriter if that Underwriter failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act and the Rules and Regulations, and the
untrue statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in such Preliminary Prospectus was
corrected in the Prospectus, unless such failure resulted from non-compliance by
the Company with Section 4(b).
(b) Each Underwriter severally, but not jointly, shall
indemnify and hold harmless the Company, Fibertek and Thermo Electron against
any loss, claim, damage or liability (or action in respect thereof) to which the
Company, Fibertek or Thermo Electron may become subject, under the Securities
Act or otherwise, insofar as such loss, claim, damage or liability (or action in
respect thereof) arises out of or is based upon (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement to any thereof, or (B) in any Blue Sky Information, or (ii) the
omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement to any
thereof, or in any Blue Sky Information a material fact required to be stated
therein or necessary to make the statements therein not misleading; and shall
reimburse any legal or other expenses reasonably incurred by the Company,
Fibertek or Thermo Electron promptly after receipt of invoices from the Company,
Fibertek or Thermo Electron in connection with investigating or defending
against any such loss, claim, damage, liability or action, notwithstanding the
possibility that payments for such expenses might later be held to be improper,
in which case the Company, Fibertek and Thermo Electron shall promptly refund
them; provided, however, that such indemnification shall be available in each
such case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company through
you by or on behalf of such Underwriter specifically for use in the preparation
thereof.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 6 except to the extent it has
been prejudiced in any material respect by such failure or from any liability
which it may have to an indemnified party otherwise than under this Section 6.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it or they wish, jointly
with any other similarly notified indemnifying party, to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under such subsection for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation, except that the
Representatives shall have the right to employ counsel to
21
<PAGE> 22
represent you and those other Underwriters who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Underwriters against the Company, Fibertek or Thermo Electron under such
subsection if, in your reasonable judgment, it is advisable for you and those
Underwriters to be represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the indemnifying party or
parties; provided, however, in no event, shall the indemnifying party or parties
be responsible for the expenses of more than one separate counsel for all such
indemnified parties.
(d) If the indemnification provided for in this Section 6 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company, Fibertek and Thermo Electron on the one hand and the Underwriters
on the other from the offering of the Units or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, Fibertek and Thermo Electron
on the one hand and the Underwriters on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company, Fibertek and Thermo Electron on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Units (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. Relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by one of the parties and such
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company, Fibertek,
Thermo Electron and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were to be determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to in the first sentence of this
subsection (d). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
against any action or claim which is the subject of this subsection (d), subject
to the proviso in the last sentence of subsection (c). Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Units underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their
22
<PAGE> 23
respective underwriting obligations and not joint. Each party entitled to
contribution agrees that upon the service of a summons or other initial legal
process upon it in any action instituted against it in respect of which
contribution may be sought, it shall promptly give written notice of such
service to the party or parties from whom contribution may be sought, but the
omission so to notify such party or parties of any such service shall not
relieve the party from whom contribution may be sought from any obligation it
may have hereunder or otherwise (except as specifically provided in subsection
(c) hereof).
(f) The obligations of the Company, Fibertek and Thermo Electron under
this Section 6 shall be in addition to any liability which the Company, Fibertek
and Thermo Electron may otherwise have, and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Securities Act or the Exchange Act; and the obligations of the
Underwriters under this Section 6 shall be in addition to any liability that the
respective Underwriters may otherwise have, and shall extend, upon the same
terms and conditions, to each director of the Company (including any person who,
with his consent, is named in the Registration Statement as about to become a
director of the Company), to each officer of the Company who has signed the
Registration Statement and to Fibertek and Thermo Electron, and each other
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act.
7. SUBSTITUTION OF UNDERWRITERS. If any Underwriter defaults in its
obligation to purchase the number of Units which it has agreed to purchase under
this Agreement, the non-defaulting Underwriters shall be obligated to purchase
(in the respective proportions which the number of Units set forth opposite the
name of each non-defaulting Underwriter in Schedule I hereto bears to the total
number of Units set forth in Schedule I hereto) the Units which the defaulting
Underwriter agreed but failed to purchase; except that the non-defaulting
Underwriters shall not be obligated to purchase any of the Units if the total
number of Units which the defaulting Underwriter or Underwriters agreed but
failed to purchase exceed 9.09% of the total number of Units, and any
non-defaulting Underwriters shall not be obligated to purchase more than 110% of
the number of Units set forth opposite its name in Schedule I hereto plus the
total number of Option Units purchasable by it pursuant to the terms of Section
2. If the foregoing maximums are exceeded, the non-defaulting Underwriters, and
any other underwriters satisfactory to you that so agree, shall have the right,
but shall not be obligated, to purchase (in such proportions as may be agreed
upon among them) all of the Units. If the non-defaulting Underwriters or the
other underwriters satisfactory to you do not elect to purchase the Units which
the defaulting Underwriter or Underwriters agreed but failed to purchase, the
Agreement shall terminate without liability on the part of any non-defaulting
Underwriter, the Company, Fibertek or Thermo Electron except for the payment of
expenses to be borne by the Company, Fibertek and Thermo Electron and the
Underwriters as provided in Section 4(h) hereof and the indemnity and
contribution agreements of the Company, Fibertek, Thermo Electron and the
Underwriters contained in Section 6 hereof.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have for damages caused by its default. If the other
underwriters satisfactory to you are obligated or agree to purchase the Units of
a defaulting Underwriter, either you or the Company may
23
<PAGE> 24
postpone the First Closing Date for up to seven full Business Days in order to
effect any changes that may be necessary in the Registration Statement or the
Prospectus or in any other document or agreement, and to file promptly any
amendments or any supplements to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary.
8. TERMINATION.
(a) Until the First Closing Date, this Agreement may be terminated by
you by giving notice as hereinafter provided to the Company, if (i) the Company,
Fibertek or Thermo Electron shall have failed, refused or been unable, at or
prior to the First Closing Date, to perform any agreement on its part to be
performed hereunder, (ii) any other condition of the obligations of the
Underwriters hereunder is not fulfilled, (iii) trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or the
International Stock Exchange of the United Kingdom or the over-the-counter
market shall have been suspended or minimum prices shall have been established
on any of such exchanges or such market by the Commission or by such exchange or
other regulatory body or governmental authority having jurisdiction, (iv) a
banking moratorium shall have been declared by Federal, New York, United Kingdom
or Massachusetts authorities, or (v) the United States or the United Kingdom is
or becomes engaged in hostilities which result in the declaration of a national
emergency or war, or (vi) there shall have been such a material adverse change
in general economic, political or financial conditions, or the effect of
international conditions on the financial markets in the United States or the
United Kingdom shall be such, as to, in the judgment of a majority in interest
of the several Underwriters, make it inadvisable or impracticable to proceed
with the delivery of the Units. Any termination of this Agreement pursuant to
this Section 8 shall be without liability on the part of the Company, Fibertek,
Thermo Electron or any Underwriter, except as otherwise provided in Sections
4(h) and 6 hereof.
Any notice referred to above may be given at the address specified in
Section 10 hereof in writing or by telegraph or telephone, and if by telegraph
or telephone, shall be immediately confirmed in writing.
9. SURVIVAL OF INDEMNITIES, CONTRIBUTION, WARRANTIES AND
REPRESENTATIONS. The agreements contained in Section 6 and the representations,
warranties and agreements of the Company, Fibertek and Thermo Electron in
Sections 1, 1A and 4 shall survive the delivery of the Units to the Underwriters
hereunder and shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement or any investigation made by or on
behalf of any indemnified party.
10. NOTICES. Except as otherwise provided in this Agreement, (a)
whenever notice is required by the provisions of this Agreement to be given to
the Company, Fibertek or Thermo Electron, such notice shall be in writing
addressed to the Company, Fibertek or Thermo Electron at 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046, Attention: Chief Financial Officer;
and (b) whenever notice is required by the provisions of the Agreement to be
given to the several Underwriters, such notice shall be in writing addressed to
you in care of
24
<PAGE> 25
NatWest Securities Limited, 135 Bishopsgate, London EC2M3UR, England, Attention:
Syndicate Department.
11. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth
in the last paragraph on the outside cover page, the paragraph containing
stabilization information on the inside front cover page and the statements
under the caption "Underwriting" in any Preliminary Prospectus and in the
Prospectus, constitute the only written information furnished by or on behalf of
any Underwriter referred to in paragraph (b) of Section 1 hereof and in
paragraphs (a) and (b) of Section 6 hereof.
12. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters, the Company, Fibertek and Thermo
Electron, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(a) the representations, warranties, indemnities and agreements of the Company,
Fibertek and Thermo Electron contained in this Agreement shall also be deemed to
be for the benefit of the person or persons, if any, who control any Underwriter
within the meaning of the Securities Act or the Exchange Act and (b) the
indemnity agreement of the Underwriters contained in Section 6 hereof shall be
deemed to be for the benefit of directors of the Company, officers of the
Company who signed the Registration Statement, and any person controlling the
Company, including Fibertek and Thermo Electron. Nothing in this Agreement shall
be construed to give any person, other than the persons referred to in this
paragraph, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
13. DEFINITION OF "BUSINESS DAY", "SUBSIDIARY" AND "SIGNIFICANT
SUBSIDIARY". For purposes of this Agreement, (a) "Business Day" means any day on
which the American Stock Exchange is open for trading, (b) "Subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations and (c) "Significant
Subsidiary" has the meaning set forth in Item 1-02(v) of the Regulation S-X of
the Rules and Regulations.
14. PERFORMANCE BY THE COMPANY. Thermo Electron and Fibertek agree to
cause the Company to perform each of the agreements and obligations of the
Company contained in this Agreement.
15. GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice of law or conflict of law principles thereof.
16. COUNTERPARTS. This agreement may be signed in one or more
counterparts, each of which together shall constitute one and the same
agreement.
25
<PAGE> 26
Please confirm, by signing and returning to us eight counterparts of
this Agreement, that you are acting on behalf of yourselves and the other
several Underwriters and that the foregoing correctly sets forth the agreement
among the Company, Fibertek, Thermo Electron and the several Underwriters.
Very truly yours,
THERMO FIBERGEN INC.
By:
-------------------------------------
Title:
THERMO FIBERTEK INC.
By:
-------------------------------------
Title:
THERMO ELECTRON CORPORATION
By:
-------------------------------------
Title:
Confirmed and accepted as of the
date first above mentioned:
NATWEST SECURITIES LIMITED
LEHMAN BROTHERS INC.
OPPENHEIMER & CO., INC.
as Representatives of the several
Underwriters named in Schedule I hereto
By: NATWEST SECURITIES LIMITED
By:
-------------------------------------
Authorized Signatory
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Units To be
Underwriter Purchased
----------- ---------
<S> <C>
NatWest Securities Limited
Lehman Brothers Inc. .....................................
Oppenheimer & Co., Inc. ..................................
Total ........................................... 3,100,000
=========
</TABLE>
27
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
THERMO FIBERGEN INC.
* * * * * * *
FIRST: The name of the corporation is:
Thermo Fibergen Inc.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the corporation is to purchase, subscribe for,
acquire, own, hold, sell, exchange, assign, transfer, create security interests
in, pledge, or otherwise dispose of shares, bonds or other securities issued by
any other corporation or corporations organized under the laws of this state or
any other state or district or country, nation, or government and also bonds or
other securities of the United States or any state, district, territory,
dependency or country or subdivision or municipality thereof, and while the
owner thereof to exercise all the rights, powers, and privileges of ownership,
including the right to vote on any shares or other securities so owned; to issue
in exchange therefor shares, bonds or other securities of the Corporation; to
promote, lend money to, and guarantee the notes, contracts or other obligations
of, and otherwise aid in any manner which shall be lawful, any corporation or
association of which any shares, bonds or other securities shall be held by or
for the Corporation, or in which, or in the welfare of which, the Corporation
shall have any interest, and to do any acts and things permitted by law and
designed to protect, preserve, improve, or enhance the value of any such shares,
bonds or other securities or the property of the Corporation; and to engage in
any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is three thousand (3,000), and the par
value of each of such shares is one cent ($.01), amounting in the aggregate to
thirty dollars ($30.00) of capital stock.
1
<PAGE> 2
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME ADDRESS
- ---- -------
Tina-marie DePaulis 81 Wyman Street
Waltham, MA 02254
SIXTH: The names and mailing addresses of the persons who are to serve
as directors until the first annual meeting of the stockholders or until their
successors are elected and qualified are as follows:
NAME MAILING ADDRESS
Steven J. Coleman 81 Wyman Street
Waltham, MA 02254
John N. Hatsopoulos 81 Wyman Street
Waltham, MA 02254
Yiannis Monovoukas 81 Wyman Street
Waltham, MA 02254
Jonathan W. Painter 81 Wyman Street
Waltham, MA 02254
William A. Rainville 81 Wyman Street
Waltham, MA 02254
SEVENTH: The corporation is to have perpetual existence.
EIGHTH: The private property of the stockholders shall not be subject
to the payment of the corporation debts to any extent whatever.
NINTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation and for defining
and regulating the powers of the corporation and its directors and stockholders
and are in the furtherance and not in limitation of the powers conferred upon
the corporation by statute:
(a) The by-laws of the corporation may fix and alter, or provide
the manner for fixing and altering, the number of directors
constituting the whole Board. In case of any vacancy on the Board of
Directors or any increase in the number of directors constituting the
whole Board, the vacancies shall be filled by the directors or by the
stockholders at the time having voting power, as may be prescribed in
the by-laws. Directors need not be stockholders of the corporation, and
the election of directors need not be by ballot.
2
<PAGE> 3
(b) The Board of Directors shall have the power and authority:
(1) to make, alter or repeal by-laws of the corporation,
subject only to such limitation, if any, as may be from time to
time imposed by law or by the by-laws; and
(2) to the full extent permitted or not prohibited by law,
and without the consent of or other action by the stockholders,
to authorize or create mortgages, pledges or other liens or
encumbrances upon any or all of the assets, real, personal or
mixed, and franchises of the corporation, including
after-acquired property, and to exercise all of the powers of
the corporation in connection therewith; and
(3) subject to any provision of the by-laws, to determine
whether, to what extent, at what times and places and under what
conditions and regulations the accounts, books and papers of the
corporation (other than the stock ledger), or any of them, shall
be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any account, book or
paper of the corporation except as conferred by statute or
authorized by the by-laws or by the Board of Directors.
TENTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws so provide. The books of the corporation may be kept
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the by-laws of the
corporation.
ELEVENTH: The corporation shall indemnify each director and officer of
the corporation, his heirs, executors and administrators, and may indemnify each
employee and agent of the corporation, his heirs, executors, administrators and
all other persons whom the corporation is authorized to indemnify under the
provisions of the General Corporation Law of the State of Delaware, to the
maximum extent permitted by law (a) against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any action, suit or proceeding, whether
civil, criminal, administrative or investigative (except an action by or in the
right of the corporation), or in connection with any appeal therein, or
otherwise, and (b) against all expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of any
action or suit by or in the right of the corporation, or otherwise; and no
provision of this Article Eleventh is intended to be construed as limiting,
prohibiting, denying or abrogating any of the general or specific powers or
rights conferred by the General Corporation Law of the State of Delaware upon
the corporation to furnish, or upon any court to award, such indemnification, or
indemnification as otherwise authorized pursuant to the General Corporation Law
of the State of Delaware or any other law now or hereafter in effect.
The Board of Directors of the corporation may, in its discretion,
authorize the corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a
3
<PAGE> 4
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the foregoing paragraph of this Article Eleventh.
TWELFTH: To the maximum extent that Delaware law in effect from time to
time permits limitation of the liability of directors, no director of the
corporation shall be liable to the corporation or its stockholders for money
damages. Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the corporation's Certificate of
Incorporation or by-laws inconsistent with this Article, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. The limitation on liability provided by this Article applies to events
occurring at the time a person serves as a director of the corporation whether
or not such person is a director at the time of any proceeding in which
liability is asserted.
THIRTEENTH: The corporation reserves the right to amend, alter, change
or repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is my act and deed and the facts stated herein are true, and
accordingly have hereunto set my hand this 9th day of February, 1996.
/s/ Tina-marie DePaulis
Tina-marie DePaulis
4
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
Thermo Fibergen Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the minutes of the Board,
adopted a resolution proposing and declaring advisable the following
amendment to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of Thermo Fibergen
Inc. be amended by changing the Fourth Article thereof so that, as
amended, said Article shall be and read as follows:
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is twenty-five million
(25,000,000), and the par value of each of such shares is one cent
($.01), amounting in the aggregate to three hundred thousand dollars
($250,000.00) of capital stock.
SECOND: That in lieu of a meeting and vote of stockholders, the stockholders
have given unanimous written consent to said amendment in accordance
with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
1
<PAGE> 6
IN WITNESS WHEREOF, said Thermo Fibergen Inc. has caused this
certificate to be signed by Sandra L. Lambert, its Secretary, this 26th day of
June, 1996.
Thermo Fibergen Inc.
By /s/ Sandra L. Lambert
Sandra L. Lambert, Secretary
2
<PAGE> 1
Exhibit 3.2
THERMO FIBERGEN INC.
BY-LAWS
<PAGE> 2
THERMO FIBERGEN INC.
BY-LAWS
TABLE OF CONTENTS
ARTICLE I - GENERAL ........................................................ 1
Section 1.1. Offices .................................................... 1
Section 1.2. Seal ....................................................... 1
Section 1.3. Fiscal Year ................................................ 1
ARTICLE II - STOCKHOLDERS .................................................. 1
Section 2.1. Place of Meetings .......................................... 1
Section 2.2. Annual Meeting ............................................. 1
Section 2.3. Quorum ..................................................... 1
Section 2.4. Right to Vote; Proxies ..................................... 2
Section 2.5 Voting ...................................................... 2
Section 2.6. Notice of Annual Meetings .................................. 2
Section 2.7. Stockholders' List ......................................... 2
Section 2.8. Special Meetings ........................................... 2
Section 2.9. Notice of Special Meetings ................................. 3
Section 2.10. Inspectors ................................................ 3
Section 2.11. Stockholders' Action by Consent ........................... 3
ARTICLE III - DIRECTORS .................................................... 3
Section 3.1. Number of Directors ........................................ 3
Section 3.2. Change in Number of Directors; Vacancies ................... 4
Section 3.3. Resignation ................................................ 4
Section 3.4. Removal .................................................... 4
Section 3.5. Place of Meetings and Books ................................ 4
Section 3.6. General Powers ............................................. 4
Section 3.7. Executive Committee ........................................ 4
Section 3.8. Other Committees ........................................... 4
Section 3.9. Powers Denied to Committees ................................ 5
(i)
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Section 3.10. Substitute Committee Member .............................. 5
Section 3.11. Compensation of Directors ................................ 5
Section 3.12. Annual Meeting ........................................... 5
Section 3.13. Regular Meetings ......................................... 5
Section 3.14. Special Meetings ......................................... 5
Section 3.15. Quorum ................................................... 5
Section 3.16. Telephonic Participation in Meetings ..................... 6
Section 3.17. Action by Consent ........................................ 6
ARTICLE IV - OFFICERS ..................................................... 6
Section 4.1. Selection; Statutory Officers............................. 6
Section 4.2. Time of Election ......................................... 6
Section 4.3. Additional Officers ...................................... 6
Section 4.4. Terms of Office .......................................... 6
Section 4.5. Compensation of Officers ................................. 6
Section 4.6. Chairman of the Board .................................... 7
Section 4.7. President ................................................ 7
Section 4.8. Vice-Presidents .......................................... 7
Section 4.9. Treasurer ................................................ 7
Section 4.10. Secretary................................................. 7
Section 4.11. Assistant Secretary ...................................... 8
Section 4.12. Assistant Treasurer ...................................... 8
Section 4.13. Subordinate Officers ..................................... 8
ARTICLE V - STOCK ......................................................... 8
Section 5.1. Stock .................................................... 8
Section 5.2. Fractional Share Interests ............................... 9
Section 5.3. Transfers of Stock ....................................... 9
Section 5.4. Record Date .............................................. 9
Section 5.5. Transfer Agent and Registrar ............................. 10
Section 5.6. Dividends ................................................ 10
1. Power to Declare .................................................. 10
2. Reserves ........................................... .............. 10
Section 5.7. Lost, Stolen, or Destroyed Certificates .................. 10
Section 5.8. Inspection of Books ...................................... 10
ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS .......................... 10
(ii)
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Section 6.1. Checks, Drafts and Notes .................................. 10
Section 6.2 Notices ................................................... 11
Section 6.3. Conflict of Interest ...................................... 11
Section 6.4. Voting of Securities owned by this Corporation ............ 11
Section 6.5. Indemnification ........................................... 12
ARTICLE VII - AMENDMENTS .................................................. 12
Section 7.1. Amendments ................................................ 12
(iii)
<PAGE> 5
THERMO FIBERGEN INC.
BY-LAWS
ARTICLE I - GENERAL
SECTION 1.1. OFFICES. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
SECTION 1.2. SEAL. The seal of the Corporation shall be in the form
approved by the Board of Directors.
SECTION 1.3. FISCAL YEAR. The fiscal year of the Corporation shall
end on the Saturday closest to December 31 of each year.
ARTICLE II - STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such place within or without the State of Delaware as may be
designated from time to time by the Board of Directors or the President or, if
not so designated, at the registered office of the Corporation.
SECTION 2.2. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors, the Chairman of the Board, if any, or the President
(which date shall not be a legal holiday in the place where the meeting is to be
held) at the time and place to be fixed by the Board of Directors, the Chairman
of the Board, if any, or the President and stated in the notice of the meeting.
If no annual meeting is held in accordance with the foregoing provisions, the
Board of Directors shall cause the meeting to be held as soon thereafter as
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these
by-laws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.
SECTION 2.3. QUORUM. At all meetings of the stockholders the holders of
a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business except as otherwise provided by law, by the
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have the power to adjourn the meeting from time to time
without notice other than announcement at the meeting
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until the requisite amount of voting stock shall be present. If the adjournment
is for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stock holder of record entitled to vote at the meeting. At such
adjourned meeting, at which the requisite amount of voting stock shall be
represented, any business may be transacted which might have been transacted if
the meeting had been held as originally called.
SECTION 2.4. RIGHT TO VOTE; PROXIES. Each stockholder having the right
to vote at any meeting shall be entitled to one vote for each share of stock
held by him. Any stockholder entitled to vote at any meeting of stockholders may
vote either in person or by proxy, but no proxy which is dated more than three
years prior to the meeting at which it is offered shall confer the right to vote
thereat unless the proxy provides that it shall be effective for a longer
period. Every proxy shall be in writing, subscribed by a stockholder or his duly
authorized attorney in fact, and dated, but need not be sealed, witnessed, or
acknowledged.
SECTION 2.5 VOTING. At all meetings of stockholders all questions,
except as otherwise expressly provided for by statute, the Certificate of
Incorporation or these by-laws, shall be determined by a majority vote of the
stockholders present in person or represented by proxy. Except as otherwise
expressly provided by law, the Certificate of Incorporation or these by-laws, at
all meetings of stockholders the voting shall be by voice vote, but any
stockholder qualified to vote on the matter in question may demand a stock vote,
by shares of stock, upon such question, whereupon such stock vote shall be taken
by ballot, each of which shall state the name of the stockholder voting and the
number of shares voted by him, and, if such ballot be cast by a proxy, it shall
also state the name of the proxy. All elections of directors shall be decided in
accordance with Article FOURTH of the Certificate of Incorporation.
SECTION 2.6. NOTICE OF ANNUAL MEETINGS. Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to vote
thereat at such address as appears on the stock books of the Corporation at
least ten (10) days (and not more than sixty (60) days) prior to the meeting. It
shall be the duty of every stockholder to furnish to the Secretary of the
Corporation or to the transfer agent, if any, of the class of stock owned by
him, his post office address and to notify said Secretary or transfer agent of
any change therein.
SECTION 2.7. STOCKHOLDERS' LIST. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder, and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and filed
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held, at least ten days before such meeting,
and shall at all times during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder for a
purpose germane to the meeting.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, unless otherwise provided by statute, may be called by
the Board of Directors, the Chairman of the Board, if any, the President or any
Vice President.
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SECTION 2.9. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting of stockholders, stating the time and place and object thereof shall be
mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the corporation. No business may be
transacted at such meeting except that referred to in said notice, or in a
supplemental notice given also in compliance with the provisions hereof, or such
other business as may be germane or supplementary to that stated in said notice
or notices.
SECTION 2.10. INSPECTORS. One or more inspectors may be appointed by the
Board of Directors before or at any meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which the inspector or inspectors
are appointed, he or they shall open and close the polls, receive and take
charge of the proxies and ballots, and decide all questions touching on the
qualifications of voters, the validity of proxies and the acceptance and
rejection of votes. If any inspector previously appointed shall fail to attend
or refuse or be unable to serve, the presiding officer shall appoint an
inspector in his place.
SECTION 2.11. STOCKHOLDERS' ACTION BY CONSENT. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the statutes, the
Certificate of Incorporation, or these by-laws, the meeting and vote of
stockholders may be dispensed with, and any corporate action upon which a vote
of stockholders is required or permitted may be taken with the written consent
of stockholders having not less than 50% of all of the stock entitled to vote
upon the action if a meeting were held; provided that in no case shall the
written consent be by holders having less than the minimum percentage of the
total vote required by statute for the proposed corporate action and provided
that prompt notice be given to all stockholders of the taking of such corporate
action without a meeting and by less than unanimous consent.
ARTICLE III - DIRECTORS
SECTION 3.1. NUMBER OF DIRECTORS. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, the property and business of
the Corporation shall be managed by or under the direction of a board of not
less than one nor more than thirteen directors. Within the limits specified, the
number of directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. Directors need not be
stockholders, residents of Delaware or citizens of the United States. The
directors shall be elected by ballot at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be elected
and shall qualify or until his earlier resignation or removal; provided that in
the event of failure to hold such meeting or to hold such election at such
meeting, such election may be held at any special meeting of the stockholders
called for that purpose. If the office of any director becomes vacant by reason
of death, resignation, disqualification, removal, failure to elect, or
otherwise, the remaining directors, although more or less than a quorum, by a
majority vote of such remaining directors may elect a successor or successors
who shall hold office for the unexpired term.
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SECTION 3.2. CHANGE IN NUMBER OF DIRECTORS; VACANCIES. The maximum
number of directors may be increased by an amendment to these by-laws adopted by
a majority vote of the Board of Directors or by a majority vote of the capital
stock having voting power, and if the number of directors is so increased by
action of the Board of Directors or of the stockholders or otherwise, then the
additional directors may be elected in the manner provided above for the filling
of vacancies in the Board of Directors or at the annual meeting of stockholders
or at a special meeting called for that purpose.
SECTION 3.3. RESIGNATION. Any director of this Corporation may resign at
any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein and at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 3.4. REMOVAL. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
SECTION 3.5. PLACE OF MEETINGS AND BOOKS. The Board of Directors may
hold their meetings and keep the books of the Corporation outside the State of
Delaware, at such places as they may from time to time determine.
SECTION 3.6. GENERAL POWERS. In addition to the powers and authority
expressly conferred upon them by these by-laws, the board may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
SECTION 3.7. EXECUTIVE COMMITTEE. There may be an executive committee of
one or more directors designated by resolution passed by a majority of the whole
board. The act of a majority of the members of such committee shall be the act
of the committee. Said committee may meet at stated times or on notice to all by
any of their own number, and shall have and may exercise those powers of the
Board of Directors in the management of the business affairs of the Company as
are provided by law and may authorize the seal of the Corporation to be affixed
to all papers which may require it. Vacancies in the membership of the committee
shall be filled by the Board of Directors at a regular meeting or at a special
meeting called for that purpose.
SECTION 3.8. OTHER COMMITTEES. The Board of Directors may also
designate one or more committees in addition to the executive committee, by
resolution or resolutions passed by a majority of the whole board; such
committee or committees shall consist of one or more directors of the
Corporation, and to the extent provided in the resolution or resolutions
designating them, shall have and may exercise specific powers of the Board of
Directors in the management of the business and affairs of the Corporation to
the extent permitted by statute and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it. Such
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committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
SECTION 3.9. POWERS DENIED TO COMMITTEES. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
Certificate of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation or a dissolution
or to amend the by-laws of the Corporation. Further, committees of the Board of
Directors shall not have any power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 3.10. SUBSTITUTE COMMITTEE MEMBER. In the absence or on the
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of such absent or disqualified
member. Any committee shall keep regular minutes of its proceedings and report
the same to the board as may be required by the board.
SECTION 3.11. COMPENSATION OF DIRECTORS. The Board of Directors shall
have the power to fix the compensation of directors and members of committees of
the Board. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3.12. ANNUAL MEETING. The newly elected board may meet at such
place and time as shall be fixed and announced by the presiding officer at the
annual meeting of stockholders, for the purpose of organization or otherwise,
and no further notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present, or they may meet at such place and time as shall be stated in a notice
given to such directors two (2) days prior to such meeting, or as shall be fixed
by the consent in writing of all the directors.
SECTION 3.13. REGULAR MEETINGS. Regular meetings of the board may be
held without notice at such time and place as shall from time to time
be determined by the board.
SECTION 3.14. SPECIAL MEETINGS. Special meetings of the board may be
called by the Chairman of the Board, if any, or the President, on two (2) days'
notice to each director, or such shorter period of time before the meeting as
will nonetheless be sufficient for the convenient assembly of the directors so
notified; special meetings shall be called by the Secretary in like manner and
on like notice, on the written request of two or more directors.
SECTION 3.15. QUORUM. At all meetings of the Board of Directors, a
majority of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of
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business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically permitted or provided by statute, or by the
Certificate of Incorporation, or by these by-laws. If at any meeting of the
board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at said meeting which
shall be so adjourned.
SECTION 3.16. TELEPHONIC PARTICIPATION IN MEETINGS. Members of the Board
of Directors or any committee designated by such board may participate in a
meeting of the board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.17. ACTION BY CONSENT. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if written consent thereto is signed by all
members of the board or of such committee as the case may be and such written
consent is filed with the minutes of proceedings of the board or committee.
ARTICLE IV - OFFICERS
SECTION 4.1. SELECTION; STATUTORY OFFICERS. The officers of the
Corporation shall be chosen by the Board of Directors. There shall be a
President, a Secretary and a Treasurer, and there may be a Chairman of the Board
of Directors, one or more Vice Presidents, one or more Assistant Secretaries,
and one or more Assistant Treasurers, as the Board of Directors may elect. Any
number of offices may be held by the same person, except that the offices of
President and Secretary shall not be held by the same person simultaneously.
SECTION 4.2. TIME OF ELECTION. The officers above named shall be chosen
by the Board of Directors at its first meeting after each annual meeting of
stockholders. None of said officers need be a director.
SECTION 4.3. ADDITIONAL OFFICERS. The board may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
SECTION 4.4. TERMS OF OFFICE. Each officer of the Corporation shall hold
office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
SECTION 4.5. COMPENSATION OF OFFICERS. The Board of Directors shall have
power to fix the compensation of all officers of the Corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
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SECTION 4.6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall preside at all meetings of the stockholders and directors, and
shall have such other duties as may be assigned to him from time to time by the
Board of Directors.
SECTION 4.7. PRESIDENT. Unless the Board of Directors otherwise
determines, the President shall be the chief executive officer and head of the
Corporation. Unless there is a Chairman of the Board, the President shall
preside at all meetings of directors and stockholders. Under the supervision of
the Board of Directors and of the executive committee, the President shall have
the general control and management of its business and affairs, subject,
however, to the right of the Board of Directors and of the executive committee
to confer any specific power, except such as may be by statute exclusively
conferred on the President, upon any other officer or officers of the
Corporation. The President shall perform and do all acts and things incident to
the position of President and such other duties as may be assigned to him from
time to time by the Board of Directors or the executive committee.
SECTION 4.8. VICE-PRESIDENTS. The Vice-Presidents shall perform such of
the duties of the President on behalf of the Corporation as may be respectively
assigned to them from time to time by the Board of Directors or by the executive
committee or by the President. The Board of Directors or the executive committee
may designate one of the Vice-Presidents as the Executive Vice-President, and in
the absence or inability of the President to act, such powers and discharge all
of the duties of the President, subject to the control of the board and of the
executive committee.
SECTION 4.9. TREASURER. The Treasurer shall have the care and custody of
all the funds and securities of the Corporation which may come into his hands as
Treasurer, and the power and authority to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or
proper and to deposit the same to the credit of the Corporation in such bank or
banks or depository as the Board of Directors or the executive committee, or the
officers or agents to whom the Board of Directors or the executive committee may
delegate such authority, may designate, and he may endorse all commercial
documents requiring endorsements for or on behalf of the Corporation. He may
sign all receipts and vouchers for the payments made to the Corporation. He
shall render an account of his transactions to the Board of Directors or to the
executive committee as often as the board or the committee shall require the
same. He shall enter regularly in the books to be kept by him for that purpose
full and adequate account of all moneys received and paid by him on account of
the Corporation. He shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors and of the executive
committee. He shall when requested, pursuant to vote of the Board of Directors
or the executive committee, give a bond to the Corporation conditioned for the
faithful performance of his duties, the expense of which bond shall be borne by
the Corporation.
SECTION 4.10. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; he shall attend to
the giving and serving of all notices of the Corporation. Except as otherwise
ordered by the Board of Directors or the executive committee, he shall attest
the seal of the Corporation upon all contracts and instruments executed under
such seal and shall affix the seal of the Corporation thereto and to all
certificates of shares
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of the Capital Stock. He shall have charge of the stock certificate book,
transfer book and stock ledger, and such other books and papers as the Board of
Directors or the executive committee may direct. He shall, in general, perform
all the duties of Secretary, subject to the control of the Board of Directors
and of the executive committee.
SECTION 4.11. ASSISTANT SECRETARY. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or more
Assistant Secretaries of the Corporation. Any Assistant Secretary upon his
appointment shall perform such duties of the Secretary, and also any and all
such other duties as the executive committee or the Board of Directors or the
President or the Executive Vice-President or the Treasurer or the Secretary may
designate.
SECTION 4.12. ASSISTANT TREASURER. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or more
Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his
appointment shall perform such of the duties of the Treasurer, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice-President or the Treasurer or the Secretary
may designate.
SECTION 4.13. SUBORDINATE OFFICERS. The Board of Directors may select
such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period, have such authority, and perform such duties
as the Board of Directors may prescribe. The Board of Directors may, from time
to time, authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
ARTICLE V - STOCK
SECTION 5.1. STOCK. Each stockholder shall be entitled to a certificate
or certificates of stock of the Corporation in such form as the Board of
Directors may from time to time prescribe. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall certify the holder's name and number
and class of shares and shall be signed by both of (a) either the President or a
Vice-President, and (b) any one of the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, and shall be sealed with the corporate
seal of the Corporation. If such certificate is countersigned (1) by a transfer
agent other than the Corporation or its employee, or, (2) by a registrar other
than the Corporation or its employee, the signature of the officers of the
Corporation and the corporate seal may be facsimiles. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature shall have
been used thereon had not ceased to be such officer or officers of the
Corporation.
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SECTION 5.2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall
not be required to, issue fraction of a share. If the corporation does not issue
fractions of a share, it shall (a) arrange for the disposition of fractional
interests by those entitled thereto, (b) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (c) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
SECTION 5.3. TRANSFERS OF STOCK. Subject to any transfer restrictions
then in force, the shares of stock of the Corporation shall be transferable only
upon its books by the holders thereof in person or by their duly authorized
attorneys or legal representatives and upon such transfer the old certificates
shall be surrendered to the Corporation by the delivery thereof to the person in
charge of the stock and transfer books and ledgers or to such other person as
the directors may designate by whom they shall be cancelled and new certificates
shall thereupon be issued. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof save as expressly provided by the laws of
Delaware.
SECTION 5.4. RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. If no such record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
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SECTION 5.5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
SECTION 5.6. DIVIDENDS.
1. POWER TO DECLARE. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and the laws of
Delaware.
2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such
sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose
as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve
in the manner in which it was created.
SECTION 5.7. LOST, STOLEN, OR DESTROYED CERTIFICATES. No certificates
for shares of stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed, except upon
production of such evidence of the loss, theft or destruction and upon
indemnification of the Corporation and its agents to such extent and in such
manner as the Board of Directors may from time to time prescribe.
SECTION 5.8. INSPECTION OF BOOKS. The stockholders of the Corporation,
by a majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors or by a resolution of the
stockholders.
ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS
SECTION 6.1. CHECKS, DRAFTS AND NOTES. All checks, drafts or orders for
the payment of money, and all notes and acceptances of the Corporation shall be
signed by such officer or officers, agent or agents as the Board of Directors
may designate.
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SECTION 6.2. NOTICES.
1. Notices to directors may, and notices to stockholders shall,
be in writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
Corporation. Notice by mail shall be deemed to be given at the time
when the same shall be mailed. Notice to directors may also be given by
telegram or orally, by telephone or in person.
2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation of
the Corporation or of these by-laws, a written waiver of notice, signed
by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called
or convened.
SECTION 6.3. CONFLICT OF INTEREST. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the board of or committee thereof which
authorized the contract or transaction, or solely because his or their votes are
counted for such purpose, provided that the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee and the board or committee
in good faith authorizes the contract or transaction by the affirmative vote of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum or provided that the contract or transaction is
otherwise authorized in accordance with the laws of Delaware. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract of transaction.
SECTION 6.4. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other Corporation and owned or controlled by this
Corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this Corporation if he is present at such
meeting, or in his absence by the Treasurer of this Corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other Corporation and owned by
this Corporation, such proxy or consent shall be executed in the name of this
Corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of
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this Corporation shall have full right, power and authority to vote the shares
or other securities issued by such other corporation and owned by this
Corporation the same as such shares or other securities might be voted by this
Corporation.
SECTION 6.5. INDEMNIFICATION. The Corporation shall indemnify each
director and officer against all judgments, fines, settlement payments and
expenses, including reasonable attorneys' fees, paid or incurred in connection
with any claim, action, suit or proceeding, civil or criminal, to which he may
be made a party or with which he may be threatened by reason of his being or
having been a director or officer of the Corporation, or, at its request, a
director, officer, stockholder or member of any other Corporation, firm or
association of which the Corporation is a stockholder or creditor and by which
he is not so indemnified, or by reason or any action or omission by him in such
capacity, whether or not he continues to be a director or officer at the time of
incurring such expenses or at the time the indemnification is made. No
indemnification shall be made hereunder (a) with respect to payments and
expenses incurred in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding not to have acted in good faith and
in the reasonable belief that his action was in the best interests of the
Corporation, or (b) otherwise prohibited by law. The foregoing right of
indemnification shall not be exclusive of other rights to which any director or
officer may otherwise be entitled and shall inure to the benefit of the executor
or administrator of such director or officer.
ARTICLE VII - AMENDMENTS
SECTION 7.1. AMENDMENTS. The by-laws of the Corporation may be altered,
amended or repealed at any meeting of the Board of Directors upon notice thereof
in accordance with these by-laws, or at any meeting of the stockholders by the
vote of the holders of the majority of the stock issued and outstanding and
entitled to vote at such meeting, in accordance with the provisions of the
Certificate of Incorporation of the corporation and of the laws of Delaware.
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<PAGE> 1
Exhibit 10.3
CORPORATE SERVICES AGREEMENT
THIS is an AGREEMENT dated as of July 2 ,1996 between Thermo Electron
Corporation, a Delaware corporation ("Thermo"), and Thermo Fibergen
Inc. ("Subsidiary"), a Delaware corporation.
PRELIMINARY STATEMENT
Subsidiary desires to obtain administrative and other services from
Thermo and Thermo is willing to furnish or make such services available to
Subsidiary.
By this Agreement, Thermo and Subsidiary desire to set forth the basis
for Thermo's providing services of the type referred to herein.
AGREEMENTS
IT IS MUTUALLY agreed by the parties hereto as follows:
1. SERVICES
1.1 Beginning on the date of this Agreement, Thermo, through its
corporate staff, will provide or otherwise make available to Subsidiary certain
general corporate services, including but not limited to accounting, tax,
corporate communications, legal, financial and other administrative staff
functions, and arrange for administration of insurance and employee benefit
programs. The services will include the following:
(a) Accounting and securities compliance related services.
Maintenance of corporate records, assistance, if and when necessary, in
preparation of Securities and Exchange Commission filings, including without
limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the
preparation of Proxies and Proxy Statements and the solicitation of Proxies, and
assistance in the preparation of the Annual and Quarterly Reports to
Stockholders, maintenance of internal audit support services and review of
compliance with financial and accounting procedures.
(b) Tax related services. Preparation of Federal tax returns,
preparation of state and local tax returns (including income tax returns), tax
research and planning and assistance on tax audits (Federal, state and local).
(c) Insurance and employee benefit related services. Arranging
for liability, property and casualty, and other normal business insurance
coverage. Support for product, worker safety and environmental programs
(Subsidiary acknowledges that principal responsibility for compliance rests with
the Subsidiary). Administration of Subsidiary's employee participation
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<PAGE> 2
in employee benefit plans sponsored by Thermo and insurance programs such as the
following: 401(k) plan, group medical insurance, group life insurance, employee
stock purchase plan and various stock options plans. Filing of all required
reports under ERISA for employee benefit plans sponsored by Thermo.
(d) Corporate record keeping services. Maintenance of corporate
records, including without limitation, maintenance of minutes of meetings of the
Boards of Directors and Stockholders, supervision of transfer agent and
registration functions, coordination of stock repurchase programs, and tracking
of stock issuances and reserved shares.
(e) Services in addition to those enumerated in subsections
1.1(a) through 1.1(d) above including, but not limited to, routine legal and
other administrative activities, Corporate information and treasury and other
financial services as reasonably requested by Subsidiary.
1.2 For performing general services of the types described above in
Paragraph 1.1, Thermo will initially charge Subsidiary an annual fixed fee equal
to 1.0% of the gross revenues of Subsidiary for the fiscal year in which such
services are performed (such amount to be prorated on a daily basis for any
partial year), which fee is intended to compensate Thermo for Subsidiary's pro
rata share of the aggregate costs actually incurred by Thermo in connection with
the provision of such services to all recipients thereof. The fee set forth in
the preceding sentence may be adjusted from time to time by mutual agreement of
Thermo and Subsidiary.
1.3 In addition to the foregoing services, certain specific services are
made available to Subsidiary by Thermo on an as-requested basis. These may
include, but are not limited to, services specifically requested by Subsidiary
or services which, in Thermo's judgment, are not routine administrative services
or create unusual burdens or demands on Thermo's resources, such as litigation
support, acquisition and offering support services (including legal services),
corporate development, tax audit support or public or investor relations
services other than routine shareholder communications. Thermo will charge
Subsidiary the costs actually incurred (including overhead and general
administrative expenses) for such services that are requested by Subsidiary and
supplied by Thermo.
1.4 The charges for services pursuant to Subsections 1.2 and 1.3 above
will be determined and payable no less frequently than on a quarterly basis. The
charges will be due when billed and shall be paid no later than 30 days from the
date of billing.
1.5 When services of the type described above in this Section 1 are
provided by outside providers to Subsidiary or, in connection with the provision
of such services out-of-pocket costs are incurred such as travel, the cost
thereof will be paid by Subsidiary. To the extent that Subsidiary is billed by
the provider directly, Subsidiary shall pay the bill directly. If Thermo is
billed for such services, Thermo may pay the bill and charge Subsidiary the
amount of the bill or forward the bill to Subsidiary for payment by Subsidiary.
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<PAGE> 3
2. SUBSIDIARY'S DIRECTORS AND OFFICERS. Nothing contained herein will be
construed to relieve the directors or officers of Subsidiary from the
performance of their respective duties or to limit the exercise of their powers
in accordance with the charter or By-Laws of Subsidiary or in accordance with
any applicable statute or regulation.
3. LIABILITIES. In furnishing Subsidiary with management advice and
other services as herein provided, neither Thermo nor any of its officers,
directors or agents shall be liable to Subsidiary or its creditors or
shareholders for errors of judgment or for anything except willful malfeasance,
bad faith or gross negligence in the performance of their duties or reckless
disregard of their obligations and duties under the terms of this Agreement. The
provisions of this Agreement are for the sole benefit of Thermo and Subsidiary
and will not, except to the extent otherwise expressly stated herein, inure to
the benefit of any third party.
4. TERM.
(a) Term. The initial term of this Agreement shall begin on the date of
this Agreement and continue through the end of the current fiscal year. This
Agreement shall automatically renew at the end of the initial term for
successive one-year terms until terminated in accordance with Subsection (b)
below.
(b) Termination. This Agreement may be terminated by Subsidiary at any
time on thirty days prior notice to Thermo. In addition, this Agreement shall
automatically terminate without any further action by either party on the date
the Subsidiary ceases to be a member of the Thermo Group or a participant in the
Thermo Electron Corporate Charter.
(c) Termination Fee. In the event of a termination of this Agreement,
Subsidiary shall pay to Thermo its pro rata fee pursuant to Section 1.2 for the
year in which the termination takes effect plus a termination fee equal to the
fee payable under Section 1.2 for the most recent nine consecutive months.
(d) Post-Termination Services. Following a termination of this
Agreement, corporate administrative services of the kind provided under the
Agreement may continue to be provided to Subsidiary on an as-requested basis by
the Subsidiary or as required in the event it is not practicable for the
Subsidiary to provide such services or it is otherwise unable to identify
another source to provide such services (as would be the case of administration
of employee benefit plans and insurance programs sponsored by Thermo and in
which Subsidiary's employees participate) or as otherwise required by Thermo
acting in its capacity as majority stockholder of Subsidiary. In the even such
services are provided by Thermo to Subsidiary, Subsidiary shall be charged by
Thermo a fee equal to the market rate for comparable services charged by
third-party vendors. Such fee will be charged monthly and payable by Subsidiary
within thirty days. The obligations of Subsidiary set forth in this Section 4(d)
shall survive the termination of this Agreement.
5. STATUS. Thermo shall be deemed to be an independent contractor and,
except as expressly provided or authorized in this Agreement, shall have no
authority to act for or represent Subsidiary.
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6. OTHER ACTIVITIES OF THERMO. Subsidiary recognizes that Thermo now
renders and may continue to render management and other services to other
companies that may or may not have policies and conduct activities similar to
those of Subsidiary. Thermo shall be free to render such advice and other
services, and Subsidiary hereby consents thereto. Thermo shall not be required
to devote full time and attention to the performance of its duties under this
Agreement, but shall devote only so much of its time and attention as it deems
reasonable or necessary to perform the services required hereunder.
7. NOTICES. All notices, billings, requests, demands, approvals,
consents, and other communications which are required or may be given under this
Agreement shall be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
<TABLE>
<CAPTION>
IF TO SUBSIDIARY: IF TO THERMO:
----------------- -------------
<S> <C>
Thermo Fibergen Inc. Thermo Electron Corporation
8 Alfred Circle 81 Wyman Street
Bedford, Massachusetts 01730 Waltham, Massachusetts 02254
Attention: Chief Executive Officer Attention: Chief Executive Officer
</TABLE>
8. NO ASSIGNMENT. This Agreement shall not be assignable except with
the prior written consent of the other party to this Agreement.
9. APPLICABLE LAW. This Agreement shall be governed by and construed
under the laws of the Commonwealth of Massachusetts applicable to contracts made
and to be performed therein.
10. PARAGRAPH TITLES. The paragraph titles used in this Agreement are
for convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized offices as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Jonathan W. Painter
----------------------------
Title: Treasurer
SUBSIDIARY:
THERMO FIBERGEN INC.
By: /s/ Yiannis A. Monovoukas
----------------------------
Title: President
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Exhibit 10.5
TAX ALLOCATION AGREEMENT
THIS AGREEMENT is made as of July 2, 1996 between Thermo Fibertek Inc.,
a Delaware corporation ("TFT"), and Thermo Fibergen Inc., a Delaware corporation
("Fibergen" - The term "Fibergen" shall refer to Fibergen and those of its
subsidiaries that are at least 80% owned by Thermo Fibergen Inc.).
Preliminary Statement
TFT is the parent of an affiliate group of corporations (including
Fibergen) within the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the "Code").
TFT owns more than 80% of the issued and outstanding shares of voting
common stock of Fibergen, the only class of stock that Fibergen is authorized to
issue. Fibergen is required to file consolidated federal income tax returns with
TFT.
TFT is the common parent of an affiliated group of corporations and
Fibergen recognizes that any one of them that sustains a net operating loss or
otherwise generates beneficial tax attributes for a taxable period may be
deprived of such benefits when offset in that or other periods against income or
tax liabilities of the others.
By this Agreement, the parties desire to set forth the understanding
they have reached with respect to the filing of the consolidated United States
federal income tax returns. Foreign tax returns are not subject to this
Agreement.
Agreements
IT IS MUTUALLY agreed by the parties hereto as follows:
1. Definitions and Construction.
1.1. The Term "TFT Group" means the group of corporations of which
TFT is common parent and with which TFT files an affiliated consolidated federal
income tax return, excluding Fibergen and subsidiaries of Fibergen that may
exist now or in the future. For purposes of this Agreement, the TFT Group shall
be treated as a single corporate entity. The TFT Group and Fibergen and its
subsidiaries, respectively, are sometimes herein referred to collectively as the
"Two Companies" or the "Companies." This Agreement anticipates that TFT will set
aside and retain certain sums calculated as provided herein. All reference to
TFT paying sums to itself pursuant to this Agreement shall be satisfied by TFT
setting aside sums in respect of the obligations established under this
Agreement.
1.2. The paragraph titles used herein are for convenience of
reference only and will not be considered in the interpretation or construction
of any of the provisions hereof. Words may be construed in the singular or the
plural as the context requires.
<PAGE> 2
2. Tax Returns.
2.1. Federal Tax Returns. TFT as the common parent will prepare and
file or cause to be prepared and filed federal and state income tax returns on a
consolidated basis, for the TFT Group and Fibergen and its subsidiaries for all
fiscal periods as to which a consolidated return is appropriate in accordance
with the terms of this Agreement.
2.2. State Tax Returns. TFT as the common parent will prepare and
file or cause to be filed state income tax returns on a combined, consolidated,
unitary, or other method that TFT believes will result in a lower overall tax
liability to the Two Companies. Fibergen will reimburse TFT for its portion of
the tax. Such reimbursement will be the tax Fibergen would have paid on a
separate return basis, but only if it was required to file a return in that
state.
3. Time of Payment of Federal Obligations to TFT. The obligations of
the Companies for Federal income tax payments will be determined and paid as
follows:
(a) Not later than the 15th day after the end of the fourth, sixth,
ninth and twelfth months of each consolidated taxable year of TFT, TFT will make
a reasonable determination (consistent with the provisions of Section 6655 of
the Code) of the separate federal income tax liability that each Company would
be required to pay as estimated payments on a separate return basis for that
period. Each Company shall pay to TFT the amount of such liability within ten
days.
(b) After the end of TFT's fourth accounting quarter and before the
15th day of the third month thereafter, each Company will promptly pay to TFT
the entire amounts estimated to be due and payable under such Company's federal
income tax return as if filed on a separate return basis, less all amounts
previously paid with respect to that year pursuant to subparagraph (a) of this
Paragraph 3.
(c) If upon the filing of the consolidated income tax return, a
revised calculation is made in the manner set forth in subparagraph (b) of this
Paragraph 3, and it is determined that either Company has paid to TFT with
respect to the consolidated taxable year an amount greater than that required by
Paragraph 3(b), then that excess will be promptly paid by TFT to that Company.
4. Tax Obligations of TFT. TFT will pay the consolidated tax
liabilities of the Companies arising from filing a consolidated federal income
tax return.
5. Payment of Funds by TFT. After the end of TFT's fourth quarter and
before the 15th day of the third month thereafter, if in any year Fibergen
incurs a loss, TFT shall pay to Fibergen a sum equal to the amount of benefit
realized by TFT that is attributable to the loss incurred by Fibergen.
6. Changes in Prior Year's Tax Liabilities. In the event that the
consolidated tax liability or the separate tax liability referred to in
Paragraphs 3 and 4 hereof for any year for which a consolidated tax return for
the two Companies was filed is or would be increased or decreased by reason of
filing an amended return or returns (including carry-back claims), or by reason
of the examination of the returns by the Internal Revenue Service, the amounts
due TFT for payment of taxes under Paragraph 3 hereof, and the amount to be paid
to TFT for allocation to Fibergen under Paragraph 4 hereof for each such year
will be recomputed by TFT to reflect the adjustments to taxable income and tax
credits for the taxable year and interest or penalties, if any. In accordance
with those recomputations, additional sums will be paid by the Companies to TFT
or
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<PAGE> 3
paid by TFT to the Companies regardless of whether a member has become a
Departing Member (as defined in Paragraph 8 hereof) subsequent to the taxable
year of recomputation.
7. New Members. The Companies agree that if, subsequent to the
execution of this Agreement, TFT becomes the parent, as that term is used in
Section 1504 of the Code, of one or more subsidiary corporations, in addition to
Fibergen, then each newly acquired subsidiary corporation may become a separate
party to this Agreement by consenting in writing to be bound by its provisions,
effective immediately upon its delivery to TFT, but the income, deductions and
tax credits of the newly acquired subsidiary corporations will first be included
in the consolidated federal income tax return as required by the Code.
8. Departing Members.
8.1. The term "Departing Member," as used herein, will mean a
Company that is no longer permitted under the Code to be included in the
consolidated federal income tax return.
8.2. In applying this Agreement to a Departing Member for the final
taxable year in which its income, deductions, and tax credits are required to be
included in the consolidated federal income tax return: (i) the amount required
to be paid by a Departing Member under the provisions of Paragraph 3 hereof and
(ii) the amount that the Departing Member is entitled to receive under the
provisions of Paragraph 4 hereof, will be determined by taking into account the
income, deductions and tax credits of the Departing Member only for the
fractional part of such year as the Departing Member was a member of the
consolidated group and included in the consolidated federal income tax return.
8.3. After the filing of the consolidated federal income tax return
for the last taxable year that the Departing Member was included therein, the
Departing Member will be informed of the amount of consolidated carry-overs as
of the end of the taxable year or period which are attributable to the Departing
Member, as provided by Treasury Regulations Section 1.1502-79 or otherwise,
including the agreement of the parties.
9. Determination of Sums Due from and Payable to Members. TFT will
determine the sums due from and payable to the Companies under the provisions of
this Agreement (including the determination for purposes of Paragraph 6 hereof).
The Companies agree to provide TFT with such information as may reasonably be
necessary to make these determinations. Issues arising in the course of the
determinations that are not expressly provided for in this Agreement will be
resolved in an equitable manner.
10. Tax Controversies. If a consolidated federal income tax return for
any taxable year during which this Agreement is in effect is examined by the
Internal Revenue Service, the examination, as well as any other matters relating
to that tax return, including any tax litigation, will be handled solely by TFT.
Fibergen will cooperate with TFT and to this end will execute protests,
petitions, and any other documents as TFT determines to be necessary or
appropriate. The cost and expense of TFT's handling of a tax controversy,
including legal and accounting fees, will be allocated to and paid by the
Company to whom the tax controversy relates. If the tax controversy relates to
both Companies, the cost and expense will be allocated between the Companies in
the proportion that each Company's potential additional tax liability bears to
the total potential additional tax liability of both Companies (determined in
accordance with Paragraph 6 hereto and assuming that the tax controversy is
resolved in favor of the Internal Revenue Service) for the taxable year on
issue. If the tax controversy encompasses more than one taxable year, TFT will
first allocate the cost and expense to each taxable year in the
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<PAGE> 4
proportion that the potential additional tax liability for each taxable year
bears to the total potential additional tax liability for the taxable years in
issue.
11. Effective Date. This Agreement shall be effective beginning as of
the date of this Agreement, and will continue on a year-to-year basis thereafter
with respect to Fibergen for so long as Fibergen is permitted to file a
consolidated federal income tax return with TFT.
12. State Taxes. The two Companies will jointly file any state tax
return on a combined, consolidated, unitary, or other method that TFT determines
results in a lower overall tax liability to the Two Companies. In the event that
said state tax returns shall be filed, the provisions of sections 1 through 11
hereof shall apply, mutatis mutandis (the necessary changes being made) to the
allocation, preparation, filing and payment related to such state taxes and tax
returns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO FIBERTEK INC.
By: /s/ Jonathan W. Painter
----------------------------
Title: Treasurer
THERMO FIBERGEN INC.
By: /s/ Yiannis A. Monovoukas
----------------------------
Title: President
4
<PAGE> 1
Exhibit 10.6
MASTER REPURCHASE AGREEMENT
AGREEMENT dated as of July 2, 1996 between Thermo Electron Corporation,
a Delaware corporation ("Seller"), and Thermo Fibergen Inc., a Delaware
corporation (the "Buyer").
1. APPLICABILITY
From time to time Buyer and Seller may enter into transactions in which
Seller agrees to transfer to Buyer certain securities and/or financial
instruments ("Securities") against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Securities on demand,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and shall be governed by this Agreement, unless
otherwise agreed in writing.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to either party (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property; or (ii)
the commencement of any such case or proceeding against such party, or another
seeking such an appointment, which (A) is consented to or not timely contested
by such party, (B) results in the entry of an order for relief, such an
appointment or the entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a general assignment
for the benefit of creditors; or (iv) the admission in writing by a party of
such party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest, dividends or other distributions thereon;
(d) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued Income to the extent not included therein (other
than any Income transferred to Seller pursuant to Paragraph 6 hereof) as of such
date (unless contrary to market practice for such Securities);
(e) "Other Buyers", third parties that have entered into an agreement
with Seller that is substantially similar to this Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper Composite rate
for 30-day maturities provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated (or, if such rate is not available, a substantially equivalent rate
agreed to by Buyer and Seller) plus 25 basis points, which rate shall be
adjusted on the first business day of each fiscal quarter and shall be in effect
for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased Securities are
transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by Seller to
Buyer in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect
to any Transaction at any time also shall include Additional Purchase
<PAGE> 2
Securities transferred pursuant to Paragraph 4(a) and shall exclude Securities
returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account maintained by Seller
containing, among other Securities, the Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an amount equal to
the Purchase Price paid by Buyer to Seller for such Purchased Security.
3. TRANSACTIONS
(a) A Transaction may be initiated by Buyer upon the transfer of the
Purchase Price to Seller's account. Upon such transfer, Seller shall transfer to
Buyer Purchased Securities having a Market Value equal to 103% of the Purchase
Price.
(b) Purchased Securities shall be held in custody for Buyer by Seller in
the Repurchase Collateral Account. Seller shall indicate on its books for such
account Buyer's ownership of the Purchased Securities. Upon reasonable request
from Buyer, Seller shall provide Buyer with a complete list of Purchased
Securities owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase from Buyer,
and Buyer shall sell to Seller, for the Repurchase Price all or any part of the
Purchased Securities then owned by Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer is less than 103% of the aggregate Repurchase
Price for such Purchased Securities, then Seller shall transfer to Buyer
additional Securities ("Additional Purchased Securities"), so that the aggregate
Market Value of such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such aggregate
Repurchase Price.
(b) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer exceeds 103% of the aggregate Repurchase Price
for such Purchased Securities, then Seller may transfer Purchased Securities to
Seller, so that the aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. INTEREST PAYMENTS
If during any fiscal month Buyer owned Purchased Securities, then on the
first day of the next following fiscal month Seller shall pay to Buyer an amount
equal to the sum of the aggregate Repurchase Prices of the Purchased Securities
owned by Buyer at the close of each day during the preceding fiscal month
divided by the number of days in such month and the product multiplied by the
Pricing Rate times the number of days in such month divided by 360.
6. INCOME PAYMENTS AND VOTING RIGHTS
Where a particular Transaction's term extends over an Income payment
date on the Purchased Securities subject to that Transaction, Buyer shall, on
the date such Income is payable, transfer to Seller an amount equal to such
Income payment or payments with respect to any Purchased Securities subject to
such Transaction. Seller shall retain all voting rights with respect to
Purchased Securities sold to Buyer under this Agreement.
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<PAGE> 3
7. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a security interest in,
all of the Purchased Securities with respect to all Transactions hereunder and
all proceeds thereof.
8. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder shall
be in immediately available funds. As used herein with respect to Securities,
"transfer" is intended to have the same meaning as when used in Section 8-313 of
the Massachusetts Uniform Commercial Code or, where applicable, in any federal
regulation governing transfers of the Securities.
9. SUBSTITUTION
Buyer hereby grants Seller the authority to manage, in Seller's sole
discretion, the Purchased Securities held in custody for Buyer by Seller in the
Repurchase Collateral Account. Buyer expressly agrees that Seller may (i)
substitute other Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase Collateral
Account. Substitutions shall be made by transfer to Buyer of such other
Securities and transfer to Seller of the Purchased Securities for which
substitution is being made. After substitution, the substituted Securities shall
be deemed to be Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of substitution equal
to or greater than the Market Value of the Purchase Securities for which such
Securities were substituted.
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other that (i)
it is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf, (iii) it has obtained all authorizations of
any governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(iv) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the date for any Transaction Buyer and Seller shall
each be deemed to repeat all the foregoing representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to repurchase or Buyer fails to
transfer Purchased Securities upon demand for repurchase from either Buyer or
Seller, (ii) Seller or Buyer fails, after one business day's notice, to comply
with Paragraph 4 hereof, (iii) Buyer fails to make payment to Seller pursuant to
Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof, (v) an
Act of Insolvency occurs with respect to Seller or Buyer, (vi) any
representation made by Seller or Buyer shall have been incorrect or untrue in
any material respect when made or repeated or deemed to have been made or
repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or
its intention not to, perform any of its obligations hereunder (each an "Event
of Default"):
(a) At the option of the nondefaulting party, exercised by written
notice to the defaulting party (which option shall be deemed to have been
exercised, even if no notice is given, immediately upon the occurrence of any
Act of Insolvency), Seller shall become obligated to repurchase, and Buyer
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<PAGE> 4
shall become obligated to sell, all Purchased Securities then owned by Buyer for
the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises or is deemed
to have exercised the option referred to in subparagraph (a) of this Paragraph,
(i) the Seller's obligations hereunder to repurchase all Purchased Securities in
such Transactions shall thereupon become immediately due and payable, (ii) all
Income paid after such exercise or deemed exercise shall be retained by Buyer
and applied to the aggregate unpaid Repurchase Prices owed by Seller, and (iii)
Seller shall immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting party, upon
tender by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Securities
subject to such Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (a) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the defaulting party, (A)
immediately sell, in a recognized market at such price or prices as Buyer may
reasonably deem satisfactory, any or all Purchased Securities subject to such
Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in its sole
discretion elect, in lieu of selling all or a portion of such Purchased
Securities, to give Seller credit for such Purchased Securities in an amount
equal to the price therefor on such date, obtained from a generally recognized
source or the most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by Seller
hereunder; and
(ii) as to Transactions in which Buyer is the defaulting party, (A)
purchase securities ("Replacement Securities") of the same class and amount as
any Purchased Securities that are not delivered by Buyer to Seller as required
hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement
Securities, to be deemed to have purchased Replacement Securities at the price
therefor on such date, obtained from a generally recognized source or the most
recent closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting party , Buyer
shall be liable to Seller (i) with respect to Purchased Securities (other than
Additional Purchased Securities), for any excess of the price paid (or deemed
paid) by Seller for Replacement Securities therefor over the Repurchase Price
for such Purchased Securities and (ii) with respect to Additional Purchased
Securities, for the price paid (or deemed paid) by Seller for the Replacement
Securities therefor.
(g) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a
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default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries and other transfers may be applied against each other
and netted.
13. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement and agreement herein shall be treated as separate
and independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other provision or
agreement.
14. NON-ASSIGNABILITY; TERMINATION
The rights and obligations of the parties under this Agreement and under
any Transactions shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be canceled by
either party upon giving written notice to the other, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Transactions then
outstanding.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of law principles thereof.
16. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a wavier of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto.
19. INTENT
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Securities subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THERMO ELECTRON CORPORATION THERMO FIBERGEN INC.
By: /s/ Jonathan W. Painter By: /s/ Yiannis A. Monovoukas
----------------------------- --------------------------------
Jonathan W. Painter Yiannis A. Monovoukas
Title: Treasurer Title: President
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<PAGE> 1
Exhibit 10.7
MASTER GUARANTEE REIMBURSEMENT AGREEMENT
This AGREEMENT is entered into as of the 2nd day of July, 1996 by and
among Thermo Electron Corporation (the "Parent") and those of its subsidiaries
that join in this Agreement by executing the signature page hereto (the
"Majority Owned Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries in the past have entered into,
and wish to enter into in the future, various financial transactions, such as
convertible or nonconvertible debt, bank loans, and equity offerings, and other
contractual arrangements with third parties (the "Underlying Obligations");
WHEREAS, the Majority Owned Subsidiaries acknowledge that they are
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from the Parent (a "Parent Guarantee");
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries ") are themselves majority owned subsidiaries of
other Majority Owned Subsidiaries ("First Tier Majority Owned
Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations are often demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation;
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If, after the date hereof, the Parent provides a Parent Guarantee of an
Underlying Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under the Parent
Guarantee for any other reason, then the Majority Owned Subsidiary that
is obligated under such Underlying Obligation shall indemnify and save
harmless the Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the Parent as a
result of the Parent Guarantee. If the Underlying Obligation is issued
by a Second Tier Majority Owned Subsidiary, and such Second Tier
Majority Owned Subsidiary is unable to fully indemnify the Parent
(because of the poor financial condition of such Second Tier Majority
Owned Subsidiary, or for any other reason), then the First Tier Majority
Owned Subsidiary that owns the majority of the stock of such Second Tier
Majority Owned Subsidiary shall indemnify and save harmless
<PAGE> 2
the Parent from any remaining liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the Parent as a
result of the Parent Guarantee.
2. For purposes of this Agreement, the term "guarantee" shall include not
only a formal guarantee of an obligation, but also any other arrangement
where the Parent is liable for the obligations of a Majority Owned
Subsidiary. Such other arrangements include (a) representations,
warranties and/or covenants or other obligations joined in by the
Parent, whether on a joint or joint and several basis, for the benefit
of the Majority Owned Subsidiary and (b) responsibility of the Parent by
operation of law for the acts and omissions of the Majority Owned
Subsidiary, including controlling person liability under securities and
other laws.
3. Promptly after the Parent receives notice that a beneficiary of a Parent
Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned Subsidiary(s) obligated under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) shall have the
right, at its own expense, to contest the claim of such beneficiary. If
a Majority Owned Subsidiary is contesting the claim of such beneficiary,
the Parent will not perform under the relevant Parent Guarantee unless
and until, in the Parent's reasonable judgment, the Parent is obligated
under the terms of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary and a
beneficiary of a Parent Guarantee shall not affect such Majority Owned
Subsidiary's obligation to promptly indemnify the Parent hereunder.
4. All payments required to be made by a Majority Owned Subsidiary shall be
made within two days after receipt of notice from the Parent.
5. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts applicable to contracts made
and performed therein.
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 THERMO FIBERTEK INC.
By: /s/ Jonathan W. Painter By: /s/ Jonathan W. Painter
------------------------ -------------------------------
Title: Treasurer Title: Treasurer
THERMO FIBERGEN INC.
By: /s/ Yiannis A. Monovoukas
--------------------------
Title: President
2
<PAGE> 1
Exhibit 10.8
MASTER GUARANTEE REIMBURSEMENT AGREEMENT
This AGREEMENT is entered into as of the 2nd day of July, 1996 by and
among Thermo Fibertek Inc. (the "Parent") and those of its subsidiaries that
join in this Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries wish to enter into in the
future various financial transactions, such as convertible or nonconvertible
debt, bank loans, and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations");
WHEREAS, the Majority Owned Subsidiaries acknowledge that they may be
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from the Parent (a "Parent Guarantee");
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries ") 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; and
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If, after the date hereof, the Parent provides a Parent Guarantee of an
Underlying Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under the Parent
Guarantee for any other reason, then the Majority Owned Subsidiary that
is obligated under such Underlying Obligation shall indemnify and save
harmless the Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the Parent as a
result of the Parent Guarantee. If the Underlying Obligation is issued
by a Second Tier Majority Owned Subsidiary, and such Second Tier
Majority Owned Subsidiary is unable to fully indemnify the Parent
(because of the poor financial condition of such Second Tier Majority
Owned Subsidiary, or for any other reason), then the First Tier Majority
Owned Subsidiary that owns the majority of the stock of such Second Tier
Majority Owned Subsidiary shall indemnify and save harmless the Parent
from any remaining liability, cost, expense or damage (including
reasonable attorneys' fees) suffered by the Parent as a result of the
Parent Guarantee.
<PAGE> 2
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. Such other arrangements include (a) representations,
warranties and/or covenants or other obligations joined in by the
Parent, whether on a joint or joint and several basis, for the benefit
of the Majority Owned Subsidiary and (b) responsibility of the Parent by
operation of law for the acts and omissions of the Majority Owned
Subsidiary, including controlling person liability under securities and
other laws.
3. Promptly after the Parent receives notice that a beneficiary of a Parent
Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned Subsidiary(s) obligated under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) shall have the
right, at its own expense, to contest the claim of such beneficiary. If
a Majority Owned Subsidiary is contesting the claim of such beneficiary,
the Parent will not perform under the relevant Parent Guarantee unless
and until, in the Parent's reasonable judgment, the Parent is obligated
under the terms of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary and a
beneficiary of a Parent Guarantee shall not affect such Majority Owned
Subsidiary's obligation to promptly indemnify the Parent hereunder.
4. All payments required to be made by a Majority Owned Subsidiary shall be
made within two days after receipt of notice from the Parent.
5. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts applicable to contracts made
and performed therein.
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 FIBERTEK INC.
By: /s/ Jonathan W. Painter
--------------------------
Title: Treasurer
THERMO FIBERGEN INC.
By: /s/ Yiannis A. Monovoukas
--------------------------
Title: President
<PAGE> 1
Exhibit 10.9
LEASE
THIS LEASE (the "Lease") is made as of April 12, 1996, by and between
AL AND LEE REALTY ("Lessor") and THERMO FIBERGEN INC. ("Lessee").
NOW, THEREFORE, for and in consideration of the premises and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEMISE OF PREMISES. Lessor does hereby lease to Lessee, and Lessee does
hereby lease from Lessor, the real estate, together with the building thereon
consisting of approximately 6000 square feet of floor area (the "Building"),
known and numbered as 8 Alfred Circle, Bedford, Massachusetts 01730, and all
rights, privileges and appurtenances thereto (collectively, the "Premises"),
which Premises are shown outlined in red on Exhibit A attached hereto and
incorporated herein by this reference.
2. TERM. The term of this Lease shall be for a period of five (5) years (the
"Term"), commencing on April 15, 1996 (the "Commencement Date"). Notwithstanding
anything to the contrary contained herein, Lessee shall have the right, at its
option, to terminate this Lease, effective as of the date of expiration of the
third full year of the Term (the "Early Termination Date"), upon written notice
to Lessor given no less than ninety (90) days prior to the Early Termination
Date, in which event this Lease will terminate on the Early Termination Date as
though the same were set forth herein as the date of expiration of the Term.
3. RENT AND SECURITY DEPOSIT. Lessee hereby agrees to pay rent to Lessor in an
amount equal to $60,000 per annum, calculated at the rate of $10.00 per square
foot (the "Rent"). All Rent shall be paid monthly in advance on the first day of
each calendar month. Rent for any partial month shall be prorated on a daily
basis. Rent shall be paid by Lessee to Lessor in lawful money of the United
States at Lessor's address set forth in Section 29 below, or at such other place
as Lessor may designate from time to time by no less than thirty (30) days'
prior written notice to Lessee.
Upon execution of this Lease, Lessee shall pay to Lessor the amount of
$10,000 (the "Security Deposit") which shall be held as security for the
performance by Lessee of its obligations under this Lease. Lessor shall place
the Security Deposit in a separate account and shall not commingle the same with
other funds of Lessor, provided that any and all interest earned thereon shall
be the sole and absolute property of Lessor. Upon the occurrence of an Event of
Default (as defined in Section 16.1 below), Lessor may use the Security Deposit,
or any portion thereof, to cure the Event of Default in accordance with the
provisions of this Lease. Lessee shall upon demand pay to Lessor an amount equal
to the portion of the Security Deposit so expended by Lessor so as to restore
the Security Deposit to its original amount. Notwithstanding anything to the
contrary contained herein, it is expressly understood and agreed that if Lessee
does not elect to exercise its right to terminate this Lease under the
provisions of Section 31 below, Lessor shall refund to Lessee within thirty (30)
days a portion of the Security Deposit equal to $5000, and thereafter the term
"Security Deposit" shall for purposes of this Lease mean the remaining
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balance of $5000. Provided there is then existing no uncured Event of Default
hereunder, upon the expiration or earlier termination of this Lease, Lessor
shall refund to Lessee the full amount of the Security Deposit not previously
expended by Lessor in accordance with the provisions of this Section 3, as the
same may have theretofore been restored by Lessee.
4. LESSOR'S WORK. Without in any way limiting the provisions of Section 7 below,
Lessor agrees that, to the extent, and only to the extent, that the same is
required at any time during the Term of this Lease (as the same may be extended)
by any municipal, state or federal governmental or other public authority in
connection with Lessee's use and occupancy of the Premises for the uses
hereunder, including without limitation the Initial Permitted Uses (as defined
in Section 5 below), Lessor shall promptly commence and diligently prosecute to
completion, at Lessor's sole cost and expense, the work set forth in Exhibit B
attached hereto and incorporated herein by this reference ("Lessor's Work"). To
the extent that Lessor's Work is required as aforesaid, Lessor shall perform the
same in a good and workmanlike manner and in compliance with all applicable
laws, rules, regulations, codes and ordinances of governmental or other public
authorities. Lessor shall perform such Lessor's Work without, to the extent
practicable, interfering with the conduct of Lessee's business. If during the
performance of Lessor's Work the Premises are rendered wholly or partially
unsuitable for the operation of Lessee's business, there shall be an equitable
abatement of Rent until such time as Lessor's Work has been completed.
5. USE. Lessee may use and occupy the Premises for office, research and
development and laboratory space (collectively, the "Initial Permitted Uses"),
together with any other lawful purpose.
6. MAINTENANCE.
6.1 By Lessor. Lessor shall, at Lessor's sole cost and expense, maintain
throughout the Term of this Lease, as the same may be extended, the foundation,
floorslab, exterior walls, load-bearing interior walls, structural portions,
roof, gutters, downspouts, doors, heating, ventilation and air conditioning
("HVAC") equipment (other than routine filter changes which shall be the
responsibility of Lessee) and electrical wiring of the Premises, and all utility
lines, pipes and plumbing serving but located outside of the Building (including
without limitation all underground utility lines, pipes and plumbing), in good,
clean, safe and, with respect to the roof, watertight condition and repair.
Lessor shall also perform, at Lessor's sole cost and expense, all landscaping of
the Premises and all maintenance of all paved areas located on the Premises.
Without in any way limiting the foregoing, in the event of the occurrence of a
recurrent roof leak or a series of roof leaks, Lessor agrees promptly to replace
the entire roof membrane at Lessor's sole cost and expense. Lessor shall make
all repairs and replacements without, to the extent practicable, interfering
with the conduct of Lessee's business. If during such repairs or replacements
the Premises are rendered wholly or partially unsuitable for the operation of
Lessee's business, there shall be an equitable abatement of Rent until such time
as such repairs and replacements have been completed.
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6.2 By Lessee. Lessee shall, at Lessee's sole cost and expense, maintain in
good condition and repair throughout the Term of this Lease, as the same may be
extended, all non-structural, interior portions of the Premises the maintenance
of which is not the responsibility of Lessor under Subsection 6.1 above,
including without limitation routine filter changes to all HVAC units. Lessee
shall also perform, at Lessee's sole cost and expense, all snow and ice removal
from the paved areas located on the Premises. Notwithstanding anything to the
contrary contained herein, in no event shall Lessee be obligated to make any
repairs or replacements which would constitute items of expense properly
chargeable to "capital account" under generally accepted accounting principles
consistently applied ("GAAP") or which are required as the result of the
negligence or willful misconduct of Lessor, its agents, employees,
representatives or contractors, or the failure of Lessor to perform any of its
obligations under this Lease, all of which repairs and replacements shall be
made by Lessor at Lessor's sole cost and expense.
7. LEGAL REQUIREMENTS. Lessor agrees that, during the Term of this Lease, as the
same may be extended, Lessor shall, at Lessor's sole cost and expense, promptly
observe and comply with, and conform the Premises to, all present and future
municipal, state and federal ordinances, laws, rules and regulations affecting
the Premises whether the same are in force and effect at the time of the
Commencement Date or may in the future be passed, enacted, or directed
(collectively, "Legal Requirements"), and Lessor shall pay all costs, expenses,
liabilities, losses, damages, fines, penalties, claims and demands, including
without limitation reasonable attorneys' fees, that may in any manner arise out
of or be imposed because of the failure of Lessor to comply with the provisions
of this Section 7. Notwithstanding the foregoing, Lessee shall comply, at
Lessee's sole cost and expense, with all Legal Requirements to the extent such
compliance is necessitated by reason of the special nature of Lessee's
particular and specific use of the Premises; provided, however, that in no event
shall Lessee be responsible for the performance of Lessor's Work as required by
Section 4 and Exhibit B hereto. Each party shall have the right, upon giving
notice to the other, to contest any obligations imposed upon such party pursuant
to the provisions of this Section 7 and to defer its respective compliance
during the pendency of such contest, provided the enforcement of such Legal
Requirement is stayed during such contest and such contest will not subject the
other party to criminal penalty or interfere with Lessee's use and occupancy of
the Premises or jeopardize the title to the Premises. Each party shall cooperate
reasonably with the other in any such contest.
8. UTILITIES. Lessee agrees to pay directly to the applicable supplier thereof
all charges for electricity, gas, water, garbage, sewage, telephone and other
utilities used or consumed in the Premises. Lessor warrants and represents that
all utility services furnished to the Premises are separately metered.
9. TAXES, ASSESSMENT AND INSURANCE.
9.1 Taxes and Assessments. Lessor agrees to pay, at Lessor's sole cost and
expense, all taxes and special and general assessments which may be levied upon
the Premises during the Term hereof, as the same may be extended, at the time
when the same become due and payable. Lessee agrees to pay, at Lessee's sole
cost and expense, all taxes and special and general assessments which may be
levied upon Lessee's personal property located upon the Premises
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during the Term of this Lease, as the same may be extended, at the time when the
same shall become due and payable. In addition, Lessee agrees that if in any tax
year during the Term of this Lease, commencing with the tax year 1996-1997, the
real estate taxes levied upon the Premises are in excess of the real estate
taxes thereon for the tax year 1995-1996, Lessee will pay to Lessor, within
thirty (30) days following Lessee's receipt of a copy of the applicable tax bill
therefor, the full amount of such excess. If this Lease shall not be in force
and effect for all of a particular tax year, Lessee's payment of any increase in
real estate taxes as provided for herein shall be pro-rated so that the amount
payable by Lessee shall be based on the actual number of days that this Lease
shall be in force and effect during such tax year. Notwithstanding anything to
the contrary contained herein, in the event that Lessee is obligated pursuant to
the provisions of the immediately preceding sentence to pay any portion of any
betterment or special assessment, Lessee's payments shall be calculated as if
such assessment were amortized on a straight-line basis consistent with GAAP,
such that Lessee shall pay a total amount equal to such assessment multiplied by
a fraction, the numerator of which is the number of years remaining in the Term
(as the same may be extended) and the denominator of which is the greater of (i)
the number of years in the entire Term (as the same may be extended) or (ii) the
number of years for amortization indicated by GAAP. If Lessor shall obtain or
receive any abatement, refund or rebate in real estate taxes or assessments paid
with respect to the Premises during the Term of this Lease, as the same may be
extended, Lessor shall promptly forward the same to Lessee, less any cost
incurred by Lessor in obtaining the same. In addition, Lessee shall have the
right to seek, at Lessee's expense and in Lessor's name and behalf, an
abatement, refund or rebate with respect to real estate taxes or assessments
payable during the Term of this Lease, as the same may be extended, and Lessor
agrees that any such abatement, refund or rebate shall belong to Lessee. Lessor
shall cooperate reasonably with Lessee in the seeking by Lessee of any such
abatement, refund or rebate. Lessee shall not, in any event, be liable for any
interest or penalty charges payable with respect to any real estate taxes or
assessments. Lessor warrants and represents that the Premises are separately
assessed.
9.2 Insurance. Lessee agrees to carry and maintain in full force and effect
during the Term of this Lease, as the same may be extended, at Lessee's sole
cost and expense, with reputable companies duly authorized to transact business
in Massachusetts, (i) public liability insurance covering bodily injury and
property damage liability, with limits of coverage of not less than $1,000,000
for each person and $1,000,000 in the aggregate for bodily injury or death for
each accident, and $1,000,000 for property damage for each accident, and (ii) a
policy of All-Risk insurance covering all Lessee Alterations on a full
replacement cost basis. Lessor agrees to carry and maintain in full force and
effect during the Term of this Lease, as the same may be extended, at Lessor's
sole cost and expense, a policy of All-Risk insurance, with extended coverage
endorsement, insuring all buildings included as part of the Premises on a full
replacement cost basis (excluding any Lessee Alterations, which shall be insured
by Lessee as aforesaid). Each party shall, upon request, furnish to the other
party certificates of all insurance required to be maintained by such party
under this Lease. Notwithstanding anything to the contrary contained in this
Lease, Lessor and Lessee each hereby waives all rights of recovery against the
other party, and such other party's insurance carrier (by way of subrogation or
otherwise), for all losses, damages or injuries to the Premises, any
improvements thereon or any personal property of either party therein, to the
extent such waiver does not invalidate the insurance coverage of either party
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and to the extent such losses, damages or injuries are covered by insurance the
damaged party is required to carry hereunder or otherwise elects to maintain;
provided, however, that the foregoing waiver by either party shall not apply
with respect to any loss, damage or injury to the extent caused by the
negligence or willful misconduct of the other party, its agents, employees,
representatives or contractors.
10. ALTERATIONS. Lessee shall have the right to erect a storage shed or similar
structure, at Lessee's cost, on the lot on which the Building is located, the
precise location of such structure to be subject to Lessor's approval, which
approval shall not be unreasonably withheld, conditioned or delayed. Lessor's
failure either to approve or deny the proposed location of such structure within
ten (10) business days after receipt of Lessee's written request for approval,
together with such information as Lessor shall reasonably require in order to
evaluate such request, shall be deemed to constitute approval thereof. Lessee
shall have the right to make non-structural, interior alterations, additions,
betterments or improvements to the Premises without Lessor's consent; provided,
however, that any such alterations, additions, betterments or improvements which
may have an impact on the exterior walls or roof of the Building shall be
subject to Lessor's prior consent, which consent shall not be unreasonably
withheld, conditioned or delayed. Any and all alterations, additions,
betterments and improvements made by Lessee ("Lessee Alterations") shall be at
Lessee's sole cost and expense and in compliance with all applicable municipal,
state and federal ordinances, laws, rules and regulations. Lessee agrees to
remove or bond over any mechanics' or materialmen's liens created against or
imposed upon the Premises, or any part thereof, as a result of any Lessee
Alterations. All Lessee Alterations shall become the property of Lessor upon the
expiration or earlier termination of this Lease.
11. CONDEMNATION. If any part of the Premises shall be taken for public use by
right of eminent domain or transferred by agreement under threat of such taking,
this Lease shall terminate as of the earlier of the date of such taking or
agreement or the date title is vested in the condemnor or transferee. All rights
to damages or compensation with respect to such taking shall belong to Lessor in
all cases, except that Lessee shall have the right to prove and collect in a
separate action the value of the trade fixtures and Lessee Alterations installed
by it and moving expenses. In the event of the termination of this Lease under
the provisions of this Section 11, all Rent paid in advance shall be apportioned
and returned to Lessee as of the date of such termination. Notwithstanding the
foregoing, in the event that only a part of the Premises shall be so taken and
the part not so taken shall, in Lessee's opinion, be sufficient for the
operation of Lessee's business, Lessee, at its election, may retain the part not
so taken and this Lease shall continue in full force and effect with a reduction
in Rent in corresponding proportion to the reduction in square footage. In the
event of a partial taking where Lessee elects to continue this Lease in
accordance with the provisions of the immediately preceding sentence, Lessor
shall promptly restore, at Lessor's sole cost and expense, the remainder of the
Premises as nearly equivalent as practicable to its condition immediately prior
to such taking. If Lessor fails to so restore the Premises within ninety (90)
days from the date that possession of the portion of the Premises taken is
delivered to the condemning authority (including any and all periods of
Excusable Delay), then, in such event, Lessee may elect to terminate this Lease
by no less than ten (10) days' prior written notice to Lessor given no later
than thirty (30) days after the expiration of the aforesaid ninety (90)-day
period.
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12. CASUALTY. In the event that less than fifty percent (50%) of the Premises is
damaged or destroyed by fire, the elements, or any other cause or casualty,
Lessor shall proceed with due diligence to repair the Premises (excluding any
Lessee Alterations) to a condition as nearly equivalent as practicable to their
condition immediately prior to such damage or destruction. Within fifteen (15)
days of such damage or destruction, Lessor shall notify Lessee if the same can
be so repaired within sixty (60) days of such damage or destruction. If such
repairs are not, or if Lessor notifies Lessee that the same cannot be, completed
as aforesaid within said sixty (60)-day period (including any and all periods of
Excusable Delay), Lessee may, at Lessee's option, terminate this Lease as of the
date of such damage or destruction upon written notice to Lessor given no less
than five (5) business days after Lessee's receipt of Lessor's notice or the
expiration of said sixty (60)-day period, as the case may be. Upon termination
of this Lease, all Rent paid in advance shall be apportioned as of the date of
the damage or destruction.
In the event that more than fifty percent (50%) of the Premises is damaged or
destroyed by fire, the elements, or other cause or casualty, Lessor or Lessee
shall have the option to terminate this Lease upon written notice given to the
other party no later than ten (10) business days after the date of the
occurrence of such damage or destruction. Any such termination shall be
effective as of the date of such damage or destruction. If neither party elects
to exercise its option to terminate, Lessor shall proceed with due diligence to
repair the Premises (excluding any Lessee Alterations) to a condition as nearly
equivalent as practicable to their condition immediately prior to such damage or
destruction. Within fifteen (15) days of such damage or destruction, Lessor
shall notify Lessee if the same can be so repaired within ninety (90) days of
such damage or destruction. If such repairs are not, or if Lessor notifies
Lessee that the same cannot be, completed as aforesaid within said ninety
(90)-day period (including any and all periods of Excusable Delay), Lessee may,
at Lessee's option, terminate this Lease as of the date of such damage or
destruction upon written notice to Lessor given no less than five (5) business
days after Lessee's receipt of Lessor's notice or the expiration of said ninety
(90)-day period, as the case may be. Upon termination of this Lease, all Rent
paid in advance shall be apportioned as of the date of the damage or
destruction. A just proportion of the Rent according to the nature and extent of
the damage shall be abated until the completion of any restoration performed by
Lessor pursuant to this Section 12.
13. SUBORDINATION. This Lease shall be subject and subordinate to the lien of
any first mortgage of the entire fee interest of the Premises to a bona fide
lending, thrift or banking institution, pension fund or insurance company to
provide construction and/or permanent financing and any renewals, modifications
or extensions thereof, provided that a Subordination, Recognition and
Non-Disturbance Agreement (a "Subordination Agreement") is executed,
acknowledged and delivered by such mortgagee to Lessee. Such Subordination
Agreement must be in form suitable for recording and must contain substantially
the following provisions:
(a) Mortgagee consents to and approves this Lease;
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<PAGE> 7
(b) Lessee shall not be named or joined as a party defendant in any suit,
action or proceeding for the foreclosure of the mortgage or to enforce any
rights under the mortgage or note or other obligation secured thereby;
(c) The possession by Lessee of the Premises and Lessee's rights thereto
shall not be disturbed, affected or impaired by, nor will this Lease or the
Term, as the same may be extended, be terminated or otherwise affected by,
(i) any suit, action or proceeding upon the mortgage or the note or other
obligation secured thereby, or the foreclosure of the mortgage or the
enforcement of any rights under the mortgage or any other documents held by
the mortgagee, or by any judicial sale or execution or other sale of the
Premises, or by any deed given in lieu of foreclosure, or by the exercise of
any other rights given to the mortgagee by any other documents or as a matter
of law or (ii) any default under the mortgage or the note or other obligation
secured thereby;
(d) If the mortgagee takes possession of the Premises or starts collecting
rent or becomes the owner of the Premises by reason of foreclosure of the
mortgage or otherwise, or if the Premises shall be sold as a result of any
action or proceeding to foreclose the mortgage or by a deed given in lieu of
foreclosure, this Lease shall continue in full force and effect, without
necessity for executing any new lease, as a direct lease between Lessee, as
tenant thereunder, and the mortgagee or then owner of the Premises, as
landlord thereunder, upon all of the same terms, covenants, and provisions
contained in this Lease, and in such event the mortgagee or new owner shall
be bound to Lessee under all of the terms, covenants and provisions of this
Lease for the remainder of the Term hereof, as the same may be extended,
which terms, covenants and provisions such mortgagee or new owner hereby
agrees to assume and perform; and
(e) Such Subordination Agreement shall bind and inure to the benefit of and
be enforceable by the parties thereto and their respective heirs, personal
representatives, successors and assigns.
The term "mortgage", as used herein, includes mortgages, deeds of trust or
other similar instruments and modifications, consolidations, extensions,
renewals, replacements and substitutes thereof. In the event of the existence of
any mortgage at the time this Lease is executed and to which this Lease would
otherwise be subordinate, Lessor shall obtain a Subordination Agreement in the
form set forth above simultaneously with, or before the date of, Lessee's
execution of this Lease.
14. LESSOR'S WARRANTIES. To induce Lessee to execute this Lease, and in
consideration thereof, Lessor represents, warrants and covenants as follows:
(a) Lessor has good fee simple title to the Premises, free and clear of all
easements, restrictions, liens, leases and other encumbrances.
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(b) As of the Commencement Date, (i) the Premises shall be in compliance with
all applicable laws, codes, ordinances, orders, rules and regulations of any
governmental or other public authority, and (ii) there shall be no restrictions
or other legal impediments, either imposed by law (including without limitation
applicable zoning and building codes or ordinances) or by instrument, which
would prevent the use of the Premises for the Initial Permitted Uses hereunder.
If at any time during the Term of this Lease, as the same may be extended,
applicable law shall not permit the use of the Premises as aforesaid, then
Lessee, without waiving any other rights Lessee may have on account thereof, may
terminate this Lease upon no less than thirty (30) days' prior written notice to
Lessor.
15. ASSIGNMENT AND SUBLETTING. Lessee may not assign this Lease or sublet the
Premises, in whole or in part, without the express written consent of Lessor,
which consent shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding anything to the contrary contained in this Lease, Lessee shall
have the right to make, without Lessor's consent, any assignment of this Lease
or subletting of all or any portion of the Premises to (i) a parent, subsidiary,
affiliate or division of Lessee, (ii) any entity with which or into which Lessee
may consolidate or merge or (iii) any entity acquiring all or substantially all
of the assets of Lessee. Lessee agrees to provide notice to Lessor of any such
assignment or subletting.
16. LESSEE'S DEFAULT.
16.1 Event of Default. Each of the following events shall constitute an
"Event of Default" of Lessee:
(a) Lessee's failure to pay when due any payment of Rent or other sum
which it is obligated to pay by any provision of this Lease, which failure
continues for ten (10) days after written notice thereof by Lessor to Lessee;
and
(b) Lessee's failure to perform any of its other obligations under the
provisions of this Lease, which failure continues for thirty (30) days after
written notice thereof by Lessor to Lessee (or, if such failure cannot
reasonably be cured in thirty (30) days, if Lessee fails to commence to cure the
same within said thirty (30)-day period and thereafter diligently to prosecute
such cure to completion).
16.2 Lessor's Remedies. If any Event of Default occurs, Lessor shall have the
right, at the option of Lessor, to terminate this Lease upon three (3) days
written notice to Lessee, and thereupon to re-enter and take possession of the
Premises. If any Event of Default occurs, Lessor shall further have the right,
at its option, from time to time, without terminating this Lease, to re-enter
and relet the Premises, or any part thereof, as the agent and for the account of
Lessee upon such terms and conditions as Lessor may deem advisable or
satisfactory, in which event the rents received on such re-letting shall be
applied first to the expenses of such re-letting and collection including, but
not limited to, necessary renovation and alterations of the Premises, reasonable
attorneys' fees, any real estate commissions paid, and thereafter toward payment
of all sums due or to become due to Lessor hereunder, and if a sufficient sum
shall not be thus realized or secured to pay such sums and other charges, (i) at
Lessor's option, Lessee shall pay Lessor any
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deficiency immediately upon demand therefor, and Lessor may bring an action
therefor as such deficiency shall arise, or (ii) at Lessor's option, the present
value of the entire deficiency, which is subject to ascertainment for the
remaining Term of this Lease, less the amount Lessee proves could have been
reasonably avoided by Lessor, shall be immediately due and payable by Lessee.
Lessor shall not, in any event, be required to pay Lessee any surplus of any
sums received by Lessor on a re-letting of the Premises in excess of the Rent
provided in this Lease.
If any Event of Default occurs, Lessor, in addition to other rights and
remedies it may have, shall have the right in accordance with applicable law to
remove all or any part of Lessee's property from the Premises and any property
removed may be stored in any public warehouse or elsewhere at the cost of, and
for the account of, Lessee, and Lessor shall not be responsible for the care or
safekeeping thereof whether in transport, storage or otherwise, and Lessee
hereby waives any and all claims against Lessor for loss, destruction and/or
damage or injury which may be occasioned by any of the aforesaid acts.
No such re-entry or taking possession of the Premises by Lessor shall be
construed as an election on Lessor's part to terminate this Lease unless a
written notice of such intention is given to Lessee. Notwithstanding any such
re-letting without termination, Lessor may at all times thereafter elect to
terminate this Lease for such previous Event of Default. Notwithstanding
anything to the contrary contained herein, Lessor agrees to use reasonable
efforts to mitigate its damages following the occurrence of an Event of Default.
17. LESSOR'S DEFAULT. In the event of a default by Lessor under this Lease,
which default is not cured within sixty (60) days after written notice thereof
by Lessee to Lessor, Lessee may, but shall not be obligated to, cure such
default and reimburse itself for the cost thereof out of payments thereafter
accruing hereunder (with any unreimbursed balance remaining upon the expiration
or earlier termination of this Lease to be promptly paid by Lessor to Lessee).
18. ENVIRONMENTAL. Lessor agrees to indemnify, defend and hold harmless Lessee,
its parent, subsidiaries and affiliates, and their respective officers,
directors, shareholders and employees, from and against any and all liabilities,
losses, damages, suits, actions, causes of action, costs, expenses (including
without limitation reasonable attorneys' fees and disbursements and court
costs), penalties, fines, demands, judgments, claims or liens (including without
limitation liens or claims imposed under any so-called "Superfund" or other
environmental legislation) arising from or in connection with the presence at
the time of Lessee's taking possession of the Premises of Hazardous Materials
(as hereinafter defined) on, in or under, or the subsequent removal thereof
from, the Premises.
Lessee agrees to indemnify, defend and hold harmless Lessor from and against
any and all liabilities, losses, damages, suits, actions, causes of action,
costs, expenses (including without limitation reasonable attorneys' fees and
disbursements and court costs), penalties, fines, demands, judgments, claims or
liens (including without limitation liens or claims imposed under any so-called
"Superfund" or other environmental legislation) arising from or in connection
with the use, storage, release or discharge by Lessee of Hazardous Materials on,
in or under, or the subsequent removal thereof from, the Premises. Lessee shall
have the right, at Lessee's sole
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election and at Lessee's sole cost and expense, to perform or cause to be
performed, from time to time during the Term of this Lease, as the same may be
extended, environmental testing to determine the presence of Hazardous
Substances on, in or under the Premises.
For purposes of this Section 18, the term "Hazardous Materials" shall include
without limitation any petroleum product, any flammable, explosive or
radioactive material, or any hazardous or toxic waste, substance or material,
including without limitation substances defined as "hazardous substances",
"hazardous materials," "solid waste" or "toxic substances" under any applicable
laws relating to hazardous or toxic materials and substances, air pollution
(including noise and odors), water pollution, liquid and solid waste,
pesticides, drinking water, community and employee health, environmental land
use management, stormwater, sediment control, nuisances, radiation, wetlands,
endangered species, environmental permitting and petroleum products, which laws
may include, but not be limited to, the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended; the Toxic Substances Control Act; the Clean Water
Act; the National Environmental Policy Act, as amended; the Solid Waste Disposal
Act, as amended; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Hazardous Materials Transportation Act, as
amended; the Resource Conservation and Recovery Act, as amended; the Clean Air
Act, as amended; the Emergency Planning and Community Right-to-Know Act, as
amended; the Occupational Safety and Health Act, as amended; comparable state
laws; and all rules and regulations promulgated pursuant to such laws and
ordinances.
The provisions of this Section 18 shall survive the expiration or earlier
termination of this Lease.
19. INDEMNIFICATION BY LESSOR. Lessor shall indemnify, defend with competent and
experienced counsel and hold harmless Lessee, its parent, subsidiaries and
affiliates, and their respective officers, directors, shareholders and
employees, from and against any and all damages, liabilities, actions, causes of
action, suits, claims, demands, losses, costs and expenses (including without
limitation reasonable attorneys' fees and disbursements and court costs) to the
extent arising from or in connection with the negligence or willful misconduct
of Lessor, its agents, employees, representatives or contractors, or the failure
by Lessor to perform any of its obligations under this Lease. The provisions of
this Section 19 shall survive the expiration or earlier termination of this
Lease.
20. SIGNS. Lessee shall have the right, at Lessee's sole cost and expense, to
erect and maintain a sign or signs on the exterior of the Premises; provided,
however, such sign(s) shall be consistent with all applicable laws, ordinances,
codes and regulations.
21. PREVAILING PARTY. If any action at law or in equity is brought to enforce or
interpret the provisions of this Lease, the prevailing party in such action
shall be entitled to reimbursement of the reasonable attorneys' fees and
disbursements and court costs incurred by said prevailing party in connection
with such action.
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22. EXCUSABLE DELAY. Except as otherwise expressly provided herein, in any case
where either party hereto is required to perform any act, delays caused by or
resulting from acts of God, war, civil commotion, labor difficulties, shortages
of labor, materials or equipment, government regulations, or other causes beyond
such party's reasonable control (individually, an "Excusable Delay") shall not
be counted in determining the time during which the performance of such act
shall be completed, whether such time be designated by a fixed date, a fixed
time or "a reasonable time."
23. BROKERAGE. Each of the parties hereto represents and warrants to the other
that there are no claims for brokerage commissions or finder's fees in
connection with the execution of this Lease except the commission to be paid by
Lessor to The Stubblebine Company. Each party shall indemnify and hold harmless
the other party from and against any and all claims for brokerage fees,
commissions or other charges arising from the dealings of such party in
connection with this Lease.
24. OPTION TO EXTEND. Lessee shall have the right, at its option, to extend the
Term of this Lease for two (2) additional successive periods of three (3) years
each (individually, an "Option Term"), upon written notice to Lessor given no
less than ninety (90) days prior to the expiration of the then current Term or
Option Term, as the case may be. All of the terms, covenants and provisions of
this Lease shall apply to each such Option Term, except that the annual Rent
payable with respect to each Option Term shall be equal to the annual Rent
payable with respect to the immediately preceding Term or Option Term, as the
case may be, increased by an amount equal to the percentage increase, if any, in
the Consumer Price Index for All Urban Consumers as published by the Bureau of
Labor Statistics of the United States Department of Labor for the metropolitan
area in which the Premises are located (base year 1982/1984=100), for the twelve
(12) calendar month period ending four (4) months prior to the first full
calendar month of said Option Term; provided, however, that in no event shall
the annual Rent payable during any Option Term be greater than one hundred five
percent (105%) of the annual Rent payable during the immediately preceding Term
or Option Term, as the case may be. If such Consumer Price Index shall cease to
be published, the most comparable governmental index published in lieu thereof
shall be used.
25. RIGHT OF FIRST OFFER. Provided Lessee is not then in default under this
Lease beyond the expiration of all applicable notice and cure periods, Lessee
shall have the continuous right ("Right of First Offer") to lease any space on
the street on which the Premises are located which becomes available at any
time, and from time to time, during the Term of this Lease, as the same may be
extended ("Available Space"), prior to Lessor leasing such Available Space to a
third party. Lessor agrees that, prior to marketing any such Available Space,
Lessor shall first offer the Available Space to Lessee, in writing, upon terms
and conditions acceptable to Lessor (the "Offer Notice"). Lessee shall have
thirty (30) days from receipt of the Offer Notice within which to notify Lessor
of Lessee's intent to lease such Available Space upon the terms and conditions
set forth in the Offer Notice or such other terms and conditions as shall be
acceptable to the parties. In the event that Lessee notifies Lessor that it does
not intend to so lease the Available Space or fails to notify Lessor as
hereinabove provided, Lessor shall have the right to lease such Available Space
to a third party on terms and conditions not materially more favorable to such
party than
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those contained in the Offer Notice to Lessee. It is expressly understood and
agreed that upon the expiration or termination of any such third party lease, or
in the event Lessor fails to execute such third party lease within six (6)
months after the date of Lessee's receipt of the Offer Notice with respect
thereto, such Available Space shall again be offered to Lessee in accordance
with the foregoing provisions of this Section 25.
26. HOLDING OVER. Lessor agrees that no holding over by Lessee after the
expiration of this Lease shall operate to extend or renew this Lease, and that
any such holding over shall be construed as a tenancy from month to month at one
hundred fifty percent (150%) of the monthly Rent in effect when such holding
over shall have commenced, and such tenancy shall be subject to all the terms,
conditions, covenants and agreements of this Lease.
27. QUIET ENJOYMENT. Lessor agrees that, so long as Lessee is not in default
hereunder beyond the expiration of all applicable notice and cure periods,
Lessee may peaceably and quietly have, hold and enjoy the Premises during the
Term of this Lease, as the same may be extended, without any manner of
hindrance, disturbance or molestation.
28. SUCCESSORS AND ASSIGNS. It is understood and agreed by and between the
parties hereto that the agreements, covenants, terms, conditions, provisions and
undertakings in this Lease shall extend to and be binding upon the assigns and
successors-in-interest of the respective parties hereto, as if they were in
every case named and expressed, and shall be construed as covenants running with
the land; and wherever reference is made to either of the parties hereto, it
shall be held to include and apply also to the heirs, personal representatives,
beneficiaries, successors and assigns of such party, as if in each and every
case so expressed.
29. NOTICES. Whenever, by the terms of this Agreement, notice, demand or other
communication shall or may be given to either party, the same shall be in
writing and addressed as follows:
If to Lessor:
Al and Lee Realty
63 Winter Street
Lexington, MA 02173
If to Lessee:
Thermo Fibergen Inc.
8 Alfred Circle
Bedford, MA 01730
Attention: President
with a copy to:
Thermo Electron Corporation
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81 Wyman Street
Waltham, MA 02254
Attention: General Counsel
or to such other address or addresses as shall from time to time be designated
by written notice by either party to the other as herein provided. All notices
shall be sent by registered or certified mail, postage pre-paid and return
receipt requested, or by Federal Express or other comparable courier providing
proof of delivery, and shall be deemed duly given and received (i) if mailed, on
the third business day following the mailing thereof, or (ii) if sent by
courier, the date of its receipt (or, if such day is not a business day, the
next succeeding business day).
30. YIELD UP. Lessee agrees on or before the expiration date of the Term of this
Lease, as the same may be extended, to remove its moveable trade fixtures and
personal property, to repair any damage caused by such removal, to surrender all
keys to the Premises and to yield up the Premises in the same order and repair
in which Lessee is obligated to maintain the Premises by the provisions of this
Lease, reasonable wear and tear and damage by casualty or taking excepted.
31. CONTINGENCY. Notwithstanding anything to the contrary contained in this
Lease, if Lessee is unable, on or before August 1, 1996 (the "Contingency
Deadline"), to obtain (a) all approvals and permits, subject only to such
conditions as are acceptable to Lessee, required by Lessee to conduct its
business (including without limitation the Initial Permitted Uses) in the
Premises, including without limitation all approvals and permits required to
transform the electrical power in the Premises from 220 to 440 voltage and any
required certificate of occupancy or its equivalent, and (b) any and all permits
required in connection with the construction by Lessee of its improvements,
alterations and additions, then Lessee may elect to terminate this Lease by
written notice to Lessor, in which event Lessee will restore the Premises (at
Lessee's expense) to a leasable condition within thirty (30) days after the
Contingency Deadline, and this Lease will terminate upon completion of such work
without further recourse to either party hereto. Upon termination of this Lease,
all Rent paid in advance shall be apportioned as of the effective date of such
termination.
32. MISCELLANEOUS. This Lease shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts. This Lease constitutes the
entire agreement between Lessor and Lessee with respect to the subject matter
hereof and shall not be supplemented, amended, varied or modified in any manner
except by an instrument in writing signed by duly authorized representatives of
both parties. No delay or omission on the part of either party to this Lease in
requiring performance by the other party or in exercising any right hereunder
shall operate as a waiver of any provision hereof or of any right hereunder, and
the waiver, omission or delay in requiring performance or exercising any right
hereunder on any one occasion shall not be construed as a bar to or waiver of
such performance or right on any future occasion. Any and all rights and
remedies which either party may have under this Lease, at law or in equity,
shall be cumulative and shall not be deemed inconsistent with each other, and
any two or more of all such rights and remedies may be exercised at the same
time insofar as permitted by law. Section headings and the organization of this
Lease are for descriptive purposes only and shall not control or alter the
meaning of this Lease. The individuals executing this Lease hereby
13
<PAGE> 14
represent and warrant that they are empowered and duly authorized to so execute
this Lease on behalf of the parties they represent.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as a
sealed instrument as of the date first above written.
LESSOR:
AL AND LEE REALTY
By: /s/ Al Iodice
-------------------------------
Name: Al Iodice
Title: Trustee
LESSEE:
THERMO FIBERGEN INC.,
a Delaware corporation
By: /s/ Yiannis Monovoukas
-------------------------------
Name: Yiannis Monovoukas
Title: President
14
<PAGE> 15
EXHIBIT B
LESSOR'S WORK
To the extent required by the provisions of Section 4 of this Lease,
Lessor shall perform the following work, at Lessor's sole cost and expense:
1. Renovation of all existing restrooms in the Premises so as to
conform the same to all applicable requirements of municipal,
state and federal governmental or other public authorities,
including without limitation the provisions of the Americans with
Disabilities Act (the "ADA"); and
2. Construction of access ramp(s) in the parking area located on the
Premises in conformance with all applicable requirements of
municipal, state and federal governmental or other public
authorities, including without limitation the provisions of the
ADA.
All work performed by Lessor shall be done in a good and workmanlike
manner and in compliance with all applicable requirements of municipal, state
and federal governmental or other public authorities.
15
<PAGE> 1
Exhibit 10.11
THERMO FIBERGEN INC.
EQUITY INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
Thermo Fibergen Inc. (the "Company") and its Stockholders the benefits arising
from capital stock ownership by employees, officers and Directors of, and
consultants to, the Company and its subsidiaries or other persons who are
expected to make significant contributions to the future growth and success of
the Company and its subsidiaries. The Plan is intended to accomplish these goals
by enabling the Company to offer such persons equity-based interests,
equity-based incentives or performance-based stock incentives in the Company, or
any combination thereof ("Awards").
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of two or more members of the Board, each
of whom shall be deemed a "disinterested person" within the meaning of Rule
16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the
"Exchange Act").
3. EFFECTIVE DATE
The Plan shall be effective as of the date first approved by the Board
of Directors, subject to the approval of the Plan by the Corporation's
Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of
grant), but shall be conditioned on and subject to such approval of the Plan.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 10.6, the total number of
shares of the common stock, $.01 par value per share, of the Company (the
"Common Stock"), reserved and available for distribution under the Plan shall be
600,000 shares. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to
<PAGE> 2
2
satisfy obligations arising by virtue of any Award, such shares shall be
available for distribution in connection with future Awards under the Plan.
5. ELIGIBILITY
Employees, officers and Directors of, and consultants to, the Company
and its subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. TYPES OF AWARDS
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided however that the maximum number of
shares permitted to be granted under any Award or combination of Awards to any
Participant during any one calendar year may not exceed 5% of the shares of
Common Stock outstanding at the beginning of such calendar year.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 OPTIONS
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 OPTION PRICE. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 OPTION GRANTS. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory option.
6.1.3 OPTION PERIOD. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
<PAGE> 3
3
Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 PAYMENT OF EXERCISE PRICE. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
6.1.5 BUYOUT PROVISION. The Board may at any time offer to buy out for a
payment in cash, shares of Common Stock, deferred stock or restricted stock, an
option previously granted, based on such terms and conditions as the Board shall
establish and communicate to the option holder at the time that such offer is
made.
6.1.6 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. Each provision of the
Plan and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422 of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent Stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined by the Board. An incentive stock
option may not be granted after the tenth anniversary of the date on which the
Plan was adopted by the Board and the latest date on which an incentive stock
option may be exercised shall be the tenth anniversary (fifth anniversary, in
the case of any incentive stock option granted to a more than ten percent
Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 RESTRICTED AND UNRESTRICTED STOCK
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 RESTRICTED STOCK AWARDS. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 RESTRICTIONS. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which the restrictions
on all or any part of the shares shall lapse.
6.2.3 RIGHTS AS A STOCKHOLDER. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
<PAGE> 4
4
6.2.4 PURCHASE PRICE. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Board may
provide that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 UNRESTRICTED STOCK. The Board may, in its sole discretion, sell to
any Participant shares of Common Stock free of restrictions under the Plan for a
price determined by the Board, but which may not be less than the par value per
share of the Common Stock.
6.3 DEFERRED STOCK
6.3.1 DEFERRED STOCK AWARD. A deferred stock Award entitles the
recipient to receive shares of deferred stock which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which delivery of all or any part of the
Common Stock will take place.
6.3.2 OTHER AWARDS SETTLED WITH DEFERRED STOCK. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 PERFORMANCE AWARDS
6.4.1 PERFORMANCE AWARDS. A performance Award entitles the recipient to
receive, without payment, an Amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 OTHER AWARDS SUBJECT TO PERFORMANCE CONDITIONS. The Board may,
at the time any Award described in this Section 6 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 of the Plan) that performance goals be met prior to the Participant's
realization of any payment or benefit under the Award.
7. PURCHASE PRICE AND PAYMENT
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. LOANS AND SUPPLEMENTAL GRANTS
The Company may make a loan to a Participant, either on or after the
grant to the Participant of any Award, in connection with the purchase of Common
Stock under the Award or with the payment of any obligation incurred or
recognized as a result of the Award. The Board will have full authority to
decide whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven.
<PAGE> 5
5
In connection with any Award, the Board may at the time such Award is
made or at a later date, provide for and make a cash payment to the participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the participant's
income tax liabilities arising from all payments under the Plan.
9. CHANGE IN CONTROL
9.1 IMPACT OF EVENT
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the Plan
that were not previously exercisable and vested shall become fully
exercisable and vested.
(b) Awards of restricted stock and other stock-based Awards subject to
restrictions and to the extent not fully vested, shall become fully
vested and all such restrictions shall lapse so that shares issued
pursuant to such Awards shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the
passage of time, continued employment or affiliation, will be waived and
removed as to deferred stock Awards and performance Awards. Performance
of other conditions (other than conditions relating solely to the
passage of time, continued employment or affiliation) will continue to
apply unless otherwise provided in the agreement evidencing the Awards
or in any other agreement between the Participant and the Company or
unless otherwise agreed by the Board.
9.2 DEFINITION OF "CHANGE IN CONTROL"
"Change in Control" means any one of the following events: (i) when, any
Person is or becomes the beneficial owner (as defined in Section 13(d) of the
Exchange Act and the Rules and Regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company or its
parent corporation, Thermo Fibertek Inc. ("Thermo Fibertek"), or the beneficial
owner of 25% or more of the outstanding common stock of Thermo Electron
Corporation ("Thermo Electron"), without the prior approval of the Prior
Directors of the applicable issuer, (ii) the failure of the Prior Directors to
constitute a majority of the Board of Directors of the Company, Thermo Fibertek
or Thermo Electron, as the case may be, at any time within two years following
any Electoral Event, or (iii) any other event that the Prior Directors shall
determine constitutes an effective change in the control of the Company, Thermo
Fibertek or Thermo Electron. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined
in Rule 405 under the Securities Act of 1933 and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's,
Thermo Fibertek's or Thermo Electron's Board of Directors, as the case
may be, immediately prior to any Electoral Event (or, if there has been
no Electoral Event, those persons sitting on the applicable Board of
Directors on the date of this Agreement) and any future director of the
Company, Thermo Fibertek or Thermo Electron who has been nominated or
elected by a majority of the Prior Directors who are then members of the
Board of Directors of the Company, Thermo Fibertek or Thermo Electron,
as the case may be; and
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(c) "Electoral Event" shall mean any contested election of Directors, or
any tender or exchange offer for the Company's, Thermo Fibertek' or
Thermo Electron's Common Stock, not approved by the Prior Directors, by
any Person other than the Company, Thermo Fibertek, Thermo Electron or a
majority-owned subsidiary of Thermo Electron.
10. GENERAL PROVISIONS
10.1 DOCUMENTATION OF AWARDS
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
10.2 RIGHTS AS A STOCKHOLDER
Except as specifically provided by the Plan or the instrument evidencing
the Award, the receipt of an Award will not give a Participant rights as a
Stockholder with respect to any shares covered by an Award until the date of
issue of a stock certificate to the participant for such shares.
10.3 CONDITIONS ON DELIVERY OF STOCK
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
10.4 TAX WITHHOLDING
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered,
the Board will have the right to require that the participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the Board
with regard to such requirements, prior to the delivery of any Common Stock. If
and to the extent that such withholding is required, the Board may permit the
participant or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
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10.5 NONTRANSFERABILITY OF AWARDS
Except as otherwise specifically provided by the Board in the case of
participants who are not reporting persons under Section 16 of the Exchange Act,
no Award (other than an Award in the form of an outright transfer of cash or
Common Stock not subject to any restrictions) may be transferred other than by
the laws of descent and distribution, except pursuant to the terms of a
qualified domestic relations order as defined in the Code, and during a
Participant's lifetime an Award requiring exercise may be exercised only by him
or her (or in the event of incapacity, the person or persons properly appointed
to act on his or her behalf).
10.6 ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution with respect to common Stockholders other than normal cash
dividends, the Board will make (i) appropriate adjustments to the maximum number
of shares that may be delivered under the Plan under Section 4 above, and (ii)
appropriate adjustments to the number and kind of shares of stock or securities
subject to Awards then outstanding or subsequently granted, any exercise prices
relating to Awards and any other provisions of Awards affected by such change.
(b) The Board may also make appropriate adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions, repurchases or similar corporate
transactions, or any other event, if it is determined by the Board that
adjustments are appropriate to avoid distortion in the operation of the Plan,
but no such adjustments other than those required by law may adversely affect
the rights of any Participant (without the Participant's consent) under any
Award previously granted.
10.7 EMPLOYMENT RIGHTS
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued employment with the Company or any
subsidiary or interfere in any way with the right of the Company or subsidiary
to terminate any employment relationship at any time or to increase or decrease
the compensation of such person. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
10.8 OTHER EMPLOYEE BENEFITS
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 LEGAL HOLIDAYS
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
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10.10 FOREIGN NATIONALS
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
11. TERMINATION AND AMENDMENT
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment, unless approved by the Stockholders,
shall be effective if it would cause the Plan to fail to satisfy the
requirements of the federal tax law or regulation relating to incentive stock
options or the requirements of Rule 16b-3 (or any successor rule) of the
Exchange Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any participant under any Award
previously granted without such participant's consent.
<PAGE> 1
Exhibit 10.12
THERMO FIBERGEN INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
SECTION 1. PARTICIPATION. Any director of Thermo Fibergen Inc. (the "Company")
may elect to have such percentage as he or she may specify of the fees otherwise
payable to him or her deferred and paid to him or her as provided in this Plan.
A director who is also an employee of the Company or its parent corporations,
Thermo Fibertek or Thermo Electron Corporation, shall not be eligible to
participate in this Plan. Each election shall be made by notice in writing
delivered to the Secretary of the Company, in such form as the Secretary shall
designate, and each election shall be applicable only with respect to fees
earned subsequent to the date of the election for the period designated in the
form. The term "participant" as used herein refers to any director who shall
have made an election. No participant may defer the receipt of any fees to be
earned after the later to occur of either (a) the date on which the participant
shall retire from or otherwise cease to engage in his or her principal
occupation or employment or (b) the date on which he or she shall cease to be a
director of the Company, or such earlier date as the Board of Directors of the
Company, with the participant's consent, may designate (the "deferral
termination date"). In the event that the participant's deferral termination
date is the date on which he or she ceases to engage in his or her principal
occupation or employment, the participant or a personal representative shall
advise the Company of that date by written notice delivered to the Secretary of
the Company.
SECTION 2. ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. There shall be
established for each participant an account to be designated as that
participant's deferred compensation account.
SECTION 3. ALLOCATIONS TO DEFERRED COMPENSATION ACCOUNTS. There shall be
allocated to each participant's deferred compensation account, as of the end of
each quarter, an amount equal to his or her fees for that quarter which that
participant shall have elected to have deferred pursuant to Section 1.
SECTION 4. STOCK UNITS AND STOCK UNIT ACCOUNTS. All amounts allocated to a
participant's deferred compensation account pursuant to Section 3 and Section 5
shall be converted, at the end of each quarter, into stock units by dividing the
accumulated balance in the deferred compensation account as of the end of that
quarter by the average last sale price per share of the Company's common stock
as reported on in the Wall Street Journal, for the five business days up to and
including the last business day of that quarter. The number of stock units, so
determined, rounded to the nearest one-hundredth of a share, shall be credited
to a separate stock unit account to be established for the participant, and the
aggregate value thereof as of the last business day of that quarter shall be
charged to the participant's deferred compensation account. No amounts credited
to the participant's deferred compensation account pursuant to Section 5
subsequent to the close of the fiscal
<PAGE> 2
2
year in which occurs the participant's deferral termination date shall be
converted into stock units. Any such amount shall be distributed in cash as
provided in Section 8. A maximum number of 25,000 shares of the Company's common
stock may be represented by stock units credited under this Plan, subject to
proportionate adjustment in the event of any stock dividend, stock split or
other capital change affecting the Company's common stock.
SECTION 5. CASH DIVIDEND CREDITS. Additional credits shall be made to a
participant's deferred compensation account, until all distributions shall have
been made from the participant's stock unit account, in amounts equal to the
cash dividends (or the fair market value of dividends paid in property other
than dividends payable in common stock of the Company) which the participant
would have received from time to time had he or she been the owner on the record
dates for the payment of such dividends of the number of shares of the Company's
common stock equal to the number of units in his or her stock unit account on
those dates.
SECTION 6. STOCK DIVIDEND CREDITS. Additional credits shall be made to a
participant's stock unit account, until all distributions shall have been made
from the participant's stock unit account, of a number of units equal to the
number of shares of the Company's common stock, rounded to the nearest
one-hundredth share, which the participant would have received from time to time
as stock dividends had he or she been the owner on the record dates for the
payments of such stock dividends of the number of units of the Company's common
stock equal to the number of units credited to his or her stock unit account on
those dates.
SECTION 7. RECAPITALIZATION. If, as a result of a recapitalization of the
Company (including a stock split), the Company's outstanding shares of common
stock shall be changed into a greater or smaller number of shares, the number of
units then credited to a participant's stock unit account shall be appropriately
adjusted on the same basis.
SECTION 8. DISTRIBUTION OF STOCK AND CASH AFTER PARTICIPANT'S DEFERRAL
TERMINATION DATE. When a participant's deferral termination date shall occur,
the Company shall become obligated to make the distributions prescribed in the
following paragraphs (a) and (b).
(a) The Company shall distribute to the participant the number of shares
of the common stock of the Company which shall equal the total number of units
accumulated in his or her stock unit account as of the close of the fiscal year
in which the participant's deferral termination date occurs. Such distribution
of stock shall be made in ten annual installments, unless, at least six months
prior to his or her deferral termination date, the participant shall have
elected, by notice in writing filed with the Secretary of the Company, to have
such distribution made in five annual installments. In either such case, the
installments shall be of as nearly equal number of shares as practicable,
adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of
units remaining in the participant's stock unit account. The first such
installment shall be distributed within 60
<PAGE> 3
3
days after the close of the fiscal year in which the participant's deferral
termination date occurs. The remaining installments shall be distributed at
annual intervals thereafter. Anything herein to the contrary notwithstanding,
the Company shall have the option, if its Board of Directors shall by resolution
so determine, in lieu of making distribution in ten or five annual installments
as set forth above, with the participant's consent, to distribute stock or any
remaining installments thereof in a single distribution at any time following
the close of the fiscal year in which the participant's deferral termination
date occurs. Distribution of stock made hereunder may be made from shares of
common stock held in the treasury and/or from shares of authorized but
previously unissued shares of common stock. All distributions under the plan
shall be completed not later than December 31, 2025.
(b) The Company shall distribute to the participant sums in cash equal
to the balance credited to his or her deferred compensation account as of the
close of the fiscal year in which his or her deferral termination date occurs
plus such additional amounts as shall be credited thereto from time to time
thereafter pursuant to Section 5. The cash distribution shall be made on the
same dates as the annual distributions made pursuant to paragraph (a) above, and
each cash distribution shall consist of the entire balance credited to the
participant's deferred compensation account at the time of the annual
distribution.
If a participant's deferral termination date shall occur by reason of
his or her death or if he or she shall die after his or her deferral termination
date but prior to receipt of all distributions of stock and cash provided for in
this Section 8, all stock and cash remaining distributable hereunder shall be
distributed to such beneficiary as the participant shall have designated in
writing and filed with the Secretary of the Company or, in the absence of
designation, to the participant's personal representative. Such distributions
shall be made in the same manner and at the same intervals as they would have
been made to the participant had he or she continued to live.
SECTION 9. PARTICIPANT'S RIGHTS UNSECURED. The right of any participant to
receive distributions under Section 8 shall be an unsecured claim against the
general assets of the Company. The Company may but shall not be obligated to
acquire shares of its outstanding common stock from time to time in anticipation
of its obligation to make such distributions, but no participant shall have any
rights in or against any shares of stock so acquired by the Company. All such
stock shall constitute general assets of the Company and may be disposed of by
the Company at such time and for such purposes as it may deem appropriate.
SECTION 10. TERMINATION OF THE PLAN. The Plan shall terminate and full
distribution shall be made from all participants' deferred compensation accounts
and stock unit accounts upon any change of control of the Company. Either of the
following shall be deemed to be a change of control: (a) the occurrence, without
the prior approval of the Board of Directors, of the acquisition, directly or
indirectly, by any person of 50% or more of the outstanding common stock of
either the Company or its parent corporation, Thermo Fibertek Inc. ("Thermo
Fibertek"), or the beneficial owner of 25% or more of the
<PAGE> 4
4
outstanding common stock of Thermo Electron Corporation ("Thermo Electron"),
without the prior approval of the prior directors of the Company, Thermo
Fibertek, or Thermo Electron, as the case may be; (b) the failure of the prior
directors to constitute a majority of the Board of Directors of the Company,
Thermo Fibertek or Thermo Electron, at any time within two years following any
electoral event. As used in this sentence and the preceding sentence, person
shall mean a natural person, an entity (together with an affiliate thereof, as
defined in Rule 405 under the Securities Act of 1933) or a group, as defined in
Rule 13d-5 under the Securities Exchange Act of 1934; prior directors shall mean
the persons serving on the Board of Directors immediately prior to any electoral
event; and electoral event shall mean any contested election of directors or any
tender or exchange offer for common stock of the Company, Thermo Fibertek or
Thermo Electron by any person other than the Company, Thermo Fibertek, Thermo
Electron or a subsidiary of any of the foregoing companies. The Board of
Directors at any time, at its discretion, may terminate the Plan. If the Board
of Directors terminates the Plan after any person or group of persons shall have
acquired or proposed to acquire control of the Company through the Board of
Directors, Thermo Fibertek or Thermo Electron, full and prompt distribution
shall be made from all participants' deferred compensation accounts and stock
unit accounts. Otherwise, distributions in respect of credits to participants'
deferred compensation accounts and stock unit accounts as of the date of
termination shall be made in the manner and at the time prescribed in Section 8.
SECTION 11. AMENDMENT OF THE PLAN. The Board of Directors of the Company may
amend the Plan at any time and from time to time, provided, however, that no
amendment affecting credits already made to any participant's deferred
compensation account or stock unit account may be made without the consent of
that participant or, if that participant has died, that participant's
beneficiary.
SECTION 12. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective
commencing upon the date the U. S. Securities and Exchange Commission shall have
declared effective the registration of shares of the Company's Common Stock in
an underwritten public offering pursuant to the Securities Act of 1933, as
amended.
<PAGE> 1
Exhibit 10.13
THERMO FIBERGEN INC.
DIRECTORS STOCK OPTION PLAN
1. PURPOSE
The purpose of this Directors Stock Option Plan (the "Plan") of Thermo
Fibergen Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose services are considered essential to the
Company's growth and progress and to provide them with a further incentive to
become directors and to continue as directors of the Company. The Plan is
intended to be a nonstatutory stock option plan.
2. ADMINISTRATION
The Board of Directors, or a Committee (the "Committee") consisting of
two or more directors of the Company appointed by the Board of Directors, shall
supervise and administer the Plan. Grants of stock options under the Plan and
the amount and nature of the options to be granted shall be automatic in
accordance with Section 5. However, all questions of interpretation of the Plan
or of any stock options granted under it shall be determined by the Board of
Directors or the Committee and such determination shall be final and binding
upon all persons having an interest in the Plan.
3. PARTICIPATION IN THE PLAN
Directors of the Company who are not employees of the Company or any
subsidiary or parent of the Company shall be eligible to participate in the
Plan. Directors who receive grants of stock options in accordance with this Plan
are sometimes referred to herein as "Optionees."
4. STOCK SUBJECT TO THE PLAN
The maximum number of shares that may be issued under the Plan shall be
two hundred thousand (200,000) shares of the Company's $.01 par value Common
Stock (the "Common Stock"), subject to adjustment as provided in Section 9.
Shares to be issued upon the exercise of options granted under the Plan may be
either authorized but unissued shares or shares held by the Company in its
treasury. If any option expires or terminates for any reason without having been
exercised in full, the unpurchased shares subject thereto shall again be
available for options thereafter to be granted.
5. TERMS AND CONDITIONS
A. OWNERSHIP GRANTS TO OUTSIDE DIRECTORS OF THE COMPANY.
Each Director, who is initially elected or appointed a Director of the
Company on or before December 31, 1999 and who meets the requirements of Section
3, shall be granted an option to purchase shares of Common Stock upon the later
of (i) the date of the adoption of this plan by the Board of Directors, (ii) the
date of such person's initial election or appointment as a Director and (iii)
either the completion of an initial public offering of the Corporation's common
stock or a private placement of the Corporation's common stock primarily to
independent investors, determined as follows:
<PAGE> 2
<TABLE>
<CAPTION>
Date of Initial Appointment No. of Shares Granted
--------------------------- ---------------------
<S> <C>
Before December 31, 1996 20,000
After December 31, 1996 and on
or before December 31, 1997 15,000
After December 31, 1997 and on
or before December 31, 1998 10,000
After December 31, 1998 and on
or before December 31, 1999 5,000
After December 31, 1999 0
</TABLE>
Notwithstanding any other provision of this plan, options granted under
this Section 5(A) shall vest and be exercisable as to 100% of the shares of
Common Stock subject to the option on the fourth anniversary of the grant date
of the option, unless, prior to such anniversary, the underlying Common Stock
shall have been registered under Section 12 of the Securities and Exchange Act
of 1934, as amended (referred to herein as "Section 12 Registration"). From and
after 90 days after the effective date of Section 12 Registration, options
granted hereunder shall be immediately exercisable as to 100% of the shares
subject to the option, subject to the right of the Company to repurchase the
shares at the exercise price in the event the Optionee ceases to serve as a
director of the Company, or any subsidiary of the Company or Thermo Electron,
during the option term. In such event, the right of the Company to so repurchase
the shares shall lapse in equal installments of 5,000 shares beginning on the
first anniversary of the grant date and each anniversary of the grant date
thereafter, provided the Optionee has remained continuously a director of the
Company, Thermo Electron or any subsidiary of Thermo Electron since the grant
date. In all other respects, the option shall be subject to the general terms
and conditions applicable to all option grants as set forth below in Section
5(C), including the determination of the exercise price of such option.
B. ANNUAL STOCK OPTION GRANTS
Each Director of the Company who meets the requirements of Section 3 and
who is holding office immediately following the Annual Meeting of Stockholders
shall be granted an option to purchase 1,000 shares of Common Stock at the close
of business on the date of such Annual Meeting, commencing with the Annual
Meeting of Stockholders held in calendar year 2000, provided that the effective
date of Section 12 Registration (as defined in Section 5(A) above) shall have
occurred prior to such meeting. Options granted under this Subsection B shall be
exercisable as to 100% of the shares subject to the option as set forth in
Section 5(C)(1), but shares acquired upon exercise are subject to repurchase by
the Company at the exercise price if an Optionee ceases to serve as a director
of the Company, Thermo Electron Corporation ("Thermo Electron")or any subsidiary
of Thermo Electron, prior to the first anniversary of the grant date, for any
reason other than death.
C. GENERAL TERMS AND CONDITIONS APPLICABLE TO ALL GRANTS.
1. Options shall be exercisable at any time from and after the
six-month anniversary of the grant date and prior to the date
which is the earliest of:
(a) three years after the grant date for options granted under
Section 5(B) and five years after the grant date for options
granted under Section 5(A), (b) three months after the later of
the date (i) the Optionee either ceases to meet the requirements
of Section 3 or (ii) otherwise ceases to serve as a director of
the Company, Thermo Electron or any subsidiary of Thermo
Electron (six months in the event the Optionee ceases to meet
the requirements of this Subsection by reason of his death), or
(c) the date of dissolution or liquidation of the Company.
<PAGE> 3
2. The exercise price at which Options are granted hereunder shall
be the average of the closing prices reported by the national
securities exchange on which the common stock is principally
traded for the five trading days immediately preceding and
including the date the option is granted or, if such security is
not traded on an exchange, the average last reported sale price
for the five-day period on the NASDAQ National Market List, or
the average of the closing bid prices for the five-day period
last quoted by an established quotation service for
over-the-counter securities, or if none of the above shall
apply, the last price paid for shares of the Common Stock by
independent investors in a private placement; provided, however,
that such exercise price per share shall not be lower than the
par value per share or less than 50% of the fair market value of
the Common Stock until such time as the Company elects to be
subject to Rule 16b-3 as amended by SEC Rel. No. 33-28869.
3. All options shall be evidenced by a written agreement
substantially in such form as shall be approved by the Board of
Directors or Committee, containing terms and conditions
consistent with the provisions of this Plan.
6. EXERCISE OF OPTIONS
A. EXERCISE/CONSIDERATION
An option may be exercised in accordance with its terms by written
notice of intent to exercise the option, specifying the number of shares of
stock with respect to which the option is then being exercised. The notice shall
be accompanied by payment in the form of cash or shares of Common Stock of the
Company (the shares so tendered referred to herein as "Tendered Shares") with a
then current market value equal to the exercise price of the shares to be
purchased; provided, however, that such Tendered Shares shall have been acquired
by the Optionee more than six months prior to the date of exercise (unless such
requirement is waived in writing by the Company). Against such payment the
Company shall deliver or cause to be delivered to the Optionee a certificate for
the number of shares then being purchased, registered in the name of the
Optionee or other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other body having
jurisdiction in the premises shall require the Company or the Director to take
any action in connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or certificates
for such shares shall be postponed until completion of the necessary action,
which shall be taken at the Company's expense.
B. TAX WITHHOLDING
The Company shall have the right to deduct from payments of any kind
otherwise due to the Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the Optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the Optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. Notwithstanding the foregoing, no election to use shares for the
payment of withholding taxes shall be effective unless made in compliance with
any applicable requirements of Rule 16b-3.
7. TRANSFERABILITY
Options shall not be transferable, otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Internal Revenue Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder (a "Qualified Domestic Relations
Order"). Options may
<PAGE> 4
be exercised during the life of the Optionee only by the
Optionee or a transferee pursuant to a Qualified Domestic Relations Order.
8. LIMITATION OF RIGHTS TO CONTINUE AS A DIRECTOR
Neither the Plan, nor the quantity of shares subject to options granted
under the Plan, nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a Director for any period of time, or at any
particular rate of compensation.
9. CHANGES IN COMMON STOCK
If the outstanding shares of Common Stock are increased, decreased or
exchanged for a different number or kind of shares or other securities, or if
additional shares or new or different shares or other securities are distributed
with respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock, or other securities, an appropriate proportionate adjustment may be made
in the maximum number or kind of shares reserved for issuance under the Plan. No
fractional shares will be issued under the Plan on account of any such
adjustments.
10. LIMITATION OF RIGHTS IN OPTION STOCK
The Optionees shall have no rights as stockholders in respect of shares
as to which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan or the written
agreement evidencing options granted hereunder.
11. STOCK RESERVED
The Company shall at all times during the term of the options reserve
and keep available such number of shares of the Common Stock as will be
sufficient to permit the exercise in full of all options granted under this Plan
and shall pay all other fees and expenses necessarily incurred by the Company in
connection therewith.
12. SECURITIES LAWS RESTRICTIONS
A. INVESTMENT REPRESENTATIONS.
The Company may require any person to whom an option is granted, as a
condition of exercising such option, to give written assurances in substance and
form satisfactory to the Company to the effect that such person is acquiring the
Common Stock subject to the option for his or her own account for investment and
not with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in
order to comply with federal and applicable state securities laws.
B. COMPLIANCE WITH SECURITIES LAWS.
Each option shall be subject to the requirement that if, at any time,
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein
<PAGE> 5
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification, or to satisfy such condition.
13. CHANGE IN CONTROL
A. IMPACT OF EVENT
In the event of a "Change in Control" as defined in Section 13(B), the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options awarded under the Plan that were not previously
exercisable and vested shall become fully exercisable and vested.
(b) Shares purchased upon the exercise of options subject to
restrictions and to the extent not fully vested, shall become fully
vested and all such restrictions shall lapse so that shares issued
pursuant to such options shall be free of restrictions.
B. DEFINITION OF "CHANGE IN CONTROL"
"Change in Control" means any one of the following events: (i) when, any
Person is or becomes the beneficial owner (as defined in Section 13(d) of the
Exchange Act and the Rules and Regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company or its
parent corporation, Thermo Fibertek Inc. ("Thermo Fibertek"), or the beneficial
owner of 25% or more of the outstanding common stock of Thermo Electron
Corporation ("Thermo Electron"), without the prior approval of the Prior
Directors of the Company, Thermo Fibertek or Thermo Electron, as the case may
be, (ii) the failure of the Prior Directors to constitute a majority of the
Board of Directors of the Company, Thermo Fibertek or Thermo Electron, as the
case may be, at any time within two years following any Electoral Event, or
(iii) any other event that the Prior Directors shall determine constitutes an
effective change in the control of the Company, Thermo Fibertek or Thermo
Electron. As used in the preceding sentence, the following capitalized terms
shall have the respective meanings set forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined
in Rule 405 under the Securities Act of 1933 and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's,
Thermo Fibertek' or Thermo Electron's Board of Directors, as the case
may be, immediately prior to any Electoral Event (or, if there has been
no Electoral Event, those persons sitting on the applicable Board of
Directors on the date of this Agreement) and any future director of the
Company, Thermo Fibertek or Thermo Electron who has been nominated or
elected by a majority of the Prior Directors who are then members of the
Board of Directors of the Company, Thermo Fibertek or Thermo Electron,
as the case may be; and
(c) "Electoral Event" shall mean any contested election of Directors, or
any tender or exchange offer for the Company's, Thermo Fibertek's or
Thermo Electron's Common Stock, not approved by the Prior Directors, by
any Person other than the Company, Thermo Fibertek, Thermo Electron or a
subsidiary of Thermo Electron.
14. AMENDMENT OF THE PLAN
The provisions of Sections 3 and 5 of the Plan shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Subject to the foregoing, the Board of Directors may at any time, and from time
to time, modify
<PAGE> 6
or amend the Plan in any respect, except that if at any time the approval of the
Stockholders of the Company is required as to such modification or amendment
under Rule 16b-3, the Board of Directors may not effect such modification or
amendment without such approval.
The termination or any modification or amendment of the Plan shall not,
without the consent of an Optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the Optionees affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding option to
the extent necessary to ensure the qualification of the Plan under Rule 16b-3.
15. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective when adopted by the Board of Directors,
but no option granted under the Plan shall become exercisable until six months
after the Plan is approved by the Stockholders of the Company.
16. NOTICE
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
17. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
<PAGE> 1
Exhibit 10.14
THERMO FIBERGEN INC.
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this ** day of **, 1996,
("Agreement"), by and between Thermo Fibergen Inc., a Delaware corporation (the
"Company"), and *** ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to, and activities on behalf of, the corporation;
WHEREAS, uncertainties relating to the continued availability of
adequate directors and officers liability insurance ("D&O Insurance") and the
uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the difficulty in attracting and retaining such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified;
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to
take on additional service for or on behalf of the Company on the condition that
he be so indemnified and that such indemnification be so guaranteed.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve or continue
to serve as a Director of the Company. This agreement shall not impose any
obligation on the Indemnitee or the Company to continue the Indemnitee's
position with the Company beyond any period otherwise applicable.
2. INDEMNITY. The Company shall indemnify, and shall advance
Expenses (as hereinafter defined) to, Indemnitee as provided in this Agreement
and to the fullest extent permitted by law.
<PAGE> 2
2
3. GENERAL. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 3 if, by reason of his Corporate Status
(as hereinafter defined), he is, or is threatened to be made, a party to any
threatened, pending, or completed action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or other proceeding
whether civil, criminal, administrative or investigative. Pursuant to this
Section 3, Indemnitee shall be indemnified against Expenses, judgments,
penalties, fines and amounts paid in settlement incurred by him or on his behalf
in connection with such action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or other proceeding
whether civil, criminal, administrative or investigative or any claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. In the case of
any action or suit by or in the right of the Company, indemnification shall be
made only (i) for Expenses or (ii) in respect of any claim, issue or matter as
to which Indemnitee shall have been adjudged to be liable to the Company if such
indemnification is permitted by Delaware law; provided, however, that
indemnification against Expenses shall nevertheless be made by the Company in
such event to the extent that the Court of Chancery of the State of Delaware, or
the court in which such action or suit shall have been brought or is pending,
shall determine to be proper despite the adjudication of liability but in view
of all the circumstances of the case.
5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or other proceeding whether civil, criminal, administrative or investigative, he
shall be indemnified against all Expenses incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful but is successful,
on the merits or otherwise, as to one or more but less than all claims, issues
or matters in such action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or other proceeding whether
civil, criminal, administrative or investigative, the Company shall indemnify
Indemnitee against all Expenses incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter by
dismissal, or withdrawal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
6. ADVANCE OF EXPENSES. The Company shall advance all Expenses
incurred by or on behalf of Indemnitee in connection with any action, suit,
arbitration, alternative dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative within twenty (20) days after the receipt by the
Company of a statement or statements from Indemnitee requesting such advance or
advances from time to time, whether prior to or after final disposition of such
action, suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative. Such statement or statements shall
reasonably evidence
<PAGE> 3
3
the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses, which undertaking shall be
accepted by or on behalf of the Company without reference to the financial
ability of Indemnitee to make repayment.
7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 7(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case:
(i) if a Change in Control (as hereinafter defined) shall have occurred, by
Independent Counsel (as hereinafter defined) in a written opinion to the Board,
a copy of which shall be delivered to Indemnitee (unless Indemnitee shall
request that such determination be made by the Board or the Stockholders, in
which case the determination shall be made in the manner provided below in
clauses (ii) or (iii)); (ii) if a Change of Control shall not have occurred, (A)
by the Board by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board consisting
of Disinterested Directors is not obtainable or, even if obtainable, such quorum
of Disinterested Directors so directs, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) by
the Stockholders of the Company; or (iii) as provided in Section 8(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement,
the Independent Counsel shall be selected as provided in this Section 7(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected. If a Change
of Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board, in which event the preceding
<PAGE> 4
4
sentence shall apply), and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so selected. In either
event, Indemnitee or the Company, as the case may be, may, within 7 days after
such written notice of selection shall have been given, deliver to the Company
or to Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 14 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 7(a) hereof, no Independent Counsel
shall have been selected or if selected, shall have been objected to, in
accordance with this Section 7(c), either the Company or Indemnitee may petition
the Court of Chancery of the State of Delaware or other court of competent
jurisdiction for resolution of any objection which shall have been made by the
Company or Indemnitee to the other's selection of independent counsel and/or for
the appointment as independent counsel of a person selected by the Court or by
such other person as the Court shall designate, and the person with respect to
whom an objection is favorably resolved or the person so appointed shall act as
Independent Counsel under Section 7(b) hereof. The Company shall pay reasonable
fees and expenses of Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 7(b) hereof. The Company shall pay
any and all reasonable fees and expenses incident to the procedures of this
Section 7(c), regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 9(a)(iii) of this Agreement, Independent Counsel
shall be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 7(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under Section
7 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made such determination within sixty (60) days
after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional thirty (30)
days, if the person, persons
<PAGE> 5
5
or entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining or
evaluating of documentation and/or information relating thereto; and provided,
further, that the foregoing provisions of this Section 8(b) shall not apply (i)
if the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 7(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board has resolved to submit such determination to the
stockholders for their consideration at an annual meeting thereof to be held
within seventy-five (75) days after such receipt and such determination is made
thereat, or (B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 7(b) of this Agreement.
(c) The termination of any action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or other
proceeding whether civil, criminal, administrative or investigative or of any
claim, issue or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any criminal
action or proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.
9. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section 7
of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within ninety (90) days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 8 of this Agreement, Indemnitee shall be entitled to an adjudication in
an appropriate court of the State of Delaware, or in any other court of
competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 9(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
<PAGE> 6
6
(b) In the event that a determination shall have been made pursuant to
Section 7 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 9
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 9 the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 7 or 8 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 9, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 9 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 9, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 14 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
10. SECURITY. To the extent requested by the Indemnitee and approved by
the Board, the Company may at any time and from time to time provide security to
the Indemnitee for the Company's obligations hereunder through an irrevocable
bank line of credit, funded trust or other collateral. Any such security, once
provided to the Indemnitee, may not be revoked or released without the prior
written consent of Indemnitee.
<PAGE> 7
7
11. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Company's certificate of incorporation or by-laws, any other agreement, a vote
of stockholders or a resolution of directors, or otherwise. This Agreement shall
continue until and terminate upon the later of: (a) ten (10) years after the
date that Indemnitee shall have ceased to serve as a Director of the Company or
fiduciary of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which Indemnitee served at the request of the
Company; or (b) the final termination of all pending actions, suits,
arbitrations, alternative dispute resolution mechanisms, investigations,
administrative hearings or other proceedings whether civil, criminal,
administrative or investigative in respect of which Indemnitee is granted rights
of indemnification or advancement of expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 9 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of Indemnitee and his heirs, executors
and administrators.
(b) To the extent that the Company maintains D&O Insurance, Indemnitee
shall be covered by such D&O Insurance in accordance with its terms to the
maximum extent of the coverage available for any Director under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. SEVERABILITY; REFORMATION. If any provision or provisions of
this Agreement shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
13. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision of this Agreement, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any action, suit
<PAGE> 8
8
or proceeding, or any claim therein, initiated, brought or made by him (i)
against the Company, unless a Change in Control shall have occurred, or (ii)
against any person other than the Company, unless approved in advance by the
Board.
14. DEFINITIONS. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item on
any similar schedule or form) promulgated under the Securities Exchange
Act of 1934 (the "Act"), whether or not the Company is then subject to
such reporting requirement; provided, however, that, without limitation,
such a Change in Control shall be deemed to have occurred if (i) any
"person" (as such term is used in Section 13(d) and 14(d) of the Act) is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds
of the members of the Board in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a
proxy contest, as a consequence of which members of the Board in office
immediately prior to such transaction or event constitute less than a
majority of the Board thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the Board (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period) cease for any
reason to constitute at least a majority of the Board.
(b) "Corporate Status" describes the status of a person who is or was or
has agreed to become a director of the Company, or is or was an officer
or fiduciary of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which
such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is not
and was not a party to the action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or
any other proceeding whether civil, criminal, administrative or
investigative in respect of which indemnification is sought by
Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, travel expenses,
duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend or investigating an action,
suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative.
<PAGE> 9
9
(e) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither currently
is, nor in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party or
(ii) any other party to the action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or
any other proceeding whether civil, criminal, administrative or
investigative giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's Rights under this Agreement.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
16. MODIFICATION AND WAIVER. This Agreement may be amended from time
to time to reflect changes in Delaware law or for other reasons. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
17. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any matter
which may be subject to indemnification or advancement of Expenses covered
hereunder; provided, however, that the failure to give any such notice shall not
disqualify the indemnitee from indemnification hereunder.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: The address shown beneath
his or her signature on
the last page hereof
<PAGE> 10
10
(b) If to the Company, to: Thermo Fibergen Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
19. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
Attest: THERMO FIBERGEN INC.
By:________________________________ By:____________________________________
Sandra L. Lambert Yiannis A. Monovoukas
Secretary Chief Executive Officer
INDEMNITEE
_______________________________________
Address:
_______________________________________
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY INCORPORATION % OWNERSHIP
<S> <C> <C>
GranTek Inc. Wisconsin 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Fibergen Inc:
As independent public accountants, we hereby consent to the use of our
report dated July 3, 1996 (and to all references to our Firm) included in or
made part of this Registration Statement on Form S-1 and related Prospectus of
Thermo Fibergen Inc.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 3, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Thermo Electron Corporation:
As independent public accountants, we hereby consent to the
incorporation by reference in the Registration Statements and related
Prospectuses of Thermo Fibergen Inc. and Thermo Electron Corporation on Forms
S-1 and S-3, respectively, of our report dated February 15, 1996 (except with
respect to matters discussed in Note 16 as to which the date is March 1, 1996)
included or incorporated by reference in Thermo Electron Corporation's Form 10-K
for the year ended December 30, 1995 and to all references to our Firm included
in these Registration Statements.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 3, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Trustees of Edward Lowe Foundation, Inc., Granulation Technology, Inc.
and Biodac, a division of Edward Lowe Industries, Inc.:
We hereby consent to the use of our report, dated July 2, 1996 on the
combined financial statements of Granulation Technology, Inc. and Biodac, a
division of Edward Lowe Industries, Inc., as of September 30, 1994 and 1995 and
for the years ended September 30, 1993, 1994 and 1995 in this Registration
Statement on Form S-1 and the Prospectus of Thermo Fibergen, Inc. We also
consent to the use of our name and the statements with respect to us appearing
under the heading "Experts" in the Prospectus.
CROWE, CHIZEK AND COMPANY LLP
South Bend, Indiana
July 2, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
FIBERGEN INC.'S REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-30-1995 DEC-28-1996
<PERIOD-END> DEC-30-1995 MAR-30-1996
<CASH> 0 12,500
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 12,500
<PP&E> 0 6
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 12,506
<CURRENT-LIABILITIES> 0 16
<BONDS> 0 0
0 0
0 0
<COMMON> 0 100
<OTHER-SE> 0 12,390
<TOTAL-LIABILITY-AND-EQUITY> 0 12,506
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 601 203
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (601) (104)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (601) (104)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (601) (104)
<EPS-PRIMARY> (.06) (.01)
<EPS-DILUTED> 0 0
</TABLE>
