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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- -
ACT OF 1934
For the quarterly period ended October 3, 1999 OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to __________
Commission file number 333-29871
THERMA-WAVE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3000561
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
1250 Reliance Way
Fremont, California 94539
(Address of principal executive offices) (Zip Code)
</TABLE>
(510) 490-3663
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----------- ----------
Indicate the number of shares of the issuer's class of common stock, as of the
latest practical date:
Class Outstanding as of October 31, 1999
- --------------------------------------------------------------------------------
Class A Common stock, $.01 par value 9,073,532
Class B Common stock, $.01 par value 1,120,448
Class L Common stock, $.01 par value 1,008,170
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THERMA-WAVE, INC.
FORM 10-Q
INDEX
Part I. Financial Information
Item 1. Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1999 and March 31, 1999 3
Condensed Consolidated Statements of Operations
Three and six months ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1999 and 1998 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 19
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Part I. Financial Information
Item 1. Unaudited Consolidated Condensed Financial Statements
THERMA-WAVE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,107 $ 20,245
Accounts receivable, net 23,668 12,180
Inventories 19,864 15,369
Other current assets 2,948 9,759
------------- ------------
Total current assets 59,587 57,553
Property and equipment, net 4,217 4,513
Deferred financing costs, net 7,541 8,349
Other assets 2,460 1,937
------------- ------------
Total assets $ 73,805 $ 72,352
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 8,749 $ 4,034
Other current liabilities 21,119 22,125
------------- ------------
Total current liabilities 29,868 26,159
Long term debt 115,000 115,000
Other liabilities 3,322 2,817
------------- ------------
Total liabilities 148,190 143,976
Commitments and contingencies
Mandatorily redeemable preferred stock 15,759 15,347
Stockholders' equity (net capital deficiency)
Common stock - Class A 91 91
Common stock - Class B 11 11
Common stock - Class L 10 10
Additional paid-in capital 19,356 19,754
Notes receivable from stockholders (241) (241)
Accumulated deficit (108,762) (105,416)
Other comprehensive loss (609) (1,180)
------------ ------------
Total stockholders' equity (net capital deficiency) (90,144) (86,971)
------------ ------------
Total liabilities and stockholders' equity (net
capital deficiency) $ 73,805 $ 72,352
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THERMA-WAVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
--------------------------------- ----------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net revenue $25,913 $15,196 $47,054 $ 30,442
Cost of revenue 13,676 8,883 25,904 17,862
-------------- -------------- -------------- --------------
Gross margin 12,237 6,313 21,150 12,580
Operating expenses:
Research and development 5,086 3,924 8,941 8,522
Selling, general and administrative 4,847 4,500 8,902 9,133
Expenses relating to operating cost
improvements - 475 - 1,057
-------------- -------------- -------------- --------------
Total operating expenses 9,933 8,899 17,843 18,712
-------------- -------------- -------------- --------------
Operating income (loss) 2,304 (2,586) 3,307 (6,132)
Other income (expense):
Interest expense (3,488) (3,450) (7,013) (6,949)
Interest income 135 171 285 377
Other, net 42 105 75 (56)
-------------- -------------- -------------- --------------
(3,311) (3,174) (6,653) (6,628)
-------------- -------------- -------------- --------------
Loss before income taxes (1,007) (5,760) (3,346) (12,760)
Benefit for income taxes - (750) - (1,660)
-------------- -------------- -------------- --------------
Net loss (1,007) (5,010) (3,346) (11,100)
Accretion of preferred stock
dividend 206 208 412 414
-------------- -------------- -------------- --------------
Net loss available to common
stockholders $(1,213) $(5,218) $(3,758) $(11,514)
============== ============== ============== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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THERMA-WAVE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
September 30,
----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net loss $ (3,346) $ (11,100)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 2,246 2,206
Amortization of deferred financing costs 808 800
Non-cash expenses relating to operating cost
improvements - 100
Changes in assets and liabilities:
Accounts receivable (11,488) 4,895
Inventories (5,178) (475)
Other assets 6,314 (121)
Other liabilities 4,214 (208)
------------ ------------
Net cash used by operating activities (6,430) (3,903)
Investing activities:
Purchases of property and equipment (1,038) (277)
Other (255) (195)
------------ ------------
Net cash used in investing activities (1,293) (472)
Net cash provided used in financing activities 585 39
------------ ------------
Net decrease in cash and cash equivalents (7,138) (4,336)
Cash and cash equivalents at beginning of period 20,245 20,422
------------ ------------
Cash and cash equivalents at end of period $ 13,107 $ 16,086
============ ============
Supplementary disclosures:
Cash paid for interest $ 6,172 $ 6,236
============ ============
Cash paid for taxes $ - $ 273
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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THERMA-WAVE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and include the accounts of Therma-Wave, Inc. and its
wholly owned subsidiaries. Certain information and footnote disclosures,
normally included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or omitted
pursuant to such rules and regulations. In our opinion, the financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position at
September 30, 1999, and the operating results and cash flows for the six
months ended September 30, 1999 and 1998. These financial statements and
notes should be read in conjunction with our audited financial statements and
notes thereto for the year ended March 31, 1999.
The results of operations for the interim periods are not necessarily
indicative of the results of operations that may be expected for any other
period or for the fiscal year, which ends on April 2, 2000.
The second quarters of fiscal years 2000 and 1999 and the fiscal year 1999
ended on October 3, 1999, October 4, 1998 and April 4, 1999, respectively.
For presentation purposes, the accompanying financial statements have been
shown as ending on the last day of the month.
In accordance with generally accepted accounting principles, earnings per
share information is not presented since we do not have publicly held common
stock.
2. Inventories
Inventories are summarized as follows (in thousands):
September 30, 1999 March 31, 1999
--------------------- ------------------
Purchased materials $ 7,169 $ 6,678
Systems in process 9,776 5,302
Finished systems 2,919 3,389
--------------------- ------------------
$19,864 $15,369
===================== ==================
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3. Expenses Relating to Operating Cost Improvements
On June 22, 1998 and September 24, 1998, we announced and implemented an
operating cost improvement program aimed at bringing operating expenses in
line with our operating environment. All terminated employees were notified
of their severance and related benefits at the time the program was
announced. This program resulted in a reduction of approximately 100
employees primarily involved in customer service and manufacturing
positions. Certain leased facilities in Texas, Arizona and Japan were closed
and fixed assets were consolidated. Total cash outlays for fiscal 1999 were
$832,000. Non-cash charges of $100,000 were primarily for asset write-offs.
The balance of $25,000 at September 30, 1999 primarily represented cash
payments and will be utilized during the remainder of fiscal 2000. Expenses
relating to operating cost improvements are summarized as follows:
<TABLE>
<CAPTION>
Provision
Provision Quarter Ended Balance
Quarter Ended September 30, Utilized Balance September 30,
June 30, 1998 1998 in FY99 March 31, 1999 Utilized 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Severance $406 $431 $(762) $ 75 $ (75) $ -
Facilities 76 44 (70) 50 (25) 25
Other 100 - (100) - - -
---- ---- ----- ---- ----- ------
$582 $475 $(932) $125 $(100) $ 25
</TABLE>
4. Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." The statement established standards for the reporting
and display of comprehensive income and its components. The adoption of this
statement had no significant impact on our net loss or stockholders' equity.
SFAS 130 requires unrealized gains or losses on available-for-sale
securities and foreign currency translation adjustments to be included in
comprehensive loss. The difference between net loss and comprehensive loss
is due to foreign currency translation adjustments. Prior year financial
statements have been reclassified to conform to the requirements of SFAS
130.
During the three months ended September 30, 1999 and 1998, comprehensive
loss amounted to approximately $308,000 and $4,916,000, respectively. During
the six months ended September 30, 1999 and 1998, comprehensive loss
amounted to approximately $2,775,000 and $11,007,000, respectively.
5. Recently Issued Accounting Statements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." SFAS No. 131
establishes new requirements for the
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annual reporting of information regarding operating segments, products,
services, geographic areas and major customers. We adopted SFAS No.131
effective March 31, 1999.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes a new model
for accounting for derivatives and hedging activities and supercedes and
amends a number of existing accounting standards. SFAS No. 133 requires that
all derivatives be recognized in the balance sheet at their fair market
value, and the corresponding derivative gains or losses be either reported
in the statement of operations or as a deferred item, depending on the type
of hedge relationship that exists with respect to such derivative. We
currently do not hold any derivative instruments that are affected by the
adoption of SFAS No. 133.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
When used in this discussion, the words "expects", "anticipates" and similar
expressions are intended to identify forward-looking statements. Such forward-
looking statements are subject to a number of risks and uncertainties that could
cause actual results to differ materially from the statements made. We have
experienced and expect to continue to experience significant fluctuations in our
quarterly results of operations. Our expense levels are based, in part, on
expectations of future revenues. If revenue levels in a particular quarter do
not meet expectations, operating results are adversely affected. A variety of
factors could have an influence on the level of our revenues in a particular
quarter. These factors include the cyclical nature of the semiconductor
industry, the risk that factors which allowed us to experience relatively good
performance in industry downturns may not protect us in future downturns, the
timing of the receipt of orders from major customers, customer cancellations or
delay of shipments, specific feature requests by customers, production delays or
manufacturing inefficiencies, exchange rate fluctuations, management decisions
to commence or discontinue product lines, our ability to design, introduce and
manufacture new products on a cost effective and timely basis, the introduction
of new products by ourselves or our competitors, the timing of research and
development expenditures, and expenses attendant to acquisitions, strategic
alliances and the future development of marketing and service capabilities.
General
We develop, manufacture, market and service process control metrology systems
for use in the manufacture of semiconductors. Our process control metrology
systems are principally used to measure ion implantation and thin film
deposition and removal. We have developed two product families of process
control metrology systems: the Therma-Probe systems and the Opti-Probe systems.
Therma-Probe Product Family
The Therma-Probe systems utilize our proprietary thermal wave technology and are
the predominant nondestructive process control metrology system used to measure
the critical ion implantation process on product wafers in the fabrication of
semiconductors.
Opti-Probe Product Family
The Opti-Probe systems significantly improve upon existing thin film metrology
systems by successfully integrating different measurement technologies and
utilizing our proprietary optical technologies.
9
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Results of Operations
The following table summarizes our unaudited historical results of operations as
a percentage of net revenues for the periods indicated. The historical
financial data for the six months ended September 30, 1999 and 1998 were derived
from our unaudited consolidated financial statements which, in the opinion of
management, reflect all adjustments (consisting of normal recurring adjustments)
necessary for the fair presentation of the financial condition and results of
operations for such periods.
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
-------------------------------- ---------------------------------
Statement of Operations Data: 1999 1998 1999 1998
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue 52.8 58.5 55.1 58.7
-------------- ------------- -------------- --------------
Gross margin 47.2 41.5 44.9 41.3
Operating expenses:
Research and development 19.6 25.8 19.0 28.0
Selling, general and administrative 18.7 29.6 18.9 30.0
Expenses relating to operating cost
improvements - 3.1 - 3.5
-------------- ------------- -------------- --------------
Operating income (loss) 8.9 (17.0) 7.0 (20.2)
Interest expense (13.5) (22.7) (14.9) (22.8)
Interest income 0.5 1.1 0.6 1.2
Other, net 0.2 0.7 0.2 (0.2)
-------------- ------------- -------------- --------------
Loss before income taxes (3.9) (37.9) (7.1) (42.0)
Benefit for income taxes - (4.9) - (5.5)
-------------- ------------- -------------- --------------
Net loss (3.9)% (33.0)% (7.1)% (36.5)%
============== ============= ============== ==============
</TABLE>
Net Revenues. Revenues were $25.9 million and $47.1 million, respectively, for
the three and six months ended September 30, 1999. For the three months ended
September 30, 1999, revenues were up 23% from the prior quarter and increased
71% from the same quarter a year ago. For the six months ended September 30,
1999, revenues increased 55% from the same period in the prior fiscal year. The
increase in revenue is a result of the improvement in the semiconductor
equipment industry that favorably impacted sales in both our product lines. New
orders for the second quarter were up substantially from the prior quarter and
resulted in a strengthened backlog.
Gross Margin. Gross margin was 47% and 45%, respectively, for the three and
six months ended September 30, 1999. For the three months ended September 30,
1999, gross margin increased from 42% in the previous quarter and 42% for the
same quarter a year ago. For the six months ended September 30, 1999, gross
margin increased from 41% in the same period in the prior fiscal year. The
increase in gross margin is due to the improvement in the semiconductor
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industry resulting higher average selling prices and a favorable mix in sales of
higher margin products. The increase in gross margin was slightly offset by
higher manufacturing costs associated with the manufacturing scale-up of new
products.
Research and Development ("R&D") Expenses. R&D expenses were $5.1 million
and $8.9 million, respectively, for the three and six months ended September 30,
1999. For the three months ended September 30, 1999, R&D expenses increased 32%
from the previous quarter and 30% from the same quarter a year ago. For the six
months ended September 30, 1999, R&D expenses increased 5% from the same period
in the prior fiscal year. The increase from the prior periods is the result of
additional resources dedicated to new products expected to be released in the
next nine to fifteen months. We believe that technical leadership is essential
to our success and expect to continue to commit significant resources to R&D
projects. In the near term, we expect our R&D expenses to increase in both
absolute dollar terms and as a percentage of our net revenues.
Selling, General and Administrative ( "SG&A") Expenses. SG&A expenses were
$4.8 million and $8.9 million, respectively, for the three and six months ended
September 30, 1999. For the three months ended September 30, 1999, SG&A
increased 20% from the previous quarter and 8% from the same quarter a year ago.
For the six months ended September 30, 1999, SG&A decreased 3% from the same
period in the prior fiscal year. The increase from the prior periods is mainly
due to the increase in external sales commissions resulting from the increase in
sales and the change in customer sales mix. The decrease in the six months ended
September 30, 1999 from the same period of the prior fiscal year resulted from
reductions in headcount.
Expenses Relating to Operating Cost Improvements. On June 22, 1998 and
September 24, 1998, we announced and implemented an operating cost improvement
program aimed at bringing operating expenses in line with our current operating
environment. All terminated employees were notified of their severance and
related benefits at the time the program was announced. This program resulted in
a reduction of approximately 100 employees primarily involved in customer
service and manufacturing positions. Certain leased facilities in Texas, Arizona
and Japan were closed and fixed assets were consolidated. Total cash outlays for
fiscal 1999 were $832,000. Non-cash charges of $100,000 were primarily for asset
write-offs.
Interest Expense. Interest expense for the three and six months ended
September 30, 1999 was $3.5 million and $7.0 million, respectively. These
amounts are comparable to prior periods.
Provision for Income Taxes. Our tax benefit for the three and six months ended
September 30, 1998 reflected the tax benefit rate of 13% based upon our loss
carryback potential. For the three and six months ended September 30, 1998, we
recorded a benefit for income taxes of $0.8 million and $1.7 million,
respectively. For fiscal 2000, we have not recorded any tax benefit since we
have fully utilized our loss carryback ability.
Net Loss. We experienced a net loss of $1.0 million and $3.3 million,
respectively, for the three and six months ended September 30, 1999. For the
three months ended September 30, 1999, the net loss improved $1.3 million from
the previous quarter and $4.0 million from the
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same quarter a year ago. For the six months ended September 30, 1999, the net
loss improved $7.8 million from the same period of the prior fiscal year.
Liquidity and Capital Resources
Our principal liquidity requirements are for working capital. Since the
recapitalization, we have funded our operating activities principally from funds
generated from operations. Cash flow used in operating activities was $6.4
million and $3.9 million for the six months ended September 30, 1999 and 1998,
respectively. The decrease in cash flow used in operating activities from fiscal
year 2000 to 1999 is mainly due to the increase in accounts receivable,
partially offset by the tax refund of $8.3 million, the decrease in net loss and
the increase in liabilities.
Purchases of property and equipment were $1.0 million and $0.3 million for the
six months ended September 30, 1999 and 1998, respectively.In May 1997, we
issued $115.0 million in aggregate principal amount of senior notes that,
together with a $20.1 million equity contribution, was used to finance the
recapitalization. In the recapitalization, we used $26.9 million to repay
outstanding borrowings, $96.9 million to redeem a portion of our common stock,
$11.0 million to pay related fees and expenses and $0.3 million for general
working capital purposes.
In conjunction with the recapitalization, we entered into a senior credit
facility with various lending institutions, and Bankers Trust Company, as agent.
The bank credit facility bears interest, at our option, at (i) the base rate
plus 1.75% or (ii) the Eurodollar rate plus 3.00%. Our borrowings under the
bank credit facility are secured by substantially all of our assets, a pledge of
all of the capital stock of any domestic subsidiaries and a pledge of 65% of the
capital stock of our first-tier foreign subsidiaries. The bank credit facility
matures on May 16, 2002.
During the quarter ended June 30, 1998, we amended the bank credit facility to
have our borrowing availability subject to a borrowing base formula, which
provides a maximum revolving credit facility of $30.0 million, and to adjust the
financial covenants requiring us to maintain minimum levels of EBITDA during
each six-month period ending on the last day of each fiscal quarter and minimum
levels of cumulative EBITDA from April 7, 1996 to the last day of each fiscal
quarter. In August 1999, we entered into a second amendment to our bank credit
facility to further adjust these financial tests. We may borrow amounts under
the amended bank credit facility to finance our working capital requirements and
other general corporate purposes. The amended bank credit facility requires us
to meet certain financial tests and contains covenants customary for this type
of financing. At September 30, 1999, there was $3.5 million outstanding under a
letter of credit and $26.5 million of unused borrowing capacity under the
amended bank credit facility.
Our principal sources of funds are anticipated to be cash on hand ($13.1 million
as of September
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30,1999), cash flows from operating activities and, if necessary, borrowings
under the bank credit facility. In addition, we received a tax refund of $8.3
million during the first quarter of fiscal 2000. We believe that these funds
will provide us with sufficient liquidity and capital resources for us to meet
our current and future financial obligations, as well as to provide funds for
our working capital, capital expenditures and other needs for at least the next
12 months and, assuming continued improvement in the semiconductor industry,
through the next 24 months. No assurance can be given, however, that this will
be the case. We may require additional equity or debt financing to meet our
working capital requirements or to fund our research and development activities.
There can be no assurance that additional financing will be available when
required or, if available, will be on terms satisfactory to us.
We have filed a registration statement for an initial public offering of common
stock with the Securities and Exchange Commission. The registration statement
has not yet become effective.
Impact of Currency Exchange Rates
Foreign exchange rate fluctuations have historically not had a significant
impact on our results of operations since our export sales are denominated in
United States dollars. A substantial portion of our sales are denominated in
U.S. dollars and as a result, we have relatively little exposure to foreign
currency exchange risk with respect to sales made. We do not use forward
exchange contracts to hedge exposures denominated in foreign currencies or any
other derivative financial instruments for trading or speculative purposes. Due
to the unpredictability of currency exchange rates, there can be no assurance
that we will not experience negative currency translation adjustments in the
future, nor can we predict the effect of exchange rate fluctuations upon future
operating results.
Year 2000
Many computer systems used by us and our suppliers may not properly recognize a
date using "00" as the year 2000. This could result in system/program failure
or logic errors that could disrupt normal business activities. We have
established a formal project with a project office and project team to address
this issue and achieve year 2000 readiness.
The project is focused on four key readiness areas:
Internal Infrastructure Readiness, addressing internal hardware, software and
non-information technology systems;
Supplier Readiness, addressing the preparedness of those suppliers providing
material incorporated into our products;
Product Readiness, addressing product functionality; and
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Customer Readiness, addressing customer support and transactional activity.
For each readiness area, we are systematically performing a global risk
assessment, conducting testing and remediation (renovation and implementation),
developing contingency plans to mitigate unknown risk, and communication with
employees, suppliers and customers to raise awareness of the Year 2000 problem.
Internal Infrastructure Readiness Program. We conducted an assessment of
internal hardware and software applications beginning early in calendar 1999.
All software applications and all hardware, including network fabric,
telecommunications equipment and workstations have now been made Year 2000
compliant.
In addition to applications and information technology hardware, remediation of
facilities and other operations has been completed.
Supplier Readiness Program. This program focuses on minimizing the risks
associated with suppliers in two areas: (1) a supplier's business capability to
continue providing products and services; and (2) a supplier's product
integrity. We have identified and contacted key suppliers based on their
relative risks in these two areas. To date, we have received responses from all
of our key suppliers, most of which indicate that they either have completed or
are in the process of developing and implementing remediation plans. Based on
our assessment of each supplier's progress to adequately address the Year 2000
issue, we have developed a supplier action list and contingency plans. We
revisited key suppliers during the third calendar quarter of 1999 to ensure that
supplier commitments had been met. Alternate sources are being investigated for
those few vendors that we have identified as high risk, and such alternative
sources are expected to be in place by November 1, 1999. We have identified
certain key components of our products and will increase our inventory level of
these items during the fourth calendar quarter of this year. We anticipate all
of these items to be usable in our products, and therefore we do not expect such
additional inventory purchases to have a material adverse effect on our
financial condition.
Product Readiness Program. This program focuses on identifying and resolving
Year 2000 issues existing in our products. The program encompasses a number of
activities including testing, evaluation, engineering and manufacturing
implementation. Sematech is a consortium of integrated circuit manufacturers
that provides guidelines to equipment suppliers to the semiconductor industry.
We have adopted the Sematech guidelines known as Year 2000 readiness testing
scenarios as the baseline for our product testing. Sematech is a consortium of
integrated circuit manufacturers that provides guidelines to equipment suppliers
in the semiconductor industry. We believe that the use of these scenarios should
enable our products to meet standards that we believe are generally accepted
across the computer industry for Year 2000 readiness. The testing, and
subsequent remediation, of our products to meet the Sematech guidelines has not
had a material adverse impact on our operations. As of the fourth calendar
quarter of 1998, we believe that all of our products then in production met the
Sematech guidelines for Year 2000 readiness. Our customers were notified of
known risks and remediation plans in the third calendar quarter of 1998.
Retrofitting of customer equipment covered by
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warranty or contract has been essentially completed during the first three
calendar quarters of 1999, and minor work yet to be performed will be completed
by the end of 1999.
Customer Readiness Program. This program is focused on customer support,
including the coordination of retrofit activity, and developing contingency
plans where appropriate, as well as the ability of our customers to continue to
conduct business with us. The retrofit activity is essentially complete and the
general contingency plan is complete except for finalization of staffing levels
which will be completed by mid November 1999.
In addition to the above programs, we have identified "worst case" scenarios
and developed appropriate contingency plans. The most reasonably likely worst
case scenario is a breakdown of general infrastructure, such as widespread power
failures. We have investigated most of our exposure in this area and do not
consider the foregoing a high risk. However, we have prepared for short-term
public service interruptions as part of our existing disaster recovery plan. The
plan consists of utilizing emergency power supplies, employing remote storage
facilities for copies of our vital records and using off-site backup computer
systems provided by an independent service supplier. To aid our customers,
emergency response teams are being formed within our organization to respond to
any unexpected product issues that may arise as a result of our or any third
party's failure to be Year 2000 compliant. We are selecting people for these
teams who were trained in troubleshooting all aspects of our products. We expect
these teams to be formed by November 30, 1999.
We estimate that total Year 2000 incremental costs will be approximately
$150,000. Through September 30, 1999, we have spent approximately $138,000 to
address the Year 2000 issue. We are continuing our assessments and developing
alternatives that will necessitate refinement of this estimate over time. There
can be no assurance, however, that there will not be a delay in, or increased
costs associated with, the programs described in this section.
Since the programs described in this section are ongoing, all potential Year
2000 complications may not have yet been identified. Therefore, the potential
impact of these complications on our financial condition and results of
operations cannot be determined at this time. If computer systems used by us or
our suppliers, products provided to us by our suppliers, or the software
applications of hardware used in systems manufactured or sold by us, fail or
experience significant difficulties related to the Year 2000 issue, our results
of operations and financial condition could be materially adversely affected. We
could incur delays in producing and delivering products to our customers, which
could result in order cancellations and lost revenue and profits. We believe the
likelihood of losing revenue and profits from difficulties resulting from Year
2000 issues is low.
15
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
On June 5, 1998, at our request, the United States Patent Office initiated an
interference proceeding between Therma-Wave and Rudolph Technologies. The
subject matter of the interference relates to ellipsometer technology that
Rudolph employs in its commercial devices. We believe we developed and
patented this technology prior to Rudolph. The interference proceedings will
determine ownership of the technology as between Rudolph Technologies and
Therma-Wave. A successful outcome of the interference proceeding may result in
Rudolph being required to pay us licensing fees. Since we have not
commercialized this technology, an unsuccessful outcome in the interference
proceeding would not have a material adverse effect on our business, financial
condition or results of operations.
On September 3, 1998, we were named in a patent infringement suit filed by
KLA-Tencor. KLA-Tencor alleged that it patented an aspect of the thin film
thickness measuring technology that we use in our Opti-Probe product family.
KLA-Tencor is seeking damages and an injunction to stop the sale of the
equipment they allege uses this aspect. We believe none of our products
infringe any of the claims of KLA-Tencor's patent and that their infringement
allegations are unfounded. Nonetheless, KLA-Tencor has made broad allegations
covering technology that accounts for a significant portion of our revenues.
Since we believe these allegations are unfounded, we intend to vigorously
defend our position, and we expect to prevail. We believe that the outcome
from such litigation, even if adverse to us, would not have a material adverse
effect on our business, financial condition or results or operations.
On January 14, 1999, we commenced an action against KLA-Tencor for patent
infringement with respect to one of our fundamental thin film technology
combination patents. The suit seeks damages for patent infringement and a
permanent injunction against any future activities undertaken by KLA-Tencor or
any third party working in conjunction with them, which infringe on our
patent. The suit was filed as a counterclaim in the 1998 infringement action
initiated by KLA-Tencor and described in the prior paragraph and also seeks a
declaratory judgment that KLA-Tencor's patent, which we were alleged of
infringing, is invalid and not infringed by any of our systems.
On July 22, 1999, we were named in a second patent infringement suit filed by
KLA-Tencor. KLA-Tencor has alleged that it patented another aspect of one of
the thin film thickness measuring technologies that we have recently added to
some of our Opti-Probe products. KLA-Tencor is seeking damages and an
injunction to stop the sale of the equipment they allege uses this aspect.
Since the patent, which is the subject of this second suit, was issued on June
8,1999, any potential liability for past sales is not material. Prior to
filing its first infringement action, KLA-Tencor notified us of an earlier
version of the patent that is the subject of this second suit. We believe none
of our products infringed any of the claims of the earlier version of this
KLA-Tencor patent and previously informed KLA-Tencor of our belief. KLA-
Tencor's new patent is a continuation of the earlier patent. We believe KLA-
16
<PAGE>
Tencor's new patent is invalid and we intend to vigorously defend our position
and we expect to prevail. We believe that the outcome from such litigation,
even if adverse to us, would not have a material adverse effect on our
business, financial condition or results of operations.
On October 25, 1999 we filed claims against KLA-Tencor Corporation for
infringement of two of our patents, both entitled "Thin Film Optical
Measurement System and Method With Calibrating Ellipsometer". The patents
contain both device and method claims relating to optical measurement systems
that include a calibrating ellipsometer. In addition to the patent
infringement claims, we also filed claims against KLA-Tencor for engaging in a
pattern of conduct designed to disparage and improperly damage Therma-Wave. We
also charged KLA-Tencor with violations of the Lanham Act and California state
law, including unfair competition and tortious interference with economic
advantage and contractual relations. Our claims were filed in the United
States District Court for the Northern District of California.
There can be no assurances, however, that we will prevail in any ongoing
patent litigation described above. We believe, however, the litigation
described above will not have a material adverse effect on our business,
financial condition or results of operations.
We are also involved in various legal proceedings from time to time arising in
the ordinary course of business, none of which are expected to have a material
adverse effect on our business or financial condition.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
On August 6, 1999 the stockholders voted on a consent in lieu of an annual
meeting. The following matters were voted on: (1) Amended and Restated
Certificate of Incorporation (which included among other things the
establishment of a classified Board of Directors and the election of
existing Directors to such Classified Board); (2) Amended and Restated By-
Laws; (3) Appointment of Independent Public Accountant; (4) Form of
Indemnification Agreements; (5) 1999 Equity Incentive Plan; (6) 1999
Employee Stock Purchase Plan; (7) Election of the following Directors in
connection with the establishment of a Classified Board: G. Leonard Baker,
Jr. and Ian K. Loring will serve until annual stockholders meeting in 2000;
Martin M. Schwartz and David Dominik will serve until the annual
stockholders meeting in 2001; Dr. Allan Rosencwaig and Adam W. Kirsch will
serve until the annual stockholders meeting in 2002. On all matters the vote
tally was 8,484,915 votes for, with three (3) shareholders abstaining.
On August 26, 1999 the stockholders voted on a consent in lieu of a special
meeting. The following matters were voted on: (1) Amended and Restated
Certificate of Incorporation (which, among other things, deleted the
Classified Board); (2) Amended and Restated By-Laws; (3) Election of the
following Directors in connection with the dissolution of the Classified
Board: G. Leonard Baker, Jr., Ian K. Loring, Martin M. Schwartz, David
Dominik, Dr. Allan Rosencwaig and Adam W. Kirsch. On all matters the vote
tally was 8,484,915 votes for, with three (3) shareholders abstaining.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
Exhibit
Number Description
3.1 Restated Certificate of Incorporation of Therma-Wave, Inc.
3.2 Amended and Restated By-Laws of Therma-Wave, Inc.
10.29 Second Amendment to Credit Agreement, dated as of August 13, 1999,
between Therma-Wave and Bankers Trust Company, as agent.(1)
27.1 Financial Data Schedule.
99.1 Risk Factors. (1)
_______
17
<PAGE>
(1) Incorporated by reference to the same numbered exhibit to the
Company's Registration Statement on Form S-1 (Registration No.
333-76019)
The Company did not file any reports on Form 8-K during the six months ended
September 30, 1999.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THERMA-WAVE, INC.
(Registrant)
/s/ L. Ray Christie
---------------------------------------
L. RAY CHRISTIE
Chief Financial Officer
(as Registrant and as Principal Accounting Officer)
October 28, 1999
19
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
THERMA-WAVE, INC.
ARTICLE ONE
The name of the Corporation is Therma-Wave, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
19801. The name of the registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
A. AUTHORIZED SHARES
-----------------
The total number of share of capital stock which the Corporation has
authority to issue is 27,000 hares, consisting of:
(1) 1,000,000 shares of Series A Convertible Preferred Stock, par
value $.01 per share ("Series A Preferred")';
------------------
(2) 20,000,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common");
--------------
(3) 4,000,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common"); and
--------------
(4) 2,000,000 shares of Class L Common Stock, par value $.01 per
share ("Class L Common").
--------------
1
<PAGE>
The Class A Common, Class B Common and Class L Common, and any other common
stock issued hereafter, are referred to collectively as the "Common Shares."
-------------
The Series A Preferred and the Common Shares shall have the rights, preferences
and limitations set forth below. Capitalized terms used but not otherwise
defined in Part A or Part B or Part C of this Article IV are defined in Part D.
B. SERIES A PREFERRED
------------------
Section 1. Dividends.
---------
1A. General Obligation. When and as declared by the Corporation's
------------------
Board of Directors and to the extent permitted under the General Corporation Law
of Delaware, the Corporation shall pay preferential dividends in cash to the
holders of the Series A Preferred (the "Series A Preferred") as provided in this
------------------
Section 1. Dividends on each share of the Series A Preferred (a "Share") shall
-----
be cumulative and accrue at the rate of 6% per annum of the sum of the
Liquidation Value thereof plus all accumulated and unpaid dividends thereon from
and including the date of issuance of such Share to and including the first to
occur of (i) the date on which the Liquidation Value of such Share (plus all
accrued and unpaid dividends thereon) is paid to the holder thereof in
connection with the liquidation of the Corporation or the redemption of such
Share by the Corporation, (ii) the date on which such Share is converted into
shares of Conversion Stock hereunder or (iii) the date on which such shares is
otherwise acquired by the Corporation. Such dividends shall accrue whether or
not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
The date on which the Corporation initially issues any Shares shall be deemed to
be its "date of issuance" regardless of the number of times transfer of such
Share is made on the stock records maintained by or for the Corporation and
regardless of the number of certificates which may be issued to evidence such
Share.
1B. Dividend Reference Dates. To the extent not paid on May 16 of
------------------------
each year, beginning May 16, 1998 (the "Dividend Reference Date"), all dividends
-----------------------
which have accrued on each Share outstanding during the year ending upon each
such Dividend Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such Share until paid to the holder thereof.
1C. Distribution of Partial Dividend Payments. Except as otherwise
-----------------------------------------
provided herein, if at any time the Corporation pays less than the total amount
of dividends then accrued with respect to the Series A Preferred, such payment
shall be distributed pro rata among the holders thereof based upon the number of
Shares held by each such holder.
Section 2. Liquidation. Upon any liquidation, dissolution or winding
-----------
up of the Corporation (whether voluntary or involuntary), each holder of Series
A Preferred shall be entitled to be paid, before any distribution or payment is
made upon any Junior Securities, an amount in cash equal to the greater of (a)
the aggregate Liquidation Value
2
<PAGE>
of all Shares held by such holder (plus all accrued and unpaid dividends
thereon, which for all purposes hereof shall include dividends which have
accrued since the last Dividend Reference Date) and (b) the amount that such
holder would have received had such holder converted such Shares into shares of
Class A Common immediately prior to such liquidation, dissolution or winding up,
and the holders of Series A Preferred shall not be entitled to any further
payment. If upon any such liquidation, dissolution or winding up of the
Corporation the Corporation's assets to be distributed among the holders of the
Series A Preferred are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid under this Section 2, then
the entire assets available to be distributed to the Corporation's stockholders
shall be distributed pro rata among such holders based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series A
Preferred held by each such holder. Not less than 30 days prior to the payment
date stated therein, the Corporation shall mail written notice of any such
liquidation, dissolution or winding up to each record holder of Series A
Preferred, setting forth in reasonable detail the amount of proceeds to be paid
with respect to each Share and each share of Common Stock in connection with
such liquidation, dissolution or winding up.
Section 3. Priority of Series A Preferred on Dividends and
-----------------------------------------------
Redemptions. So long as any Series A Preferred remains outstanding, without the
- -----------
prior written consent of the holders of a majority of the outstanding shares of
Series A Preferred, the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities, nor shall the Corporation directly or indirectly pay or
declare any dividend or make any distribution upon any Junior Securities;
provided that the Corporation may repurchase shares of Common Stock from former
employees of the Corporation and its Subsidiaries to the extent permitted by the
Corporation's agreements related to the Corporation's indebtedness, including
without limitation any indenture, whether entered into in connection with
transactions contemplated by the Recapitalization Agreement or thereafter, and
including any extensions of refinancing thereof.
Section 4. Redemptions.
-----------
4A. Scheduled Redemption. On May 17, 2004 (the "Scheduled Redemption
-------------------- --------------------
Date "), the Corporation shall redeem all outstanding Shares of Series A
- ----
Preferred at a price per Share equal to the Liquidation Value thereof (plus
accrued and unpaid dividends thereof).
4B. Optional Redemptions. The Corporation may, at any time and from
--------------------
time to time after the first to occur of (i) June 30, 1998 and (ii) the
Corporation's initial Public Offering, redeem all or any portion of the Shares
of Series A Preferred then outstanding at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon). Any
partial redemption pursuant to this paragraph shall be for a number of Shares,
the aggregate Liquidation Value of which, together with accrued and unpaid
dividends thereon, is at least $5,000,000, and redemptions made
3
<PAGE>
pursuant to this paragraph shall not relieve the Corporation of its obligation
to redeem Shares on the Scheduled Redemption Dates.
4C. Redemption Payments. For each Share which is to be redeemed
-------------------
hereunder, the Corporation shall be obligated on the Redemption Date to pay to
the holder thereof (upon surrender by such holder at the Corporation's principal
office of the certificate representing such Share) an amount in cash equal to
the Liquidation Value of such Share (plus all accrued and unpaid dividends
thereon). If the funds of the Corporation legally available for redemption of
Shares on any Redemption Date are insufficient to redeem the total number of
Shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of Shares pro rata among the
holders of the Shares to be redeemed based upon the aggregate Liquidation Value
of such Shares held by each such holder (plus all accrued and unpaid dividends
thereon). At any time thereafter when additional funds of the Corporation are
legally available for the redemption of Shares, such funds shall immediately be
used to redeem the balance of the Shares which the Corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
4D. Notice of Redemption. Except as otherwise provided herein, the
--------------------
Corporation shall mail written notice of each redemption of any Series A
Preferred (other than a redemption at the request of a holder or holders of
Series A Preferred) to each record holder thereof not more than 60 nor less than
30 days prior to the date on which such redemption is to be made. In case fewer
than the total number of Shares represented by any certificate are redeemed, a
new certificate representing the number of unredeemed Shares shall be issued to
the holder thereof without cost to such holder within five business days after
surrender of the certificate representing the redeemed Shares.
4E. Determination of the Number of Each Holder's Shares to be
---------------------------------------------------------
Redeemed. The number of Shares of Series A Preferred to be redeemed from each
- --------
holder thereof in redemptions hereunder shall be the number of Shares determined
by multiplying the total number of Shares to be redeemed times a fraction, the
numerator of which shall be the total number of Shares then held by such holder
and the denominator of which shall be the total number of Shares then
outstanding.
4F. Dividends After Redemption Date. No Share shall be entitled to
-------------------------------
any dividends accruing after the date on which the Liquidation Value of such
Share (plus all accrued and unpaid dividends thereon) is paid to the holder of
such Share. On such date, all rights of the holder of such Share shall cease,
and such Share shall no longer be deemed to be issued and outstanding.
4G. Redeemed or Otherwise Acquired Shares. Any Shares which are
-------------------------------------
redeemed or otherwise acquired by the Corporation shall be canceled and retired
to authorized but unissued shares and shall not be reissued, sold or
transferred.
4
<PAGE>
4H. Special Redemptions.
-------------------
(i) If, in connection with or after any Public Offering, any
member of the Bain Group receives any proceeds in respect of Common Stock owned
by such member, the Corporation shall give prompt written notice to the holders
of the Series A Preferred of such event. The holder or holders of a majority of
the Series A Preferred then outstanding may require the Corporation to redeem
all outstanding shares of Series A Preferred at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by
giving written notice to the Corporation of such election within 30 days after
the receipt of such notice from the Corporation. Upon receipt of such election,
the Corporation shall be obligated to redeem the outstanding Shares of Series A
Preferred on a date fixed by the Corporation, which date shall be not more than
30 days after the Corporation's receipt of such notice.
(ii) If a Change in Ownership has occurred or the Corporation
obtains knowledge that a Change in Ownership is proposed to occur, the
Corporation shall give prompt written notice of such Change in Ownership
describing in reasonable detail the material terms and date of consummation
thereof to each holder of Series A Preferred. The holder or holders of a
majority of the Series A Preferred then outstanding may require the Corporation
to redeem all outstanding shares of Series A Preferred at a price per Share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon) by giving written notice to the Corporation of such election prior to
the later of (a) 30 days after receipt of the Corporations notice and (b) five
days prior to the consummation of the Change in Ownership (the "Expiration
----------
Date").
- ----
Upon receipt of such election, the Corporation shall be obligated to
redeem the outstanding Shares of Series A Preferred on the later of (a) the
occurrence of the Change in Ownership or (b) five days after the Corporations
receipt of such election(s). If any proposed Change in Ownership does not occur,
all requests for redemption in connection therewith shall be automatically
rescinded.
The term "Change in Ownership" means any sale or transfer or series of
-------------------
sales or transfers by the Bain Group (other than to any Affiliate of any member
of the Bain Group) of at least 25% of the Common Stock purchased by the Bain
Group pursuant to the Recapitalization Agreement, determined on the basis of the
cost of such Common Stock
(iii) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change describing in
reasonable detail the material terms and date of consummation thereof to each
holder of Series A Preferred not more than 45 days nor less than 20 days prior
to the consummation of such Fundamental Change, and the Corporation shall give
each holder of Series A Preferred prompt written notice of any material change
in the terms or timing of such transaction. The holder or holders of a majority
of the Series A Preferred then outstanding may require the Corporation to redeem
all outstanding Shares of Series A Preferred at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by
giving written notice to the Corporation of such election
5
<PAGE>
prior to the later of (a) five days prior to the consummation of the Fundamental
Change or (b) 30 days alter receipt of notice from the Corporation.
Upon receipt of such election, the Corporation shall be obligated to
redeem the outstanding Shares of Series A Preferred upon the consummation of
such Fundamental Change. If any proposed Fundamental Change does not occur, all
requests for redemption in connection therewith shall be automatically
rescinded.
The term "Fundamental Change" means any sale or transfer of all or
------------------
substantially all of the assets of the Corporation and its Subsidiaries on a
consolidated basis in any transaction or series of related transactions.
(iv) Redemptions made pursuant to this paragraph 4H shall not
relieve the Corporation of its obligation to redeem Series A Preferred on the
Scheduled Redemption Dates pursuant to paragraph 4A above.
4I. Partial Redemptions. Notwithstanding anything contained herein,
-------------------
any redemption by the Corporation of less then all of the Shares of Series A
Preferred then held by each holder must be a number of Shares of Series A
Preferred sufficient, in the good faith opinion of counsel to the holder, to not
be treated as a dividend under Section 302 of the Internal Revenue Code of 1986,
as amended (or any comparable successor provision), as to such holder.
- Section 5. Voting Rights. The holders of the Series A Preferred
-------------
shall be entitled to notice of all stockholders meetings in accordance with the
Corporations bylaws, and the holders of the Series A Preferred shall be entitled
to vote on all matters submitted to the stockholders for a vote together with
the holders of the Common Stock voting together as a single class with each
share of Common Stock entitled to one vote per share and each Share of Series A
Preferred entitled to one vote for each share of Common Stock issuable upon
conversion of the Series A Preferred as of the record date for such vote or, if
no record date is specified, as of the date of such vote.
Section 6. Conversion.
----------
6A. Conversion Procedure.
---------- ---------
(i) At any time, any holder of Series A Preferred may convert
all of the Series A Preferred held by such holder into shares of Conversion
Stock. Each Share of Series A Preferred shall be convertible into one share of
Conversion Stock (as such amount is adjusted for stock splits, stock dividends,
recapitalizations and similar transactions).
(ii) Except as otherwise provided herein, each conversion of
Series A Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Series A Preferred to be
6
<PAGE>
converted have been surrendered for conversion at the principal office of the
Corporation. At the time any such conversion has been effected, the rights of
the holder of the Shares converted as a holder of Series A Preferred (including
the right to receive accrued and unpaid dividends on the Series A Preferred)
shall ease and the Person or Persons in whose name or names any certificate or
certificates for shares of Conversion Stock are to be issued upon such
conversion shall be deemed to have become the holder or holders of record of the
shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon).
(iv) Notwithstanding any other provision hereof, if a conversion
of Series A Preferred is to be made in connection with a Public Offering, a
Change in Ownership, a Fundamental Change or other transaction affecting the
Corporation, the conversion of any Shares of Series A Preferred may, at the
election of the holder thereof, be conditioned upon the consummation of such
transaction, in which case such conversion shall not be deemed to be effective
until such transaction has been consummated.
(v) As soon as possible after a conversion has been effected,
the Corporation shall deliver to the converting holder a certificate or
certificates representing the number of shares of Conversion Stock issuable by
reason of such conversion in such name or names and such denomination or
denominations as the converting holder has specified.
(vi) The issuance of certificates for shares of Conversion Stock
upon conversion of Series A Preferred shall be made without charge to the
holders of such Series A Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock. Upon conversion of each
Share of Series A Preferred, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the issuance
thereof
(vii) The Corporation shall not close its books against the
transfer of Series A Preferred or of Conversion Stock issued or issuable upon
conversion of Series A Preferred in any manner which interferes with the timely
conversion of Series A Preferred. The Corporation shall assist and cooperate
with any holder of Shares required to make any governmental filings or obtain
any governmental approval prior to or in connection with any conversion of
Shares hereunder (including, without limitation, making any filings required to
be made by the Corporation).
7
<PAGE>
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion Stock, solely
for the purpose of issuance upon the conversion of the Series A Preferred, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Series A Preferred. All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance). The Corporation shall not take any action which would cause the
number of authorized but unissued shares of Conversion Stock to be less than the
number of such shares required to be reserved hereunder for issuance upon
conversion of the Series A Preferred.
6B. Notices. The Corporation shall give written notice to all
-------
holders of Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any dividend
or distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any dissolution or liquidation.
Section 7. Reorganization, Reclassification, Consolidation, Merger or
----------------------------------------------------------
Sale. Any recapitalization, reorganization, reclassification, consolidation,
- ----
merger, sale of all or substantially all of the Corporations assets or other
transaction, in each case which is effected in such a manner that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions to insure that each of the holders of Series A Preferred shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series A
Preferred, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had converted its
Series A Preferred immediately prior to such Organic Change.
Section 8. Registration of Transfer. The Corporation shall keep at
------------------------
its principal office a register for the registration of Series A Preferred.
Upon the surrender of any certificate representing Series A Preferred at such
place, the Corporation shall, at the request of the record holder of such
certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of Shares represented by the surrendered certificate. Each such new
certificate shall be registered in such name and shall represent such number of
Shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which
8
<PAGE>
dividends have been fully paid on such Series A Preferred represented by the
surrendered certificate.
Section 9. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Shares of Series A Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor or an original party to the
Recapitalization Agreement its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and dividends
shall accrue on the Series A Preferred represented by such new certificate from
the date to which dividends have been fully paid on such lost, stolen, destroyed
or mutilated certificate.
Section 10. Amendment and Waiver. No amendment, modification or
--------------------
waiver shall be binding or effective with respect to any provision of Sections 1
to 11 of this Part B without the prior written consent of the holders of a
majority of the Series A Preferred outstanding at the time such action is taken;
provided that no change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders of a majority
of the Series A Preferred then outstanding.
Section 11. Notices. Except as otherwise expressly provided
-------
hereunder, all notices referred to herein shall be in writing and shall be
delivered by registered or certified mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, and shall
be deemed to have been given when so mailed or sent (i) to the Corporation, at
its principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
C. COMMON SHARES
-------------
Except as otherwise provided in this Part C or as otherwise required
by applicable law, all Common Shares shall be identical in all respects and
shall entitle the holders thereof to the same rights and privileges, subject to
the same qualifications, limitations and restrictions.
Section 1. Voting Rights. Except as otherwise required by
-------------
applicable law, all holders of Class A Common and Class L Common shall be
entitled to one vote per share on all matters to be voted on by the
Corporation's stockholders. Except as otherwise provided by applicable law, all
holders of Class B Common shall have no right to vote on any matters to be voted
on by the Corporations stockholders.
9
<PAGE>
Section 2. Distributions. At the time of each Distribution, such
-------------
Distribution shall be made to the holders of Common Shares in the following
priority:
(i) The holders of Class L Common, as a separate class, shall
be entitled to receive all or a portion of such Distribution (ratably among such
holders based upon the aggregate Unpaid Yield on Class L Common held by each
such holder as of the time of such Distribution) equal to the aggregate Unpaid
Yield on the outstanding shares of Class L Common as of the time of such
Distribution, and no Distribution or any portion thereof shall be made under
paragraph 2(ii) or (iii) below until the entire amount of the Unpaid Yield on
the outstanding shares of Class L Common as of the time of such Distribution has
been paid in full. The Distributions made pursuant to this paragraph 2(i) to
holders of Class L Common shall constitute a payment of Yield on Class L Common.
(ii) After the required amount of a Distribution has been made
in full pursuant to paragraph 2(i) above, the holders of Class L Common, as a
separate class, shall be entitled to receive all or a portion of such
Distribution (ratably among such holders based upon the aggregate Unreturned
Cost of shares of Class L Common held by each such holder as of the time of such
Distribution) equal to the aggregate Unreturned Cost of the outstanding shares
of Class L Common as of the time of such Distribution, and no Distribution or
any portion thereof shall be made under paragraph 2(iii) below until the entire
amount of the Unreturned Cost of the outstanding shares of Class L Common as of
the time of such Distribution has been paid in full. The Distributions made
pursuant to this paragraph 2(ii) to holders of Class L Common shall constitute a
payment of Cost of Class L Common.
(iii) After the required amount of a Distribution has been made
pursuant to paragraphs 2(i) and 2(ii) above, holders of Common Shares, as a
group, shall be entitled to receive the remaining portion of such Distribution
(ratably among such holders based upon the number of Common Shares held by each
such holder as of the time of such Distribution).
Section 3. Stock Splits and Stock Dividends. The Corporation shall
--------------------------------
not in any manner subdivide (by stock split, stock dividend or otherwise) or
combine (by stock split, stock dividend or otherwise) the outstanding Common
Shares of one class unless the outstanding Common Shares of all the other
classes shall be proportionately subdivided or combined, respectively. All such
subdivisions and combinations shall be payable only in Class L Common to the
holder of Class L Common, in Class A Common to the holders of Class A Common,
and in Class B Common to the holders of Class B Common. In no event shall a
stock split or stock dividend constitute a payment of Yield or a return of Cost.
Section 4. Conversion of Class L Common Upon Initial Public Offering.
---------------------------------------------------------
(i) Upon the consummation of the Corporations initial Public
Offering, each outstanding share of Class L Common shall, without any action by
the
10
<PAGE>
holder thereof, automatically convert into a number of shares of Class A Common
equal to the sum of (i) one and (ii) the result of (x) the Unreturned Cost plus
Unpaid Yield of such share of Class L Common divided by (y) the price per share
of the Class A Common in the Public Offering (in each case before giving effect
to any stock split declared in connection with such Public Offering).
(ii) As soon as possible after a conversion has been effected,
the Corporation shall deliver to the converting holder a certificate or
certificates representing the number of shares of Class A Common issuable by
reason of such conversion in such name or names and such denomination or
denominations as the converting holder has specified.
(iii) The issuance of certificates for shares of Class A Common
upon conversion of Class L Common shall be made without charge to the holders of
such Class L Common for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Class A Common. Upon conversion of each share of Class L
Common, the Corporation shall take all such actions as are necessary in order to
insure that the Class A Common issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and clear of all taxes,
liens, charges and encumbrances with respect to the issuance thereof.
(iv) The Corporation shall not close its books against the
transfer of Class L Common or of Class A Common issued or issuable upon
conversion of Class L Common in any manner which interferes with the timely
conversion of Class L Common. The Corporation shall assist and cooperate with
any holder of shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of shares
hereunder (including, without limitation, making any filings required to be made
by the Corporation).
(v) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common, solely
for the purpose of issuance upon the conversion of the Class L Common, such
number of shares of Class A Common issuable upon the conversion of all
outstanding Class L Common. All shares of Class A Common which are so issuable
shall, when issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Class A Common may
be so issued without violation of any applicable law or governmental regulation
or any requirements of any domestic securities exchange upon which shares of
Class A Common may be listed (except for official notice of issuance which shall
be immediately delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number of authorized
but unissued shares of Class A Common to be less than the number of such shares
required to be reserved hereunder for issuance upon conversion of the Class L
Common.
11
<PAGE>
Section 5. Conversion of Class B Common.
----------------------------
(i) Upon consummation of the Corporations initial Public
Offering, each holder of Class B Common shall be entitled to convert any or all
of the shares of such holder's Class B Common into the same number of shares of
Class A Common.
(ii) Each conversion of shares of Class B Common into shares of
Class A Common shall be effected by the surrender of the certificate or
certificates representing the shares to be converted at the principal office of
the Corporation at any time during normal business hours, together with a
written notice by the holder of such Class B Common stating that such holder
desires to convert the shares, or a stated number of shares, of Class B Common
represented by such certificate or certificates into Class A Common. Each
conversion shall be deemed to have been effected as of the close of business on
the date on which such certificate or certificates have been surrendered and
such notice has been received, and at such time the rights of the holder of the
converted Class B Common as such holder shall cease and the person or persons in
whose name or names the certificate or certificates for shares of Class A Common
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Class A Common represented thereby.
(iii) Promptly after the surrender of certificates and the
receipt of such written notice, the Corporation shall issue and deliver in
accordance with the surrendering holder's instructions (a) the certificate or
certificates for the Class A Common issuable upon such conversion and (b) a
certificate representing any Class B Common which was represented by the
certificate or certificates delivered to the Corporation in connection with such
conversion but which was not converted.
(iv) The issuance of certificates for Class A Common upon
conversion of Class B Common shall be made without charge to the holders of such
shares for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of Class
A Common. All shares of Class A Common which are so issuable shall, when issued,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges.
(v) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Class A Common, solely
for the purpose of issuance upon the conversion of Class B Common, such number
of shares of Class A Common issuable upon the conversion of all outstanding
Class B Common. All shares of Class A Common which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free from
all taxes, liens and charges.
(vi) The Corporation shall not close its books against the
transfer of Class A Common or of Class B Common issued or issuable upon
conversion of Class A Common in any manner which would interfere with the timely
conversion of Class A Common.
12
<PAGE>
(vii) If the Corporation in any manner subdivides or combines the
outstanding shares of Class A Common or Class B Common, as the case may be, the
outstanding shares of the Class A Common (in the case of a subdivision or
combination of the Class B Common) or the Class B Common (in the case of a
subdivision or combination of the Class A Common), shall be proportionately
subdivided or combined in a similar manner.
Section 6. Registration or Transfer. The Corporation shall keep at
------------------------
its principal office (or such other place as the Corporation reasonably
designates) a register for the registration of Common Shares. Upon the
surrender of any certificate representing shares of any class of Common Shares
at such place, the Corporation shall, at the request of the registered holder of
such certificate, execute and deliver a new certificate or certificates in
exchange therefor representing in the aggregate the number of shares of such
class represented by the surrendered certificate, and the Corporation forthwith
shall cancel such surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of shares of such class
as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate. The issuance of
new certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax with respect thereof or other cost incurred by
the Corporation in connection with such issuance.
Section 7. Replacement. Upon receipt of evidence reasonably
-----------
satisfactory to the Corporation (an affidavit of the registered holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more shares of any class of Common Shares, and
in the case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor or an original party to
the Recapitalization Agreement, its own agreement will be satisfactory), or, in
the case of any such mutilation upon surrender of such certificate, the
Corporation shall (at its expense) execute and deliver in lieu of such
certificate a new certificate of like kind representing the number of shares of
such class represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate.
Section 8. Notices. All notices referred to herein shall be in
-------
writing, shall be delivered personally or by first class mail, postage prepaid,
and shall be deemed to have been given when so delivered or mailed to the
Corporation at its principal executive offices and to any stockholder at such
holder's address as it appears in the stock records of the Corporation (unless
otherwise specified in a written notice to the Corporation by such holder).
Section 9. Fractional Shares. In no event will holders of fractional
-----------------
shares be required to accept any consideration in exchange for such shares other
than consideration which all holders of Common Stock are required to accept.
13
<PAGE>
Section 10. Amendment and Waiver. No amendment or waiver of any
--------------------
provision of Part C of this Article IV shall be effective without the prior
written consent of the holders of a majority of the then outstanding Common
Shares voting as a single class; provided that no amendment as to any terms or
provisions of, or for the benefit of, any class of Common Shares that adversely
affects the powers, preferences or special rights of such class of Common Shares
shall be effective without the prior consent of the holders of a majority of the
then outstanding shares of such affected class of Common Shares, voting as a
single class.
D. DEFINITIONS
-----------
"Affiliate" means, with respect to any Person, any other Person,
---------
entity or investment fund controlling, controlled by or under common control
with such Person and, in the case of a Person which is a partnership, any
partner of such Person.
"Bain Group" means, collectively, Bain Capital Fund V, L.P., Bain
----------
Capital Fund V--B, L.P., BCIP Associates, BCIP Trust Associates, L.P., and
Randolph Street Partners.
"Change in Ownership" has the meaning set forth in paragraph 4H of
-------------------
Part B hereof.
"Common Stock" means, collectively, the Corporations Class A Common
------------
Stock, the Corporation's Class B Common Stock, the Corporation's Class L Common
Stock and any other class of capital stock of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation, other than the Series A Preferred.
"Conversion Stock" means shares of the Corporations Class A Common
---------- -----
Stock, par value $.01 per share; provided that if there is a change such that
the securities issuable upon conversion of the Series A Preferred are issued by
an entity other than the Corporation or there is a change in the type or class
of securities so issuable, then the term "Conversion Stock" shall mean the
securities issuable upon conversion of the Series A Preferred.
"Cost" of each share of Class L Common shall be equal to $19.085 per
----
share (as proportionally adjusted for all stock splits, stock dividends and
other recapitalizations affecting the Class L Common).
"Distribution" means each distribution made by the Corporation to
------------
holders of Common Shares, whether in cash, property, or securities of the
Corporation and whether by dividend, liquidating distributions or otherwise;
provided that neither of the following shall be a Distribution, (a) any
redemption or repurchase by the Corporation of any Common Shares for any reason
or (b) any recapitalization or exchange of any
14
<PAGE>
Common Shares, or any subdivision (by stock split, stock dividend or otherwise)
or any combination (by stock split, stock dividend or otherwise) of any
outstanding Common Shares.
"Fundamental Change" has the meaning set forth in paragraph 4H of Part
------------------
B hereof.
"General Corporation Law" means the General Corporation Law of the
-----------------------
State of Delaware, as amended from time to time.
"Junior Securities" means any capital stock or other equity securities
-----------------
of the Corporation, except for the Series A Preferred.
"Liquidation Value" of any Share of Series A Preferred as of any
-----------------
particular date shall be equal to $18.40.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its capital
---------------
stock or equity securities to the public pursuant to an effective registration
statement under the Securities Act of 1933, as then in effect, or any comparable
statement under any similar federal statute then in force; provided that for
purposes of paragraph 4H of Part B hereof, a Public Offering shall not include
an offering made in connection with a business acquisition or combination or an
employee benefit plan.
"Recapitalization Agreement" means the Recapitalization Agreement
--------------------------
dated as of December 18, 1996 among the Corporation, the Bain Group, Toray
Industries, Inc., Toray Industries (America), Inc. and Shimadzu Corporation.
"Redemption Date" as to any Share means the date specified in the
---------------
notice of any redemption at the Corporations option or at the holder's option or
the applicable date specified herein in the case of any other redemption;
provided that no such date shall be a Redemption Date unless the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon and any
required premium with respect thereto) is actually paid in full on such date,
and if not so paid in full, the Redemption Date shall be the date on which such
amount is fully paid.
"Subsidiary" means any corporation of which a majority of the shares
----------
of outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the board of directors are, at the time as of which
any determination is being made, owned by the Corporation either directly or
indirectly through Subsidiaries.
"Unpaid Yield" of any share of Class L Common means an amount equal to
------------
the excess, if any, of (a) the aggregate Yield accrued on such share, over (b)
the
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<PAGE>
aggregate amount of Distributions made by the Corporation that constitute
payment of Yield on such share.
"Unreturned Cost" of any share of Class L Common means an amount equal
---------------
to the excess, if any, of (a) the Cost of such share, over (b) the aggregate
amount of Distributions made by the Corporation that constitute a return of the
Cost of such share.
"Yield" means, with respect to each outstanding share of Class L
-----
Common for each calendar year, the amount accruing on such share each day during
such year at the rate of 12% per annum of the sum of (a) such shares Unreturned
Cost, plus (b) Unpaid Yield thereon for all prior years. In calculating the
amount of any Distribution to be made to the Class L Common during a calendar
year, the portion of a Class L Common share's Yield for such portion of such
year elapsing before such Distribution is made shall be taken into account.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
In furtherance and not in limitation of the powers conferred by state,
the board of directors of the Corporation is expressly authorized to make, alter
or repeal the by-laws of the Corporation.
ARTICLE SEVEN
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws of the Corporation may provide. The books of the
Corporation may be kept outside 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. Election of directors need not be by written ballot unless
the by-laws of the Corporation so provide.
ARTICLE EIGHT
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
this Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE EIGHT shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE NINE
The Corporation expressly elects not to be governed by (S)203 of the
General Corporation Law of the State of Delaware.
16
<PAGE>
ARTICLE TEN
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation in the manner now
or hereafter prescribed herein and by the laws of the State of Delaware, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
17
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
OF
THERMA-WAVE, INC.
A Delaware corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the corporation in
--------- -----------------
the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle 19805. The name of the corporation's registered
agent at such address shall be The Corporation Trust Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. 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.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
--------- --------------------------
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall deter-mine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stock-holders may be
--------- ----------------
called for any purpose and may be held at such time and place, within or without
the State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the president or the holders of shares entitled to cast
not less than a majority of the votes at the meeting.
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<PAGE>
Section 3. Place of Meetings. The board of directors may designate any
--------- -----------------
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
--------- ------
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail, postage prepaid, addressed to the stockholder at his, her or its
address as the same appears on the records of the corporation. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends 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 5. Stockholders List. The officer having charge of the stock
--------- -----------------
ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, 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.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
--------- ------
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present, the
holders of a majority of the shares present in person or represented by proxy at
the meeting, and entitled to vote at the meeting, may adjourn the meeting to
another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
--------- ------------------
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken.
2
<PAGE>
At the adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting. 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 stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
--------- -------------
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one upon which by express provisions of an
applicable law or of the certificate of incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
--------- -------------
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to one (1) vote in person or by proxy for each share of common stock
held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
---------- -------
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
---------- -------------------------
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
3
<PAGE>
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in which
proceedings of meetings of the stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested provided, however, that no consent or consents
delivered by certified or registered mail shall be deemed delivered until such
consent or consents are actually received at the registered office. All
consents properly delivered in accordance with this section shall be deemed to
be recorded when so delivered. No written consent shall be effective to take
the corporate action referred to therein unless, within sixty (60) days of the
earliest dated consent delivered to the corporation as required by this section,
written consents signed by the holders of a sufficient number of shares to take
such corporate action are so recorded. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing. Any action
taken pursuant to such written consent or consents of the stockholders shall
have the same force and effect as if taken by the stockholders at a meeting
thereof.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the corporation
--------- --------------
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
--------- -----------------------------------
which shall constitute the board shall be six (6). Thereafter, the number of
directors shall be established from time to time by in accordance with the
provisions of that certain Stockholders Agreement, dated as of May 16, 1997 by
and among the corporation and certain of its stockholders (the "Stockholders
Agreement") or the Voting Agreement, dated as of May 16, 1997 by and among the
corporation and certain of its stockholders (the "Voting Agreement"). The
directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting and entitled to vote in the
election of directors. Except as provided in the Stockholders Agreement or the
Voting Agreement and Section 4 of this Article III, the directors shall be
elected in this manner at the annual meeting of the stockholders. Each director
elected shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as hereinafter provided.
4
<PAGE>
Section 3. Removal and Resignation. The directors may only be removed,
--------- -----------------------
with or without cause, as set forth in the Stockholders Agreement or the Voting
Agreement. Any director may resign at any time upon written notice to the
corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
--------- ---------
from any increase in the authorized number of directors may only be filled as
set forth in the Stockholders Agreement or the Voting Agreement. Each director
so chosen shall hold office until a successor is duly elected and qualified or
until his or her earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected
--------- ---------------
board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
--------- -------------------------
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at
the request of the president on at least twenty-four (24) hours notice to each
director, either personally, by telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
--------- -------------------------------------
number of directors, which majority includes each of the three directors
designated by Bain Capital Fund V, L.P., Bain Capital Fund V-B, L.P. and BCIP
Associates, respectively, pursuant to the Restated Stockholders Agreement
(except to the extent any such director has waived attendance in writing), shall
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed
--------- ----------
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation, which
to the extent provided in such resolution or these by-laws shall have and may
exercise the powers of the board of directors in the management and affairs of
the corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Such
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. Each committee
shall keep regular minutes of its meetings and report the same to the board of
directors when required.
5
<PAGE>
Section 9. Committee Rules. Each committee of the board of directors may
--------- ---------------
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the commit-tee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent or
disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors
---------- ------------------------
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
---------- ------------------------------------------
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends 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. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
---------- -------------------------
certificate of incorporation, 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 all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
6
<PAGE>
Section 1. Number. The officers of the corporation shall be elected by
--------- ------
the board of directors and shall consist of a chairman, president, chief
financial officer, one or more vice-presidents, secretary, a treasurer, and such
other officers and assistant officers as may be deemed necessary or desirable by
the board of directors. Any number of offices may be held by the same person.
In its discretion, the board of directors may choose not to fill any office for
any period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
--------- ---------------------------
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at
the first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
--------- -------
directors may be removed by the board of directors whenever in its judgment the
best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
--------- ---------
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors for the unexpired portion of the term by the board of
directors then in office.
Section 5. Compensation. Compensation of all officers shall be fixed by
--------- ------------
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6. Chairman of the Board. The chairman of the board shall have
--------- ---------------------
the powers and perform the duties incident to that position. Subject to the
powers of the board of directors, he shall be in the general and active charge
of the entire business and affairs of the corporation. He shall preside at all
meetings of the board of directors and stockholders and shall have such other
powers and perform such other duties as may be pre-scribed by the board of
directors or provided in these by-laws. Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chairman of the board
shall perform all the duties and responsibilities and exercise all the powers of
the president.
7
<PAGE>
Section 7. The President. The president shall be the chief executive
--------- -------------
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
pre-scribed by the board of directors, chairman or as may be provided in these
by-laws.
Section 8. Chief Financial Officer. The chief financial officer of the
--------- -----------------------
corporation shall, under the direction of the chief executive officer, be
responsible for all financial and accounting matters and for the direction of
the offices of treasurer and controller. The chief financial officer shall have
such other powers and perform such other duties as may be pre-scribed by the
chairman of the board, the chief executive officer or the board of directors or
as may be provided in these by-laws.
Section 9. Vice-presidents. The vice-president, or if there shall be
--------- ---------------
more than one, the vice-presidents in the order determined by the board of
directors or by the president, shall, in the absence or disability of the
president, act with all of the powers and be subject to all the restrictions of
the president. The vice-presidents shall also perform such other duties and have
such other powers as the board of directors, the chairman, the president or
these by-laws may, from time to time, prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
---------- ---------------------------------------
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these by-
laws may, from time to time, prescribe; and shall have custody of the corporate
seal of the corporation. The secretary, or an assistant secretary, shall have
authority to affix the corporate seal to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
assistant secretary. The board of directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order deter-mined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall
8
<PAGE>
perform such other duties and have such other powers as the board of directors,
the chairman, the president, or secretary may, from time to time, prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall
---------- -------------------------------------
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors;
shall cause the funds of the corporation to be disbursed when such disbursements
have been duly authorized, taking proper vouchers for such disbursements; and
shall render to the president and the board of directors, at its regular meeting
or when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six (6) years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman, the
president or chief financial officer may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
---------- ---------------------------------------------
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 13. Absence or Disability of Officers. In the case of the absence
---------- ---------------------------------
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Nature of Indemnity. Each person who was or is made a party or
--------- -------------------
is threatened to be made a party to or is involved in any action, suit or
9
<PAGE>
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified and
held harmless by the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the General Corporation Law of the
State of Delaware, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment) against all expense,
liability and loss (including attorneys' fees actually and reasonably incurred
by such person in connection with such proceeding) and such indemnification
shall inure to the benefit of his heirs, executors and administrators; provided,
however, that, except as provided in Section 2 hereof, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of the corporation. The right to indemnification
conferred in this Article V shall be a contract right and, subject to Sections 2
and 5 hereof, shall include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final disposition.
The corporation may, by action of its board of directors, provide
indemnification to employees and agents of the corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
--------- -------------------------------------------------------
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall be
made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within thirty (30) days, the right to indemnification
or advances as granted by this Article V shall be enforceable by the director or
officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the General Corporation Law
of the State of Delaware for the corporation to indemnify the claimant for the
amount claimed, but the burden of such defense
10
<PAGE>
shall be on the corporation. Neither the failure of the corporation (including
its board of directors, independent legal counsel, or its stock-holders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the General Corporation Law
of the State of Delaware, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
--------- ---------------------
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
--------- ---------
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section
--------- --------
1 of this Article V in defending a proceeding shall be paid by the corporation
in advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
corporation. Such expenses incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
--------- --------------------
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the corporation
as employees or agents of another corporation, partnership, joint venture, trust
or other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the board of directors.
Section 7. Contract Rights. The provisions of this Article V shall be
--------- ---------------
deemed to be a contract right between the corporation and each director or
11
<PAGE>
officer who serves in any such capacity at any time while this Article V and the
relevant provisions of the General Corporation Law of the State of Delaware or
other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article V,
--------- -----------------------
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article V
with respect to the resulting or surviving corporation as he or she would have
with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the corporation shall be
--------- ----
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
corporation or its employee or (2) by a registrar, other than the corporation or
its employee, the signature of any such president, vice-president, secretary, or
assistant secretary may be facsimiles. In case any officer or officers who have
signed, or whose facsimile signature or signatures 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 have been delivered by the corporation, such
certificate or certificates may nevertheless be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures have been used thereon had not ceased to be
such officer or officers of the corporation. All certificates for shares shall
be consecutively numbered or otherwise identified. The name of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. Shares of
stock of the corporation shall only be transferred on the books of the
corporation by the holder of record thereof or by such holder's attorney duly
authorized in writing, upon surrender to the corporation of the
12
<PAGE>
certificate or certificates for such shares endorsed by the appropriate person
or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization, and other matters as the corporation may reason-ably
require, and accompanied by all necessary stock transfer stamps. In that event,
it shall be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate or certificates, and record the
transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the transfer
of any class or series of securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct a new
--------- -----------------
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
--------- ---------------------------------------------
the corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no 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 the close of business
on the next day 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. A determination of stockholders of record entitled to notice
of or to vote at a 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.
Section 4. Fixing a Record Date for Action by Written Consent. In order
--------- --------------------------------------------------
that the corporation may determine the stock-holders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record
13
<PAGE>
date has been fixed by the board of directors, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is required by statute,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stock-holders are recorded. Delivery made to
the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
statute, the record date for determining stock-holders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action.
Section 5. Fixing a Record Date for Other Purposes. In order that the
--------- ---------------------------------------
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
--------- -----------------------
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
--------- -----------------------
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the corporation may proceed to collect the
amount due in the same manner as any debt due the corporation.
14
<PAGE>
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. 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. 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 any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
--------- ------------------------
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
--------- ---------
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
--------- -----
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
--------- -----------
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
--------- --------------
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware".
15
<PAGE>
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
--------- --------------------------------------
any other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
--------- -------------------------------
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these by-laws are for
--------- ----------------
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
---------- -----------------------
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
Except for Article III hereof, the Stockholders Agreement or the Voting
Agreement, these by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the by-laws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMA-WAVE,
INC.'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-02-2000
<PERIOD-START> APR-05-1999
<PERIOD-END> OCT-03-1999
<CASH> $13,107
<SECURITIES> 0
<RECEIVABLES> 23,668
<ALLOWANCES> 1,706
<INVENTORY> 19,864
<CURRENT-ASSETS> 59,587
<PP&E> 4,217
<DEPRECIATION> 1,334
<TOTAL-ASSETS> 73,805
<CURRENT-LIABILITIES> 29,868
<BONDS> 115,000
15,759
0
<COMMON> 112
<OTHER-SE> (90,256)
<TOTAL-LIABILITY-AND-EQUITY> 73,805
<SALES> 47,054
<TOTAL-REVENUES> 47,054
<CGS> 25,904
<TOTAL-COSTS> 25,904
<OTHER-EXPENSES> 17,843
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,013
<INCOME-PRETAX> (3,346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,346)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
