SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 28, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-13104
THERMOLASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1360302
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10455 Pacific Center Court
San Diego, California 92121-4339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- ---------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to the
filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference into Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of November 22, 1996, was approximately $281,022,000.
As of November 22, 1996, the Registrant had 40,719,299 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended September 28, 1996, are incorporated by reference into Parts I
and II.
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on March 12, 1997, are incorporated by
reference into Part III.
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PART I
Item 1. Business
(a) General Development of Business
ThermoLase Corporation (the Company or the Registrant) has
developed a proprietary system for the removal of unwanted hair (the
SoftLight(SM) system). In April 1995, the Company received clearance from
the U.S. Food and Drug Administration (FDA) to commercially market
services using this system.
The SoftLight system uses a low-energy, dermatology laser in
combination with a lotion to remove hair. The Company believes that its
system has significant advantages over electrolysis, which is a slow and
painful process in which an electrified needle is inserted directly into
each individual hair follicle.
The Company is marketing the SoftLight system in the U.S. through
its Spa Thira salons and through licensing agreements with doctors. The
Company is marketing the SoftLight system in foreign countries by
engaging in joint ventures and other licensing arrangements with
companies or individuals that are experienced in those locations.
In November 1995, the Company opened its first commercial salon,
Spa Thira, in La Jolla, California. The Company opened additional salons
in Dallas in June 1996, in Houston and Beverly Hills in September 1996,
in Denver in October 1996, and in Boca Raton in November 1996. The
Company also plans to open a spa in suburban Detroit in December 1996 and
has signed leases for four additional sites in Greenwich, Connecticut;
Manhasset, New York; suburban Minneapolis; and Palm Beach, Florida. Lease
negotiations are under way for additional sites.
In January 1996, the Company entered into a joint venture to market
the SoftLight process in Japan, as well as its laser-based skin-
rejuvenation process, if and when available. Before opening the first spa
in Japan, the joint venture must obtain Japanese regulatory clearance to
market the SoftLight process, for which it is presently conducting
clinical studies to obtain data to submit to the appropriate Japanese
regulatory authorities. The Company currently holds a 50% stake in the
joint venture, with an option to increase its ownership to 51% pursuant
to a fair-value purchase option.
In June 1996, the Company initiated a program to license its
SoftLight technology to doctors. In this program, the Company licenses
its technology to doctors and receives a per-procedure royalty that
varies depending on the location treated. The Company also provides the
doctors with the lasers and supplies that are necessary to perform the
service. A total of 55 doctors were licensees as of December 1, 1996.
In June 1996, the Company purchased $4,400,000 of convertible
preferred stock of AntiCancer Incorporated (AntiCancer), representing an
approximate 10% equity interest on a fully diluted basis. The Company
also has the option to purchase an additional 5% equity interest at any
time before the earlier of 2011 or AntiCancer's initial public offering
of common stock. San Diego-based AntiCancer is developing technology that
may have the potential to enhance the effectiveness of the SoftLight
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process. In this technology, liposomes, which have been proven to be
effective delivery agents in other applications, might provide a more
efficient method of delivering carbon, which is the primary ingredient in
the lotion used in the SoftLight process, to hair follicles. The Company
has signed an agreement to license this technology as it pertains not
only to hair removal, but also to stimulation of hair growth, suppression
of hair growth, and hair coloring. The agreement calls for up to
$1,500,000 in future payments by the Company upon the attainment by
AntiCancer of certain milestones relating to the satisfactory completion
of certain preliminary efficacy testing and regulatory matters. In
addition to such future payments, the Company will be substantially
responsible for development costs incurred after attainment of such
milestones. In the event that the funded development efforts result in
commercially viable products that the Company elects to market, the
Company will pay AntiCancer a royalty based on sales, subject to certain
minimum payments.
In November 1996, the Company entered into a joint venture to
market its SoftLight process in France, as well as its laser-based
skin-rejuvenation process, if and when available. The joint venture plans
to open Spa Thira salons in France and to sublicense to French physicians
and others the right to perform services using the SoftLight system. The
Company has committed to provide up to $5,000,000 to fund working capital
requirements of the joint venture in exchange for its 50% stake in the
joint venture. The Company's partner in the venture, an affiliate of
Groupe Jacques Dessange (a leading provider of premium hair- and
skin-care services in France), has also committed to fund up to
$5,000,000 in exchange for its 50% ownership. The Company has licensed
the technology to perform the SoftLight process to the joint venture, and
will receive a royalty based on the joint venture's revenues.
In November 1996, the Company entered into a license agreement with
a third party, which will market the SoftLight process through Spa Thira
salons and sublicensing arrangements in Saudi Arabia, as well as its
laser-based skin-rejuvenation process, if and when available.
The Company is investigating other applications for its laser-based
technology, and in June 1995 was granted a patent covering a laser-based
skin-rejuvenation system, which the Company believes may be used to
remove the outer layers of dead skin cells. In recent years, those
seeking younger-looking skin have embraced a variety of methods for
removing wrinkles, including dermabrasion (mechanically sanding the skin)
and chemical peels. More recently, carbon dioxide (CO2) lasers have been
used to remove wrinkles, but their use has been associated with long
healing times and, in some cases, undesirable side effects. The Company
believes that the skin-rejuvenation process that it is developing will
cause less skin damage than existing laser skin treatments that use a CO2
laser. Although the safety of using lasers for skin treatments has been
established by several systems that are already approved by the FDA for
the removal of birthmarks and tattoos, the Company may not commercially
sell its skin-rejuvenation system, or services using the system, until it
has received clearance from the FDA. The Company is currently conducting
clinical trials at two sites: the University of New Mexico and in
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Westwood, New Jersey, under the direction of Dr. David Goldberg. The
Company plans to submit a 510(k) application containing clinical data by
the end of the second quarter of fiscal 1997.
In December 1993, the Company acquired CBI Laboratories, Inc.
(CBI), a manufacturer of skin-care and bath and body products. CBI
provides the Company with expertise in the market for personal-care
products and manufactures the lotion used with the SoftLight system. In
addition, CBI has recently started manufacturing a line of Spa Thira
products to be sold at the spas and at doctors' offices where SoftLight
services are provided.
As of September 28, 1996, ThermoTrex Corporation (ThermoTrex) owned
25,960,996 shares of the common stock of the Company, representing 64% of
such stock then outstanding. A publicly traded, majority-owned subsidiary
of Thermo Electron Corporation (Thermo Electron), ThermoTrex, through its
publicly traded, majority-owned Trex Medical Corporation (Trex Medical)
subsidiary, is the world's leading manufacturer of mammography and
stereotactic breast-biopsy systems, and also supplies other specialized
and general-purpose X-ray equipment, in addition to the Company's
products and services. ThermoTrex also conducts advanced technology
research and is currently developing a laser communication system,
products for the medical imaging and avionics markets, and is pursuing
industrial applications for its advanced-materials technology. Thermo
Electron is a world leader in environmental monitoring and analysis
instruments, biomedical products such as heart-assist devices and
mammography systems, papermaking and paper-recycling equipment, biomass
electric power generation, and other specialized products and
technologies. Thermo Electron also provides a range of services related
to environmental quality.
In fiscal 1996*, the Company purchased SoftLight laser systems from
Trex Medical at an aggregate cost of $8,549,000. As of September 28,
1996, the Company has committed to purchase additional lasers at an
aggregate cost of $6,402,000.
Forward-looking Statements
Forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. These statements involve a number of risks and
uncertainties, including those detailed under the caption
"Forward-looking Statements" in the Registrant's Fiscal 1996 Annual
Report to Shareholders incorporated herein by reference.
(b) Financial Information About Industry Segments
The Company conducts business in one industry segment.
* In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
References to "fiscal 1996," "fiscal 1995," and "1994" herein are for
the year ended September 28, 1996, the nine months ended September 30,
1995, and the year ended December 31, 1994, respectively.
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(c) Description of Business
(i) Principal Products and Services
Laser-based Hair Removal
The patented SoftLight system uses a low-energy, dermatology laser
in combination with a lotion that absorbs the laser's energy to disable
hair follicles. Unlike electrolysis, the SoftLight system can disable
numerous hair follicles at one time. As a result, the Company believes
that it will be able to address a larger market than electrolysis by
offering hair removal from large areas, such as the legs. The lasers,
which are similar to those used for tattoo and birthmark removal, are
manufactured for the Company by Trex Medical. The lotion is manufactured
by the Company's CBI Laboratories subsidiary.
In a typical treatment, the area from which hair is to be removed
is first waxed to open each hair duct. The lotion is then applied, and
the area is scanned with the laser beam. The laser energy passes through
the skin and is absorbed by the lotion that has penetrated the hair duct,
causing the temperature of the lotion to increase to a level that
disables the hair follicles. Each client typically has a series of
treatments, for which the Company's spas currently offer several pricing
programs, including fixed fees for one or more treatments and fixed fees
for treatments during specified time periods. The Company continues to
invest in research and development to improve the efficacy of the system
and increase the length of time between treatments.
The Company is marketing the SoftLight system in the U.S. through
its Spa Thira salons and through licensing agreements with doctors. The
Company is marketing the SoftLight system in foreign countries by
engaging in joint ventures or other licensing arrangements with companies
or individuals that are experienced in those locations.
In November 1995, the Company opened its first commercial salon,
Spa Thira, in La Jolla, California. The Company opened additional salons
in Dallas in June 1996, in Houston and Beverly Hills in September 1996,
in Denver in October 1996, and in Boca Raton in November 1996. The
Company also plans to open a salon in suburban Detroit in December 1996
and has signed leases for four additional sites in Greenwich,
Connecticut; Manhasset, New York; suburban Minneapolis; and Palm Beach,
Florida. Lease negotiations are under way for additional sites.
In June 1996, the Company initiated a program to license its
SoftLight technology to doctors. In this program, the Company licenses
its technology to doctors and receives a per-procedure royalty that
varies depending on the location treated. The Company also provides the
doctors with the lasers and supplies that are necessary to perform the
service. A total of 55 doctors were licensees as of December 1, 1996.
In January 1996, the Company entered into a joint venture to market
the SoftLight process in Japan, as well as its laser-based skin-
rejuvenation process, if and when available. The Company currently holds
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a 50% stake in the joint venture, with an option to increase its
ownership to 51% pursuant to a fair-value purchase option. During fiscal
1996, the Company received $2.0 million in minimum guaranteed payments in
accordance with contractual terms. The Company will receive $1.0 million
in minimum guaranteed payments in fiscal 1997, subject to certain
exceptions in the event the joint venture is unable to obtain patent
protection in Japan on prescribed terms. The Company's primary partner in
the joint venture is the Fox River Investment Group, whose principals and
partners have extensive experience developing consumer products and
services in Japan. Before opening the first spa in Japan, the joint
venture must obtain Japanese regulatory clearance to market the SoftLight
process, for which it is presently conducting clinical studies to obtain
data to submit to the appropriate Japanese regulatory authorities.
In November 1996, the Company entered into a joint venture to
market its SoftLight process in France, as well as its laser-based
skin-rejuvenation process, if and when available. The joint venture plans
to open Spa Thira salons in France and to sublicense to French physicians
and others the right to perform services using the SoftLight system. The
Company has committed to provide up to $5,000,000 to fund working capital
requirements of the joint venture in exchange for its 50% stake in the
joint venture. The Company's partner in the venture, an affiliate of
Groupe Jacques Dessange (a leading provider of premium hair- and
skin-care services in France), has also committed to fund up to
$5,000,000 in exchange for its 50% ownership. The Company has licensed
the technology to perform the SoftLight process to the joint venture, and
will receive a royalty based on the joint venture's revenues.
In November 1996, the Company entered into a license agreement with
a third party, which will market the SoftLight process through Spa Thira
salons and sublicensing arrangements in Saudi Arabia, as well as its
laser-based skin-rejuvenation process, if and when available. Pursuant to
the agreement, the Company will receive up-front fees totaling $1,000,000
over a two-year period and a fee based on revenues derived from SoftLight
services.
The Company's existing and planned spas are designed to reflect the
environment of a luxurious day spa. The Company believes that the
uniformity of its centers will foster brand recognition and facilitate
the opening of new spas. The Company currently utilizes medical staff,
including physicians, nurses, and other medical personnel, to operate the
SoftLight system at its centers.
The Company advertises the SoftLight system through an advertising
and public relations campaign focused on Company exposure in fashion and
health magazines as well as the national news media.
During fiscal 1996, the Company derived revenues of $4,647,000 from
laser-based hair removal services.
Personal-care Products
In December 1993, the Company acquired CBI, a designer, developer,
manufacturer, and packager of high-quality personal-care products for
sale to retailers under its own brand names and as a contract
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manufacturer under arrangements with third parties. CBI develops and
manufactures most of its products using botanicals and herbal extracts,
with no animal fats, chemical dyes, or artificial aromas. CBI has the
facilities and personnel to develop new product formulations, design
packaging layouts, mix and fill formulations, and package final products
for distribution. CBI does not manufacture packaging such as containers
and boxes, but contracts with third parties for these supplies. CBI has a
portfolio of approximately 3,000 formulations, and may manufacture up to
300 different products in a quarter. Through fiscal 1995, CBI's sales
accounted for all of the Company's revenues.
CBI divides its business into three primary groups: Salon, Custom
Design, and Store Brands. The Salon group, which represents CBI's
original business, develops and manufactures a line of products primarily
sold directly by CBI to professional estheticians in skin-care salons and
spas. The Custom Design group markets CBI's manufacturing and design
services primarily to major retailers and multilevel marketing groups for
custom design of private-label product lines. The Store Brands group
markets complete proprietary product lines created by CBI, including
product formulations, packaging, brand name, and promotional materials,
which can be purchased by a customer for sale in its retail outlets as an
exclusive product line.
CBI's marketing and sales strategy varies by product line. Sales in
the Salon group are made by phone solicitations and by sales
representatives. Sales in the Custom Design and Store Brands groups are
managed by the president of CBI and a group of account executives working
exclusively in this area. In addition, the Company expects its network of
Spa Thira salons and physicians' offices where SoftLight services are
offered to provide a retail outlet for CBI's salon products. To support
its marketing activities, CBI attends industry trade shows and advertises
in major trade publications.
During fiscal 1996, fiscal 1995, and 1994, the Company derived
revenues of $23,165,000, $17,544,000, and $18,682,000 from the sale of
personal-care products.
(ii) New Products
In June 1995, the Company was issued a U.S. patent covering a
laser-based exfoliation system, which the Company believes may be used to
remove the outer layers of dead skin cells. In this skin-rejuvenation
system, a lotion, which is applied to the area to be treated, is absorbed
by the outer layers of dead skin cells, which are more loosely connected
than the new skin below. When the treatment area is scanned with the
laser, the laser's energy is absorbed by the lotion causing the dead skin
cells to break free. The Company is currently performing studies at two
sites: the University of New Mexico and in Westwood, New Jersey, under
the direction of Dr. David Goldberg, to determine the safety and efficacy
of this system. The Company is required to perform clinical trials and to
obtain FDA clearance before it can commercially market its skin-
rejuvenation system. The Company plans to submit a 510(k) application
containing clinical data by the end of the second quarter of fiscal 1997.
If the skin-rejuvenation system is commercially viable and the Company
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receives FDA clearance to market it, the Company currently intends to
offer its skin-rejuvenation system at its Spa Thira salons.
(iii) Raw Materials
Raw materials, components, and supplies purchased by the Company
are either available from a number of different suppliers or from
alternative sources that could be developed without a material adverse
effect on the Company. To date, the Company has experienced no
difficulties in obtaining these materials.
(iv) Patents, Licenses, and Trademarks
The Company's policy is to protect its intellectual property rights
relating to its work on the SoftLight system including, if appropriate,
applying for patents in the U.S. and foreign countries. The Company has
been issued two U.S. patents and certain foreign patents related to its
hair-removal system, and has various patents pending to extend the
coverage of the U.S. patents in the U.S. and in foreign countries. The
Company has corresponding patent applications pending in numerous foreign
countries and in the European Community (EC) and has reserved its rights
to file further corresponding patent applications in countries which are
members of the Patent Cooperation Treaty (PCT). The Company's issued U.S.
patents cover a hair-removal system that incorporates a substance that
penetrates the hair duct and absorbs the energy from an illuminating
light source that penetrates the skin.
The Company has been issued one U.S. patent related to its
skin-rejuvenation system. The Company has corresponding patent
applications pending in numerous foreign countries and has reserved its
rights to file further corresponding patent applications in countries
which are members of the PCT.
The Company has patent applications pending in the United States
and has reserved its rights to file patent applications in countries that
are members of the PCT, related to a laser-based drug-delivery system
using a concept similar to its laser-based hair-removal system.
The Company intends to aggressively pursue any person or company
that offers services that the Company believes infringe on one or more of
its patents.
The technology underlying the SoftLight system, including all
patents issued thereon, belongs to the Company by virtue of a license
agreement executed in February 1993 between the Company and the inventor
of the system, which grants the Company an irrevocable, exclusive,
worldwide, perpetual license to the technology in exchange for a $100,000
commitment fee and a royalty equal to 0.25% of revenues generated from
the sale or use of the SoftLight system through February 10, 2010.
CBI relies primarily on trade secret protection for the proprietary
formulations that form the basis of its products. CBI generally retains
the proprietary rights to the formulations it develops, either for itself
or for a specific customer.
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(v) Seasonal Influences
Due to the recent growth of CBI's sales to stores, the Company
experienced an increase in revenues in the first quarter of fiscal 1996
and the fourth quarter of calendar 1994 as a result of holiday demand, a
seasonal trend that the Company expects will continue.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms
extended to customers that would have a material adverse effect on the
Company's working capital.
(vii) Dependency on a Single Customer
No single customer accounted for more than 10% of the Company's
total revenues in fiscal 1996.
(viii) Backlog
The Company's backlog of firm orders at September 28, 1996 and
September 30, 1995, which consisted exclusively of orders for CBI's
products, was $5,466,000 and $4,600,000, respectively. The Company
anticipates that substantially all of its backlog will be shipped or
completed during fiscal 1997.
(ix) Government Contracts
Not applicable.
(x) Competition
The Company expects that, in the near term, the principal
competitors relative to treatment using the SoftLight system will be
electrolysis providers. The electrolysis market is characterized by many
small practitioners. Although the Company believes that it has a
significant competitive advantage over electrolysis, it does not have the
well-established network of client relationships that many electrologists
have. In addition, a number of laser manufacturers have announced that
they have filed applications with the FDA seeking to obtain clearance to
market a laser for hair removal. Although, to date, none of these
companies has been successful in obtaining such clearance, a number of
them are currently marketing substantially similar devices for
indications other than hair removal. The Company believes that certain of
these devices are being used "off-label" for hair removal by some
physicians in the U.S. and are being marketed for hair removal in some
foreign jurisdictions where regulatory clearance is not as stringent as
it is in the United States. The Company's products and services will also
compete with other hair-removal products. If the Company's technology is
accepted by the general public, the Company expects that others will seek
to develop similar technologies and products that may compete directly
with the SoftLight system.
The professional skin-care and bath-and-body products markets are
highly competitive. In selling its Salon product line, CBI competes with
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a number of small manufacturers and divisions of larger companies. The
competition in this market is fragmented with no one competitor
dominating the market. In the Custom Design and Store Brands groups, CBI
competes with numerous contract packaging companies that can prepare and
package custom formulations for customers. Some of these competitors have
substantially greater financial, marketing, and research and development
resources than those of the Company. CBI competes in these markets by
offering its customers exclusive product lines that the Company believes
can generally be sold at a lower price but with higher margins than CBI's
competitors.
(xi) Research and Development
During fiscal 1996, fiscal 1995, and 1994, the Company incurred
approximately $3,470,000, $3,151,000, and $2,324,000, respectively, of
internally sponsored research and development programs. Approximately 21
professional employees were engaged full-time in research and development
activities at September 28, 1996.
(xii) Environmental Protection Regulations
The Company believes that compliance with federal, state, and local
environmental regulations will not have a material adverse effect on its
capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
As of September 28, 1996, the Company employed 280 people.
(d) Financial Information about Exports by Domestic Operations
Financial information about exports by domestic operations is
summarized in Note 11 to Consolidated Financial Statements in the
Registrant's Fiscal 1996 Annual Report to Shareholders and is
incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Fiscal Year First Became
Name Age Executive Officer)
------------------- --- ---------------------------------------
John C. Hansen 37 President and Chief Executive Officer
(1995)
John N. Hatsopoulos 62 Vice President and Chief Financial
Officer (1992)
Dr. Paul E. Cain 48 Vice President (1993)
Mark H. Wurth 44 Vice President, Operations (1995)
Charles K. Wittenberg 33 Vice President, Business Development
(1996)
Raymond D. Sphire 37 Vice President, Real Estate Design and
Construction (1996)
Paul F. Kelleher 54 Chief Accounting Officer (1992)
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Each executive officer serves until his successor is chosen or
appointed by the Board of Directors and qualified or until earlier
resignation, death, or removal. Messrs. Hatsopoulos and Kelleher have
held comparable positions for at least five years with Thermo Electron.
Mr. Hansen has been President and Chief Executive Officer of the Company
since May 1995. From 1990 until joining the Company, Mr. Hansen was
President of Dolphin Acquisition Corp., which sells beauty products
through a chain of retail outlets. Dr. Cain has been an officer of the
Company since its acquisition of CBI in December 1993, president of CBI
since its inception in 1982, and from 1982 until CBI's acquisition by the
Company, Dr. Cain was a Director of CBI. Mr. Wurth has been Vice
President, Operations, of the Company since June 1995. From February 1994
until joining the Company, Mr. Wurth was Vice President, International
and Southern California Operations, of Jenny Craig, Inc. From September
1993 to February 1994, Mr. Wurth was Vice President/General Manager of
Paging Network of Los Angeles, Inc. From 1990 to June 1993, Mr. Wurth
held various positions at Nutri/System, Inc., most recently, as Chief
Executive Officer, Australian Nutri/System Pty. Ltd. Mr. Wittenberg has
been Vice President, Business Development of the Company since March
1996. From January 1994 until joining the Company, Mr. Wittenberg was
Associate General Counsel at Thermo Electron. From September 1990 until
December 1993, Mr. Wittenberg was an attorney with Hale and Dorr. Mr.
Sphire has been Vice President, Real Estate Development and Design, of
the Company since June 1996. From September 1995 until June 1996, Mr.
Sphire was Director of Real Estate and Design at the Company. From 1984
until joining the Company, Mr. Sphire was a partner in The Holt Company,
a real estate development company in California. Messrs. Hatsopoulos and
Kelleher are full-time employees of Thermo Electron, but devote such time
to the affairs of the Company as the Company's needs reasonably require.
Item 2. Properties
The Company occupies approximately 15,000 square feet of office and
laboratory space under a sublease from ThermoTrex at ThermoTrex's
facilities in San Diego, California, and occupies approximately 213,000
square feet of office and manufacturing space in Carrollton, Texas, under
a lease expiring in 2004, through its CBI subsidiary. The Company also
leases approximately 43,000 square feet of retail space in California,
Texas, Colorado, and Florida for Spa Thira salons, under leases expiring
from 2000 through 2006. The Company believes that these facilities are in
good condition and are suitable and adequate for its current operations.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Information concerning the market and market price for the
Registrant's Common Stock, $.01 par value, and dividend policy is
included under the sections labeled "Common Stock Market Information" and
"Dividend Policy" in the Registrant's Fiscal 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 6. Selected Financial Data
The information required under this item is included under the
sections labeled "Selected Financial Information" and "Dividend Policy"
in the Registrant's Fiscal 1996 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's Fiscal 1996 Annual Report to
Shareholders and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements and
Supplementary Data are included in the Registrant's Fiscal 1996 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the
caption "Election of Directors" in the Registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A, not later than 120 days after the close of
the fiscal year. The information concerning delinquent filers pursuant to
Item 405 of Regulation S-K is incorporated herein by reference from the
material contained under the heading "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Registrant's definitive proxy statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A, not later than 120 days after the close of the fiscal
year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive
Compensation" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership"
in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later
than 120 days after the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship
with Affiliates" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year.
13PAGE
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PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on
Form 8-K
(a), (d) Financial Statements and Schedules
(1) The consolidated financial statements set forth in the list
below are filed as part of this Report.
(2) The consolidated financial statement schedules set forth in
the list below are filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference
are set forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this
Item 14
Information incorporated by reference from Exhibit 13 filed
herewith:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment and
Common Stock Subject to Redemption
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not
applicable or not required, or because the required
information is shown either in the financial statements or
in the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
14PAGE
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed by the undersigned, thereunto duly authorized.
Date: December 5, 1996 THERMOLASE CORPORATION
By: John C. Hansen
-------------------
John C. Hansen
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated, as of December
5, 1996.
Signature Title
--------- -----
By: John C. Hansen President, Chief Executive Officer, and
--------------------- Director
John C. Hansen
By: John N. Hatsopoulos Vice President and Chief Financial
--------------------- Officer
John N. Hatsopoulos
By: Paul F. Kelleher Chief Accounting Officer and Director
---------------------
Paul F. Kelleher
By: Carliss Y. Baldwin Director
---------------------
Carliss Y. Baldwin
By: Elias P. Gyftopoulos Director
---------------------
Elias P. Gyftopoulos
By: Robert C. Howard Director
---------------------
Robert C. Howard
By: Anthony J. Pellegrino Director
---------------------
Anthony J. Pellegrino
By: Firooz Rufeh Director
---------------------
Firooz Rufeh
By: Kenneth Y. Tang Director
---------------------
Kenneth Y. Tang
By: Gary S. Weinstein Chairman of the Board and Director
---------------------
Gary S. Weinstein
By: Nicholas T. Zervas Director
---------------------
Nicholas T. Zervas
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Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of ThermoLase Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in ThermoLase
Corporation's Annual Report to Shareholders incorporated by reference in
this Form 10-K, and have issued our report thereon dated November 1,
1996. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14 on page 14 is
the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the
audits of the basic consolidated financial statements and, in our
opinion, fairly states, in all material respects, the consolidated
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
16PAGE
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SCHEDULE II
THERMOLASE CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Balance at Provision Accounts Balance
Beginning Charged to Written at End
Description of Period Expense Off Other of Period
-------------------------------------------------------------------------
Year Ended
September 28, 1996
Allowance for
Doubtful Accounts $256 $ 63 $ - $ - $319
Nine Months Ended
September 30, 1995
Allowance for
Doubtful Accounts $103 $153 $ - $ - $256
Year Ended
December 31, 1994
Allowance for
Doubtful Accounts $ 70 $ 40 $ (7) $ - $103
17PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
3.1 Certificate of Incorporation of the Registrant (filed as
Exhibit 3.1 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-78052] and incorporated herein by
reference).
3.2 By-Laws of the Registrant, as amended and restated (filed as
Exhibit 3.2 to the Registrant's Transition Report on Form
10-K for the transition period January 1, 1995 through
September 30, 1995, [File No. 1-13104] and incorporated herein
by reference).
10.1 Corporate Services Agreement dated as of January 13, 1993
between Thermo Electron Corporation and the Registrant (filed
as Exhibit 10.1 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-78052] and incorporated herein by
reference).
10.2 Thermo Electron Corporate Charter, as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to Thermo
Electron's Annual Report on Form 10-K for the fiscal year
ended January 1, 1994 [File No. 1-8002] and incorporated
herein by reference).
10.3 Tax Allocation Agreement dated as of January 13, 1994 between
ThermoTrex Corporation and the Registrant (filed as Exhibit
10.3 to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-78052] and incorporated herein by reference).
10.4 License Agreement dated as of February 10, 1993 between the
Registrant and Nicolai I. Tankovich (filed as Exhibit 10.4 to
the Registrant's Registration Statement on Form S-1 [Reg. No.
33-78052] and incorporated herein by reference).
10.5 Master Repurchase Agreement dated as of January 1, 1994
between the Registrant and Thermo Electron Corporation (filed
as Exhibit 10.5 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-78052] and incorporated herein by
reference).
10.6 Master Guarantee Reimbursement Agreement dated as of January
1, 1994 among Thermo Electron Corporation, ThermoTrex
Corporation, and the Registrant (filed as Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1 [Reg. No.
33-78052] and incorporated herein by reference).
10.7 Lease Agreement dated March 11, 1994 between Lincoln Property
Company Acquisition Fund Limited Partnership and CBI
Laboratories, Inc. (filed as Exhibit 10.7 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-78052] and
incorporated herein by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.8 Form of Indemnification Agreement for Officers and Directors
(filed as Exhibit 10.12 to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-78052] and incorporated
herein by reference).
10.9 Employment Agreement dated as of December 15, 1993 between
Dr. Paul E. Cain and CBI Laboratories, Inc. (filed as Exhibit
10.13 to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-78052] and incorporated herein by reference).
10.10 Form of Redemption Right and related Guarantee of Thermo
Electron (filed as Exhibit 10.14 to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-78052] and
incorporated herein by reference).
10.11 Nonqualified Stock Option Plan of the Registrant (filed as
Exhibit 10.8 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-78052] and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Registrant's Incentive
Stock Option plan is 2,800,000 shares, after adjustment to
reflect share increase approved in 1993 and 2-for-1 stock
splits effected in March 1994 and June 1995).
10.12 Incentive Stock Option Plan of the Registrant (filed as
Exhibit 10.9 to the Registrant's Registration Statement on
Form S-1 [Reg. No. 33-78052] and incorporated herein by
reference). (Maximum number of shares issuable in the
aggregate under this plan and the Registrant's Nonqualified
Stock Option Plan is 2,800,000 shares, after adjustment to
reflect share increase approved in 1993 and 2-for-1 stock
splits effected in March 1994 and June 1995).
10.13 Equity Incentive Plan of the Registrant (filed as Exhibit
10.81 to Thermo TerraTech Inc.'s (formerly Thermo Process
Systems Inc.) Annual Report on Form 10-K for the fiscal year
ended April 1, 1995 [File No. 1-9549] and incorporated herein
by reference).
10.14 Deferred Compensation Plan for Directors of the Registrant
(filed as Exhibit 10.10 to the Registrant's Registration
Statement on Form S-1 [Reg. No. 33-78052] and incorporated
herein by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.15 Directors' Stock Option Plan of the Registrant (filed as
Exhibit 10.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994 [File No.
1-13104] and incorporated herein by reference).
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of Thermo
Electron Corporation and ThermoTrex Corporation for services
rendered to the Registrant or such affiliated corporations.
Such plans were filed as Exhibits 10.21 through 10.44 and
10.73 through 10.76 to the Annual Report on Form 10-K of
Thermo Electron for the fiscal year ended December 30, 1995
[File No. 1-8002] and as Exhibit 10.19 to Trex Medical
Corporation's Annual Report on Form 10-K for the fiscal year
ended September 28, 1996 [File No. 1-11827] and are
incorporated herein by reference.
10.16 Stock Holding Assistance Plan and Form of Promissory Note.
10.17 Operating Agreement of ThermoLase Japan L.L.C. dated as of
January 22, 1996 between the Registrant and Fox River Japan
Partners, L.P. (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
10.18 License Agreement dated as of January 22, 1996 between the
Registrant and ThermoLase Japan L.L.C. (filed as Exhibit 10.2
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 30, 1995 [File No. 1-13104] and
incorporated herein by reference).
10.19 Option Agreement dated as of January 22, 1996 between the
Registrant and Fox River Japan Partners, L.P. (filed as
Exhibit 10.3 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 30, 1995 [File No.
1-13104] and incorporated herein by reference).
10.20 License Agreement dated as of October 30, 1995 between the
Registrant and Ronald G. Wheeland, M.D., Professional
Corporation (filed as Exhibit 10.4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
20PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.21 Management Agreement dated as of October 30, 1995 between the
Registrant and Ronald G. Wheeland, M.D., Professional
Corporation (filed as Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
10.22 Sublease Agreement dated as of October 30, 1995 between the
Registrant and Ronald G. Wheeland, M.D., Professional
Corporation (filed as Exhibit 10.6 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
10.23 Lease dated as of April 12, 1995 between the Registrant and
The Goldberg Family Trust (filed as Exhibit 10.7 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.24 Lease dated as of December 8, 1995 between the Registrant and
Canon Properties (filed as Exhibit 10.8 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December
30, 1995 [File No. 1-13104] and incorporated herein by
reference).
10.25 Lease dated as of January 17, 1996 between the Registrant and
Trammell Crow Equity Partners (filed as Exhibit 10.9 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1995 [File No. 1-13104] and incorporated
herein by reference).
10.26* Master Joint Venture Agreement dated as of October 30, 1996
among the Registrant, Franklin Holdings, S.A. and Yves
Micheli.
10.27* SoftLight and Spa Thira Franchise and License Agreement dated
as of November 8, 1996 between the Registrant and Medical
Supply & Service Co.
10.28* Equipment Lease Agreement for SoftLight Lasers dated as of
November 8, 1996 between the Registrant and Medical Supply &
Service Co.
21PAGE
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
11 Statement re: Computation of Earnings per Share.
13 Annual Report to Shareholders for the fiscal year ended
September 28, 1996 (only those portions incorporated herein
by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
* Confidential treatment requested as to certain portions of the
document, which portions have been omitted and filed separately with
the Securities and Exchange Commission.
Exhibit 10.16
THERMOLASE CORPORATION
STOCK HOLDING ASSISTANCE PLAN
(As adopted on July 19, 1996)
SECTION 1. Purpose.
The purpose of this Plan is to benefit ThermoLase
Corporation (the "Company") and its stockholders by encouraging
Key Employees to acquire and maintain share ownership in the
Company, by increasing such employees' proprietary interest in
promoting the growth and performance of the Company and its
subsidiaries and by providing for the implementation of the Stock
Holding Policy.
SECTION 2. Definitions.
The following terms, when used in the Plan, shall have the
meanings set forth below:
Committee : The Human Resources Committee of the Board of
Directors of the Company as appointed from time to time.
Common Stock : The common stock of the Company and any
successor thereto.
Company: ThermoLase Corporation, a Delaware corporation.
Stock Holding Policy : The Stock Holding Policy of the
Company, as adopted by the Committee and as in effect from time
to time.
Key Employee : Any employee of the Company or any of its
subsidiaries, including any officer or member of the Board of
Directors who is also an employee, as designated by the
Committee, and who, in the judgment of the Committee, will be in
a position to contribute significantly to the attainment of the
Company's strategic goals and long-term growth and prosperity.
Loans : Loans extended to Key Employees by the Company
pursuant to this Plan.
Plan : The ThermoLase Corporation Stock Holding Assistance
Plan, as amended from time to time.
SECTION 3. Administration.
The Plan and the Stock Holding Policy shall be administered
by the Committee, which shall have authority to interpret the
Plan and the Stock Holding Policy and, subject to their
provisions, to prescribe, amend and rescind any rules and
regulations and to make all other determinations necessary or
desirable for the administration thereof. The Committee's
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interpretations and decisions with regard to the Plan and the
Stock Holding Policy and such rules and regulations as may be
established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable in five equal annual installments from the
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payment of annual cash incentive compensation (referred to as
bonus) to the Key Employee by the Company, beginning with the
first such bonus payment to occur after the date of the Note
evidencing the Loan, and on each of the next four bonus payment
dates. Each Loan shall also become immediately due and payable
in full, without demand, upon the occurrence of any of the
events set forth in the Note; provided that the Committee may, in
its sole and absolute discretion, authorize an extension of the
time for repayment of a Loan upon such terms and conditions as
the Committee may determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
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The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
4PAGE
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EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
THERMOLASE CORPORATION
Promissory Note
$_________
Dated:____________
For value received, ________________, an individual whose
residence is located at _______________________ (the "Employee"),
hereby promises to pay to ThermoLase Corporation (the "Company"),
or assigns, ON DEMAND, but in any case on or before [insert date
which is the fifth anniversary of date of issuance] (the
"Maturity Date"), the principal sum of [loan amount in words]
($_______), or such part thereof as then remains unpaid, without
interest. Principal shall be payable in lawful money of the
United States of America, in immediately available funds, at the
principal office of the Company or at such other place as the
Company may designate from time to time in writing to the
Employee.
Unless the Company has already made a demand for payment in
full of this Note, the Employee agrees to repay the Company an
amount equal to 20% of the initial principal amount of the Note
from the payment of annual cash incentive compensation (referred
to as bonus) to the Employee by the Company, beginning with the
first such bonus payment to occur after the date of this Note,
and on each of the next four bonus payment dates. Any amount
remaining unpaid under this Note, if no demand has been made by
the Company, shall be due and payable on the Maturity Date.
This Note may be prepaid at any time or from time to time,
in whole or in part, without any premium or penalty. The
Employee acknowledges and agrees that the Company has advanced to
the Employee the principal amount of this Note pursuant to the
Company's Stock Holding Assistance Plan, and that all terms and
conditions of such Plan are incorporated herein by reference.
The unpaid principal amount of this Note shall be and become
immediately due and payable without notice or demand, at the
option of the Company, upon the occurrence of any of the
following events:
(a) the termination of the Employee's employment with
the Company, with or without cause, for any reason or for no
reason;
(b) the death or disability of the Employee;
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(c) the failure of the Employee to pay his or her
debts as they become due, the insolvency of the Employee,
the filing by or against the Employee of any petition under
the United States Bankruptcy Code (or the filing of any
similar petition under the insolvency law of any
jurisdiction), or the making by the Employee of an
assignment or trust mortgage for the benefit of creditors or
the appointment of a receiver, custodian or similar agent
with respect to, or the taking by any such person of
possession of, any property of the Employee; or
(d) the issuance of any writ of attachment, by trustee
process or otherwise, or any restraining order or injunction
not removed, repealed or dismissed within thirty (30) days
of issuance, against or affecting the person or property of
the Employee or any liability or obligation of the Employee
to the Company.
In case any payment herein provided for shall not be paid
when due, the Employee further promises to pay all costs of
collection, including all reasonable attorneys' fees.
No delay or omission on the part of the Company in
exercising any right hereunder shall operate as a waiver of such
right or of any other right of the Company, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or
waiver of the same or any other right on any future occasion.
The Employee hereby waives presentment, demand, notice of
prepayment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note. The undersigned hereby assents to any
indulgence and any extension of time for payment of any
indebtedness evidenced hereby granted or permitted by the
Company.
This Note has been made pursuant to the Company's Stock
Holding Assistance Plan and shall be governed by and construed in
accordance with, such Plan and the laws of the State of Delaware
and shall have the effect of a sealed instrument.
_______________________________
Employee Name: _________________
________________________
Witness
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
EXHIBIT 10.26
-------------
MASTER JOINT VENTURE AGREEMENT
This Master Joint Venture Agreement (the "Agreement") is
made as of this 30th day of October, 1996 by and among ThermoLase
Corporation, a Delaware corporation having its principal offices
at 10455 Pacific Center Ct., San Diego, California 92121-4339,
U.S.A. ("ThermoLase"), Franklin Holding, S.A., a French
corporation having its principal offices at 37, av. Franklin
Roosevelt, 75008 Paris, FRANCE ("Franklin Holding"), and Mr. Yves
Micheli, a citizen of Switzerland ("Micheli").
WHEREAS, the parties have agreed that it is in their mutual best
interests to form a joint venture for the commercialization of
certain laser-based technology for the removal of human hair and
the exfoliation or rejuvenation of skin in France; and
WHEREAS, the parties have agreed upon the terms of certain
agreements and documents necessary for the formation of such
joint venture; and
WHEREAS, the formation of the joint venture will occur no later
than November 15, 1996, upon the finalization of the drafting of
the contractual documentation and the completion of certain other
actions relating thereto;
NOW THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. No later than November 15, 1996 (the "Closing Date"),
subject to the provisions of this Agreement, the parties shall
have taken the following actions:
a. Franklin Holdings, Jacques Dessange Management,
Benjamin Dessange, Bernard Sagon, Michel Couvin and Daniel Conte
will form a French S.A. ("DBC Holding"), of which Franklin
Holdings will own at least 51%, and shall have applied for
registration of DBC Holdings with the Registry of Commerce of
Paris;
b. Micheli and DBC Holdings will form a French SA (the
"SA"), of which Micheli, either personally or through a holding
company, will own 15.8% and DBC Holdings will own 84.2%, and
shall apply or have applied for registration of SA with the
Registry of Commerce of Paris;
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c. ThermoLase and SA will form a French SAS (the "SAS")
having By-laws and a Shareholders Agreement in the forms attached
hereto as Exhibits A and B , respectively , and shall apply
have applied for registration of SAS with the Registry of
Commerce of Paris;
d. ThermoLase and SA will form a Delaware limited
liability company (the "LLC") having an Operating Agreement in
the form attached hereto as Exhibit C , and the Certificate of
Formation of the LLC will be filed with the Secretary of State of
the State of Delaware;
e. ThermoLase will license certain technology to the LLC
pursuant to a License Agreement in the form attached hereto as
Exhibit D, which shall be executed and delivered by each of them;
f. LLC will sublicense such technology to SAS pursuant to
a Sublicense Agreement in the form attached hereto as Exhibit E ,
which shall be executed and delivered by each of them;
g. Franklin Holdings will license certain trademark rights
in the name "Jacques Dessange" to SAS pursuant to a Trademark
License in form and substance acceptable to the parties and
ThermoLase, which shall be executed and delivered by Franklin
Holdings and SAS;
h. ThermoLase and SA will enter into an Option Agreement
in the form attached hereto as Exhibit F, which shall be executed
and delivered by each of them;
i. ThermoLase and Franklin Holdings will agree to supply
certain equipment and other materials to SAS pursuant to a Supply
Agreement in the form attached hereto as Exhibit G , which shall
be executed and delivered by each of them;
j. Franklin Holdings, acting in the name and on behalf of
SAS, will enter into a lease agreement for the rental of premises
for use as a first location of a Spa Thira in France, which lease
agreement shall be in form and substance reasonably acceptable to
ThermoLase;
k. Franklin Holdings, acting in the name and on behalf of
SAS, will enter into various agreements with an architect,
decorators and construction company or companies for the
reconditioning of the premises leased as described above, all on
terms and conditions reasonably acceptable to ThermoLase;
l. Each party shall have received an accurate translation
of each of the foregoing documents that has not been drafted in
its native language, and such translation shall be an accurate
reflection of the agreement of the parties. In addition, the
French and English translations of each agreement shall be
consistent in all respects.
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2. Each party agrees to use its best efforts to take the
actions set forth in Article 1 above by the Closing Date.
3. No modifications to this Agreement or to any exhibits hereto
shall be made except by a written instrument executed by all the
parties hereto or, in the case of an agreement, a form of which
is an exhibit hereto, the parties to such agreement;
modifications or adjustments will nevertheless be permitted
within reason until the Closing Date. A party's execution of any
of the agreements referenced above in a form modified from that
attached as an exhibit hereto shall presumptively evidence such
party's consent to the form of the agreement executed, including
all modifications thereto.
4. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, U.S.A., without regard to its
conflict of laws provisions. This Agreement may be executed in
one or more counterparts, which, when taken together, shall
constitute a single agreement.
5. Any dispute, controversy or claim arising out of or relating
to this Agreement or to a breach hereof, including its
interpretation, performance or termination, shall be finally
resolved by arbitration. The arbitration shall be conducted by
one (1) arbitrator fluent in French and English, to be appointed
by the presiding officer of the London Court of International
Arbitration ("LCIA"). The arbitration shall be conducted in
English and in accordance with the LCIA arbitration rules. The
arbitration, including the rendering of the award, shall take
place in London, England, and shall be the exclusive forum for
resolving such dispute, controversy or claim. The decision of
the arbitrator shall be binding upon the parties hereto, and the
expense of the arbitration (including without limitation the
award of attorneys' fees to the prevailing party) shall be paid
as the arbitrator determines. The decision of the arbitrator
shall be executory, and judgment thereon may be entered by any
court of competent jurisdiction. Multiple arbitration
proceedings relating to the same subject matter may be joined in
the same proceeding.
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IN WITNESS WHEREOF, this Agreement has been executed by the
parties as of the date first written above:
THERMOLASE CORPORATION FRANKLIN HOLDINGS, S.A.
Charles K. Wittenberg Jacques Dessange
--------------------------- ------------------------
Charles K. Wittenberg
Vice President
YVES MICHELI
Yves Micheli
---------------------------
[Signature Page to Master Joint Venture Agreement]
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EXHIBIT A
S.A.S.
A Simplified Joint Stock Company
with a capital of frs. 250,000
and registered offices at:
37, avenue Franklin D. Roosevelt
75008 PARIS
The undersigned:
-The ThermoLase Corporation, a joint stock company, created
in accordance with the legal provisions of the State of Delaware,
United States of America, with its main offices located at 10455
Pacific Center Court, San Diego, California 92101, United States
of America, and a share of capital of US $ , corresponding
to the equivalent of French francs on the date of this
instrument, i.e., a sum amounting at least to the sum stipulated
under Article 262.1 of the law governing trade companies,
represented for the purposes of this instrument by its Chairman,
Mr. John Hansen, duly empowered for the purposes of this
instrument by decision of its Board of Directors in its meeting
of , 1996 (referred to below as "ThermoLase"),
-the (Dessange Holding) company, a joint stock company with
a share capital of frs. 1,500,000, i.e., a sum amounting at least
to the sum stipulated under Article 262-1 of the law governing
trade companies, with registered offices at 37, avenue Franklin
D. Roosevelt, 75008 Paris, represented by its Chief Executive
Officer for the purposes of this instrument.
Prior to drawing up and signing the Articles of Incorporation,
the undersigned parties declare, each to the extent that it is
concerned,
That they have agreed to create a simplified joint stock company
between them, without any public issue. The name of this company
is , and its capital is frs. 250,000, divided
into 1,000 shares of frs. 250 each, all cash shares, fully paid
up at their face value.
Each of the future partners has paid the sum corresponding to the
amount of its subscription.
The sum of frs. 250,000 corresponding to 1,000 shares of a face
value of Frs. 250 each, fully subscribed and paid up at their
face value, was deposited at the along with a list of the
subscribers.
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Payments were established in the depository's certificate, issued
on , 1996, upon presentation of the list of the future
partners, mentioning the shares of subscribed and the sums paid
by each of them.
The undersigned parties then declared, after having examined the
list of the future partners, that the sums paid by them comply
with the statements contained in said list and that they
confirmed their subscription of the shares constituting the share
capital, up to an amount of their respective payments, i.e.,
Amount of the
No. of Subscription Payments
Subscribers Shares (in FF.) (in FF.)
ThermoLase 500 125,000 125,000
Corporation
(Dessange Holding) 500 125,000 125,000
TOTAL 1,000 250,000 250,000
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ARTICLES OF INCORPORATION
CHAPTER I
FORM - OBJECT - NAME - REGISTERED OFFICES -
TERM - COMPANY YEAR
Article I - Forum
The company is a simplified joint stock company, governed by the
provisions of law no. 94-1 of January 3, 1994, law no. 66-537 of
July 24, 1966 and by these Articles of Incorporation. It may not
make a public issue.
Article 2 - Object
The company's object in France (Metropolitan France and France's
Overseas Departments except France's Overseas Territories) is to
exercise, either directly or indirectly, health care activity
such as beauty care and in particular the removal of body hair
and skin care, by using technologies requiring laser, including
requiring, if any, licenses or franchisees.
All such, for itself as well as on behalf of third parties or by
participating, by any way, such as by way of setting up a
company, by subscription, by sleeping partnership, by merger and
merger-acquisition, by loan, purchase or sale of securities or
company shares, by "location-g_rance" of all on-going business
("fonds de commerce"), by sale or loan of all or part of its
goods and real property and personal property rights, or by any
other way.
And, generally speaking, all financial, commercial, industrial,
personal and real operations which may further or pertain to this
object, directly or indirectly.
Article 3 - Name
The name of the company is .
------------------------
All acts and documents issued by the company and intended for
third parties must indicate the company's name immediately and
legibly preceded or followed by the words "a simplified joint
stock company" or the initials "SAS" and a statement of the
amount of the share capital and the company's registration number
in the Trade & Companies Register.
Article 4 - Registered Offices
The registered offices are at 37, avenue Franklin D. Roosevelt,
75008 Paris.
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They may be transferred to any other place in France. A
collective decision of the partners, made in accordance with
Chapter IV of these Articles of Incorporation, is necessary to
transfer the offices outside the geographic limits of the
department of the registered offices.
Article 5 - Term
The company's term has been set at ninety-nine (99) years
beginning on the date of its registration in the trade Register,
except in the event of advance dissolution in accordance with the
provisions of Article 37 of these Articles of Incorporation, or
an extension by collective decision of the partners, ruling on
the conditions of Article 24 below.
Article 6 - the Company Year
The company year begins on (January 1st) and ends on (December
31st) of each year.
As an exception, the first company year shall begin on the date
of the company's registration in the Trade & Companies Register
and end on (December 31st, 1997).
CHAPTER II
CAPITAL - SHARES
Article 7 - Capital
The share capital has been set at the sum of frs 250,000. It is
divided into 1,000 shares of frs. 250 each, all of the same
category and fully paid up.
Article 8 - Modification of the Share Capital
The share capital may be increased or reduced on the conditions
stipulated by law and these Articles of Incorporation.
Article 9 - Paying up of Shares
All share subscriptions in cash must be accompanied by immediate
payment of the entire amount of the face value of the shares
subscribed.
Article 10 - Form
Shares are registered.
Ownership of a share is the result of its registration in the
name of the holder (or holders) in the accounts kept for this
purpose by the company, on the conditions and according to the
methods stipulated by law for joint stock companies.
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At the partner's request, a certificate testifying to the
registration of the share in this account is issued to him (it)
by the company.
Article 11 - Indivisibility of shares
Shares are indivisible in the company's eyes.
Joint owners of shares are obliged to be represented on the
Company by one person selected among them, considered as the sole
owner, or by a sole representative. In the event of
disagreement, the sole representative may be appointed by the
court, at the request of the most diligent co-owner.
The voting right attached to a share belongs to the beneficial
owner in ordinary shareholders meetings and to the bare owner in
extraordinary shareholders meetings. However, the shareholders
may agree among themselves to distribute otherwise the exercise
of the voting rights at the shareholders meetings. In this case,
they shall inform the company of their decision by registered
letter sent to the registered offices.
Article 12 - Rights & Obligations attached to the shares
1. General rights & obligations
All shareholders are entitled to information on the company's
smooth running and discovery of certain company documents, on the
dates and conditions stipulated by law and the Articles of
Incorporation.
The shareholders bear the burden of loss only up to the amount of
the sums they have brought into the company.
The possession of a share automatically implies compliance with
the shareholders' decisions and with these Articles of
Incorporation.
The rights and obligations attached to the share follow it
wherever it goes.
2. Voting rights and the right to take part in shareholders
meetings.
The voting right attached to capital or dividend shares is
proportional to the share in the capital they represent and each
share entitles its owner to one vote.
3. Rights to the company's profit and assets.
A share entitles its owner to a share in the profits and reserve,
or in the company's assets at the time of any distribution,
amortization or allotment during the company's lifetime or during
its liquidation, which is proportional to the capital it
represents.
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Article 13 - Conveyance of shares
1. Terms & conditions for conveying shares
The conveyance of shares is carried out in the eyes of the
company or third parties by means of a transfer from the
assignor's account to the assignee's account, upon presentation
of a transfer order.
This transfer is entered beforehand in a register with initialed,
consecutively numbered pages, held chronologically, known as the
"Share Transfer Register."
The company is obliged to register these transfers as soon as it
receives the order for the transfer of securities and within 6
days thereof at the latest.
The transfer order, drawn up on a form provided or approved by
the company, is signed by the assignor or its (his)
representative.
2. Restrictions on the conveyance of shares
All transfers of shares even between shareholders are prohibited
for a period of 10 years, imposed by law, as of the signing of
these Articles of Incorporation, except if all shareholders
agree.
The term "transfer" means any form of conveyance of shares, in
full ownership, bare ownership or beneficial ownership, in any
form whatsoever and according to any terms and conditions
whatsoever, for valuable consideration or free of charge and in
particular, without limitation, any contribution in kind, partial
business transfer or swapping of the company's shares.
The term "share" includes all existing shares or shares issued
subsequently by the company;
Article 14 - Change of Control
All partners shall inform the company of the amount of their
share capital, the list of their owner partners and the breakdown
of their capital among them. When one or several of these
partners are legal entities themselves, the notice shall contain
the breakdown of the capital of these legal entities, it being
understood that the result of this provision is not to obligate
the partners to provide information on all the shareholders of
listed companies.
All change concerning this information, as well as any of the
events referred to in paragraph b) below must be notified to the
company within 30 days. All such notices shall be made by
registered mail with return receipt.
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CHAPTER III
THE ADMINISTRATION & CONTROL OF THE COMPANY
Article 15 - The Chairman
The Chairman is a real person who shall not be over 80, and need
not be a partner. The Chairman is appointed by the Board of
Directors, on proposal by Dessange Holding among the members of
the Board of Directors which were appointed by Dessange Holding.
He is appointed for an undetermined period of time.
The Chairman's duties shall automatically cease if one of the
following events occurs:
- death or disability
- resignation
- loss of his seat on the Board of Directors
-ad nutum dismissal by Board of Directors. This dismissal
will not have to be justified and will give no right to
indemnification.
In the event that one of the cases referred to above occurs, a
new Chairman is appointed by decision of the Board of Directors,
on proposal by Dessange Holding among the members of the Board of
Directors which were appointed by Dessange Holding.
Article 16 - Power of the Chairman - Remuneration
I. Powers
The Chairman represents the company in the eyes of third parties,
and is vested with the broadest powers to act under all
circumstances on the company's behalf, within the limit of the
company's object. He manages the company under the control of
the Board of Directors and prepares, among other things, the
Budget and the annual development plan which he submits to the
Board of Directors for approval, and which he is responsible for
executing.
However, internally and without it being possible that this
clause be put forth or opposed to third parties, the powers of
the Chairman are limited by the powers which these Articles of
Incorporation and the partners' subsequent collective partners'
decisions reserve now or in the future for other company organs.
In particular, the following must obtain the prior approval of
the Board of Directors.
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-the sale of tangible real property, the total or partial sale of
equity interests, the creation of sureties and of securities,
endorsements and guarantees;
-the purchase or sale of assets or the commitment to make any
expenditure for a unit amount exceeding frs. (100,000), inasmuch
as this commitment, this acquisition or this sale is not provided
for in the Budget;-the instituting of court proceedings or the
settlement of all disputes for a unit amount in principal of frs.
100,000 or more, or for essential matters linked to the
professional regulations applicable to the activities of the
company or its subsidiaries, it being understood that the Board
of Directors shall be informed in all events of all procedures
pending the date of any Board meeting;
-the signing of any contract with a subsidiary or with one of the
partners of the company, or with a company affiliated with Thermo
Electron or with Franklin Holding and the modification or waiver
of any rights granted under such contracts;
-and generally speaking, all operations not provided for in the
Budget apt to have a substantial effect on the company's
activity;
The Chairman convenes Shareholders Meetings, establishes their
Agenda and executes their decisions under the control of the
Board of Directors.
The Chairman may, with the prior authorization of the Board of
Directors, grant all powers to a third party for one or several
specific purposes, in the respect of the foregoing provisions.
The representatives of the Works Committee shall exercise with
the Chairman the rights defined in Article L.432-6 of the labor
regulations.
2. Remuneration
The Chairman's duties remuneration shall be determined by the
Board of Directors.
Article 17 - The Board of Directors
1. Composition
The Company is managed by a Board of Directors composed of six
real persons who shall not be over the age of 80, and who are not
necessarily partners, appointed by the shareholders as
stipulated hereafter.
Every shareholder holding:
-at least 1% and less than 20% of the company's capital may
appoint one Director:
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-at least 20% and less than 49% of the company's capital may
appoint two Directors;
-at least 49% and no more than 51% of the company's capital
may appoint three Directors;
-more than 51% and no more than 80% of the company's capital
may appoint four Directors;
-more than 80% and no more than 99% of the company's capital
may appoint five Directors;
-more than 99% of the company's capital may appoint six
Directors.
The term in office of members of the Board of Directors is one
year, renewable indefinitely. The term ends at the end of the
Ordinary Shareholders Meeting called to rule on the year's
accounts, held the year during which the mandate expires, or
pursuant to death, disability, resignation or the dismissal of
the member of the Board of Directors.
Any member of the Board of Directors may resign by registered
letter with return receipt sent to the Chairman. The resignation
comes into effect on the date of the receipt of the registered
letter (the return receipt constitutes proof thereof) or in the
absence of receipt on the day of the first presentation, unless
the letter of resignation stipulates otherwise.
Any member of the Board of Directors can be dismissed at any time
by the partner who has appointed him, without it being possible
that such dismissal call for the payment of damages, by
registered mail with return receipt sent to the dismissed member,
and to the Chairman for information and to each of the other
members of the Board of Directors. Dismissal comes into effect
on the date of the receipt of the registered letter by the
dismissed member of the Board of Directors (the return receipt
constitutes proof) or in the absence of receipt thereof on the
date of the first presentation, unless the letter of dismissal
provides otherwise.
The partner who has appointed the director whose duties end for
any reason whatsoever must, within thirty days, appoint a new
director and inform the other members of the Board of Directors
by registered letter with return receipt.
2. Smooth running of the Board of Directors
a) Time between meetings - Voting method
The Board of Directors meets as long as the company's interests
so require.
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The Board meets regularly on the dates and in the place
determined during previous Board meetings. Furthermore, the
Board meets by notice of the Chairman or of two of its members
who have taken this initiative to call the meeting.
The decisions of the Board of Directors are made either during a
meeting held in the registered offices or in any other place in
the notice (with the participation, when appropriate, of certain
directors, by teleconference), or by teleconference (by telephone
or audiovisual), or are the results of the consent of all the
Board members expressed in an act.
b) Notice of meetings
The members of the Board of Directors are convened by simple
letter, telex or fax, sent eight days prior to the date of the
meeting and mentioning the meeting's date, hour, place and
Agenda.
The notice sent to the directors consulted in a teleconference
vote is made by all means, eight days in advance. The
consultation may nonetheless take place immediately if all the
partners take part therein. The Agenda is then determined by
joint agreement of the partners.
No action for annulment due to a failure to convene is admissible
when all the Board members are present or represented.
c) Quorum
The Board makes valid decisions only if at least two thirds of
the directors are present or represented, and if at least one
director appointed by (Dessange Holding) and at least one
administrator appointed by ThermoLase Corporation are present.
Any director may grant powers to another director, even by simple
letter or telegram, to represent him at a meeting of the Board of
Directors.
The Board of Directors or a Committee created by the Board of
Directors may invite a third person, at a majority of the Board
or Committee members present, to participate in one of its
meetings without any voting right.
Furthermore, each partner may appoint two persons responsible for
advising him, who may attend all meetings of the company's organs
in an advisory capacity, inasmuch as these persons undertake to
respect the confidentiality of the information or documents to
which they might have access. The appointment and dismissal of
these advisors, in order to be binding upon the company, is
notified to the Board of Directors in writing.d) Majority
Decisions are made by a positive vote of four or more members of
the Board of Directors (present or represented), except when
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these Articles of Incorporation state otherwise. In the event of
a tie, the Chairman's vote is not the casting vote.
The following decisions are made at a unanimous vote of the six
members of the Board of Directors (present or represented):
-unless they are provided for in the Budget or Development Plan,
the creation and liquidation of all subsidiaries for managing a
spa, the signing of all loan agreements with such a subsidiary,
the financing of all increases in the capital of such a
subsidiary.
-unless they are provided for in the Budget or Development Plan,
the acquisition or sale of securities and the taking out of
interests, with the exception of current cash management
operations on the financial market for a total amount of less at
all times than FRF 500,000;
-the adoption and, as the case may be, the modification of the
company's annual budget (referred to below as "the Budget");
-the appointment or replacement of the company's statutory
auditors, auditing firm or bankers;
-unless they are provided for in the Budget or Development Plan,
investment decisions for an amount exceeding FRF 500,000;-unless
they are provided for in the Budget or the Development Plan, the
sale, transfer, rental, exchange, pledging or allocation as
surety of all or a portion of the company's assets or business,
as well as any surety, endorsement or guarantee granted in favor
of a third party, including subsidiaries;
-unless it is provided in the Budget or Development Plan, the
subscribing of short, middle or long-term loans for an amount
exceeding FRF 500,000;
-the approval and as the case may be the modification of the
annual development plan (referred to below as "the Development
Plan");
-the presentation to the General Meeting of the Partners of a
proposal to liquidate the company or to modify its Articles of
Incorporation.
-unless it is provided for in the Budget or in the Development
Plan, the lending, rental, allocation, transfer or sale of any
copyrights, except in the case of the Company's normal, current
operations.
-unless it is provided for in the Budget or the Development Plan,
the signing of any contract with a subsidiary or a partner of the
company, or with any subsidiary or company affiliated with a
partner or with any person owning a share in a partner's capital.
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-decisions pertaining to the hiring of personnel, the signing of
service agreements, or the dismissal of company executives or
managers of each subsidiary, with the exception of the contracts
of this nature referred to in the Development Plan or within the
limits stipulated in the Budget.-the distribution of dividends,
subject to the ratification of the General Meeting of the
Partners in legal forms.
-the definition of the powers of the bank's signature.
-unless provided for in the Budget or in the Development Plan,
the granting of loans to third parties for an amount exceeding
FRF 50,000;
-unless provided for in the Budget or in the Development Plan,
the signing of contracts of over one year, involving expenditures
(or the equivalent thereof in kind) for an amount exceeding FRF
250,000;
-unless provided for in the Budget or in the Development Plan,
the authorization, conclusions or execution of any fact or
contract which might result in a modification in the distribution
of the capital between ThermoLase Corporation and (Dessange
Holding).
-the authorization to issue a statement of the company's
insolvency;
e) Minutes
The proceedings of Meetings of the Board of Directors are
recorded in minutes drawn up in accordance with the legal
provisions in force, and signed by the Chairman (or in his
absence by the Chairman of the Meeting) and at least one other
member of the Board appointed by ThermoLase Corporation.
When decisions are made by teleconference, the Chairman draws up,
dates and signs, as rapidly as possible, the text of the minutes
of the meeting containing the (i) identify of the voting
directors, when appropriate the director represented by the
latter (ii) that of the directors not taking part in proceedings
(non-voting) as well as, (iii) for each motion, the identify of
the directors with their respective votes (for or against).
The Chairman sends out a copy of the minutes of the meeting by
regular mail. The directors return their original copy to the
Chairman after signing it, by regular mail, at their earliest
convenience. The date of the last signature received making it
possible to achieve the majority or the unanimous vote required
for adopting a motion shall be considered as the date of the
adoption of the motion at issue.
Proof of the mailing and receipt of the minutes to the directors
and the copies returned signed by the directors as indicated
above are kept in the registered offices.
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When a decision is the result of the approval of all the members
of the Board expressed in an act, a copy of this act is appended
to the minutes of the board meeting.
Article 18 - Powers of the Board of Directors
The Board of Directors, a collegial organ, is responsible for
administering and managing the company within the limits of the
company's object, the provisions of these Articles of
Incorporation and the legal provisions appearing in the Article
262-10 of the law governing trade companies reserving certain
prerogatives to the body of partners as a whole, and within the
limits of the exclusive power of representation with respect to
third parties which the law confers upon the Chairman. In
particular, it is responsible for adopting the annual Budget and
supervises the execution thereof by the Chairman.
a) Committees
The Board of Directors may decide to create committees composed
of several members of the Board of Directors, responsible for
studying or dealing with items submitted to it by itself or its
Chairman. The Board of Directors determines the composition and
prerogatives of the committee, which exercises them under its
responsibility.
The committees must record their proceedings in a register in the
form of minutes and must communicate this register to the Board
of Directors along with any report which the latter might request
of them;
No committee shall have the power to make decisions which require
a unanimous vote of the Board of Directors and in particular
those listed in article 17-2-d), above.
b) Delegation of Powers:
The Board of Directors may, at a unanimous vote, delegate all
special and temporary powers to a third party, to perform all
acts or sign all contracts on the company's behalf, within the
limits of the powers reserved to the General Meeting of the
Partners and the Chairman pursuant to law and these Articles of
Incorporation.
Article 19 - Remuneration of members of the Board of Directors
The Directors' duties are not remunerated. However, they are
entitled to reimbursement of their expenses upon presentation of
documents in proof and within the limits which the Board of
Directors may decide to set.
The members of the Board of Directors may receive no remuneration
from the Company, be it permanent or otherwise, other than that
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stipulated in the preceding paragraphs, unless they are bound to
the company by an employment contract on the conditions
authorized by law.
Article 20 - Agreements between the Company and a member of the
Board of Directors
Any agreement signed between the company and one of the members
of its partners who are members of the Board of Directors, either
directly or indirectly or through an intermediary party, is
subject to the prior approval of the Board of Directors.
The same is true of agreements between the company and another
company if one of the members of the Board of Directors of the
company is a partner, manager, director, managing director,
member of the Board of Trustees or of the Management Board of the
other company.
The member of the Board of Directors concerned shall not take
place in the vote concerning the authorization.
These agreements are authorized, approved by the partners on the
conditions provided under Article 262-11 of the law of July 24,
1966.
Article 21 - Statutory Auditors
The company's accounts are audited by one or several statutory
auditors in office, performing their duties in accordance with
the law.
One or several alternate statutory auditors, called upon to
replace the auditors in office in the event of refusal,
hindrance, resignation, death or replacement, are appointed at
the same time as the acting statutory auditors and for the same
term.
The Statutory Auditors are appointed by decision of the
shareholders' meeting.
The statutory auditors are appointed for six financial years,
their terms expire at the end of the collective decision of the
partners ruling on the accounts of the sixth financial year.
The statutory auditors are always re-eligible. In the event of
their fault or hindrance, the statutory auditors may, at the
request of the Chairman, the works committee, of one or several
partners representing at last one tenth of the share capital, be
removed from office prior to the normal expiry thereof, by court
decision made on the conditions established by decree.
A statutory auditor appointed to replace another shall remain in
office only until the expiry of his predecessor's term.
Statutory auditors are vested with the duties and powers
conferred upon them by law. They must be informed of any
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procedure for consulting the partners and must receive the same
documents as those sent to the partners.
The fees of the Statutory Auditors are paid by the Company.
CHAPTER IV
COLLECTIVE DECISION OF THE PARTNERS
Article 22 - Object
1. The following decisions fall within the partners' exclusive
prerogatives:
- the extension or modification of the company's object
- the transfer of the registered offices outside the
department
- appointment of Statutory Auditors
- the approval of the annual accounts and the allocation
of results
-the approval of the agreements signed between members of
the Board of Directors and the company, in accordance with
Article 262-11 of the law of July 24, 1966;
-the increase, amortization or reduction of the share
capital, in particular in the cases stipulated in Article 13
above.
-merger, partial business transfer or split;
-the transformation of the company;
-the dissolution of the company in the cases referred to in
Article 37, paragraph 1;
-the modification of the provisions governing restrictions
of share transfers and the terms and conditions of such
transfers;
-more generally speaking, any amendment of the Articles of
Incorporation, unless otherwise stipulated herein,
2. Any other direction, including cases entailing a statutory
amendment, may be made by the Board of Directors on the
conditions stipulated in Article 17 above.
Article 23 - Frequency of Consultations
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The partners must be consulted at least once per annum, within
six months following the close of the company year, to approve
the accounts of the year which has ended.
Other collective decisions are made at any time of the year.
Article 24 - Majority
Unless otherwise expressly stipulated in the Articles of
Incorporation or by the law, collective decisions are adopted by
a number of partners representing three-quarters of the shares
composing the share capital.
Article 25 - Voting Rights
The voting rights attached to the capital shares are proportional
to the share in the capital they represent, and each share
entitles its owner to one vote.
(Exercise of the voting right attached to the shares of a
Modified Partner is suspended as indicated in Article 14 of the
Articles of Incorporation.)
Article 26 - Methods for Consulting Partners
The partners are consulted at the initiative of the Chairman, two
members of the Board of Directors, a partner or the Statutory
Auditor.
Collective decisions are made either in General Meetings of the
Partners, convened in the registered offices, or in any other
place indicated in the notice, or by the Partners' signing of
written resolutions or a private instrument, or by
teleconferences (by telephone or audiovisual). The person who
has taken the initiative of consulting the partners determines
the method of consultation.
Article 27 - General Meetings
The convening of a General Meeting is optional.
The partners are convened to general meetings by simple letter
sent fifteen days prior to the meeting, and mentioning the date,
hour, place and Agenda of the meeting. The Statutory Auditor is
convened on the same conditions.
Each partner may be represented by a person of his choice, be he
a partner or not, vested with the powers for this purpose.
When all the partners are present or represented, if they
expressly accept, the general meeting can meet validly without a
notice. The Agenda is then determined by joint agreement of the
partners.
Article 28 - Written Motions
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Decisions may also be made by written consent of the Partners.
The draft of the proposed motions is sent by the person who has
initiated the consultation of the partners, to each partner and,
for information, to the company and the Statutory Auditor by
registered mail with return receipt, regular mail, fax,
electronic mail or by any other means establishing proof of
mailing and receipt.
The partners are entitled to fifteen days as of the date of the
receipt of the motions to sign the draft motion if they agree and
send it back to the Company's Chairman by registered mail with
return receipt, regular mail or fax. A partner who has not sent
back his reply within the foregoing period shall be considered as
having refused the proposed motions.
The date of the last written motion received enabling a majority
or unanimous vote required for adopting the motion, shall be
considered as the date of the adoption of the motion concerned.
During the reply period, any partner may demand all additional
explanations from the person who has taken the initiative to
consult the partners or, as the case may be, the Company's
Chairman.
Proof of the mailing and receipt of the draft motions and the
return copies of these motions signed by the partners as
indicated above, shall be kept in the registered offices.
Articles 29 - Private Instruments
All collective decisions of the partners may also be adopted by
the partners' signing of a private instrument containing the
draft motions proposed.
Article 30 - Decisions made by Teleconference (telephone or
audiovisual)
The Partners consulted by teleconference are convened by any
means, eight days prior to the consultation.
The consultation may nonetheless be carried out immediately if
all the partners take part therein. The Agenda is then
determined by joint agreement of the parties.
When decisions are made by teleconference, the Chairman draws up
the minutes of the meeting, at his earliest convenience,
indicating:
-the identify of the partners voting, as the case may be the
partner which the latter represents; that of the partners not
taking part in proceedings (non-voting);-and, for each motion,
the identity of the partners with the content of their respective
votes (adoption or rejection).
The Chairman sends out a copy of the minutes of the general
meeting by regular mail. The partners return their original copy
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to the Chairman after signing it, by regular mail, at their
earliest convenience. The date of the last signature received
enabling the majority or unanimous vote required to adopt a
motion, shall be considered as the date of adoption of the motion
at issue.
Documents in proof of the mailing and receipt of the minutes to
the partners and the copies returned signed by the partners as
indicated above, are kept in the registered offices.
Article 31 - Minutes
The decisions made by the partners in general meetings are
recorded in minutes indicating the method of consultation, the
place and date of the meeting, the identify of the partners
present or their proxies, the documents and reports submitted to
the meeting for discussion, a statement of the discussions, the
texts of the motions put to a vote and the results of the votes.
Minutes are signed by the Chairman of the meeting and a
ThermoLase Corporation representative.
The decisions adopted by signing written motions are recorded in
the minutes drawn up and signed by the Chairman. These minutes
mention the use of this procedure and the partners' responses are
appended thereto.
The decisions adopted by signing a private instrument are
recorded in minutes drawn up and signed by the Chairman. A copy
of the private instrument is appended to the minutes. The
original of the private instrument is kept in the company's
registered offices.
The decisions adopted by teleconference are recorded in the
minutes drawn up and signed by the Chairman and the partners, as
indicated in Article 25 above. The minutes shall mention the use
of this procedure.
Article 32 - Information Provided to the Partners
Regardless of the method of consultation, all consultations of
the partners shall be preceded by information containing all the
documents and information commonly sent to the shareholders of a
joint stock company or held at their disposal in the registered
offices on the conditions stipulated in Article 444 of law no.
66-537 of July 24, 1966 and 133 and 135 of enactment No. 67-236
of March 23, 1967, the reports of the Board of Directors are
replaced, for the purposes of this instrument, by the Chairman's
reports.
This information shall be communicated to each partner at least
fifteen days prior to the date of the consultation.
CHAPTER VI
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ACCOUNTS - ALLOCATION & DISTRIBUTION OF RESULTS
Article 33 - Annual Accounts
Regular accounts are kept of the company's operations, in
accordance with law. The Chairman draws up a management report
on the company's management during the past year.
At the close of each year, the Chairman draws up the balance
sheet, the income statement and the appendix, in accordance with
law.
Article 34 - Allocation & Distribution of Results
The Income Statement, which recapitulates the year's proceeds and
costs, indicates, on the basis of the difference between these
two items, after deducting amortization and provisions, the
year's profits or losses.
At least one-twentieth of the year's profits, minus, as the case
may be, previous losses, is deducted to create the reserve known
as the "legal reserve." This levy ceases to be mandatory when
the reserve amounts to one-tenth of the share capital; it must be
resumed when, for any reason whatsoever, the reserve falls below
this percentage.
The distributable profit is made up of the year's profit, minus
previous losses, and sums to be deposited in reserve accounts
pursuant to law and the Articles of Incorporation, plus the
profit carried forward.
The partners are entitled to levy the sums they deem appropriate
from the distributable profit, to allocate them to the
appropriation of all optional, ordinary or extraordinary
reserves, or to carry them forward, all in the proportions they
determine. The balance, if any exists, is distributed in equal
amounts among all the shares as dividends.
Furthermore, the partners may decide to distribute sums levied
from optional reserves, either to provide or supplement a
dividend, or as an exceptional distribution. In the latter case,
the decision expressly indicates the reserve items from which the
levies are made.
Except in the case of a reduction of the capital, no sums shall
be distributed to the partners when shareholders equity has
fallen or would fall, at the date of such deduction, below the
amount of the capital plus the reserves of which the law or these
Articles of Incorporation prevent the distribution.
The revaluation differential may not be distributed. It cannot
be totally or partially incorporated into the capital.
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Losses, if any exist, are carried forward, after the approval of
accounts, to be charged to the profits of subsequent years, until
they are entirely wiped out.
Article 35 - Methods for Paying Dividends
The methods for paying dividends are determined by collective
decision of the partners.
The payment of dividends shall take place within a maximum period
of nine months after the close of the year, unless this period is
extended by permission of the court.
Dividends may be paid in cash, in kind or in shares, including
shares in the company.
The distribution of any interim dividends, in cash or in kind or
in shares, including shares in the company, may take place at any
time, in accordance with law.
CHAPTER VI
DISSOLUTION - LIQUIDATION - TRANSFORMATION
Article 36 - Shareholders Equity Falling Below One Half of the
Share Capital
If, due to losses ascertained in accounting documents, the
company's shareholders equity falls below one half of the share
capital, the Chairman is obliged, within four months following
the approval of the accounts revealing these losses, to consult
the partners for the purpose of deciding whether it is fitting to
dissolve the company in advance.
If dissolution is not pronounced, the company is obliged, no
later than at the close of the second company year following the
year during which the losses were ascertained, and subject to the
provisions of Article 71 of the law of July 24, 1966, to reduce
its capital by a sum amounting at least to the sum of the losses
which it has not been possible to charge to reserves, if within
this period, the shareholders equity has not been brought back up
to at least one half of the share capital.
Failing consultation of the partners, all parties interested may
request that the Court dissolve the Company. The same is true
if the provisions of paragraph 2 above have not been applied.
Article 37 - Advance Dissolution
1. The company's dissolution occurs at the expiry of its term,
or prior thereto, by decision of the partners, adopted at a
majority of three-quarters of the shares composing the share
capital.
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2. The company is dissolved automatically if one of the
following events occurs:
a)judgment ordering receivership or liquidation or any other
bankruptcy procedure against the company or one of its partners,
subject to the regulations which apply in bankruptcy matters
(unless otherwise decided by all the partners not affected by
this situation confirming the Company's activity).
b)judgment adopting a plan for the total sale of the assets,
pronounced against one of the company's partners (unless
otherwise decided by all the partners not affected by this
situation confirming the Company's activity).
c)dissolution, for any cause whatsoever (other than a merger or
split) of one of the company's partners (unless otherwise decided
by all the partners not affected by this situation conforming the
Company's activity).
d) dissolution of ThermoLase France LLC
e)in the event of the loss by one of the partners of its status
partner (by means of the sale of all of its shares or otherwise),
unless otherwise decided by the remaining partners, owning at
least 50% of the company's shares, inasmuch as the latter have
the possibility of approving one or several new partners on
conditions determined by them.
3. Furthermore, the company is dissolved:
a)At the request of ThermoLase Corporation notified to the other
partners by registered mail with return receipt, within 6 months
following the first anniversary date of the company's
registration in the Trade & Companies Register, if the company
has not opened, at the first anniversary date of the company's
registration, an SPA in France utilizing the "Soft Light"
technology for which it holds the license from ThermoLase France
LLC.
b)At the request of ThermoLase Corporation, notified to the other
partners by registered mail with return receipt within 6 months
following the second anniversary date of the first SPA opened by
the company in France, utilizing "Soft Light" technology, if the
consolidated sales of the company and its subsidiaries during
these two years do not exceed US dollars 5,000,000.
Article 38 - Liquidation
Except in the cases of merger, split or the ownership of all the
shares by one entity, the company's dissolution entails its
liquidation.
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During liquidation, the company's activity is reduced to the
settlement of its business, payment of its debts, and the
performance of its obligations, the sale of its assets and the
distribution, as the case may be, of the remaining assets to the
partners, in proportion to their share in the company.Subject to
the applicable regulations, every partner will have a
preferential right to the goods or rights he had brought with him
to the company.
The partners are consulted at the end of the liquidation to rule
on the final liquidation accounts, on the discharge of the
liquidator for his management and release from his mandate and to
establish the close of the liquidation.
The decision is adopted at a two-third's majority of the shares
composing the share capital.
The sharing out of the liquidation dividend remaining after
reimbursement of the face value of the shares is performed among
the partners in the same proportions as their share in the
capital.
Article 39 - Transformation
The company's transformation into a company of another form is
always possible by collective decision of the partners at a
majority of three-quarters of the shares composing the share
capital, unless otherwise provided by law.
CHAPTER VII
DISPUTES
Article 40 - Disputes - Election of Domicile
Any disputes which might arise during the company's lifetime or
its liquidation, either between the partners and the company or
among the partners themselves, concerning company business, shall
be settled definitely according to the Regulation of the
International Arbitration Court of London ("LCIA") by one
arbitrator ruling in accordance with this Regulation. London
shall be the seat of the Court of Arbitration and the language of
the arbitration shall be English, it being understood that the
arbitrators shall have good knowledge of French.
CHAPTER VIII
APPOINTMENT OF THE CHAIRMAN
AND OF THE STATUTORY AUDITORS
Article 41 - The First Chairman
The following person has been appointed as the Company's Chairman
for a period of 1 year: Mr. _________________________
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The Chairman appointed above has accepted the mission which has
just been entrusted to him, in a letter dated __________________,
and declares that no incompatibility or any prohibition exists
preventing him from accepting this office.
Article 42 - First Statutory Auditors
The following parties have been appointed as the Company's acting
and alternate Statutory Auditors for a term of six (6) company
years, ending at the end of the meeting of all the partners
convened to close the accounts of the sixth company year:
-as acting Statutory Auditor:
Audit & Conseils Associ_s - ACA, SA, 64, rue du Rocher, 75008
Paris
__________________________________________
- as alternate Statutory Auditor:
__________________________________________In a letter of
____________________, 1996, ACA and _____________________
declared that they accepted the mission which has just been
entrusted to them and that no incompatibility or factor
prohibiting them from occupying office exists on their count.
CHAPTER IX
MISCELLANEOUS PROVISIONS
Article 43 - Commitments made for the account of the company
being created
The acts accomplished and commitments made for the account of the
company, appearing on the list appended hereto, are incumbent
upon the company, as of the date of the signing of this
instrument or the date on which they were signed, with effect on
the date of the company's registration in the Trade & Companies
Register.
The company's partners hereby empower the ___________________
company, duly represented by an empowered representative, to
conclude and sign the acts listed in Appendix II hereto on behalf
of the Company, prior to its registration in the Trade &
Companies Register.
Article 44 - Costs
The costs, taxes and fees of these Articles of Incorporation, and
those which shall ensue are to be paid by the Company.
Article 45 - Publicity - Powers
The publicity formalities required by law and the regulations are
to carried out at the Chairman's discretion.
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Drawn up in Paris
in six copies
on November, 1996
_________________________ _________________________
ThermoLase Corporation (Dessange Holding)
Represented by Represented by
Mr. John Hansen Mr. _____________________
acting as Chairman Acting as _______________
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EXHIBIT B
(THERMOLASE-DESSANGE) SAS
SHAREHOLDERS' PACT
BETWEEN:
The ThermoLase Corporation, a partnership formed under the laws
of the State of Delaware, United States of America, whose head
office is located at, 10455 Pacific Center Court, San Diego,
California 92101, United States of America, represented for the
purposes hereof by its President, Mr. John Hansen, duly
authorized for the purposes hereof by a resolution of its Board
of Directors dated ______________, 1996 (hereinafter referred to
as "ThermoLase").
First Party
AND;
the [Dessange Holding] company, a public company capitalized at
FRF 1.500.000, whose registered office is at 37, avenue Franklin
D. Roosevelt, 75008 Paris, represented by its Chairman and
Managing Director for the purposes hereof (hereinafter referred
to as "SA").
Second Party
PARTICIPANTS IN THE PACT:
1. ThermoLase France L.L.C., a limited liability company
incorporated under the laws of the State of Delaware, United
States of America, whose head office is located at 10455 Pacific
Center Court, San Diego, California 92101, United States of
America, represented for the purposes hereof by its Chief
Executive Officer Mr. _______, duly authorized for the purposes
hereof by a resolution of its Board of Directors dated
_________________, 1996 (hereinafter referred to as "LLC").
2. The Franklin Holding Company, a public company
capitalized at FRF 19.853.200, whose registered office is at 37,
avenue Franklin D. Roosevelt, 75008 Paris, represented by its
Chairman and Managing Director for the purposes hereof
(hereinafter referred to as "Franklin Holding").
3. Yves Micheli's Company.
4. Mr. Yves Micheli, resident in Geneva, Switzerland
(address) (hereinafter referred to as "Yves Micheli").
DBC Holding Company, a public company capitalized at
FRF 250.000, whose registered office is at 37, avenue Franklin D.
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Roosevelt, 75008 Paris, represented by its Chairman and Managing
Director for the purposes hereof (hereinafter referred to as
"D.B.C. Holding").
WHEREBY:
1. ThermoLase Corporation and [Dessange Holding] (the
"Parties") wishes to participate together in the joint
development of beauty salons or spas (the "Spas") in France and
in the French overseas departments (the "Territory"), dedicated
to the use of procedures - whether patented or not - developed by
the group [Thermo] and licensed by him and described in English
in Appendix 1 hereto (hereinafter referred to as the "ThermoLase
Technology"), or to grant a license to medical firms.
2. In this context, the parties decided to incorporate the
LLC in order to acquire the necessary rights on the ThermoLase
Technology and entered into an Operating Agreement appended in
Appendix 2-A.
3. For this purpose, the Parties, in order to carry
through the project, decided to set up a partnership, with the
assistance and support of their main shareholders, Franklin
Holding SA and Mr. Yves Micheli, participants herein. This
partnership (hereinafter referred to as "SAS" will sign
agreements with the holder of the rights to ThermoLase
Technology, LLC, in order to (i) obtain a license for the said
technology so that the Spas to be created by SAS and the medical
firms could benefit therefrom either directly or indirectly
through subsidiaries set up with this sole aim, and (ii) to
acquire or enable the Spas and the doctors concerned to acquire
products such as laster generators and lotions, vital for use of
the ThermoLase Technology (the "Products"). The draft license
agreement is appended hereto in Appendix 2-B.
4. In the same way, SAS would sign an agreement with
Franklin Holding SA, holder of the rights to the "Jacques
Dessange" trademark, in order to obtain a license for the said
trademark so that the Spas to be created by SAS could benefit
therefrom. The draft trademark license agreement is appended
hereto in Appendix 2-C.
5. The parties considered it necessary to indicate, in
this shareholders' pact, the conditions of the incorporation,
management and financing of the SAS and the rules intended to
govern their relations and their cooperation such SAS.
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IT HAS BEEN AGREED AS FOLLOWS:
Article 1
Purpose of the contract - Effective contract date
1.1 The purpose of this contract is to define the legal
relations between the parties at the time of incorporation and
management of a partnership in which ThermoLase and SA shall be
the sole partners.
1.2 In the context of this contract and their relations as
partners in SAS, the aim of the Parties is to enable SAS to
create and develop in the Territory, using the ThermoLase
Technology and the name and reputation of Mr. Jacques Dessange, a
network of healthcare centers and medical firms using the
ThermoLase Technology and the Products for hair removal and skin
exfoliation treatments. SAS may also make the ThermoLase
Technology available to qualified doctors, under conditions
substantially complying with the sublicense agreement appended in
Appendix 2-B, subject to the modification of this document to
comply with French law.
1.3 The Contract shall come into effect as from its
signature by the Parties thereto and the participants mentioned
in the introduction hereto [and from the time of performance of
the events or suspensive conditions mentioned in Article 13
hereafter] (hereinafter the "Effective contract date").
Article 2
Incorporation of SAS
2.1 At the latest by the Effective Contract Date, the
Parties shall incorporate SAS, the articles of incorporation of
which, in substance, shall comply with the model enclosed in
Appendix 3 hereto.
2.2 Both shareholders in SAS shall subscribe in cash for
five hundred (500) shares with a nominal value of two hundred and
fifty francs (FRF250) which shall provide a fifty per cent (50%)
shareholding in the capital of SAS.
The respective participation of the parties shall be liable to
vary in the case where ThermoLase exercises the Promise to Sell
granted thereto [this day _______] by SA for the acquisition of
shares representing a tenth of one per cent of the capital of SAS
and LLC, or in the case of deadlock, under Article 11 of the
present contract.
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2.3 Each share shall have a single voting right and the
Parties shall be prohibited from introducing any statutory clause
or mechanism providing double voting rights, or from issuing any
investment certificate or voting right certificate until the end
of the period described in Article 4.2.5. (e) hereafter.
2.4 The company name of SAS shall be indicated in Appendix
3, it being understood that SAS may not continue to use the trade
names, trademarks or other names unless it is authorized to do so
by the holders of the intellectual property rights of the said
names, trademarks and trade names through license agreements
signed with SAS.
Failing this, SAS shall modify its company name and shall stop
using the names and trade marks, for which it no longer has the
necessary rights, as soon as possible in order to avoid any
violation of the Parties' rights.
2.5 The initial registered office of SAS shall be located
at the address shown in Appendix 3 but may be transferred to any
other location at the first request of Franklin Holding.
2.6 In the event of any dispute regarding the
interpretation of this contract, or between the provisions of the
contract and those of the articles of incorporation of SAS, the
Contract provisions shall take precedence over the articles of
incorporation between the Parties.
Article 3
Management of SAS
3.1 SAS shall be managed by a Board of Directors as stated
in Appendix 3.
3.2 The Parties shall take the steps necessary to ensure
that their representatives on the Board of Directors or at
meetings of shareholders of SAS exercise their voting rights in
the interest of SAS; this shall imply respect of the Contract and
all the other agreements established between the Parties or with
companies of the ThermoLase group and/or of the Dessange group
which directly or indirectly refer to the purpose of this
Contract.
3.3 The Board of Directors shall manage all the business of
SAS for which it shall constitute the supreme authority for
making management decisions that are not legally attributed to
another authority by Law or the articles of incorporation.
3.4 Powers of the board of directors of SAS
3.4.1 The following decisions must be unanimously approved by
the Board of Directors of SAS:
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(a) except where planned in the Budget or the Annual Development
Plan of SAS, the incorporation and liquidation of any
subsidiary intended to manage a Spa, the signature of any
loan agreement with such a subsidiary or the financing of
any capital increase for such a subsidiary.
(b) except where planned in the Budget or the Annual Development
Plan of SAS, the acquisition or sale of securities and
equity investments, with the exception of current cash
management operations on the financial market whose total
amount, at any time, is less than [FRF500.000] (the
instruments of this current management shall be investments
though specialized UCITS and/or negotiable certificates of
deposit with a term of six (6) months or less, or any other
financial instrument of the same type).
(c) the adoption, where necessary, of a change in the annual
budget of SAS (hereinafter referred to as "the Budget").
The Budget shall consist of the draft annual budget prepared
for each financial year of SAS by the General Management,
approved by the Board of Directors of SAS, based in
particular on prospects of revenue and expenditure that are
reasonably foreseeable.
The draft annual budget shall respect the format of the
draft budget for financial year 1996-1997 as shown in
Appendix [ ] hereto.
(d) The appointment or replacement of auditors, the audit firm,
or the bankers of SAS.
(e) Investment decisions of an amount superior to FRF 500.000,
except if the Budget or the Development Plan envisage the
considered investment.
(f) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS: transfer, rental,
exchange, pledging or granting as guarantee of all or part
of the assets or the business of SAS, as well as any
guarantees and endorsements granted to third parties,
including subsidiaries.
(g) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS: the subscription for
short, medium or long-term bonds of an amount superior to
FRF 500.000.
(h) The approval and, where necessary, the modification of the
annual development plan (hereinafter referred to as "the
Development Plan").
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The Development Plan shall consist of the draft annual
development plan prepared for each financial year of SAS on
the basis of the information available concerning the
company, as well as the reasonably foreseeable commercial
prospects.
The draft Development Plan shall respect the same format as
the draft Development Plan for 1996-1997 as shown in
Appendix [ ] hereto.
(i) The submission to the meeting of partners of a proposal to
liquidate SAS or to change its articles of incorporation.
(j) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS, the loan, rental,
appropriation, transfer or sale of any intellectual property
rights, except in the case of normal, current operations of
the company.
(k) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS, the signing of any
contract with a subsidiary or with one of the Parties or the
Participants herein, or with a subsidiary of ThermoLase, and
the modification or cancellation of any right in regard to
the terms of such contracts.
(l) Decisions relative to recruitment or the signing of service
contracts or the dismissal of executives of SAS or the
director of each subsidiary, with the exception of contracts
of such type mentioned in the Development Plan or within the
limits set by the Budget.
(m) The distribution of dividends, subject to ratification of
the Board's decision by the meeting of the partners in legal
forms.
(n) The definition of bank signature powers of attorney.
(o) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS, the granting to third
parties of loans exceeding [FRF 50.000].
(p) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS, the signature of
contracts with a term of more than one year implying
expenditure (or the equivalent in kind) exceeding [FRF
___________].
(q) Except where such operations are planned in the Budget or
the Annual Development Plan of SAS, the authorization,
signature or execution of any action or contract which could
lead to a modification of the capital distribution between
ThermoLase Corporation and [Dessange Holding].
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(r) The authorization to proceed with declaration of suspension
of payment by the company.
[To be filled in where necessary]
3.4.2 In the same conditions of majority, the board of
directors of SAS shall have the power to decide to increase or
decrease the amounts mentioned in Articles 3.4(o) and (p),
without this requiring any change in the provisions of the
Contract.
3.5 Distribution of dividends policy
The parties promise to facilitate the granting to the
shareholders as easy as possible of the dividends of the SAS (in
particular by granting payments in advance).
3.6 Agreements between the SAS and its shareholders
The parties acknowledge that the preliminary authorization
procedure provided by Article 20 of the SAS by-laws as appended
in Appendix 3 will not apply to the conclusion of the License
Agreements, which are referred to in Appendix 2-B and 2-C, nor to
the supplying by ThermoLase or Dessange Holding of products
provided for the business of the SAS.
Article 4
Financing of SAS
4.1 Capital of SAS
4.1.1 The initial registered capital of SAS shall be
[FRF25.000] consisting of [1,000] shares with a nominal value of
FRF250. The initial capital of the company shall be paid in full
at the time of its incorporation. ThermoLase and SA shall each
receive 500 shares (i.e., 50%) for a cash contribution of
FRF125.000.
4.1.2 This initial capital could be modified under the
statutory conditions governing modification of the articles of
incorporation, i.e., (i) in terms of the shareholders' equity
requirements of SAS identified by the Parties in the Annual
Budget of SAS as defined in terms of the requirements of the
Annual Development Plan of SAS, or (ii) failing any plan in the
said documents, following a decision made in terms of an
identified requirement.
4.2 Principals governing the financing of SAS
4.2.1 The Parties shall agree to assist SAS and to cooperate
as closely as possible and in particular, the parties acknowledge
the importance for SAS of the provision, in good time by each
party, in proportion to its shares in the capital, of the
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financial resources necessary for it to finance its investments
and its working capital.
In this respect, Franklin Holding confirms that (i) it shall
guarantee the payment by SA, in good time, in terms of the
payment schedule defined by SAS in the context of the Development
Plans and the Annual Budgets, of all sums that should be advanced
by SA to SAS, within the limit of the equivalent of five million
US dollars ($5,000,000) in French francs minus the amount of the
distributable profits of the SAS which are not allocated to the
SA by the SAS as stipulated in Article 4.2.5(a) and (ii) that,
each year, and for the first time at the time of signature of
this contract, it shall give ThermoLase a certified copy of the
accounts of the Franklin Holding company as soon as they have
been approved by the shareholders of Franklin Holding.
4.2.2 In as much as the Spas may be incorporated in the form
of entities separate from SAS, the Parties are also aware of the
need for SAS to be able to meet the requirements of the said
entities and the deadlines inherent in the circulation of the
financial resources required by the said entities.
As such, the Parties agree to respond, as quickly as possible, to
calls for funds notified to its partners by SAS and to provide
the said funds or, where considered preferable, to help it find
the financial resources necessary to satisfy its obligations as
creator of Spas or as main shareholder of companies managing Spas
at the time of calls for funds from the entities incorporated for
the creation and management of the said Spas.
4.2.3 SPA shall be financed by the personal contributions of
SAS shareholders or by borrowings made by SAS from its
shareholders, or by borrowings made by SAS from independent
financial establishments or by using the own resources of the
SAS, under the conditions and according to the schedule relative
to the financial requirements of SAS.
Such requirements shall reflect those of establishments and/or
subsidiaries of SAS and shall be defined in terms of the annual
Development Plan of the company in the Annual Budge of SAS. Such
requirements will be granted by the shareholders of the SAS, in
proportion to its shares in the capital
4.2.4 Development Plan and Budget of the Company
(a) The General Management of SAS shall draw up the Development
Plan and the Budget of SAS for the financial year, according
to the models enclosed in Appendices 4 and 5, in terms of
the guidelines defined by the Board of Directors, and should
present them to the Board of Directors of the Company for
approval each year, at a date to be agreed jointly but which
should be within four (4) months of the start of each
financial year.
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As is the case for the Development Plan and Budget for 1997
enclosed in Appendices 4 and 5, the annual Development Plan
and Budget should each have an appendix describing the
projected development of SAS and the financing for the
following four financial years. This will be used as a
basis, each year, for preparation of the Development Plan
and Budget of the following financial year in order to keep
the entire investment in a totally coherent context.
(b) The Development Plan and the Budget may be established
overall for SAS, SA, LLC and the SAS subsidiaries as long as
they indicate the financial flows relative to each entity in
such a way that SAS can then respect its commitments.
(c) Both the Development Plan and the Budget of SAS for a given
financial year shall be prepared in terms of the elements
communicated by the shareholders, the forecast financing of
SAS subsidiaries and all other information known by the
parties, in particular regarding market behavior.
(d) Both the Budget and the Development Plan shall be updated
regularly by the directors of SAS during the financing year
and any major differences which were stated during the
course of the budget and development plan shall be notified
to the SAS partners under the conditions to be defined
jointly by the Parties or by the Board of Directors.
The parties attach particular importance to the fact that
meetings of those in charge of ThermoLase and Franklin
Holding and the directors of SAS should be organized at
least three times a year in order to follow up application
of the Development Plan and the Budget. In addition, the
SAS directors shall receive instructions from the partners
to respect to regular communication and reporting procedure
on the commercial policy applied, the market, the accounts
and, in particular, the results along with any other
appropriate information.
(e) At the latest three (3) months after the end of the on-going
SAS financial year (or, where the Budget and/or the
Development Plan are not approved at the expected time,
within one month of approval of the Annual Budget by the
Board of Directors of SAS), each of the Parties (i) should
have paid the due amount incumbent thereon in terms of the
financial requirements of SAS into a bank account opened for
this purpose by SAS, as such amount is indicated in the
Development Plan and the Budget decided by the SAS partners
for the following financial year, and (ii) should inform the
other Party of the said payment.
(f) In the case where one Party notes that the other Party has
not made the payment incumbent thereon in good time, the
non-defaulting Party may notify the defaulting Party of its
intention to invoke application of the procedure applicable
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in the case of Deadlock as described in Article 11 of this
contract. This procedure can only be interrupted by the
payment of the entire sum, increased by late-payment
interest of 5%, within three working days of receipt of such
notice by the defaulting Party.
4.2.5 SAS finance conditions
(a) The Parties shall agree to ensure the financing of SAS in
the form of shareholders' equity (or finance considered
equivalent thereto by the Parties ruling in the context of
the Board of Directors of SAS) to the extent of a total of
ten (10) million US dollars ($10,000,000). This financial
contribution shall be made by the partners of SAS to the
extent of their respective share in the capital of SAS on
the date of each call for funds by SAS (i.e., at now, USD
5,000,000 for each shareholder). The amount of the profits
of the SAS which won't be allocated to the shareholders,
amounts to the contribution of the shareholders to the
financing of the company, as set above and is deducted from
the USD 10,000,000.
(b) In order to appreciate the total amount of the contributions
actually made in regard to the previously-mentioned
commitment, the parties agree that every financial
contribution made in French francs shall be converted into
US dollars at the French franc/US dollar exchange rate in
force for exchange between banks, on the date of payment of
the French francs sum made on the SAS bank account by the
SA, as published in the Wall Street Journal Europe. Where
the said journal or the said information is no longer
published, the Parties shall obtain this information from
the Financial Times.
In the case of a contribution made by allocation of the
distributable profits of the SAS which were not allocated,
as described above in paragraph a., the amount of
contribution in French francs will be converted into US
dollars at the French franc/US dollar exchange rate in force
for exchange between banks, on the date when the relevant
decision is voted.
(c) In the context of the Development Plan, where the parties
decide that the Company shall proceed with one or more
capital increases, these could be effected in cash, or
possibly through off-setting against all or part of the sums
advanced by the Parties in the form of advances or loans, as
long as the said capital increase(s) of the Company do not
lead to a change in the capital distribution of the Company,
subject, however, to any authorized share transfers that may
have taken place in the meantime.
(d) The Parties shall unanimously decide to introduce company
procedures which could have an impact on their financial
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situation and their respective percentage of shares of the
capital of SAS. This shall apply, in particular, to:
-the cancellation or waiver of any preferential subscription
right
-the amount of any issue premium applicable at the time of a
capital increase
-any contribution in kind of any assets, including any debt
-any appropriation to the reserves or distribution of
dividend in the case where they consider that SAS should
keep more than the balance of the net profit of SAS as an
extraordinary reserve after appropriation to the compulsory
reserve items.
-any depreciation or any reduction of the capital,
regardless of the cause
These company procedures shall be followed by SAS through
strict respect of French rules applicable to partnerships.
(e) The procedures defined heretofore are intended to ensure
that the Parties maintain their respective percentage of
shareholdings as long as the joint investment threshold of
$10,000,000 has not be reached.
(f) When the said amount of $10,000,000 is reached, and
notwithstanding what is stated previously:
(1) The Parties shall be free to decide, in the management
bodies of SAS, the conditions of complementary finance, in
shareholders' equity, in virtual shareholders' equity, through
borrowing or even through the investment of securities with
investors concerned, as long as such an investor (i) has accepted
to acquire an equivalent stake in the capital of LLC and (ii) has
accepted to ratify all the accords and agreements governing the
legal relations between the Parties.
Where one of the SAS partners decides not to contribute to such a
capital increase for SAS, any other partner shall be entitled to
subscribe instead of it, leading, ipso facto, to dilution of the
percentage of its stake in SAS and in LLC, which the Parties
acknowledge and admit.
(2) Where one of the Parties, duly obligated to pay funds
in order to contribute to the financing of SAS, is unable to do
so, or cannot make the payment within the deadline stipulated by
SAS through application of the applicable contractual, statutory
or legal rules, the other Party may validly make the payment
instead of the defaulting Party; in such a cause, the defaulting
Party shall have his rights reduced or limited in due proportion.
As such, in the event of default of a Party in the payment of
sums intended to cover a call for funds to finance a capital
increase, the other Party may subscribe in a reducible way for
all or part of the shares normally reserved for the defaulting
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Party; as such, the defaulting Party shall suffer a reduction of
its share to the extent of its percentage stake in the capital of
SAS. The respective percentage of shares of the parties in the
LLC capital will then be adjusted accordingly.
4.3 SAS financial year
The financial year of SAS shall start on January 1st and shall
terminate on December 31st of each year. The first financial
year shall terminate on December 31st, 1997.
4.4 SAS accounting
4.4.1 The accounts of SAS shall be kept in compliance with
the accounting rules generally accepted in France and in a way
which enables application of the rules and standards to which the
Parties may agree, or those which are indispensable for correct
execution of the agreements with ThermoLase.
4.4.2 It is agreed that (i) the accounts and finance
reporting system introduced at the level of SAS, as stated in
article 4.2.4(d) heretofore, should be defined in order to be
easy to use for a French company, but compatible with that of LLC
and (ii) where it turns out to be indispensable for ThermoLase,
the presentation of the SAS accounts should be compatible with
the American accounting rules governing LLC.
4.5 Auditors
4.5.1 The statuary auditor of the Company will be: Audit et
Conseils Associes - ACA
64 rue du Rocher, 78008 Paris
4.5.2 The substitute auditor of the Company will be:
4.5.3 Where ThermoLase so requests, the parties, shall assist
the Company to choose an international audit firm to help prepare
the company accounts.
Article 5
Transfer of Company shares
5.1 The conditions governing the transfer of SAS shares are
indicated in the SAS articles of incorporation as shown in
Appendix [3] hereto.
5.2 Notwithstanding what is stated previously, the parties
agree that at the first request from one of them formulated
during the period described in Article 4.2.5(f) heretofore, they
shall meet to study a modification of the transfer rules to
enable the development of SAS to continue through finding
investors interested in taking a share in SAS or in its
subsidiaries or through any other means in order to guarantee the
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Parties that their investment and the development of Spas will be
enhanced.
In the event of such a request, the Parties shall agree to meet
and, where they fail to reach agreement, shall let the shares be
transfered at the expert's price mentioned in Article 11.3.2(b)
of the present agreement
In any case, any interested investor will have to execute the
present agreement and to ratify all the agreements which were
entered into by the parties or with certain companies from the
ThermoLase Group or from the Dessange Group, relating directly or
indirectly to the object of the present agreement.
5.3 Where the shares are sold, the existing partners may
validly decide to close the accounts of SAS and to distribute all
the distributable profits accumulated at the said accounts
closing date (dividends, where necessary distributed in the form
of an interim payment, and available reserves) of SAS and, where
one of the partners so requests, the Parties shall proceed with
such accounts closing and distribution at the first possible date
in order to limit any additional charges resulting from such a
procedure for SAS and its partners. The parties also agree that
the transfer may not take place and ownership may not be
transferred until the dividends and/or reserves mentioned
previously have been distributed.
Article 6
Non-competition
6.1 During the full period of its ownership of SAS shares,
each of the signatories shall agree not to invest in a company
and not to exercise an activity, either directly or indirectly,
alone or with other persons, in a company using laser technology
for skin care and hair removal.
This restriction shall be valid for the entire Territory.
6.2 The parties shall ensure that all the directors and all
the executives and staff of SAS, of SA, of DBC Holding and of the
SAS subsidiaries sign a non-competition commitment of the same
type as mentioned heretofore. They shall also agree to take
unrelenting legal action in the case of violation by any person
linked by such a commitment.
6.3 Where SAS is wound up in compliance with the provisions
of Article 37.2 or 37.3 of its articles of incorporation as well
as in the case stated in Article 11.3.1 and in the case of
purchase by ThermoLase of the stake of SA in the capital of SAS
in compliance with the provisions of Article 11.3.2(b) to (e), SA
shall agree, on its own behalf and on behalf of its shareholders,
not to have, either directly or indirectly as owner, partner, or
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shareholder - except within the limit of one per cent (1%) of the
capital of a quoted company - executive director, employee,
director, investor or lender, or in any other capacity, a company
which has a substantial commercial activity in the field of the
development, promotion, manufacture, sale or marketing of skin
care and hair removal products and/or services in the Territory
for a period of two (2) years as from the date of the voting, by
SA partners, of a resolution deciding to liquidate SAS (or the
date of the judgment pronouncing liquidation of SAS); however, it
is understood that the previously-mentioned persons shall be
authorized to continue their activities in the field of
hairdressing, and in that of the ownership, control, franchising,
licensing and management of beauty salons, including the supply,
sale and use in the said beauty salons of hair removal and/or
skin care products and services which do not incorporate
techniques using light sources or the technique of electrolysis.
6.4 Notwithstanding what is stated previously, where the
Company is wound up through application of the provisions of
Article 37.2(b) or (c) following a collective procedure against
ThermoLase which prevents it respecting its obligations under
this contract, or subsequent to non-execution by ThermoLase of
its obligations under this contract or any contract directly
linked to it, or where SA repurchases ThermoLase's interest in
the capital of the SAS pursuant Article 11 hereunder. ThermoLase
shall agree, for a period of two (2) years as from the date of
the vote by the partners of a resolution to liquidate SAS (or the
date of the judgment pronouncing liquidation of SAS), not to
incorporate a private company, or form a partnership, a joint
venture, sign a cooperation agreement or joint marketing
agreement, or any other cooperation agreement in the Territory
with an individual or legal entity which has substantial
commercial activities in the field of investment in (or
management of) hairdressing salons or beauty salons in order to
develop, promote, distribute or sell skin care and/or hair
removal products or services using laser technology, whether
directly or indirectly, on its own behalf and on behalf of the
companies which control it or are under its control (the word
control should be understood in the sense attributed by Article
355-1 of the Commercial Companies Act of July 24, 1966, as
modified).
Article 7
Technical support
7.1 Where necessary, Franklin Holding or any company of
such group, at the request shall provide operational, accounting,
legal and financing assistance in return for remittance which
shall be defined through mutual agreement on an annual basis.
This agreement will reflect the provisions which are generally
used by Franklin Holdings subject to the adjustment reasonably
asked for by ThermoLase.
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7.2 The said remuneration shall not cover the fees of all
the external advisers (lawyers, accounting experts, advisers or
consultants, doctors, etc.) whose intervention may be necessary
for the correct execution of the activities of SAS.
7.3 This assistance shall be independent from that which
may be offered to SAS in the context of technology license or
trademark agreements signed with SAS.
Article 8
Confidentiality
8.1 Confidential information
8.1.1 The Parties shall do everything possible to maintain
the confidentiality of all information and data, all written
documents, all files, whether kept in electronic or other form
and, more generally, all documents (unless they can be
immediately accessed by a public source or contain information
already published) (hereinafter referred to as "Information")
communicated by one of the parties or by a company of the
ThermoLase group or by one of the consultants or technicians
authorized by SAS.
Same treatment will apply to information which every party may
have on the other party's situation.
8.1.2 Where this contract is terminated, the Information
media, regardless of the form (paper, tape, diskette, etc.) and
all the copies thereof which could have been made, shall be
returned to the Party which provided them or which is the owner
thereof.
8.1.3 The obligation of confidentiality imposed by this
article 8 shall continue even if the contract is terminated and
shall remain in force as long as the Information remains
confidential.
8.1.4 The parties agree that the Information shall only be
used for purposes of execution of the Contract and the agreements
associated therewith. Where it turns out that Information should
be disclosed to a third party, including any employee of one or
other of the Parties, such a disclosure should only take place
where it is strictly necessary and the recipient of such
information should be informed of its confidentiality and must
agree to respect this confidentiality as stated heretofore.
8.2 Confidentiality of the Contract terms
8.2.1 The text and conditions of the Contract and all the
agreements associated therewith may not be revealed publicly by
either of the Parties unless written authorization is obtained
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from the other Party, except at the request of any government
authority with jurisdiction over the Party which must make the
disclosure, or where this is imposed by a legislative or
statutory text, including those governing stock markets
(particularly at the time of a share issue by one of the Parties
or one of the companies of the ThermoLase group).
8.2.2 With the exception of information intended for the
public or stock market releases which should be submitted to the
Parties and to ThermoLase beforehand, no public announcement
concerning the Contract nor any of the operations that it
concerns should be made unless there is agreement between the
Parties and with ThermoLase as regards the time, the form and the
content of the said announcement.
8.3 Protection of patents, trademarks and know-how
8.3.1 Since the activities of SAS and its subsidiaries are
directly linked to the protection provided by the status of
patents and trade marks in the Territory, the Parties explicitly
agree to inform any of their number concerned, or ThermoLase, as
quickly as possible, of any events which come to their knowledge
concerning the patents, trade marks and know-how used by SAS in
its activities. In such a case, they shall provide each other
with assistance and support.
Article 9
Contract term
9.1 The Contract shall terminate on December 31, 2012.
9.2 However, notwithstanding what is stated previously:
(a) The Contract could be extended by successive periods of five
(5) civil years as long as the ThermoLase technology
continues to be licensed to SAS.
(b) The Contract shall terminate as soon as all the shares
representing the capital of SAS are held directly or
indirectly by one of the two Parties (in particular through
employees, close family members or representatives of a
company belonging to the same group as the Party in
question).
(c) The Contract shall also terminate by way of dissolution or
liquidation of the SAS.
(d) If one Party does not own any share of the SAS, this Party
will be released from its obligations under the present
agreement as soon as it won't own any share of the SAS,
except for Article 8 and, if necessary, for Article 6.
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9.3 In the case of dissolution or liquidation of the SAS,
ThermoLase may be granted all the equipment it brought to the
SAS, subject to the relevant rules.
Article 10
Intellectual property rights
10.1 SAS shall benefit from the rights to certain patents,
trademarks and elements of know-how shall be licensed to it by
the Parties or their shareholders in the context of license
contracts complying, in substance, with the models enclosed in
Appendices 2.A and 2.B.
ThermoLase undertakes to provide to the SAS and SA all the
documents and information likely to justify the royalty rate
applying to the SAS under the license or sublicense agreements,
except the contracts made between the SAS and Franklin Holding or
French companies which are subsidiaries of or affiliated to
Franklin Holdings.
10.2 In case of a complaint or request of any kind against
the SAS or one of its licensees and/or franchisees, by a third
party relying on an infringement of his rights due to the use of
the ThermoLase Technology, or due to the performance of the
agreements referred to at article 10.1 hereabove, ThermoLase may
defend the SAS, at SAS's own expense.
In case of a complaint or request of any kind, against a
shareholder of the SAS, the managers or the shareholders of the
shareholders of the SAS themselves, by a third party relying on
the infringement of its intellectual or industrial property
rights due to the use of the ThermoLase Technology by the SAS,
ThermoLase shall defend, at SAS's own expense, against this
complaint or request, and the SAS will have to indemnify the
shareholders, their managers or their own shareholders, for all
the final judgments that could be passed against them.
If the SAS is precluded from providing such indemnification
(especially considering its financial situation), ThermoLase
shall indemnify the shareholders, their managers and their own
shareholders equal to the amounts that will not be paid by the
SAS.
In case of a request or action by a third-party against a
shareholder of the SAS, relying on an infringement of his rights
due to the use of the ThermoLase Technology, such shareholder
will have to inform the SAS and ThermoLase as soon as possible.
Failing that, the SAS would be released from its obligations
towards such shareholder if the delay to inform the SAS had
harmful consequences to the defense in respect of such
third-party's request. ThermoLase will defend, at SAS's own
expense, the shareholder or shareholders as soon as it is
informed of the request or the action of such third-party. The
shareholder may participate (without controlling it) to such
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defense, at its own expense, unless the counsel chosen by
ThermoLase has a conflict of interests with such shareholder and
the latter first informs the SAS.
ThermoLase may not settle an affair out of court nor acquiesce in
a decision which would have consequences other than financial for
a shareholder without first obtaining the written agreement of
such shareholder, who cannot refuse nor delay it without motives.
Article 11
Deadlock
11.1 Aware of the mutual interest which the project
presented in this contract, and in the deeds and other documents
associated therewith, for themselves and for their shareholders,
the parties agree that they shall provide each other with support
and assistance in order to overcome any difficulties which could
arise in their relations.
Nevertheless, they acknowledge that, in good faith, situations
could arise in which their different positions could lead to the
impossibility of agreeing to the decisions to be made by the
management bodies of SAS. The purpose of this article is to
define the conditions for solving such a disagreement (defined
for the requirements of this Contract by the term "Deadlock").
11.2 There is Deadlock where the Parties are unable to agree
according to the decision-making rules defined in the articles of
incorporation of SAS. In such a case, the Parties shall agree:
(a) To identify in writing, at the meeting where the difference
arises, the point which raises a problem and the position of
each of the parties, along with an indication of the number
of directors or partners which are in favor of it.
(b) To put off making the contested decision for a period of two
weeks.
(c) To use this period to (i) consult each other (ii) to bring
in an impartial mediator who speaks English and French
(hereafter refereed to as the "Mediator") in order to find a
mutually acceptable common solution (the cost of the
mediator shall be paid half by each of the Parties and not
by SAS), (iii) to study the economic or commercial bases on
which each of the Parties took its stance or the doubts
formulated by the Parties and (iv) to examine the
possibility of defining a path other than the one proposed,
in close liaison with the Mediator.
(d) To convene a meeting in two weeks' time with the only item
on the agenda being an examination and a vote concerning the
disputed point. It shall be explicitly agreed by the
Parties that the Mediator shall chair the meeting and shall
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
start it with a summary of the situation of SAS, the problem
raised and the solutions envisaged, while reminding the
participants of the consequences of their diverging
viewpoints on the future of SAS.
11.3 In the case where the Parties are unable to agree on
this occasion, the following shall take place:
11.3.1 If the deadlock arises before the consolidated sales of
the Company and its subsidiaries realized after the date of
incorporation of the SAS exceeds ************* (using an exchange
rate determined at the date of the meeting referred to in Article
11.2.d above),
(a) ThermoLase shall have the option of purchasing DBC Holding's
interest in the capital of the SA for a price equal to the
cumulated amount of the investments of such company in the
SA (contributions to capital, loans, advances by
shareholders or other finance contributions), it being
understood that DBC Holding and, if necessary, Franklin
Holding must indemnify jointly and severally ThermoLase in
respect of any liability of the SA which is not related to
the activities of the SA in the context of the direct or
indirect exploitation of the ThermoLase technology in France
or abroad.
For this purpose, ThermoLase shall send Franklin Holding,
for signature by DBC Holding the securities transaction
order(s) necessary to make the transfer of securities
representing the stake of DBC Holding in the capital of SA,
as well as any deed enabling the transfer of the receivables
which are due to DBC Holding by the SA to ThermoLase or any
other company of its group and to give DBC Holding a
banker's draft for the amount mentioned in paragraph (a)
heretofore in exchange for the securities transaction
orders.
ThermoLase shall be authorized to choose a new partner for
the development of the ThermoLase Technology in the
Territory. This partner shall be chosen from among groups
which have no activity in the field of hairdressing and
beauty salons. Franklin Holding shall be bound by the
non-competition clause mentioned in article 6.3 heretofore.
(b) If ThermoLase fails to exercise the options set out in a.
above within thirty days from the date of the meeting
referred to in 11.2.d above, the SAS shall be dissolved.
ThermoLase and the SA shall pay their respective shares of
the cost of closing the Spas and of liquidating the SAS in
order to avoid a judicial liquidation of the latter, it
being understood that ThermoLase shall purchase at net book
value the technical equipment which was furnished by it or
by other companies of its group (e.g., lasers).
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
11.3.2 If the Deadlock takes place after the consolidated
sales of the Company and its subsidiaries realized after the date
of incorporation of the SAS exceeds ************* (using an
exchange rate determined at the date of the meeting referred to
in Article 11.2.d above),
(a) Where the parties cannot agree to the solution defined
hereafter in paragraph (b), SAS shall be wound up and
ThermoLase and SA shall agree to pay their respective shares
of the closing of the Spas and the liquidation of SAS in
order to avoid any legal liquidation of the latter, it being
understood that ThermoLase shall buy back the technical
equipment provided by it or by other companies of its group
(e.g. lasers) at its net book value.
b) Where no agreement on the valuation of the SAS can be
reached within fifteen (15) days after the meeting referred
to in Article 11.2.d above, and where one of the parties so
proposes, in order to limit the losses of the SAS partners
or to avoid the difficulties and costs linked to winding up
SAS, an independent chartered accountants firm elected by
mutual assent of the Parties shall be asked, at the request
of the most diligent party, to evaluate SAS and each of the
Parties shall then be entitled to offer to buy or sell its
share.
(c) This valuation should take into account the specific
situation of SAS in accordance with the conditions referred
to in Article 9.03.2 c of the Operating Agreement enclosed
in Appendices 2-A.
(d) In the case where two Parties wish to acquire SAS on the
basis of the previously mentioned expert's valuation, an
auction shall be organized, which shall permit the Parties
to bid on the price determined by the expert, increased by
5% at a time, with the final bid being that for which no
higher bid is received during a period of two (2)
consecutive working days in Paris.
(e) At the end of the procedures described previously, the
Parties shall exchange the documents, payments and deeds
necessary to terminate the resulting winding up or sale.
Article 12
Relations between the parties
12.1 The contract shall not create any joint venture or de
facto company between the parties that is separate from SAS and
shall not create any link of subordination between them.
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Article 13
Change of control
13.1 Dessange Holding, DBC Holding and Franklin Holding
agree and guarantee ThermoLase that they will make DBC Holding
stay the majority shareholder of Dessange Holding and that
Franklin Holding will stay the majority shareholder of DBC
Holding.
Any change in control of Dessange Holding or DBC Holding,
pursuant to Article 355-1 of the 1966 French law on commercial
companies, will have to be first authorized by ThermoLase.
13.2 ThermoLase agrees and guarantees Dessange Holding, DBC
Holding and Franklin Holding that ThermoLase will stay directly
or indirectly controlled, in the sense of Article 355-1 of the
July 24, 1966, Statute on commercial companies, by Thermo
Electron Corporation or by one of its direct or indirect
subsidiaries.
Article 14
Applicable law - Arbitration
14.1 Applicable law
14.1.1 This contract shall be governed by French law.
14.2 Arbitration
14.2.1 In the event of any dispute concerning the execution or
interpretation of this Contract, the Parties shall agree to
consult each other in order to settle it through conciliation,
where necessary with the assistance of a third party.
14.2.2 Any dispute resulting from the Contract which cannot be
settled under the conditions mentioned heretofore shall be
settled definitively according to the Regulation of the
International Arbitration Court of London ("LCIA") by one (1)
arbitrator ruling in compliance with the said regulations. The
arbitration tribunal shall sit in London and the arbitration
language shall be English, it being understood that the
arbitrators should have a good knowledge of French.
14.2.3 In the case where the dispute which necessitated
recourse to arbitration also concerns the contract entitled
"Operating Agreement" signed by SA, ThermoLase and ThermoLase
France LLC, the parties shall agree to consult each order in
order to consider, under the auspices of the LCIA Clerk's Office,
the condition of joinder or separation, depending on the case, of
the two arbitration procedures. Where no agreement is reached on
this point, the disputes shall be settled separately.
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Article 15
Miscellaneous
15.1 Under no circumstances may the provisions of this
article be interpreted as prohibiting or restricting the right
for the shareholders of Franklin Holding to decide any operation
concerning the shareholders' equity of the said company, in
particular any placement of the share capital of Franklin Holding
on the financial markets.
15.2 Contributions - Transfers
Neither of the Parties shall be entitled to transfer all or part
of its rights and obligations in terms of the Contract nor to
contribute them to a third party without the written
authorization of the other Party.
15.2.1 However, in the case where one of the Parties transfers
its shares in SAS to a non-shareholder third party, it must
obtain confirmation from the new shareholder of its ratification
of all the provisions of this Contract, through the signature of
an additional clause to this effect along with the Parties.
Notwithstanding any such a transfer, the transferor shall
guarantee the perfect execution by the transferee for a period of
one civil year of all its obligations under this Contract.
15.2 Waiver
Waiver of the right to invoke any non-execution of the Contract
shall not be considered as waiver of any subsequent non-execution
that is identical or different. No amendment, modification or
waiver of any of the provisions of this Contract shall be valid
unless it is made in writing and signed by the party against
which such an amendment, modification or waiver is invoked.
15.4 Independence of provisions
Where any of the provisions of this contract turns out to be
invalid or inapplicable in terms of any law whatsoever, the said
provision shall be considered as unwritten, without altering the
validity of the other provisions. In this respect, it is
explicitly agreed that such a provision shall be independent and
that this Contract shall be interpreted in all cases as though
the invalid or inapplicable provision had never existed.
15.5 Titles
The titles used in this Contract are only intended to give an
indication and should not have any effect on its interpretation.
15.6 Mutual assistance
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In view of the commitments which the Parties shall make in regard
to each other under the terms of this Contract and the length of
their cooperation in this respect, the Parties agree to assist
each other in order to resolve, quickly and satisfactorily, any
obligation, procedure or request that has to be accomplished for
perfect execution of the Contract and any contract resulting
therefrom or linked thereto, either directly or indirectly.
15.7 Notice
15.7.1 Except for provisions which explicitly stipulate a
different method for notice, all notice required through
application of the Contract shall be validly served when sent by
registered mail, telex, fax, D.H.L. or any other express mail
company, or where is it delivered personally to the address of
one of the parties as indicated heretofore (any other address may
be notified at any time):
(a) If notice is sent to SA:
for the attention of President
37, avenue Franklin Holding
75008 Paris
Telephone: (33) 01
Fax: (33) 01
(b) If notice is sent to ThermoLase:
for the attention of President
9550 Distribution Avenue
San Diego, CA 92121-2306
Telephone: (1)
Fax: (1) 619-536-8572
If notice is sent to Franklin Holding:
for the attention of President
37, avenue Franklin Holding
75008 Paris
Telephone: ( )
Fax: ( )
If notice is sent to Mr. Yves Micheli:
for the attention of
-----------------
--------------------------------------
--------------------------------------
Telephone: ( )
Fax: ( )
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If notice is sent to __________________:
for the attention of __________________
_______________________________________
_______________________________________
Telephone: ( )
Fax: ( )
15.7.2 Any change of address should be notified according to
the same procedure. Any notice sent by fax or telex shall be
considered as received on the date specified on the transmission
form, subject to confirmation by registered letter.
15.8 Consultants' fees
Each of the parties shall be personally responsible for the
payment of the fees of its own consultants.
IN WITNESS WHEREOF, each of the parties duly signed this
contract, in as many original copies as there are Parties, under
the conditions indicated with each signature.
In Paris
October ___, 1996
SA
----------------------------
by:____________________________
In_____________________________
October ___, 1996
In_____________________________
October ___, 1996
In_____________________________
October ___, 1996
In_____________________________
October ___, 1996
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EXHIBIT C
OPERATING AGREEMENT
OF
THERMOLASE FRANCE L.L.C.
This Operating Agreement is made and entered into this ____
day of November, 1996, by and among ThermoLase Corporation, a
Delaware corporation, JDM Invest S.A., a French S.A., and
ThermoLase France L.L.C., a Delaware limited liability company.
WHEREAS, the parties hereto are desirous of creating a
limited liability company under the laws of the State of
Delaware;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby
acknowledged by the parties, the parties hereto agree as follows:
ARTICLE I
Definitions
1.01. Definitions . The following terms used in the
Operating Agreement shall have the following meanings (unless
otherwise expressly provided herein):
a. " Capital Account " as of any given date shall mean
the Capital Contribution to the Company by a Member as adjusted
up to the date in question pursuant to Article V.
b. " Capital Contribution " shall mean any contribution
to the capital of the Company in cash or property by a Member
whenever made. " Initial Capital Contribution " shall mean the
initial contribution to the capital of the Company made pursuant
to Section 5.01(a) this Operating Agreement.
c. " Certificate of Formation " shall mean
Certificate of Formation of ThermoLase France L.L.C. as filed
with the Secretary of State of Delaware as the same may be
amended from time to time.
d. "Company" shall refer to ThermoLase France L.L.C.,
a Delaware limited liability company.
e. " Deficit Capital Account " shall mean with respect
to any Member, the deficit balance, if any, in such Member's
Capital Account as of the end of the Fiscal Year, after giving
effect to the following adjustments:
i. Credit to such Capital Account any amount
which such Member is obligated to restore under Treas. Reg.
e 1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant
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to the next to last sentence of Treas. Reg. ee 1.704-2(g)(1) and
(i)(5), after taking into account thereunder any changes during
such Fiscal Year in partnership minimum gain (as determined in
accordance with Treas. Reg. e 1.704-2(d)) and in the minimum gain
attributable to any partner nonrecourse debt (as determined under
Treas. Reg. e1.704-2(i)(3)); and
ii. Debit to such Capital Account the items
described in Treas. Reg. ee1.704-1(b)(2)(ii)(d)(4), (5) and (6).
iii. This definition of Deficit Capital Account
is intended to comply with the provisions of Treas. Reg.
ee 1.704-1(b)(2)(ii)(d) and 1.704-2, and will be interpreted
consistently with those provisions.
f. " Delaware Act " shall mean the Delaware Limited
Liability Company Act.
g. " Economic Interest " shall mean a Member's or
Economic Interest Owner's share of the Company's Net Profits, Net
Losses, and distributions of the Company's assets pursuant to
this Operating Agreement and the Delaware Act, but shall not
include any right to participate in the management or affairs of
the Company, including the right to vote on, consent to, or
otherwise participate in any decision of the Members.
h "Economic Interest Owner" shall mean the owner of an
Economic Interest who is not a Member.
i. " Entity " shall mean any general partnership
limited partnership, limited liability company, corporation,
joint venture, trust, business trust, cooperative or association,
or any foreign trust, or other organization.
j. "Fiscal Year" shall mean the Company's fiscal year,
which shall be the 52/53 week period ending on the Saturday
closest to September 30, or such other period required as a
taxable year under IRC e 706.
k. "JDM" shall mean, JDM Invest S.A., a French S.A.
l. " Gifting Party " shall mean any Member or Economic
Interest Owner who gifts, bequeaths, or otherwise transfers for
no consideration (by operation of law or otherwise, except for
bankruptcy) all or any part of its Membership Interest or
Economic Interest.
m. " Interest Owner " shall mean any Member or Economic
Interest Owner.
n. "IRC" shall mean the Internal Revenue Code of 1986,
as amended and in effect, or corresponding provisions of
subsequent superseding federal revenue laws.
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o. "JV France" shall mean ThermoDess, S.A.S., a French
S.A.S.
p. " License Agreement " shall mean the Licence
Agreement between the Company and ThermoLase which shall be
executed and delivered as ThermoLase's Initial Capital
Contribution.
q. " Majority Interest " shall mean one or
Membership Interests which taken together exceed 50.1 percent of
the aggregate of all Membership Interests.
r. "Majority Vote" shall mean a vote of more than
50.1%.
s. " Member " shall mean each of the parties
executes a counterpart of this Operating Agreement as a Member
and each of the parties who may hereafter become a Member in
accordance with the terms of this Operating Agreement.
t. " Member's Economic Interest " shall mean, for each
Member, the Economic Interest of that Member.
u. " Membership Interest " shall mean a Member's entire
interest in the Company including the Member's Economic Interest
and the right to participate in the management of the business
and affairs of the Company, including the right to vote on,
consent to, or otherwise participate in any decision or action of
or by the Members granted pursuant to this Operating Agreement
and the Delaware Act.
v. " Net Profits " and " Net Losses " shall
income, gain, loss, deductions, and credits of the Company in the
aggregate or separately stated, as appropriate, determined in
accordance with generally accepted accounting principles employed
under the accrual method of accounting at the close of each
Fiscal Year on the Company's information tax return filed for
federal income tax purposes.
w. " Operating Agreement " shall mean this Operating
Agreement as originally executed and as amended from time to
time.
x. " Person " shall mean any individual or Entity, and
the heirs, executors, administrators, legal representatives,
successors, and assigns of the " Person " when the context so
permits.
y. "Reserves" shall mean, for any fiscal period, funds
set aside or amounts allocated during such period to reserves
that shall be maintained in amounts deemed sufficient by the
Members for working capital and to pay taxes, insurance, debt
service, or other costs or expenses incident to the ownership or
operation of the Company's business.
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z. " Selling Party " shall mean any Member or Economic
Interest Owner which sells, assigns, pledges, hypothecates, or
otherwise transfers for consideration all or any portion of its
Membership Interest or Economic Interest.
aa. "Supermajority Interest" shall mean one or more
Membership Interests which taken together exceed 80 percent of
the aggregate of all Membership Interests.
bb. "Supermajority Vote" shall mean a vote of more
than 80%.
cc. "Territory Patent" means a European patent granted
on European Patent Application No. 92 923298.1, which is
enforceable in the Territory and which has claims corresponding
in scope to the claims of U.S. Patent No. 5,425,728, and covering
a significant portion of the Licensed Technology (as defined in
the License Agreement) used in practicing laser-based hair
removal, and which, if asserted, could prevent the practice in
the Territory of the SoftLight Procedures for hair removal, as
currently practiced by ThermoLase.
dd. " ThermoLase " shall mean ThermoLase Corporation, a
Delaware corporation.
ee. " Transferring Party " shall collectively mean a
Selling Party and a Gifting Party.
ff. "Treasury Regulations" shall include all temporary
and final regulations promulgated under the IRC in effect as of
the date of filing the Certificate of Formation and the
corresponding section of any regulations subsequently issued that
amend or supersede those regulations.
gg. "Consolidated Venture Revenue" shall mean Direct
Venture Revenue plus Sublicense Revenue. Consolidated Venture
Revenue is calculated without reference to any sales or
value-added tax that may be imposed on such amounts.
hh. "Direct Venture Revenue" shall mean
consolidated aggregate revenues received from customers in
respect of the performance of the SoftLight Procedures in the
Territory (as defined in the License Agreement) and the sale of
directly related products by (i) the Company, (ii) JV France,
(iii) any entities in which they own any equity or ownership
interests, or (iv) any entities which are owned, wholly or
partially, directly or indirectly, by ThermoLase, JDM, D.B.C.
Holding S.A., Franklin Holding S.A., or any of their direct or
indirect owners.
ii. "Sublicense Revenue" shall mean the aggregate
revenue received by the entities listed in 1.01(hh)(i) to (iv)
from any of their sublicensees or franchisees who do not fall
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into categories (i) to (iv) above, and excluding any
inter-company payments (such as royalty payments, fees, service
charges and the like) between the entities listed in (i) to (iv)
above.
ARTICLE II
Formation of Company
2.01. Statutory Authority . The parties hereby agree to
form the Company as a limited liability company under and
pursuant to the provisions of the Delaware Act. The rights and
obligations of the Company, the Members and the Economic Interest
Owners shall, except as otherwise required by the Delaware Act,
be governed by this Operating Agreement.
2.02. Filings . Prior to the execution of this Operating
Agreement, a Certificate of Formation conforming to the
requirements of the Delaware Act shall have been filed in the
Office of the Secretary of State of the State of Delaware. The
Company shall make such other filings and recordings and do such
other acts and things conforming thereto as shall constitute
compliance with all requirements for the formation of a limited
liability company under the Delaware Act and the laws of such
other states in which the Company elects to do business.
2.03. Name . The name of the Company shall be the name set
forth in the heading of this Operating Agreement. The affairs of
the Company shall be conducted under the Company name or such
other name as the Board of Directors may select in accordance
with the Delaware Act. The Company shall execute and file with
the proper offices any and all certificates which in the judgment
of the officers of the Company are required by the fictitious
name or assumed name statutes of the states in which the Company
elects to do business.
2.04. Principal Office of the Company . The principal
office of the Company shall be located at such place as the Board
of Directors may from time to time designate. The Company may
have additional offices in such other place or places as may be
selected from time to time by the Board of Directors.
2.05. Records to be Maintained . The Board of Directors
shall at all times keep at the Company's principal office such
information and records as are specified in the Delaware Act or
this Operating Agreement.
2.06. Registered Office and Registered Agent . The
Company's registered office in Delaware shall be located at 1209
Orange Street, Wilmington, Delaware, USA, and the name of the
Company's registered agent for service of process at such office
shall be CT Corporation. The Board of Directors may from time to
time in accordance with the Delaware Act change the Company's
registered office and/or registered agent. The Members shall
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select and designate a registered office and registered agent for
the Company in each state in which the Company is required to
maintain or appoint one.
2.07. Term . The term of the Company shall commence as of
the date hereof and shall continue until the ninety-ninth (99th)
anniversary of such date, unless the Company is earlier dissolved
in accordance with either the provisions of this Operating
Agreement or the Delaware Act.
ARTICLE III
Business of Company
The business of the Company is to realize the full
commercial value in the territory set forth in the License
Agreement of the technology licensed to the Company by ThermoLase
through the efforts of one or more authorized sublicensees or
franchisees. Such activities may include developing or licensing
improvements or related technologies, know how, services, trade
and service marks, and products and establishing wholesale,
retail and spa facilities and every other research, development,
marketing, financing, manufacturing and product and service
delivery activity which may be necessary or desirable in
connection with such business. Subject to the restrictions of
law and in the License Agreement and this Operating Agreement,
the Company may do any and all things permitted under the
Delaware Act.
ARTICLE IV
Management of Company
4.01. Management by Members . The management of the
Company is fully reserved to the Members, and the Company shall
not have "managers," as such term is used in the Act. The powers
of the Company shall be exercised by or under the authority of,
and the business and affairs of the Company shall be managed
under the direction or authority of, the Members who shall make
all decisions and take all actions for the Company.
Notwithstanding the foregoing, the Members hereby expressly agree
that, except to the extent otherwise required by non- waivable
provisions of applicable law or expressly provided herein or in
the Certificate of Formation, in managing the business and
affairs of the Company and exercising its powers, each Member
shall act solely through the Directors designated by such Member
to serve on the Board of Directors pursuant to Section 4.02, in
the manner set forth in such Section 4.02. Except as set forth
in the foregoing provisions of this Section 4.01 or expressly
provided otherwise elsewhere in this Operating Agreement, no
Member has the right, power or authority to act for or on behalf
of the Company, to do any act that would be binding on the
Company, or to incur any expenditures on behalf of the Company.
Decisions or actions taken by the Members in accordance with this
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Operating Agreement shall constitute decisions or actions by the
Company and shall be binding on each Member, Director, officer
and employee of the Company.
4.02. Board of Directors.
a. The Company shall have a board of directors (the
"Board of Directors" or the "Board"), composed of directors (the
"Directors") designated by the Members as set forth below in this
Section 4.02. The Board of Directors shall be the highest
governing body of the Company with respect to all matters
relating to the management of the business and affairs of the
Company and the exercise of its powers. The number of Directors
who shall constitute the whole Board of Directors shall be six
(6). The Directors shall be appointed by ThermoLase and the
persons, if any, to whom ThermoLase has transferred any
Membership Interests in accordance with the terms hereof, on the
one hand, and JDM and the persons, if any, to whom JDM has
transferred any Membership Interests in accordance with the terms
hereof, on the other hand, in accordance with their collective
Membership Interests as follows (with fractional Membership
Interests being rounded to the nearest whole number):
Membership Interest Number of Directors
------------------- -------------------
0% 0/6
1% - 19% 1/6
20% - 48% 2/6
49% - 51% 3/6
52% - 80% 4/6
81% - 99% 5/6
100% 6/6
_________, __________ and __________ shall serve as the Directors
initially designated by ThermoLase, and __________, ___________
and _______________ shall serve as the Directors initially
designated by JDM.
b. In serving on the Board of Directors, each
Director shall act solely as an agent of the Member designating
such Director, in a representative capacity and not in such
Director's individual capacity. Each Director shall devote only
such time to the affairs of the Company as such Director may, in
his sole discretion, deem necessary or advisable for the proper
discharge of his duties as a Director hereunder. Each Member
hereby (i) acknowledges that each Director has certain
responsibilities to the Member designating him as a Director as
set forth herein, and (ii) agrees that each Director shall be
entitled to spend such time as may be necessary or appropriate to
discharge such responsibilities. Directors need not be Members
of the Company.
c. Each Director shall hold office until his death,
resignation or removal in accordance with the provisions hereof.
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d. Any Director may resign by delivering his written
resignation to (i) the officer of the Company designated by the
Board of Directors to receive such resignations, or (ii) the
Board. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the
happening of some other event.
e. Any Director may be removed at any time, with or
without cause, by the Member which designated such person as
Director as set forth in Section 4.02(a) or 4.02(f), as the case
may be, by delivering written notice of such removal to (i) the
officer of the Company designated by the Board of Directors to
receive such notices, and (ii) each other Member. Such removal
shall be effective upon the giving of the notice specified in the
preceding sentence to each Person entitled thereto, unless such
notice is specified to be effective at some other time or upon
the happening of some other event.
f. Any vacancy on the Board of Directors resulting
from the death, resignation or removal of any Director shall be
filled, as promptly as practicable, by the Member which
designated the Director whose position has become vacant, by
designating a replacement Director in a written notice given to
(i) the officer designated by the Board of Directors to receive
such notices, and (ii) each other Member. Such designation of a
replacement Director shall be effective upon the giving of the
notice specified in the preceding sentence to each Person
entitled thereto, unless such notice is specified to be effective
at some other time or upon the happening of some other event.
g. Regular meetings of the Board of Directors may be
held with or without notice at such time and place as shall be
determined from time to time by the Board of Directors; provided
that any Director who is absent when such a determination is made
shall be given notice of the determination. Special meetings of
the Board of Directors may be held at any time and place
designated in a call by any two Directors. Notice of any special
meeting of Directors shall be given to each Director by a
Director calling the meeting or by the officer designated by the
Board for such duty, as the case may be. Any Director may
participate in any meeting by telephone or video conference,
provided that all parties are able to hear one another clearly.
Notice of meetings shall be duly given to each Director (i) by
giving notice to such Person in person or by telephone at least
72 hours in advance of the meeting, (ii) by sending a telegram,
telex or facsimile transmission, or delivering written notice by
hand, to his last known business or home address at least 72
hours in advance of the meeting, or (iii) by sending by reputable
international overnight delivery service (such as Federal Express
or DHL) written notice to his last known business or home address
at least five (5) business days in advance of the meeting. A
notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting. Directors shall be
entitled to waive any notice required to be given hereunder. A
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Director's attendance at or participation in a meeting shall be
deemed to constitute a waiver of any notice of such meeting which
was not given to such Director.
h. At any meeting of the Board of Directors, the
Majority Vote of all Directors then in office shall be required
and sufficient to take any action, unless a different vote is
specified by law, the Certificate of Formation or this Operating
Agreement. In the event of a deadlock of Directors which cannot
be resolved pursuant to good faith negotiations between the
parties, the deadlock resolution provisions of Article IX hereof
shall apply.
i. Directors or any members of any committee
designated by the Directors may participate in a meeting of the
Board of Directors or such committee by means of conference
telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person
at such meeting. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the
Board of Directors may be taken without a meeting, if all of the
members of the Board or committee, as the case may be, who would
be empowered to take the relevant action at a duly convened
meeting of the Board or committee, as the case may be, consent to
the action in writing, and the written consents are filed with
the minutes of proceedings of the Board or committee.
j. The Board of Directors may, by resolution,
designate one or more committees, each committee to consist of
one or more of the Directors of the Company. Any such committee,
to the extent provided in the resolution of the Board of
Directors and subject to the provisions of the Act, shall have
and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the
Company; provided, however, that no committee of the Board of
Directors shall have any power or authority with respect to any
matter requiring a Supermajority Vote of the Board of Directors
hereunder unless such committee's grant of powers and authority
was made by a Supermajority Vote of the Board. Each such
committee shall keep minutes and make such reports as the Board
of Directors may from time to time request. Except as the Board
of Directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise
provided by the Directors or in such rules, its business shall be
conducted as nearly as possible in the same manner as is provided
in this Operating Agreement for the Board of Directors.
k. Directors will not be paid compensation for their
services; but they may receive such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to
time determine. No such payment shall preclude any Director from
serving the Company or any of its parent or subsidiary entities
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in any other capacity and receiving compensation for such
service.
l. To the fullest extent permitted by the Delaware
Act and other applicable law, and to the extent not inconsistent
with the specific provisions of this Operating Agreement or the
Certificate of Formation, it is the intention of the parties that
the Board of Directors shall act collectively, and no Director
acting individually in his capacity as such (but not in his
capacity, if any, as an officer of the Company) shall have any
right or authority to bind the Company. Except as the Board of
Directors may generally or in any particular case otherwise
authorize, and subject to the other provisions of this Operating
Agreement and the Certificate of Formation, the Directors may
designate an officer or officers of the Company to execute on
behalf of the Company any deeds, leases, contracts, bonds, notes,
checks, drafts and other instruments and documents.
m. Each Member may designate up to two (2) persons as
Advisors to the Company. Advisors shall be entitled to notice of
and attendance at meetings of the Board, but shall have no right
to vote or to exercise any authority with respect to the Company.
A Member may designate and remove Advisors upon notice to the
Board of Directors. In addition, upon the unanimous consent of
all Members, any Member may invite any other person to observe,
but not participate in, Board Meetings.
4.03. Officers.
a. The Board of Directors may designate one or more
individuals to be Officers of the Company. No Officer need be a
resident of the State of Delaware or a Director or Member.
Officers are not "managers" as such term is used in the Delaware
Act. Officers shall have such authority and perform such duties
as the Board of Directors may delegate to them; provided,
however, that, if the Board determines to establish any officer
position with a title expressly referenced in the General
Corporation Law of the State of Delaware, such officer shall, to
the maximum extent possible, unless otherwise determined by the
Board of Directors, have the duties and responsibilities
associated with such officer position under the General
Corporation Law of the State of Delaware. Any two or more
offices may be held by the same person.
b. Except as otherwise provided by law, by the
Certificate of Formation or by this Operating Agreement, each
officer shall hold office until his death, resignation or
removal, unless a different term is specified in the action of
the Board of Directors designating him. Any officer may resign
by delivering his written resignation to the Board of Directors.
Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the
happening of some other event. Any officer may be removed at any
time, with or without cause, by action of the Board of Directors.
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c. Except as the Board of Directors may otherwise
determine, no officer who resigns or is removed shall have any
right to any compensation as an officer for any period following
his resignation or removal, or any right to damages on account of
such removal, whether his compensation be by the month or by the
year or otherwise, unless such compensation is expressly provided
in a duly authorized written agreement with the Company.
4.04. Actions of the Board.
(A) Notwithstanding any provision in this Operating
Agreement to the contrary, the following decisions and actions
require a Supermajority Vote of the Board of Directors:
a. causing or permitting the Company to take any
action, other than as set forth in Article IX, which would alter
the ratio of ThermoLase's Economic Interest to JDM's Economic
Interest; or
b. causing or permitting the Company to become
bankrupt (but this provision shall not be construed to require
any Member to ensure the profitability or solvency of the
Company).
(B) Notwithstanding any provision in this Operating
Agreement to the contrary, the following decisions and actions
require a Majority Vote of the Board of Directors:
a. causing or permitting the Company to grant a
sublicense under the License Agreement;
b. approving the annual budget of the Company;
c. incurring any expenditure, indebtedness, or cash
reserve in the individual or aggregate case which is (i) not
provided for in an approved annual operating budget and greater
than $100,000, or (ii) if such amount is (A) in an approved
annual operating budget but more than 120% of the amount shown
therefor and (B) more than $100,000;
d. causing or permitting the Company (i) to be a party
to a merger, consolidation, share exchange, interest exchange or
other transaction authorized by or subject to the provisions of
e 18-209 of the Delaware Act or (ii) to convert into any other
type of Entity;
e. causing the Company to initiate or defend any legal
action;
f. causing the Company to amend materially the License
Agreement or any sublicense agreement under the License
Agreement;
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g. causing the Company to engage in any trade or
business in the United States.
4.05. Related Party Transactions . Other than
transactions contemplated or required by (a) the License
Agreement, including the sublicense of certain rights and
technology to JV France, (b) the supply of certain products to JV
France by ThermoLase and Franklin Holding pursuant to a Supply
Agreement acceptable to ThermoLase and Franklin Holding, and (c)
the provision by ThermoLase of certain administrative and
accounting services to the Company pursuant to a services
agreement reasonably acceptable to JDM, the Company shall not
enter into, engage in or waive or amend any rights under any
transaction, contract, agreement or arrangement in which a Member
(a "Related Member"), an officer or employee of such Related
Member, an affiliate of any of the foregoing, or a person related
by blood or marriage to any of the foregoing has an interest
unless other Members holding at least 50% of the Membership
Interests of the Company, excluding the Related Member's
Membership Interest, consent to such transactions, contract,
agreement or arrangement.
4.06. Prohibited Acts. No Member shall cause or permit the
Company to enter into or engage in any transaction, contract,
agreement or arrangement that (i) is unrelated to the Company's
purpose (as set forth in Article III above), (ii) otherwise
contravenes the Certificate of Formation or this Operating
Agreement, or (iii) would make it impossible to carry on the
ordinary business of the Company.
4.07. Duties of the Parties . The Members' respective
obligations to each other are limited to the express obligations
described in this Operating Agreement, the License Agreement, the
By-laws and Shareholders Agreement of JV France, and the other
agreements expressly described herein, which obligations the
Members shall carry out with ordinary prudence and in a manner
characteristic of business persons in similar circumstances. No
Member shall be a fiduciary of or have any fiduciary obligations
to the other Members in connection with the Company or this
Operating Agreement or such Member's performance of its
obligations under this Operating Agreement, and each Member
hereby waives to the fullest extent permitted by applicable law
any rights it may have to claim any breach of fiduciary
obligation under this Operating Agreement or in connection with
the Company.
4.08. Indemnification.
a. Except in cases of infringement as set forth in
Article XI below, each of the Directors and each of the Members,
and its direct and indirect owners (each, an "Indemnitee"), shall
be indemnified by the Company under the following circumstances
and in the manner and to the extent indicated:
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i. In any threatened, pending, or completed
action, suit or proceeding to which an Indemnitee was or is a
party, or is threatened to be made a party (other than an action,
suit or proceeding by or in the right of the Company), involving
an alleged cause of action for damages arising out of, or in any
way connected with, the manner in which the Indemnitee conducted
the Company's business or exercised its rights hereunder, the
Company shall indemnify the Indemnitee, or its direct or indirect
owner as the case may be, against all expenses, including
attorneys' fees, judgments, and amounts paid in settlement
actually and reasonably incurred by the Indemnitee in connection
with such action, suit or proceeding if, in the transaction
giving rise to such action, suit or proceeding, the Indemnitee
acted in good faith and in a manner the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the
Company and the Indemnitee's conduct in such transaction did not
constitute gross negligence, willful or wanton misconduct or a
breach of the Indemnitee's fiduciary obligations to the other
Members. The termination of any action, suit or proceeding by
judgment, order or settlement shall not, of itself, create a
presumption that the Indemnitee did not act in good faith and in
a manner which the Indemnitee reasonably believed to be in, or
not opposed to, the best interests of the Company.
ii. In any threatened, pending or completed
action, suit or proceeding by or in the right of the Company to
which an Indemnitee was or is a party, or is threatened to be
made a party, involving an alleged cause of action for damages
arising out of, or in any way connected with, the manner in which
the Indemnitee managed or was deemed to manage the internal
affairs of the Company as prescribed by this Operating Agreement
or by the Delaware Act, or both, or exercised its rights
hereunder, the Company shall indemnify the Indemnitee against all
expenses, including attorneys' fees, actually and reasonably
incurred by the Indemnitee in connection with such action, suit
or proceeding if, in the transaction giving rise to such action,
suit or proceeding, the Indemnitee did not violate its fiduciary
duties and acted in good faith and in a manner the Indemnitee
reasonably believed to be in the best interests of the Company,
except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the Indemnitee shall have
been adjudged to be liable for negligence, misconduct, or breach
of the Indemnitee's fiduciary obligations, unless and only to the
extent that the court in which such action, suit or proceeding
was brought shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the
case, the Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
b. Except in cases of infringement as set forth in
Article XI below, each officer of the Company shall be
indemnified by the Company against all judgments, fines,
settlement payments and expenses, including reasonable attorneys'
fees, paid or incurred in connection with any claim, action, suit
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or proceeding, civil or criminal, to which he may be a party or
with which he may be threatened by reason of his being or having
been an officer of the Company, or, at its request, a director,
officer, stockholder or member of any other company, firm or
association of which the Company is a stockholder, member, or
creditor and by which he is not so indemnified, or by reason of
any action or omission by him in such capacity, whether or not he
continues to be an officer at the time of incurring such expenses
or at the time the indemnification is made. No indemnification
shall be made hereunder (a) with respect to payments and expenses
incurred in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding not to have acted in
good faith and in the reasonable belief that his action was in
the best interests of the Company or (b) if otherwise prohibited
by law. To the extent permitted under local law, the Company
shall cause each of its subsidiaries to have in the appropriate
organizational document of such subsidiary an indemnification
provision substantially similar to the indemnification provisions
set forth in this section 4.08(b).
c. The foregoing rights of indemnification shall not
be exclusive of other rights to which any Member, director or
officer may otherwise be entitled and shall inure to the benefit
of the executor or administrator of such director or officer.
ARTICLE V
Contributions to Capital and Capital Accounts
5.01. Initial Capital.
a. Each Member shall contribute to the capital of the
Company the amount of money or property set forth or described on
Exhibit A as its Initial Capital Contribution opposite that
Member's name at the times set forth on Exhibit A , provided that
the Percentage Interests in respect of such Initial Capital
Contributions shall accrue to the Members on the effective date
of this Agreement.
b. JDM represents and warrants to ThermoLase that set
forth on Exhibit B is a true, correct and complete list of the
direct and indirect owners of JDM (up to Franklin Holdings,
S.A.), together with a true, correct and complete list of the
direct and indirect owners of such direct and indirect owners of
JDM, as of the effective date of this Operating Agreement. JDM
covenants to ThermoLase that JDM shall not admit new stockholders
to itself (except nominees holding one single share each up to
seven shareholders in order to satisfy French company law
requirements) and shall cause each of its stockholders not to
transfer all or any part of its stockholders interest in JDM
without ThermoLase's prior written consent, which shall be within
its sole discretion. Each of the persons executing this
Agreement as a JDM Owner covenants to ThermoLase that such person
shall not transfer all or any part of its ownership interest in
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JDM, D.B.C. Holding, S.A., JV France, Franklin Holding, S.A., or
any of its or their direct or indirect owners without
ThermoLase's prior written consent, which shall be within its
sole discretion. Notwithstanding the foregoing, ThermoLase agrees
that (i) the shareholders of JDM shall have the right to transfer
shares of JDM among themselves (but not to any third party),
provided that Franklin Holdings, S.A. at no time reduces its
ownership interest in JDM below 50%; (ii) the shareholders of
D.B.C. Holding, S.A. shall have the right to transfer shares of
D.B.C. Holding, S.A. among themselves, provided that Franklin
Holding S.A. does not reduce its ownership of shares of Franklin
Holdings, S.A. below 50.1% of the total shares of D.B.C.
Holdings, S.A.; (iii) the shareholders of Franklin Holding S.A.
shall have the right to transfer shares of Franklin Holding, S.A.
among themselves or to offer shares of Franklin Holding S.A. to
the public or to sell shares of Franklin Holding S.A. to third
parties, to the extent that the JDM Owners, their next of kin and
current or future executives and employees of Franklin Holding,
S.A. or companies controlled by Franklin Holding, S.A. retain at
least 50.1% of the capital stock and voting rights of Franklin
Holding, S.A., and (iv) the JDM Owners may transfer their
ownership interests in JDM, JV France, Franklin Holding, S.A., or
any of its or their direct or indirect owners as required by the
laws of estate or family devolution.
c. ThermoLase represents and warrants to JDM that
ThermoLase is controlled by Thermo Electron Corporation, through
one or more direct or indirect subsidiaries of Thermo Electron
Corporation. ThermoLase agrees that it shall not, without the
prior written consent of JDM, effect a change in its ownership
that would result in Thermo Electron Corporation not having
direct or indirect (through one or more subsidiaries) over
ThermoLase.
5.02. Additional Capital Contributions . Except as set
forth in section 5.01 or 5.03(g) no Member shall be required to
make any Capital Contributions.
5.03. Capital Accounts. A separate Capital Account will be
maintained for each Interest Owner.
a. Each Interest Owner's Capital Account will be
increased by:
i. The amount of money contributed by the
Interest Owner to the Company;
ii. The fair market value of property contributed
by the Interest Owner to the Company (net of liabilities secured
by such contributed property that the Company is considered to
assume or take subject to under IRC e 752); and
iii. Allocations to the Interest Owner of
partnership income and gain (or items thereof), including tax
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exempt income, and taking into account income and gain described
in Treas. Reg. e 1.704-1(b)(2)(iv)(g).
b. Each Interest Owner's Capital Account will be
decreased by:
i. The amount of money distributed to the
Interest Owner by the Company or withdrawn from the Company by
the Interest Owner;
ii. The fair market value of property distributed
to the Interest Owner by the Company (net of liabilities secured
by such distributed property that such Interest Owner is
considered to assume or take subject to under IRC e 752);
iii. Allocations to the Interest Owner of
expenditures described in IRC e 705(a)(2)(B); and
iv. Allocations to the account of the Interest
Owner of Company loss and deduction as set forth in the relevant
Treasury Regulations, taking into account adjustments to reflect
book value under Treas. Reg. e 1.704-1(b)(2)(iv)(g).
c. In the event of a permitted sale or exchange of a
Membership Interest or an Economic Interest in the Company, the
Capital Account of the transferor shall become the Capital
Account of the transferee to the extent it relates to the
transferred Membership Interest or Economic Interest in
accordance with Treas. Reg. e 1.704-1(b)(2)(iv).
d. Any adjustments to Capital Accounts to reflect
revaluations of the Company's property shall be made as follows:
i. In the case of a distribution of appreciated
or depreciated property to an Interest Owner, the Capital
Accounts shall first be adjusted to reflect the manner in which
the unrealized income, gain, loss, and deduction inherent in such
property (that has not been reflected in the capital accounts
previously) would be allocated among the Interest Owners if there
were a taxable disposition of such property for the fair market
value of such property on the date of distribution, in accordance
with Treas. Reg. e 1.704-1(b)(2)(iv)(e).
ii. The Capital Accounts of the Interest Owners
may, upon the determination of a Majority Interest for a
substantial non-tax business purpose, be adjusted to reflect a
revaluation of Company property (including intangible assets such
as goodwill) in connection with any one or more of the following
events: (A) the contribution of money or other property (other
than a de minimis amount) to the Company by a new or existing
Interest Holder as consideration for an Economic Interest;
(B) the liquidation of the Company or a distribution of money or
other property (other than a de minimis amount) by the Company to
a retiring or continuing partner as consideration for an Economic
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Interest; or (C) under generally accepted industry accounting
practices, provided substantially all of the Company's property
(excluding money) consists of securities readily tradable on an
established securities market. Revaluations pursuant to this
section 5.03(d)(ii) shall be made in accordance with Treas. Reg.
e 1.704-1(b)(2)(iv)(f).
e. The manner in which Capital Accounts are to be
maintained pursuant to this section 5.03 is intended to comply
with the requirements of IRC e 704(b) and the Treasury
Regulations promulgated thereunder. If in the opinion of the
Company's accountants the manner in which Capital Accounts are to
be maintained pursuant to the preceding provisions of this
section should be modified to comply with IRC e 704(b) and the
Treasury Regulations thereunder, then, notwithstanding anything
to the contrary contained in the preceding provisions of this
section 5.03, the method in which Capital Accounts are maintained
shall be so modified; provided, however, that any such change
pursuant to this section 5.03(e) in the manner of maintaining
Capital Accounts shall not materially alter the economic
agreement between or among the Members.
f. Upon liquidation of the Company (or any Member's
Membership Interest or Economic Interest Owner's Economic
Interest), liquidating distributions will be made in accordance
with section 10.03.
g. Except as otherwise required by the Delaware Act
(and subject to sections 5.01 and 5.02 above), no Member or
Economic Interest Owner shall have any liability to restore all
or any portion of a deficit balance in the Member's or Economic
Interest Owner's Capital Account. If such restoration is required
by the Delaware Act, amounts payable pursuant to such restoration
shall be payable by the Members in proportion to their Economic
Interests; provided that this provision is for the benefit of the
Members and not for the benefit of third party creditors of the
Company.
5.04. Withdrawal or Reduction of Members' Contributions to
Capital . A Member shall not receive out of the Company's
property any part of its Capital Contribution until:
(i) all liabilities of the Company, except liabilities
to Members on account of their Capital Contributions, have been
paid or there remains property of the Company sufficient to pay
them;
(ii) the consent of all Members is had, unless the
return of the Capital Contribution may be rightfully demanded
under the Delaware Act; or
(iii) the Certificate of Formation is canceled or so
amended as to set out the withdrawal or reduction.
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ARTICLE VI
Allocations and Distributions
6.01. Allocations of Profits and Losses from Operations .
All items of income, loss, deduction or credit of the Company
shall be allocated among the Interest Owners according to and in
proportion with their respective Economic Interests.
6.02. Tax and Special Allocations . For U.S. tax purposes
only, except as provided below or as otherwise required by the
IRC or Treasury Regulations promulgated thereunder (including,
without limitation, Treasury Regulations e 1.704-1 and
1.704-2), Company income, gain, loss, deduction, credit and other
partnership items, as computed for federal income tax purposes,
shall be allocated among the Economic Interest Owners in the same
manner as the corresponding book items are allocated pursuant to
section 6.01. In order that Company allocations have substantial
economic effect under the IRC and Treasury Regulations, the
following additional rules shall apply with respect to
allocations for tax purposes:
a. In accordance with IRC e 704(c)(1)(A) a
regulations issued thereunder, if a Member contributes property
with a fair market value that differs from its adjusted basis at
the time of contribution, income, gain, loss, and deductions
attributable to the property shall, solely for federal income tax
purposes, be allocated among the Interest Owners so as to take
account of any variation between the adjusted basis of the
property to the Company and its fair market value at the time of
contribution.
b. If any Interest Owner unexpectedly receives any
adjustments, allocations, or distributions described in Treas.
Reg. e 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which create
increase a Deficit Capital Account of the Interest Owner, the
items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income,
and gain for such Fiscal Year and, if necessary, for subsequent
Fiscal Years) shall be specially credited to the Capital Account
of the Interest Owner in an amount and manner sufficient to
eliminate, to the extent required by the Treasury Regulations,
the Deficit Capital Account so created as quickly as possible.
It is intended that this section 6.02(b) be interpreted to
constitute a "qualified income offset" and to comply with the
alternate test for economic effect set forth in Treas. Reg.
e 1.704-1(b)(2)(ii)(d).
c. If any Interest Owner would have a Deficit Capital
Account at the end of any Fiscal Year which is in excess of the
sum of any amount that the Interest Owner is obligated to restore
to the Company under Treas. Reg. e 1.704-1(b)(2)(ii)(c) and the
Interest Owner's share of minimum gain as defined in Treas. Reg.
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e 1.704-2(g)(1)(which is also treated as an obligation to restore
in accordance with Treas. Reg. e 1.704-1(b)(2)(ii)(d)), the
Capital Account of the Interest Owner shall be specially credited
with items of Company income (including gross income) and gain in
the amount of the excess as quickly as possible.
d. No allocation of loss or deduction shall be made to
an Interest Owner to the extent such allocation causes or
increases a Deficit Capital Account balance at the end of the
Fiscal Year to which such allocation relates; such loss or
deduction shall instead be allocated among the other Interest
Owners in accordance with their Economic Interests, subject to
the limitations of this section 6.02(d).
e. Non-recourse deductions (as defined in Treas. Reg.
e 1.704-2(b)(1)) shall be allocated in accordance with the
Interest Owners' respective Economic Interests, pursuant to
Treas. Reg. e 1.704-2(e)(2). Non-recourse deductions
attributable to Interest Owner non-recourse debt (as defined in
Treas. Reg. e 1.704-2(b)(4)) shall be allocated to the Interest
Owner or Interest Owners that bear the economic risk of loss for
such debt in accordance with Treas. Reg. e 1.704-2(i)(1).
f. If there is a net decrease in "partnership
[Company] minimum gain" as defined in Treas. Reg. e 1.704-2(d)
during a Fiscal Year, each Interest Owner with a share of Company
minimum gain as of the beginning of the Fiscal Year shall be
allocated items of Company income and gain for such Fiscal Year
(and, as necessary, for subsequent years) equal to that Interest
Owner's share of the decrease in Company minimum gain. This
paragraph is intended to and shall in all events be interpreted
and applied so as to constitute a "minimum gain chargeback"
within the meaning of Treas. Reg. e 1.704-2(f). If, in any
Fiscal Year that the Company has a net decrease in the Company's
minimum gain, the minimum gain chargeback requirement would cause
a distortion in the economic arrangement among the Interest
Owners and it is not expected that the Company will have
sufficient other income to correct that distortion, the Company
may (and shall, if requested to do so by a Member) seek to have
the IRS waive the minimum gain chargeback requirement in
accordance with Treas. Reg. e 1.704-2(f)(4).
g. If there is a net decrease in "partner [Interest
Owner] non-recourse debt minimum gain" as defined in Treas. Reg.
e 1.704-2(i)(3) during a Fiscal Year, each Interest Owner with a
share of Interest Owner non-recourse debt minimum gain as of the
beginning of the Fiscal Year shall be allocated items of Company
income and gain for such Fiscal Year (and, as necessary, for
subsequent years) equal to that Interest Owner's share of the net
decrease in Interest Owner non-recourse debt minimum gain. This
paragraph is intended to and shall in all events be interpreted
and applied so as to constitute "partner non-recourse debt
minimum gain chargeback" within the meaning of Treas. Reg. e
1.704-2(i)(4).
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h. All recapture of income tax deductions resulting
from sale or disposition of Company property shall be allocated
to the Interest Owner(s) to whom the deduction that gave rise to
the recapture was allocated hereunder to the extent that gain
from the sale or other disposition of the property is allocated
to such Interest Owner(s).
i. An Interest Owner's share of the liabilities of the
Company shall be determined under IRC e 752 and the Treasury
Regulations promulgated thereunder.
j. Income, gain, loss, and deduction with respect to
property contributed to the Company by an Interest Owner shall be
allocated in accordance with IRC e 704(c) and the Treasury
Regulations promulgated thereunder.
6.03. Distributions. Except as provided in section 10.03
of this Operating Agreement, all distributions of cash or other
property shall be as follows:
a. All distributions by the Company shall be made to
the Interest Owners pro rata in proportion to the respective
Economic Interests of the Interest Owners on the record date of
the distribution.
b. All amounts withheld pursuant to the IRC or any
provisions of state or local tax law for any payment or
distribution to the Interest Owners from the Company shall be
treated as amounts distributed to the relevant Interest Owner or
Interest Owners pursuant to this section 6.03.
c. No distribution shall be made pursuant to this
section 6.03 unless, after the distribution is made, the assets
of the Company are in excess of all liabilities of the Company,
except any liabilities to Interest Owners with respect to their
capital contributions.
d. No Interest Owner shall be entitled to interest on
its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for in
this Operating Agreement.
e. Nothing in this Operating Agreement shall prevent
any Interest Holder from making secured or unsecured loans to the
Company by agreement with the Company.
f. Subject to the foregoing provisions of this section
6.03, the Board of Directors shall determine the amount and
timing of distributions, provided, however that the Company shall
no later than ninety (90) days after the end of each Fiscal Year
distribute all Distributable Funds of the Company with respect to
the preceding Fiscal Year. For purposes of this section,
"Distributable Funds" means all cash received (or released from
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reserves) by the Company during any Fiscal Year (including all
interest income from temporary investments made by the Company
pending utilization, investment, or distribution by the Company),
less (i) amounts paid or reserved to pay all costs or expenses
incurred by the Company during such period, (ii) amounts paid or
reserved for payment of any indebtedness or liability of the
Company, and (iii) amounts used to create or increase reserves as
the Board of Directors may determine for the discharge of known
or existing liabilities or obligations of the Company or
otherwise for the Company's present or future obligations, needs
or business opportunities.
ARTICLE VII
Transferability
7.01. General . Except as otherwise specifically provided
in this Operating Agreement, or as approved by the unanimous
consent of the Members, neither a Member nor an Economic Interest
Owner shall have the right to:
a. sell, assign, pledge, hypothecate, transfer,
exchange or otherwise transfer for consideration (collectively,
"Sell") all or any part of its Membership Interest or Economic
Interest; or
b. gift, bequeath or otherwise transfer for no
consideration (whether or not by operation of law, except in the
case of bankruptcy) all or part of its Membership Interest or
Economic Interest.
7.02 a. Any sale or gift of a Membership Interest or
Economic Interest or admission of a Member in compliance with
this Article VII shall be deemed effective as of the last day of
the fiscal month in which the remaining Members' consent thereto
was given. The Selling Party agrees, upon the request of the
remaining Members, to execute such certificate or other documents
and perform such other acts as may be reasonably requested by the
remaining Members from time to time in connection with such sale,
transfer, assignment, or substitution. The Selling Party hereby
indemnifies the Company and the remaining Members against any and
all loss, damage, or expense (including, without limitation, tax
liabilities or loss of tax benefits) arising directly or
indirectly from any transfer or purported transfer in violation
of this Article VII.
b. The provisions of this Section 7.01 shall not apply
to a transfer made pursuant to the terms and conditions of the
Option Agreement dated as of the effective date of this Operating
Agreement between ThermoLase and JDM.
c. Any sale or gift of a Membership Interest or
Economic Interest or admission of a Member in compliance with
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this Article VII shall be deemed effective to the extent such
sale or gift shall have taken place together with a sale or gift
of the Selling Party's corresponding participating interest in JV
France in accordance with the By-laws and Shareholders' Agreement
governing the operations of JV France and the relationships of
the Parties or shareholders of JV France.
7.03. Transferee Not a Member in Absence of Unanimous
Consent. Notwithstanding anything contained in this Operating
Agreement to the contrary (including, without limitation, section
7.02 above), if all of the remaining Members do not approve by
unanimous written consent of the proposed sale or gift of the
Transferring Party's Membership Interest or Economic Interest to
a transferee or donee which is not a Member immediately before
the sale or gift, the proposed transferee or donee shall have no
right to participate in the management of the business and
affairs of the Company or to become a Member; provided, however ,
ThermoLase shall have the right to transfer its Membership
Interest to any direct or indirect subsidiary of Thermo Electron
Corporation without such consent or complying with section 7.02
above, and upon such transfer such subsidiary shall be a Member
of the Company and ThermoLase shall remain liable for its
obligations under this Operating Agreement to the extent such
subsidiary does not perform or satisfy such obligations. The
transferee or donee shall be merely an Economic Interest Owner.
No transfer of a Member's interest in the Company (including any
transfer of the Economic Interest or any other transfer that has
not been approved by unanimous written consent of the Members)
shall be effective unless and until written notice (including the
name and address of the proposed transferee or donee and the date
of such transfer) has been provided to the Company and the
nontransferring Member(s).
a. Upon and contemporaneously with any sale or gift of
a Transferring Party's Economic Interest in the Company which
does not at the same time transfer the balance of the rights
associated with the Economic Interest transferred by the
Transferring Party (including, without limitation, the rights of
the Transferring Party to participate in the management of the
business and affairs of the Company), the Company shall purchase
from the Transferring Party, and the Transferring Party shall
sell to the Company for a purchase price of $100, all remaining
rights and interests retained by the Transferring Party that
immediately before the sale or gift were associated with the
transferred Economic Interest.
b. The restrictions on transfer contained in this
section 7.03 are intended to comply (and shall be interpreted
consistently) with the restrictions on transfer set forth in the
Delaware Act.
ARTICLE VIII
Additional Membership Interests
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and Additional Members
8.01. Additional Membership Interests. From the date of
the formation of the Company, the Directors may, by their
unanimous vote, authorize the issuance of new and additional
Membership Interests for such consideration as the Directors by
their unanimous vote shall determine.
8.02. Admission to Membership .From the date of the
formation of the Company, any Person acceptable to the Directors
by their unanimous vote may become a Member in this Company
whether by the issuance by the Company of Membership Interests
for such consideration as the Directors by their unanimous vote
shall determine, or as a transferee of a Member's Membership
Interest or any portion thereof, subject to the terms and
conditions of this Operating Agreement. Notwithstanding any
other provision of this Operating Agreement, no Person shall
become a Member of the Company without satisfying the provisions
of this section 8.02 or Article VII.
8.03. Financial Adjustments. No new Members shall be
entitled to any retroactive allocation of losses, income, or
expense deductions incurred by the Company. The Board of
Directors may, at their option, at the time a Member is admitted,
close the Company's books (as though the Company's Fiscal Year
had ended) or make pro rata allocations of loss, income, and
expense deductions to a new Member for that portion of the
Company's Fiscal Year in which a Member was admitted in
accordance with the provisions of IRC e 706(d) and the Treasury
Regulations promulgated thereunder.
ARTICLE IX
Deadlock Resolution
9.01 The parties agree and acknowledge that it is in their
mutual best interest to cooperate to resolve differences that
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
arise in the course of their relationship and to overcome
disagreements that arise in the governance of the Company.
Nevertheless, the parties acknowledge that situations could arise
in which their different interests lead to a material inability
of the Company to act due to a failure of the members of the
Board of Directors, despite their good faith best efforts, to
agree upon one or more decisions which are required to be made
in order to continue the effective operation of the Company
("Deadlock"). The purpose of this Article IX is to define the
provisions pursuant to which such Deadlocks shall be resolved.
9.02 a. In the event of a Deadlock, the Members will first
comply with the mediation and dispute resolution procedures set
forth in Section 12.01 hereof.
9.03 If the Members remain unable to agree on a solution
following such procedures, then the following shall apply:
9.03.1 If the Deadlock occurs before Consolidated
Venture Revenue exceeds **********************************
************* then the parties shall dissolve the Company as
though by mutual consent, it being understood that in such event,
ThermoLase shall have the right, but not the obligation, to
purchase from D.B.C. Holding, S.A. all its interest in JDM for a
price, subject to the provisions of this section, equal to the
positive account balance of D.B.C. Holding in JDM at the time of
such purchase.
9.03.2 If the Deadlock occurs after Consolidated
Venture Revenue exceeds **********************************
************* then the following shall apply:
a. ThermoLase shall have the right to purchase from
D.B.C. Holding all its ownership interest in JDM; and JDM shall
have the right to purchase from ThermoLase all its interest in
the Company (collectively, the "Purchase Rights"). No later than
five (5) business days following the Members' failure to resolve
a Deadlock as described above, each Member shall give the other
Member a non-binding notification as to whether it would prefer
to exercise or not to exercise its Purchase Right.
b. If one Member prefers to exercise its Purchase
Right and one Member prefers not to exercise its Purchase Right,
then the Members shall attempt, in good faith, to agree upon an
appropriate exercise price for the exercising Member's purchase
right.
c. If the Members cannot agree on an appropriate
exercise price, or if both Members either desire to exercise or
not to exercise their Purchase Rights, than an independent
appraiser not connected with either Member, experienced in the
valuation of international joint ventures and otherwise
reasonably acceptable to both Members shall be engaged by and at
the expense of the Company (or by JV France, at its option) to
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determine the fair market value of the Members' respective
ownership interests subject to the Purchase Rights (the "Value").
The appraiser shall base its determination of the Value on the
price an independent third party would be willing to pay for the
ownership interest in question, without regard to whether such
interest would be held, bought or sold by ThermoLase or JDM. The
upper bound of such Value shall be the price which would be
ascribed to such interest based on the valuation of the Company
set forth in the Option Agreement of even date herewith between
ThermoLase and JDM. The determination of the appraiser shall be
final and binding on both Members.
d. No later than five (5) business days following the
delivery of the appraiser's final valuation, each Member shall
provide the other with a binding election as to whether or not it
elects to exercise its Purchase Right.
e. If only one Member exercises its Purchase Right,
then the purchase and sale of such interest shall occur promptly
following the delivery of such Member's notice to that effect for
the Value.
f. If both Members exercise their Purchase Rights,
then the Mediator shall organize an auction in which the price at
which the Purchase Right may be exercised shall increase in
increments of five percent (5%), with the winning bid being the
final bid received by the Mediator from a Member, with no higher
bid received from the other Member within 48 hours. The costs
and expenses of the Mediator shall be shared equally by the
Members, and not by the Company.
g. If neither Member exercises its Purchase Right,
then the Mediator shall organize an auction in which the price at
which the Purchase Right may be exercised shall decrease in
increments of five percent (5%), and the Member who first elects
to exercise its Purchase Right at the then-current bid price,
with no competing bid received from the other Member within 48
hours, shall be entitled to exercise its Purchase Right for such
price. The costs and expenses of the Mediator shall be shared
equally by the Members, and not by the Company.
h. The parties shall cause their respective owners to
execute all required documents evidencing the transfer of
ownership described in this Section 9.03.2.
i. Following the purchase described in this Section
9.03.2, the parties shall be bound by the applicable
non-competition provisions set forth in Section 10.07.
9.04 D.B.C. Holdings and the JDM Owners agree, jointly and
severally, to indemnify, defend and hold ThermoLase harmless
against any and all liabilities, obligations, claims, actions and
suits relating to JDM or its acts or omissions, except those
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which arise directly from its ownership of the Membership
Interests or its interest in JV France.
ARTICLE X
Dissolution and Termination
10.01. Dissolution.
a. The Company shall be dissolved upon the occurrence
of the following events:
i. when the period fixed for the duration of the
Company shall expire pursuant to section 2.07 above;
ii. by the written agreement of a Supermajority
Interest;
iii. at the election of ThermoLase, in its sole
and absolute discretion (which election shall be made in writing
and delivered to the other Members no later than six months
following the first anniversary of the date of this Operating
Agreement), if, by the first anniversary of the date of this
Operating Agreement, JV France has not opened for paying
customers a spa facility in France employing the SoftLight
technology sublicensed to it by the Company;
iv. at the election of ThermoLase, in its sole
and absolute discretion (which election shall be made in writing
and delivered to the other Members no later than six months
following the second anniversary of the opening by JV France of a
spa facility in France employing the SoftLight technology
sublicensed to it by the Company) if, by such second anniversary,
Consolidated Venture Revenues are below $5,000,000;
v. upon the dissolution, liquidation, or other
termination of the existence or business of JV France;
vi. upon the bankruptcy (under the Federal
Bankruptcy Code of 1978, as amended or similar legislation), or
dissolution of a Member or upon the occurrence of any other event
that terminates the continued membership of a Member in the
Company, unless within ninety (90) days Members owning at least a
Majority of the Membership Interests of the Company, excluding
the affected Member's Membership Interest, agree to continue the
term of the Company, subject to the other provisions hereof, and
provided that, upon any of the foregoing events that terminate
the continued membership of a Member in the Company, the
remaining Member or Members shall immediately be entitled to
admit an additional Member or additional Members on such terms
and conditions as such remaining Members shall determine. In any
such case, the Members hereunder shall remain Members of the
Company; each Member of the Company (including the former Member)
shall retain such economic interest in the Company as was held
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prior to such event; and all of the assets of the Company of any
nature whatsoever and all liabilities of the Company shall remain
the assets and liabilities of the Company. The remaining Members
shall file an amended Certificate of Formation in accordance with
the Act, if necessary, together with any documents or instruments
necessary to effectuate the provisions of this section
10.01(a)(vi).
b. As soon as possible following the occurrence of any
of the events specified in section 10.01(a) effecting the
dissolution of the Company, the appropriate representative of the
Company shall execute a statement of intent to dissolve in such
form as shall be prescribed by the Delaware Secretary of State
and file same with the Delaware Secretary of State's office.
c. If a Member who is an individual dies or a court of
competent jurisdiction adjudges him to be incompetent to manage
the Member's person or property, the Member's executor,
administrator, guardian, conservator, or other legal
representative may exercise all of the Member's rights for the
purpose of settling the Member's estate or administering his
property.
10.02. Effect of Filing of Dissolving Statement . Upon the
filing with the Delaware Secretary of State of a statement of
intent to dissolve, the Company shall cease to carry on its
business, except insofar as may be necessary for the winding up
of its business, but its separate existence shall continue until
a certificate of dissolution has been issued by the Secretary of
State or until a decree dissolving the Company has been entered
by a court of competent jurisdiction.
10.03. Winding Up, Liquidation, and Distribution of Assets.
Upon dissolution, an accounting shall be made by the Company's
independent accountants of the accounts of the Company and of the
Company's assets, liabilities, and operations, from the date of
the last previous accounting until the date of dissolution. The
Board of Directors shall immediately proceed to wind up the
affairs of the Company. If the Company is dissolved and its
affairs are to be wound up, the Board of Directors shall:
a. Sell or otherwise liquidate all of the Company's
assets as promptly as practicable (except any assets which are
required to be distributed to the Members in kind);
b. Allocate any profit or loss resulting from such
sales to the Members' and Economic Interest Owners' Capital
Accounts in accordance with Article VI above;
c. Discharge all liabilities of the Company, including
liabilities to Members and Economic Interest Owners who are
creditors, to the extent otherwise permitted by law, other than
liabilities to Members and Economic Interest Owners for
distributions, and establish such Reserves as may be reasonably
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necessary to provide for contingencies or liabilities of the
Company (for purposes of determining the Capital Accounts of the
Members and Economic Interest Owners, the amounts of such
Reserves shall be deemed to be an expense of the Company).
d. Distribute the remaining assets in the following
order:
i. The Company will distribute to ThermoLase in
kind whatever interest it has, if any, in the property
contributed by ThermoLase as its Initial Capital Contribution
pursuant to section 5.01 of this Operating Agreement. The fair
market value of such property shall be deemed to be the fair
market value of such property as reflected in the Company's books
and records at the time of its contribution to the Company for
purposes of adjustments to Capital Accounts under section 5.03 of
this Operating Agreement.
ii. All additional property of the Company shall
be distributed to the Interest Owners in proportion to their
Economic Interests.
iii. The Company may offset damages for breach of
this Operating Agreement by a Member or Economic Interest Owner
whose interest is liquidated (either upon the withdrawal of the
Member or the liquidation of the Company) against the amount
otherwise distributable to the Member under this section
10.04(d); provided, however, that a Member's election pursuant
to sections 10.01(a)(iii), (iv) or (v), or the occurrence of a
deadlock as resolved under Article IX, shall not constitute a
breach of this Operating Agreement.
e. Notwithstanding anything to the contrary in this
Operating Agreement, upon a liquidation within the meaning of
Treas. Reg. e 1.704-1(b)(2)(ii)(g), if any Member has a Deficit
Capital Account (after giving effect to all contributions,
distributions, allocations, and other Capital Account adjustments
for all taxable years, including the year during which such
liquidation occurs), the Member shall have no obligation to make
any Capital Contribution, and the negative balance of the
Member's Capital Account shall not be considered a debt owed by
the Member to the Company or to any other Person for any purpose
whatsoever.
f. Upon completion of the winding up, liquidation, and
distribution of the assets, the Company shall be deemed
terminated.
g. The Board of Directors shall comply with any
applicable requirements of applicable law pertaining to the
winding up of the affairs of the Company and the final
distribution of its assets.
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10.04. Articles of Dissolution . When all
liabilities, and obligations have been paid and discharged or
adequate provisions have been made therefor and all of the
remaining property and assets have been distributed to the
Members, articles of dissolution shall be executed in duplicate
and verified by the person signing the articles, which articles
shall set forth the information required by the Delaware Act.
Duplicate originals of the articles of dissolution shall be
delivered to the Delaware Secretary of State.
10.05. Certificate of Dissolution. Upon the issuance of
the certificate of dissolution, the existence of the Company
shall cease, except for the purpose of suits, other proceedings,
and appropriate action as provided in the Delaware Act. The
Board of Directors shall have authority to distribute any Company
property discovered after dissolution, convey real estate, and
take such other action as may be necessary on behalf of and in
the name of the Company.
10.06. Return of Contribution Nonrecourse to Other Members.
Except as provided by law or as expressly provided in this
Operating Agreement, upon dissolution, each Member shall look
solely to the assets of the Company for the return of its Capital
Contribution. If the Company property remaining after the
payment or discharge of the debts and liabilities of the Company
is insufficient to return the cash contributions of one or more
Members, the Members shall have no recourse against any other
Member.
10.07. Non-Compete.
a. During the term of this Agreement, except through
the Company and JV France, neither party shall directly or
indirectly as an individual proprietor, partner, stockholder,
officer, employee, director, joint venturer, investor, lender, or
in any other capacity whatsoever (other than as the holder of not
more than one percent (1%) of the total outstanding stock of a
publicly held company), engage in the Territory in the business
of developing, producing, marketing or selling products or
services related to hair removal or skin rejuvenation, provided,
however, that such persons shall not be restricted in the
continuation of their activities in the field of hairdressing and
the ownership, operation, franchising, licensing and management
of beauty salons, including the supply, sale or use in such
salons of non-light source, non-electrolysis hair removal and
skin rejuvenation products and/or services.
b. If the Company is dissolved pursuant to section
10.01(a) above, or if JDM's interest in the Company is acquired
by ThermoLase pursuant to Article IX, then for a period of two
years after the filing of the Articles of Dissolution pursuant to
section 10.04 of this Operating Agreement, JDM will not, and will
cause its stockholders not to, directly or indirectly as an
individual proprietor, partner, stockholder, officer, employee,
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director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than
one percent (1%) of the total outstanding stock of a publicly
held company), engage in the Territory in the business of
developing, producing, marketing or selling products or services
related to hair removal or skin rejuvenation, provided, however,
that such persons shall not be restricted in the continuation of
their activities in the field of hairdressing and the ownership,
operation, franchising, licensing and management of beauty
salons, including the supply, sale or use in such salons of
non-light source, non-electrolysis hair removal and skin
rejuvenation products and/or services.
c. If the Company is dissolved pursuant to section
10.01(a)(vi) as a result of the bankruptcy of or other similar
event affecting ThermoLase, or pursuant to section 10.01(a)(v) as
a result of a failure of ThermoLase to fulfil its obligations, or
if ThermoLase's interest in the Company is acquired by JDM
pursuant to Article IX, then for a period of two years after the
filing of the Articles of Dissolution pursuant to section 10.04
of this Operating Agreement, ThermoLase will not, and will cause
its corporate parent and subsidiary companies not to, directly or
indirectly, enter into a business partnership, joint venture,
cooperative marketing arrangement or collaboration in the
Territory with a person or company involved in the business of
owning or operating hairdressing or skin care salons for the
purpose of developing, producing, marketing or selling products
or services related to laser-based hair removal or laser-based
skin rejuvenation.
d. If any restriction set forth in this section 10.07
is found by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of time or
over too great a range of activities or in too broad a geographic
area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to
which it may be enforceable.
e. The restrictions contained in this section 10.07
are necessary for the protection of the business and goodwill of
the parties and are considered by the parties to be reasonable
for such purpose. Each party agrees that any breach by it of this
section 10.07 will cause the other party substantial and
irrevocable damage and, therefore, in the event of any such
breach, in addition to such other remedies which may be
available, the non-breaching party shall have the right to seek
specific performance and injunctive relief.
ARTICLE XI
Intellectual Property Infringement
11.01. Defense of Actions Against the Company
Notwithstanding anything to the contrary contained in Article IV
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of this Operating Agreement, if a claim is made or a suit is
brought by a third party against the Company or its sublicensee
or franchisee relating to an allegation that the Company's or
such sublicensee's or franchisee's conduct, in practice of the
processes licensed to the Company under the License Agreement,
infringes such third party's patent or other intellectual
property right, or a claim for indemnification is made by a
Member pursuant to section 11.02 below, ThermoLase shall have the
right to control the defense of such claim or suit on behalf of
the Company and at the Company's expense.
11.02. Indemnification of Members.
a. If a claim is made or suit is brought by a third
party against any of the Members, or its officers, directors or
owners, relating to an allegation that the Company's conduct, in
the practice of the processes licensed to the Company under the
License Agreement, infringes such third party's patent or other
intellectual property right (each, a "Third Party Infringement
Action"), ThermoLase shall defend such claim or suit at the
expense of the Company, and the Company shall pay or indemnify
such Member, officer, director or owner against all damages and
costs finally awarded, or settlement amounts paid, in the suit or
in connection with the claim.
b. In the event that the Company is financially unable
to perform its indemnification obligations set forth in section
11.02(a) above, but only in such event and only to the extent of
such non-performance, ThermoLase hereby agrees to assume the
performance of such obligations, at ThermoLase's expense.
11.03. Indemnification Procedures . Promptly after receipt
by a Member of notice of the commencement of any Third Party
Infringement Action against it, such Member shall give notice to
the Company and ThermoLase of the commencement of such action,
but the failure to promptly notify the Company will not relieve
the Company of any liability that it may have to any Member
except to the extent it is prejudiced by such failure. If any
Third Party Infringement Action is brought against a Member and
such Member gives notice to the Company of the commencement of
such action, ThermoLase, at the cost and expense of the Company,
shall assume the defense and control of any such claim or legal
proceeding, provided that a Member or related person who is
required to be a party to such suit shall remain a party to the
extent so required. ThermoLase shall select counsel to conduct
the defense of such action and shall take all steps necessary in
the defense or settlement thereof. ThermoLase shall not consent
to a settlement of, or the entry or any judgment arising from,
any claim or legal proceeding for other than solely monetary
damages without the prior written consent of the indemnified
person (which shall not be unreasonably withheld or delayed).
The indemnified person shall be entitled to participate in (but
not control) the defense of any such action, with its own counsel
and at its own expense (except that the Company will be
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responsible for the fees and expenses of the separate co-counsel
to the extent the indemnified person reasonably concludes that
the counsel the Company has selected has a conflict of interest
and provides timely notice of such fact to the Company).
ARTICLE XII
Dispute Resolution
12.01 Mediation . In the event of any dispute,
controversy or claim arising out of or relating to this Agreement
or to a breach hereof, including its interpretation, performance
or termination, the Members agree to follow the procedures set
forth in this Section 12.01. First, the Members shall identify
in writing the point on which they cannot agree (the "Disputed
Point") and the respective positions of each Director with
respect to such point. The Members will refrain from making a
decision on the Disputed Point for a period of up to two weeks.
During such 2-week period, the Members will (i) consult with one
another in good faith with the goal of resolving the Disputed
Point, (ii) engage a mutually acceptable impartial mediator who
is fluent in both English and French (the "Mediator") to assist
them in finding a mutually agreeable solution to the Disputed
Point, (iii) study the economic or commercial bases on which each
of the parties has based its position and the issues raised by
each of the parties in respect of the Disputed Point, and (iv)
cooperate with the Mediator in examining alternative solutions to
the Disputed Point. The costs and expenses of the Mediator shall
be shared equally by the Members, and not by the Company. The
Members will meet at the end of such 2-week period for the sole
purpose of discussing and voting on the Disputed Point. The
Mediator shall conduct the meeting and begin it with a summary of
the situation, the nature of the Disputed Point and any proposed
solutions, while reminding the Members of the consequences of the
continuation of the dispute. The Members will use their good
faith best efforts to agree on a solution prior to or during such
meeting.
12.02. Arbitration. In the event that a Disputed Point
cannot be resolved by the mediation procedure described in
Section 12.01 above, and provided that the Deadlock resolution
provisions of Article IX do not apply, then such Disputed Point,
shall be finally resolved by arbitration. The arbitration shall
be conducted by one (1) arbitrator fluent in French and English,
with experience in international commercial joint ventures, to be
appointed by the presiding officer of the London Court of
International Arbitration ("LCIA"). The arbitration shall be
conducted in English, under the supervisory authority of the
LCIA, and in accordance with the LCIA arbitration rules.
Multiple arbitrations between the parties and their Affiliates
relating to the same transaction or series of transactions may be
aggregated in the same arbitration proceeding. The arbitration,
including the rendering of the award, shall take place in London,
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England, and shall be the exclusive forum for resolving such
dispute, controversy or claim. The decision of the arbitrator
shall be binding upon the parties hereto, and the expense of the
arbitration (including without limitation the award of attorneys'
fees to the prevailing party) shall be paid as the arbitrator
determines. The decision of the arbitrator shall be executory,
and judgment thereon may be entered by any court of competent
jurisdiction. The prevailing party in any arbitration shall be
entitled to such reasonable attorneys' fees as may be awarded by
the arbitrator. The non-prevailing party shall pay to the other
party such reasonable attorneys' fees, together with such fees of
the arbitrator and costs and expenses of the arbitration, as may
be awarded by the arbitrator. Notwithstanding the foregoing,
nothing in this section 12.02 shall be construed as limiting in
any way the right of a Member to seek injunctive relief with
respect to any actual or threatened breach of this Operating
Agreement from a court of competent jurisdiction.
12.03. Limitation of Liability . No party to this
Operating Agreement shall be entitled to recover from any other
party to this Operating Agreement any special, incidental,
consequential or punitive damages.
ARTICLE XIII
Miscellaneous
13.01. Notices . Any and all notices, requests, elections,
consents or demands permitted or required to be made under this
Operating Agreement shall be in writing, signed by the Member
giving such notice, request, election, consent or demand, and
shall be delivered personally, or sent by registered or certified
mail, or by telefax, or by overnight mail, Federal Express or
other similar commercial overnight courier, to the other Member
or Members, at their addresses set forth below, or at such other
address as may be supplied by written notice given in conformity
with the terms of this section 13.01:
If to ThermoLase:
ThermoLase Corporation
9550 Distribution Avenue
San Diego, CA 92121-2306
Attention: President
Telefax No.: (619) 536-8572
with a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attention: General Counsel
Telefax No.: (617) 622-1283
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If to JDM:
with a copy to:
The date of personal delivery, the date set forth on the telefax
confirmation, or the date of mailing or delivery to an overnight
courier, as the case may be, shall be the date of such notice.
13.02. Successors and Assigns. Subject to the restrictions
on transfer set forth herein, this Operating Agreement, and each
and every provision hereof, shall be binding upon and shall inure
to the benefit of the Members, their respective successors,
successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Member, whether such successor
acquires such interest by way of gift, purchase, foreclosure, or
by any other method, shall hold such interest subject to all of
the terms and provisions of this Operating Agreement.
13.03. Amendments . Unless otherwise stated in
Operating Agreement to the contrary, this Operating Agreement may
be amended only by a written instrument executed by a
Supermajority Interest.
13.04. No Partition . The Members hereby agree that no
Member, nor any successor-in-interest to any Member, shall have
the right while this Operating Agreement remains in effect to
have the property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have
the property of the Company partitioned, and each Member, on
behalf of himself, his successors, representatives, heirs, and
assigns, hereby waives any such right. It is the intention of
the Members that during the term of this Operating Agreement, the
rights of the Members and their successors-in-interest, as among
themselves, shall be governed by the terms of this Operating
Agreement, and that the right of any Member or
successor-in-interest to assign, transfer, sell or otherwise
dispose of his interest in the Company shall be subject to the
limitations and restrictions of this Operating Agreement.
13.05. No Waiver. The failure of any Member to insist upon
strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such
failure continues, shall not be a waiver of such Member's right
to demand strict compliance in the future. No consent or waiver,
express or implied, to or of any breach or default in the
performance of any obligation hereunder, shall constitute a
consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
13.06. Entire Agreement . This Operating Agreement
together with the other agreements referenced herein, constitutes
the full and complete agreement of the parties hereto with
respect to the subject matter hereof.
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13.07. Captions . Titles or captions of Articles
sections contained in this Operating Agreement are inserted only
as a matter of convenience and for reference, and in no way
define, limit, extend or describe the scope of this Operating
Agreement or the intent of any provision hereof.
13.08. Counterparts . This Operating Agreement may be
executed in a number of counterparts, all of which together shall
for all purposes constitute one Operating Agreement, binding on
all the Members notwithstanding that all Members have not signed
the same counterpart.
13.09. Applicable Law . This Operating Agreement and the
rights and obligations of the parties hereunder shall be governed
by and interpreted, construed and enforced in accordance with the
laws of the State of Delaware, without reference to its choice of
law rules.
13.10. Gender, Etc . In the case of all terms used in this
Operating Agreement, the singular shall include the plural and
the masculine gender shall include the feminine and neuter, and
vice versa, as the context requires.
13.11. Creditors. None of the provisions of this Operating
Agreement shall be for the benefit of or enforceable by any
creditor of any Member or of the Company other than a Member who
is such a creditor of the Company.
13.12. U.S. Dollars. All amounts expressed herein shall be
deemed to be in U.S. dollars.
13.13. Confidential Information . Each Member acknowledges
and agrees that it may receive from the Company certain
confidential information of the Company regarding its business
operations, trade secrets, know-how, customer information,
pricing, marketing data and other information of a confidential
nature, including without limitation the terms of this Operating
Agreement (collectively, the "Confidential Information"). Each
Member agrees to maintain the confidentiality of the Confidential
Information. Notwithstanding the foregoing provisions of this
section 13.13, each Member shall have the right to disclose any
information which (i) was rightfully possessed by such Member
before it was received from the Company, (ii) is independently
developed by or for such Member without reference to or
derivation from the Confidential Information, (iii) is or become
public otherwise than through any act or default of such Member
or (iv) is required by law or stock exchange rule to be
disclosed, provided such Member notifies the Company prior to
making any such disclosure so as to afford the Company a
reasonable opportunity to object or seek an appropriate
protective order with respect to such disclosure.
13.14 Compliance with Law . Each party agrees to comply
with all applicable laws, rules and governmental regulations
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applicable to its performance hereunder. During the term of this
Operating Agreement, the Members shall monitor the sales levels
and market share of the Company and its sublicensees and
subfranchisees, and shall, if counsel to the Company so advises,
modify the Company's arrangements with its licensees,
sublicensees and subfranchisees, and take other steps, to comply
with applicable laws, rules and governmental regulations.
IN WITNESS WHEREOF, the parties have executed this Operating
Agreement as of the date first above written.
MEMBERS:
THERMOLASE CORPORATION JDM INVEST S.A.
By:___________________________ By:___________________________
Name: John C. Hansen Name:
Title: President Title:
THERMOLASE FRANCE L.L.C.
By its Members
THERMOLASE CORPORATION JDM INVEST S.A.
By:__________________________ By:___________________________
Name: John C. Hansen Name:
Title: President Title:
JDM OWNERS:
JACQUES DESSANGE MANAGEMENT FRANKLIN HOLDING S.A.
By:__________________________ By:___________________________
Name: Name:
Title: Title:
_____________________________ ______________________________
Benjamin Dessange Bernard Sagon
_____________________________ ______________________________
Michel Couvin Daniel Conte
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
OPERATING AGREEMENT
OF
THERMOLASE FRANCE L.L.C.
a Delaware Limited Liability Company
EXHIBIT A
Schedule of Interests
---------------------
Initial Capital Membership
Name Contribution Interest %
---- ------------ ----------
JDM *********************************
********************************* 50%
*************************
*******************************
********************************
**********************************
*********************************
************
*********************************
********************************
*********************************
****************************
********************************
*********************************
**************************
**********************************
**********************************
*************************
ThermoLase License Agreement, to be executed
Corporation and delivered on or before the date 50%
of this Operating Agreement.
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OPERATING AGREEMENT
OF
THERMOLASE FRANCE L.L.C.
a Delaware Limited Liability Company
EXHIBIT B
Schedule of Ownership
---------------------
JDM Invest S.A.
---------------
Yves Micheli ____%
D.B.C. Holding S.A. ____%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
D.B.C. Holding S.A.
-------------------
Franklin Holdings, S.A. 59.5%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
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EXHIBIT D
LICENSE AGREEMENT
-----------------
Licensee Information:
Name: THERMOLASE FRANCE L.L.C. ("Licensee")
Address: ________________
________________
________________
Telephone No.: ________________
Fax No. ________________
Effective Date: ________ __, 1996
Territory: FRANCE (including its Departements d'Outre-Mer
(D.O.M)., but excluding all other Territories
d'Outre-Mer (T.O.M.) and other jurisdictions)
BACKGROUND
A. ThermoLase Corporation ("ThermoLase") has developed certain
proprietary technology and processes for the removal of unwanted
human hair and the exfoliation or rejuvenation of skin.
ThermoLase desires to have such technology and processes utilized
in the Territory set forth above (the "Territory").
B. In order to satisfy its initial capital contribution
obligations to Licensee pursuant to the terms of the Operating
Agreement of ThermoLase France L.L.C. between ThermoLase and JDM
Invest S.A. of even date herewith (the "Operating Agreement"),
ThermoLase is prepared to license the technology and processes to
Licensee for use in the Territory on the terms and conditions set
forth in this License Agreement (the "Agreement"), and to sell to
Licensee certain SoftLight Lasers and SoftLight Lotion for use in
practicing such procedures, all pursuant to a mutually acceptable
Supply Agreement to be entered into by the parties (the "Supply
Agreement").
AGREEMENT
ThermoLase and Licensee hereby agree as follows:
1. DEFINITIONS
The following terms shall have the following meanings when
capitalized herein:
1.1 "Business Day" means a day on which banks are open for
business in San Diego, California and Paris, France.
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
1.2 "Improvement" means any improvement, enhancement or
modification to Licensed Technology, whether developed by
ThermoLase, Licensee or any third party.
1.3 "Licensed Technology" means the inventions claimed in
the Patents, including Improvements, together with any and all
know-how, trade secrets and other information relating to the
SoftLight Procedures and SoftLight Laser.
1.4 "Patents" means (i) the patents and patent applications
listed on Exhibit A attached hereto, (ii) any subsequent patent
application by ThermoLase having one or more claims covering
Improvements, (iii) any divisions, reissues, continuations,
renewals and extensions of any of said patents or patent
applications, and (iv) any patent issuing upon any of the
foregoing.
1.5 "SoftLight Laser" means a laser designed by ThermoLase
for use with a lotion in the removal of unwanted human hair and
the exfoliation or rejuvenation of skin.
1.6 "SoftLight Lotion" means the lotion approved by
ThermoLase for use in the SoftLight Procedures.
1.7 "SoftLight Procedures" means the removal of unwanted
human hair and the exfoliation or rejuvenation of skin using one
or more SoftLight Lasers and the SoftLight Lotion.
1.8 "Territory Patent" means a European patent granted on
European Patent Application No. ***********, which is enforceable
in the Territory and which has claims corresponding in scope to
the claims of U.S. Patent No. *********, and covering a
significant portion of the Licensed Technology used in practicing
laser-based hair removal, and which, if asserted, could prevent
the practice in the Territory of the SoftLight Procedures for
hair removal, as currently practiced by ThermoLase.
1.9 "ThermoLase Marks" means ThermoLase's SoftLight(SM) and
Spa Thira(SM) service marks and the trade name "ThermoLase",
including the registrations and applications listed on Exhibit A
hereto.
1.10. "Consolidated Venture Revenue" shall mean Direct
Venture Revenue plus Sublicense Revenue. Consolidated Venture
Revenue is calculated without reference to any sales or
value-added tax that may be imposed on such amounts.
1.11. "Direct Venture Revenue" shall mean the consolidated
aggregate revenues received from customers in respect of the
performance of the SoftLight Procedures in the Territory and the
sale of directly related products by (i) the Licensee, (ii) any
entities in which Licensee owns any equity or ownership
interests, or (iii) any entities which are owned, wholly or
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partially, directly or indirectly, by ThermoLase, JDM
Investment, S.A., D.B.C. Holding S.A., Franklin Holding S.A., or
any of their direct or indirect owners.
1.12. "Sublicense Revenue" shall mean the aggregate revenue
received by the entities listed in 1.11(i) to (iv) from any of
their sublicensees or franchisees who do not fall into categories
(i) to (iv) above, and excluding any inter-company payments (such
as royalty payments, fees, service charges and the like) between
the entities listed in (i) to (iv) above.
2. LICENSE AND OWNERSHIP OF TECHNOLOGY
2.1 Grant of License . ThermoLase grants to Licensee, upon
the terms and subject to the conditions set forth in this
Agreement, an exclusive, non-transferable license, under the
Patents and all other ThermoLase intellectual property in the
Licensed Technology, to perform the SoftLight Procedures in the
Territory. Licensee shall have the right to sublicense the
foregoing rights to one or more sublicensees in the Territory
(the "Sublicensee(s)") pursuant to sublicense agreements in form
and substance acceptable to ThermoLase.
2.2 Ownership of Licensed Technology . Licensee will not
take any action or position contrary to ThermoLase's ownership of
all right, title and interest in and to the Patents and the
Licensed Technology, and Licensee agrees that it will not, at any
time, do or cause to be done any act or thing contesting or in
any way impairing or tending to impair the Patents or Licensed
Technology or any part of such right, title or interest of
ThermoLase. Licensee shall not in any manner represent that
Licensee has ownership of the Licensed Technology or Patents, and
acknowledges that Licensee's use of the Licensed Technology shall
not create in Licensee any right, title or interest in or to the
Licensed Technology, except for the rights granted to Licensee by
the express terms of this Agreement.
2.3 Licensee Improvements . Licensee shall disclose
promptly to ThermoLase any and all Improvements to the Licensed
Technology developed or discovered by Licensee or Sublicensee or
their officers, employees or agents. All such Improvements shall
be the property of ThermoLase, and, to the extent permitted by
law, Licensee hereby assigns all right, title and interest in and
to such Improvements, and all patent, copyright, trademark, trade
secret and other intellectual property rights therein, to
ThermoLase, as they are developed. Licensee shall, at
ThermoLase's request, execute and deliver all certificates,
waivers, applications, assignments and other instruments as
ThermoLase may reasonably request in order to effectuate the
assignment of Improvements to ThermoLase as described above,
including agreements between Licensee or its Sublicensee and
their employees relating to the ownership of inventions prepared
by employees. All employees of Licensee shall waive all moral
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
rights with respect to works of authorship constituting
Improvements created by them to the fullest extent permitted by
law.
2.4 ThermoLase Improvements . In the event that ThermoLase
develops or acquires Improvements that it commercially implements
at its commercial facilities for the SoftLight Procedures in the
United States, it shall provide such Improvements to Licensee at
no additional charge. Such Improvements shall be deemed to
constitute Licensed Technology for all purposes hereunder.
2.5 Future Patents . ThermoLase shall have the exclusive
right, at its sole expense, to make all decisions and take all
actions relating to the filing and prosecution of additional
patent applications relating to the Licensed Technology and the
Improvements. If Licensee requests ThermoLase to pursue
particular patent protection in the Territory relating to the
Licensed Technology, then, notwithstanding ThermoLase's exclusive
ownership of such patent, Licensee shall be responsible for all
costs of preparing, prosecuting and maintaining such patent in
the Territory.
3. THERMOLASE TECHNICAL ASSISTANCE
During the first year of the term of this Agreement,
ThermoLase shall provide to Licensee (or to Sublicensee, if so
designated by Licensee) up to an aggregate of **************** of
support and assistance in connection with the establishment and
operation of facilities for the performance of the SoftLight
Procedures. ThermoLase shall not charge for such support
services, except that Licensee shall be responsible for all
reasonable travel and out of pocket expenses incurred by
ThermoLase and its personnel in connection with providing such
services. Any direct costs and expenses for additional support
and assistance shall be borne by the Licensee. The parties shall
cooperate with each other to schedule training and assistance in
an efficient and cost-effective manner.
4. PAYMENT OF FEES AND ROYALTIES
4.1 Fees and Royalties.
(a) In consideration of the rights and licenses
granted to Licensee pursuant to this Agreement, Licensee shall
pay to ThermoLase (i) percentage royalties as provided in
paragraph (b) below (the "Royalties") and (ii) a single fee of
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
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Licensee's obligation to make further installment payments shall
expire if, prior to the date such installment is due, the
Licensee is dissolved or Dessange Holding's interest in the
Licensee is acquired by ThermoLase.
(b) Royalties shall be payable quarterly within 45
days following the end of each calendar quarter in the amount of
**** of Consolidated Venture Revenues. Each payment of
Royalties shall be accompanied by a written report, in detail
reasonably satisfactory to ThermoLase, specifying the method of
calculation of the Royalties for the applicable quarter. Any
fees or Royalties that are not paid when due shall bear interest
from the due date until paid at the lesser of (i) the rate of
1.5% per month or (ii) the maximum rate allowed by applicable
law.
(c) The Royalties, fees and all other amounts payable
pursuant to this Agreement are exclusive of any and all present
and future federal, national, state, local, municipal and other
excise, sales, use, property, value-added or similar taxes and
fees, all of which shall be paid by Licensee. Licensee shall
obtain and provide to ThermoLase any certificate of exemption or
similar document required to exempt any transaction under this
Agreement from any such tax or fee.
(d) The Royalties, fees and all other amounts payable
pursuant to this Agreement shall be payable in United States
Dollars. To the extent that Licensee's revenues are in a
currency other than United States Dollars, such revenues shall be
converted into United States Dollars, for the purposes of
calculating Royalties payable to ThermoLase hereunder, at the
average exchange rate during the relevant quarter as published in
the New York edition of the Wall Street Journal.
5. USE OF THERMOLASE MARKS
5.1 Trademark License; Promotional Materials.
(a) ThermoLase grants to Licensee an exclusive right
and license in the Territory (including the right to sublicense
to one or more Sublicensees) to use the ThermoLase Marks in
connection with promotional activities relating to the
performance of SoftLight Procedures, provided Licensee and all
Sublicensees acknowledge ThermoLase's rights in and to the
ThermoLase Marks by (i) referring to the same at all times as
service marks of ThermoLase in any signage, advertising, press
release, article, publication or other promotional material,
document or broadcast referencing the ThermoLase Marks and by
(ii) including the proprietary marking "(SM)" after SoftLight and
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Spa Thira each time they are used by Licensee (or Sublicensee) in
any printed or electronic media. In any and all descriptions of
or references to the SoftLight Procedures, Licensee and
Sublicensee shall use no descriptive name or mark other than
SoftLight(SM) Spa Thira(SM), and "ThermoLase", or a name approved
in advance by ThermoLase which is formed by combining a
ThermoLase Mark with the name "Jacques Dessange" (the "Combined
Name"), the use of which will be authorized only to the extent
Licensee or Sublicensee has received appropriate licenses or
sublicenses from the relevant trademark owners.
(b) ThermoLase shall have the right to review and
pre-approve (or reject) all promotional and advertising materials
relating to the SoftLight Procedures or SoftLight Lasers which
are prepared by Licensee or its Sublicensee, consultants,
contractors or agents, and which are not based substantially on
materials provided by ThermoLase. Licensee shall not include in
any such promotional or advertising materials any claims, facts,
data or representations relating to the SoftLight Procedures or
SoftLight Lasers which are not provided in writing by ThermoLase
or otherwise approved by ThermoLase in writing.
5.2 Ownership of ThermoLase Marks . ThermoLase shall have
the exclusive right under this Agreement to apply for
registration (and shall so apply), and to extend existing
registrations, of the ThermoLase Marks for use in connection with
the SoftLight Procedures or otherwise, except the Combined Name,
which may be applied for and owned by Licensee, subject to
ThermoLase's ownership of any underlying ThermoLase Marks and any
third party's ownership of the name "Jacques Dessange". Licensee
will not register, or cause or permit to be registered in the
name of any entity other than ThermoLase, the ThermoLase Marks or
any trademark, trade name or service mark confusingly similar
thereto, with any federal, national, supra-national, state,
municipal or other governmental authority of any jurisdiction,
whether within or outside the United States or the Territory.
Except as contemplated by the parties in case of use of the
Combined Name, Licensee will not use or associate the ThermoLase
Marks with any other trademark, trade name or service mark in any
advertising or publicity utilized by Licensee in connection with
the SoftLight Procedures or otherwise in such manner as to be
misleading with respect to the ownership of the ThermoLase Marks.
Licensee further agrees not to create a composite trademark,
trade name or service mark with the ThermoLase Marks, except in
each instance with ThermoLase's prior written consent which
ThermoLase acting in its sole discretion may withhold. Licensee
agrees that every use of the ThermoLase Marks shall inure to the
ultimate benefit of ThermoLase. Licensee shall not remove or
obscure or alter in any manner the ThermoLase Marks or any notice
thereof, which may be displayed on the SoftLight Lasers, the
SoftLight Lotion, a facility for the performance of SoftLight
Procedures, or any other documentation provided by ThermoLase
hereunder.
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5.3 Quality Controls and Assurance.
(a) Licensee agrees that any services provided by
Licensee and its Sublicensees based on performance of the
SoftLight Procedures pursuant to this Agreement shall be of a
quality at least equal to the quality of similar services
provided by ThermoLase or its other franchisees at facilities at
which ThermoLase or its other franchisees provide such services.
(b) In addition, in order to comply with ThermoLase's
quality control standards, Licensee shall: (i) use the
ThermoLase Marks in compliance with all relevant laws and
regulations; and (ii) accord ThermoLase the right (to the extent
permitted by local law or rules of professional conduct) to
inspect during normal business hours, without prior advance
notice, its facilities (and those of its Sublicensees) in order
to confirm that Licensee's use of the ThermoLase Marks is in
compliance with this Agreement.
(c) Licensee agrees that its failure to comply with
the quality standards described in this Article 5 shall
constitute a material breach of this Agreement.
5.4 Translation of Documentation . Licensee shall ensure,
at its expense, that all technical manuals, advertising and
marketing information and other documentation provided by
ThermoLase required by law to be in the French language are
translated into French. Licensee shall provide ThermoLase with
advance copies of all such materials for approval; provided ,
however, that Licensee shall take full responsibility for any
mistakes or inaccuracies in such translations. All right, title
and interest in and to such translations shall be owned by
ThermoLase, and Licensee hereby assigns all right, title and
interest in and to such translations, and all copyright,
trademark and other intellectual property rights therein, to
ThermoLase, as they are developed. Licensee shall, at
ThermoLase's request, execute and deliver all certificates,
applications, assignments and other instruments as ThermoLase may
reasonably request in order to effectuate the assignment of
translations to ThermoLase as described above. All employees of
Licensee shall waive all moral rights with respect to works of
authorship in such translations created by them. To the extent
permitted by local law, Licensee will enter into, and cause
Sublicensee to enter into, agreements with its employees to
ensure compliance with the provisions of this Section 5.4.
6. CONFIDENTIALITY
6.1 Licensee acknowledges and agrees that ThermoLase has
disclosed, and shall continue to disclose, to Licensee in
connection with the use of the Licensed Technology and
performance of this Agreement certain confidential information of
ThermoLase regarding its business operations, trade secrets,
know-how, customer information, pricing, marketing data and other
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information of a confidential nature relating to the Licensed
Technology and the SoftLight Procedures, including, without
limitation, the terms of this Agreement (collectively, the
"ThermoLase Confidential Information"). In addition, ThermoLase
acknowledges and agrees that Licensee may disclose to it during
the term of this Agreement certain confidential information of
Licensee regarding its business operations, trade secrets,
know-how, customer information, pricing, marketing data and other
information of a confidential nature (the "Licensee Confidential
Information").
6.2 The Confidential Information of each party shall remain
the sole and exclusive property of such party, and the other
party shall have no interest or rights with respect thereto,
except to the extent expressly provided in this Agreement. Each
party agrees to maintain the confidentiality of the Confidential
Information of the other party, provided, however, that Licensee
shall have the right to disclose such information to its
sublicensees who have a need to know such information and who
have agreed in writing to maintain the confidentiality thereof in
a manner no less restrictive than that required under this
Agreement. Notwithstanding the foregoing provisions of this
Article 6, the receiving party shall have the right to disclose
any information that it can demonstrate (i) was rightfully
possessed by the receiving party before it was received from the
disclosing party, (ii) is or becomes public otherwise than
through any act or default of the receiving party, or (iii) is
required by law, court order or stock exchange rule to be
disclosed, provided the receiving party notifies the disclosing
party in writing prior to making any such disclosure so as to
afford to ThermoLase a reasonable opportunity to object or seek
an appropriate protective order with respect to such disclosure.
7. ENFORCEMENT OF RIGHTS
Licensee shall promptly advise ThermoLase upon becoming
aware of any infringement or threatened infringement of any of
the Licensed Technology or the ThermoLase Marks in the Territory
or any claim that the Licensed Technology or the ThermoLase Marks
infringe the intellectual property rights of another party in
the Territory. ThermoLase, in its sole discretion, shall
determine the appropriate action, if any, to be taken with
respect to any such infringement and shall have the right to
exclusive control of any enforcement suit or proceeding
(provided, however, that Licensee shall remain a party to such
suit to the extent so required). Licensee shall cooperate with
ThermoLase with respect to any enforcement, including, without
limitation, joining as a party to any litigation, if required.
All costs and expenses (including attorneys' fees) of any action
relating to any such infringement shall be borne by Licensee or,
and all amounts, if any, recovered under such action, shall be
paid to Licensee. Notwithstanding the foregoing, ThermoLase
shall be solely responsible for enforcing its rights against the
European Laser Center's technology as it exists as of the
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Effective Date, and shall bear all costs, and receive all
recoveries, in connection therewith.
8. LIMITATION OF LIABILITY; REMEDIES
8.1 Consequential Damages. Notwithstanding anything to the
contrary contained in this Agreement, including without
limitation the provisions of Article 7 above, neither party
hereto shall be liable to the other for any indirect, special,
consequential, incidental or punitive damages (including without
limitation damages for loss of use of facilities or equipment,
loss of revenue, loss of profits or loss of goodwill) regardless
of (i) the negligence (either sole or concurrent) of either party
and (ii) whether either party has been informed of the
possibility of such damages.
8.2 No Warranty. THERMOLASE PROVIDES HEREIN NO WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF NON-
INFRINGEMENT, OR AS TO THE RESULTS THAT MAY BE ATTAINED BY THE
PERFORMANCE, PRACTICE OR OPERATION OF THE SOFTLIGHT PROCEDURES,
INCLUDING WITHOUT LIMITATION THE SOFTLIGHT LASERS.
8.3 Equitable Relief . Notwithstanding any other provision
of this Agreement to the contrary, due to the fact that the
unauthorized use, transfer or dissemination of the ThermoLase
Confidential Information or the Licensed Technology, or the
improper use thereof in violation of ThermoLase's instructions
and/or applicable law or regulations, would diminish
substantially the value thereof and cause irreparable harm to
ThermoLase which could not be adequately addressed by monetary
damages, if Licensee breaches any of the provisions of Articles 2
or 5 of this Agreement, ThermoLase shall be entitled, without
limiting its other rights or remedies, to obtain equitable relief
to prevent or restrain such breach, including without limitation
injunctive relief.
9. TERM AND TERMINATION
9.1 Term . The initial term of this Agreement ("Term")
shall commence on the Effective Date and shall continue until
December 31, 2012, unless sooner terminated as set forth herein,
and shall be renewed automatically for successive one-year
renewal terms, unless either party notifies the other of its
desire not to so renew at least sixty (60) days prior to the end
of the initial term or the applicable renewal term, as the case
may be.
9.2 Termination.
ThermoLase shall have the right to terminate this Agreement,
effective immediately upon notice to Licensee:
(a) if Licensee fails to perform or observe, or
otherwise materially breaches any of its material obligations
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under this Agreement or the Supply Agreement, and such failure or
breach continues unremedied for a period of thirty (30) days
following written notice thereof; or
(b) upon the occurrence of any change in the ownership
of Dessange Holding S.A., Licensee, D.B.C. Holding, Franklin
Holdings, S.A., or any of its or their direct or indirect owners.
Notwithstanding the foregoing, ThermoLase agrees that (i) the
shareholders of Dessange Holding listed on Exhibit B hereto shall
have the right to transfer shares of Dessange Holding among
themselves (but not to any third party), provided that Franklin
Holdings, S.A. at no time reduces its ownership interest in
Dessange Holding below 50%; (ii) the shareholders of D.B.C.
Holding, S.A. shall have the right to transfer shares of D.B.C.
Holding, S.A. among themselves, provided that Franklin Holding
S.A. does not reduce its ownership of shares of Franklin
Holdings, S.A. below 50.1% of the total shares of D.B.C.
Holdings, S.A.; (iii) the shareholders of Franklin Holding S.A.
shall have the right to transfer shares of Franklin Holding, S.A.
among themselves or to offer shares of Franklin Holding S.A. to
the public or to sell shares of Franklin Holding S.A. to third
parties, to the extent that the Dessange Holding Owners, their
next of kin and current or future executives and employees of
Franklin Holding, S.A. or companies controlled by Franklin
Holding, S.A. retain at least 50.1% of the capital stock and
voting rights of Franklin Holding, S.A., and (iv) the Dessange
Holding Owners may transfer their ownership interests in Dessange
Holding, JV France, Franklin Holding, S.A., or any of its or
their direct or indirect owners as required by the laws of estate
or family devolution.
(c) upon the occurrence of an event of dissolution
pursuant to the terms of Article X of the Operating Agreement, or
upon the occurrence of ThermoLase's purchase of D.B.C. Holding's
interest in Licensee pursuant to Article IX of the Operating
Agreement; or
(d) upon the dissolution of JV France; or
(e) if Licensee: (i) files for or consents to a
general assignment for the benefit of creditors, (ii) applies for
or consents to the appointment of, or the taking possession by, a
receiver, custodian, trustee or liquidator of itself or all or a
substantial part of its assets, (iii) files a petition in
bankruptcy or liquidation, or is adjudicated bankrupt or
insolvent or takes similar actions under the laws of any
jurisdiction for the general benefit of creditors of an insolvent
or financially troubled debtor, (iv) seeks the liquidation,
dissolution or winding-up of itself, or the composition or
readjustment of its debts, (v) adopts any resolution of its
Members or Directors for the purpose of effecting any of the
foregoing, or (vi) is the subject of an involuntary proceeding,
which is not fully dismissed within forty-five (45) days, seeking
Licensee's liquidation, reorganization, dissolution or
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winding-up, or composition or readjustment of its debts, or the
appointment of a trustee, receiver custodian, liquidator or the
like of Licensee or all or any substantial part of its assets, or
similar relief in respect of Licensee under any law relating to
bankruptcy, insolvency, reorganization, winding-up or the
composition or readjustment of debts.
Licensee (by action of its Directors other than Directors
designated by ThermoLase) shall have the right to terminate this
Agreement, effective immediately upon notice to ThermoLase:
(f) in the event that ThermoLase ceases to be
controlled, directly or indirectly, by Thermo Electron
Corporation or one of its direct or indirect subsidiaries (where
control means ownership of more than 50% of the capital stock or
voting stock of a corporation); or
(g) upon the occurrence of an event of dissolution
pursuant to the terms of Article X of the Operating Agreement, or
(h) upon the dissolution of JV France.
9.3 Effects of Termination . Upon expiration or earlier
termination of this Agreement for any reason, all rights and
obligations of the parties under this Agreement shall cease,
except that Licensee shall be obligated to pay to ThermoLase all
outstanding fees and Royalties that are payable with respect to
the period prior to the effective date of such expiration or
earlier termination. Upon such expiration or earlier
termination, Licensee shall cease all use of the ThermoLase Marks
and the Licensed Technology, and ThermoLase shall have free
access to all User Manuals and any other materials in Licensee's
possession that are related to the Licensed Technology or the
ThermoLase Marks. Upon the expiration or earlier termination of
this Agreement, Licensee will be deemed to have assigned,
transferred or conveyed to ThermoLase any and all rights and
goodwill in or to the ThermoLase Marks that may have been
obtained or developed by Licensee, and Licensee will, without any
consideration other than the mutual covenants and agreements of
this Agreement, execute and deliver such instruments and other
documents as may be requested by ThermoLase to accomplish such
assignment, transfer and conveyance, or to preserve and secure
the rights of ThermoLase (or its parents, subsidiaries or
affiliates) in and to the ThermoLase Marks. Upon the expiration
or earlier termination of this Agreement, Licensee shall
immediately remove all signs and other markings from each of its
facilities and articles (and shall oversee such removal from the
facilities and articles of its Sublicensees) which indicate any
connection to the SoftLight Procedures, SoftLight Lasers, the
ThermoLase Marks or ThermoLase.
9.4 No Rights to Compensation Upon Expiration or
Termination . In the event of a termination pursuant to any of
the provisions of this Agreement or upon expiration of this
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Agreement, ThermoLase shall not have any obligation to Licensee
or to its Sublicensee, or to any employee of Licensee or
Sublicensee, for compensation or for damages on account of the
loss by Licensee or Sublicensee or such employee of present or
prospective sales, investments, compensation or goodwill.
Licensee, for itself and on behalf of each of its employees,
hereby waives any rights which may be granted to it or them under
the laws and regulations of the Territory or otherwise which are
not granted to it or them by this Agreement.
9.5 Survival . Notwithstanding anything to the contrary
contained herein, the provisions of Sections 2.2, 2.3, 6, 7, 8,
9.3, 9.4, 9.5 and 10 of this Agreement shall survive any
expiration or earlier termination of this Agreement according to
their respective terms.
10. MISCELLANEOUS
10.1 Compliance with Laws . Licensee shall comply with all
national, supra-national, provincial and local laws, rules,
orders, ordinances and regulations of any governmental or other
public authority applicable to the performance of the SoftLight
Procedures.
10.2 Notices . Whenever by the terms of this Agreement,
notice, demand or other communication shall or may be given to
either party, the same shall be in writing and, addressed as
follows, or to such other address or addresses as shall from time
to time be designated by written notice by either party to the
other as herein provided:
if to Licensee:
ThermoLase France, L.L.C.
10455 Pacific Center Court
San Diego, CA 92101, USA
Attn: President;
if to ThermoLase:
ThermoLase Corporation
10455 Pacific Center Court
San Diego, CA 92101, USA
Attn: President;
with a copy to
General Counsel
Thermo Electron Corporation
81 Wyman St.
Waltham, MA 02254-9046 USA
All notices shall be sent by registered or certified air mail,
postage prepaid and return receipt requested, or by Federal
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Express or other comparable courier providing proof of delivery,
and shall be deemed duly given and received (i) if mailed, on the
[tenth (10th)] Business Day following the mailing thereof, or
(ii) if sent by courier, the date of its receipt (or, if such day
is not a Business Day, the next succeeding Business Day).
10.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
excluding its conflict of laws principles. Notwithstanding the
application of the laws of the State of Delaware, Licensee agrees
that ThermoLase shall have no obligation to provide Licensee with
any information or disclosures relating to the Licensed
Technology, the SoftLight Procedures or the operation of a Spa
Thira except as set forth herein. In particular, Licensee
waives, and releases ThermoLase from, any obligation to comply
with the Disclosure Requirements and Prohibitions concerning
Franchising and Business Opportunity Ventures of the United
States Federal Trade Commission or any similar provisions
existing under the laws of the State of Delaware.
10.4 Governing Language . This Agreement, any sublicense
under this Agreement and any amendments or other modifications
hereof or thereof, and all notices and other communications
hereunder or thereunder shall be in the English language. In the
event that this Agreement or any sublicense hereunder is
translated into any other language, the English language version
shall control.
10.5 Entire Agreement . This Agreement, including all
schedules and exhibits hereto, constitutes the sole and entire
agreement between ThermoLase and Licensee with respect to the
subject matter hereof, supersedes all prior agreements between
the parties either written or oral and shall not be supplemented,
amended, varied or modified in any manner except by an instrument
in writing signed by duly authorized representatives of both
parties.
10.6 Waiver. No delay or omission on the part of either
party to this Agreement in requiring performance by the other
party or in exercising any right hereunder shall operate as a
waiver of any provision hereof or of any right hereunder, and the
waiver, omission or delay in requiring performance or exercising
any right hereunder on any one occasion shall not be construed as
a bar to or waiver of such performance or right on any future
occasion.
10.7 Remedies Cumulative . Any and all rights and remedies
which either party may have under this Agreement, at law or in
equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted
by law.
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10.8 Headings . Article and Section headings and the
organization of this Agreement are for descriptive purposes only
and shall not control or alter the meaning of this Agreement.
10.9 Costs . Except as otherwise expressly provided herein,
each party shall bear its own costs and expenses in performing
its obligations under this Agreement. In the event that one
party to this Agreement commences an action against the other
party to this Agreement, the prevailing party shall be entitled
to recover its costs resulting from such action from the
non-prevailing party.
10.10 Successors and Assigns . This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.11 Authority . The individuals executing this
Agreement hereby represent and warrant that they are empowered
and duly authorized to so execute this Agreement on behalf of the
parties they represent.
10.12 Severability . If any provision of this Agreement
is declared invalid or unenforceable by a court or other tribunal
having competent jurisdiction, it is mutually agreed that this
Agreement shall endure except for the part declared invalid or
unenforceable by order of such court or tribunal. The parties
shall consult and use their best efforts to agree upon a valid
and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the
intent of this Agreement.
10.13 Change in Control. In the event that Dessange
Holding acquires the entire interest of ThermoLase in the
Licensee, then ThermoLase and Licensee shall negotiate in good
faith such amendments to this Agreement as are reasonably
necessary to enable Licensee to enjoy the benefits of this
Agreement.
10.14 Dispute Resolution.
a. Mediation . In the event of any dispute,
controversy or claim arising out of or relating to this Agreement
or to a breach hereof, including its interpretation, performance
or termination, the parties agree to follow the procedures set
forth in this Section 10.14. First, the parties shall identify
in writing the point on which they cannot agree (the "Disputed
Point") and the respective positions of each party with respect
to such point. The parties will refrain from making a decision on
the Disputed Point for a period of up to two weeks. During such
2-week period, the parties will (i) consult with one another in
good faith with the goal of resolving the Disputed Point, (ii)
engage a mutually acceptable impartial mediator who is fluent in
both English and French (the "Mediator") to assist them in
finding a mutually agreeable solution to the Disputed Point,
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(iii) study the economic or commercial bases on which each of the
parties has based its position and the issues raised by each of
the parties in respect of the Disputed Point, and (iv) cooperate
with the Mediator in examining alternative solutions to the
Disputed Point. The costs and expenses of the Mediator shall be
shared equally by the parties. The parties will meet at the end
of such 2-week period for the sole purpose of discussing and
voting on the Disputed Point. The Mediator shall conduct the
meeting and begin it with a summary of the situation, the nature
of the Disputed Point and any proposed solutions, while reminding
the parties of the consequences of the continuation of the
dispute. The parties will use their good faith best efforts to
agree on a solution prior to or during such meeting.
b. Arbitration. In the event that a Disputed Point
cannot be resolved by the mediation procedure described in
Section 10.14(a) above, and provided that the Deadlock
resolution provisions of Article IX of the Operating Agreement do
not apply, then such Disputed Point, shall be finally resolved by
arbitration. The arbitration shall be conducted by one (1)
arbitrator fluent in French and English, with experience in
international commercial joint ventures, to be appointed by the
presiding officer of the London Court of International
Arbitration ("LCIA"). The arbitration shall be conducted in
English, under the supervisory authority of the LCIA, and in
accordance with the LCIA arbitration rules. Multiple
arbitrations between the parties and their Affiliates relating to
the same transaction or series of transactions may be aggregated
in the same arbitration proceeding. The arbitration, including
the rendering of the award, shall take place in London, England,
and shall be the exclusive forum for resolving such dispute,
controversy or claim. The decision of the arbitrator shall be
binding upon the parties hereto, and the expense of the
arbitration (including without limitation the award of attorneys'
fees to the prevailing party) shall be paid as the arbitrator
determines. The decision of the arbitrator shall be executory,
and judgment thereon may be entered by any court of competent
jurisdiction. The prevailing party in any arbitration shall be
entitled to such reasonable attorneys' fees as may be awarded by
the arbitrator. The non-prevailing party shall pay to the other
party such reasonable attorneys' fees, together with such fees of
the arbitrator and costs and expenses of the arbitration, as may
be awarded by the arbitrator. Notwithstanding the foregoing,
nothing in this section 10.14(b) shall be construed as limiting
in any way the right of a party to seek injunctive relief with
respect to any actual or threatened breach of this Agreement from
a court of competent jurisdiction.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the date first set forth above.
THERMOLASE CORPORATION THERMOLASE FRANCE L.L.C.
By: ____________________ By:___________________________
Name: Name:
Title: Title:
[Signature Page to License Agreement]
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
EXHIBIT A
Licensed Technology
United States Patents
5,226,907 Hair Removal Device and Method
5,425,728 Hair Removal Device and Method
5,423,803 Skin Surface Peeling Process using Laser
United States Patent Applications
********** ******************************
********** ****************************
********** **********************************************
*******************************
********** **********************************
********** ****************************
********** **********************************
********** *******************
European Patent Applications
*********** ***********************************************
********
*********** ****************************************
*************************
Patent Cooperation Treaty ("PCT") Applications
*************** ******************
*************** *********************************
Other Patents. As patent applications that cover the Licensed
Technology are filed and issue in the Territory, they shall
constitute Patents under this Agreement.
Other Licensed Technology
ThermoLase's trade secrets and know how relating to the
inventions covered by the above patents, the operation and
maintenance of the SoftLight Lasers and the performance of the
SoftLight Procedures, as described more fully in the User Manual
and the training to be provided by ThermoLase to Licensee.
European Trademarks
-------------------
ThermoLase has applied for EC trademarks for the following marks:
Mark Application Date Classes
---- ---------------- -------
SoftLight April 6, 1996 9, 42
Spa Thira April 6, 1996 3, 42
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EXHIBIT B
Schedule of Ownership
JDM Investment, S.A.
--------------------
Yves Micheli ____%
D.B.C. Holding S.A. ____%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
D.B.C. Holding S.A.
-------------------
Franklin Holdings, S.A. 59.5%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
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EXHIBIT E
SUBLICENSE AGREEMENT
Sublicensee Information:
Name: THERMODESS, S.A.S. ("Sublicensee")
Address: ________________
________________
________________
Telephone No.: ________________
Fax No. ________________
Effective Date: ________ __, 1996
Territory: FRANCE (including its Departements d'Outre-Mer
(D.O.M)., but excluding all other Territories
d'Outre-Mer (T.O.M.) and other jurisdictions)
BACKGROUND
A. ThermoLase Corporation ("ThermoLase") has developed certain
proprietary equipment and processes for the removal of unwanted
human hair and the exfoliation or rejuvenation of skin.
ThermoLase desires to have such technology and processes utilized
in the Territory set forth above (the "Territory").
B. ThermoLase France L.L.C. ("Licensee") has been appointed as
ThermoLase's exclusive licensee of such Patents and procedures in
France, pursuant to a License Agreement between ThermoLase and
Licensee, of even date herewith (the "License Agreement").
C. Sublicensee is a French S.A.S., the members of which are
ThermoLase and JDM Invest S.A. Licensee is prepared to appoint
Sublicensee as a sublicensee of such Patents and procedures in
the territory set forth above (the "Territory") on the terms and
conditions set forth below, and to sell to Sublicensee certain
SoftLight Lasers and SoftLight Lotion for use in practicing such
procedures, all pursuant to a mutually acceptable Supply
Agreement to be entered into by the parties (the "Supply
Agreement").
AGREEMENT
Licensee and Sublicensee hereby agree as follows:
1. DEFINITIONS
The following terms shall have the following meanings when
capitalized herein:
1.1 "Business Day" means a day on which banks are open for
business in San Diego, California and Paris, France.
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1.2 "Improvement" means any improvement, enhancement or
modification to existing Licensed Technology, whether developed
by ThermoLase, Licensee, Sublicensee or any third party.
1.3 "Licensed Technology" means the inventions claimed in
the Patents, including Improvements, together with any and all
know-how, trade secrets and other information relating to the
SoftLight Procedures and SoftLight Laser.
1.4 "Patents" means (i) the patents and patent applications
listed on Exhibit A attached hereto, (ii) any subsequent patent
application by ThermoLase having one or more claims covering
Improvements, (iii) any divisions, reissues, continuations,
renewals and extensions of any of said patents or patent
applications, and (iv) any patent issuing upon any of the
foregoing.
1.5 "SoftLight Laser" means a laser designed by ThermoLase
for use with a lotion in the removal of unwanted human hair and
the exfoliation or rejuvenation of skin.
1.6 "SoftLight Lotion" means the lotion approved by
ThermoLase for use in the SoftLight Procedures.
1.7 " SoftLight Procedures" means the removal of unwanted
human hair and the exfoliation or rejuvenation of skin using one
or more SoftLight Lasers and the SoftLight Lotion.
1.8 "ThermoLase Marks" means ThermoLase's SoftLight(SM) and
Spa Thira(SM) service marks and the trade name "ThermoLase",
including the registrations and applications listed on Exhibit A
hereto.
1.9. "Consolidated Venture Revenue" shall mean Direct
Venture Revenue plus Sublicense Revenue. Consolidated Venture
Revenue is calculated without reference to any sales or
value-added tax that may be imposed on such amounts.
1.10. "Direct Venture Revenue" shall mean the consolidated
aggregate revenues received from customers in respect of the
performance of the SoftLight Procedures in the Territory and the
sale of directly related products by (i) the Sublicensee, (ii)
any entities in which Sublicensee owns any equity or ownership
interests, or (iii) any entities which are owned, wholly or
partially, directly or indirectly, by ThermoLase, JDM Investment,
S.A., D.B.C. Holding S.A., Franklin Holding S.A., or any of their
direct or indirect owners.
1.11. "Sublicense Revenue" shall mean the aggregate revenue
received by the entities listed in 1.10(i) to (iv) from any of
their sublicensees or franchisees who do not fall into categories
(i) to (iv) above, and excluding any inter-company payments (such
as royalty payments, fees, service charges and the like) between
the entities listed in (i) to (iii) above.
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2. LICENSE AND OWNERSHIP OF TECHNOLOGY
2.1 Grant of License. Licensee grants to Sublicensee, upon
the terms and subject to the conditions set forth in this
Agreement, an exclusive, non-transferable license, under the
Patents and all other ThermoLase intellectual property in the
Licensed Technology, to perform the SoftLight Procedures in the
Territory. Sublicensee shall have the right to sublicense the
foregoing rights to one or more further sublicensees in the
Territory (the "Sub-Sublicensee(s)") pursuant to sublicense
agreements in form and substance acceptable to ThermoLase and
Licensee.
2.2 Ownership of Licensed Technology. Sublicensee will not
take any action or position contrary to ThermoLase's ownership of
all right, title and interest in and to the Patents and the
Licensed Technology, and Sublicensee agrees that it will not, at
any time, do or cause to be done any act or thing contesting or
in any way impairing or tending to impair the Patents or Licensed
Technology or any part of such right, title or interest of
ThermoLase. Sublicensee shall not in any manner represent that
Sublicensee has ownership of the Licensed Technology or Patents,
and acknowledges that Sublicensee's use of the Licensed
Technology shall not create in Sublicensee any right, title or
interest in or to the Licensed Technology, except for the rights
granted to Sublicensee by the express terms of this Agreement.
2.3 Sublicensee Improvements . (a) Sublicensee shall
disclose promptly to ThermoLase any and all Improvements to the
Licensed Technology developed or discovered by Sublicensee or its
officers, employees or agents. All such Improvements shall be
the property of ThermoLase, and, to the extent permitted by law,
Sublicensee hereby assigns all right, title and interest in and
to such Improvements, and all patent, copyright, trademark, trade
secret and other intellectual property rights therein, to
ThermoLase, as they are developed. Sublicensee shall, at
ThermoLase's request, execute and deliver all certificates,
waivers, applications, assignments and other instruments as
ThermoLase may reasonably request in order to effectuate the
assignment of Improvements to ThermoLase as described above,
including agreements between Sublicensee or its
Sub-Sublicensee(s) and their employees relating to the ownership
of inventions prepared by employees. All employees of
Sublicensee shall waive all moral rights with respect to works of
authorship constituting Improvements created by them to the
fullest extent permitted by law. To the extent permitted by
local law, Sublicensee will enter into agreements with its
employees to ensure compliance with the provisions of this
Section 2.3.
(b) To this end, the parties agree that French employment
agreements entered into with employees and/or employees of any
Sub-sublicensees will include appropriate language requiring
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employees to undertake, in accordance with the provisions of
French Law No. 79-797 of September 4, 1979, to declare formally
to their employer any and all inventions such employee might
develop as author or co-author, attaching to such declaration any
necessary information, data, drawings or documents held by such
employee and relating to such inventions.
(c) With respect to inventions which would be made by such
employees within the scope of any research task required from the
employee by its employer within the scope of its employment
agreement, the employee shall undertake:
- to acknowledge the ownership of its employer on
the invention, and
- to satisfy all statutory requirements and to carry
out all steps required to allow the employer to be recognized as
the owner of such invention, including any patents or other
intellectual property rights which might result from such
invention, it being understood that the name of the employee
shall be stated in case any patent application is filed, without
such statement entailing any right of co-ownership on the patent.
In consideration therefor, the employer shall grant the
employee a remuneration which shall be in addition to the
employee's contractual remuneration, and which shall be set in
accordance with applicable collective bargaining rules and/or
then current French practice.
(d) With respect to inventions which would be made by such
employee outside of the scope of any research task required from
the employee by its employer as stated above, but which would
satisfy the rules set out in Article L.611-7 of the French
Industrial Property Code, then such inventions would be governed
by the rules set out in such statutory provision.
(e) The employer shall thereupon take all steps to transfer
the ownership of the intellectual property right, or, if such
transfer is contrary to local law, to license to ThermoLase the
perpetual, irrevocable, exclusive right to use such invention, in
which case ThermoLase shall undertake to reimburse the employer
for any amounts paid to the employee in accordance with local
rules, as set out above.
2.4 Additional Improvements . n the event that Licensee
receives or is entitled to receive improvements to the Licensed
Technology from ThermoLase, Licensee shall provide such
Improvements to Sublicensee at the price at which such
Improvements were provided to Licensee.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
2.5 Future Patents . ThermoLase shall have the exclusive
right, at its sole expense, to make all decisions and take all
actions relating to the filing and prosecution of additional
patent applications relating to the Licensed Technology and the
Improvements. If Sublicensee requests ThermoLase to pursue
particular patent protection in the Territory relating to the
Licensed Technology, then, notwithstanding ThermoLase's
exclusive ownership of such patent, Sublicensee shall be
responsible for all costs of preparing, prosecuting and
maintaining such patent in the Territory.
3. THERMOLASE TECHNICAL ASSISTANCE
During the first year of the term of this Agreement,
Licensee shall engage ThermoLase to provide to Sublicensee (or to
Sub-Sublicensee(s), if so designated by Sublicensee), up to an
aggregate of **************** of support and assistance in
connection with the establishment and operation of the
Facilities. ThermoLase shall not charge for such support
services, except that Sublicensee shall be responsible for all
reasonable travel and out of pocket expenses incurred by
ThermoLase and its personnel in connection with providing such
services. Any direct costs and expenses for additional support
and assistance shall be borne by the Sublicensee. The parties
shall cooperate with each other to schedule training and
assistance in an efficient and cost-effective manner.
4. PAYMENT OF FEES AND ROYALTIES
4.1 Fees and Royalties.
(a) In consideration of the rights and licenses
granted to Sublicensee pursuant to this Agreement, Sublicensee
shall pay to Licensee percentage royalties as provided in
paragraph (b) below (the "Royalties").
(b) Royalties shall be payable quarterly within 45
days following the end of each calendar quarter. The amount of
such Royalties shall equal ******************** of Direct Venture
Revenue. ********************************************************
*****************************************************************
************************
(c) Sublicensee shall be entitled to retain ***
************* of Sublicense Revenue. Sublicensee shall remit to
Licensee the balance of Sublicense Revenue as an additional
Royalty.
(d) Notwithstanding the foregoing, in no event shall
the Royalties payable during any quarter exceed Sublicensee's
total profits during such quarter.
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(e) Each payment of Royalties shall be accompanied by
a written report, in detail reasonably satisfactory to Licensee,
specifying the method of calculation of the Royalties for the
applicable quarter. Any fees or Royalties that are not paid when
due shall bear interest from the due date until paid at the
lesser of (i) the rate of 1.5% per month or (ii) the maximum rate
allowed by applicable law. The foregoing Royalty rate is
intended by the parties to be the arm's length royalty rate; and
the parties will, no less than annually, consider whether it
still reflects the arm's length rate and, if not, whether to
adjust the Royalty rate by mutual agreement.
(f) The Royalties, fees and all other amounts payable
pursuant to this Agreement are exclusive of any and all present
and future federal, national, state, local, municipal and other
excise, sales, use, property, value-added or similar taxes and
fees, all of which shall be paid by Sublicensee. Sublicensee
shall obtain and provide to Licensee any certificate of exemption
or similar document required to exempt any transaction under this
Agreement from any such tax or fee.
(g) The Royalties, fees and all other amounts payable
pursuant to this Agreement shall be payable in United States
Dollars. To the extent that revenues are in a currency other
than United States Dollars, such revenues shall be converted into
United States Dollars, for the purposes of calculating Royalties
payable to Licensee hereunder, at the average exchange rate
during the relevant quarter as published in the New York edition
of the Wall Street Journal.
5. USE OF THERMOLASE MARKS
5.1 Trademark License; Promotional Materials.
(a) Licensee grants to Sublicensee an exclusive right
and license in the Territory (including the right to sublicense
to one or more Sub-Sublicensees) to use the ThermoLase Marks in
connection with promotional activities relating to the
performance of SoftLight Procedures, provided Sublicensee and all
Sub-Sublicensees acknowledge ThermoLase's rights in and to the
ThermoLase Marks by (i) referring to the same at all times as
service marks of ThermoLase in any signage, advertising, press
release, article, publication or other promotional material,
document or broadcast referencing the ThermoLase Marks and by
(ii) including the proprietary marking "(SM)" after SoftLight and
Spa Thira each time they are used by Licensee (or Sublicensee) in
any printed or electronic media. In any and all descriptions of
or references to the SoftLight Procedures, Sublicensee and its
Sub-Sublicensees shall use no descriptive name or mark other than
SoftLight, Spa Thira, and "ThermoLase", or a name approved in
advance by ThermoLase which is formed by combining a ThermoLase
Mark with the name "Jacques Dessange" (the "Combined Name"), the
use of which will be authorized only to the extent Sublicensee or
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Sub-Sublicensee(s) has received appropriate licenses or
sublicenses from the relevant trademark owners.
(b) ThermoLase shall have the right to review and
pre-approve (or reject) all promotional and advertising materials
relating to the SoftLight Procedures or SoftLight Lasers which
are prepared by Sublicensee or its Sub-Sublicensees, consultants,
contractors or agents, and which are not based substantially on
materials provided by ThermoLase or Licensee. Sublicensee shall
not include in any such promotional or advertising materials any
claims, facts, data or representations relating to the SoftLight
Procedures or SoftLight Lasers which are not provided in writing
by ThermoLase or Licensee or otherwise approved by ThermoLase or
Licensee in writing.
5.2 Ownership of ThermoLase Marks . ThermoLase shall have
the exclusive right to apply for registration, and to extend
existing registrations, of the ThermoLase Marks for use in
connection with the SoftLight Procedures or otherwise, except the
Combined Name, which may be applied for and owned by Sublicensee,
subject to ThermoLase's ownership of any underlying ThermoLase
Marks and any third party's ownership of the name "Jacques
Dessange". Licensee will not register, or cause or permit to be
registered in the name of any entity other than ThermoLase, the
ThermoLase Marks or any trademark, trade name or service mark
confusingly similar thereto, with any federal, national,
supra-national, state, municipal or other governmental authority
of any jurisdiction, whether within or outside the United States
or the Territory. Except as contemplated by the parties in case
of use of the Combined Name, Sublicensee will not use or
associate the ThermoLase Marks with any other trademark, trade
name or service mark in any advertising or publicity utilized by
Licensee in connection with the SoftLight Procedures or otherwise
in such manner as to be misleading with respect to the ownership
of the ThermoLase Marks. Sublicensee further agrees not to
create a composite trademark, trade name or service mark with the
ThermoLase Marks, except in each instance with ThermoLase's prior
written consent which ThermoLase acting in its sole discretion
may withhold. Sublicensee agrees that every use of the
ThermoLase Marks shall inure to the ultimate benefit of
ThermoLase. Sublicensee shall not remove or obscure or alter in
any manner the ThermoLase Marks or any notice thereof, which may
be displayed on the SoftLight Lasers, the SoftLight Lotion, a
facility for the performance of SoftLight Procedures, or any
other documentation provided by ThermoLase or Licensee hereunder.
5.3 Quality Controls and Assurance.
(a) Sublicensee agrees that any services provided by
Sublicensee and its Sub-Sublicensees based on performance of the
SoftLight Procedures pursuant to this Agreement shall be of a
quality at least equal to the quality of similar services
provided by ThermoLase or its other franchisees at facilities at
which ThermoLase or its other franchisees provide such services.
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(b) In addition, in order to comply with ThermoLase's
quality control standards, Sublicensee shall: (i) use the
ThermoLase Marks in compliance with all relevant laws and
regulations; and (ii) accord ThermoLase the right (to the extent
permitted by local law or rules of professional conduct) to
inspect during normal business hours, without prior advance
notice, its facilities (and those of its Sub-Sublicensees) in
order to confirm that the use of the ThermoLase Marks is in
compliance with this Agreement.
(c) Sublicensee agrees that its failure to comply with
the quality standards described in this Article 5 shall
constitute a material breach of this Agreement.
5.4 Translation of Documentation . Sublicensee shall
ensure, at its expense, that all technical manuals, advertising
and marketing information and other documentation provided by
ThermoLase or Licensee required by law to be in the French
language are translated into French. Sublicensee shall provide
ThermoLase with advance copies of all such materials for
approval; provided, however, that Sublicensee shall take
responsibility for any mistakes or inaccuracies in such
translations. All right, title and interest in and to such
translations shall be owned by ThermoLase, and Sublicensee hereby
assigns all right, title and interest in and to such
translations, and all copyright, trademark and other intellectual
property rights therein, to ThermoLase, as they are developed.
Sublicensee shall, at ThermoLase's request, execute and deliver
all certificates, applications, assignments and other
instruments as ThermoLase may reasonably request in order to
effectuate the assignment of translations to ThermoLase as
described above. All employees of Sublicensee and
Sub-Sublicensees shall waive all moral rights with respect to
works of authorship in such translations created by them. To the
extent permitted by local law, Sublicensee will enter into, and
cause its Sub-Sublicensee to enter into, agreements with its
employees to ensure compliance with the provisions of this
Section 5.4.
6. CONFIDENTIALITY
6.1 Licensee acknowledges and agrees that ThermoLase and
Licensee have disclosed, and shall continue to disclose, to
Sublicensee in connection with the use of the Licensed Technology
and performance of this Agreement certain confidential
information of ThermoLase and Licensee regarding its business
operations, trade secrets, know-how, customer information,
pricing, marketing data and other information of a confidential
nature relating to the Licensed Technology and the SoftLight
Procedures, including, without limitation, the terms of this
Agreement (collectively, the "ThermoLase Confidential
Information"). In addition, Licensee acknowledges and agrees
that Sublicensee may disclose to it during the term of this
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Agreement certain confidential information of Sublicensee
regarding its business operations, trade secrets, know-how,
customer information, pricing, marketing data and other
information of a confidential nature (the "Sublicensee
Confidential Information").
6.2 The Confidential Information of each party shall remain
the sole and exclusive property of such party, and the other
party shall have no interest or rights with respect thereto,
except to the extent expressly provided in this Agreement. Each
party agrees to maintain the confidentiality of the Confidential
Information of the other party, provided, however, that Licensee
shall have the right to disclose such information to its
sublicensees who have a need to know such information and who
have agreed in writing to maintain the confidentiality thereof in
a manner no less restrictive than that required under this
Agreement. Notwithstanding the foregoing provisions of this
Article 6, the receiving party shall have the right to disclose
any information that it can demonstrate (i) was rightfully
possessed by the receiving party before it was received from the
disclosing party, (ii) is or becomes public otherwise than
through any act or default of the receiving party, or (iii) is
required by law, court order or stock exchange rule to be
disclosed, provided the receiving party notifies the disclosing
party in writing prior to making any such disclosure so as to
afford to ThermoLase a reasonable opportunity to object or seek
an appropriate protective order with respect to such disclosure.
7. ENFORCEMENT OF RIGHTS
Sublicensee shall promptly advise Licensee and ThermoLase
upon becoming aware of any infringement or threatened
infringement of any of the Licensed Technology or the ThermoLase
Marks in the Territory or any claim that the Licensed Technology
or the ThermoLase Marks infringe the intellectual property rights
of another party in the Territory. Sublicensee agrees that
ThermoLase, in its sole discretion, shall determine the
appropriate action, if any, to be taken with respect to any such
infringement and shall have the right to exclusive control of any
enforcement suit or proceeding (provided, however, that
Sublicensee shall remain a party to such suit to the extent so
required). Sublicensee shall cooperate with ThermoLase with
respect to any enforcement, including, without limitation,
joining as a party to any litigation, if required. All costs and
expenses (including attorneys' fees) of any action relating to
any such infringement shall be borne by Sublicensee, and all
amounts, if any, recovered under such action, shall be paid to
Sublicensee. Notwithstanding the foregoing, ThermoLase shall be
solely responsible for enforcing its rights against the European
Laser Center's technology as it exists as of the Effective Date,
and shall bear all costs, and receive all recoveries, in
connection therewith.
8. LIMITATION OF LIABILITY; REMEDIES
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8.1 Consequential Damages. Notwithstanding anything to the
contrary contained in this Agreement, including without
limitation the provisions of Article 7 above, neither party
hereto shall be liable to the other for any indirect, special,
consequential, incidental or punitive damages (including without
limitation damages for loss of use of facilities or equipment,
loss of revenue, loss of profits or loss of goodwill) regardless
of (i) the negligence (either sole or concurrent) of either party
and (ii) whether either party has been informed of the
possibility of such damages.
8.2 No Warranty . THERMOLASE AND LICENSEE PROVIDE HEREIN NO
WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE,
OF NON-INFRINGEMENT, OR AS TO THE RESULTS THAT MAY BE ATTAINED BY
THE PERFORMANCE, PRACTICE OR OPERATION OF THE SOFTLIGHT
PROCEDURES, INCLUDING WITHOUT LIMITATION THE SOFTLIGHT LASERS.
8.3 Equitable Relief . Notwithstanding any other provision
of this Agreement to the contrary, due to the fact that the
unauthorized use, transfer or dissemination of the ThermoLase
Confidential Information or the Licensed Technology, or the
improper use thereof in violation of the User Manual and/or
applicable law or regulations, would diminish substantially the
value thereof and cause irreparable harm to ThermoLase and
Licensee which could not be adequately addressed by monetary
damages, if Sublicensee breaches any of the provisions of
Articles 2 or 5 of this Agreement, ThermoLase and Licensee shall
be entitled, without limiting their other rights or remedies, to
obtain equitable relief to prevent or restrain such breach,
including without limitation injunctive relief.
9. TERM AND TERMINATION
9.1 Term .The initial term of this Agreement ("Term")
shall commence on the Effective Date and shall continue until
December 31, 2012, unless sooner terminated as set forth herein,
and shall be renewed automatically for successive one-year
renewal terms, unless either party notifies the other of its
desire not to so renew at least sixty (60) days prior to the end
of the initial term or the applicable renewal term, as the case
may be. This Agreement shall terminate automatically upon the
termination, for any reason, of the License Agreement.
9.2 Termination. Licensee shall have the right to
terminate this Agreement, effective immediately upon notice to
Sublicensee:
(a) if Sublicensee fails to perform or observe, or
otherwise materially breaches any of its obligations under this
Agreement or the Supply Agreement, and such failure or breach
continues unremedied for a period of thirty (30) days following
written notice thereof; or
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(b) if Sublicensee: (i) files for or consents to a
general assignment for the benefit of creditors, (ii) applies for
or consents to the appointment of, or the taking possession by, a
receiver, custodian, trustee or liquidator of itself or all or a
substantial part of its assets, (iii) files a petition in
bankruptcy or liquidation, or is adjudicated bankrupt or
insolvent or takes similar actions under the laws of any
jurisdiction for the general benefit of creditors of an insolvent
or financially troubled debtor, (iv) seeks the liquidation,
dissolution or winding-up of itself, or the composition or
readjustment of its debts, (v) adopts any resolution of its
Members or Directors for the purpose of effecting any of the
foregoing, or (vi) is the subject of an involuntary proceeding,
which is not fully dismissed within forty-five (45) days, seeking
Sublicensee's liquidation, reorganization, dissolution or
winding-up, or composition or readjustment of its debts, or the
appointment of a trustee, receiver custodian, liquidator or the
like of Sublicensee or all or any substantial part of its assets,
or similar relief in respect of Sublicensee under any law
relating to bankruptcy, insolvency, reorganization, winding-up or
the composition or readjustment of debts.
Sublicensee shall have the right to terminate this
Agreement, effective immediately upon notice to Licensee:
(f) in the event that ThermoLase ceases to be
controlled, directly or indirectly, by Thermo Electron
Corporation or one of its direct or indirect subsidiaries (where
control means ownership of more than 50% of the capital stock or
voting stock of a corporation); or
(g) upon the occurrence of an event of dissolution
pursuant to the terms of Article X of the Operating Agreement.
9.3 Effects of Termination . Upon expiration or earlier
termination of this Agreement for any reason, all rights and
obligations of the parties under this Agreement shall cease,
except that Sublicensee shall be obligated to pay to Licensee all
outstanding fees and Royalties that are payable with respect to
the period prior to the effective date of such expiration or
earlier termination. Upon such expiration or earlier
termination, Sublicensee shall cease all use of the ThermoLase
Marks and the Licensed Technology, and Licensee shall have free
access to all user manuals and any other materials in
Sublicensee's possession that are related to the Licensed
Technology or the ThermoLase Marks. Upon the expiration or
earlier termination of this Agreement, Sublicensee will be deemed
to have assigned, transferred or conveyed to ThermoLase any and
all rights and goodwill in or to the ThermoLase Marks that may
have been obtained or developed by Sublicensee, and Sublicensee
will, without any consideration other than the mutual covenants
and agreements of this Agreement, execute and deliver such
instruments and other documents as may be requested by ThermoLase
or Licensee to accomplish such assignment, transfer and
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conveyance, or to preserve and secure the rights of ThermoLase
(or its parents, subsidiaries or affiliates) in and to the
ThermoLase Marks. Upon the expiration or earlier termination of
this Agreement, Sublicensee shall immediately remove all signs
and other markings from each of its facilities and articles (and
shall oversee such removal from the facilities and articles of
its Sub-Sublicensees) which indicate any connection to the
SoftLight Procedures, SoftLight Lasers, the ThermoLase Marks or
ThermoLase or Licensee.
9.4 No Rights to Compensation Upon Expiration or
Termination . In the event of a termination pursuant to any of
the provisions of this Agreement or upon expiration of this
Agreement, ThermoLase and Licensee shall not have any obligation
to Sublicensee, or to any Sub- Sublicensee or employee of
Sublicensee, for compensation or for damages on account of the
loss by Sublicensee or such Sub-Sublicensee or employee of
present or prospective sales, investments, compensation or
goodwill. Sublicensee, for itself and on behalf of each of its
employees hereby waives any rights which may be granted to it or
them under the laws and regulations of the Territory or otherwise
which are not granted to it or them by this Agreement.
9.5 Survival. Notwithstanding anything to the contrary
contained herein, the provisions of Sections 2.2, 2.3, 6, 7, 8,
9.3, 9.4, 9.5 and 10 of this Agreement shall survive any
expiration or earlier termination of this Agreement according to
their respective terms.
10. MISCELLANEOUS
10.1 Compliance with Laws . Sublicensee shall comply with
all national, supra-national, provincial and local laws, rules,
orders, ordinances and regulations of any governmental or other
public authority applicable to the performance of the SoftLight
Procedures.
10.2 Notices . Whenever by the terms of this Agreement,
notice, demand or other communication shall or may be given to
either party, the same shall be in writing and, addressed as
follows, or to such other address or addresses as shall from time
to time be designated by written notice by either party to the
other as herein provided:
if to Sublicensee:
if to Licensee:
ThermoLase France, L.L.C.
10455 Pacific Center Court
San Diego, Ca 92101, USA
Attn: President;
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with copies of all notices to:
ThermoLase Corporation
10455 Pacific Center Court
San Diego, CA 92101, USA
Attn: President;
And
General Counsel
Thermo Electron Corporation
81 Wyman St.
Waltham, MA 02254-9046 USA
All notices shall be sent by registered or certified air mail,
postage prepaid and return receipt requested, or by Federal
Express or other comparable courier providing proof of delivery,
and shall be deemed duly given and received (i) if mailed, on the
tenth (10th) Business Day following the mailing thereof, or (ii)
if sent by courier, the date of its receipt (or, if such day is
not a Business Day, the next succeeding Business Day).
10.3 Governing Laws . This Agreement shall be governed by
and construed in accordance with the laws of the State of New
York, excluding its conflict of laws principles. Notwithstanding
the application of the laws of the State of New York, Sublicensee
agrees that Licensee and ThermoLase shall have no obligation to
provide Sublicensee with any information or disclosures relating
to the Licensed Technology, the SoftLight Procedures or the
operation of a Spa Thira except as set forth herein. In
particular, Sublicensee waives, and releases ThermoLase and
Licensee from, any obligation to comply with the Disclosure
Requirements and Prohibitions concerning Franchising and Business
Opportunity Ventures of the United States Federal Trade
Commission or any similar provisions existing under the laws of
the State of Delaware.
10.4 Governing Language . This Agreement, any sublicense
under this Agreement and any amendments or other modifications
hereof or thereof, and all notices and other communications
hereunder or thereunder shall be in the English language. In the
event that this Agreement or any sublicense hereunder is
translated into any other language, the English language version
shall control.
10.5 Entire Agreement . This Agreement, including all
schedules and exhibits hereto, constitutes the sole and entire
agreement between Sublicensee and Licensee with respect to the
subject matter hereof, supersedes all prior agreements between
the parties either written or oral and shall not be supplemented,
amended, varied or modified in any manner except by an instrument
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in writing signed by duly authorized representatives of both
parties.
10.6 Waiver. No delay or omission on the part of either
party to this Agreement in requiring performance by the other
party or in exercising any right hereunder shall operate as a
waiver of any provision hereof or of any right hereunder, and the
waiver, omission or delay in requiring performance or exercising
any right hereunder on any one occasion shall not be construed as
a bar to or waiver of such performance or right on any future
occasion.
10.7 Remedies Cumulative . Any and all rights and remedies
which either party may have under this Agreement, at law or in
equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted
by law.
10.8 Headings . Article and Section headings and the
organization of this Agreement are for descriptive purposes only
and shall not control or alter the meaning of this Agreement.
10.9 Costs . Except as otherwise expressly provided herein,
each party shall bear its own costs and expenses in performing
its obligations under this Agreement. In the event that one
party to this Agreement commences an action against the other
party to this Agreement, the prevailing party shall be entitled
to recover its costs resulting from such action from the
non-prevailing party.
10.10 Successors and Assigns . This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
10.11 Authority . The individuals executing this
Agreement hereby represent and warrant that they are empowered
and duly authorized to so execute this Agreement on behalf of the
parties they represent.
10.12 Severability . If any provision of this Agreement
is declared invalid or unenforceable by a court or other tribunal
having competent jurisdiction, it is mutually agreed that this
Agreement shall endure except for the part declared invalid or
unenforceable by order of such court or tribunal. The parties
shall consult and use their best efforts to agree upon a valid
and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the
intent of this Agreement.
10.13 Change in Control . In the event that Dessange
Holding acquires the entire interest of ThermoLase in the
Licensee, then Licensee and Sublicensee shall negotiate in good
faith such amendments to this Agreement as are reasonably
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<PAGE>
necessary to enable Sublicensee to enjoy the benefits of this
Agreement.
10.14 Dispute Resolution.
a. Mediation . In the event of any dispute,
controversy or claim arising out of or relating to this Agreement
or to a breach hereof, including its interpretation, performance
or termination, the parties agree to follow the procedures set
forth in this Section 10.14. First, the parties shall identify
in writing the point on which they cannot agree (the "Disputed
Point") and the respective positions of each party with respect
to such point. The parties will refrain from making a decision on
the Disputed Point for a period of up to two weeks. During such
2-week period, the parties will (i) consult with one another in
good faith with the goal of resolving the Disputed Point, (ii)
engage a mutually acceptable impartial mediator who is fluent in
both English and French (the "Mediator") to assist them in
finding a mutually agreeable solution to the Disputed Point,
(iii) study the economic or commercial bases on which each of the
parties has based its position and the issues raised by each of
the parties in respect of the Disputed Point, and (iv) cooperate
with the Mediator in examining alternative solutions to the
Disputed Point. The costs and expenses of the Mediator shall be
shared equally by the parties. The parties will meet at the end
of such 2-week period for the sole purpose of discussing and
voting on the Disputed Point. The Mediator shall conduct the
meeting and begin it with a summary of the situation, the nature
of the Disputed Point and any proposed solutions, while reminding
the parties of the consequences of the continuation of the
dispute. The parties will use their good faith best efforts to
agree on a solution prior to or during such meeting.
b. Arbitration . In the event that a Disputed Point
cannot be resolved by the mediation procedure described in
Section 10.14(a) above, and provided that the Deadlock
resolution provisions of Article IX of the Operating Agreement do
not apply, then such Disputed Point, shall be finally resolved by
arbitration. The arbitration shall be conducted by one (1)
arbitrator fluent in French and English, with experience in
international commercial joint ventures, to be appointed by the
presiding officer of the London Court of International
Arbitration ("LCIA"). The arbitration shall be conducted in
English, under the supervisory authority of the LCIA, and in
accordance with the LCIA arbitration rules. Multiple
arbitrations between the parties and their Affiliates relating to
the same transaction or series of transactions may be aggregated
in the same arbitration proceeding. The arbitration, including
the rendering of the award, shall take place in London, England,
and shall be the exclusive forum for resolving such dispute,
controversy or claim. The decision of the arbitrator shall be
binding upon the parties hereto, and the expense of the
arbitration (including without limitation the award of attorneys'
fees to the prevailing party) shall be paid as the arbitrator
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determines. The decision of the arbitrator shall be executory,
and judgment thereon may be entered by any court of competent
jurisdiction. The prevailing party in any arbitration shall be
entitled to such reasonable attorneys' fees as may be awarded by
the arbitrator. The non-prevailing party shall pay to the other
party such reasonable attorneys' fees, together with such fees of
the arbitrator and costs and expenses of the arbitration, as may
be awarded by the arbitrator. Notwithstanding the foregoing,
nothing in this section 10.14(b) shall be construed as limiting
in any way the right of a party to seek injunctive relief with
respect to any actual or threatened breach of this Agreement from
a court of competent jurisdiction.
10.15 Third Party Beneficiary .ThermoLase is made a
express third party beneficiary of this Agreement, and ThermoLase
shall be entitled to enforce the terms of this Agreement against
either party.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the date first set forth above.
THERMOLASE FRANCE L.L.C. THERMODESS, S.A.S.
By: _________________________ By:_____________________
Name: Name:
Title: Title:
[Signature Page to Sublicense Agreement]
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
EXHIBIT A
Licensed Technology
United States Patents
5,226,907 Hair Removal Device and Method
5,425,728 Hair Removal Device and Method
5,423,803 Skin Surface Peeling Process using Laser
United States Patent Applications
********** ******************************
********** ****************************
********** **********************************************
*******************************
********** **********************************
********** ****************************
********** **********************************
********** *******************
European Patent Applications
*********** ***********************************************
********
*********** ****************************************
*************************
Patent Cooperation Treaty ("PCT") Applications
*************** ******************
*************** *********************************
Other Patents. As patent applications that cover the Licensed
Technology are filed and issue in the Territory, they shall
constitute Patents under this Agreement.
Other Licensed Technology
ThermoLase's trade secrets and know how relating to the
inventions covered by the above patents, the operation and
maintenance of the SoftLight Lasers and the performance of the
SoftLight Procedures, as described more fully in the User Manual
and the training to be provided by ThermoLase to Franchisee.
European Trademarks
ThermoLase has applied for EC trademarks for the following marks:
Mark Application Date Classes
---- ---------------- -------
SoftLight April 6, 1996 9, 42
Spa Thira April 6, 1996 3, 42
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EXHIBIT B
Schedule of Ownership
JDM Investment, S.A.
--------------------
Yves Micheli ____%
D.B.C. Holding S.A. ____%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
D.B.C. Holding S.A.
-------------------
Franklin Holdings, S.A. 59.5%
Jacques Dessange
Management, S.A. ____%
Benjamin Dessange ____%
Bernard Sagon ____%
Michel Couvin ____%
Daniel Conte ____%
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
EXHIBIT F
OPTION AGREEMENT
This Agreement, dated as of , 1996 (the
"Effective Date") is made between ThermoLase Corporation, a
Delaware corporation ("ThermoLase") and JDM Invest S.A., a French
S.A. ("JDM").
WHEREAS, ThermoLase and JDM have entered into an Operating
Agreement for ThermoLase France L.L.C., a Delaware limited
liability company (the "US LLC") of even date herewith (the
"Operating Agreement"); and
WHEREAS, ThermoLase and JDM have entered into a Shareholders
Agreement for ThermoDess, S.A.S., a French S.A.S. ("SAS") of even
date herewith (the "S.A.S. Agreement"); and
WHEREAS, in connection with the execution of the Operating
Agreement and the S.A.S. Agreement, JDM has agreed to grant
ThermoLase an option to purchase those portions of JDM's equity
interest in the US LLC and SAS described below.
NOW, THEREFORE, ThermoLase and JDM hereby agree as follows:
1. Grant of Option . JDM hereby grants to ThermoLase an
irrevocable option (the "Option") to purchase from JDM the
following assets (collectively, the "Fractional Interests"): (a)
a one-tenth of one percent (.001) Membership Interest (as such
term is defined in the Operating Agreement) of the US LLC now
owned by JDM and (b) a one-tenth of one percent (.001) Membership
Interest (as such term is defined in the S.A.S. Agreement and the
Bylaws of SAS) of SAS now owned by JDM. ThermoLase may exercise
the Option only in full, for the purchase from JDM of all
Fractional Interests.
2. Exercise Price . The aggregate exercise price for the
Fractional Interests (the "Exercise Price") shall be determined
as follows, based on the date on which ThermoLase exercises the
Option:
Exercise Date Exercise Price
------------- --------------
Prior to second anniversary ***********************
of Effective Date ******************************
***************************
****************************
*****************************
******************************
***********************
On or after second *********************
anniversary of Effective Date ******************************
but prior to third ******************************
anniversary of Effective Date ****************************
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
*****************************
******************************
***********************
On or after third anniversary *********************
of Effective Date but prior ******************************
to fourth anniversary of ******************************
Effective Date ****************************
*****************************
******************************
***********************
On or after fourth *********************
anniversary of Effective Date ******************************
**************************
****************************
*****************************
******************************
***********************
Consolidated revenue and consolidated net income of SAS
shall be determined in accordance with United States generally
accepted accounting principles. For purposes of this Agreement,
consolidated net revenue of SAS shall be determined without
regard to any royalties paid by SAS to US LLC.
3. Exercise of Option. The Option may be exercised by
ThermoLase at any time by sending notice to JDM, specifying the
calculation of the Exercise Price, and the place, date and time
for closing of the purchase of the Fractional Interests (the
"Closing"), provided that such date may not be more than thirty
(30) nor less than ten (10) business days from the date of such
notice. The Exercise Price shall be paid in U.S. Dollars, and to
the extent that the amounts on which the calculation of the
Exercise Price are not denominated in U.S. Dollars, such amounts
shall be converted to U.S. Dollars at the average conversion rate
as published in the New York edition of the Wall Street Journal
during the 30 business days immediately prior to the Closing.
At the Closing, JDM shall deliver all duly executed documents
necessary to effectuate the transfer of the Fractional Interests
to ThermoLase and ThermoLase shall deliver to JDM a wire transfer
or certified or bank cashier's check payable to JDM in an amount
equal to the Exercise Price. JDM covenants that at the time of
transfer of the Fractional Interests such transfer will vest in
ThermoLase full title to the Fractional Interests free and clear
of all liens, pledges or other encumbrances.
4. Adjustment in Certain Events. In the event of any
mergers, consolidations, recapitalizations, combinations,
conversions, exchanges, extraordinary or liquidating
distributions, or other changes in the corporate or capital
structure of the US LLC or SAS that would have the effect of
diluting or changing ThermoLase's rights hereunder, the number
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and kind of interests or securities subject to the Option shall
be appropriately and equitably adjusted so that ThermoLase shall
receive upon the exercise of the Option the interests or other
securities or property that ThermoLase would have received in
respect of the Fractional Interests if the Option had been
exercised immediately prior to such event; provided, however,
that the aggregate Exercise Price shall not be changed.
5. Notices. Any notices required hereunder shall be given
in the manner provided in the Operating Agreement.
6. Amendments. This Agreement may only be modified by
written agreement of the parties hereto.
7. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, provided that ThermoLase
may assign its rights and obligations to any affiliate of
ThermoLase and provided, further, that JDM may not assign,
delegate or otherwise transfer the Fractional Interests or any of
its rights or obligations under this Agreement without the prior
written consent of ThermoLase.
8. Specific Performance. Each party's obligation under
this Agreement is unique. If any party should default in his or
its obligations under this Agreement, the parties each
acknowledge that it would be extremely impractical to measure in
full all of the resulting damages; accordingly, the nondefaulting
party, in addition to any other available rights or remedies, may
sue in equity for specific performance, and the parties each
knowingly and willingly waive the defense that a remedy in money
damages will be adequate (with no party waiving his or its
respective rights to pursue the remedy of money damages if it
elects to do so). The terms of this Agreement are specifically
enforceable.
9. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of laws thereof.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above
written.
THERMOLASE CORPORATION JDM INVEST S.A.
By:_______________________ By:_____________________
John C. Hansen, President Name:
Title:
[Signature Page to Option Agreement]
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EXHIBIT G
---------
SUPPLY AGREEMENT
This Supply Agreement is entered into this ____ day of
_______, 1996 by and among ThermoLase Corporation (hereinafter
called "ThermoLase"), a corporation organized and existing under
the laws of the State of Delaware, with its principal offices
located at 10455 Pacific Center Court, San Diego, CA 92101,
United States of America; Franklin Holding, S.A., a French
corporation with its principal offices located at 37 Ave Franklin
Roosevelt, 75008 Paris FRANCE ("Franklin"); ThermoLase - Dessange
S.A.S., a French S.A.S. with its principal offices located at
_________________ Paris FRANCE ("SAS") and ThermoLase France,
L.L.C., a Delaware limited liability company ("LLC").
ThermoLase, Franklin, LLC and SAS are sometimes collectively
referred to herein as the "Parties" and individually as a
"Party";
1. Definitions
The following terms shall have the following meanings when
capitalized herein:
1.1 "Business Day" means a day on which banks are open for
business in San Diego, California, U.S.A. and Paris, France.
1.2 "Sublicense Agreement" means that Sublicense Agreement
of even date herewith between SAS and LLC, pursuant to which SAS
has been granted the right to practice the SoftLight Procedures
in certain territories therein defined.
1.3 "Other Products" means certain supplies and products,
other than the SoftLight Products, which may be used in
connection with the SoftLight Procedures and which ThermoLase
and/or Franklin make available to SAS, including without
limitation, smoke evacuator filters, waxing equipment and
supplies, and lotions and cleansers.
1.4 "Products" means the SoftLight Products and the Other
Products.
1.5 "SoftLight Laser" means a laser specified by ThermoLase
for use with a lotion in the removal of unwanted human hair and
the exfoliation or rejuvenation of skin.
1.6 "SoftLight Lotion" means the lotion approved by
ThermoLase for use in the SoftLight Procedures.
1.7 "SoftLight Procedures" means the removal of unwanted
human hair and the exfoliation or rejuvenation of skin using one
or more SoftLight Lasers and the SoftLight Lotion.
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
1.8 "SoftLight Products" means the SoftLight Lasers and the
SoftLight Lotions.
1.9 "License Agreement" means that License Agreement of
even date herewith between ThermoLase and LLC, pursuant to which
LLC has been granted the right to practice and sublicense the
SoftLight Procedures in certain territories therein defined.
2. SUPPLY OF PRODUCTS.
2.1 SoftLight Products. LLC agrees to purchase all of its
requirements for the SoftLight Products exclusively from
ThermoLase upon the terms and conditions hereof. SAS agrees to
purchase all of its requirements for the SoftLight Products
exclusively from LLC upon the terms and conditions hereof. SAS
and LLC agree that they shall not purchase any products similar
to the SoftLight Products for use in the SoftLight Procedures
from any other vendors.
2.2 Use of SoftLight Products. SAS and LLC acknowledge and
understand that the SoftLight Products have been carefully
developed in order to maximize the safety and effectiveness of
the SoftLight Procedures in compliance with applicable laws and
regulations and ThermoLase's User Manual, and SAS and LLC
covenant and agree not to (i) modify the same in any manner or
(ii) use a SoftLight Laser in the absence of the SoftLight Lotion
or otherwise in conjunction with any lotion, gel, compound or
other substance which has not been approved in advance and in
writing by ThermoLase as complying with applicable laws and
regulations and satisfying ThermoLase's safety and efficacy
standards with respect to the use of SoftLight Lasers.
ThermoLase reserves the right to modify, from time to time during
the term of this Agreement, the SoftLight Products supplied to
hereunder. SAS and LLC expressly agree to use the SoftLight
Products in accordance with the instructions of ThermoLase and
the provisions of ThermoLase's User Manual, as it may be amended
from time to time (the "User Manual").
2.3 Other Products . SAS may, from time to time, purchase
Other Products from ThermoLase and/or Franklin, but shall have no
obligation to do so, and shall be free to purchase similar or
competing products from other vendors. ThermoLase and Franklin
shall supply Other Products to SAS based on their availability.
ThermoLase and Franklin agree that they shall not, directly or
indirectly through their subsidiaries or affiliates, supply Other
Products to the sublicensees or subfranchisees of SAS.
3. PRICING.
3.1 Price to SAS. ThermoLase, Franklin and LLC each agrees
to sell the Products under this Agreement at a price *********
*****************************************************************
*****************************************************************
*****************************************************************
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS.
*****************************************************************
*********
3.2 Price Charged by SAS . Neither ThermoLase, LLC nor
Franklin shall have any right under this Agreement to control the
price at which SAS offers the SoftLight Procedures or the Other
Products to its customers.
4. ORDERING AND DELIVERY.
4.1 Purchase Orders. From time to time a party may order
Products (as specified in Section 2) pursuant to written purchase
orders specifying the quantity of Products ordered, the requested
delivery date(s) and any special shipping or delivery
instructions. Subject to availability, the sellers will use
reasonable efforts to deliver Products to the buyers in
accordance with such purchase orders. All Products ordered in
accordance with this Section 4.1 shall be referred to as "Ordered
Products". The price in effect for the Ordered Products when
ordered shall be the price at which the buyer will be charged for
the Ordered Products when shipped, in accordance with Section 3.1
above. The Parties agree that if the terms or conditions stated
on any purchase order conflict with or are contradictory to any
of the provisions of this Agreement, the provisions of this
Agreement shall govern and the conflicting or contradictory
provisions of such purchase order shall have no effect.
4.2 Shipping . The seller shall ship, or cause to be
shipped, Products to the buyer, or another destination specified
by the buyer, by a reputable commercial carrier reasonably
acceptable to the buyer. The seller shall insure the Products in
shipment, at the buyer's expense. The buyer shall be responsible
for the cost of shipping the Products to the requested
destinations.
4.3 Risk of Loss . Risk of loss of the Products shall pass
to buyer immediately upon delivery to a carrier for shipment to
buyer.
5. PAYMENT TERMS.
5.1 Invoice . The seller shall invoice the buyer monthly
for all charges due hereunder. The Buyer shall remit payment in
full to the seller, in the currency specified by the seller, no
later than thirty (30) days following the date of each invoice.
5.2 Taxes . All taxes payable with respect to the Products
sold hereunder shall be paid by the buyer, except for the
corresponding income taxes which shall be paid by seller, as
applicable.
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6. MANUFACTURERS' WARRANTY; LIMITATIONS OF LIABILITY.
6.1 Manufacturers' Warranty . The SoftLight Products may
contain written warranties extended by their respective
manufacturers. To the greatest extent permitted by law and the
terms of the manufacturers' warranties, the benefits of such
warranties shall be transferred by ThermoLase to LLC, by LLC to
SAS, and by SAS to its end user customers. ThermoLase and LLC
make no representations with respect to such manufacturers'
warranties, nor do ThermoLase or LLC represent or guaranty that
such warranties will be applicable to any person, including SAS's
customers.
6.2 NO OTHER WARRANTY . THERMOLASE, LLC AND FRANKLIN
DISCLAIM ALL WARRANTIES AND CONDITIONS, EXPRESS AND IMPLIED,
WITH RESPECT TO THE PRODUCTS, INCLUDING THE IMPLIED WARRANTIES
AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT, OR AS TO THE RESULTS THAT MAY BE
ATTAINED BY THE PERFORMANCE, PRACTICE OR OPERATION OF THE
SOFTLIGHT PROCEDURES, INCLUDING WITHOUT LIMITATION THE SOFTLIGHT
LASERS.
6.3 Consequential Damages. Notwithstanding anything to the
contrary contained in this Agreement, no party hereto shall be
liable to the other for any indirect, special, consequential,
incidental or punitive damages (including without limitation
damages for loss of use of facilities or equipment, loss of
revenue, loss of profits or loss of goodwill) regardless of (i)
the negligence (either sole or concurrent) of the other party and
(ii) whether the other party has been informed of the possibility
of such damages.
7. TERMINATION.
Unless earlier terminated by mutual agreement of the
parties, this Agreement shall remain in effect until the
termination or expiration of the License Agreement. Upon any
termination of this Agreement, all rights and obligations of the
Parties hereunder shall immediately cease and terminate.
8. NOTICES.
Whenever by the terms of this Agreement, notice, demand or
other communication shall or may be given to a Party, the same
shall be in writing and, addressed as follows, or to such other
address or addresses as shall from time to time be designated by
written notice by a Party to the other as herein provided:
If to SAS: __________________________
__________________________
__________________________
Facsimile: ________________
Attention: ________________
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If to ThermoLase: ThermoLase Corporation
10455 Pacific Center Court
San Diego, CA 92101, USA
Attn: President
with a copy to: General Counsel
Thermo Electron Corporation
81 Wyman St.
Waltham, MA 02254-9046 USA
If to LLC:
If to Franklin: Franklin Holding, S.A.
37 Ave Franklin Roosevelt
75008 Paris FRANCE
Attn: General Manager
All notices shall be sent by registered or certified air mail,
postage prepaid and return receipt requested, or by Federal
Express or other comparable courier providing proof of delivery,
and shall be deemed duly given and received (i) if mailed, on the
tenth (10th) Business Day following the mailing thereof, or (ii)
if sent by courier, the date of its receipt (or, if such day is
not a Business Day, the next succeeding Business Day).
9. GOVERNING LAW AND LANGUAGE.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, U.S.A.,
excluding: (i) its conflict of laws principles; (ii) the United
Nations Convention on Contracts for the International Sale of
Goods; and (iii) the 1974 Convention on the Limitation Period in
the International Sale of Goods (the "1974 Convention") and the
Protocol amending the 1974 Convention, done at Vienna April 11,
1980. This Agreement is written in the English language and may
be executed in two (2) or more counterparts, each of which shall
be deemed an original. The English language text of this
Agreement shall prevail over any translation hereof.
10. GENERAL PROVISIONS.
10.1 Amendment. This Agreement shall not be deemed or
construed to be modified, amended or waived, in whole or in part,
except by written agreement of the parties.
10.2 Entire Agreement . This Agreement, including all
schedules hereto, constitutes the sole and entire agreement
between the Parties with respect to the subject matter hereof,
supersedes all prior agreements between the Parties either
written or oral and shall not be supplemented, amended, varied or
modified in any manner except by an instrument in writing signed
by duly authorized representatives of both Parties.
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10.3 Waiver . No delay or omission on the part of any Party
to this Agreement in requiring performance by any other Party or
in exercising any right hereunder shall operate as a waiver of
any provision hereof or of any right hereunder, and the waiver,
omission or delay in requiring performance or exercising any
right hereunder on any one occasion shall not be construed as a
bar to or waiver of such performance or right on any future
occasion.
10.4 Remedies Cumulative . Any and all rights and remedies
which a Party may have under this Agreement, at law or in
equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted
by law.
10.5 Headings . Article and Section headings and the
organization of this Agreement are for descriptive purposes only
and shall not control or alter the meaning of this Agreement.
10.6 Authority . The individuals executing this Agreement
hereby represent and warrant that they are empowered and duly
authorized to so execute this Agreement on behalf of the Parties
they represent.
10.7 Severability .If any provision of this Agreement is
declared invalid or unenforceable by a court or other tribunal
having competent jurisdiction, it is mutually agreed that this
Agreement shall endure except for the part declared invalid or
unenforceable by order of such court or tribunal. The Parties
shall consult and use their best efforts to agree upon a valid
and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the
intent of this Agreement.
10.8 Force Majeure . No Party will be liable in any respect
for failures to perform hereunder due wholly or substantially to
the elements, acts of God, acts of terrorism, acts of civil or
military authority, fires, floods, epidemics, armed hostilities,
riots and other unavoidable natural disasters beyond the control
of the Parties.
10.9 Dispute Resolution.
a. Mediation . In the event of any dispute,
controversy or claim arising out of or relating to this Agreement
or to a breach hereof, including its interpretation, performance
or termination, the parties agree to follow the procedures set
forth in this Section 10.9. First, the parties shall identify in
writing the point on which they cannot agree (the "Disputed
Point") and the respective positions of each party with respect
to such point. The parties will refrain from making a decision on
the Disputed Point for a period of up to two weeks. During such
2-week period, the parties will (i) consult with one another in
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good faith with the goal of resolving the Disputed Point, (ii)
engage a mutually acceptable impartial mediator who is fluent in
both English and French (the "Mediator") to assist them in
finding a mutually agreeable solution to the Disputed Point,
(iii) study the economic or commercial bases on which each of the
parties has based its position and the issues raised by each of
the parties in respect of the Disputed Point, and (iv) cooperate
with the Mediator in examining alternative solutions to the
Disputed Point. The costs and expenses of the Mediator shall be
shared equally by the parties. The parties will meet at the end
of such 2-week period for the sole purpose of discussing and
voting on the Disputed Point. The Mediator shall conduct the
meeting and begin it with a summary of the situation, the nature
of the Disputed Point and any proposed solutions, while reminding
the parties of the consequences of the continuation of the
dispute. The parties will use their good faith best efforts to
agree on a solution prior to or during such meeting.
b. Arbitration .In the event that a Disputed Point
cannot be resolved by the mediation procedure described in
Section 10.9(a) above, and provided that the Deadlock resolution
provisions of Article IX of the Operating Agreement do not apply,
then such Disputed Point, shall be finally resolved by
arbitration. The arbitration shall be conducted by one (1)
arbitrator fluent in French and English, with experience in
international commercial joint ventures, to be appointed by the
presiding officer of the London Court of International
Arbitration ("LCIA"). The arbitration shall be conducted in
English, under the supervisory authority of the LCIA, and in
accordance with the LCIA arbitration rules. Multiple
arbitrations between the parties and their Affiliates relating to
the same transaction or series of transactions may be aggregated
in the same arbitration proceeding. The arbitration, including
the rendering of the award, shall take place in London, England,
and shall be the exclusive forum for resolving such dispute,
controversy or claim. The decision of the arbitrator shall be
binding upon the parties hereto, and the expense of the
arbitration (including without limitation the award of attorneys'
fees to the prevailing party) shall be paid as the arbitrator
determines. The decision of the arbitrator shall be executory,
and judgment thereon may be entered by any court of competent
jurisdiction. The prevailing party in any arbitration shall be
entitled to such reasonable attorneys' fees as may be awarded by
the arbitrator. The non-prevailing party shall pay to the other
party such reasonable attorneys' fees, together with such fees of
the arbitrator and costs and expenses of the arbitration, as may
be awarded by the arbitrator. Notwithstanding the foregoing,
nothing in this section 10.9(b) shall be construed as limiting in
any way the right of a party to seek injunctive relief with
respect to any actual or threatened breach of this Agreement from
a court of competent jurisdiction.
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IN WITNESS HEREOF, the Parties hereto have executed this
Agreement as of the date first set forth above.
THERMOLASE CORPORATION THERMOLASE - DESSANGE S.A.S.
By:_______________________ By:_________________________
Name: Name:
Title: Title:
FRANKLIN HOLDING, S.A. THERMOLASE FRANCE, L.L.C.
By:_______________________ By:_________________________
Name: Name:
Title: Title:
[Signature Page to Supply Agreement]
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
EXHIBIT 10.27
-------------
SoftLight (SM) and Spa Thira (SM)
Franchise and License Agreement
Franchisee Information:
Name: Medical Supply & Service Co. (MEDIC) ("Franchisee")
Address: P.O. Box 7795
Jeddah, 21472
Saudi Arabia
Telephone No.: 966-2-669-5961
Fax No. 966-2-660-4525
Effective Date: November 8, 1996
BACKGROUND
A. ThermoLase Corporation ("ThermoLase") has developed
specially-designed lasers (the "SoftLight Lasers") for use in the
removal of hair and the rejuvenation of skin (the "SoftLight
Procedures").
B. ThermoLase has developed designs, furnishings, standards and
procedures for facilities dedicated to the utilization of
SoftLight Lasers for the performance of the SoftLight Procedures
and intends to operate, or license others to operate, such
facilities under the name "Spa Thira".
C. ThermoLase owns and has the right to use and to license
others to use the marks "SoftLight" and "Spa Thira".
D. ThermoLase is prepared to appoint Franchisee as the
exclusive ThermoLase franchisee in Saudi Arabia on the terms and
conditions set forth below.
AGREEMENT
ThermoLase and Franchisee agree as follows:
1. GRANT OF FRANCHISE; FACILITIES
1.1 Grant of Franchise. ThermoLase grants to Franchisee an
exclusive license for the practice of the SoftLight Procedures in
Saudi Arabia in one or more facilities under the name "Spa Thira"
or such other name as is approved by ThermoLase (collectively the
"Facilities", and each a "Facility"). ThermoLase will disclose
to Franchisee the Licensed Technology (as hereinafter defined)
and provide Franchisee with training, support and technical
assistance on the terms and conditions hereinafter set forth.
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1.2 Facilities. ThermoLase shall provide to Franchisee a
set of plans and specifications for a "model" Spa Thira.
Subsequently, Franchisee shall submit to ThermoLase for approval
detailed plans and specifications for each Facility to be
established. The approval of ThermoLase shall not be
unreasonably withheld. Each Facility will contain furniture and
fixtures appropriate for a Spa Thira, taking into account local
customs, traditions and tastes. ThermoLase shall have the right
to inspect and approve each Facility before allowing such
Facility to perform the SoftLight Procedures.
2. LICENSE OF SOFTLIGHT TECHNOLOGY
2.1 Grant of License. ThermoLase grants to Franchisee,
upon the terms and subject to the conditions set forth in this
Agreement, an exclusive, non-transferable license, under
ThermoLase's patents, patent applications or know how now owned
or hereafter developed or acquired by ThermoLase (the "Licensed
Technology"), to perform in Saudi Arabia at the Facilities the
SoftLight Procedures in accordance with the protocols set forth
in the SoftLight User's Manual, as the same may be modified by
ThermoLase from time to time (the "User Manual"). Franchisee
acknowledges and understands that the safety and efficacy of the
SoftLight Procedures are dependent upon the performance of the
SoftLight Procedures in the manner detailed in the User Manual.
Franchisee covenants and agrees to ensure that the SoftLight
Procedures are performed in a safe and appropriate manner by
properly trained personnel in full compliance with the User
Manual and all applicable laws, rules, orders, ordinances and
regulations of any governmental or other public authority.
2.2 Ownership of Licensed Technology. Franchisee
acknowledges ThermoLase's right, title and interest in and to the
Licensed Technology, and Franchisee agrees that it will not, at
any time, do or cause to be done any act or thing, contesting or
in any way impairing or tending to impair the Licensed Technology
or any part of such right, title or interest of ThermoLase.
Franchisee shall not in any manner represent that Franchisee has
ownership of the Licensed Technology, and acknowledges that
Franchisee's use of the Licensed Technology shall not create in
Franchisee any right, title or interest in or to the Licensed
Technology, except for the rights granted to Franchisee by the
express terms of this Agreement.
2.3 Franchisee Improvements. Franchisee shall disclose
promptly to ThermoLase any and all material Improvements to the
Licensed Technology developed or discovered by Franchisee or its
officers, employees or agents. Franchisee hereby grants
ThermoLase a non- exclusive, perpetual, royalty-free,
transferable, worldwide right and license to use such
Improvements for any and all purposes. For purposes of this
Agreement, "Improvements" shall include any developments or
discoveries that involve or are based on Licensed Technology or
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
on substantially equivalent technology. Franchisee shall, at
ThermoLase's request, sign such applications, assignments and
other instruments as ThermoLase may reasonably request in order
to achieve such intellectual property status for the Improvements
as ThermoLase shall deem appropriate and to perfect the rights so
granted by Franchisee to ThermoLase. Franchisee agrees that it
shall use any Improvements only in connection with the SoftLight
Procedures and will not transfer or license rights to use such
Improvements to any third party.
2.4 ThermoLase Improvements. ThermoLase shall disclose
promptly to Franchisee all material Improvements to the Licensed
Technology developed or discovered by ThermoLase or its officers,
employees or agents if and to the extent that such Improvements
are utilized by ThermoLase in the operation of Spa Thiras or made
generally available to other franchisees. Such Improvements
shall be considered part of the Licensed Technology licensed to
Franchisee pursuant to Section 2.1 above.
2.5 Sublicenses. Franchisee may grant sublicenses to the
Licensed Technology to the extent reasonably necessary to
establish and operate Facilities in Saudi Arabia. The terms and
conditions of each sublicense which relate to the ownership and
protection of the Licensed Technology shall be subject to the
approval of ThermoLase, which shall not be unreasonably withheld.
Franchisee shall have no obligation to disclose to ThermoLase the
economic terms and conditions of any sublicense, except to the
extent necessary for calculating the Royalties payable to
ThermoLase pursuant to Article 3 hereof. For purposes of
calculating the Royalties payable to ThermoLase pursuant to
Article 3 hereof, reference shall be made to the aggregate gross
revenues from performance of the SoftLight Procedures at the
Facilities of Franchisee and all sublicensees.
3. PAYMENT OF FEES AND ROYALTIES
3.1 Fees and Royalties.
(a) In consideration of the rights and licenses
granted to Franchisee pursuant to this Agreement, Franchisee
shall pay to ThermoLase percentage royalties as provided in
paragraph (b) below (the "Royalties").
(b) Royalties shall be payable monthly within fifteen
(15) days following the end of each calendar month in the amount
of **************** of gross revenues generated by each Facility
from the performance of the SoftLight Procedures during the
relevant month provided, however, that the first payment shall
not be due until fifteen (15) days after the end of the fourth
month after the first Facility commences operations with respect
to revenues generated by such Facility during such period. The
Royalty rate shall increase to *******************************
beginning one year after the first Facility commences operations
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
and to **************** beginning two years after the first
Facility commences operations.
Each payment of Royalties shall be accompanied by a written
report, in a form to be mutually agreed, specifying the method of
calculation of the Royalties for the applicable month.
(c) It is understood and agreed that Franchisee shall
have the right to determine, in its sole discretion, the fees to
be charged by Franchisee to its clients in connection with the
performance of the SoftLight Procedures.
(d) The Royalties, fees and all other amounts payable
pursuant to this Agreement are to be paid by Franchisee without
deduction or withholding for or on account of any and all present
and future taxes and fees, all of which shall be paid by
Franchisee, provided, however, that Franchisee may withhold from
its payments hereunder Saudi Arabian income taxes payable by
ThermoLase. Franchisee shall obtain and provide to ThermoLase
any certificate of exemption or similar document required to
exempt any transaction under this Agreement from any such tax or
fee. In addition, if Franchisee withholds any taxes from
Royalties, fees or other amounts payable to ThermoLase hereunder,
then Franchisee shall provide to ThermoLase evidence of the
payment of such taxes to the relevant taxing authority.
(e) The Royalties, fees and all other amounts payable
pursuant to this Agreement shall be payable in United States
Dollars. To the extent that revenues generated at a Facility are
in a currency other than United States Dollars, such revenues
shall be converted into United States Dollars, for the purposes
of calculating Royalties payable to ThermoLase hereunder, at the
average exchange rate during the relevant calendar month as
published by the Saudi Arabian Monetary Agency (SAMA).
3.2 Financial Records. Franchisee shall keep and maintain,
and shall require its subliat each Facility and for a period of
not less than five (5) years after the expiration or earlier
termination of this Agreement, complete and accurate books and
records (collectively, the "Financial Records") covering all
financial and other information required in connection with the
determination of the Royalties payable hereunder. The Financial
Records shall be maintained in accordance with accounting
principles generally accepted in the Kingdom of Saudi Arabia,
consistently applied. Franchisee shall engage an internationally
recognized accounting firm to provide an annual audit and
accounting of the business to Franchisee and ThermoLase.
3.3 Audit Rights. At any time during normal business hours
and upon reasonable notice, ThermoLase, or an independent
certified public accountant designated by ThermoLase, shall have
the right, at ThermoLase's expense, to audit and inspect the
Financial Records at the Facilities, including those operated by
a sublicensee, for the purpose of verifying the accuracy thereof
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and of the payment of Royalties required to be made by Franchisee
under the terms of this Agreement. If, as a result of such audit
or inspection, ThermoLase shall determine that the Royalties paid
by Franchisee to ThermoLase with respect to the period covered by
such audit or inspection are less than the Royalties payable
hereunder by Franchisee to ThermoLase with respect to said
period, ThermoLase shall promptly furnish to Franchisee a copy of
such audit or inspection report (the "Deficiency Report") setting
forth the amount of the deficiency (the "Deficiency") and
showing, in reasonable detail, the basis upon which the
Deficiency was determined. If Franchisee disagrees with the
Deficiency Report, it shall have thirty (30) days within which to
initiate arbitration pursuant to Section 13.6 below. During such
30-day period the parties shall attempt to amicably resolve the
dispute. If Franchisee does not initiate arbitration, or the
arbitrators determine that the Deficiency is correct or that
Franchisee owes ThermoLase a different amount (the "Modified
Deficiency"), then Franchisee shall pay to ThermoLase, within
thirty (30) days following receipt of the Deficiency Report, or
the arbitrators' decision, as the case may be, a sum equal to the
Deficiency, or the Modified Deficiency, together with a late fee
thereon at the lesser of one and one-half percent (1-1/2%) per
month or the maximum rate allowed by applicable law, calculated
from the date when such amount was originally due through the
date of payment. If the Deficiency or Modified Deficiency is an
amount equal to or greater than five percent (5%) of the
Royalties payable by Franchisee to ThermoLase with respect to the
period covered by such audit or inspection, Franchisee shall
promptly reimburse ThermoLase upon demand for the reasonable cost
of such audit or inspection. ThermoLase shall exercise the same
degree of care to safeguard the confidentiality of the Financial
Records as ThermoLase would exercise in safeguarding its own
similar confidential information; provided, however, that
ThermoLase shall be entitled to use the Financial Records in any
proceeding to enforce its rights pursuant to this Agreement or as
may be otherwise required by law.
3.4 Client Consents. Franchisee agrees to obtain a signed
Informed Consent Release, in a form reasonably satisfactory to
ThermoLase, from each client on whom the SoftLight Procedures are
performed. Franchisee will establish and enforce procedures to
ensure that proper and complete confidential medical records are
maintained in the manner required by applicable law and
regulations with respect to all persons on whom the SoftLight
Procedures are performed.
4. USE OF SOFTLIGHT AND SPA THIRA SERVICE MARKS
4.1 Promotional Activities. Franchisee agrees to use its
best efforts, to the extent permitted by applicable law and
regulations, to promote the performance of the SoftLight
Procedures at the Facilities. Franchisee shall have the right to
use ThermoLase's SoftLight(SM) and Spa Thira(SM) service marks
(the "SoftLight Marks") in connection with Franchisee's business
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and promotional activities provided it obtains ThermoLase's prior
written approval and acknowledges ThermoLase's rights in and to
the SoftLight Marks by (i) referring to the same at all times as
service marks of ThermoLase Corporation in any signage,
advertising, press release, article, publication or other
promotional material, document or broadcast referencing the
SoftLight Marks and by (ii) including the proprietary mark "(SM)"
after SoftLight and Spa Thira each time it is used by Franchisee
in any printed or electronic media. Franchisee shall forward to
ThermoLase a copy of the proposed promotional material and if
ThermoLase does not approve or disapprove of same within 10
business days after receipt thereof, such material shall be
deemed approved. Franchisee may also use the name "ThermoLase"
in connection with the business but only with the prior written
approval of ThermoLase. In any and all descriptions of or
references to the SoftLight Procedures made by or on behalf of
Franchisee, Franchisee shall use no descriptive name or mark
other than SoftLight(SM), Spa Thira(SM), and "ThermoLase" unless
required by the laws of Saudi Arabia.
4.2 Ownership of SoftLight Marks. Franchisee acknowledges
that ThermoLase (i) has the exclusive right, title and interest
in and to the SoftLight Marks and (ii) shall have the exclusive
right to apply for registration, and to extend existing
registrations, of the SoftLight Marks for use in connection with
the SoftLight Procedures, the Facilities or otherwise. Franchisee
will not register, or cause to be registered, the SoftLight
Marks, "ThermoLase" or any trademark, trade name or service mark
confusingly similar thereto, with any federal, national,
supra-national, state, municipal or other governmental authority
of any jurisdiction, whether within or outside the United States
or Saudi Arabia. Franchisee will not use or associate the
SoftLight Marks or "ThermoLase" with any other trademark, trade
name or service mark in any advertising or publicity utilized by
Franchisee in connection with the SoftLight Procedures, the
Facilities or otherwise in such manner as to be misleading with
respect to the ownership of the SoftLight Marks. Franchisee
further agrees not to create a composite trademark, trade name or
service mark with the SoftLight Marks or "ThermoLase", except in
each instance with ThermoLase's prior written consent which
ThermoLase acting in its sole discretion may withhold.
Franchisee agrees that every use of the SoftLight Marks and
"ThermoLase" shall inure to the ultimate benefit of ThermoLase.
Franchisee shall not remove or obscure or alter in any manner the
SoftLight Marks or "ThermoLase", or any notice thereof, which may
be displayed on the SoftLight Lasers, the SoftLight Lotion, a
Facility, the User Manual or any other documentation provided by
ThermoLase hereunder.
4.3 Quality Controls and Assurance.
(a) Franchisee agrees that any services provided by
Franchisee based on performance of the SoftLight Procedures
pursuant to this Agreement shall be of a quality at least equal
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to the quality of similar services provided by ThermoLase or its
other franchisees at facilities at which ThermoLase or its other
franchisees provide such services.
(b) In addition, in order to comply with ThermoLase's
quality control standards, Franchisee shall: (i) use the
SoftLight Marks in compliance with all relevant laws and
regulations; and (ii) accord ThermoLase the right to inspect the
Facilities during normal business hours, without prior advance
notice, taking into account local regulations, customs, and
traditions, in order to confirm that Franchisee's use of the
SoftLight Marks is in compliance with this Agreement.
4.4 Translation of Documentation. Franchisee shall
translate, at its own expense, the User Manual, all technical
manuals, advertising and marketing information and other
documentation provided by ThermoLase into the Arabic language and
provide ThermoLase with advance copies of all such materials for
approval; provided, however, that Franchisee shall take full
responsibility for any mistakes or inaccuracies in such
translations. ThermoLase shall have 10 business days after
receipt of such materials to disapprove same otherwise such
material shall be deemed approved. ThermoLase shall have a
non-exclusive, perpetual, royalty- free, worldwide right and
license to use such translations, or any part thereof, for
general corporate purposes. If a franchisee from another Arabic
speaking country wishes to use said translations, or any part
thereof, then ThermoLase shall instruct such franchisee to
negotiate a license with Franchisee.
5. TRAINING.
5.1 Training in the United States. Franchisee agrees that
all managers, technicians, and repairmen of Franchisee who will
be involved in the performance of the SoftLight Procedures at a
Facility will complete the training program offered by ThermoLase
in the United States or at a mutually agreeable location prior to
performing the SoftLight Procedures at a Facility. Such training
shall be provided by ThermoLase at no cost to Franchisee,
provided, however, that Franchisee shall be required to pay for
all related travel, room and board expenses associated with its
personnel attending the training course.
5.2 Training On-Site. At the request of Franchisee,
ThermoLase shall provide reasonable training services to
Franchisee on-site in Saudi Arabia at a mutually agreeable time
at no additional cost to Franchisee, provided, however, that
Franchisee shall pay or reimburse ThermoLase for all related
travel, room and board expenses incurred by ThermoLase personnel.
5.3 User Manual. ThermoLase agrees to provide to
Franchisee, at no additional charge, one copy of the User Manual
for each Facility operated by Franchisee. Franchisee
acknowledges that the User Manual is copyrighted material of
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
ThermoLase and cannot be reproduced in whole or in part, except
to translate it into Arabic in accordance with Section 4.4 above.
ThermoLase will consider requests for additional copies of the
User Manual. For purposes of this Agreement, the term User
Manual shall mean the manual provided by ThermoLase to Franchisee
at ThermoLase's training course, setting forth, among other
things, the protocols for the SoftLight Procedures, procedures to
be followed with respect to the use and operation of the
SoftLight Lasers, guidelines for personnel training, operation
and maintenance procedures for a Facility, and procedures for
establishing and maintaining a common "look and feel", taking
into consideration local customs, traditions, and tastes, between
each Facility and other locations at which ThermoLase permits the
operation of SoftLight Lasers under the name Spa Thira(SM), as
such User Manual may be amended by ThermoLase from time to time.
ThermoLase shall provide to Franchisee instructional pamphlets
for each employee of Franchisee to use as a reference when
performing the SoftLight Procedures.
6. TECHNICAL ASSISTANCE. During the first year of the term of
this Agreement, ThermoLase shall provide to Franchisee, at no
additional cost to Franchisee, up to an aggregate of *******
***** of support and assistance in connection with the
establishment and operation of the Facilities by Franchisee.
During each year thereafter, ThermoLase shall provide to
Franchisee, at no additional cost to Franchisee, up to *******
***** of support and assistance in connection with the
establishment and operation of the Facilities. Any support and
assistance in excess of the amounts specified above shall be
provided by ThermoLase on terms mutually agreeable to ThermoLase
and Franchisee.
7. EXCLUSIVITY. Franchisee agrees that, during the term of
this Agreement, Franchisee shall not offer or perform, either
directly or indirectly, any hair removal or skin rejuvenation
process or offer any similar service other than the SoftLight
Procedures at the Facilities.
8. CONFIDENTIALITY
8.1 Protection. Franchisee acknowledges and agrees that
ThermoLase has disclosed, and shall continue to disclose, to
Franchisee in connection with the use of the Licensed Technology
and performance of this Agreement certain confidential
information of ThermoLase regarding its business operations,
trade secrets, know-how, customer information, pricing, marketing
data and other information of a confidential nature relating to
the Licensed Technology and the SoftLight Procedures, including,
without limitation the terms of this Agreement and the User
Manual (collectively, the "ThermoLase Confidential Information").
The ThermoLase Confidential Information shall remain the sole and
exclusive property of ThermoLase and Franchisee shall have no
interest or rights with respect thereto, except to the extent
expressly provided in this Agreement. Franchisee agrees to
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maintain the confidentiality of the ThermoLase Confidential
Information. Notwithstanding the foregoing provisions of this
Section 8.1, Franchisee shall have the right to disclose any
information that it can demonstrate by clear and convincing
evidence (i) was rightfully possessed by Franchisee before it was
received from ThermoLase, (ii) is or becomes public otherwise
than through any act or default of Franchisee, or (iii) is
required by law, court order or stock exchange rule to be
disclosed, provided Franchisee notifies ThermoLase in writing
prior to making any such disclosure so as to afford to ThermoLase
a reasonable opportunity to object or seek an appropriate
protective order with respect to such disclosure.
8.2 Equitable Relief. Due to the fact that the
unauthorized use, transfer, dissemination or disclosure of the
ThermoLase Confidential Information would cause irreparable harm
to ThermoLase, if Franchisee breaches the provisions of this
Article 8, ThermoLase shall be entitled, in addition to any other
rights and remedies available to ThermoLase, to obtain equitable
relief, including without limitation injunctive relief. If
ThermoLase receives confidential information from Franchisee,
ThermoLase shall maintain such information in confidence. If
ThermoLase improperly discloses such information, then Franchisee
shall be entitled, in addition to any other rights and remedies
available to Franchisee, to obtain equitable relief, including
without limitation injunctive relief.
9. INSURANCE.
Franchisee shall operate the business in strict compliance
with all applicable requirements of the Saudi Arabia Ministry of
Health. Franchisee shall carry such insurance for the risks of
the business as is customary in Saudi Arabia and commercially
available. Franchisee shall consult with ThermoLase regarding the
appropriate extent of insurance coverage.
10. INDEMNIFICATION.
10.1 By Franchisee. Subject to the provisions of Article 11
below, Franchisee shall indemnify, defend and hold harmless
ThermoLase, its parents, subsidiaries and affiliates, and their
respective officers, directors, shareholders and employees, from
and against any and all actions, causes of action, suits, claims,
or demands by, or damages, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees and
disbursements and court costs) to, a third party to the extent
arising from or in connection with (i) the negligence (including
without limitation professional malpractice) or willful
misconduct of Franchisee, its agents, employees, representatives
or contractors; (ii) failure of Franchisee to perform the
SoftLight Procedures in accordance with the protocols set forth
in the User Manual; (iii) failure to operate and maintain each
Facility in accordance with the User Manual; or (iv) any
employee, agent or representative of Franchisee under any
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applicable termination, labor, social security or other similar
laws or regulations.
10.2 By ThermoLase. Subject to the provisions of Article 11
below, ThermoLase shall indemnify, defend and hold harmless
Franchisee, its parents, subsidiaries and affiliates, and their
respective officers, directors, shareholders and employees, from
and against any and all actions, causes of action, suits, claims,
or demands by, or damages, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees and
disbursements and court costs) to, a third party to the extent
arising from or in connection with the negligence or willful
misconduct of ThermoLase, its agents, employees, representatives
or contractors.
10.3 Procedures. The indemnified party shall provide
written notice within 7 days of any third party claim to the
indemnifying party. The indemnifying party shall have the right
to assume exclusive control of the defense of such claim or, at
the option of the indemnifying party, to settle the same provided
that no settlement that imposes any obligation on the indemnified
party or affects the indemnified party rights under this
Agreement may be made without the prior written consent of the
indemnified party. The indemnified party agrees to reasonably
cooperate with the indemnifying party in connection with the
performance of the indemnifying party's obligations under this
Article. In the event that the indemnifying party fails to
perform its defense obligations hereunder, the indemnified party
shall have the right to do so at the indemnifying party's
expense.
10.4 Enforcement of Intellectual Property Rights.
Franchisee shall promptly advise ThermoLase upon becoming aware
of any infringement or threatened infringement of any of the
Licensed Technology or the SoftLight Marks or any claim that the
Licensed Technology or the SoftLight Marks infringe the
intellectual property rights of another party. ThermoLase, in
its sole discretion, shall determine the appropriate action, if
any, to be taken with respect to any such infringement and shall
have the right to exclusive control of any enforcement suit or
proceeding. Unless otherwise agreed with Franchisee, ThermoLase
shall pay all costs incurred in such suit or proceeding and shall
be entitled to all damages or other amounts recovered by reason
of such suit or proceeding. Franchisee shall cooperate with
ThermoLase with respect to any enforcement, including, without
limitation, joining as a party to any litigation, if required.
11. LIMITATION OF LIABILITY.
11.1 Consequential Damages. Notwithstanding anything to the
contrary contained in this Agreement, including without
limitation the provisions of Article 10 above, neither party
hereto shall be liable to the other for any indirect, special,
consequential, incidental or punitive damages (including without
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
limitation damages for loss of use of facilities or equipment,
loss of revenue, loss of profits or loss of goodwill) regardless
of (i) the negligence (either sole or concurrent) of either party
and (ii) whether either party has been informed of the
possibility of such damages.
11.2 No Warranty. THERMOLASE PROVIDES HEREIN NO WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF NON-
INFRINGEMENT IN SAUDI ARABIA, OR AS TO THE RESULTS THAT MAY BE
ATTAINED BY THE PERFORMANCE, PRACTICE OR OPERATION OF THE
SOFTLIGHT PROCEDURES, INCLUDING WITHOUT LIMITATION THE SOFTLIGHT
LASERS.
12. TERM AND TERMINATION; RESTRICTIVE COVENANT.
12.1 Term. The initial term of this Agreement ("Term")
shall commence on the Effective Date and continue for five (5)
years from the date on which the first Facility opens to the
public, unless sooner terminated as set forth herein, and shall
be automatically renewed for successive five (5) year terms so
long as Franchisee is in full compliance with all terms and
conditions of this Agreement.
12.2 Termination.
(a) This Agreement may be terminated by ThermoLase:
(i) in the event of a breach by Franchisee of any
material obligation hereunder (e.g., default in payment,
unauthorized disclosure of ThermoLase Confidential Information,
failure to perform SoftLight Procedures in accordance with User
Manual) that is not cured within forty-five (45) days following
written notice thereof; or
(ii) at any time after one year from the date on
which the first Facility opens to the public if during any
semiannual period the total revenue to ThermoLase from Franchisee
does not equal or exceed *********** times the number of
SoftLight Lasers which are in operable condition during such
period; or
(iii) in the event of the occurrence of a
change in control of Franchisee which has, or in the reasonable
opinion of ThermoLase could have, a material adverse effect on
the business, prospects or operations of Franchisee and the
failure of Franchisee to promptly pursue (within forty-five (45)
days after receiving written notice thereof from ThermoLase) a
remedy designed to cure (in the reasonable judgment of
ThermoLase) ThermoLase's objections to such change; or
(iv) in the event Franchisee contests the validity
of the Licensed Technology or the ownership thereof by
ThermoLase; or
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(v) in the event of the termination of the
Equipment Lease Agreement between ThermoLase and Franchisee.
(b) This Agreement may be terminated without cause by
Franchisee upon sixty (60) days written notice to ThermoLase.
12.3 Termination Upon Occurrence of Certain Events.
ThermoLase may terminate this Agreement, effective immediately
and without the requirement of any notice if Franchisee: (i)
files for or consents to a general assignment for the benefit of
creditors, (ii) files a petition in bankruptcy or liquidation, or
is adjudicated bankrupt or insolvent or takes similar actions
under the laws of any jurisdiction for the general benefit of
creditors of an insolvent or financially troubled debtor, or
(iii) is the subject of an involuntary bankruptcy or insolvency
proceeding which is not fully dismissed within forty-five (45)
days.
12.4 Additional Rights of ThermoLase. This Agreement may be
suspended by ThermoLase, effective immediately upon written
notice to Franchisee, in the event that (i) the marketing
clearance granted to ThermoLase by the U.S. Food and Drug
Administration (the "FDA") or any Saudi Arabian regulatory
authority with respect to the SoftLight Procedures is revoked,
rescinded or suspended for any reason, or any adverse regulatory
action is undertaken by the FDA or any Saudi Arabian regulatory
authority with respect to the validity or scope of such marketing
clearance, or (ii) any claim is asserted against ThermoLase
alleging that the Licensed Technology, or any portion thereof, or
the SoftLight Marks are being used by Franchisee in a manner
which infringes a patent or other intellectual property rights
owned by a third party and ThermoLase and Franchisee are unable
to agree as to how to resolve such claim after consulting with
each other for a period of not less than ten (10) Business Days.
If a favorable outcome is achieved with respect to the matter
under which this Agreement was suspended, then the terms and
conditions of this Agreement shall thereafter be resumed.
12.5 Effect of Termination. Upon expiration or earlier
termination of this Agreement for any reason, all rights and
obligations of the parties under this Agreement shall cease,
except that Franchisee shall be obligated to pay to ThermoLase
all outstanding fees and Royalties that are payable with respect
to the period prior to the effective date of such expiration or
earlier termination. Upon such expiration or earlier
termination, Franchisee shall cease all use of the SoftLight
Marks and the Licensed Technology, and ThermoLase shall remove
the SoftLight Lasers, SoftLight Lotion, all User Manuals and any
other materials in Franchisee's possession that are related to
the Licensed Technology or the SoftLight Marks within thirty (30)
days. Franchisee shall provide free and ready access to
ThermoLase to each Facility, at ThermoLase's convenience, for the
repossession of the SoftLight Lasers, the SoftLight Lotion, the
User Manuals and any other materials in Franchisee's possession
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that are related to the Licensed Technology or the SoftLight
Marks. The SoftLight Lasers shall be repossessed by ThermoLase
free of all liens and encumbrances and in good working order and
repair, reasonable wear and tear only excepted. Upon the
expiration or earlier termination of this Agreement, Franchisee
will be deemed to have assigned, transferred or conveyed to
ThermoLase any and all rights in or to the SoftLight Marks that
may have been obtained by Franchisee, and Franchisee will,
without any consideration other than the mutual covenants and
agreements of this Agreement, execute and deliver such
instruments and other documents as may be requested by ThermoLase
to accomplish such assignment, transfer and conveyance, or to
preserve and secure the rights of ThermoLase (or its parents,
subsidiaries or affiliates) in and to the SoftLight Marks. Upon
the expiration or earlier termination of this Agreement,
Franchisee shall immediately remove all signs and other markings
from each Facility which indicate any connection to the SoftLight
Procedures, SoftLight Lasers, the SoftLight Marks or ThermoLase.
12.6 Restrictive Covenant. Franchisee agrees that, in the
event that this Agreement expires or is terminated pursuant to
Section 12.2(a)(iv) or 12.(2)(b), Franchisee shall not offer or
perform, directly or indirectly, commercial hair removal services
or skin rejuvenation service involving the use of a laser, or any
other light source, for a period of twelve (12) months following
the effective date of expiration or termination.
12.7 No Rights to Compensation Upon Expiration or
Termination. In the event of a termination pursuant to any of
the provisions of this Agreement or upon expiration of this
Agreement, ThermoLase shall not have any obligation to
Franchisee, or to any employee of Franchisee, for compensation or
for damages of any kind, whether on account of the loss by
Franchisee or such employee of present or prospective sales,
investments, compensation or goodwill. Similarly, Franchisee
shall not have any obligation to ThermoLase or any employee of
ThermoLase for compensation or for damages of any kind by reason
of the termination or expiration of this Agreement, except for
any amounts that may be due and outstanding under this Agreement
as of the date of termination.
12.8 Survival. Notwithstanding anything to the contrary
contained herein, the provisions of Section 2.2, 2.3, 4.2 and
12.5 through 12.8 and Articles 3, 8, 9, 10, 11 and 13 of this
Agreement shall survive any expiration or earlier termination of
this Agreement according to their respective terms.
13. MISCELLANEOUS
13.1 Relationship of the Parties. The parties acknowledge
that no relationship of partnership, joint venture or employment
is created by this Agreement and that neither party shall have
any right, power or authority to act for or to bind the other
party in any way except to the extent expressly provided in this
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Agreement. Without in any way limiting the foregoing, Franchisee
shall be solely responsible at all times during the term of this
Agreement for all aspects of the professional services delivered
at each Facility and for the selection, training, professional
direction, supervision and employment of all persons, who are
licensed, registered or certified by the jurisdiction in which
each Facility is located to perform such services (collectively,
the "Professional Staff"). No provision of this Agreement is
intended, nor shall it be construed, to permit ThermoLase to
affect or influence the professional judgment of any member of
the Professional Staff involved in the performance of the
SoftLight Procedures at a Facility.
13.2 Franchisee Operations. Franchisee shall comply with
all national, supra- national, provincial and local laws, rules,
orders, ordinances and regulations of any governmental or other
public authority applicable to the operation of each Facility,
including, without limitation, the performance of the SoftLight
Procedures.
13.3 Representation and Warranties. Franchisee represents
and warrants that all of the information relating to Franchisee
set forth on Schedule A attached hereto is true, complete and
correct. ThermoLase represents and warrants that all of the
information relating to ThermoLase set forth on Schedule B
attached hereto is true, correct and complete.
13.4 Notices. Whenever by the terms of this Agreement,
notice, demand or other communication shall or may be given to
either party, the same shall be in writing and, addressed if to
Franchisee at the address set forth at the beginning of this
Agreement and if to ThermoLase at ThermoLase Corporation, 10455
Pacific Center Court, San Diego, CA 92121, Attn: President or to
such other address or addresses as shall from time to time be
designated by written notice by either party to the other as
herein provided. All notices shall be sent by registered or
certified air mail, postage prepaid and return receipt requested,
or by Federal Express or other comparable courier providing proof
of delivery, and shall be deemed duly given and received (i) if
mailed, on the tenth (10th) Business Day following the mailing
thereof, or (ii) if sent by courier, the date of its receipt (or,
if such day is not a Business Day, the next succeeding Business
Day).
13.5 Governing Laws. This Agreement shall be governed by
and construed in accordance with the laws of England, excluding:
(i) its conflict of laws principles; (ii) the United Nations
Convention on Contracts for the International Sale of Goods; and
(iii) the 1974 Convention on the Limitation Period in the
International Sale of Goods (the "1974 Convention") and the
Protocol amending the 1974 Convention, done at Vienna April 11,
1980. Notwithstanding the application of the laws of England,
Franchisee agrees that ThermoLase shall have no obligation to
provide Franchisee with any information or disclosures relating
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to the Licensed Technology, the SoftLight Procedures or the
operation of a Spa Thira except as set forth herein and in the
User Manual. In particular, Franchisee waives, and releases
ThermoLase from, any obligation to comply with the Disclosure
Requirements and Prohibitions concerning Franchising and Business
Opportunity Ventures of the United States Federal Trade
Commission or any similar provisions existing under the laws of
England.
13.6 Arbitration.
(a) Any dispute, controversy or claim arising out of
or relating to this Agreement or to a breach hereof, including
its interpretation, performance or termination, shall be finally
resolved by arbitration. The arbitration shall be conducted by
three (3) arbitrators, one to be appointed by ThermoLase, one to
be appointed by Franchisee and a third being nominated by the two
arbitrators so selected or, if they cannot agree on a third
arbitrator, by the Presiding Judge of the London Court of
International Arbitration ("LCIA").
(b) The arbitration shall be conducted in English and
in accordance with the commercial arbitration rules of the LCIA,
which shall administer the arbitration and act as appointing
authority. The arbitration, including the rendering of the
award, shall take place in London, England, and shall be the
exclusive forum for resolving such dispute, controversy or claim.
For the purposes of this arbitration, the provisions of this
Agreement and all rights and obligations thereunder shall be
governed and construed in accordance with the laws of England,
excluding: (i) its conflict of laws principles; (ii) the United
Nations Convention on Contracts for the International Sale of
Goods; and (iii) the 1974 Convention on the Limitation Period in
the International Sale of Goods (the "1974 Convention") and the
Protocol amending the 1974 Convention, done at Vienna April 11,
1980. The decision of the arbitrators shall be binding upon the
parties hereto, and the expense of the arbitration (including
without limitation the award of attorneys' fees to the prevailing
party) shall be paid as the arbitrators determine. The decision
of the arbitrators shall be executory, and judgment thereon may
be entered by any court of competent jurisdiction.
13.7 Entire Agreement. This Agreement constitutes the sole
and entire agreement between ThermoLase and Franchisee with
respect to the subject matter hereof, supersedes all prior
agreements between the parties either written or oral and shall
not be supplemented, amended, varied or modified in any manner
except by an instrument in writing signed by duly authorized
representatives of both parties.
13.8 Waiver. No delay or omission on the part of either
party to this Agreement in requiring performance by the other
party or in exercising any right hereunder shall operate as a
waiver of any provision hereof or of any right hereunder, and the
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waiver, omission or delay in requiring performance or exercising
any right hereunder on any one occasion shall not be construed as
a bar to or waiver of such performance or right on any future
occasion.
13.9 Remedies Cumulative. Any and all rights and remedies
which either party may have under this Agreement, at law or in
equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted
by law.
13.10 Headings. Article and Section headings and the
organization of this Agreement are for descriptive purposes only
and shall not control or alter the meaning of this Agreement.
13.11 Costs. Except as otherwise expressly provided
herein, each party shall bear its own costs and expenses in
performing its obligations under this Agreement. In the event
that one party to this Agreement commences an arbitration or
other action against the other party to this Agreement, the
prevailing party shall be entitled to recover its costs resulting
from such arbitration or action from the non-prevailing party to
the extent so provided in the arbitration award or judgment.
13.12 Force Majeure. Neither party shall be deemed to
be in default under this Agreement if prevented from performing
any obligation hereunder (other than a payment obligation which
arose prior to the event of force majeure) for any reason beyond
its reasonable control, including without limitation Acts of God,
war, civil commotion, fire, flood or casualty, labor
difficulties, shortages of or inability to obtain labor,
materials or equipment, governmental regulations or restrictions,
or unusually severe weather. In any such case, the parties agree
to negotiate in good faith with the goal of preserving this
Agreement and the respective rights and obligations of the
parties hereunder, to the extent reasonably practicable. It is
agreed that financial inability shall not be a matter beyond a
party's reasonable control.
13.13 Successors and Assigns. This Agreement is
personal to Franchisee and has been entered into in reliance upon
the competence and skill of Franchisee. Accordingly, Franchisee
may not assign this Agreement, except to an entity controlled by
or under common control with Franchisee, without the prior
written consent of ThermoLase, which consent may be withheld in
ThermoLase's sole and absolute discretion. ThermoLase may assign
this Agreement upon written notice to Franchisee. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted
assigns.
13.14 Authority. The individuals executing this
Agreement hereby represent and warrant that they are empowered
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and duly authorized to so execute this Agreement on behalf of the
parties they represent.
13.15 Severability. If any provision of this Agreement
is declared invalid or unenforceable by a court or other tribunal
having competent jurisdiction, it is mutually agreed that this
Agreement shall endure except for the part declared invalid or
unenforceable by order of such court or tribunal. The parties
shall consult and use their best efforts to agree upon a valid
and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the
intent of this Agreement.
13.16 Definition of Business Day. For the purposes of
this Agreement, a "Business Day" means a day on which banks are
open for business in San Diego, California and Riyadh, Saudi
Arabia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the date first set forth above.
THERMOLASE CORPORATION MEDICAL SUPPLY & SERVICE CO.
By: John C. Hansen By: Ibrahim El Khereiji
---------------------- -------------------------
Name: John C. Hansen Name:
Title: President and CEO Title:
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Schedule A
Representations and Warranties of Franchisee
Franchisee represents and warrants to ThermoLase as follows:
(i) Franchisee is a Saudi Arabian company duly organized,
validly existing and in good standing under the laws of Saudi
Arabia, with requisite powers adequate for executing and
delivering, and performing its obligations under, this Agreement;
(ii) the execution, delivery and performance of this
Agreement by Franchisee have been duly authorized by all
necessary action on the part of Franchisee; and
(iii) the execution, delivery and performance of this
Agreement by Franchisee do not and will not conflict with or
contravene any provision of the charter documents of Franchisee
or, in any material respect, any agreement, document, instrument,
indenture or other obligation of Franchisee.
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Schedule B
Representations and Warranties of ThermoLase
ThermoLase represents and warrants to Franchisee as follows:
(i) ThermoLase is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with corporate powers adequate for executing and
delivering, and performing its obligations under this Agreement;
(ii) the execution, delivery and performance of this
Agreement by ThermoLase have been duly authorized by all
necessary corporate action on the part of ThermoLase;
(iii) the execution, delivery and performance of this
Agreement by ThermoLase do not and will not conflict with or
contravene any provision of the charter documents or by-laws of
ThermoLase or, in any material respect, any agreement, document,
instrument, indenture or other obligation of ThermoLase;
(iv) ThermoLase is not in default (nor has there transpired
an event which with notice or lapse of time or both would become
a default), under any agreement, document, instrument, indenture
or other obligation of ThermoLase pertaining to the Licensed
Technology or The SoftLight Marks; and
(v) as of the date hereof, ThermoLase owns, or has the
right to license to the Franchisee, the Licensed Technology, free
and clear of all liens, pledges or other encumbrances.
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
EXHIBIT 10.28
-------------
Equipment Lease Agreement
for SoftLight (SM) Lasers
Lessee Information:
Name: Medical Supply & Service Co. (MEDIC) ("Lessee")
Address: P.O. Box 7795
Jeddah, 21472
Saudi Arabia
Telephone No.: 966-2-669-5961
Fax No. 966-2-669-4525
Effective Date:November 8, 1996
BACKGROUND
A. ThermoLase Corporation ("ThermoLase") has developed
specially-designed lasers (the "SoftLight Lasers") for use in the
removal of hair and the rejuvenation of skin (the "SoftLight
Procedures").
B. ThermoLase is prepared to lease SoftLight Lasers to Lessee
for use in Saudi Arabia on the terms and conditions set forth
below.
AGREEMENT
ThermoLase and Lessee agree as follows:
1. LEASE; SUBLEASE
1.1 Equipment Leased. ThermoLase agrees to lease to Lessee
up to fifteen (15) SoftLight Lasers capable of performing hair
removal procedures and up to fifteen (15) SoftLight Lasers
capable of performing skin rejuvenation procedures, if different.
Lessee acknowledges that ownership of and title to such
SoftLight Lasers shall remain with ThermoLase, and Lessee shall
take no action adverse to ThermoLase's title to and interest in
such SoftLight Lasers. Lessee shall not directly or indirectly
create or suffer to exist any mortgage, security interest,
attachment, writ or other lien or encumbrance on the SoftLight
Lasers, and will promptly, at its own expense, discharge any such
lien or encumbrance that may arise. After Lessee has
successfully completed ThermoLase's training course relating to
the performance of the SoftLight Procedures, ThermoLase shall use
commercially reasonable efforts to complete shipment of the
SoftLight Lasers to a facility established by Lessee and approved
by ThermoLase (a "Facility") within thirty (30) days after
Lessee's request for such shipment, provided that Lessee has
completed all of the modifications necessary to the Facility to
prepare the Facility in accordance with specifications approved
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
by ThermoLase. Lessee shall pay all costs and expenses associated
with the shipment of such SoftLight Lasers from ThermoLase's
facility to the Facility, including without limitation freight,
insurance, customs duties and related charges and taxes,
provided, however, that ThermoLase shall pay or reimburse Lessee,
within thirty (30) days, for any import duties or taxes imposed
by Saudi Arabia up to a maximum of *****************************
************************************. Lessee agrees not to
remove, obscure or otherwise deface any labeling present on any
SoftLight Laser at the time of delivery thereof to Lessee.
1.2 Subleases. Lessee may enter into subleases for the
SoftLight Lasers to the extent reasonably necessary to establish
and operate Facilities in Saudi Arabia. The terms and conditions
of each sublease which relate to the ownership and operation of
the SoftLight Lasers shall be subject to the approval of
ThermoLase, which shall not be unreasonably withheld. Lessee
shall have no obligation to disclose to ThermoLase the economic
terms and conditions of any sublease, except to the extent
necessary for calculating the rent payable to ThermoLase pursuant
to Article 7 hereof. For purposes of calculating the rent
payable to ThermoLase pursuant to Article 7 hereof, reference
shall be made to the aggregate gross revenues of Lessee and all
sublessees.
2. INSTALLATION
2.1 Initial Installation. As soon as reasonably
practicable after delivery of the SoftLight Lasers, ThermoLase
shall install, or cause to be installed, at no additional charge
to Lessee, the SoftLight Lasers at the Facility; provided,
however, that ThermoLase shall have no obligation to install the
SoftLight Lasers unless the installation site (i) meets the
specifications approved by ThermoLase, (ii) remains accessible to
ThermoLase throughout the period of installation and (iii) is
otherwise safe and appropriate for installation of the SoftLight
Lasers. ThermoLase, or its designated agent or subcontractor,
shall perform all unpacking of the SoftLight Lasers at the
Facility. Upon installation thereof, ThermoLase, or its
designated agent or subcontractor, shall perform ThermoLase's
standard acceptance test procedures to confirm that the SoftLight
Lasers operate in substantial conformance with the applicable
specifications.
2.2 Unauthorized Installation, Reinstallation or
Relocation. Any installation or reinstallation of any SoftLight
Laser performed by any person other than ThermoLase, or its
designated agent or subcontractor, without the prior written
consent of ThermoLase, shall be a breach of this Agreement by
Lessee. Lessee shall not relocate the SoftLight Lasers installed
in the Facility without the prior written consent of ThermoLase.
Any such relocation consented to by ThermoLase shall be performed
by ThermoLase, or its designated agent or subcontractor.
ThermoLase hereby disclaims all liability for any and all claims,
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losses, costs and damages to the extent arising from or in
connection with the unauthorized installation, reinstallation or
relocation of any SoftLight Laser.
3. SERVICE AND MAINTENANCE. ThermoLase agrees, provided
it is promptly notified upon the discovery of any defect, to
repair or replace, at ThermoLase's option, a defective SoftLight
Laser or any component thereof, so as to cause the same to
operate in substantial conformance with the protocols set forth
in the SoftLight User's Manual (the "User Manual") when subjected
to normal, proper and intended usage by properly trained
personnel, all in accordance with the User Manual. Such repair
or replacements shall be at ThermoLase's expense, except that
Lessee shall pay all costs and expenses associated with the
shipment of such SoftLight Lasers, including without limitation
freight, insurance, customs duties and related charges and taxes,
provided, however, that ThermoLase shall pay or reimburse Lessee,
within thirty (30) days, for any import duties or taxes imposed
by Saudi Arabia up to a maximum of *****************************
************************************. Lessee agrees to make
SoftLight Lasers installed in the Facility available to
ThermoLase for inspection at any reasonable time and to cooperate
reasonably with ThermoLase in the performance of its obligations
hereunder. Because of the importance of safe and effective
operation of the SoftLight Lasers in compliance with applicable
laws and regulations, it is understood and agreed that Lessee
shall not undertake to provide, or contract with any party other
than ThermoLase (or ThermoLase's designated agent or
subcontractor) to provide, maintenance or other services of any
nature with respect to any SoftLight Laser without the prior
written consent of ThermoLase. ThermoLase shall have the right
to subcontract its obligations under this Section 3. ThermoLase
shall contract its in-country maintenance to Medic during the
term of this agreementThermoLase shall not be responsible for
costs of service or maintenance to the SoftLight Lasers that is
caused by or related to (i) misuse, fault or negligence of or by
Lessee, or (ii) use of the SoftLight Lasers in an operating
environment inconsistent with the User Manual or in combination
with equipment, software or other products not supplied by
ThermoLase. ThermoLase shall furnish off-site telephone and fax
support, in the form of consultations, assistance and advice on
the use and maintenance of SoftLight Lasers, within 2 Business
Days after receipt of Lessee's request therefor. In the event
that the reported defect is not corrected within an additional 5
Business Days after the initiation of such off-site telephone
support, ThermoLase shall repair or replace, at ThermoLase's
option, such defective SoftLight Laser as soon as reasonably
possible. Replacement parts may be new or refurbished, at the
election of ThermoLase. All replaced parts shall be and remain
the property of ThermoLase. If, at any time after arrival at the
Facility, ThermoLase's service representatives are unable to
proceed with the performance of service or maintenance requested
hereunder due to delays caused by Lessee, its agents, employees,
representatives or contractors, Lessee shall reimburse ThermoLase
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
upon demand for such delays at ThermoLase's then prevailing
rates. ThermoLase or its designee will conduct training for
franchisee's employee(s) in the U.S. at no cost to franchisee.
Franchisee shall be responsible for all travel, room and board
expenses incurred by its employee(s) during the training.
4. SPARE PARTS AND REPLACEMENT LASERS.
4.1 Spare Parts. ThermoLase shall provide to Lessee, at no
additional cost to Lessee, an initial supply of spare parts for
the SoftLight Lasers and associated equipment. During the term of
this Agreement, ThermoLase shall provide to Lessee, at no
additional cost to Lessee, reasonable additional quantities of
spare parts. In each case, Lessee shall pay all costs and
expenses associated with the shipment of the spare parts,
including without limitation freight, insurance, customs duties
and related charges and taxes, provided, however, that ThermoLase
shall pay or reimburse Lessee, within thirty (30) days, for any
import duties or taxes imposed by Saudi Arabia up to a maximum of
*************************************************************.
4.2 Replacement SoftLight Lasers. ThermoLase shall have
the right to substitute modified or replacement versions of the
SoftLight Laser for any SoftLight Laser then installed in a
Facility. ThermoLase shall substitute improved versions of the
SoftLight Laser within a reasonable period of time after such
improved versions are placed in general commercial service by
ThermoLase. In such event, ThermoLase shall arrange for the
delivery and installation of a new SoftLight Laser at, and
removal of the replaced SoftLight Laser from, the Facility at
ThermoLase's expense, except that Lessee shall pay all costs and
expenses associated with the shipment of such SoftLight Lasers,
including without limitation freight, insurance, customs duties
and related charges and taxes, provided, however, that ThermoLase
shall pay or reimburse Lessee, within thirty (30) days, for any
import duties or taxes imposed by Saudi Arabia up to a maximum of
************************************************************
*****.
5. SUPPLIES
5.1 SoftLight Lotion. Throughout the term of this
Agreement, ThermoLase agrees to supply to Lessee the lotion used
in the SoftLight Procedures (the "SoftLight Lotion") in such
amounts as may be reasonably requested by Lessee (based on
Lessee's use of the SoftLight Lasers as reported to ThermoLase)
for use in connection with the performance of the SoftLight
Procedures under the terms of this Agreement. ThermoLase shall
endeavor to obtain the approval of the SoftLight Lotion by the
Saudi Arabian Standards Organization. ThermoLase shall use
commercially reasonable efforts to ship SoftLight Lotion to
Lessee within fifteen (15) Business Days after receipt of
Lessee's written request therefor. Title to the SoftLight Lotion
shall pass to Lessee upon delivery of possession of the SoftLight
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Lotion by ThermoLase to the carrier, and Lessee shall pay all
costs and expenses associated with shipment of the SoftLight
Lotion, including without limitation freight, insurance, customs
duties and related charges and taxes, provided, however, that
ThermoLase shall pay or reimburse Lessee, within thirty (30)
days, for any import duties or taxes imposed by Saudi Arabia up
to a maximum of *************************************************
****************. Lessee acknowledges and understands that the
composition of the SoftLight Lotion has been carefully developed
in order to maximize the safety and effectiveness of the
SoftLight Procedures in compliance with applicable laws and
regulations, and Lessee covenants and agrees not to (i) modify
the same in any manner or (ii) use a SoftLight Laser in the
absence of the SoftLight Lotion or otherwise in conjunction with
any lotion, gel, compound or other substance which has not been
approved in advance and in writing by ThermoLase as complying
with applicable laws and regulations and satisfying ThermoLase's
safety and efficacy standards with respect to the use of
SoftLight Lasers. ThermoLase reserves the right to modify, from
time to time during the term of this Agreement, the SoftLight
Lotion supplied to Lessee hereunder.
5.2. Other Supplies. All other supplies required in
connection with the performance of the SoftLight Procedures shall
be provided by Lessee at Lessee's sole cost and expense,
including without limitation, smoke evacuator filters, waxing
equipment and supplies, and lotions and cleansers; provided,
however, that ThermoLase reserves the right to inspect such
supplies and to impose minimum standards with respect to such
supplies, which ThermoLase considers, in its reasonable
discretion, to be necessary in order to satisfy ThermoLase's
safety and efficacy standards with respect to the use of
SoftLight Lasers. ThermoLase shall provide Lessee with a list of
such other supplies and the names of suppliers thereof.
6. ADDITIONAL EQUIPMENT
6.1 Additional SoftLight Lasers. ThermoLase will provide
to Lessee up to five (5) additional SoftLight Lasers during any
period of six (6) months, provided that the SoftLight Lasers then
operated by Lessee are generating total revenue to ThermoLase per
semiannual period of at least *********** times the number of
SoftLight Lasers then in operable condition. The rental for such
additional SoftLight Lasers shall be the same as provided in
Section 7.2 below.
6.2 Skin Rejuvenation Process. Lessee acknowledges that
the use of SoftLight Lasers for skin rejuvenation has not yet
been perfected and that ThermoLase may decide to lease to Lessee
SoftLight Lasers specially designed for use in skin rejuvenation
procedures ("Dedicated Lasers"). If ThermoLase decides to place
Dedicated Lasers in general commercial service, then ThermoLase
shall lease Dedicated Lasers to Lessee on the same terms and
conditions as the other SoftLight Lasers described herein.
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SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
7. RENTALS
7.1 Advance Payments. In consideration for the use of the
SoftLight Lasers leased to Lessee pursuant to this Agreement,
Lessee shall pay to ThermoLase: (i) a non-refundable advance
payment of Five Hundred Thousand United States Dollars
(US$500,000), due at the time of execution of this Agreement,
(ii) a non-refundable advance payment of Five Hundred Thousand
United States Dollars (US$500,000), due on the day after the
first anniversary of this Agreement, and (iii) ongoing rentals
as provided in paragraph (b) below.
7.2 Rent. Rent shall be payable monthly within fifteen
(15) days following the end of each calendar month in the amount
of ************************* of gross revenues generated from the
performance of the SoftLight Procedures at the Facilities during
the relevant month, provided, however, that the first payment
shall not be due until fifteen (15) days after the end of the
fourth month after the first Facility commences operations with
respect to revenues generated at such Facility during such
period. The rent shall increase to *************************
*************** beginning one year after the first Facility
commences operations and to ************************** beginning
two years after the first Facility commences operations.
Each payment of rent shall be accompanied by a written report, in
a form to be mutually agreed, specifying the method of
calculation of the rent for the applicable month.
7.3 Taxes. The rent and all other amounts payable pursuant
to this Agreement are to be paid by Lessee without deduction or
withholding for or on account of any and all present and future
taxes and fees, all of which shall be paid by Lessee, provided,
however, that Lessee may withhold from its payment hereunder
Saudi Arabian income taxes payable by ThermoLase. Lessee shall
obtain and provide to ThermoLase any certificate of exemption or
similar document required to exempt any transaction under this
Agreement from any such tax or fee. In addition, if Lessee
withholds any taxes from rent or other amounts payable to
ThermoLase hereunder, then Lessee shall provide to ThermoLase
evidence of the payment of such taxes to the relevant taxing
authority.
7.4 Currency. The rent and all other amounts payable
pursuant to this Agreement shall be payable in United States
Dollars. To the extent that revenues generated at a Facility are
in a currency other than United States Dollars, such revenues
shall be converted into United States Dollars, for the purposes
of calculating rent payable to ThermoLase hereunder, at the
average exchange rate during the relevant calendar month as
published by the Saudi Arabian Monetary Authority (SAMA).
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7.5 Financial Records. Lessee shall keep and maintain, at
each Facility and for a period of not less than five (5) years
after the expiration or earlier termination of this Agreement,
complete and accurate books and records (collectively, the
"Financial Records") covering all financial and other information
required in connection with the determination of the rent payable
hereunder. The Financial Records shall be maintained in
accordance with accounting principles generally accepted in the
Kingdom of Saudi Arabia, consistently applied. Lessee shall
engage an internationally recognized accounting firm to provide
an annual audit and accounting of the business to Lessee and
ThermoLase.
7.6 Audit Rights. At any time during normal business hours
and upon reasonable notice, ThermoLase, or an independent
certified public accountant designated by ThermoLase, shall have
the right, at ThermoLase's expense, to audit and inspect the
Financial Records at the Facilities, including those operated by
a sublicensee, for the purpose of verifying the accuracy thereof
and of the payment of rent required to be made by Lessee under
the terms of this Agreement. If, as a result of such audit or
inspection, ThermoLase shall determine that the rent paid by
Lessee to ThermoLase with respect to the period covered by such
audit or inspection is less than the rent payable hereunder by
Lessee to ThermoLase with respect to said period, ThermoLase
shall promptly furnish to Lessee a copy of such audit or
inspection report (the "Deficiency Report") setting forth the
amount of the deficiency (the "Deficiency") and showing, in
reasonable detail, the basis upon which the Deficiency was
determined. If Lessee disagrees with the Deficiency Report, it
shall have thirty (30) days within which to initiate arbitration
pursuant to Section 13.6 below. If Lessee does not initiate
arbitration, or the arbitrators determine that the Deficiency is
correct or that Lessee owes ThermoLase a different amount (the
"Modified Deficiency"), then Lessee shall pay to ThermoLase,
within thirty (30) days following receipt of the Deficiency
Report, or the arbitrators' decision, as the case may be, a sum
equal to the Deficiency, or the Modified Deficiency, together
with a late fee thereon at the lesser of one and one-half percent
(1-1/2%) per month or the maximum rate allowed by applicable law,
calculated from the date when such amount was originally due
through the date of payment. If the Deficiency or Modified
Deficiency is an amount equal to or greater than five percent
(5%) of the rent payable by Lessee to ThermoLase with respect to
the period covered by such audit or inspection, Lessee shall
promptly reimburse ThermoLase upon demand for the reasonable cost
of such audit or inspection. ThermoLase shall exercise the same
degree of care to safeguard the confidentiality of the Financial
Records as ThermoLase would exercise in safeguarding its own
similar confidential information; provided, however, that
ThermoLase shall be entitled to use the Financial Records in any
proceeding to enforce its rights pursuant to this Agreement or as
may be otherwise required by law.
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8. CONFIDENTIALITY
8.1 Protection. Lessee acknowledges and agrees that
ThermoLase has disclosed, and shall continue to disclose, to
Lessee in connection with the use of the SoftLight Lasers and
performance of this Agreement certain confidential information of
ThermoLase regarding its business operations, trade secrets,
know-how, customer information, pricing, marketing data and other
information of a confidential nature relating to the SoftLight
Lasers and the SoftLight Procedures, including, without
limitation the terms of this Agreement and the User Manual
(collectively, the "ThermoLase Confidential Information"). The
ThermoLase Confidential Information shall remain the sole and
exclusive property of ThermoLase and Lessee shall have no
interest or rights with respect thereto, except to the extent
expressly provided in this Agreement. Lessee agrees to maintain
the confidentiality of the ThermoLase Confidential Information.
Notwithstanding the foregoing provisions of this Section 8.1,
Lessee shall have the right to disclose any information that it
can demonstrate by clear and convincing evidence (i) was
rightfully possessed by Lessee before it was received from
ThermoLase, (ii) is or becomes public otherwise than through any
act or default of Lessee, or (iii) is required by law, court
order or stock exchange rule to be disclosed, provided Lessee
notifies ThermoLase in writing prior to making any such
disclosure so as to afford to ThermoLase a reasonable opportunity
to object or seek an appropriate protective order with respect to
such disclosure.
8.2 Equitable Relief. Due to the fact that the
unauthorized use, transfer, dissemination or disclosure of the
ThermoLase Confidential Information would cause irreparable harm
to ThermoLase, if Lessee breaches the provisions of this Article
8, ThermoLase shall be entitled, in addition to any other rights
and remedies available to ThermoLase, to obtain equitable relief,
including without limitation injunctive relief. If ThermoLase
receives confidential information from Lessee, ThermoLase shall
maintain such information in confidence. If ThermoLase
improperly discloses such information, then Lessee shall be
entitled, in addition to any other rights and remedies available
to Lessee, to obtain equitable relief, including without
limitation injunctive relief.
9. INSURANCE.
Lessee shall operate the business in strict compliance with
all applicable requirements of the Saudi Arabia Ministry of
Health. Lessee shall carry such insurance for the risks of the
business as is customary in Saudi Arabia and commercially
available. Lessee shall consult with ThermoLase regarding the
appropriate extent of insurance coverage.
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10. INDEMNIFICATION.
10.1 By Lessee. Subject to the provisions of Article 11
below, Lessee shall indemnify, defend and hold harmless
ThermoLase, its parents, subsidiaries and affiliates, and their
respective officers, directors, shareholders and employees, from
and against any and all actions, causes of action, suits, claims,
or demands by, or damages, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees and
disbursements and court costs) to, a third party to the extent
arising from or in connection with (i) the negligence (including
without limitation professional malpractice) or willful
misconduct of Lessee, its agents, employees, representatives or
contractors; (ii) failure of Lessee to perform the SoftLight
Procedures in accordance with the protocols set forth in the User
Manual; (iii) failure to operate and maintain each Facility in
accordance with the User Manual; or (iv) any employee, agent or
representative of Lessee under any applicable termination, labor,
social security or other similar laws or regulations.
10.2 By ThermoLase. Subject to the provisions of Article 11
below, ThermoLase shall indemnify, defend and hold harmless
Lessee, its parents, subsidiaries and affiliates, and their
respective officers, directors, shareholders and employees, from
and against any and all actions, causes of action, suits, claims,
or demands by, or damages, liabilities, costs and expenses
(including without limitation reasonable attorneys' fees and
disbursements and court costs) to, a third party to the extent
arising from or in connection with the negligence or willful
misconduct of ThermoLase, its agents, employees, representatives
or contractors.
10.3 Procedures. The indemnified party shall provide
written notice within 7 days of any third party claim to the
indemnifying party. The indemnifying party shall have the right
to assume exclusive control of the defense of such claim or, at
the option of the indemnifying party, to settle the same provided
that no settlement that imposes any obligation on the indemnified
party or affects the indemnified party rights under this
Agreement may be made without the prior written consent of the
indemnified party. The indemnified party agrees to reasonably
cooperate with the indemnifying party in connection with the
performance of the indemnifying party's obligations under this
Article. In the event that the indemnifying party fails to
perform its defense obligations hereunder, the indemnified party
shall have the right to do so at the indemnifying party's
expense.
11. LIMITATION OF LIABILITY.
11.1 Consequential Damages. Notwithstanding anything to the
contrary contained in this Agreement, including without
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CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE OMMISSIONS
limitation the provisions of Article 10 above, neither party
hereto shall be liable to the other for any indirect, special,
consequential, incidental or punitive damages (including without
limitation damages for loss of use of facilities or equipment,
loss of revenue, loss of profits or loss of goodwill) regardless
of (i) the negligence (either sole or concurrent) of either party
and (ii) whether either party has been informed of the
possibility of such damages.
11.2 No Warranty. THERMOLASE PROVIDES HEREIN NO WARRANTY OF
MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF NON-
INFRINGEMENT IN SAUDI ARABIA, OR AS TO THE RESULTS THAT MAY BE
ATTAINED BY THE PERFORMANCE, PRACTICE OR OPERATION OF THE
SOFTLIGHT PROCEDURES, INCLUDING WITHOUT LIMITATION THE SOFTLIGHT
LASERS.
12. TERM AND TERMINATION; RESTRICTIVE COVENANT.
12.1 Term. The initial term of this Agreement shall
commence on the Effective Date and continue for five (5) years
from the date on which the first Facility opens to the public,
unless sooner terminated as set forth herein, and shall be
automatically renewed for successive five (5) year terms so long
as Lessee is in full compliance with all terms and conditions of
this Agreement.
12.2 Termination.
(a) This Agreement may be terminated by ThermoLase:
(i) in the event of a breach by Lessee of any
material obligation hereunder (e.g., default in payment,
unauthorized disclosure of ThermoLase Confidential Information)
that is not cured within forty-five (45) days following written
notice thereof; or
(ii) at any time after one year from the date on
which the first Facility opens to the public if during any
semiannual period the total revenue to ThermoLase from Lessee
does not equal or exceed *********** times the number of
SoftLight Lasers which are in operable condition during such
period; or
(iii) in the event of the occurrence of a
change in control of Lessee which has, or in the reasonable
opinion of ThermoLase could have, a material adverse effect on
the business, prospects or operations of Lessee and the failure
of Lessee to promptly pursue (within forty-five (45) days after
receiving written notice thereof from ThermoLase) a remedy
designed to cure (in the reasonable judgment of ThermoLase)
ThermoLase's objections to such change; or
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(iv) in the event Lessee contests the validity of
the Licensed Technology or the ownership thereof by ThermoLase;
or
(v) in the event of the termination of the
Franchise and License Agreement between ThermoLase and Lessee.
(b) This Agreement may be terminated without cause by
Lessee upon sixty (60) days written notice to ThermoLase.
12.3 Termination Upon Occurrence of Certain Events.
ThermoLase may terminate this Agreement, effective immediately
and without the requirement of any notice if Lessee: (i) files
for or consents to a general assignment for the benefit of
creditors, (ii) files a petition in bankruptcy or liquidation, or
is adjudicated bankrupt or insolvent or takes similar actions
under the laws of any jurisdiction for the general benefit of
creditors of an insolvent or financially troubled debtor, or
(iii) is the subject of an involuntary bankruptcy or insolvency
proceeding which is not fully dismissed within forty-five (45)
days.
12.4 Additional Rights of ThermoLase. This Agreement may be
suspended by ThermoLase, effective immediately upon written
notice to Lessee, in the event that the marketing clearance
granted to ThermoLase by the U.S. Food and Drug Administration
(the "FDA") or any Saudi Arabian regulatory authority with
respect to the SoftLight Procedures is revoked, rescinded or
suspended for any reason, or any adverse regulatory action is
undertaken by the FDA or any Saudi Arabian regulatory authority
with respect to the validity or scope of such marketing
clearance. If a favorable outcome is achieved with respect to
the matter under which this Agreement was suspended, then the
terms and conditions of this Agreement shall thereafter be
resumed.
12.5 Effect of Termination. Upon expiration or earlier
termination of this Agreement for any reason, all rights and
obligations of the parties under this Agreement shall cease,
except that Lessee shall be obligated to pay to ThermoLase all
outstanding rent and other amounts payable with respect to the
period prior to the effective date of such expiration or earlier
termination. Upon such expiration or earlier termination, Lessee
shall cease all use of the SoftLight Lasers, and ThermoLase shall
remove the SoftLight Lasers, SoftLight Lotion, all User Manuals
and any other materials in Lessee's possession that are related
to the SoftLight Lasers within thirty (30) days. Lessee shall
provide free and ready access to ThermoLase to each Facility, at
ThermoLase's convenience, for the repossession of the SoftLight
Lasers, the SoftLight Lotion, the User Manuals and any other
materials in Lessee's possession that are related to the
SoftLight Lasers. The SoftLight Lasers shall be repossessed by
ThermoLase free of all liens and encumbrances and in good working
order and repair, reasonable wear and tear only excepted.
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12.6 No Rights to Compensation Upon Expiration or
Termination. In the event of a termination pursuant to any of
the provisions of this Agreement or upon expiration of this
Agreement, ThermoLase shall not have any obligation to Lessee, or
to any employee of Lessee, for compensation or for damages of any
kind, whether on account of the loss by Lessee or such employee
of present or prospective sales, investments, compensation or
goodwill. Similarly, Lessee shall not have any obligation to
ThermoLase or any employee of ThermoLase for compensation or for
damages of any kind by reason of the termination or expiration of
this Agreement, except for any amounts that may be due and
outstanding under this Agreement as of the date of termination..
12.7 Survival. Notwithstanding anything to the contrary
contained herein, the provisions of Sections 12.5 through 12.7
and Articles 7, 8, 9, 10, 11 and 13 of this Agreement shall
survive any expiration or earlier termination of this Agreement
according to their respective terms.
13. MISCELLANEOUS
13.1 Relationship of the Parties. The parties acknowledge
that no relationship of partnership, joint venture or employment
is created by this Agreement and that neither party shall have
any right, power or authority to act for or to bind the other
party in any way except to the extent expressly provided in this
Agreement. Without in any way limiting the foregoing, Lessee
shall be solely responsible at all times during the term of this
Agreement for all aspects of the professional services delivered
at each Facility and for the selection, training, professional
direction, supervision and employment of all persons, who are
licensed, registered or certified by the jurisdiction in which
each Facility is located to perform such services (collectively,
the "Professional Staff"). No provision of this Agreement is
intended, nor shall it be construed, to permit ThermoLase to
affect or influence the professional judgment of any member of
the Professional Staff involved in the performance of the
SoftLight Procedures at a Facility.
13.2 Lessee Operations. Lessee shall comply with all
national, supra-national, provincial and local laws, rules,
orders, ordinances and regulations of any governmental or other
public authority applicable to the operation of the SoftLight
Lasers.
13.3 Representation and Warranties. Lessee represents and
warrants that all of the information relating to Lessee set forth
on Schedule A attached hereto is true, complete and correct.
ThermoLase represents and warrants that all of the information
relating to ThermoLase set forth on Schedule B attached hereto is
true, correct and complete.
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13.4 Notices. Whenever by the terms of this Agreement,
notice, demand or other communication shall or may be given to
either party, the same shall be in writing and, addressed if to
Lessee at the address set forth at the beginning of this
Agreement and if to ThermoLase at ThermoLase Corporation, 10455
Pacific Center Court, San Diego, CA 92121, Attn: President or to
such other address or addresses as shall from time to time be
designated by written notice by either party to the other as
herein provided. All notices shall be sent by registered or
certified air mail, postage prepaid and return receipt requested,
or by Federal Express or other comparable courier providing proof
of delivery, and shall be deemed duly given and received (i) if
mailed, on the tenth (10th) Business Day following the mailing
thereof, or (ii) if sent by courier, the date of its receipt (or,
if such day is not a Business Day, the next succeeding Business
Day).
13.5 Governing Laws. This Agreement shall be governed by
and construed in accordance with the laws of England, excluding:
(i) its conflict of laws principles; (ii) the United Nations
Convention on Contracts for the International Sale of Goods; and
(iii) the 1974 Convention on the Limitation Period in the
International Sale of Goods (the "1974 Convention") and the
Protocol amending the 1974 Convention, done at Vienna April 11,
1980.
13.6 Arbitration.
(a) Any dispute, controversy or claim arising out of
or relating to this Agreement or to a breach hereof, including
its interpretation, performance or termination, shall be finally
resolved by arbitration. The arbitration shall be conducted by
three (3) arbitrators, one to be appointed by ThermoLase, one to
be appointed by Lessee and a third being nominated by the two
arbitrators so selected or, if they cannot agree on a third
arbitrator, by the Presiding Judge of the London Court of
International Arbitration ("LCIA").
(b) The arbitration shall be conducted in English and
in accordance with the commercial arbitration rules of the LCIA,
which shall administer the arbitration and act as appointing
authority. The arbitration, including the rendering of the
award, shall take place in London, England, and shall be the
exclusive forum for resolving such dispute, controversy or claim.
For the purposes of this arbitration, the provisions of this
Agreement and all rights and obligations thereunder shall be
governed and construed in accordance with the laws of England,
excluding: (i) its conflict of laws principles; (ii) the United
Nations Convention on Contracts for the International Sale of
Goods; and (iii) the 1974 Convention on the Limitation Period in
the International Sale of Goods (the "1974 Convention") and the
Protocol amending the 1974 Convention, done at Vienna April 11,
1980. The decision of the arbitrators shall be binding upon the
parties hereto, and the expense of the arbitration (including
13PAGE
<PAGE>
without limitation the award of attorneys' fees to the prevailing
party) shall be paid as the arbitrators determine. The decision
of the arbitrators shall be executory, and judgment thereon may
be entered by any court of competent jurisdiction.
13.7 Entire Agreement. This Agreement constitutes the sole
and entire agreement between ThermoLase and Lessee with respect
to the subject matter hereof, supersedes all prior agreements
between the parties either written or oral and shall not be
supplemented, amended, varied or modified in any manner except by
an instrument in writing signed by duly authorized
representatives of both parties.
13.8 Waiver. No delay or omission on the part of either
party to this Agreement in requiring performance by the other
party or in exercising any right hereunder shall operate as a
waiver of any provision hereof or of any right hereunder, and the
waiver, omission or delay in requiring performance or exercising
any right hereunder on any one occasion shall not be construed as
a bar to or waiver of such performance or right on any future
occasion.
13.9 Remedies Cumulative. Any and all rights and remedies
which either party may have under this Agreement, at law or in
equity, shall be cumulative and shall not be deemed inconsistent
with each other, and any two or more of all such rights and
remedies may be exercised at the same time insofar as permitted
by law.
13.10 Headings. Article and Section headings and the
organization of this Agreement are for descriptive purposes only
and shall not control or alter the meaning of this Agreement.
13.11 Costs. Except as otherwise expressly provided
herein, each party shall bear its own costs and expenses in
performing its obligations under this Agreement. In the event
that one party to this Agreement commences an arbitration or
other action against the other party to this Agreement, the
prevailing party shall be entitled to recover its costs resulting
from such arbitration or action from the non-prevailing party to
the extent so provided in the arbitration award or judgment.
13.12 Force Majeure. Neither party shall be deemed to
be in default under this Agreement if prevented from performing
any obligation hereunder (other than a payment obligation which
arose prior to the event of force majeure) for any reason beyond
its reasonable control, including without limitation Acts of God,
war, civil commotion, fire, flood or casualty, labor
difficulties, shortages of or inability to obtain labor,
materials or equipment, governmental regulations or restrictions,
or unusually severe weather. In any such case, the parties agree
to negotiate in good faith with the goal of preserving this
Agreement and the respective rights and obligations of the
parties hereunder, to the extent reasonably practicable. It is
14PAGE
<PAGE>
agreed that financial inability shall not be a matter beyond a
party's reasonable control.
13.13 Successors and Assigns. This Agreement is
personal to Lessee and has been entered into in reliance upon the
competence and skill of Lessee. Accordingly, Lessee may not
assign this Agreement, except to an entity controlled by or under
common control with Lessee, without the prior written consent of
ThermoLase, which consent may be withheld in ThermoLase's sole
and absolute discretion. ThermoLase may assign this Agreement
upon written notice to Lessee. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
13.14 Authority. The individuals executing this
Agreement hereby represent and warrant that they are empowered
and duly authorized to so execute this Agreement on behalf of the
parties they represent.
13.15 Severability. If any provision of this Agreement
is declared invalid or unenforceable by a court or other tribunal
having competent jurisdiction, it is mutually agreed that this
Agreement shall endure except for the part declared invalid or
unenforceable by order of such court or tribunal. The parties
shall consult and use their best efforts to agree upon a valid
and enforceable provision which shall be a reasonable substitute
for such invalid or unenforceable provision in light of the
intent of this Agreement.
13.16 Definition of Business Day. For the purposes of
this Agreement, a "Business Day" means a day on which banks are
open for business in San Diego, California and Riyadh, Saudi
Arabia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the date first set forth above.
THERMOLASE CORPORATION MEDICAL SUPPLY & SERVICE CO.
By: John C. Hansen By: Ibrahim El Khereiji
----------------------- -------------------------
Name: John C. Hansen Name:
Title: President and CEO Title:
15PAGE
<PAGE>
Schedule A
Representations and Warranties of Lessee
Lessee represents and warrants to ThermoLase as follows:
(i) Lessee is a Saudi Arabian company duly organized,
validly existing and in good standing under the laws of Saudi
Arabia, with requisite powers adequate for executing and
delivering, and performing its obligations under, this Agreement;
(ii) the execution, delivery and performance of this
Agreement by Lessee have been duly authorized by all necessary
action on the part of Lessee; and
(iii) the execution, delivery and performance of this
Agreement by Lessee do not and will not conflict with or
contravene any provision of the charter documents of Lessee or,
in any material respect, any agreement, document, instrument,
indenture or other obligation of Lessee.
16PAGE
<PAGE>
Schedule B
Representations and Warranties of ThermoLase
ThermoLase represents and warrants to Lessee as follows:
(i) ThermoLase is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with corporate powers adequate for executing and
delivering, and performing its obligations under, this Agreement;
(ii) the execution, delivery and performance of this
Agreement by ThermoLase have been duly authorized by all
necessary corporate action on the part of ThermoLase; and
(iii) the execution, delivery and performance of this
Agreement by ThermoLase do not and will not conflict with or
contravene any provision of the charter documents or by-laws of
ThermoLase or, in any material respect, any agreement, document,
instrument, indenture or other obligation of ThermoLase.
Exhibit 11
THERMOLASE CORPORATION
Computation of Earnings Per Share
Nine Year
Year Ended Months Ended Ended
---------------------- ------------ --------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
1996 1995 1995 1994
--------------------------------------------------------------------------
(Unaudited)
Computation of
Primary Earnings
(Loss) per Share
Before Cumulative
Effect of Change
in Accounting
Principle:
Income (Loss) Before
Cumulative Effect of
Change in Accounting
Principle (a) $(1,386,000)$(1,675,000) $(1,679,000) $ 6,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 40,353,128 37,880,121 38,004,971 34,670,262
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 1,096,690
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 40,353,128 37,880,121 38,004,971 35,766,952
----------- ----------- ----------- -----------
Primary Earnings
(Loss) per Share
Before Cumulative
Effect of Change
in Accounting
Principle (a) / (b) $ (.03)$ (.04) $ (.04) $ -
=========== =========== =========== ===========
PAGE
<PAGE>
Exhibit 11
THERMOLASE CORPORATION
Computation of Earnings Per Share
Nine Year
Year Ended Months Ended Ended
---------------------- ------------ --------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
1996 1995 1995 1994
--------------------------------------------------------------------------
(Unaudited)
Computation of
Primary Earnings
(Loss) per Share:
Net Income (Loss) (c) $(1,386,000)$(1,675,000) $(1,679,000) $ 15,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 40,353,128 37,880,121 38,004,971 34,670,262
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - - - 1,096,690
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (d) 40,353,128 37,880,121 38,004,971 35,766,952
----------- ------------ ----------- -----------
Primary Earnings (Loss)
per Share (c) / (d) $ (.03)$ (.04) $ (.04) $ -
=========== =========== =========== ===========
Exhibit 13
ThermoLase Corporation
Consolidated Financial Statements
Fiscal Year 1996
PAGE
<PAGE>
ThermoLase Corporation
Consolidated Statement of Operations
Nine Months Year
Year Ended Ended Ended
--------------------- ----------- ----------
(In thousands except Sept. 28, Sept. 30, Sept. 30, Dec. 31,
per share amounts) 1996 1995 1995 1994
-----------------------------------------------------------------------------
(Unaudited)
Revenues (Note 11)
Product revenues $23,165 $23,348 $17,544 $18,682
Service revenues 4,647 - - -
------- ------- ------- -------
27,812 23,348 17,544 18,682
------- ------- ------- -------
Costs and Operating Expenses:
Cost of product revenues 15,063 14,714 11,424 10,785
Cost of service revenues 4,964 - - -
Selling, general and admin-
istrative expenses (Note 9) 9,761 8,128 6,158 5,744
Research and development
expenses 3,470 3,774 3,151 2,324
------- ------- ------- -------
33,258 26,616 20,733 18,853
------- ------- ------- -------
Operating Loss (5,446) (3,268) (3,189) (171)
Interest Income 3,482 971 789 595
Interest Expense, Related Party
(Note 9) - - - (116)
Gain (Loss) on Sale of
Investments (Note 3) 115 (41) - (42)
------- ------- ------- -------
Income (Loss) Before Income
Taxes and Cumulative Effect
of Change in Accounting
Principle (1,849) (2,338) (2,400) 266
Income Tax (Provision) Benefit
(Note 8) 463 663 721 (260)
------- ------- ------- -------
Income (Loss) Before
Cumulative Effect of Change
in Accounting Principle (1,386) (1,675) (1,679) 6
Cumulative Effect of Change in
Accounting Principle, Net of
Tax (Note 3) - - - 9
------- ------- ------- -------
Net Income (Loss) $(1,386) $(1,675) $(1,679) $ 15
======= ======= ======= =======
Earnings (Loss) per Share
Before Cumulative Effect of
Change in Accounting Principle $ (.03) $ (.04) $ (.04) $ -
======= ======= ======= =======
Earnings (Loss) per Share $ (.03) $ (.04) $ (.04) $ -
======= ======= ======= =======
Weighted Average Shares 40,353 37,880 38,005 35,767
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
2PAGE
<PAGE>
ThermoLase Corporation
Consolidated Balance Sheet
September 28, September 30,
(In thousands except share amounts) 1996 1995
--------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 7,923 $13,146
Available-for-sale investments, at quoted
market value (amortized cost of $44,205
and $52,281) (Note 3) 44,132 52,294
Accounts receivable, less allowances of
$319 and $256 4,572 4,255
Inventories 4,269 5,203
Prepaid expenses 408 186
Prepaid income taxes (Note 8) 1,882 852
------- -------
63,186 75,936
------- -------
Property and Equipment, at Cost, Net 19,323 4,168
------- -------
Other Assets 4,679 319
------- -------
Cost in Excess of Net Assets of Acquired
Company 8,332 9,040
------- -------
$95,520 $89,463
======= =======
Liabilities and Shareholders' Investment
Current Liabilities:
Accounts payable $ 5,179 $ 3,405
Accrued payroll and employee benefits 1,008 538
Accrued income taxes 245 412
Deferred revenue 913 -
Other accrued expenses 1,546 1,818
Due to parent company and affiliated companies 7,098 1,072
------- -------
15,989 7,245
------- -------
Deferred Lease Liability 494 -
------- -------
Commitments and Contingencies (Notes 9 and 10)
Shareholders' Investment (Notes 5 and 6):
Common stock, $.01 par value, 50,000,000
shares authorized; 40,803,932 and
40,109,772 shares issued 408 401
Capital in excess of par value 85,813 84,354
Accumulated deficit (3,516) (2,130)
Treasury stock at cost, 116,570 and
21,944 shares (3,621) (415)
Net unrealized gain (loss) on available-for-
sale investments (Note 3) (47) 8
------- -------
79,037 82,218
------- -------
$95,520 $89,463
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
3PAGE
<PAGE>
ThermoLase Corporation
Consolidated Statement of Cash Flows
Nine Months Year
Year Ended Ended Ended
--------------------- ----------- ----------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
(In thousands) 1996 1995 1995 1994
-----------------------------------------------------------------------------
(Unaudited)
Operating Activities:
Net income (loss) $ (1,386) $ (1,675) $ (1,679) $ 15
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Cumulative effect of
change in accounting
principle (Note 3) - - - (9)
Depreciation and
amortization 1,482 836 640 741
Provision for losses on
accounts receivable 63 153 153 40
(Gain) loss on sale of
investments (Note 3) (115) 41 - 42
Loss on disposal of
property and equipment - 125 125 -
Deferred lease liability 494 - - -
Changes in current
accounts, excluding the
effects of acquisition:
Accounts receivable (380) (1,132) (540) (1,093)
Inventories 934 (2,402) (1,101) (1,743)
Other current assets (1,221) (586) (846) 182
Accounts payable 1,774 1,859 1,355 796
Other current
liabilities 2,205 2,138 1,317 (648)
-------- -------- -------- --------
Net cash provided by (used
in) operating activities 3,850 (643) (576) (1,677)
-------- -------- -------- --------
Investing Activities:
Acquisition, net of cash
acquired (Note 4) - (197) - (197)
Investment in other assets
(Note 1) (4,400) - - -
Purchases of available-for-
sale investments (49,500) (49,793) (49,793) (9,700)
Proceeds from sale and
maturities of available-
for-sale investments 57,140 11,659 6,000 7,658
Purchases of property and
equipment (13,230) (2,975) (1,584) (2,736)
Other 553 256 101 460
-------- -------- -------- --------
Net cash used in investing
activities $ (9,437) $(41,050) $(45,276) $ (4,515)
-------- -------- -------- --------
4PAGE
<PAGE>
ThermoLase Corporation
Consolidated Statement of Cash Flows (continued)
Nine Months Year
Year Ended Ended Ended
--------------------- ----------- ----------
Sept. 28, Sept. 30, Sept. 30, Dec. 31,
(In thousands) 1996 1995 1995 1994
-----------------------------------------------------------------------------
(Unaudited)
Financing Activities:
Net proceeds from issuance
of Company common stock
(Note 5) $ 2,591 $ 55,544 $ 55,544 $ 14,784
Payment of withholding taxes
related to stock option
exercises (2,227) (776) (776) -
Repayment of promissory note
to parent company (Note 9) - - - (5,000)
-------- -------- -------- --------
Net cash provided by
financing activities 364 54,768 54,768 9,784
-------- -------- -------- --------
Increase (Decrease) in Cash
and Cash Equivalents (5,223) 13,075 8,916 3,592
Cash and Cash Equivalents at
Beginning of Period 13,146 71 4,230 638
-------- -------- -------- --------
Cash and Cash Equivalents at
End of Period $ 7,923 $ 13,146 $ 13,146 $ 4,230
======== ======== ======== ========
Cash Paid (Refunded) For:
Interest $ - $ - $ - $ 116
Income taxes $ 12 $ 42 $ 124 $ (82)
Noncash Activities:
Fair value of assets of
acquired company $ - $ 479 $ - $ 479
Cash paid for acquired
company - (197) - (197)
-------- -------- -------- --------
Liabilities assumed of
acquired company $ - $ 282 $ - $ 282
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
5PAGE
<PAGE>
ThermoLase Corporation
Consolidated Statement of Shareholders' Investment and Common Stock Subject
to Redemption
Common Common
Stock Stock, Capital in
Subject to $.01 Par Excess of
(In thousands) Redemption Value Par Value
--------------------------------------------------------------------------
Balance January 1, 1994 $ 14,511 $ 130 $ -
Net income - - -
Net proceeds from initial
public offering of common
stock (Note 5) - 27 14,757
Accretion related to common
stock subject to redemption 254 - (107)
Expiration of redemption
rights (Note 1) (14,765) 31 14,734
Cumulative effect of change
in accounting principle
(Note 3) - - -
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - -
-------- -------- --------
Balance December 31, 1994 - 188 29,384
Net loss - - -
Effect of two-for-one stock
split - 188 (188)
Net proceeds from sale of
common stock (Note 5) - 24 55,311
Issuance of stock under
employees' and directors'
stock plans - 1 (153)
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - -
-------- -------- --------
Balance September 30, 1995 - 401 84,354
Net loss - - -
Issuance of stock under
employees' and directors'
stock plans - 7 1,459
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - -
-------- -------- --------
Balance September 28, 1996 $ - $ 408 $ 85,813
======== ======== ========
6PAGE
<PAGE>
ThermoLase Corporation
Consolidated Statement of Shareholders' Investment and Common Stock Subject
to Redemption (continued)
Net
Unrealized
Gain (Loss) on
Available-
Accumulated Treasury for-sale
(In thousands) Deficit Stock Investments
--------------------------------------------------------------------------
Balance January 1, 1994 $ (319) $ - $ -
Net income 15 - -
Net proceeds from initial
public offering of common
stock (Note 5) - - -
Accretion related to common
stock subject to redemption (147) - -
Expiration of redemption
rights (Note 1) - - -
Cumulative effect of change
in accounting principle
(Note 3) - - (9)
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - (115)
-------- -------- --------
Balance December 31, 1994 (451) - (124)
Net loss (1,679) - -
Effect of two-for-one stock
split - - -
Net proceeds from sale of
common stock (Note 5) - - -
Issuance of stock under
employees' and directors'
stock plans - (415) -
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - 132
-------- -------- --------
Balance September 30, 1995 (2,130) (415) 8
Net loss (1,386) - -
Issuance of stock under
employees' and directors'
stock plans - (3,206) -
Change in net unrealized gain
(loss) on available-for-
sale investments (Note 3) - - (55)
-------- -------- --------
Balance September 28, 1996 $ (3,516) $ (3,621) $ (47)
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
7PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
ThermoLase Corporation (the Company) has developed a laser-based
system called SoftLight(SM) for the removal of unwanted hair. The
SoftLight system uses a low-energy, dermatology laser in combination with
a lotion that absorbs the laser's energy to disable hair follicles. The
Company markets the SoftLight hair-removal service in the U.S. through
its Spa Thira salons and through a network of independent doctors, who
pay the Company a per-procedure fee, and internationally through joint
ventures and other licensing arrangements. The Company also manufactures
and markets skin-care, bath, and body products through its CBI
Laboratories, Inc. (CBI) subsidiary, which manufactures the lotion used
in the SoftLight hair-removal process.
Relationship with ThermoTrex Corporation and Thermo Electron Corporation
The Company was incorporated in January 1993 as a wholly owned
subsidiary of ThermoTrex Corporation (ThermoTrex). As of September 28,
1996, ThermoTrex owned 25,960,996 shares of the Company's common stock,
representing 64% of such stock outstanding. ThermoTrex is a 51%-owned
public subsidiary of Thermo Electron Corporation (Thermo Electron).
Principles of Consolidation
The accompanying financial statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
Fiscal Year
In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's transition period, which ended on September
30, 1995, was the 39-week period from January 1, 1995 to September 30,
1995, referenced as "fiscal 1995." References to "fiscal 1996" and "1994"
are for the years ended September 28, 1996 and December 31, 1994,
respectively. Fiscal 1996 and 1994 each included 52 weeks. The unaudited
consolidated statements of operations and cash flows for the 52-week
period ended September 30, 1995 are presented for comparative purposes
only.
Revenue Recognition
The Company generally recognizes product revenues upon shipment.
Revenues from hair-removal treatments at the Company's Spa Thira salons
are recognized over the anticipated treatment period. Revenues from
hair-removal treatments performed by the Company's network of independent
doctors are also recognized when the treatments are performed.
Nonrefundable minimum licensing fees are recorded when earned. Deferred
revenue in the accompanying fiscal 1996 balance sheet represents unearned
revenue from hair-removal treatments at the Company's Spa Thira salons,
and will be recognized within one year.
8PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Concentration of Credit Risk
The Company sells its skin-care and other personal-care products
primarily to regional and national stores and salons. As a result, a
majority of the Company's receivables are with these customers.
Management does not believe that this concentration of credit risk has,
or will have, a significant negative impact on the Company. The Company
does not typically require collateral on its credit sales.
Income Taxes
In accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," the Company recognizes
deferred income taxes based on the expected future tax consequences of
differences between the financial statement basis and the tax basis of
assets and liabilities calculated using enacted tax rates in effect for
the year in which the differences are expected to be reflected in the tax
return.
Earnings (Loss) per Share
Earnings (loss) per share have been computed based on the weighted
average number of shares outstanding during the period. Weighted average
shares in 1994 include the effect of the exercise of stock options that
were computed using the treasury stock method. Because the effect of the
exercise of stock options would be anti-dilutive in fiscal 1996 and
fiscal 1995, such options were not included in weighted average shares.
Cash and Cash Equivalents
As of September 28, 1996, $6,001,000 of the Company's cash
equivalents were invested in a repurchase agreement with Thermo Electron.
Under this agreement, the Company in effect lends excess cash to Thermo
Electron, which Thermo Electron collateralizes with investments
principally consisting of corporate notes, U.S. government agency
securities, money market funds, commercial paper, and other marketable
securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. As of September 28, 1996,
the Company's cash equivalents also included money market fund
investments. Cash equivalents are carried at cost, which approximates
market value.
Available-for-sale Investments
Pursuant to SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company's debt and marketable equity
securities are accounted for at market value (Note 3).
9PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Inventories
Inventories are stated at the lower of cost (on a first-in,
first-out basis) or market value and include materials, labor, and
manufacturing overhead. The components of inventories are as follows:
(In thousands) 1996 1995
----------------------------------------------------------------------
Raw materials and supplies $ 1,521 $ 2,864
Work in process and finished goods 2,748 2,339
------- -------
$ 4,269 $ 5,203
======= =======
Property and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation and amortization using the straight-line method
over the estimated useful lives of the property as follows: machinery and
equipment -- three to ten years, and leasehold improvements -- the
shorter of the term of the lease or the life of the asset. Property and
equipment consist of the following:
(In thousands) 1996 1995
----------------------------------------------------------------------
Machinery and equipment $14,384 $ 3,382
Leasehold improvements 6,001 1,325
Construction in process 958 268
------- ------
21,343 4,975
Less: Accumulated depreciation and amortization 2,020 807
------- ------
$19,323 $ 4,168
======= =======
Other Assets
In June 1996, ThermoLase purchased $4,400,000 of convertible
preferred stock of AntiCancer, representing an approximate 10% equity
interest in AntiCancer on a fully diluted basis. AntiCancer is a San
Diego-based company that is developing a new chemotherapeutic drug for
cancer patients, and that is also developing certain technologies that
may be relevant to the SoftLight hair-removal process and other
personal-care applications. The Company has the option to purchase for
$2,500,000 an additional 5% equity interest in AntiCancer on a fully
diluted basis, exercisable at any time before the earlier of June 19,
2011, or AntiCancer's initial public offering of stock. This investment
is being accounted for under the cost method of accounting. In addition,
the Company has licensed certain technology from AntiCancer (Note 10).
10PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cost in Excess of Net Assets of Acquired Company
The excess of cost over the fair value of net assets of the
acquired company is amortized using the straight-line method over 40
years. Accumulated amortization was $658,000 and $422,000 at September
28, 1996 and September 30, 1995, respectively. The Company assesses the
future useful life of this asset whenever events or changes in
circumstances indicate that the current useful life has diminished. The
Company considers the future undiscounted cash flows of the acquired
business in assessing the recoverability of this asset.
Deferred Lease Liability
Deferred lease liability in the accompanying balance sheet
represents facilities rent which is being recognized ratably over the
respective lease terms.
Common Stock Subject to Redemption
Common stock subject to redemption in the accompanying statement of
shareholders' investment and common stock subject to redemption
represents amounts associated with redemption rights that were issued in
March 1993. These redemption rights expired in November 1994, and as a
result, the Company transferred $14,765,000 of common stock subject to
redemption to common stock and capital in excess of par value.
Stock Split
All weighted average share and per share information has been
restated to reflect a two-for-one stock split, effected in the form of a
100% stock dividend, which was distributed in June 1995.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and
cash equivalents, available-for-sale investments, accounts receivable,
accounts payable, and due to parent company and affiliated companies. The
carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, and due to parent company and affiliated
companies approximate fair value due to their short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on
quoted market prices. See Note 3 for information pertaining to the fair
value of available-for-sale investments.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
11PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
2. Unaudited Comparative Results
The following unaudited financial information for the nine months
ended October 1, 1994 is presented to provide comparative results for
fiscal 1995, included in the accompanying statement of operations.
Nine
Months Ended
(In thousands except per share amounts) October 1,1994
------------------------------------------------------------------------
Revenues $12,878
-------
Costs and Operating Expenses:
Cost of revenues 7,495
Selling, general and administrative expenses 3,774
Research and development expenses 1,701
-------
12,970
-------
Operating Loss (92)
Interest Income 413
Interest Expense, Related Party (116)
Loss on Sale of Investments (1)
-------
Income Before Income Taxes and Cumulative
Effect of Change in Accounting Principle 204
Income Tax Provision (202)
-------
Income Before Cumulative Effect of Change
in Accounting Principle 2
Cumulative Effect of Change in Accounting
Principle, Net of Tax 9
-------
Net Income $ 11
=======
Earnings per Share Before Cumulative
Effect of Change in Accounting Principle $ -
=======
Earnings per Share $ -
=======
Weighted Average Shares 34,759
=======
12PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
3. Available-for-sale Investments
Effective January 2, 1994, the Company adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." In
accordance with SFAS No. 115, the Company's debt and marketable equity
securities are classified as available-for-sale investments in the
accompanying balance sheet and are carried at market value, with the
difference between cost and market value, net of related tax effects,
recorded currently as a component of shareholders' investment titled "Net
unrealized gain (loss) on available-for-sale investments." Cumulative
effect of change in accounting principle in the accompanying 1994
statement of operations represents the reversal of an unrealized loss,
net of related tax effects, recorded as other expense in the 1993
statement of operations. This amount was recorded as a reduction of
shareholders' investment in the accompanying 1994 financial statements.
The aggregate market value, cost basis, and gross unrealized gains
and losses of available-for-sale investments by major security type, as
of September 28, 1996 and September 30, 1995, are as follows:
1996
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency
securities $43,458 $43,531 $ - $ (73)
Other 674 674 - -
------- ------- ------- -------
$44,132 $44,205 $ - $ (73)
======= ======= ======= =======
1995
Gross Gross
Market Cost Unrealized Unrealized
(In thousands) Value Basis Gains Losses
-----------------------------------------------------------------------
Government agency
securities $50,647 $50,671 $ - $ (24)
Corporate bonds 540 503 37 -
Other 1,107 1,107 - -
------- ------- ------- -------
$52,294 $52,281 $ 37 $ (24)
======= ======= ======= =======
13PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
3. Available-for-sale Investments (continued)
Available-for-sale investments in the accompanying 1996 balance
sheet include $34,051,000 with contractual maturities of one year or less
and $10,081,000 with contractual maturities of more than one year through
five years. Actual maturities may differ from contractual maturities as a
result of the Company's intent to sell these securities prior to maturity
and as a result of put and call options that enable the Company and/or
the issuer to redeem these securities at an earlier date.
The cost of available-for-sale investments that were sold was based
on specific identification in determining realized gains and losses
recorded in the accompanying statement of operations. Gain on the sale of
investments in the accompanying fiscal 1996 statement of operations
represents the gross realized gains relating to the sale of
available-for-sale investments. Loss on sale of investments in the
accompanying 1994 statement of operations resulted from gross realized
gains of $29,000 and gross realized losses of $71,000 relating to the
sale of available-for-sale investments.
4. Joint Venture and Acquisition
Joint Venture
In January 1996, the Company entered into a joint venture agreement
and a technology license agreement to market its SoftLight system in
Japan. The Company currently holds a 50% stake in the joint venture but
may increase its ownership to 51% pursuant to a fair-value purchase
option. Under the terms of the joint venture agreement, the Company will
receive payments for the use of the SoftLight system equal to 2% of the
joint venture's revenues through calendar year 2010, subject to minimum
guaranteed payments totaling $3,000,000, of which $2,000,000 was received
in fiscal 1996. The remaining $1,000,000 is due in fiscal 1997, subject
to certain exceptions in the event the joint venture is unable to obtain
patent protection in Japan on prescribed terms. If cumulative licensing
fees paid to the Company exceed $50,000,000, the rate will decrease to
.25% through calendar year 2010. Starting in calendar year 2011, the rate
will be 1%.
Acquisition
On November 14, 1994, CBI acquired substantially all of the assets,
subject to certain liabilities, of Marcor Laboratories, Inc. (Marcor) for
$136,000 in cash and the repayment of $61,000 of existing indebtedness of
Marcor. Marcor distributes skin-care products. This acquisition has been
accounted for using the purchase method of accounting, and its results of
operations have been included in the accompanying financial statements
from the date of acquisition. Allocation of the purchase price for this
acquisition was based on estimates of the fair value of the net assets
acquired.
14PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
5. Common Stock
In June 1995, the Company sold 200,000 shares of its common stock
in private placements for net proceeds of $2,563,000. In August 1995, the
Company sold 2,250,000 shares of its common stock in a public offering
for net proceeds of $52,772,000.
In July 1994, the Company sold 5,349,572 shares of its common stock
in connection with its initial public offering, pursuant to a rights
offering, for net proceeds of $14,784,000.
At September 28, 1996, the Company had reserved 3,420,940 unissued
shares of its common stock for possible issuance under stock-based
compensation plans.
6. Stock-based Compensation Plans
The Company has stock-based compensation plans for its key
employees, directors, and others. Two of these plans, adopted in 1993,
permit the grant of nonqualified and incentive stock options. A third
plan, adopted in fiscal 1995, permits the grant of a variety of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the Board Committee), including restricted
stock, stock options, stock bonus shares, or performance-based shares. To
date, only nonqualified stock options have been awarded under these
plans. The option recipients and the terms of options granted under these
plans are determined by the Board Committee. Generally, options granted
to date are exercisable immediately, but are subject to certain transfer
restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price, upon certain events.
The restrictions and repurchase rights generally lapse ratably over
periods ranging from four to ten years after the first anniversary of the
grant date, depending on the term of the option, which may range from
five to twelve years. Nonqualified stock options may be granted at any
price determined by the Board Committee, although incentive stock options
must be granted at not less than the fair market value of the Company's
stock on the date of grant. To date, all options have been granted at
fair market value. The Company also has a directors' stock option plan
that provides for the grant of stock options to outside directors
pursuant to a formula approved by the Company's shareholders. Options
awarded under this plan are exercisable six months after the date of
grant and expire three to seven years after the date of grant. In
addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based
compensation plans of Thermo Electron or its majority-owned subsidiaries.
15PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
6. Stock-based Compensation Plans (continued)
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity. A summary of the Company's stock option
information for fiscal 1996, fiscal 1995, and 1994 is as follows:
1996 1995 1994
----------------- ----------------- ----------------
Range of Range of Range of
Option Option Option
Number Prices Number Prices Number Prices
(In thousands except of per of per of per
per share amounts) Shares Share Shares Share Shares Share
- ------------------------------------------------------------------------------
Options outstanding, $ 1.75- $ 1.75- $ 1.75-
beginning of year 3,341 $20.53 2,707 $ 4.68 2,477 $ 2.50
23.48- 11.74- 3.00-
Granted 339 29.55 872 20.53 236 4.68
1.75- 1.75-
Exercised (746) 11.74 (184) 2.50 - -
2.50- 1.75-
Lapsed or cancelled (114) 20.53 (54) 2.50 (6) 2.50
----- ----- -----
Options outstanding, $ 1.75- $ 1.75- $ 1.75-
end of year 2,820 $29.55 3,341 $20.53 2,707 $ 4.68
===== ===== =====
$ 1.75- $ 1.75-
Options exercisable 2,820 $29.55 3,341 $20.53 - $ -
===== ===== =====
Options available
for grant 451 676 493
===== ===== =====
16PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
7. Employee Benefit Plans
Employee Stock Purchase Plan
Prior to November 1, 1996, substantially all of the Company's
full-time employees could participate in an employee stock purchase plan
sponsored by ThermoTrex, under which employees could purchase shares of
ThermoTrex's and Thermo Electron's common stock. Effective November 1,
1996, substantially all of the Company's full-time employees may
participate in employee stock purchase plans sponsored by the Company and
Thermo Electron, under which employees can purchase shares of the
Company's and Thermo Electron's common stock. Under these plans, shares
of common stock may be purchased at the end of a 12-month plan year at
95% of the fair market value at the beginning of the plan year, and the
shares purchased are subject to a six-month resale restriction. Prior to
November 1, 1995, the applicable shares of common stock could be
purchased at 85% of the fair market value at the beginning of the plan
year, and the shares purchased were subject to a one-year resale
restriction. Shares are purchased through payroll deductions of up to 10%
of each participating employee's gross wages.
401(k) Savings Plan
Effective January 1, 1995, the majority of the Company's full-time
employees are eligible to participate in Thermo Electron's 401(k) savings
plan. Contributions to the Thermo Electron 401(k) savings plan are made
by both the employee and the Company. Company contributions are based
upon the level of employee contributions. The Company contributed and
charged to expense for this plan $144,000 and $108,000 in fiscal 1996 and
fiscal 1995, respectively.
8. Income Taxes
The components of the income tax (provision) benefit for fiscal
1996, fiscal 1995, and 1994 are as follows:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Currently refundable (payable):
Federal $ 80 $ 154 $(177)
State 25 (82) (116)
----- ----- -----
105 72 (293)
----- ----- -----
Deferred:
Federal 328 609 28
State 30 40 5
----- ----- -----
358 649 33
----- ----- -----
$ 463 $ 721 $(260)
===== ===== =====
17PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
8. Income Taxes (continued)
The income tax (provision) benefit in the accompanying statement of
operations differs from the amounts calculated by applying the statutory
federal income tax rate of 34% to income (loss) before income taxes and
cumulative effect of change in accounting principle due to the following:
(In thousands) 1996 1995 1994
-----------------------------------------------------------------------
Income tax (provision) benefit
at statutory rate $ 629 $ 816 $ (90)
Differences resulting from:
State income taxes, net of federal tax 36 (28) (73)
Nondeductible expenses (202) (67) (97)
------ ------ -----
$ 463 $ 721 $(260)
====== ====== =====
Prepaid income taxes in the accompanying balance sheet consist of
the following:
(In thousands) 1996 1995
--------------------------------------------------------------
Prepaid income taxes:
Net operating loss $2,226 $ 660
Inventory basis differences 714 431
Accruals and other reserves 207 133
Accrued compensation 212 129
Allowance for doubtful accounts 121 96
Other, net 65 104
------ ------
3,545 1,553
Less: Valuation allowance 1,663 701
------ ------
$1,882 $ 852
====== ======
The year-end 1996 valuation allowance relates to employee exercises
of stock options for which no tax benefit was recognized, and will be
used to increase capital in excess of par value when the net operating
loss is realized. The year-end 1995 valuation allowance related primarily
to the uncertainty surrounding the realization of future tax benefits
associated with acquisition reserves related to CBI, and was used to
reduce cost in excess of net assets of acquired company during fiscal
1996, when such uncertainty was reduced. As of September 28, 1996, the
Company had federal tax net operating loss carryforwards of $6,184,000
that begin to expire in fiscal 2009.
18PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
9. Related Party Transactions
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement
under which Thermo Electron's corporate staff provides certain
administrative services, including certain legal advice and services,
risk management, certain employee benefit administration, tax advice and
preparation of tax returns, centralized cash management, and certain
financial and other services, for which the Company pays Thermo Electron
annually an amount equal to 1.0% of the Company's revenues. The Company
paid an annual fee equal to 1.20% and 1.25% of the Company's revenues in
calendar year 1995 and 1994, respectively. The annual fee is reviewed and
adjusted annually by mutual agreement of the parties. For these services,
the Company was charged $293,000, $211,000, and $234,000 in fiscal 1996,
fiscal 1995, and 1994, respectively. Management believes that the service
fee charged by Thermo Electron is reasonable and that such fees are
representative of the expenses the Company would have incurred on a
stand-alone basis. The corporate services agreement is renewed annually
but can be terminated upon 30 days' prior notice by the Company or upon
the Company's withdrawal from the Thermo Electron Corporate Charter (the
Thermo Electron Corporate Charter defines the relationship among Thermo
Electron and its majority-owned subsidiaries). For additional items such
as employee benefit plans, insurance coverage, and other identifiable
costs, Thermo Electron charges the Company based upon costs attributable
to the Company.
Other Related Party Services
ThermoTrex provides certain services to the Company, which are
charged to the Company based on actual usage. These services include
personnel administration, accounting, data processing, and general
administrative management. For these services, the Company was charged
$327,000, $175,000, and $101,000 in fiscal 1996, fiscal 1995, and 1994,
respectively.
Operating Leases
The Company subleases office and research facilities from
ThermoTrex and is charged for the actual square footage occupied at
approximately the same cost-per-square-foot paid by ThermoTrex under its
prime lease. The accompanying statement of operations includes expenses
from this sublease of $125,000, $22,000, and $16,000 in fiscal 1996,
fiscal 1995, and 1994, respectively. Currently, the cost of the area
occupied by the Company is $223,000 per year.
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with
Thermo Electron as discussed in Note 1.
19PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
9. Related Party Transactions (continued)
Short-term Borrowings
To help finance the acquisition of CBI in December 1993, the
Company borrowed $5,000,000 from ThermoTrex, pursuant to a promissory
note due December 1994 and bearing interest at the 90-day Commercial
Paper Composite Rate plus 25 basis points. The weighted average interest
rate of the promissory note was 4.16% in 1994. This note was repaid in
July 1994 with proceeds from the Company's initial public offering of
common stock.
Laser Manufacturing Arrangement
During fiscal 1996 and fiscal 1995, the Company purchased laser
systems at an aggregate cost of $8,549,000 and $350,000, respectively,
from Trex Medical Corporation, a publicly traded, majority-owned
subsidiary of ThermoTrex. The Company has committed to purchase
additional lasers at an aggregate cost of $6,402,000.
10. Commitments and Contingencies
Operating Leases
In addition to the leases described in Note 9, the Company occupies
office, manufacturing, warehouse, and service facilities under
noncancellable operating lease arrangements that expire at various dates
through 2006. The accompanying statement of operations includes expenses
from operating leases of $915,000, $316,000, and $534,000 in fiscal 1996,
fiscal 1995, and 1994, respectively. Future minimum payments due under
noncancellable operating leases as of September 28, 1996, are $1,604,000
in fiscal 1997; $1,812,000 in fiscal 1998; $1,829,000 in fiscal 1999;
$1,912,000 in fiscal 2000; $2,145,000 in fiscal 2001; and $7,968,000 in
fiscal 2002 and thereafter. Total future minimum lease payments are
$17,270,000.
Technology License Agreements
In June 1996, the Company purchased an approximate 10% equity
interest in AntiCancer (Note 1). In addition, the Company has licensed
from AntiCancer certain technology related to hair removal, stimulation
of hair growth, suppression of hair growth, and hair coloring under an
agreement that calls for up to $1,500,000 in future payments by the
Company upon the attainment of certain milestones by AntiCancer. In
addition to such future payments, the Company will be substantially
responsible for development costs incurred after attainment of such
milestones. In the event that the funded development efforts result in
commercially viable products that the Company elects to market, the
Company will pay AntiCancer a royalty based on sales, subject to certain
minimum payments.
20PAGE
<PAGE>
ThermoLase Corporation
Notes to Consolidated Financial Statements
10. Commitments and Contingencies (continued)
In February 1993, the Company entered into an irrevocable exclusive
technology license agreement for the use of the laser-based hair-removal
system technology. Under the terms of the agreement, the Company will pay
a royalty equal to 0.25% of the revenues recorded from the sale or use of
the laser-based hair-removal system through February 10, 2010.
Contingencies
The Company has from time to time received allegations that its
SoftLight laser-based system infringes the intellectual property rights
of others, and the Company may continue to receive such allegations in
the future. In general, an owner of intellectual property can prevent
others from using such property without a license and is entitled to
damages for unauthorized past usage. The Company has investigated the
bases of the allegations it has received to date and, based on opinions
of its counsel, believes that if it were sued on these bases it would
have meritorious defenses.
11. Export Sales
Export sales were $2,820,000 in fiscal 1996, and were less than 10%
of the Company's total revenues in fiscal 1995 and 1994. In general,
export sales are denominated in U.S. dollars.
12. Unaudited Quarterly Information
(In thousands except per share amounts)
Three Months Ended
--------------------------------------------
Dec. 30, March 30, June 29, Sept. 28,
Fiscal 1996 1995 1996 1996 1996
Revenues $ 7,400 $ 7,020 $ 6,314 $ 7,078
Gross profit 2,240 2,617 1,813 1,115
Net loss (82) (77) (22) (1,205)
Loss per share - - - (.03)
April 1, July 1, Sept. 30,
Fiscal 1995 (a) 1995 1995 1995
Revenues $ 6,109 $ 5,642 $ 5,793
Gross profit 2,515 2,115 1,490
Net loss (46) (499) (1,134)
Loss per share - (.01) (.03)
(a) In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's 39-week transition period ended September
30, 1995 is presented.
21PAGE
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors of ThermoLase Corporation:
We have audited the accompanying consolidated balance sheet of
ThermoLase Corporation (a Delaware corporation and 64%-owned subsidiary of
ThermoTrex Corporation) and subsidiary as of September 28, 1996 and
September 30, 1995, and the related consolidated statements of operations,
shareholders' investment and common stock subject to redemption, and cash
flows for the year ended September 28, 1996, the nine months ended
September 30, 1995, and the year ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
ThermoLase Corporation and subsidiary as of September 28, 1996 and
September 30, 1995, and the results of their operations and their cash
flows for the year ended September 28, 1996, the nine months ended
September 30, 1995, and the year ended December 31, 1994, in conformity
with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 1, 1996
22PAGE
<PAGE>
ThermoLase Corporation
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
These statements involve a number of risks and uncertainties, including
those detailed immediately after this Management's Discussion and
Analysis of Financial Conditions and Results of Operations under the
caption "Forward-looking Statements."
Overview
The Company has developed a laser-based system called SoftLight(SM)
for the removal of unwanted hair. The SoftLight system uses a low-energy,
dermatology laser in combination with a lotion that absorbs the laser's
energy to disable hair follicles. In April 1995, the Company received
clearance from the U.S. Food and Drug Administration (FDA) to
commercially market services using the SoftLight system. The Company
began earning revenue from the SoftLight system in the first quarter of
fiscal 1996 as a result of opening its first commercial salon (Spa Thira)
in La Jolla, California, in November 1995. The Company opened additional
salons in Dallas in June 1996, in Houston and Beverly Hills in September
1996, in Denver in October 1996, and in Boca Raton in November 1996. The
Company also plans to open a salon in suburban Detroit in December 1996
and has signed leases for four additional sites in Greenwich,
Connecticut; Manhasset, New York; suburban Minneapolis, and Palm Beach,
Florida. In June 1996, the Company initiated a program to license to
doctors the right to perform the Company's patented SoftLight
hair-removal procedure. In this program, the Company licenses its
technology to physicians and receives a per-procedure royalty that varies
depending on the location treated. The Company also provides the doctors
with the lasers and supplies that are necessary to perform the service.
The Company is marketing the SoftLight system internationally through
joint ventures and other licensing arrangements, including separate joint
ventures established in Japan in January 1996 and in France in November
1996, and a licensing arrangement established in Saudi Arabia in November
1996. The Company also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. (CBI) subsidiary, which
manufactures the lotion used in the SoftLight hair-removal process.
Results of Operations
In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the results of operations for 1996 compares the year ended
September 28, 1996 (fiscal 1996) with the unaudited year ended September
30, 1995 (1995). The results of operations for 1995 compares the nine
months ended September 30, 1995 (fiscal 1995) with the unaudited nine
months ended October 1, 1994 (fiscal 1994).
23PAGE
<PAGE>
ThermoLase Corporation
Fiscal 1996 Compared With 1995
Revenues increased 19% to $27,812,000 in fiscal 1996 from
$23,348,000 in 1995, primarily due to the inclusion of $2,647,000 of
revenues from the Company's Spa Thira salons and doctors' licensing
program, as well as $2,000,000 in SoftLight licensing fees from the joint
venture established in Japan in January 1996. Revenues at CBI were
$23,165,000 in fiscal 1996, compared with $23,348,000 in 1995. The
Company estimates that CBI will continue to represent a smaller portion
of total revenues as revenues from hair-removal services increase.
During fiscal 1996, the Company opened its first four Spa Thira
salons, including two which opened in September 1996. Under the current
pricing structure, the majority of spa clients pay a fixed fee in advance
to receive a series of treatments, as necessary. Consequently, the
Company defers revenue related to such payments, which is recognized over
the anticipated treatment period. As the Company collects further data
concerning the number of treatments required and duration of the
treatment period, the period of revenue recognition may be affected.
In January 1996, the Company entered into a joint venture agreement
to market the SoftLight process in Japan, as well as its laser-based
skin-rejuvenation process, if and when available. The Company currently
holds a 50% stake in the joint venture with an option to increase its
ownership to 51% pursuant to a fair-value purchase option. The agreement
calls for the Company to receive minimum guaranteed payments of
$1,000,000 in fiscal 1997, subject to certain exceptions in the event the
joint venture is unable to obtain patent protection in Japan on
prescribed terms.
The gross profit margin in fiscal 1996 was 28%, compared with 37%
in 1995. The decline was primarily due to the early operations of the Spa
Thira business, which has been operating below maximum capacity as the
Company develops a client base, continues refining its operating
procedures, and incurs pre-opening costs, offset in part by the effect of
revenues from the joint venture in Japan and doctors' licensing program.
As the Company opens additional Spa Thira locations in fiscal 1997, the
effect of operating each spa below maximum capacity as the Company
develops its client base, as well as pre-opening costs, will have a
negative impact on the gross profit margin. In addition, the decline in
the gross profit margin in fiscal 1996 resulted from lower margins on the
sale of skin-care and other personal-care products at CBI due to a shift
to lower-margin products.
Selling, general and administrative expenses as a percentage of
revenues was 35% in both periods, with an increase to $9,761,000 in
fiscal 1996 from $8,128,000 in 1995. The increase was primarily due to
costs related to setting up a personal-care service organization for Spa
Thira, including the hiring of senior management and administrative
staff, as well as legal costs associated with expanding the Company's
hair-removal business domestically and internationally, offset in part by
lower spending at CBI.
24PAGE
<PAGE>
ThermoLase Corporation
Fiscal 1996 Compared With 1995 (continued)
Research and development expenses decreased to $3,470,000 in fiscal
1996 from $3,774,000 in 1995. The Company expects to increase its
research and development expenses in fiscal 1997, as it increases
pre-clinical and clinical research related to improving the effectiveness
of the Company's hair-removal process and developing its skin-
rejuvenation process and investigates other health and beauty
applications for its proprietary laser technology.
Interest income increased to $3,482,000 in fiscal 1996 from
$971,000 in 1995, primarily as a result of interest income earned on
invested proceeds from the Company's August 1995 public offering of
common stock and June 1995 private placement of common stock.
The effective tax rates in both periods differ from the statutory
federal income tax rate due to nondeductible amortization of cost in
excess of net assets of acquired company, incurred in connection with the
acquisition of CBI, and the impact of CBI's state income taxes.
Fiscal 1995 Compared With Fiscal 1994
Revenues increased 36% to $17,544,000 in fiscal 1995 from
$12,878,000 in fiscal 1994, primarily due to an increase in demand as a
result of the Company's focus on designing and selling custom brands of
its skin-care and other personal-care products to large retailers and, to
a lesser extent, the inclusion of $1,025,000 in additional revenues from
Marcor, which was acquired in November 1994.
The gross profit margin was 35% in fiscal 1995, compared with 42%
in fiscal 1994. The decline in the gross profit margin in fiscal 1995 was
due to lower margins on the sale of skin-care and other personal-care
products as a result of an increase in the price of raw materials and a
shift in product mix. In addition, the decline in the gross profit margin
resulted from pre-opening costs of the first Spa Thira salon. These
decreases were offset in part by the inclusion in fiscal 1994 of a
nonrecurring adjustment to expense $250,000 of inventory revalued at the
time of CBI's acquisition by the Company.
Selling, general and administrative expenses increased to
$6,158,000 in fiscal 1995 from $3,774,000 in fiscal 1994, primarily due
to increased selling efforts to expand the market for the Company's
skin-care and other personal-care products. In addition, during the third
quarter of fiscal 1995, the Company hired a chief executive officer and a
vice president of operations, which resulted in an increase in the
Company's administrative expenses.
Research and development expenses increased to $3,151,000 in fiscal
1995 from $1,701,000 in fiscal 1994, due to the acceleration of the
Company's research and development efforts associated with the SoftLight
system, including process optimization studies.
25PAGE
<PAGE>
ThermoLase Corporation
Fiscal 1995 Compared With Fiscal 1994 (continued)
Interest income increased to $789,000 in fiscal 1995 from $413,000
in fiscal 1994, as a result of interest income earned on invested
proceeds from the Company's August 1995 public offering of common stock,
June 1995 private placement of common stock, and July 1994 initial public
offering of common stock. Interest expense, related party in 1994
represents interest associated with a $5,000,000 promissory note issued
to ThermoTrex Corporation (ThermoTrex) in connection with the acquisition
of CBI. This note was repaid in full in July 1994.
The effective tax rates in fiscal 1995 and fiscal 1994 differ from
the statutory federal income tax rate due to nondeductible amortization
of cost in excess of net assets of acquired company, incurred in
connection with the acquisition of CBI, and the impact of CBI's state
income taxes.
Liquidity and Capital Resources
Working capital was $47,197,000 at September 28, 1996, compared
with $68,691,000 at September 30, 1995. Included in working capital are
cash, cash equivalents, and available-for-sale investments of $52,055,000
at September 28, 1996, compared with $65,440,000 at September 30, 1995.
Operating activities provided cash of $3,850,000 during fiscal 1996,
primarily due to an increase in accounts payable and other accrued
expenses, including an increase in deferred revenue of $913,000 related
to the Company's Spa Thira salons.
During fiscal 1996, the Company expended $13,230,000 for purchases
of property and equipment. The Company purchased laser systems from Trex
Medical Corporation, a publicly traded, majority-owned subsidiary of
ThermoTrex, for an aggregate cost of $8,549,000, including $3,132,000 of
purchases made during the fourth quarter, which are included in due to
parent company and affiliated companies in the accompanying 1996 balance
sheet. The Company has committed to purchase additional lasers at an
aggregate cost of $6,402,000.
During fiscal 1996, the Company expended $4,400,000 for an
approximate 10% equity interest in AntiCancer Incorporated (AntiCancer).
Pursuant to a licensing agreement entered into with AntiCancer, the
Company will pay up to $1,500,000 upon the attainment of certain
milestones by AntiCancer, and is substantially responsible for
development costs incurred after the attainment of such milestones
(Note 10).
In November 1996, the Company entered into a joint venture
agreement, which is subject to certain conditions, to market its
SoftLight system in France, as well as its laser-based skin-rejuvenation
process, if and when available. The Company has committed to provide up
to $5,000,000 to fund working capital requirements of the joint venture
in exchange for its 50% stake in the joint venture.
26PAGE
<PAGE>
ThermoLase Corporation
Liquidity and Capital Resources (continued)
In September 1996, the Company's Board of Directors authorized the
repurchase by the Company of up to $10,000,000 of Company common stock
through August 28, 1997, in market transactions or pursuant to the
exercise by investors of standardized put options written on the
Company's common stock. As of December 1, 1996, no shares had been
repurchased, however the Company had contingent obligations under
outstanding put options to purchase up to 80,000 shares for $1,500,000.
In addition to the Denver, Boca Raton, and suburban Detroit spas
which were being completed as of September 28, 1996, the Company has
signed leases in Greenwich, Connecticut; Manhasset, New York; suburban
Minneapolis; and Palm Beach, Florida, where it plans to open additional
Spa Thira salons. The Company plans to open between 10 and 20 additional
spas in various parts of the United States during fiscal 1997. Depending
on the size of the salon, each facility will require approximately
$1,500,000 to $2,500,000 for such items as leasehold improvements and
laser systems. In addition, the Company expects to expend between
$8,000,000 and $10,000,000 during fiscal 1997 for equipment related to
its program to license doctors the right to perform hair-removal
services. Although the Company has no material commitments for capital
expenditures, except as noted above, such expenditures will largely be
affected by the number of Spa Thira locations that can be developed and
the number of doctors engaged in the licensing program. The Company
believes its existing resources will be sufficient to meet the capital
requirements of its existing businesses for the foreseeable future.
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important factors, among others, in some cases
have affected, and in the future could affect, the Company's actual
results and could cause its actual results in fiscal 1997 and beyond to
differ materially from those expressed in any forward-looking statements
made by, or on behalf of, the Company.
Need for Continued Product Development. In 1994, the Company
conducted a clinical trial using a SoftLight laser to collect data on the
effectiveness of the SoftLight hair-removal process under the clinical
protocol established for the Company's FDA submission. Results were based
on a dermatologist's visual observation of each subject's treatment area
at various time intervals after treatment and varied depending upon the
anatomical site treated. Of the 65 anatomical sites screened 12 weeks
after receiving such treatment, 49 (75%) experienced a reduction in hair
growth greater than 30%, with the average reduction in hair growth equal
to 46%. Of the 32 anatomical sites screened 24 weeks after receiving such
treatment, 21 (66%) experienced a reduction in hair growth greater than
30%, with the average reduction in hair growth equal to 39%. Although the
Company received FDA clearance in April 1995 to commercially market the
SoftLight process, the Company continues to study the process to better
understand the effects of the system and to develop the system in order
to increase its effectiveness and the length of time between treatments.
These studies will also be used to further clarify the duration for which
27PAGE
<PAGE>
ThermoLase Corporation
Forward-looking Statements (continued)
hair can be removed, the number of treatments required to effectively
remove hair from a given area, and the effectiveness of the process
across a broad range of skin types and anatomical sites. In addition,
although the Company has not observed any significant side effects to
date, it is continuing to monitor subjects and customers for the
development of possible side effects. Failure to further improve the
SoftLight process, including extending the duration for which hair can be
removed, may limit the Company's ability to successfully commercialize
the SoftLight process.
Uncertain Market Acceptance. The SoftLight process is significantly
different from current commercially available hair-removal technologies.
With any new cosmetic technology, there is a risk that the marketplace
may not accept, or be receptive to, the potential benefits of such
technology. Market acceptance of the SoftLight process will depend, in
large part, upon the ability of the Company to demonstrate to consumers
the safety and effectiveness of the SoftLight process and its advantages
over other types of hair-removal treatment. Although the initial
reception by customers at the Company's existing spas generally has been
positive, there can be no assurance that the SoftLight process will be
accepted by the general public. The Company's skin-rejuvenation system is
also different from current skin-rejuvenation treatments and, if
successfully developed, will be subject to similar market acceptance
risks.
Need to Manage Growth; Ability to Attract Qualified Personnel. The
Company is experiencing a period of rapid growth as it commences
commercial operations of its SoftLight process. The Company presently
intends to commercialize the SoftLight process in the United States
primarily through affiliated spas and a network of physicians using the
process as part of their practices. The Company will be required to
recruit and train a large number of personnel for its spas, including
medical staff such as physicians, registered nurses, physician
assistants, or other personnel. There may be only a limited number of
such persons with the requisite skills, and it may become increasingly
difficult for the Company to hire such personnel over time. The Company
will also be required to recruit qualified physicians for its network of
physician practices that offer the SoftLight process. Such qualified
physicians may not be available or interested in offering the SoftLight
process in their private practices. The Company's commercialization
strategy may also significantly strain operational, management,
financial, sales and marketing, and other resources. To manage growth
effectively, the Company must continue to enhance its systems and
controls and successfully expand, train, and manage its employee base and
physician network. There can be no assurance that the Company will be
able to manage this expansion effectively.
Dependence Upon Proprietary Technology. The Company has been issued
patents by the United States and certain other countries related to its
hair-removal system, has patent applications pending to extend the
coverage of issued patents in the United States, has filed corresponding
patent applications in various foreign countries, and has reserved its
rights to file further corresponding patent applications in countries
28PAGE
<PAGE>
ThermoLase Corporation
Forward-looking Statements (continued)
that are members of the Patent Cooperation Treaty (PCT). The Company has
been issued a patent by the United States related to its skin-
rejuvenation system, has filed corresponding patent applications in
various foreign countries, and has reserved its rights to file further
corresponding patent applications in countries that are members of the
PCT. The Company has patents pending in the United States for a drug
delivery system using a concept similar to its laser-based hair-removal
system, and has reserved its rights to file corresponding patent
applications in countries that are members of the PCT.
While the Company believes its technology is unique and distinct
from any technology currently claimed by other companies, there can be no
assurance that other companies are not investigating or developing other
technologies that are similar to the ThermoLase technology, that any
additional patents will be issued to the Company, or that the Company's
patents or any additional patents, if issued, will afford the Company
sufficiently broad patent coverage to provide any significant deterrent
to competitive products or services. The Company currently intends to
aggressively pursue any person or company that offers services that the
Company believes infringe on one or more of its patents. In the event the
Company becomes involved in a patent infringement claim, the expense of
litigating such claim may be costly. In addition, there may be patents or
intellectual property rights owned by others, which, if infringed by the
Company, would permit the owner to prevent the Company from using the
SoftLight process without a license and to be entitled to damages for
past infringement. The Company has from time to time received allegations
that the SoftLight process infringes the intellectual property rights of
others, and the Company may continue to receive such allegations in the
future. Although the Company believes that its products and technologies
do not infringe the intellectual property rights of others, there can be
no assurance that litigation relating to such a claim will not be brought
against the Company. If the Company is obligated to devote substantial
financial or management resources to patent litigation, its ability to
fund its operations and to pursue its business goals may be impaired. The
issuance of additional patents to the Company and the validity and
enforceability of such patents may be essential to the success of the
Company.
Uncertainty of Development of Skin-rejuvenation System. The
Company's skin-rejuvenation system is at an early stage of development.
The Company received a United States patent covering this system in June
1995 and, in late 1995, began clinical trials at a Westwood, New Jersey,
clinical site and at the University of New Mexico to determine the safety
and efficacy of the system. The Company is required to complete its
clinical trials and to obtain FDA clearance before it can commercially
market its skin-rejuvenation system. There can be no assurance that the
clinical studies will support the Company's belief as to the
effectiveness of the skin-rejuvenation system.
Compliance with FDA Regulations. The SoftLight process is subject
to FDA regulations governing the use and marketing of medical devices.
The Company's hair-removal system received FDA clearance in April 1995;
however, its skin-rejuvenation system must receive FDA clearance before
29PAGE
<PAGE>
ThermoLase Corporation
Forward-looking Statements (continued)
it can be commercially used in the United States. In addition, the
Company will be subject to requirements in certain foreign countries
where the SoftLight process may be marketed. The process of obtaining
regulatory approvals is lengthy, expensive, and inherently uncertain.
Although the Company believes that its skin-rejuvenation system is
substantially similar to a system already cleared by the FDA through the
FDA's 510(k) pre-market notification process, no assurance can be given
that the FDA will not require the Company to perform substantial clinical
trials before clearance is granted. There can be no assurance that the
appropriate clearances from the FDA will be granted or that the process
to obtain such clearances will not be excessively expensive or lengthy.
Most of CBI's products are classified as cosmetics, are regulated
by the FDA, and are subject to inspection. Furthermore, CBI manufactures
a few preparations, principally sun blocks and skin-fading agents, which
are classified as pharmaceuticals, and CBI has a FDA license for this
purpose. This license requires, among other things, that CBI adheres to
the FDA's Good Manufacturing Practices procedures for pharmaceuticals,
and CBI is subject to facilities inspection by the FDA.
The FDA also imposes various requirements on manufacturers and
sellers of products under its jurisdiction such as labeling,
manufacturing practices, record keeping, and reporting. The FDA also may
require post-market testing and surveillance programs to monitor a
product's effects. Failure to comply with applicable regulatory
requirements can result in, among other things, civil and criminal fines,
suspensions of approvals, recalls of products, seizures, injunctions and
criminal prosecutions.
Compliance with State Regulations. The Company recognizes, for
purposes of commercializing its centers, that the operation of the
SoftLight process may be deemed by certain regulators to constitute the
practice of medicine. If operation of the SoftLight process is determined
to involve the practice of medicine, the degree of physician involvement
required under applicable laws and regulations in delivering the process
is unclear. In addition, many states prohibit business corporations from
engaging in the practice of medicine, employing physicians, or entering
into certain financial arrangements with physicians, including fee
splitting.
The Company believes there are several possible structures it can
employ to provide for physician involvement where required, including,
where possible, direct employment and independent contractor status. In
some states, including California, however, the Company will be required
to license the right to use the SoftLight process to an independent
medical corporation. Although the precise legal structure of the centers
may vary as the result of differing state law requirements, the Company
believes that the operating structures adopted with respect to its
centers will not materially affect the revenue or profit received by the
Company from the operation of its centers, taken as a whole. The Company
believes that its existing and proposed structures and relationships with
physicians and others comply with applicable laws and regulations.
30PAGE
<PAGE>
ThermoLase Corporation
Forward-looking Statements (continued)
However, no formal ruling regarding the Company's various structures and
relationships has been obtained from any government agency and there can
be no assurance that any such ruling would deem such structures or
relationships in compliance with applicable laws and regulations. There
can be no assurance that review of the Company's business by courts or
healthcare, tax, labor, and other regulatory authorities that have
jurisdiction over matters including, without limitation, the corporate
practice of medicine, licensure of facilities and equipment, and
franchising will not result in determinations that could adversely affect
the operations of the Company or that the healthcare regulatory
environment will not change in a manner that would restrict the Company's
proposed operations or limit the expansion of the Company's business or
otherwise adversely affect the Company.
Limited Operating History. To date, the Company has made only
limited commercial sales of services using the SoftLight process through
its six spas currently in operation and through its physician network.
The members of the Company's current senior management, substantially all
of whom have joined the Company within the last eighteen months, continue
to develop the marketing and commercialization strategy for the Company.
However, because the Company has opened only six spas and has only
recently had sales through its physician network, it has only a limited
operating history on which to base such strategy. No assurance can be
given that the Company will be able to devise a successful marketing and
commercialization strategy or attract the personnel necessary to
effectively implement such strategy.
Intense Competition. Competition in the market for personal-care
products and services is very intense. The SoftLight process will compete
with electrolysis and other methods of hair removal, including persons
who may attempt to infringe the Company's patents. In addition, a number
of laser manufacturers have recently announced that they have filed
applications with the FDA seeking to obtain clearance to market a laser
for hair removal. Competition from these sources could limit the
Company's ability to charge premium prices for its hair-removal services.
In addition, the Company's services could be rendered obsolete or
uneconomical by the introduction of new hair-removal products or
processes.
31PAGE
<PAGE>
ThermoLase Corporation
Selected Financial Information
Nine Months
Year Ended Ended (a) Year Ended
-------------------- --------- ---------------------------
(In thousands
except per Sept. 28, Sept. 30, Sept. 30, Dec. 31, Jan. 1, Jan. 2,
share amounts) 1996 1995 1995 (b) 1994 (c) 1994 (d) 1993
------------------------------------------------------------------------------
(Unaudited)
Statement of
Operations Data:
Revenues $27,812 $23,348 $17,544 $18,682 $ 625 $ -
Income (loss)
before cumul-
ative effect
of change in
accounting
principle (1,386) (1,675) (1,679) 6 (16) (215)
Net income
(loss) (1,386) (1,675) (1,679) 15 (16) (215)
Earnings (loss)
per share
before cumula-
tive effect
of change in
accounting
principle (.03) (.04) (.04) - - (.01)
Earnings (loss)
per share (.03) (.04) (.04) - - (.01)
Balance Sheet Data:
Working capital $47,197 $68,691 $16,325 $ 3,610 $ -
Total assets 95,520 89,463 33,570 23,551 71
Long-term
obligations - - - - -
Common stock
subject to
redemption - - - 14,511 -
Shareholders'
investment 79,037 82,218 28,997 (189) 71
(a) In September 1995, the Company changed its fiscal year end from the
Saturday nearest December 31 to the Saturday nearest September 30.
Accordingly, the Company's 39-week transition period ended September 30,
1995 is presented.
(b) Reflects the net proceeds of the Company's private placements and public
offering of common stock.
(c) Reflects the net proceeds of the Company's initial public offering and the
adoption of Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
(d) Reflects the net proceeds of the Company's private placement and the
December 1993 acquisition of CBI Laboratories.
32PAGE
<PAGE>
ThermoLase Corporation
Common Stock Market Information
The following table shows the market range for the Company's common
stock based on reported sales prices on the American Stock Exchange
(symbol TLZ) for fiscal 1996 and fiscal 1995. Prices have been restated
to reflect a two-for-one stock split distributed in June 1995.
Fiscal 1996 Fiscal 1995
--------------------- ---------------------
Quarter High Low High Low
--------------------------------------------------------------------
First $27 5/8 $17 1/4 $ 6 15/16 $ 3 5/8
Second 31 20 7/8 22 3/8 5 15/16
Third 36 1/2 24 1/4 25 1/2 19 1/2
Fourth 30 3/4 19 7/8
As of November 22, 1996, the Company had 503 holders of record of
its common stock. This does not include holdings in street or nominee
names. The closing market price on the American Stock Exchange for the
Company's common stock on November 22, 1996, was $20 1/8 per share.
Stock Transfer Agent
American Stock Transfer & Trust Company is the stock transfer agent
and maintains shareholder activity records. The agent will respond to
questions on issuances of stock certificates, changes of ownership, lost
stock certificates, and changes of address. For these and similar
matters, please direct inquiries to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Shareholder Services
Shareholders of ThermoLase Corporation who desire information about
the Company are invited to contact John N. Hatsopoulos, Vice President
and Chief Financial Officer, ThermoLase Corporation, 81 Wyman Street,
P.O. Box 9046, Waltham, Massachusetts 02254-9046, (617) 622-1111. A
mailing list is maintained to enable shareholders whose stock is held in
street name, and other interested individuals, to receive quarterly
reports, annual reports, and press releases as quickly as possible.
Beginning with the 1997 fiscal year, quarterly distributions will be
limited to the second quarter report only. All quarterly reports and
press releases are also available through the Internet at the Company's
home page on the World Wide Web (http://www.thermo.com/subsid/tlz.html).
33PAGE
<PAGE>
ThermoLase Corporation
Dividend Policy
The Company has never paid cash dividends and does not expect to
pay cash dividends in the foreseeable future because its policy has been
to use earnings to finance expansion and growth. Payment of dividends
will rest within the discretion of the Board of Directors and will depend
upon, among other factors, the Company's earnings, capital requirements,
and financial condition.
Form 10-K Report
A copy of the Annual Report on Form 10-K for the year ended
September 28, 1996, as filed with the Securities and Exchange Commission,
may be obtained at no charge by writing to John N. Hatsopoulos, Vice
President and Chief Financial Officer, ThermoLase Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Wednesday, March
12, 1997, at 10:00 a.m. at the Westin Hotel, 70 Third Avenue, Waltham,
Massachusetts.
Exhibit 21
THERMOLASE CORPORATION
Subsidiaries of the Registrant
At November 30, 1996, ThermoLase Corporation owned the following
companies:
State of Jurisdiction Registrant's
Name or Incorporation % of Ownership
------------------------------------------------------------------------
CBI Laboratories, Inc. Texas 100
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation by reference of our reports dated November 1, 1996,
included in or incorporated by reference into ThermoLase Corporation's
Annual Report on Form 10-K for the year ended September 28, 1996, into
the Company's previously filed Registration Statements as follows:
Registration Statement No. 33-88396 on Form S-8, Registration Statement
No. 33-88398 on Form S-8, Registration Statement No. 33-88394 on Form
S-8, Registration Statement No. 33-88400 on Form S-8, Registration
Statement No. 33-80749 on Form S-8, Registration Statement No. 33-84516
on Form S-3, and Registration Statement No. 33-94658 on Form S-3.
Arthur Andersen LLP
Boston, Massachusetts
December 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOLASE
CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 28, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> SEP-28-1996
<CASH> 7,923
<SECURITIES> 44,132
<RECEIVABLES> 4,891
<ALLOWANCES> 319
<INVENTORY> 4,269
<CURRENT-ASSETS> 63,186
<PP&E> 21,343
<DEPRECIATION> 2,020
<TOTAL-ASSETS> 95,520
<CURRENT-LIABILITIES> 15,989
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<COMMON> 408
<OTHER-SE> 78,629
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<SALES> 23,165
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<CGS> 15,063
<TOTAL-COSTS> 20,027
<OTHER-EXPENSES> 3,470
<LOSS-PROVISION> 63
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<INCOME-PRETAX> (1,849)
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