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 27, 1997
[ ] 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: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which registered
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Common Stock, $.01 par value American Stock Exchange
Units (each unit consisting
of one share of common stock
and one redemption right) 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 October 31, 1997, was approximately $175,977,000.
As of October 31, 1997, the Registrant had 38,488,798 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended September 27, 1997, 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 5, 1998, 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 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 hair-removal
services using the SoftLight system.
The Company is marketing the SoftLight system in the U.S. through its
Spa Thira locations and through licensing agreements with physicians and
others. The Company is marketing the SoftLight system internationally by
engaging in joint ventures and other licensing arrangements with
companies or individuals that are experienced in those locations.
The Company opened its first Spa Thira in early fiscal 1996, and had
a total of four opened by the end of fiscal 1996. In fiscal 1997, the
Company opened nine more domestic spas, and by October 1997 had a total
of 14 domestic Spa Thira locations. In addition, the Company's
international arrangements resulted in the opening of spas in Paris in
May 1997 and Lugano, Switzerland, in October 1997.
In June 1996, the Company commenced a program to license to
physicians and others the right to perform the Company's patented
SoftLight hair-removal procedure. In this program, the Company licenses
its technology and receives a one-time fee and a per-procedure royalty.
The Company also provides the licensees with the lasers and lotion that
are necessary to perform the service.
The Company is marketing the SoftLight system internationally through
joint ventures and other licensing arrangements. In January 1996, the
Company established a joint venture in Japan. During fiscal 1997, the
Company established joint ventures in France in November 1996 and England
in September 1997, and six additional licensing arrangements: in Saudi
Arabia in November 1996; in Tunisia and Belgium in December 1996; in the
United Arab Emirates and Oman in March 1997; in Switzerland in April
1997; in Brazil in June 1997; and in the United Kingdom (excluding
England) and the Republic of Ireland in September 1997.
The Company continues to pursue an extensive research and development
program to improve the efficacy and duration of its hair-removal
treatment. The Company has developed a modification to its procedure,
called SoftLight 2.0, and began introducing this procedure in its spas
and to its licensees in September 1997. Although the clinical laboratory
results are encouraging, the results are preliminary and there can be no
assurance that SoftLight 2.0 will be successful in improving the
hair-removal process. The Company believes that improvements in the
hair-removal procedure are critical elements in its ability to improve
the profitability of its business.
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In March 1997, the Company filed with the FDA a 510(k) application
seeking clearance to market cosmetic skin resurfacing services utilizing
its SoftLight Rejuvenation(TM) Laser, including wrinkle- and skin-texture
treatment. This technology, which uses the same laser as the Company's
hair-removal system, is designed to improve the skin's appearance and
texture.
The Company also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. (CBI) subsidiary, which also
manufactures the lotion used in the SoftLight hair-removal process.
As of September 27, 1997, ThermoTrex Corporation (ThermoTrex) owned
25,960,996 shares of the common stock of the Company, representing 67% of
such stock then outstanding. A majority-owned subsidiary of Thermo
Electron Corporation (Thermo Electron), ThermoTrex, through its
majority-owned and wholly owned subsidiaries, manufactures mammography
and other specialized and general-purpose X-ray equipment, as well as
digital breast-biopsy systems, in addition to the Company's products and
services. ThermoTrex also conducts advanced technology research in the
areas of communications, avionics, X-ray detection, signal processing,
and lasers. As of September 27, 1997, Thermo Electron owned 781,208
shares of the common stock of the Company, representing 2% of such stock
then outstanding. Thermo Electron purchased such shares in the open
market during fiscal 1997 for $10,166,000. Thermo Electron is a world
leader in environmental monitoring and analysis instruments, biomedical
products such as heart-assist devices and mammography systems,
papermaking and recycling equipment, biomass electric power generation,
and other specialized products and technologies. Thermo Electron also
provides a range of services related to environmental quality.
ThermoTrex intends for the foreseeable future to maintain at least
50% ownership of the Company. This may require the purchase by ThermoTrex
of additional shares of Company common stock from time to time as the
number of outstanding shares issued by the Company increases. These or
any other purchases by ThermoTrex or Thermo Electron may be made either
on the open market or directly from the Company. See Notes 5 and 8 to
Consolidated Financial Statements in the Registrant's Fiscal 1997 Annual
Report to Shareholders for a description of outstanding stock options and
subordinated convertible debentures.
The Company purchased SoftLight laser systems and components from
Trex Medical Corporation (Trex Medical), a majority-owned subsidiary of
ThermoTrex, at an aggregate cost of $11,390,000, $8,549,000, and $350,000
in fiscal 1997*, 1996, and 1995, respectively. As of September 27, 1997,
the Company has committed to purchase additional laser systems and
components at an aggregate cost of $6,006,000.
* 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 1997," "fiscal 1996," and "fiscal 1995" herein are
for the years ended September 27, 1997, and September 28, 1996, and the
nine months ended September 30, 1995, respectively.
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Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report
on Form 10-K. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the foregoing, the words "believes,"
"anticipates," "plans," "expects," "seeks," "estimates," and similar
expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the
Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in the Registrant's Fiscal 1997 Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) Financial Information About Industry Segments
The Company conducts business in one industry segment.
(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 specially developed lotion that directs and 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
given a gentle cleansing. The lotion is then applied to the skin, and the
area is scanned several times with the laser beam. The laser energy 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. The laser treatment most effectively disables hair follicles
in the active growing (anagen) stage of development, and at any one time,
a certain percentage of hair follicles are in the resting (telogen)
stage. Therefore, it is necessary for clients to return for one or more
additional treatments to ensure that each follicle is treated while in
the active stage of hair growth. The number of follow-up sessions
required and the time interval between treatments varies depending on the
particular characteristics of the client and the anatomical site being
treated.
The Company's spas currently offer a variety of pricing programs,
including a fixed fee for a single treatment (occurring over two visits)
as well as fixed fees for multiple treatments during specified time
periods. The per-session cost of the SoftLight system to the customer is,
in general, substantially higher than the per-session costs of
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alternative methods of hair removal, including waxing, electrolysis, and
shaving. The total cost of the SoftLight treatments in comparison to
these alternatives varies depending on factors including the body part
treated, the pricing plan selected, and the length of time for which hair
is removed in comparison to such alternatives.
The Company has invested and continues to invest in research and
development to improve the SoftLight hair-removal process. In fiscal
1997, ThermoLase spent $5,704,000 on research and development and created
an in-house clinic with the ability to biopsy hair follicles. Through
examination of biopsies, which show the cellular structure of the entire
follicle, researchers were able to test many parameters related to the
process and the extent of damage to the follicle. The Company believes
that the greater the cellular damage to the follicle, the less likely a
healthy hair will regrow.
In September 1997 the Company introduced SoftLight 2.0, a
modification of the hair-removal process that is intended to increase the
effectiveness of the treatment. The Company has modified its lotion,
thereby eliminating the need for waxing, part of the process used in
earlier treatment protocols, and added an additional step to better
direct the laser energy into the hair follicle. The Company is continuing
to evaluate the results of the new protocol as well as the connection
between follicle damage and long-term hair removal.
ThermoLase opened its first Spa Thira salon in La Jolla, California,
in November 1995. Since then, the Company has opened domestic spas in
Beverly Hills and Newport Beach, California; Boca Raton, Miami Beach, and
Palm Beach, Florida; Chicago, Illinois; Dallas and Houston, Texas;
Denver, Colorado; Detroit, Michigan; Greenwich, Connecticut; Manhasset,
New York; and Minneapolis, Minnesota. In addition, the Company signed a
lease and plans to open a spa in the Georgetown section of Washington,
D.C., during fiscal 1998. Internationally, the first European spa opened
in Paris in May 1997 and an additional spa opened in Lugano, Switzerland,
in October 1997. A spa is also under construction in Dubai in the United
Arab Emirates, and additional spas are expected to be constructed in
Japan, Saudi Arabia, Brazil, and London, pending regulatory approvals.
The international spas are being developed pursuant to joint ventures
and other licensing arrangements. In January 1996, the Company
established a joint venture in Japan. During fiscal 1997, the Company
established joint ventures in France in November 1996 and England in
September 1997, and six additional licensing arrangements: in Saudi
Arabia in November 1996; in Tunisia and Belgium in December 1996; in the
United Arab Emirates and Oman in March 1997; in Switzerland in April
1997; in Brazil in June 1997; and in the United Kingdom (excluding
England) and the Republic of Ireland in September 1997.
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 uses medical staff,
including physicians and nurses, as well as other personnel, to operate
the SoftLight system at its centers.
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In June 1996, the Company initiated a program to license its
SoftLight technology to doctors. In this program, the Company receives a
per-procedure royalty that varies depending on the anatomical site
treated and pricing plan selected by the client. The Company also
provides the doctors with the lasers and supplies that are necessary to
perform the service. As of November 1997, approximately 150 lasers were
placed in practices in 33 states and certain international markets.
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 1997 and fiscal 1996, the Company derived revenues of
$21,037,000 and $4,647,000, respectively, 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
manufacturer under arrangements with third parties. CBI develops and
manufactures most of its products, which include shampoos, lotions,
shower creams, bath salts, and facial treatments, using botanicals and
herbal extracts. 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. In addition, CBI has developed a line of branded
products that are sold through Spa Thira locations, physicians' offices,
and other retail channels.
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
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its marketing activities, CBI attends industry trade shows and advertises
in major trade publications.
During fiscal 1997, 1996, and 1995, the Company derived revenues of
$24,196,000, $23,165,000, and $17,544,000 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 skin-treatment system for cosmetic skin resurfacing,
including wrinkle- and skin-texture treatments. In this process, the same
Nd:YAG laser used in the SoftLight hair-removal system is used in
conjunction with a specially developed lotion. The laser's energy passes
through the skin's surface and reacts with the lotion, creating heat and
mechanical energy that remove the outer layer of dead skin. The Company
also believes that the heat passing into the dermal layers may stimulate
formation of collagen and elastin -- the substances in the dermal tissue
that keep the skin strong and supple. The Company performed 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. During the second quarter of fiscal 1997, the
Company submitted a 510(k) application to the U.S. FDA for its SoftLight
Rejuvenation(TM) Laser, seeking clearance to market the process for
cosmetic skin resurfacing, including wrinkle- and skin-texture treatment.
If the system is commercially viable and the Company receives FDA
clearance to market it, the Company currently intends to offer its
SoftLight Rejuvenation system at its Spa Thira salons and/or through
licensees.
(iii) Raw Materials
In connection with its SoftLight 2.0 process, the Company currently
uses a hydrogel product that is currently available from only one source.
The Company has been able to obtain an adequate supply of hydrogel to
satisfy its current needs for the product, but there can be no assurance
that it will be able to do so indefinitely or that the Company will
continue to be able to obtain an adequate supply of the product at prices
acceptable to the Company. Other 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
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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 SoftLight-
Rejuvenation Laser. 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.
(v) Seasonal Influences
There are no significant seasonal influences on the Company's sales.
(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 1997.
(viii) Backlog
The Company's backlog of firm orders at September 27, 1997, and
September 28, 1996, which consisted exclusively of orders for CBI's
products, was $2,820,000 and $5,466,000, respectively. The Company
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estimates that CBI will continue to represent a decreasing portion of
total revenues as revenues from hair-removal services increase. The
Company does not believe that the decrease in backlog at CBI is
necessarily indicative of a trend. The Company anticipates that
substantially all of its 1997 backlog will be shipped or completed during
fiscal 1998.
(ix) Government Contracts
Not applicable.
(x) Competition
The Company expects that, in the near term, the principal competitors
relative to the hair removal 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. Over time, it is expected that the Company will face growing
competition from other laser-based hair removal services. Four other
laser manufacturers received market clearance from the FDA in 1997 for
hair removal. The Company expects that others, in addition to the laser
companies that currently have clearance for hair removal, will seek to
develop similar technologies and products that may compete directly with
the SoftLight system. The Company's services will also compete with other
hair-removal products and methods. The Company believes that competition
for its hair-removal services is based primarily on efficacy, price,
comfort, and safety.
Should it receive clearance to market the SoftLight Rejuvenation
Laser system for skin resurfacing, the Company expects that its principal
competitors will be providers of carbon dioxide laser and chemical peel
resurfacing and traditional spa-based services. The Company believes that
its SoftLight Rejuvenation skin treatment system will offer customers an
alternative to more aggressive skin-texture and wrinkle-treatment
methods.
The professional skin-care and bath-and-body products markets are
highly competitive. In selling its Salon product line, CBI competes with
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.
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(xi) Research and Development
During fiscal 1997, fiscal 1996, and fiscal 1995, the Company
incurred approximately $5,704,000, $3,470,000, and $3,151,000,
respectively, of internally sponsored research and development programs.
Approximately 31 professional employees were engaged full-time in
research and development activities at September 27, 1997.
(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 27, 1997, the Company employed 454 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 1997 Annual Report to Shareholders, which information
is incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Fiscal Year First
Name Age Became Executive Officer)
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John C. Hansen 38 President and Chief Executive Officer
(1995)
John N. Hatsopoulos 63 Chief Financial Officer and
Vice President (1992)
Dr. Paul E. Cain 49 Vice President (1993)
John J. Mlynski 40 Vice President, International (1997)
Raymond D. Sphire 38 Vice President (1996)
Charles K. Wittenberg 34 Vice President (1996)
Mark H. Wurth 45 Vice President, Operations (1995)
Paul F. Kelleher 55 Chief Accounting Officer (1992)
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
from its inception in 1982 through May 1997, and from 1982 until CBI's
acquisition by the Company, Dr. Cain was a Director of CBI. Mr. Mlynski
has been a Vice President of the Company since February 1997. From
February 1989 until joining the Company, Mr. Mlynski held various
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positions, including Division Vice President for the Asia/Pacific region,
with the Blockbuster Video division of Viacom, which rents and sells
video cassettes. 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., a provider of managed weight loss
services. From September 1993 to February 1994, Mr. Wurth was Vice
President/General Manager of Paging Network of Los Angeles, Inc., a
provider of paging communications services. From 1990 to June 1993, Mr.
Wurth held various positions at Nutri/System, Inc., a provider of managed
weight loss services, 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 a Vice
President 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 83,000 square feet of retail space for its Spa Thira
salons, under leases expiring from 2000 through 2013. 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
(a) 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 1997 Annual Report to
Shareholders and is incorporated herein by reference.
On August 5, 1997, the Company entered into an agreement to sell at
par $115 million principal amount of 4 3/8% convertible subordinated
debentures due 2004 (the Debentures).
Such debentures were sold on August 12, 1997, to the managers of the
offering in reliance on Section 4(2) of the Securities Act of 1933, as
amended (the Securities Act). Debentures having an aggregate principal
amount of $94,585,000 were then resold by the managers to institutional
buyers in the U.S., principally in reliance on the exemption from
registration provided by Rule 144A under the Securities Act. (The balance
of the Debentures were resold and delivered by the managers to non-United
States persons outside of the United States, its territories and
possessions in reliance on the exemption from registration provided by
Regulation S under the Securities Act.)
The managers of the offering were Lehman Brothers International
(Europe), Salomon Brothers Inc., Oppenheimer & Co., Inc., and HSBC
Investment Banking. The total discounts and commissions applicable to the
Debentures resold by the managers to investors in the U.S. were
approximately $1.9 million, or 2.0% of the principal amount thereof.
The Debentures are convertible into shares of the Company's common
stock at a price of $17.385 per share and are guaranteed on a
subordinated basis by Thermo Electron. ThermoTrex has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a
payment under the guarantee.
(d) The Company sold 5,349,572 shares of common stock pursuant to a
Registration Statement on Form S-1 (File No. 33-78052), which was
declared effective by the Securities and Exchange Commission on June 10,
1994. The managing underwriters of the offering were NatWest Securities
Limited and Lehman Brothers. The aggregate gross proceeds of the offering
were $16,049,000. The Company's total expenses in connection with the
offering were $1,265,000, of which $761,000 was for underwriting
discounts and commissions and $504,000 was for other expenses paid to
persons other than directors or officers of the Company, persons owning
more than 10 percent of any class of equity securities of the Company or
affiliates of the Company. The Company's net proceeds from the offering
were $14,784,000. In fiscal 1994, the Company expended $5,000,000 of such
net proceeds to repay indebtedness to its parent company, ThermoTrex, and
expended $197,000 to purchase the assets, subject to certain liabilities,
of Marcor Laboratories, Inc. In fiscal 1995, the Company expended
$1,352,000 of such net proceeds to fund its operating activities and
$1,584,000 of such net proceeds to purchase property and equipment. In
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fiscal 1996, the Company expended $4,400,000 of such net proceeds to
acquire a 10% equity interest in AntiCancer Corporation, and expended the
balance of such proceeds to purchase property and equipment.
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 1997 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the
heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Registrant's Fiscal 1997 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 1997 Annual Report to
Shareholders and are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
13PAGE
<PAGE>
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
heading "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 heading "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 heading "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 heading "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.
14PAGE
<PAGE>
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
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
On August 6, 1997, the Registrant filed a Current Report on
Form 8-K to report, under Item 5, with respect to its agreement
to sell at par $115,000,000 principal amount of its Convertible
Subordinated Debentures due 2004 (the "Debentures").
On August 13, 1997, the Registrant filed a Current Report on
Form 8-K to report, under Item 9, the sale of certain Debentures
in reliance on the exemption from registration provided by
Regulation S under the Securities Act of 1933.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
15PAGE
<PAGE>
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 4, 1997 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 4, 1997.
Signature Title
--------- -----
By: John C. Hansen President, Chief Executive Officer, and
------------------------- Director
John C. Hansen
By: John N. Hatsopoulos Chief Financial Officer and
------------------------- Vice President
John N. Hatsopoulos
By: Paul F. Kelleher Chief Accounting Officer and Director
-------------------------
Paul F. Kelleher
By: Director
-------------------------
Carliss Y. Baldwin
By: Elias P. Gyftopoulos Director
-------------------------
Elias P. Gyftopoulos
By: Gary S. Weinstein Chairman of the Board and Director
-------------------------
Gary S. Weinstein
By: Director
-------------------------
Nicholas T. Zervas
16PAGE
<PAGE>
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 3,
1997. 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 15 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 3, 1997
17PAGE
<PAGE>
SCHEDULE II
THERMOLASE CORPORATION
Valuation and Qualifying Accounts
(In thousands)
Provision
Balance at Charged Accounts Balance
Beginning to Written at End
Description of Period Expense Off Other of Period
----------- ---------- --------- -------- ------ ---------
Allowance for
Doubtful Accounts
Year Ended
September 27, 1997 $ 319 $ 83 $ - $ - $ 402
Year Ended
September 28, 1996 $ 256 $ 63 $ - $ - $ 319
Nine Months Ended
September 30, 1995 $ 103 $ 153 $ - $ - $ 256
18PAGE
<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).
4.1 Form of Unit Certificate (filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-4 [Reg.
No. 333-19633] and incorporated herein by reference).
4.2 Guaranty Agreement between the Registrant and Thermo
Electron Corporation dated March 5, 1997 (filed as Exhibit
4.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 29, 1997, and incorporated herein by
reference).
4.3 Fiscal Agency Agreement dated as of August 12, 1997, among
the Registrant, Thermo Electron Corporation, and Bankers
Trust Company as Fiscal Agent, relating to $115,000,000
principal amount of 4 3/8% Convertible Subordinated
Debentures due 2004.
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).
19PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.5 Master Repurchase Agreement dated as of January 1, 1994,
between the Registrant and Thermo Electron Corporation.
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)
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 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.)
10.10 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.)
10.11 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).
20PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.12 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).
10.13 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 10.45 to the Annual Report on Form 10-K of Thermo
Electron for the fiscal year ended December 28, 1996 [File
No. 1-8002] and as Exhibits 10.14 through 10.18 to the
Annual Report on Form 10-K of ThermoTrex for the fiscal year
ended September 27, 1997 [File No. 1-10791] and are
incorporated herein by reference.
10.14 Amended and Restated Stock Holding Assistance Plan and Form
of Promissory Note.
10.15 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).
10.16 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).
10.17 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).
10.18 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).
21PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.19 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).
10.20 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).
10.21 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).
10.22 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).
10.23 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).
10.24 Master Joint Venture Agreement dated as of October 30, 1996,
among the Registrant, Franklin Holdings, S.A. and Yves
Micheli (filed as Exhibit No. 26 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended September 28,
1996, and incorporated herein by reference).
10.25 SoftLight and Spa Thira Franchise and License Agreement dated
as of November 8, 1996, between the Registrant and Medical
Supply & Service Co. (filed as Exhibit No. 27 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 28, 1996, and incorporated herein by
reference).
10.26 Equipment Lease Agreement for SoftLight Lasers dated as of
November 8, 1996, between the Registrant and Medical Supply &
Service Co. (filed as Exhibit No. 28 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
September 28, 1996, and incorporated herein by reference).
22PAGE
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.27 Loan Agreement between the Registrant and Thermo Electron
Corporation dated July 30, 1997 (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 28, 1997, and incorporated herein by reference).
10.28 Franchise Agreement with the Effective Date of December 31,
1996, between the Company and Yves Micheli (filed as Exhibit
10.1 to the Registrant's Annual Report on Form 10-Q for the
quarter ended December 28, 1996, and incorporated herein by
reference).
10.29 Amendment to Operating Agreement of ThermoLase Japan L.L.C.
dated as of May 1, 1996, by and among the Registrant, Fox
River Partners L.P., and ThermoLase Japan L.L.C.
10.30 Form of Terms and Conditions for Purchases of Lasers from
Trex Medical Corporation.
13 Annual Report to Shareholders for the fiscal year ended
September 27, 1997 (only those portions incorporated herein
by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
EXHIBIT 4.3
FISCAL AGENCY AGREEMENT
among
THERMOLASE CORPORATION
as Issuer,
THERMO ELECTRON CORPORATION,
as Guarantor
and
BANKERS TRUST COMPANY,
as Fiscal Agent
______________________
Dated as of August 12, 1997
______________________
U.S. $115,000,000 Principal Amount
4 3/8% Convertible Subordinated Debentures Due 2004
PAGE
<PAGE>
CONTENTS
Heading Page
1. The Securities
2. Appointment of Agents and Security Registrar
3. Registration of Transfer and Exchange; Restrictions on
Transfer
4. Closing Date; Exchange of Regulation S Global Security
5. Payment
6. Redemption
7. Conversion of Securities
8. Surrendered Securities
9. Mutilated, Destroyed, Stolen or Lost Securities
10. Signatures
11. Agreements Concerning Agents
12. Offices, Resignation, Successors, Etc. of Agents, Paying,
Conversion and Transfer Agencies
13. Taxes
14. Meetings and Votes of Holders
15. Merger, Consolidation or Sale of Assets
16. Governing Law
17. Amendments
18. Agent for Service of Process
19. Notices
20. Counterparts
PAGE
<PAGE>
Exhibit A- Form of Registered Security
Form of Bearer Security
Exhibit B- Form of Regulation S Global Security
Exhibit C- Form of Certificate to be given by the Euroclear
Operator or Cedel with respect to the exchange of
all or a portion of the Regulation S Global
Security for Bearer Securities
Exhibit D- Form of Certificate of Beneficial Ownership for
Bearer Securities to be provided to the Euroclear
Operator or Cedel
Exhibit E- Form of Certificate of Beneficial Ownership for
Registered Securities to be provided to the
Euroclear Operator or Cedel
Exhibit F- Form of Certificate to be given by the Euroclear
Operator or Cedel with respect to the exchange of
all or a portion of the Regulation S Global
Security for Registered Regulation S Securities
Exhibit G- Form of Transferee Letter
PAGE
<PAGE>
FISCAL AGENCY AGREEMENT, dated as of August 12, 1997 (this
"Agreement"), among ThermoLase Corporation, a corporation duly
organized and validly existing under the laws of the State of
Delaware (the "Company"), Thermo Electron Corporation, a
corporation duly organized and validly existing under the laws of
the State of Delaware (the "Guarantor"), and Bankers Trust
Company, a banking corporation duly organized and validly
existing under the laws of the State of New York (the "Fiscal
Agent").
1. The Securities.
(a) The Company has, by a Subscription Agreement,
dated August 5,1997 (the "Subscription Agreement"), among the
Company, the Guarantor and the managers named therein (the
"Managers"), agreed to issue and sell to the Managers U.S.
$115,000,000 aggregate principal amount of its 4 3/8% Convertible
Subordinated Debentures Due 2004 (hereinafter referred to as the
"Securities"). The amount of Securities that may be issued
hereunder may be increased by agreement among Lehman Brothers
International (Europe) (the "Lead Manager"), the Company, the
Guarantor and the Fiscal Agent, and such additional securities
shall be "Securities" hereunder. The due and punctual payment of
principal, premium, if any, and interest and Additional Amounts
(as defined in Section 2 of the Securities) on the Securities
when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise, are unconditionally
guaranteed on a subordinated basis by the Guarantor. Interest on
the Securities shall be calculated on the basis of a 360 day year
comprised of twelve 30-day months.
(b) Pursuant to the Subscription Agreement, the
Managers (or their affiliates) may sell the Securities to (i)
persons who are not "U.S. Persons" (as such term is defined in
Regulation S promulgated by the United States Securities and
Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended (the "Securities Act")) in transactions that
meet the requirements of Regulation S, (ii) "qualified
institutional buyers" (as such term is defined in Rule 144A
promulgated by the SEC pursuant to the Securities Act and
hereinafter referred to as "QIBs") in reliance on Rule 144A (the
Securities that are resold by the Managers pursuant to Rule 144A
being hereinafter referred to as the "Rule 144A Securities") and
(iii) a limited number of "institutional accredited investors"
(within the meaning of Rule 501(a)(1), (2), (3) or (7)
promulgated by the SEC pursuant to the Securities Act)
("Institutional Accredited Investors") that, prior to their
purchase of any Securities, deliver to the Managers a letter
containing certain representations and agreements (the Securities
that are resold by the Managers to institutional accredited
investors being referred to as the "Accredited Investor
Securities").
1PAGE
<PAGE>
(c) A portion of the Securities will initially be
issued in the form of a temporary global debenture in bearer form
without coupons or conversion rights having endorsed thereon the
guarantee of the Guarantor (the "Guarantee"), which will be
deposited with a depository in London for Cedel and Euroclear for
the accounts of the subscribers of such Securities on the Closing
Date (as defined herein). Upon deposit of the temporary global
debenture, Cedel or Euroclear, as the case may be, will credit
each subscriber with a principal amount of Securities equal to
the principal amount thereof for which it has subscribed and paid
in the aggregate principal amount of the entire issue of
Securities less the aggregate principal amount of the Rule 144A
Securities and Accredited Investor Securities concurrently
issued, substantially in the form of Exhibit B hereto (the
"Regulation S Global Security"). As hereinafter provided, the
Regulation S Global Security may subsequently be exchanged for
Securities (i) in printed definitive form with the Guarantees
endorsed thereon either as (a) bearer Securities ("Bearer
Securities") in denominations of U.S. $1,000 and U.S. $10,000 and
with interest coupons attached thereto, representing the
semi-annual interest payable thereon, or (b) fully registered
Securities ("Registered Regulation S Securities") in
denominations of U.S. $1,000 and integral multiples thereof,
without coupons, or (ii) if permitted by Cedel or Euroclear, as
the case may be, a beneficial interest in the Rule 144A Global
Security (as defined below), in accordance with the provisions of
Section 3(c). Bearer Securities shall be substantially in the
form of Exhibit A hereto, including the coupons set forth
therein. Registered Regulation S Securities also shall be
substantially in the form of Exhibit A hereto. The Securities
which are not Bearer Securities or the Regulation S Global
Security are hereinafter collectively referred to as the
"Registered Securities."
(d) The Rule 144A Securities will initially be issued
in the form of a global Security in the aggregate principal
amount of the Rule 144A Securities, which Security shall be in
substantially the form of Exhibit A hereto, having endorsed
thereon a Guarantee, and is hereinafter referred to as the "Rule
144A Global Security." Such Rule 144A Global Security shall be
duly executed by the Company and authenticated by the Fiscal
Agent (as defined below) as hereinafter provided and will be
deposited on the Closing Date with, or on behalf of, The
Depositary Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee of DTC. The aggregate principal amount of
the Rule 144A Global Security may from time to time be increased
or reduced by adjustments made in the Security Register.
Transfers of interests in the Rule 144A Global Security will be
subject to certain restrictions set forth therein and described
in Section 3 hereof.
(e) The Accredited Investor Securities will initially
be issued in fully registered form in minimum denominations of
U.S. $50,000 and integral multiples of U.S. $1,000 in excess
2PAGE
<PAGE>
thereof, which Securities shall be in substantially the form of
Exhibit A hereto, having endorsed thereon a Guarantee, and are
hereinafter collectively referred to as "Registered Accredited
Investor Securities." Such Registered Accredited Investor
Securities shall be in definitive, fully registered certificated
form only and registered in the names of such Institutional
Accredited Investors or their nominees. Such Institutional
Accredited Investors may not elect to hold Registered Accredited
Investor Securities through DTC, Euroclear or Cedel. As provided
herein, such Registered Accredited Investor Securities may
subsequently be exchanged for Registered Accredited Investor
Securities in denominations of $1,000 and integral multiples
thereof. The aggregate principal amount of the Registered
Accredited Investor Securities may be increased or reduced by
adjustments made in the Security Register. Transfers of
Registered Accredited Investor Securities will be subject to
certain restrictions set forth therein and described in Section 3
hereof.
(f) During the period beginning on the Closing Date
and ending on the date which is two years (or the then
applicable holding period under Rule 144(k) under the Securities
Act (or successor provision)) after the later of the date of
original issuance thereof and the last date on which the Company
or any affiliate of the Company was the owner thereof (or any
predecessor), all Rule 144A Securities, all Accredited Investor
Securities, all other Registered Securities and all Securities
issued upon registration of transfer of or in exchange for such
Securities, shall be "Restricted Securities" and shall be subject
to the restrictions on transfer in Section 3 hereof; provided,
however, that the term "Restricted Securities" shall not include
Registered Securities as to which such restrictions on transfer
have been terminated in accordance with Section 3(g) hereof. All
Restricted Securities shall bear the legend required by Section
3(f) hereof.
(g) The Securities will be convertible as provided in
Section 4 of the Registered Securities and the Bearer Securities
and Section 7 hereof. The Securities may be redeemed by the
Company as provided in Section 3 of the Registered Securities and
the Bearer Securities and Section 6 hereof. The Securities will
be subordinated as provided in Section 7 of the Registered
Securities and the Bearer Securities. The Registered Securities,
the Bearer Securities and the Regulation S Global Security shall
contain such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement
and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as
may, consistent herewith, be determined by the officer of the
Company executing such Securities, as evidenced by his execution
of such Securities.
(h) The Company in issuing the Securities shall use
CUSIP numbers, and the Fiscal Agent may use such CUSIP numbers in
3PAGE
<PAGE>
any notice of redemption with respect to the Securities. The
Company shall obtain one CUSIP number for the Rule 144A
Securities, one for the Accredited Investor Securities and one
for the Registered Regulation S Securities. In addition, the
Company shall obtain an ISIN number and a Common Code for the
Regulation S Global Security, the Bearer Securities and the
Registered Regulation S Securities.
(i) Pursuant to the Subscription Agreement, the
Managers (or their affiliates) may sell the Securities to persons
who are not persons within the United States or its possessions
or "United States persons" as defined in the Internal Revenue
Code except as provided in U.S. Treasury Regulation Section
1.163-5(c)(2)(i)(D). In compliance with United States tax laws
and regulations, Bearer Securities may not be offered or sold
during the 40-day period beginning on the Closing Date, or at any
time if part of a Manager's unsold allotment, to a person who is
within the United States or its possessions or to a United States
person other than (a) foreign branches of United States financial
institutions if such institutions agree in writing to comply with
the requirements of Section 165(j)(3)(A), (B), or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations
thereunder, (b) United States offices of exempt distributors, or
(c) United States offices of international organizations or
foreign central banks. United States tax laws and regulations
also require that Bearer Securities not be delivered within the
United States or its possessions.
(j) The Company will use its reasonable best efforts
to have the Securities approved for listing on the Luxembourg
Stock Exchange or such other exchange as shall be agreed upon by
the Managers and the Company, as soon as practicable after the
date hereof.
2. Appointment of Agents and Security Registrar.
(a) The Company and the Guarantor hereby appoint Bankers
Trust Company, at present having an office at Four Albany Street,
New York, New York 10006 (The "Fiscal Agent"), as their fiscal
agent in respect of the Securities and the Guarantees upon the
terms and subject to the conditions herein set forth. (Bankers
Trust Company and its successor or successors as such fiscal
agent qualified and appointed in accordance with Section 12
hereof are herein called the "Fiscal Agent.") The Fiscal Agent
shall have the powers and authority granted to and conferred upon
it herein and in the Securities, and such further powers and
authority, acceptable to it, to act on behalf of the Company and
the Guarantor as the Company and the Guarantor may hereafter
grant to or confer upon it.
(b) The Company and the Guarantor hereby appoint
Bankers Trust Company, having an office at 1 Appold Street,
Broadgate, London EC2A 2HE as principal paying agent (the
"Principal Paying Agent"), in respect of the Securities and the
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Guarantees upon the terms and subject to the conditions herein
set forth. (The Fiscal Agent and Principal Paying Agent and
their successor or successors as such paying agent qualified and
appointed in accordance with Section 12 hereof are herein called
the "Paying Agent.") The Paying Agent shall have the powers and
authority granted to and conferred upon it herein and in the
Securities, and such further powers and authority, acceptable to
it, to act on behalf of the Company and the Guarantor as the
Company and the Guarantor may hereafter grant to or confer upon
it. As used herein, "paying agencies" shall mean paying agencies
maintained by the Company as provided in Section 12(f) hereof.
(c) The Company hereby appoints the Fiscal Agent as
its conversion agent in respect of the Securities upon the terms
and subject to the conditions herein set forth. (The Fiscal Agent
and its successor or successors as such conversion agent
qualified and appointed in accordance with Section 12 hereof are
herein called the "Principal Conversion Agent," and the Paying
Agent, the Principal Paying Agent, the Principal Conversion
Agent, the Transfer Agents (as herein defined) and the Fiscal
Agent are sometimes herein referred to severally as an "Agent"
and, collectively, as the "Agents"). The Principal Conversion
Agent shall have the powers and authority granted to and
conferred upon it herein and in the Securities, and such further
powers and authority, acceptable to it, to act on behalf of the
Company as the Company may hereafter grant to or confer upon it.
As used herein, "conversion agencies" shall mean conversion
agencies maintained by the Company as provided in Section 12(f)
hereof.
(d) The Company shall cause to be kept at the office
of the Fiscal Agent a register (the registers maintained in such
office and in any other office or agency designated for such
purpose (which office shall be located outside of the United
Kingdom) being herein sometimes collectively referred to as the
"Security Register") in which, subject to such reasonable
regulations as the Fiscal Agent may prescribe, the Company shall
provide for the registration of Registered Securities and of
transfers of Registered Securities. The Fiscal Agent is hereby
appointed "Security Registrar" for the purpose of registering
Registered Securities and transfers of Registered Securities as
herein provided.
(e) With respect to the Securities issuable or issued
in whole or in part in the form of the Rule 144A Global Security,
the Company and the Guarantor hereby appoint DTC, at present
located at 55 Water Street, New York, New York, 10041, as the
depository for the Rule 144A Global Security upon the terms and
conditions herein set forth. DTC and its successor or successors
as such depository are herein called the "Depository."
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3. Registration of Transfer and Exchange; Restrictions on
Transfer.
(a) Upon surrender for registration of transfer of any
Registered Security at any office or agency designated for such
purpose by the Company pursuant to Section 12(g) hereof, the
Company shall execute, and the Fiscal Agent shall authenticate,
register and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of any
authorized denominations and of a like aggregate principal
amount, having endorsed thereon a Guarantee duly executed by the
Guarantor, and bearing such restrictive legends as may be
required by this Agreement; provided, however, that, with respect
to any Registered Security that is a Restricted Security, the
Fiscal Agent shall not register the transfer of such Security
unless the conditions in Sections 3(b) hereof shall have been
satisfied. The holder of each Restricted Security, by such
holder's acceptance thereof, agrees to be bound by the transfer
restrictions set forth herein and in the legend on such
Restricted Security.
(b) Whenever any Restricted Security is presented or
surrendered for registration of transfer or exchange for a
Registered Security registered in a name other than that of the
holder, no registration of transfer or exchange shall be made
unless:
(i) The registered holder presenting such
Restricted Security for transfer shall have certified to the
Fiscal Agent by checking box (a) of the Transfer Notice attached
to such Restricted Security that such registered holder is
transferring such Restricted Security to a QIB in compliance with
the exemption from registration under the Securities Act provided
by Rule 144A thereunder (or a successor provision);
(ii) The registered holder presenting such
Restricted Security for transfer shall have certified to the
Fiscal Agent that the registered holder is transferring such
Restricted Security outside the United States in a transaction
meeting the requirements of Rule 904 of Regulation S under the
Securities Act by checking box (b) of the Transfer Notice
attached to such Restricted Security;
(iii) (A) The registered holder presenting such
Restricted Security for transfer shall have certified to the
Fiscal Agent that such registered holder is transferring such
Restricted Security to an "institutional accredited investor"
(within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) in a transaction that is exempt from the
registration requirements of the Securities Act by checking box
(c) of the Transfer Notice attached to such Restricted Security;
and (B) a broker or dealer registered under Section 15 of the
Securities Exchange Act of 1934, as amended, shall have certified
to the Fiscal Agent in writing that: (x) each person who will
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become a beneficial owner of the Restricted Security upon
transfer is an institutional "accredited investor" (as such term
is defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act); (y) no general solicitation or general
advertising was made or used by such broker or dealer in
connection with the offer and sale of such Restricted Security to
such person(s); and (z) such institutional accredited investor
has been informed that the Securities have not been registered
under the Securities Act and are subject to the restrictions on
transfer set forth in the Securities and this Agreement;
(iv) The registered holder presenting such
Restricted Security for transfer shall have certified to the
Fiscal Agent that the registered holder is transferring the
Registered Security to the Company by checking box (d) of the
Transfer Notice attached to such Restricted Security; or
(v) The Fiscal Agent has received transfer
documentation indicating, and a written opinion of U.S. counsel
acceptable in form and substance to the Company and the Fiscal
Agent, that the transfer is being made pursuant to an exemption
from, or a transaction not otherwise subject to, the registration
requirements of the Securities Act.
(vi) In the event the Securities are issued as a
Rule 144A Global Security with the Depository: (A) the Fiscal
Agent may deal with the Depository as the authorized
representative of the holders; (B) the rights of the holders
shall be exercised only through the Depository and shall be
limited to those established by law and agreement between the
holders and the Depository and/or direct participants of the
Depository and (C) the direct participants of the Depository
shall have no rights under this Agreement under or with respect
to any of the Securities hold on their behalf by the Depository,
and the Depository may be treated by the Fiscal Agent and its
agents, employees, officers and directors as the absolute owner
of the Securities for all purposes whatsoever.
In the case of transfer pursuant to the foregoing clauses
(ii), (iii) or (v) above, the Company and the Fiscal Agent may
require that the registered holder deliver an opinion of counsel,
certifications or other information acceptable to them in form
and substance. The Fiscal Agent shall notify the Company upon
receipt of such Transfer Notice and the Company shall immediately
advise the Fiscal Agent as to whether an opinion of counsel,
certifications or other information as described herein shall be
required for such transfer. In addition, in the case of a
transfer pursuant to the foregoing clause (iii) above, the
transferor shall be required to deliver a letter from the
transferee substantially in the form of Exhibit G hereto.
(c) Bearer Securities may, at the option of the holder
thereof, (with all unmatured coupons appertaining thereto and
matured defaulted coupons appertaining thereto), be exchanged at,
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subject to applicable laws and regulations, the offices of the
Principal Paying Agent and, if the Securities are listed on the
Luxembourg Stock Exchange and so long as listed thereon,
Luxembourg or as designated by the Company for such purposes
pursuant to Section 12(g), for an equal aggregate principal
amount of Registered Securities in denominations of $1,000 and
integral multiples thereof without coupons and/or Bearer
Securities of authorized denominations. If such holder is unable
to produce any such unmatured coupon or coupons or matured coupon
or coupons in default, such exchange may be effected if the
Bearer Securities are accompanied by payment in funds acceptable
to the Company in an amount equal to the face amount of such
missing coupon or coupons or the surrender of such missing coupon
or coupons may be waived by the Company and the Guarantor if
there be furnished to them and the Fiscal Agent such security or
indemnity as they may require to save each of them, the Fiscal
Agent, the Paying Agent, any paying agency and any of their
respective officers, directors, employees or agents harmless. If
thereafter the holder of such Security shall surrender to any
paying agency any such missing coupon in respect of which such a
payment shall have been made, such holder shall be entitled to
receive the amount of such payment from the Company; provided,
however, that, except as otherwise provided in the form of Bearer
Security set forth in Exhibit A hereto, interest represented by
coupons shall be payable only upon presentation and surrender of
those coupons outside of the United States, its territories and
its possessions. Bearer Securities and coupons are transferable
upon delivery.
Registered Securities may, at the option of the holder
thereof, be exchanged at the office of the Fiscal Agent, or
subject to applicable laws and regulations, the offices of the
Principal Paying Agent and, if the Securities are listed on the
Luxembourg Stock Exchange and so long as listed thereon, a paying
agency in Luxembourg or as designated by the Company for such
purposes pursuant to Section 12(g), for an equal aggregate
principal amount of Registered Securities of different
denominations. Registered Securities shall not be exchangeable
for Bearer Securities. Whenever any Registered Securities are so
surrendered for exchange, the Company shall execute, and the
Fiscal Agent shall authenticate and deliver, the Registered
Securities which the holder making the exchange is entitled to
receive, having endorsed thereon a Guarantee duly executed by the
Guarantor. If the holder thereof requests in writing that such
Registered Security be exchanged for an interest in the Rule 144A
Global Security, such Registered Security will be exchangeable
into an equal aggregate principal amount of beneficial interest
in the Rule 144A Global Security; provided, however, that, if
such Registered Security is a Restricted Security, such exchange
may only be made if such holder certifies to the Fiscal Agent in
writing that such holder is a QIB by checking box (a) of the
Transfer Notice on the reverse of such Security. Upon any
exchange as provided in the immediately preceding sentence, the
Fiscal Agent shall cancel such Registered Security and cause, or
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direct any custodian for the Rule 144A Global Security to cause,
in accordance with the standing instructions and procedures
existing between the Depository and any such custodian, the
aggregate principal amount of Securities represented by the Rule
144A Global Security to be increased accordingly. If no Rule
144A Global Securities are then outstanding, the Company shall
issue and the Fiscal Agent shall authenticate a new Rule 144A
Global Security in the appropriate principal amount, having
endorsed thereon a Guarantee duly executed by the Guarantor.
Any person having a beneficial interest in a Rule 144A
Global Security may upon request exchange such beneficial
interest for a Registered Security only as provided in this
paragraph. Upon receipt by the Company and the U.S. Agent of (i)
written or electronic instructions from the Depository or its
nominee (or such other form of instructions as is customary) on
behalf of any person having a beneficial interest in a Rule 144A
Global Security and upon receipt by the Fiscal Agent of a written
order of such person containing registration instructions and
(ii) in the case of a Restricted Security, the following
additional information and documents (all of which may be
submitted by facsimile):
(A) if such beneficial interest is being
transferred to the person designated as being the beneficial
owner, a certification to that effect from such person; or
(B) if such beneficial interest is being
transferred to a person other than the person designated as being
the beneficial owner, the provisions of Section 3(b) hereof have
been satisfied;
in which case the Fiscal Agent or any custodian for the Rule 144A
Global Security, at the direction of the Fiscal Agent, shall, in
accordance with the standing instructions and procedures existing
between the Depository and such custodian, cause the aggregate
principal amount of the Rule 144A Global Security to be reduced
accordingly and, following such reduction, the Company shall
execute and the Fiscal Agent shall authenticate and deliver to
such person or the transferee, as the case may be, a Registered
Security in the appropriate principal amount, having endorsed
thereon a Guarantee duly executed by the Guarantor and, if such
Registered Security is a Restricted Security, including the
appropriate legend. Registered Securities issued in exchange for
a beneficial interest in the Rule 144A Global Security pursuant
to this paragraph shall be registered in such names and such
authorized denominations as shall be instructed to the Fiscal
Agent. The Fiscal Agent shall deliver such Registered Securities
to the persons in whose names such Securities are so registered.
(d) Notwithstanding any other provision of this
Agreement (other than the provisions set forth in Section 3(e)
hereof), the Rule 144A Global Security may not be transferred as
a whole except by the Depository to a nominee of the Depository
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or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(e) If at any time either (i) the Depository for the
Rule 144A Global Security notifies the Company and the Guarantor
that the Depository is unwilling or unable to continue as
Depository for the Rule 144A Global Security and a successor
Depository for the Rule 144A Global Security is not appointed by
the Company and the Guarantor within 90 days after delivery of
such notice, or (ii) the Company and the Guarantor, at their sole
discretion, notify the Fiscal Agent in writing that the Company
elects to cause the issuance of Registered Securities under this
Agreement, then the Company shall execute, and the Fiscal Agent
shall authenticate and deliver, Registered Securities in an
aggregate principal amount equal to the principal amount of the
Rule 144A Global Security in exchange for such Rule 144A Global
Security.
(f) Each certificate evidencing Restricted Securities
shall bear a legend in substantially the following form:
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO
"U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY
WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT
WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO
THE DATE WHICH IS TWO YEARS (OR THE THEN APPLICABLE HOLDING
PERIOD UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR SUCCESSOR
PROVISION)) AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR),
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL INVESTOR THAT IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501 (A)(1),(2),
(3) OR (7) UNDER THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
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AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING
CLAUSES (II)(D), (E) OR (F) IS SUBJECT TO THE RIGHT OF THE ISSUER
OF THIS SECURITY AND THE FISCAL AGENT FOR SUCH ISSUER TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
(g) The restrictions imposed by Section 3(b) upon the
transferability of any particular Restricted Security shall cease
and terminate when such Restricted Security has been sold
pursuant to an effective registration statement under the
Securities Act or transferred pursuant to Rule 144 under the
Securities Act (or any successor provision thereto), unless the
holder is an affiliate of the Company within the meaning of said
Rule 144 (or such successor provision). Any Restricted Security
as to which such restrictions on transfer shall have expired in
accordance with their terms or shall have terminated may, upon
surrender of such Restricted Security for exchange to the Fiscal
Agent in accordance with the provisions of this Section 3(g)
(accompanied, in the event that such restrictions on transfer
have terminated by reason of a transfer pursuant to Rule 144 (or
any successor provision), by an opinion of counsel reasonably
acceptable to the Company, addressed to the Company and the
Fiscal Agent and in form and scope satisfactory to the Company,
to the effect that the transfer of such Restricted Security has
been made in compliance with Rule 144 (or such successor
provision)), be exchanged for a new Registered Security, of like
tenor and aggregate principal amount, which shall not bear the
restrictive legend required by Section 3(f) hereof. The Company
shall promptly inform the Fiscal Agent in writing of the
effective date of any registration statement registering the
Securities under the Securities Act.
(h) The transfer and exchange of the Rule 144A Global
Security or beneficial interests therein shall be effected
through the Depository, in accordance with this Agreement and the
procedures of the Depository therefor, which shall include
restrictions on transfer comparable to those set forth herein to
the extent required by the Securities Act.
(i) At such time as all beneficial interests in the
Rule 144A Global Security have either been exchanged for
Registered Securities, redeemed, repurchased or canceled, the
Rule 144A Global Security shall be returned to or retained and
canceled by the Fiscal Agent. At any time prior to such
cancellation, if any beneficial interest in the Rule 144A Global
Security is exchanged for Registered Securities, redeemed,
repurchased or canceled, the principal amount of Securities
represented by the Rule 144A Global Security shall be reduced
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accordingly and an endorsement shall be made on the Rule 144A
Global Security, by the Fiscal Agent or any custodian therefor,
at the direction of the Fiscal Agent, to reflect such reduction.
(j) All Securities issued upon any registration of
transfer or exchange of Securities shall be the valid obligations
of the Company, and the Guarantees endorsed thereon shall be the
valid obligations of the Guarantor, evidencing the same
obligations, and entitled to the same benefits under this
Agreement, as the Securities surrendered upon such registration
of transfer or exchange.
(k) Every Registered Security presented for
registration of transfer or surrendered for exchange shall be
duly endorsed, and shall include the certification referred to in
Section 3(c)(A). The registration of the transfer of a
Registered Security by the Security Registrar shall be deemed to
be the written acknowledgment of such transfer on behalf of the
Company.
(1) No service charge shall be made for any
registration of transfer or exchange (other than the cost of
delivery), but the Company or the Transfer Agent may require
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 4 hereof or not involving any
registration of transfer.
(m) Neither the Company nor the Fiscal Agent nor any
of the offices or agencies designated for the purposes specified
in Section 12(f) nor any Transfer Agent shall be required (i) to
exchange Bearer Securities for Registered Securities during the
period between the close of business on any Record Date (as
defined in Section 5(c) hereof) and the opening of business on
the next succeeding interest payment date, (ii) to exchange any
Bearer Security (or portion thereof) for a Registered Security if
the Company shall determine and inform the Principal Paying Agent
in writing that, as a result thereof, the Company would incur
adverse consequences under the United States Federal income tax
laws at the time of such exchange, or (iii) in the event of a
redemption in part, (A) to register the transfer of Registered
Securities or to exchange any Bearer Securities for Registered
Securities for a period of 15 days immediately preceding the date
notice is given pursuant to Section 3(f) of the Registered
Securities and the Bearer Securities identifying the serial
numbers of any Securities to be redeemed, or (B) to register the
transfer of or exchange of any Registered Security so selected
for redemption in whole or in part, except portions not being
redeemed of Securities being redeemed in part, or (C) to exchange
any Bearer Security called for redemption; provided, however,
that a Bearer Security called for redemption may be exchanged, on
the terms and conditions set forth above, for a Registered
Security that is simultaneously surrendered, with written
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instruction for payment on the date fixed for redemption, unless
the redemption date is after a Record Date and on or before the
next succeeding interest payment date, in which case such
exchange may be made only prior to the Record Date immediately
preceding the redemption date.
4. Closing Date; Exchange of Regulation S Global Security.
(a) At any time and from time to time after the
execution and delivery of this Agreement, the Company may deliver
Securities executed by the Company in accordance with this
Agreement bearing the Guarantees of the Guarantor endorsed
thereon to the Fiscal Agent, in the case of Registered
Securities, and to the Principal Paying Agent, in the case of
Bearer Securities or the Regulation S Global Security for
authentication together with an officer's certificate of the
Company directing such authentication, and the Fiscal Agent or
Principal Paying Agent shall thereupon authenticate and make such
Securities available for delivery upon and in accordance with the
written order of the Company. No Security shall be valid or
enforceable for any purpose unless and until the certificate of
authentication thereon shall have been manually signed by a duly
authorized signatory of the Fiscal Agent or Principal Paying
Agent and such duly executed certificate of authentication on any
Security shall be conclusive evidence that the Security has been
duly authenticated and delivered hereunder. The Regulation S
Global Security, the Rule 144A Global Security and the Registered
Accredited Investor Securities will be issued upon payment to the
Company or its order in United States dollars in same-day funds
by check or wire transfer to a United States dollar account
designated by the Company, at 2:00 p.m., London time, on August
12, 1997, or at such other time on the same or such other date,
not later than 5:00 p.m., London time, on the fourth Business Day
(as such term is defined in Section 5(h) hereof) in London
thereafter, as the Managers and the Company may agree (the
"Closing Date"). Such payment will be made (1) upon
authorization from the Managers, (2) against delivery as provided
in Section 4(b) hereof of the amount, if any, of Rule 144A
Securities and Registered Accredited Investor Securities as the
Managers may request and as they shall direct, and (3) against
delivery of the Regulation S Global Security for the balance of
the Securities to Bankers Trust Company, London office, as
depositary (the "Common Depositary") for Morgan Guaranty Trust
Company of New York, Brussels office, as operator of the
Euroclear System (the "Euroclear Operator"), and Cedel Bank
societe anonyme ("Cedel"). The Regulation S Global Security
shall be held on deposit with the Common Depositary for the
accounts of the Euroclear Operator and Cedel, for credit to the
Managers' respective Securities Clearance Accounts (or to such
other accounts as the Lead Manager may have specified) with the
Euroclear Operator or Cedel.
(b) On the Closing Date, the Company shall execute and
deliver to (i) the Managers, at the office of an affiliate of the
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Lead Manager (as defined in the Subscription Agreement) in New
York, Registered Accredited Investor Securities bearing the
Guarantees of the Guarantor endorsed thereon (which shall have
been duly authenticated by the Fiscal Agent and which may be in
typewritten form) in respect of the Accredited Investor
Securities and (ii) the Depositary or its custodian, at its
office in New York, the Rule 144A Global Security bearing the
Guarantee of the Guarantor endorsed thereon (which shall have
been duly authenticated by the Fiscal Agent and which may be in
typewritten form) in respect of the Rule 144A Securities.
(c) On or before the Exchange Date, the Company will
execute and deliver to the Principal Paying Agent, at its office
in London, or the Paying Agent, at its office in Luxembourg,
definitive Registered Regulation S Securities and Bearer
Securities bearing the Guarantees of the Guarantor endorsed
thereon in the aggregate principal amount outstanding in the
Regulation S Global Security and in such proportion of Registered
Regulation S Securities to Bearer Securities as the Principal
Paying Agent may specify. "Exchange Date" means the date
following the expiration of the 40-day period commencing on the
Closing Date. On or after the Exchange Date, the Regulation S
Global Security may be surrendered to the Principal Paying Agent
to be exchanged, as a whole or in part, for definitive Bearer
Securities without charge, and the Principal Paying Agent, or its
agent, shall authenticate and deliver, in exchange for such
Regulation S Global Security or the portions thereof to be
exchanged, an equal aggregate principal amount of definitive
Bearer Securities, but only upon presentation to the Principal
Paying Agent at its office in London of a certificate of the
Euroclear Operator or Cedel with respect to the Regulation S
Global Security or portions thereof being exchanged,
substantially in the form of Exhibit C hereto, to the effect that
it has received a certificate or certificates in substantially
the form set forth in Exhibit D hereto dated no earlier than 15
days prior to the Exchange Date and signed by the person
appearing in its records as the owner of the Regulation S Global
Security or portions thereof being exchanged. Similarly, on or
after the Exchange Date, portions of the Regulation S Global
Security may be exchanged for an equal aggregate principal amount
of definitive Registered Regulation S Securities upon
presentation to the Principal Paying Agent of a certificate
substantially in the form of Exhibit F hereto, to the effect that
it has received a certificate or certificates in substantially
the form set forth in Exhibit E hereto dated no earlier than 15
days prior to the Exchange Date and signed by the person
appearing in its records as the owner of the Regulation S Global
Security or portions thereof being exchanged. In addition, if
permitted by Cedel or Euroclear, as the case may be, on or after
the Exchange Date, (or if permitted by the Company and the Fiscal
Agent, before the Exchange Date), portions of the Regulation S
Global Security may be exchanged for a beneficial interest in an
equal aggregate principal amount of the Rule 144A Global Security
(which portion shall be a Restricted Security) upon
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certifications acceptable to the Company and to the Fiscal Agent
to the effect that the person(s) beneficially owning such portion
of the Rule 144A Global Security are QIBs that acquired such
interest in transaction(s) that complied with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder (or a successor provision).
(d) The definitive Securities and coupons shall be
printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner permitted
by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such
Securities and coupons, as evidenced by such execution.
(e) Only Bearer Securities may be issued upon receipt
by the Euroclear Operator or Cedel of a certificate or
certificates in the form of Exhibit D hereto. Bearer Securities
will be delivered only outside the United States, its territories
and its possessions. Only Registered Securities may be issued
upon receipt by the Euroclear Operator or Cedel of a certificate
or certificates in the form of Exhibit E hereto.
(f) The delivery to the Principal Paying Agent by the
Euroclear Operator or Cedel of any certificate referred to above
may be relied upon by the Company and the Principal Paying Agent
as conclusive evidence that a corresponding certificate or
certificates has or have been delivered to the Euroclear Operator
or Cedel pursuant to the terms of this Agreement. The Principal
Paying Agent shall receive such certificate on behalf of the
Company and shall promptly deliver the original certificate to
the Company, retaining a copy of such certificate for its
records.
(g) Upon any such exchange of a portion of the
Regulation S Global Security for a definitive Bearer Security or
Securities or a definitive Registered Regulation S Security or
Securities or a beneficial interest in the Rule 144A Global
Security or an Accredited Investor Security or Securities, the
Regulation S Global Security shall be endorsed by the Principal
Paying Agent to reflect the reduction of its principal amount by
an amount equal to the aggregate principal amount of such
definitive Security or Securities. Until so exchanged in full,
the Regulation S Global Security shall in all respects be
entitled to the same benefits under this Agreement as definitive
Securities authenticated and delivered hereunder.
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5. Payment.
(a) The Company will pay, or cause to be paid, to the
Paying Agent, at its office in New York, the amounts, at the
times and for the purposes, set forth herein and in the text of
the Securities, and the Company hereby authorizes and directs the
Paying Agent to make payment, or to cause payment to be made, at
the Agencies set forth in Section 12(f), of the principal of,
premium, if any, and interest on and Additional Amounts (as
defined in Section 2 of the Registered Securities and the Bearer
Securities), if any, on the Securities from such payments.
(b) At least 15 days prior to the date on which any
payment of Additional Amounts shall be required to be made
pursuant to Section 2 of the Registered Securities and the Bearer
Securities, the Company will furnish the Paying Agent, at its
office in New York, each other paying agency of the Company, the
Fiscal Agent and the Principal Paying Agent with a certificate of
one of its duly authorized officers instructing the Paying Agent
and each other paying agency of the Company as to the amounts
required (i) to be deducted or withheld for or on account of any
taxes described in Section 2 of the Registered Securities and the
Bearer Securities from a payment to be made on that date and (ii)
to be paid to each holder of Securities or coupons as Additional
Amounts pursuant to that Section. If the foregoing amounts are
not uniform for all holders, then the Company's certificate shall
specify by country of residence or other factor the amounts
required to be deducted or withheld and to be paid as Additional
Amounts for each holder or class of holders of the Securities or
coupons. In the absence of its receipt of any such certificate
from the Company, the Paying Agent may make payment without
deduction or withholding. The Company and the Guarantor hereby
agree to indemnify the Paying Agent, each other paying agency of
the Company and the Fiscal Agent and their respective officers,
directors, employees and agents, for, and to hold them harmless
against, any loss, liability or expense reasonably incurred
without gross negligence or bad faith on their part, arising out
of or in connection with actions taken or omitted by any of them
in reliance on any certificate furnished pursuant to this
Section.
(c) Interest on any Registered Security that is
payable, and is punctually paid or duly provided for, on any
interest payment date shall be paid to the person in whose name
that Security is registered at the close of business on the
January 31 or July 31 immediately preceding such interest payment
date (each a "Record Date"), even if such Registered Security is
canceled, upon redemption, conversion or otherwise, after such
Record Date. In case a Bearer Security is surrendered for
exchange for a Registered Security after the close of business on
any Record Date and before the opening of business on the next
succeeding interest payment date, the Fiscal Agent shall not be
required to perform such transfer or exchange of such Security.
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(d) Interest on any Registered Security that is
payable upon conversion in accordance with Section 7(a) hereof
shall be paid to the person in whose name that Security is
registered immediately prior to the conversion, provided that if
a Registered Security is converted after the close of business on
a Record Date and before the opening of business on the next
succeeding interest payment date, accrued interest shall be paid
on the next succeeding interest payment date to the person in
whose name that Security is registered at the close of business
on that Record Date.
(e) Any interest on any Registered Security that is
payable, but is not punctually paid or duly provided for, on any
interest payment date shall forthwith cease to be payable to the
registered holder thereof on the relevant regular record date by
virtue of having been such holder, and such defaulted interest
may be paid by the Company to the registered holder of such
registered Security on a subsequent record date established by
the Company in any lawful manner if, after notice given by the
Company to the Principal Paying Agent of the proposed payment
pursuant to this clause, such manner of payment shall be deemed
practicable by the Principal Paying Agent.
(f) Subject to the foregoing provisions of this
Section 5, each Security delivered under this Agreement upon
registration of transfer of or in exchange for or in lieu of any
other Security shall carry all the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Security.
(g) In order to provide for the payment of the
principal of, premium, if any, and interest on the Securities as
the same shall become due and payable, the Company shall pay to
the Paying Agent at its office in New York, in such coin or
currency of the United States of America as at the time of
payment is legal tender for the payment of public and private
debts therein, and in same day funds, the following amounts (and
the Company shall give notice to the Principal Paying Agent at
least two full Business Days prior to the date payment is due to
the Paying Agent as to the means of such payment), to be held and
applied by the Paying Agent as hereinafter set forth:
(i) The Company shall pay to the Paying Agent, at
its office in New York, on the Business Day immediately prior to
each interest payment date in same day funds an amount sufficient
to pay the interest due (and Additional Amounts, if any) on all
the Securities outstanding on such interest payment date and the
Paying Agent shall apply the amounts paid to it to the payment of
such interest (and Additional Amounts, if any) on such interest
payment date.
(ii) Upon presentment for conversion of any
Securities pursuant to Section 7(a) hereof (except as described
in the proviso to Section 5(d)), the Paying Agent shall promptly
notify the Company of the amount of any accrued interest due and
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owing thereon. Within four Business Days of such notification,
the Company shall pay to the Paying Agent, at its office in New
York, an amount sufficient to pay the accrued interest due on
such Securities (and Additional Amounts, if any, thereon), and
the Paying Agent shall apply the amounts so paid to it to the
payment of such accrued interest (and Additional Amounts, if any,
thereon) in accordance with the terms of the Securities.
(iii) If the Company shall elect, or shall be
required, to redeem the Securities in accordance with Section 6
hereof, the Company will pay to the Paying Agent, at its office
in New York, not later than 10:00 a.m. New York time on the date
fixed for redemption thereof in same day funds an amount
sufficient (with any amount then held by the Paying Agent and
available for the purpose) to pay the redemption price of the
Securities called for redemption on the redemption date or
entitled to be redeemed, together with accrued interest thereon
(and Additional Amounts, if any, thereon) to the date fixed for
redemption and not paid pursuant to clause (g)(i) of this Section
5, and the Paying Agent shall apply such amount to the payment of
the redemption price and accrued interest thereon (and Additional
Amounts, if any, thereon) in accordance with the terms of the
Securities.
(iv) Not later than 10:00 a.m. New York time on
the maturity date of the Securities, the Company shall pay to the
Paying Agent, at its office in New York, in same day funds an
amount which, together with any amounts then held by the Paying
Agent, and available for payment thereof, shall be equal to the
entire amount of principal and interest (and Additional Amounts,
if any) to be due on such maturity date on all the Securities
then outstanding, and the Paying Agent shall apply such amount to
each payment of the principal of and interest on (and Additional
Amounts, if any, on) the Securities in accordance with the terms
of the Securities.
(h) Notwithstanding anything in this Section to the
contrary, if any payment of interest or premium or principal (or
Additional Amounts, if any) is due on a day that is not a
Business Day, payment shall be made on the next succeeding
Business Day, with the same effect as if made on the day such
payment was due, and no interest shall accrue for the period
after such date. A "Business Day" is defined, with respect to
any act to be performed pursuant hereto or to the Securities, as
any day which is not (i) a Saturday, Sunday, or (ii) a day on
which banking institutions in (x) the place where such act is to
occur and (y) New York are authorized or obligated by applicable
law, regulation or executive order to close.
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6. Redemption.
(a) If, under the circumstances described in Section 3
of the Registered Securities and Bearer Securities, the Company
shall elect or be required to redeem outstanding Securities, the
following provisions shall be applicable:
(i) The Company shall, at least 45 days in the
case of a redemption in whole or 75 days in the case of a
redemption in part (or such shorter period as shall be reasonably
acceptable to the Fiscal Agent) before the date designated for
such redemption, give written notice to the Agents of its
election to redeem the Securities on the redemption date
specified in such notice and state in such notice that the
conditions precedent to such redemption have occurred and
describe them, and in case of redemptions pursuant to Section
3(b) of the Registered Securities and the Bearer Securities,
shall provide to the Fiscal Agent an opinion of counsel
satisfactory to the Fiscal Agent stating that the legal
conditions precedent to the right of the Company to effect such
redemption have occurred, and shall request the Fiscal Agent to
arrange for publication and mailing of the notice specified in
clause (a) (ii) below.
(ii) In case the Company shall give notice to the
Fiscal Agent of its election to redeem the Securities, the Fiscal
Agent shall cause to be published on behalf of and at the expense
of the Company a notice of redemption in accordance with the
provisions of Section 3 of the Registered Securities and Bearer
Securities and shall mail by first-class mail a copy of the
notice to each holder of a Registered Security at the address of
such holder as it shall appear in the Security Register. The
Fiscal Agent shall send a copy of such notice of redemption to
the Company, the Guarantor, the Paying Agent (if different from
the Fiscal Agent) and each other paying agency of the Company.
(iii) Such notice shall be published on
behalf and at the expense of the Company in an Authorized
Newspaper (as defined in Section 19 hereof) on a Business Day in
New York City and in London and, if the Securities are listed on
the Luxembourg Stock Exchange and so long as listed thereon, in
an Authorized Newspaper in Luxembourg, or, if publication in
either London or Luxembourg is not practical, in an Authorized
Newspaper in any country in Western Europe, as set forth in
Section 19 of this Agreement and Section 3 of the Registered
Securities and Bearer Securities. In the case of a redemption in
whole, notice will be given once not more than 60 nor less than
30 days prior to the date fixed for redemption. In the case of
partial redemption, notice will be given twice, the first such
notice to be given not more than 75 nor less than 60 days prior
to the date fixed for redemption and the second such notice to be
given not more than 60 and not less than 30 days prior to the
date fixed for redemption. The Fiscal Agent shall notify the
Company promptly of the portions of outstanding Securities to be
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called for redemption as determined pursuant to Section 3(a) of
the Registered Securities and Bearer Securities.
(b) Under the circumstances described in Section 3(d)
of the Registered Securities and Bearer Securities concerning the
redemption of outstanding Securities at the option of the holders
thereof, the following provisions shall be applicable:
(i) The Company shall give notice to the Fiscal
Agent of the occurrence of a Redemption Event (as defined below)
immediately upon the occurrence of such Redemption Event. For
purposes hereof a "Redemption Event" shall have occurred if the
Company's Common Stock (or other equity securities into which the
Securities are then convertible) is neither listed for trading on
a United States national securities exchange nor approved for
trading on an established automated over-the-counter trading
market in the United States. Such notice shall state:
(A) The nature of the Redemption Event;
(B) The Holder Redemption Date (as defined in
Section 3(d) of the Registered Securities and Bearer Securities)
in respect of such Redemption Event; and
(C) The redemption price as set forth in Section
3(d) of the Registered Securities and Bearer Securities.
(ii) The Fiscal Agent shall cause to be published
on behalf of the Company a notice of entitlement to redeem in
accordance with the provisions of Section 3 of the Registered
Securities and Bearer Securities and shall mail by first-class
mail a copy of such notice to each holder of a Registered
Security at the address of such holder as it shall appear in the
Security Register. The Fiscal Agent shall send a copy of such
notice of entitlement to redeem to the Company, the Guarantor,
the Paying Agent (if different from the Fiscal Agent) and each
other paying agency of the Company hereunder. Such notice shall
be published on behalf and at the expense of the Company in
Authorized Newspapers on a Business Day in New York City and in
London and, if the Securities are listed on the Luxembourg Stock
Exchange and so long as listed thereon, in an Authorized
Newspaper in Luxembourg, or, if either publication in London or
Luxembourg is not practical, in an Authorized Newspaper in any
country in Western Europe, as set forth in Section 19 of this
Agreement. Notice shall be given not later than 10 days after
the later of the Exchange Date or the date of the occurrence of a
Redemption Event.
(iii) Upon the deposit of any of the Registered
Securities or Bearer Securities with the agency designated by the
Company as the place for payment of the Registered Securities and
Bearer Securities together with a duly signed and completed
redemption notice in the form set forth on the reverse of the
Bearer Securities and Registered Securities, all in accordance
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with the provisions of Section 3 of the Registered Securities and
Bearer Securities, the holder of such Registered Security and
Bearer Security shall be entitled to receive a non-transferable
receipt evidencing such deposit.
(iv) The Fiscal Agent shall notify the Company on
each Business Day in the five Business Days prior to the Holder
Redemption Date for outstanding Securities to be redeemed under
this Section 6(b) of the amount required to redeem such
Securities.
7. Conversion of Securities.
(a) Subject to and upon compliance with the provisions
of this Section 7, at the option of the holder thereof, any
outstanding Registered Security or Bearer Security or, in the
case of any outstanding Registered Security or Bearer Security of
a denomination other than $1,000, any portion of the principal
amount thereof which is $1,000 or an integral multiple of $1,000,
may be converted into shares of the Company's common stock, par
value $.01 per share ("Common Stock"), issuable upon conversion
of the Securities, at the principal amount thereof, or of such
portion thereof, into fully paid and nonassessable shares of
Common Stock ("Conversion Shares") as set forth in the Registered
Securities and Bearer Securities. Such Registered Securities or
Bearer Securities may be converted on or after the date which is
the later of: (i) the Exchange Date, and (ii) the date of the
effectiveness of the Registration Statement to be filed by the
Company under the Securities Act relating to the Common Stock
issuable upon conversion of the Restricted Securities (the
"Registration Date"), and in any event prior to redemption or
maturity. The right to convert Securities called for redemption
will terminate at the close of business on the fifteenth day next
preceding the date fixed for redemption (or if such date is not a
Business Day, then the next succeeding Business Day), and will be
lost if not exercised prior to that time. No payment or
adjustment shall be made upon any conversion on account of any
dividends on the Common Stock issued upon conversion. Accrued
interest from the immediately preceding interest payment date
until the conversion date (and Additional Amounts, if any,
thereon) will be paid to the holder, through the Paying Agent, in
the same manner as payments of interest, within five Business
Days after the conversion date, provided that if a Registered
Security is converted after the close of business on a Record
Date and before the opening of business on the next succeeding
interest payment date, accrued interest shall be paid on the next
succeeding interest payment date to the person in whose name that
Security is registered at the close of business on that Record
Date. The price at which Conversion Shares shall be delivered
upon conversion (herein called the "Conversion Price") shall be
initially U.S. $17.385 per share of Common Stock. The Conversion
Price shall be adjusted in certain instances as provided in
paragraphs (c)(i), (ii), (iii), (iv), (vi) and (vii) of Section 4
of the Registered Securities and Bearer Securities.
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In lieu of issuing shares of Common Stock upon such
conversion of the Securities, the Company may elect, in its sole
discretion, to pay cash in respect of all or a portion of the
shares of Common Stock otherwise issuable upon such conversion.
The amount of cash to be so delivered shall be equal to the
number of shares of Common Stock as to which cash is being paid
in lieu of issuance of shares of Common Stock multiplied by the
Market Price of a share of Common Stock, subject to appropriate
adjustment in the event the Conversion Price is adjusted as
provided in the Definitive Securities. The Company shall inform
each Conversion Agent and Paying Agent of the Market Price.
"Market Price" means the Weighted Average Price of the
Common Stock on the last Stock Trading Day preceding the
applicable conversion date, appropriately adjusted to reflect
events giving rise to an adjustment to the Conversion Price as
provided in the Definitive Securities.
"Stock Trading Day" means each day on which the securities
exchange or quotation system which is used to determine the
Weighted Average Price is open for trading or quotation and on
which at least one trade of the Common Stock has occurred.
"Weighted Average Price" of a share of Common Stock on any
Stock Trading Day means the weighted average per share sale price
for all sales of shares of Common Stock on such Stock Trading Day
(or, if the information necessary to calculate such weighted
average per share sale price is not available, the average of the
high and low sale prices or, if no sales prices are reported, the
average of the bid and asked prices or, if more than one in
either case, the average of the average bid and average asked
prices) as reported in the composite transactions for the
American Stock Exchange, or if the Common Stock is not listed or
admitted to trading on a United States national or regional
securities exchange, as reported by the National Association of
Securities Dealers Inc. Automated Quotation System or by the
National Quotation Bureau Incorporated; provided that, in the
absence of such quotations, the Company shall be entitled to
determine the Weighted Average Price on the basis of such
quotations as it considers appropriate.
(b) In order to exercise the conversion privilege, the
holder of any Security to be converted shall surrender such
Security, or, if less than the entire principal amount of a
Registered Security or Bearer Security of a denomination other
than $1,000 is to be converted, the portion thereof to be
converted, together with all unmatured coupons and any matured
coupons in default appertaining thereto, at any applicable office
or agency of the Company maintained for that purpose pursuant to
Section 12(f) hereof, accompanied by a duly signed and completed
Conversion Notice, in substantially the form set forth in the
Registered Securities and Bearer Securities, to the Company, at
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such office or agency that the holder elects to convert such
Security (or specified portion thereof).
Upon presentment for conversion of any Securities pursuant
to this Section, the Principal Conversion Agent shall immediately
that day notify the Company of such presentment. Within two
business days (as defined in the Securities) after the conversion
date, the Company shall deliver to the Paying Agent written
notice of whether such Debenture shall be converted into shares
of Common Stock or cash or a combination of shares of Common
Stock and cash (specifying the amounts of each) (the "Company
Conversion Notice"). The Company shall deliver to such holder no
later than the fifth business day following the conversion date,
through the Paying Agent, in respect of the portion of the
converted security to be settled in cash, and as promptly as
practicable on or following the conversion date in respect of the
portion of the Converted Security as to which shares of Common
Stock are to be issued, the amount of cash and certificates
representing the number of shares of Common Stock to be
delivered, and cash in lieu of any fractional shares. No payment
or adjustment shall be made upon any conversion on account of any
dividends on the Common Stock issued upon conversion. Accrued
interest from the immediately preceding interest payment date
until the conversion date (and Additional Amounts, if any,
thereon) will be paid to the holder, through the Paying Agent, in
the same manner as payments of interest, within five business
days (as defined in the Securities) after the conversion date,
provided that if a Registered Security is converted after the
close of business on a Record Date and before the opening of
business on the next succeeding interest payment date, accrued
interest shall be paid on the next succeeding interest payment
date to the person in whose name that security is registered at
the close of business on that Record Date.
(c) Securities shall be deemed to have been converted
immediately prior to the close of business on the day of
surrender of such Securities for conversion in accordance with
the foregoing provisions, and at such time the rights of the
holders of such Securities as holders shall cease, and the person
or persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder
or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company shall
cause to be issued or delivered at such office or agency a
certificate or certificates for the number of full shares of
Common Stock issuable or deliverable upon conversion, together
with payment, in lieu of any fraction of a share, as provided
below. The Paying Agent shall, within five Business Days after
the conversion date, make a payment, or cause payment to be made,
at the Agencies set forth in Section 12(f), for the accrued
interest thereon (and Additional Amounts, if any, thereon),
except as otherwise provided in this Section 7.
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In the event that payment by the Company of cash in lieu of
issuing shares of Common Stock upon conversion of a Security
shall require any withholding for or on account of any present or
future tax, assessment or other governmental charge imposed upon
or as a result of such cash payment by the United States or any
political subdivision or taxing authority thereof or therein,
then the Company will be required to pay Additional Amounts with
respect thereto in the same manner and to the same extent as is
provided for in Section 2 of the Definitive Securities.
In the event that payment by the Company of cash in lieu of
issuing shares of Common stock upon conversion of a Security
shall require any certification, identification or information
reporting requirement of United States law or regulation with
regard to the nationality, residence or identity of a beneficial
owner of a Bearer Security who is a United States Alien (as
defined in Section 2 hereof) (other than a requirement (a) which
would not be applicable to a payment made (i) directly to the
beneficial owner or (ii) to a custodian, nominee or other agent
of the beneficial owner, or (b) which could be satisfied by the
holder, custodian, nominee or other agent certifying that the
beneficial owner is a United States Alien, provided, however, in
each case referred to in clauses (a) (ii) and (b) payment by such
custodian, nominee or agent to the beneficial owner is not
otherwise subject to any requirement referred to in this
sentence), the Company may not elect to make the cash payment
unless such certification, identification or information
reporting requirement would be fully satisfied by payment of
United States withholding, backup withholding or similar taxes
and the Company pays such Additional Amounts (without regard to
Section 2 hereof) as are necessary in order that, following the
effective date of such requirement, every net payment made
outside the United States by the Company or a related paying
agent of the cash payment on a Bearer Security to a holder who is
a United States Alien (without regard to a certification,
identification or information reporting requirement as to the
nationality, residence or identity of such holder), after
deduction for United States withholding, backup withholding or
similar taxes (other than withholding, backup withholding or
similar taxes (i) which would not be applicable in the
circumstances referred to in the parenthetical clauses above or
(ii) are imposed as a result of presentation of such Bearer
Security for payment more than 10 days after the date on which
such payment becomes due and payable or on which payment thereof
is duly provided for, whichever is later), will not be less than
the amount provided in the Bearer Security to be then due and
payable.
(d) In the case of any Registered Security or Bearer
Security of a denomination other than $1,000 which is converted
in part only, upon such conversion the Company shall execute and
the Fiscal Agent shall authenticate and deliver to the holder
thereof, at the expense of the Company, a new Security or
Securities of any authorized kind or denomination as requested by
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such holder, in aggregate principal amount equal to the
unconverted portion of the principal amount of such Security,
having endorsed thereon a Guarantee duly executed by the
Guarantor.
(e) No fractional shares of Common Stock shall be
issued or delivered upon conversion of Securities. If more than
one Security shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock which
shall be issuable or deliverable upon conversion thereof shall be
computed on the basis of the aggregate principal amount of the
Securities (or, in the case of Registered Securities or Bearer
Securities of a denomination other than $1,000, specified
portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable or
deliverable upon conversion of any Security or Securities (or, in
the case of Registered Securities or Bearer Securities of a
denomination other than $1,000, specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction
in an amount equal to the same fraction of the Closing Price (as
defined in Section 4(c)(v) of the Registered Securities and
Bearer Securities) for a share of Common Stock at the close of
business on the day preceding the day of conversion.
(f) Whenever the Conversion Price is adjusted as
provided in the Registered Securities and Bearer Securities:
(i) the Company shall compute the adjusted
Conversion Price in accordance with the terms of the Registered
Securities and Bearer Securities and shall prepare a certificate
signed by the President, any Vice President or the Treasurer of
the Company setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment
is based, and such certificate shall forthwith be filed with the
Principal Conversion Agent and at each office or agency
maintained for the purpose of conversion of Securities pursuant
to Section 12(f) hereof; and
(ii) a notice stating that the Conversion
Price has been adjusted and setting forth the adjusted Conversion
Price shall forthwith be prepared, and, as soon as practicable
after it is prepared, the Company shall promptly cause a notice
setting forth the adjusted Conversion Price to be given to the
holders of the Securities. Such notice shall be published on
behalf and at the expense of the Company in Authorized Newspapers
on a Business Day in New York City and in London and, if the
Securities are listed on the Luxembourg Stock Exchange and so
long as listed thereon, in an Authorized Newspaper in Luxembourg,
or, if publication in either London or Luxembourg is not
practical, in an Authorized Newspaper in any country in Western
Europe, as set forth in Section 19 of this Agreement and Section
4 of the Registered Securities and Bearer Securities.
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(g) In case:
(i) the Company shall declare a dividend (or
any other distribution) on its Common Stock payable otherwise
than in cash out of its retained earnings (excluding dividends
payable in stock for which adjustment is made pursuant to the
terms of the Registered Securities and Bearer Securities); or
(ii) the Company shall authorize the granting
to the holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights; or
(iii) of any reclassification of the Common
Stock of the Company (other than a subdivision or combination of
its outstanding shares of Common Stock), or of any consolidation
with, or merger of the Company into, any other corporation, or of
any merger of another corporation into the Company (other than a
merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of
the Company), or of any sale or transfer of all or substantially
all of the assets of the Company (which shall not include the
sale or transfer, in one or more transactions, of any portion of
the assets of the Company to any corporation or corporations if
each of such corporations immediately following such transfer is
at least 51% owned, directly or indirectly, by the Company,
provided that such sale or transfer does not result in the
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company); or
(iv) of the involuntary dissolution,
liquidation or winding up of the Company; or
(v) the Company shall take any other action
which would require an adjustment of the Conversion Price
pursuant to the Registered Securities and Bearer Securities;
then the Company shall cause to be filed with the Principal
Conversion Agent and at each office or agency maintained for the
purpose of conversion of Securities a notice setting forth the
adjusted Conversion Price and shall cause notice to be given as
provided in Section 19 except that notice need be given once at
least 20 days (or 10 days in any case specified in clause (i) or
(iii) above) prior to the applicable record date hereinafter
specified, stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants is to be determined,
or (y) the date on which a reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
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to exchange their shares of Common Stock for the securities, cash
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation
or winding up. The failure to give notice required by this
Section or any defect therein shall not affect the legality or
validity of any dividend, distribution, rights, warrants,
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, or the vote on any such
action.
(h) The Company shall, at all times, have reserved and
available, free from preemptive rights, out of its authorized but
unissued shares of Common Stock, for the purpose of effecting the
conversion of Securities, the full number of Conversion Shares
then issuable upon the conversion of all Securities (based on the
aggregate principal amount of Securities outstanding).
(i) The Company shall file, as soon as practicable
following the Closing Date, a shelf registration statement with
the United States Securities and Exchange Commission covering the
resale of shares of Common Stock issuable upon conversion of the
Securities ("Registrable Securities"); provided that any holder
of any Securities shall not sell any shares pursuant to such
registration statement unless and until it provides to the
Company such information as the Company may reasonably request
for use in connection with the identification of such holder as a
selling stockholder in such registration statement, or any
prospectus included therein, and no such sale shall be made by
such holder pursuant to such registration statement unless and
until such information is included by the Company in such
registration statement or prospectus. The Company shall in good
faith use its best efforts and at its cost to cause such
registration statement to be declared effective as promptly as
practicable thereafter and to include in such registration
statement the information provided by a holder as a selling
stockholder and shall notify the Fiscal Agent of the
effectiveness thereof and agrees to use its best efforts to (i)
cause all registrations with, and to obtain any approvals by, any
governmental authority under any Federal or state law of the
United States that may be required in connection with the
conversion of the Securities into Common Stock and the resale
thereof, (ii) maintain the effectiveness of such registrations
until the earlier of the date that Rule 144(k) under the
Securities Act (or successor provision) is available for the
resale of the shares of Common Stock issuable upon conversion of
the Restricted Securities (or other securities issuable upon
conversion of the Securities) and (iii) to list the shares of
Common Stock required to be issued or delivered upon conversion
of Securities (or other securities issuable upon conversion of
the Securities) prior to such issue or delivery on such national
securities exchange or automated over-the-counter trading market
where such Common Stock is listed or traded at the time of such
delivery. The Company and the Guarantor, jointly and severally,
shall, without limitation as to time, indemnify and hold
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harmless, to the fullest extent permitted by law, each holder of
Registrable Securities, the officers, directors and agents and
employees of each of them, each person who controls such holder
(within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended)
and the officers, directors, agents and employees of any such
controlling person, from and against all losses, claims, damages,
liabilities, costs (including, without limitation, the costs of
preparation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or based upon any untrue
or alleged untrue statement of a material fact contained in any
such registration statement, or related prospectus or in any
amendment or supplement thereto, or arising out of or based upon
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based
solely upon information, if any, furnished in writing to the
Company by such holder expressly for use therein; provided, that
the Company shall not be liable to any holder of Registrable
Securities to the extent that any such Losses arise out of or are
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus
if either (A)(i) such holder failed to send or deliver a copy of
the final prospectus with or prior to the delivery of written
confirmation of the sale by such holder of a Registrable Security
to the person asserting the claim from which such Losses arise
and (ii) the prospectus would have completely corrected such
untrue statement or alleged untrue statement or such omission or
alleged omission; or (B)(i) such untrue statement or alleged
untrue statement, omission or alleged omission is completely
corrected in an amendment or supplement to the prospectus and
(ii) having previously been furnished by or on behalf of the
Company with copies of the prospectus as so amended or
supplemented, such holder thereafter fails to deliver such
prospectus as so amended or supplemented, prior to or
concurrently with the sale of a Registrable Security to the
person asserting the claim from which such Losses arise.
Promptly after receipt by an indemnified party under this
Paragraph (i) of notice of any claim or the commencement of any
action, the indemnified party shall, if a claim in respect
thereof is to be made against the Company or the Guarantor under
this Paragraph (i) notify the Company and the Guarantor in
writing of the claim or the commencement of that action;
provided, however, that the failure to notify the Company or the
Guarantor shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Paragraph
(i). If any such claim or action shall be brought against an
indemnified party, the Company and the Guarantor shall be
entitled to participate therein and, to the extent that they
wish, to assume the defense thereof. After notice from the
Company or the Guarantor to the indemnified party of its election
to assume the defense of such claim or action, neither the
Company nor the Guarantor shall be liable to the indemnified
party under this Paragraph (i) for any legal or other expenses
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subsequently incurred by the indemnified party in connection with
the defense thereof; provided, however, if the defendants in any
such action include both an indemnified party and the Company or
the Guarantor and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and
for other indemnified parties that are different from or
additional to those available to the Company or the Guarantor,
the indemnified party or parties under this Paragraph (i) shall
have the right to employ not more than one counsel to represent
them and, in that event, the reasonable fees and expenses of not
more than one such separate counsel shall be paid by the Company
or the Guarantor. Neither the Company nor the Guarantor shall be
liable for any settlement effected without its written consent of
any claim or action.
(j) The Company covenants that all shares of Common
Stock which may be issued or delivered upon conversion of
Securities (or other securities issuable upon conversion of the
Securities) will upon issuance be fully paid and nonassessable
and, except as provided in Section 13 hereof, the Company will
pay all stamp, excise or similar taxes or duties, liens and
charges with respect to the issue thereof.
(k) The Fiscal Agent shall cause the converted
securities to be cancelled and destroyed in accordance with its
policy for disposal of canceled securities or as otherwise
directed by the Company. Converted Securities shall not be
transferred. The Principal Conversion Agent shall give the
Company prompt notice of all Securities which have been
converted, and if the Fiscal Agent is not also the Principal
Conversion Agent, the Company will promptly give, or cause to be
given, written notice to the Fiscal Agent of the serial numbers
of all Securities which have been converted.
(1) In case of any consolidation with, or merger of
the Company into, any other corporation, or in case of any merger
of another corporation into the Company (other than a merger
which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of
the Company), or in case of any sale or transfer, in one or more
transactions, of all or substantially all of the assets of the
Company (which shall not include the sale or transfer of any
portion of the assets of the Company to any corporation or
corporations if each of such corporations immediately following
such transfer is at least 51% owned, directly or indirectly, by
the Company, provided that such sale or transfer does not result
in the reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), the
corporation formed by such consolidation or resulting from such
merger, or which acquires such assets, as the case may be, shall
execute and deliver to the Fiscal Agent an amendment to the
Fiscal Agency Agreement providing that the holder of each
Registered Security and Bearer Security shall have the right
during the period such Security shall be convertible as specified
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in the Registered Securities and Bearer Securities to convert
such Security only into the kind and amount of securities, cash
and other property receivable upon such consolidation, merger,
sale or transfer by a holder of the number of shares of Common
Stock of the Company into which such Security might have been
converted immediately prior to such consolidation, merger, sale
or transfer, assuming, if such consolidation, merger, sale or
transfer is prior to the period such Security shall be
convertible as specified in the Registered Securities and Bearer
Securities, that the Securities were convertible at such time at
the initial Conversion Price as adjusted pursuant to the terms of
the Registered Securities and Bearer Securities. Such amendment
shall provide for adjustments which, for events subsequent to the
effective date of such amendment, shall be as nearly equivalent
as may be practicable to the adjustments provided for in the
Registered Securities and the Bearer Securities. The above
provisions of this Section shall similarly apply to successive
consolidations, mergers, sales or transfers.
(m) Subject to Section 11(j) hereof, neither the
Fiscal Agent nor the Conversion Agent or conversion agency
appointed by the Company shall at any time be under any duty or
responsibility to any holder of Securities to determine whether
any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any
such adjustment when made, or with respect to the method
employed, or herein or in the Registered Securities and Bearer
Securities provided to be employed, in making the same. Neither
the Fiscal Agent nor the Conversion Agent or conversion agency
appointed by the Company shall be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common
Stock or of any securities or property which may at any time be
issued or delivered upon the conversion of any Security; and
neither the Fiscal Agent nor the Conversion Agent or conversion
agency appointed by the Company makes any representation with
respect thereto. Neither the Fiscal Agent nor the Conversion
Agent or conversion agency appointed by the Company shall be
responsible for any acts or omissions of the Company including
without limitation any failure of the Company to issue, transfer
or deliver any certificates representing shares of Common Stock
or other securities or property or to make any cash payment upon
the delivery of any Security for the purpose of conversion or to
comply with any of the covenants contained in this Section 7.
(n) Any Common Stock issued upon conversion of a
Restricted Security ("Restricted Common Stock") at any time prior
to the date which is two years (or the then applicable holding
period under Rule 144(k) under the Securities Act (or successor
provision)) after the date of original issuance of such
Restricted Security and the last date on which the Company or any
affiliate of the Company was the owner thereof (or any
predecessor), and when a registration statement in respect of
such Common Stock is not effective under the Securities Act,
shall be subject to the restrictions on transfer set forth in
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Section 3 hereof to the same extent as such Restricted Securities
which were so converted. All shares of Restricted Common Stock
shall bear the legend and transfer requirements set forth in
Section 3(f) hereof, with such modifications thereto as the
Company shall deem appropriate.
8. Surrendered Securities.
All Securities, together with any coupons appertaining
thereto, surrendered for payment, redemption, retirement,
transfer or exchange and all coupons paid through the application
of interest installments and all Securities purchased by the
Company or any subsidiary shall be delivered to the Fiscal Agent
in the case of Registered Securities, and to the Principal Paying
Agent in the case of Bearer Securities and the Regulation S
Global Security. In any such case such Principal Paying Agent
shall cancel all Securities and coupons not previously canceled
and destroy all such Securities and coupons so delivered and
shall furnish to the Company and the Guarantor a certificate with
respect to such destruction. Such certificate shall state, in
the case of destruction of the Regulation S Global Security, that
all certificates of the Euroclear Operator or Cedel as to
beneficial ownership required by Section 4 hereof have been duly
presented by the Euroclear Operator or Cedel.
9. Mutilated, Destroyed, Stolen or Lost Securities.
The Fiscal Agent in the case of Registered Securities, and
to the Principal Paying Agent, in the case of Bearer Securities
and the Regulation S Global Security is hereby authorized, in
accordance with the provisions of the Securities and this
Section, from time to time to authenticate and deliver Securities
in exchange for or in lieu of Securities that become mutilated,
destroyed, stolen or lost, upon receipt of indemnity and such
other documents or proof as may be required in form and substance
satisfactory to the Principal Paying Agent and Fiscal Agent, the
Company and the Guarantor. Every Security authenticated and
delivered in exchange for or in lieu of any such Security shall
have endorsed thereon a Guarantee and shall be considered
obligations of the Company and the Guarantor and shall carry all
rights to interest accrued and unpaid and to accrue which were
carried by such Security, and notwithstanding anything to the
contrary herein contained, any new Bearer Security shall have
attached thereto such coupons that neither gain nor loss in
interest shall result from such exchange or substitution.
10. Signatures.
(a) Securities shall be executed on behalf of the
Company by its President, its Secretary, any Vice President or
its Treasurer, any of whose signatures may be manual or in
facsimile, and any coupons appertaining thereto shall be executed
on behalf of the Company by the facsimile signature of its
President, its Secretary, any Vice President or its Treasurer.
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Any signature in facsimile may be imprinted or otherwise
reproduced on the Securities. The Company may adopt and use the
signature or facsimile signature of any person who shall be a
President, Secretary, Vice President or Treasurer at the time of
the execution of the Securities, notwithstanding the fact that at
the time the Securities shall be authenticated and delivered, or
disposed of, such person shall have ceased to have held such
office by virtue of which such person so executed such security.
(b) The Guarantees shall be executed on behalf of the
Guarantor by its President, any Vice President, or its Treasurer,
manually or in facsimile, and a facsimile of its corporate seal
shall be impressed, imprinted or engraved thereon and shall be
attested by its Secretary or one of its Assistant Secretaries,
whose signature may be manual or in facsimile, prior to the
authentication of the Securities on which they are endorsed. Any
signature in facsimile may be imprinted or otherwise reproduced
on the Guarantees. The Guarantor may adopt and use the signature
or facsimile signature of any person who shall be any such
officer of the Guarantor at the time of the execution of the
Guarantee, notwithstanding the fact that at the time the
Securities shall be authenticated and delivered, or disposed of,
such person shall have ceased to be such officer of the
Guarantor.
11. Agreements Concerning Agents.
Each of the Agents accepts its obligations herein and in the
Securities, upon the terms and conditions hereof and thereof,
including the following, to all of which the Company and the
Guarantor agree and to all of which the rights hereunder of the
holders from time to time of the Securities and coupons shall be
subject:
(a) Each of the Agents shall be entitled to reasonable
compensation for all services rendered by such Agent, as
separately agreed by the Company and the Agent, and the Company
and the Guarantor agree promptly to pay such compensation and to
reimburse each of the Agents for the reasonable out-of-pocket
fees, charges and expenses (including, but not limited to,
counsel fees and expenses) incurred by such Agent in connection
with the services rendered by it hereunder. The Company and the
Guarantor also agree to indemnify each of the Agents and their
officers, directors, employees and agents and each other paying
agency and conversion agency of the Company for, and to hold it
harmless against, any loss, liability or expense (including the
costs and expenses of defending against any claim of liability)
incurred without negligence or bad faith on the part of such
Agent or other paying agency and conversion agency of the Company
hereunder. The obligations of the Company and the Guarantor
under this clause (a) shall survive payment of the Securities or
the resignation or removal of any Agent or paying agency or
conversion agency and the termination of this Agreement.
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(b) In acting under this Agreement and in connection
with the Securities, each of the Agents and each other paying
agency and conversion agency of the Company is acting solely as
agent of the Company, and does not assume any obligation, or
relationship of agency or trust, for or with any of the owners or
holders of the Securities or coupons, except that all funds held
by the Paying Agent or any other paying agency of the Company for
payment of principal of, premium, if any, or interest on (or
Additional Amounts, if any, on) the Securities shall be held in
trust but need not be segregated from other funds except as
required by law and as set forth herein and in the Securities,
and shall be applied as set forth herein and in the Securities;
provided, however, that monies paid by the Company or the
Guarantor to the Paying Agent or any other paying agency of the
Company for the payment of principal of or interest on (or
Additional Amounts, if any, on) Securities remaining unclaimed at
the end of two years after such principal or interest (or
Additional Amounts, if any) shall have become due and payable
shall be repaid to the Company or the Guarantor, as provided and
in the manner set forth in the Securities, whereupon the
aforesaid trust shall terminate and all liability of the Paying
Agent or such other paying agency or the Company with respect
thereto shall cease and the holders of Securities shall
thereafter have recourse only to the Company and the Guarantor.
(c) Each of the Agents and each other paying agency
and conversion agency of the Company may consult with one or more
counsel satisfactory to it (including counsel to the Company or
the Guarantor), and the advice or written opinion of such counsel
shall be full and complete authorization and protection in
respect of any action taken, omitted or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel.
(d) Each of the Agents and each other paying agency
and conversion agency of the Company shall be protected and shall
incur no liability for or in respect of any action taken, omitted
or suffered by it in reliance upon any Security, Guarantee or
coupon, notice, direction, consent, certificate, affidavit,
statement or other paper or document believed in good faith by
such Agent or such other paying agency and conversion agency of
the Company to be genuine and to have been signed by the proper
parties.
(e) Each of the Agents and each other paying agency
and conversion agency of the Company, its officers, directors and
employees may become the owner of, or acquire any interest in,
any Securities or coupons, with the same rights that it or they
would have if it were not an Agent or such other paying agency of
the Company hereunder, and may engage or be interested in any
financial or other transaction with the Company, the Guarantor
and their affiliates and may act on, or as depositary, trustee or
agent for, any committee or body of holders of Securities or
other obligations of the Company or the Guarantor, as freely as
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if it were not an Agent or a paying agency or conversion agency
of the Company hereunder.
(f) Neither the Paying Agent nor any other paying
agency of the Company shall be under any liability for interest
on any monies at any time received by it pursuant to any of the
provisions of this Agreement or of the Securities.
(g) The recitals contained herein and in the
Securities (except in the Fiscal Agent's certificates of
authentication), shall be taken as the statements of the Company
or the Guarantor, as the case may be, and the Agents assume no
responsibility for the correctness of the same. None of the
Agents makes any representation as to the validity or sufficiency
of this Agreement, the Offering Circular relating to the
Securities or the Securities or the coupons or the Guarantees,
except for such Agent's due authorization to execute this
Agreement. Neither the Agents nor any other paying agency or
conversion agency of the Company shall be accountable for the use
or application by the Company of the proceeds of any Securities
authenticated and delivered by the Fiscal Agent in conformity
with the provisions of this Agreement.
(h) The Agents and each other paying agency and
conversion agency of the Company shall be obligated to perform
such duties and only such duties as are herein and in the
Securities specifically set forth and no implied duties or
obligations shall be read into this Agreement or the Securities
against the Agents or any other paying agency of the Company.
The Agents shall not be under any obligation to take any action
hereunder which may tend to involve them in any expense or
liability, the payment of which, within a reasonable time, is
not, in their reasonable opinion, assured to them and for which
they have not received an indemnity satisfactory to them.
(i) Unless herein or in the Securities otherwise
specifically provided, any order, certificate, notice, request,
direction, or other communication, from the Company or the
Guarantor made by or given by it under any provision of this
Agreement shall be sufficient and may be conclusively relied upon
by any Agent, if signed by the President, the Secretary, any Vice
President or the Treasurer of the Company or the Guarantor, as
the case may be.
(j) Anything in this Agreement to the contrary
notwithstanding, none of the Agents shall incur any liability
hereunder, except as a result of negligence or bad faith
attributable to it or its officers or employees, and shall incur
no liability for the negligence or bad faith of its agents
appointed by it with due care; provided that the Agent shall
notify the Company and the Guarantor of the appointment of any
such agents.
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(k) The Agents shall not be liable for any loss caused
by events beyond the reasonable control of the Agents, including
any malfunction, interruption of or error in the transmission of
information caused by any machines or systems or interruption of
communication facilities, abnormal operating conditions or acts
of God. The Agents shall have no liability whatsoever for any
consequential, special, indirect or speculative losses or
damages.
12. Offices, Resignation, Successors, Etc. of Agents,
Paying, Conversion and Transfer Agencies.
(a) The Company agrees that, until none of the
Securities and coupons are outstanding or until monies for the
payment of all principal of premium, if any, and interest on (and
Additional Amounts, if any, on) all outstanding Securities shall
have been made available at the office of the Paying Agent and
shall have been returned to the Company as provided in the
Securities, there shall at all times be a Fiscal Agent in the
Borough of Manhattan, New York City, which shall be a bank or
trust company organized and doing business under the laws of the
United States of America or of any State of the United States of
America, in good standing and authorized under such laws to
exercise corporate trust powers, a Paying Agent, a Principal
Conversion Agent and a Transfer Agent having offices in New York
City, which shall be a bank or trust company organized, in good
standing and doing business under the laws of the United States
of America or of any State of the United States of America, and a
Principal Paying Agent, a paying agency, a conversion agency and
a transfer agency in at least one city in Western Europe, which
shall include Luxembourg if the Securities are listed on the
Luxembourg Stock Exchange and so long as listed thereon.
(b) Each of the Agents may at any time resign as such
Agent by giving written notice to the Company and to the
Guarantor of such intention on its part, specifying the date on
which its desired resignation shall become effective; provided,
however, that such date shall not be less than 90 days after
receipt of such notice by the Company and the Guarantor unless
the Company and the Guarantor agree to accept less notice. Each
of the Agents hereunder may be removed at any time by the filing
with it of any instrument in writing signed on behalf of the
Company and the Guarantor and specifying such removal and the
date when it is intended to become effective. Such resignation
or removal shall take effect upon the date of the appointment by
the Company and the Guarantor, as hereinafter provided, of a
successor Fiscal Agent, Principal Conversion Agent or Principal
Paying Agent, as the case may be, and the acceptance of such
appointment by such successor Agent. Upon its resignation or
removal, each of the Agents shall be entitled to the payment by
the Company and the Guarantor of its compensation for the
services rendered hereunder and to the reimbursement of all
reasonable out-of-pocket expenses incurred in connection with the
services rendered hereunder by such Agent.
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(c) In case at any time any of the Agents shall
resign, or shall be removed, or shall be incapable of acting, or
shall file a voluntary petition as a debtor under Chapter 7 or 11
of Title 11 of the United States Code or have an order for relief
entered against it as a debtor under Chapter 7 or 11 of Title 11
of the United States Code or make an assignment for the benefit
of its creditors or consent to the appointment of a receiver of
all or any substantial part of its property, or shall admit in
writing its inability to pay or meet its debts as they mature, or
if an order of any court shall be entered approving any petition
filed by or against the Fiscal Agent under any legislation
similar to the provisions of Title 11 of the United States Code
or against any of the Agents under the provisions of any
legislation similar to the provisions of Title 11 of the United
States Code, or if a receiver of it or of all or any substantial
part of its property shall be appointed, or if any public officer
shall take charge or control of it or of its property or affairs,
for the purpose of rehabilitation, conservation or liquidation, a
successor Agent, qualified as aforesaid, shall be appointed by
the Company and the Guarantor by an instrument in writing. Upon
the appointment as aforesaid of a successor Agent and acceptance
by it of such appointment, the Agent so superseded shall cease to
be such Agent hereunder. If no successor Agent shall have been
so appointed by the Company and the Guarantor and shall have
accepted appointment as hereinafter provided, any holder of a
Security, on behalf of itself and all others similarly situated,
or any Agent may petition any court of competent jurisdiction for
the appointment of a successor Agent and shall promptly notify
the Company and the Guarantor of such action.
(d) Any successor Fiscal Agent, Principal Conversion
Agent, Transfer Agent or Principal Paying Agent appointed
hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company and the Guarantor an instrument
accepting such appointment hereunder, and thereupon such
successor Agent, without any further act, deed or conveyance,
shall become vested with all the authority, rights, powers,
trusts, immunities, duties and obligations of such predecessor
with like effect as if originally named as such Agent hereunder,
and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to
transfer, deliver and pay over, and such successor Agent shall be
entitled to receive, all monies, securities or other property on
deposit with or held by such predecessor, as such Agent
hereunder.
(e) Any corporation or bank into which any of the
Agents hereunder may be merged or converted, or any corporation
or bank with which such Agent may be consolidated, or any
corporation or bank resulting from any merger, conversion or
consolidation to which such Agent shall be a party, or any
corporation or bank to which such Agent shall sell or otherwise
transfer all or substantially all the assets and business of such
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Agent, or any corporation to which the Fiscal Agent shall sell or
otherwise transfer all or substantially all of its corporate
trust business, provided that it shall be qualified as aforesaid,
shall be the successor to such Agent under this Agreement without
the execution or filing of any document or any further act on the
part of any of the parties hereto.
(f) So long as there shall be a Fiscal Agent and
Paying Agent hereunder, the Company shall maintain agencies (i)
where Registered Securities (but not Bearer Securities or
coupons) may be presented for surrender for payment (and for the
payment of Additional Amounts on the Registered Securities, if
any) and where Securities may be surrendered for conversion in
the Borough of Manhattan, New York City, and (ii) where Bearer
Securities and coupons may be surrendered for payment (and for
the payment of Additional Amounts (pursuant to Section 2 of the
Bearer Securities) on Bearer Securities, if any) and where Bearer
Securities may be surrendered for conversion in at least one city
in Western Europe, which shall be Luxembourg if the Securities
are listed on the Luxembourg Stock Exchange and so long as listed
thereon. The Company now intends to maintain additional agencies
(subject to applicable laws and regulations) where Bearer
Securities may be surrendered for payment (and for the payment of
Additional Amounts (pursuant to Section 2 of the Bearer
Securities) on Bearer Securities, if any), where Registered
Securities may be surrendered for payment and where Securities
may be surrendered for conversion in London, England and, if the
Securities are listed on the Luxembourg Stock Exchange and so
long as listed thereon, Luxembourg, and during such period to
keep the Agents advised of the names and locations of such
agencies. Unless the Company shall otherwise notify each of the
Agents in writing, the sole such paying agencies and conversion
agencies shall be the agencies specified in the Securities. The
Company authorizes the Paying Agent to pay to or to the order of
the aforesaid agencies, upon written demand by such agencies,
funds for the payment of the principal of, premium, if any, and
interest on (and Additional Amounts pursuant to Section 2 of the
Registered Securities and Bearer Securities, if any, on) the
Securities. Except as otherwise arranged by the Company, the
Fiscal Agent shall arrange for the payment of the compensation of
such paying agencies for their services as such, and the Company
and the Guarantor shall pay to the Fiscal Agent from time to time
sufficient funds to make such payments.
(g) So long as there shall be a Fiscal Agent, Paying
Agent and Conversion Agent hereunder, the Company shall maintain
a Security Registrar and additional transfer agencies (the
"Transfer Agents") (i) where Registered Securities may be
surrendered for exchange for other Registered Securities in New
York City and (ii) in at least one city in Western Europe, which
shall be Luxembourg if the Securities are listed on the
Luxembourg Stock Exchange and so long as listed thereon, where
Bearer Securities may be delivered in exchange for Bearer
Securities or for Registered Securities. Consistent with
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applicable laws and regulations, including the provisions of the
federal income tax laws of the United States, such agencies may
be the same agencies as or different agencies from those
maintained by the Company pursuant to Section 12(f).
The Company hereby appoints, subject to the listing of the
Securities on the Luxembourg Stock Exchange, Bankers Trust
Luxembourg, S.A. 14 Boulevard, F.D. Roosevelt, L-2450 Luxembourg,
Luxembourg as Transfer Agent for such exchanges. The transfer,
exchange and registration of transfer or exchange of Registered
Securities shall be made by the Fiscal Agent in New York City.
13. Taxes.
The Company will pay all stamp taxes and other similar
duties, if any, that may be imposed by the United States of
America or the United Kingdom, or any state or political
subdivision thereof or taxing authority therein, with respect to
the execution or delivery of this Agreement, or the issuance of
the Regulation S Global Security or the Guarantees, or the
exchange from time to time of the Regulation S Global Security
for Registered Securities and Bearer Securities, or with respect
to the issue or delivery of shares of Common Stock on conversion
of Securities; provided, however, that the Company shall not be
required to pay any tax or duty which may be payable in respect
of any transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the holder of the
Security or Securities to be converted, and no such issue or
delivery shall be made unless and until the person requesting
such issue has paid to the Company the amount of any such tax or
duty or has established to the satisfaction of the Company that
such tax or duty has been paid; and further provided that the
Company shall not be required to pay any tax or duty that may be
payable in respect of any accrued interest paid in connection
with the conversion of the Securities.
14. Meetings and Votes of Holders.
(a) A meeting of holders of Securities may be called
at any time and from time to time pursuant to this Section for
any of the following purposes: (i) to give any notice to the
Company, to the Guarantor or to the Fiscal Agent, or to give any
directions to the Fiscal Agent, or to consent to the waiving of
any default hereunder or under the Registered Securities and
Bearer Securities and its consequences, or to take any other
action authorized to be taken by holders of Securities pursuant
to Section 9 of the Registered Securities and Bearer Securities;
or (ii) to take any other action authorized to be taken by or on
behalf of the holders of any specified aggregate principal amount
of the Securities under any other provision of this Agreement,
the Registered Securities and Bearer Securities or under
applicable law.
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(b) Meetings of holders of Securities may be held at
such place or places in New York City or London as the Fiscal
Agent or, in case of its failure to act, the Company, the
Guarantor or the holders calling the meeting shall from time to
time determine.
(c) The Fiscal Agent may at any time call a meeting of
holders of Securities to be held at such time and at such place
in any of the locations designated in Section 14(b) hereof as the
Fiscal Agent shall determine. Notice of every meeting of holders
shall be made as specified in Section 19 hereof, except that such
notice shall set forth the time and the place of such meeting, in
general terms the action proposed to be taken at such meeting and
a general description of regulations applicable to such meeting,
and shall be published at least three times in the publications
specified in such Section 19, the first publication to be not
less than 21 nor more than 180 days prior to the date fixed for
the meeting.
(d) In case at any time the Company, the Guarantor or
the holders of at least 25% in aggregate principal amount of the
Securities shall have requested the Fiscal Agent to call a
meeting of the holders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting,
and the Fiscal Agent shall not have given the first notice of
such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company, the Guarantor or the holders
of Securities in the amount above specified may determine the
time and the place in either of the locations designated in
Section 14(b) hereof for such meeting and may call such meeting
to take any action authorized in Section 14(a) hereof by giving
notice thereof as provided in Section 14(c) hereof.
(e) To be entitled to vote at any meeting of holders
of Securities, a person shall be (i) a holder of one or more
Securities, or (ii) a person appointed by an instrument in
writing as proxy for a holder or holders of Securities by such
holder or holders, which proxy need not be a holder of
Securities. The only persons who shall be entitled to be present
or to speak at any meeting of holders shall be the persons
entitled to vote at such meeting and their counsel and any
representatives of the Fiscal Agent and its counsel and any
representatives of the Company and its counsel and any
representatives of the Guarantor and its counsel.
(f) The persons entitled to vote a majority in
principal amount of the outstanding Securities shall constitute a
quorum for the transaction of all business specified in Section
14(a) hereof. No business shall be transacted in the absence of a
quorum unless a quorum is represented when the meeting is called
to order. In the absence of a quorum within 30 minutes of the
time appointed for any such meeting, the meeting shall, if
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convened at the request of the holders of Securities (as provided
in Section 14(d) hereof), be dissolved. In any other case the
meeting shall be adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening
of any adjourned meeting shall be given as provided in Section
14(c) hereof except that such notice need be published only once
but must be given not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Subject to the
foregoing, at the reconvening of any meeting adjourned for a lack
of a quorum the persons entitled to vote 25% in principal amount
of the Securities outstanding shall constitute a quorum for the
taking of any action set forth in the notice of the original
meeting. Notice of the reconvening of an adjourned meeting shall
state expressly the percentage of the aggregate principal amount
of the Securities that shall constitute a quorum. At a meeting
or an adjourned meeting duly reconvened and at which a quorum is
present as aforesaid, any resolution and all matters (except as
limited by Section 9 of the Registered Securities and Bearer
Securities) shall be effectively passed and decided if passed or
decided by the persons entitled to vote a majority in principal
amount of the Securities represented and voting at such meeting,
provided that such amount shall be not less than 25% in principal
amount of the Securities outstanding. Any holder of a Security
who has executed an instrument in writing appointing a person as
his proxy shall be deemed to be present for the purposes of
determining a quorum and be deemed to have voted; provided,
however, that such holder shall be considered as present or
voting only with respect to the matters covered by such
instrument in writing. Any resolution passed or decision taken
at any meeting of the holders of Securities duly held in
accordance with this Section 14 shall be binding on all the
holders of Securities whether or not present or represented at
the meeting.
(g) Notwithstanding any other provision of this
Agreement, the Fiscal Agent may make such reasonable regulations
as it may deem advisable for any meeting of holders of Securities
in regard to proof of the holding of Securities and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Bearer
Securities shall be proved by the production of the Bearer
Securities or by a certificate executed, as depositary, by, and
the appointment of any proxy shall be proved by having the
signature of the person executing the proxy witnessed or
guaranteed by, in each case, any trust company, bank or banker
satisfactory to the Fiscal Agent. Such regulations may provide
that written instruments appointing proxies, regular on their
face, may be presumed valid and genuine without the proof
specified herein or other proof. The holding of Registered
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Securities shall be proved by the registry books maintained in
accordance with Section 2(d) hereof or by a certificate or
certificates of the Fiscal Agent in its capacity as Company's
agent for the maintenance of such books.
(h) The Fiscal Agent shall, by an instrument in
writing, appoint a temporary chairperson and a temporary
secretary of the meeting, unless the meeting shall have been
called by the Company, the Guarantor or by the holders of
Securities or the Fiscal Agent at the request of the Company, the
Guarantor or the holders of Securities as provided in Section
14(d) hereof and in the Securities, in which case the Company,
the Guarantor or the holders calling the meeting, as the case may
be, shall in like manner appoint a temporary chairperson and a
temporary secretary. A permanent chairperson and a permanent
secretary of the meeting shall be elected by vote of the holders
of a majority in principal amount of the Securities represented
at the meeting and entitled to vote.
(i) At any meeting each holder or proxy shall be
entitled to one vote for each U.S. $1,000 principal amount of
Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any
Securities challenged as not outstanding and ruled by the
chairperson of the meeting to be not outstanding. The
chairperson of the meeting shall have no right to vote, except as
a holder or proxy.
(j) Any meeting of holders of Securities duly called
pursuant to Section 14(c) or 14(d) hereof at which a quorum is
present may be adjourned from time to time by vote of the holders
(or proxies for the holders) of a majority in principal amount of
the Securities represented at the meeting and entitled to vote;
and the meeting may be held as so adjourned without further
notice.
(k) The vote upon any resolution submitted to any
meeting of holders of Securities shall be by written ballots on
which shall be subscribed the signatures of the holders of
Securities or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them.
The permanent chairperson of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record, at least
in triplicate, of the proceedings of each meeting of holders of
Securities shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts
setting forth a copy of the notice of the meeting and showing
that said notice was published as provided in Section 14(c) or
14(d) hereof and, if applicable, Section 14(f) hereof. Each copy
41PAGE
<PAGE>
shall be signed and verified by the affidavits of the permanent
chairperson and secretary of the meeting, and one such copy shall
be delivered to the Company, another to the Guarantor and another
to the Fiscal Agent to be preserved by the Fiscal Agent, the copy
delivered to the Fiscal Agent to have attached thereto the
ballots voted at the meeting. Any record so signed and verified
shall be conclusive evidence of the matters therein stated.
15. Merger, Consolidation or Sale of Assets.
(a) If at any time there shall be a merger,
consolidation, sale or conveyance of assets or assumption of
obligations to which any of the covenants contained in Section 6
of the Registered Securities and Bearer Securities or Section 3
of the Guarantees, is applicable, then in any such event the
successor or assuming corporation referred to therein will
promptly deliver to the Fiscal Agent:
(i) a certificate signed by an executive officer
of such successor or assuming corporation stating that as of the
time immediately after the effective date of any such
transaction, the covenants of the Company or the Guarantor, as
the case may be, contained in the Registered Securities and
Bearer Securities or the Guarantees, as applicable, have been
complied with and the successor or assuming corporation is not in
default under the provisions of this Agreement or the Securities
or the Guarantees, as applicable; and
(ii) a written opinion of legal counsel (who may
be an employee of or counsel to the successor or assuming
corporation) stating that, in such counsel's opinion, such
covenants have been complied with and that any instrument or
instruments executed in the performance of such covenants comply
with the requirements thereof.
In case of any such merger, consolidation, sale, conveyance or
assumption, such successor or assuming corporation shall succeed
to and be substituted for the Company or the Guarantor, as the
case may be, with the same effect, subject to (in the case of a
merger to which the Company is a party) Section 6(b) of the
Registered Securities and Bearer Securities, as if such successor
or assuming corporation had been named herein and in the
Registered Securities and Bearer Securities or the Guarantees, as
applicable, as the Company or the Guarantor, as the case may be;
the Company or the Guarantor, as the case may be, shall thereupon
be relieved of any further obligation or liability hereunder or
upon the Securities or the Guarantees, as applicable, provided
that any successor or assuming corporation shall have the right
to redeem the Securities, pursuant to Section 3(b) of the
Registered Securities and Bearer Securities, only as a result of
circumstances which occur subsequent to such merger,
consolidation, sale, conveyance or assumption and as a result of
which the Company would have had such right if the Company had
remained the obligor on the Securities. The Company or the
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<PAGE>
Guarantor, as the case may be, as the predecessor corporation may
thereupon or at any time thereafter be dissolved, wound up or
liquidated. If applicable, such successor or assuming
corporation thereupon may cause to be signed, and may issue
either in its own name or in the name of the Company any or all
of the Securities issuable hereunder which theretofore shall not
have been executed on behalf of the Company and delivered to the
Fiscal Agent; and, upon the order of such successor or assuming
corporation, instead of the Company, and subject to all the
terms, conditions and limitations in this Agreement prescribed,
the Fiscal Agent shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered
by the officers of the Company to the Fiscal Agent for
authentication, and any Securities which such successor or
assuming corporation thereafter shall cause to be signed and
delivered to the Fiscal Agent for that purpose. If applicable,
such successor or assuming corporation may cause to be endorsed
either in its own name or in the name of the Guarantor,
Guarantees on any or all of the Securities issuable hereunder
which theretofore shall not have been so endorsed and delivered
to the Fiscal Agent. All the Securities so issued shall in all
respects have the same legal rank and benefit under this
Agreement as the Securities theretofore or thereafter issued in
accordance with the terms of this Agreement as though all of such
Securities had been issued at the date of the execution hereof.
In case of any merger, consolidation, sale, conveyance or
assumption, such changes in phraseology and form (but not in
substance) may be made in the Securities or the Guarantees
thereafter to be issued as may be appropriate.
(b) The Fiscal Agent may rely on the documents
delivered pursuant to this Agreement by any successor or assuming
corporation pursuant to this Section 15 as conclusive evidence
that any such merger, consolidation, sale, conveyance or
assumption complies with the provisions of this Section and the
Securities.
16. Governing Law.
THIS AGREEMENT, THE SECURITIES AND ANY COUPONS APPERTAINING
THERETO AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES.
17. Amendments.
This Agreement may be amended by the parties hereto, and
certain provisions hereof may be waived, in the manner provided
in Section 9 of the Registered Securities and Bearer Securities.
This Agreement may also be amended by the parties hereto, without
the consent of the holder of any Security, for the purposes set
forth in Section 9 of the Registered Securities and Bearer
Securities and for the purpose of curing any ambiguity, or of
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<PAGE>
curing, correcting or supplementing any defective provision
contained herein or in any manner that the parties may mutually
deem necessary or desirable, and that shall not materially
adversely affect the interests of the holders of the Securities.
18. Agent for Service of Process.
As long as any of the Securities or coupons appertaining
thereto remain outstanding, the Company and the Guarantor will at
all times have an authorized agent in the City of New York, upon
whom process may be served in any legal action or proceeding
arising out of or relating to this Agreement or any Security or
any coupons appertaining thereto or any Guarantee. Service of
process upon such agent and written notice of such service mailed
or delivered to the Company or the Guarantor, as the case may be,
shall to the extent permitted by law be deemed in every respect
effective service of process upon the Company or the Guarantor,
as the case may be, in any such legal action or proceeding. Each
of the Company and the Guarantor hereby appoints the Fiscal Agent
as its agent for such purpose, and covenants and agrees that
service of process in any legal action or proceeding may be made
upon it at the office of such agent located at Four Albany
Street, New York, New York 10006 (or such other address in the
City of New York, as may be the principal corporate trust office
of such agent), unless and until the Company or the Guarantor, as
the case may be, shall designate another agent for such purpose
by written notice to the Fiscal Agent. If the Fiscal Agent
receives any such service of process, it shall promptly notify
the Company and the Guarantor of such service.
19. Notices.
All notices hereunder shall be deemed to have been given
when deposited in the mail as first-class mail, registered or
certified, return receipt requested, postage prepaid, addressed
to any party hereto as follows:
The Company: 10455 Pacific Center Court
San Diego, CA 92121-4339
with a copy to the
Guarantor and the
General Counsel of
the Guarantor
The Guarantor: 81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn: Secretary,
with a copy to the General Counsel
The Fiscal Agent: Bankers Trust Company
Four Albany Street
New York, New York 10006
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Attn: Corporate Trust and Agency
Group
The Principal Paying Agent: Bankers Trust Company
1 Appold Street
Broadgate, London EC2A 2HE
England
Attn: Corporate Trust and Agency
Group
The Transfer Agent(1): Bankers Trust Luxembourg, S.A.
14 Boulevard, F.D. Roosevelt,
L-2450 Luxembourg, Luxembourg
Attn: Corporate Trust and Agency
Group
or at any other address of which any of the foregoing shall have
notified the others in writing.
Notices to holders of the Securities shall be given by
publication on a Business Day in an Authorized Newspaper. For
purposes of this Agreement, the term "Authorized Newspaper" means
an English language newspaper, customarily published on each
business day in morning editions, whether or not it shall be
published in Saturday, Sunday or holiday editions, such as The
Wall Street Journal (Eastern edition) in New York City, the
Financial Times in London and the Luxemburger Wort in Luxembourg.
If by reason of the temporary or permanent suspension of
publication of any newspaper or by reason of any other cause it
shall be impossible to make publication of such notice in an
Authorized Newspaper as herein provided, then such publication or
other notice in lieu thereof as shall be made by the Fiscal Agent
shall constitute sufficient publication of such notice, if such
publication or other notice shall, so far as may be possible,
approximate the terms and conditions of the publication in lieu
of which it is given. Notices will be mailed by the Fiscal
Agent, on behalf of and at the expense of the Company, by
first-class mail to registered holders of Registered Securities
at their registered address as the same shall appear on the books
of the Fiscal Agent on the day 15 days prior to such mailing.
The Fiscal Agent shall promptly furnish to the Company and to
each other paying agency of the Company a copy of each notice so
published or mailed.
_____________
(1) Subject to the listing of the Securities on the Luxembourg
Stock Exchange.
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<PAGE>
20. Counterparts.
This Agreement may be executed in separate counterparts, and
by each party separately in a separate counterpart, each such
counterpart, when so executed and delivered, to be an original.
Such counterparts shall together constitute but one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Fiscal Agency Agreement as of the date first above written.
THERMOLASE CORPORATION
By: /s/ John N. Hatsopoulos
Name: John N. Hatsopoulos
Title: Vice President
THERMO ELECTRON CORPORATION
By: /s/ John N. Hatsopoulos
Name: John N. Hatsopoulos
Title: President
BANKERS TRUST COMPANY
as Fiscal Agent
By: /s/ Sandra J. Shaffer
Name: Sandra J. Shaffer
Title: Assistant Vice
President
BANKERS TRUST LUXEMBOURG, S.A.
as Transfer Agent
By: /s/ Dorothy Robinson
Name: Dorothy Robinson
Title: Assistant Vice
President
47PAGE
<PAGE>
EXHIBIT A
(FORM OF FACE OF REGISTERED SECURITY)
Unless and until it is exchanged in whole or in part for
Securities in definitive form, this Security may not be
transferred except as a whole by the Depository to a nominee of
the Depository or by a nominee of the Depository to the
Depository or another nominee of the Depository or by the
Depository or any such nominee to a successor depository or a
nominee of such successor Depository. Unless this certificate is
presented by an authorized representative of The Depository Trust
Company, a New York corporation (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.(2)
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE "UNITED STATES" OR TO
"U.S. PERSONS" (AS DEFINED IN REGULATION S UNDER THE SECURITIES
ACT) IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE
HEREOF, REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF
THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY
WHICH HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT
WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO
THE DATE WHICH IS TWO YEARS (OR THE THEN APPLICABLE HOLDING
PERIOD UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR SUCCESSOR
PROVISION)) AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR ANY PREDECESSOR),
EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
____________________
(2) This paragraph should be included only if the Security is
issued in global form.
A-1PAGE
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144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL INVESTOR THAT IS AN
"ACCREDITED INVESTOR" (WITHIN THE MEANING OF RULE 501 (A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE.
ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING
CLAUSES II(D), (E) OR (F) IS SUBJECT TO THE RIGHT OF THE ISSUER
OF THIS SECURITY AND THE FISCAL AGENT FOR SUCH ISSUER TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
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<PAGE>
THERMOLASE CORPORATION
(Incorporated in the State of Delaware)
4 3/8% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2004
GUARANTEED ON A SUBORDINATED BASIS BY
THERMO ELECTRON CORPORATION
(Incorporated in the State of Delaware)
No. R U.S.$
CUSIP
ThermoLase Corporation, a corporation duly incorporated and
existing under the laws of the State of Delaware (the "Company"),
for value received, hereby promises to pay to CEDE & Co., or
registered assigns, the principal sum of ______________________
United States Dollars on August 5, 2004 upon presentation and
surrender hereof and to pay interest thereon, from August
12, 1997 or from the most recent Interest Payment Date (as
defined below) to which interest has been paid or duly provided
for, semiannually in arrears on February 15 and August 15 in each
year (each an "Interest Payment Date"), commencing February 15,
1998, at the rate of 4 3/8% per annum, until the principal hereof
is paid or made available for payment. Interest hereon shall be
calculated on the basis of a 360-day year comprised of twelve
30-day months. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided
in the Fiscal Agency Agreement (as defined on the reverse
hereof), be paid to the person in whose name this Security is
registered at the close of business on the Record Date for such
interest payment, which shall be the January 31 and July 31
(whether or not a Business Day (as defined on the reverse
hereof)) next preceding such Interest Payment Date. Except as
otherwise provided in the Fiscal Agency Agreement (as defined on
the reverse hereof), any such interest not so punctually paid or
duly provided for will forthwith cease to be payable to the
holder on such Record Date and may be paid at any time in any
lawful manner, all as more fully provided in the Fiscal Agency
Agreement. Payment of interest on this Security shall be made by
United States dollar check drawn on a bank in the City of New
York and mailed to the person entitled thereto at his address as
it shall appear in the Security Register, or (if arrangements
satisfactory to the Company and the Fiscal Agent are made) by
wire transfer to a United States dollar account maintained by the
payee with a bank in the City of New York; provided, however,
that if such mailing is not possible and no such application
shall have been made, payment of interest shall be made at the
principal corporate trust office of the Fiscal Agent, or such
other office or agency of the Company as may be designated for
such purpose in the City of New York, in United States currency.
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Reference is hereby made to the further provisions of this
Security set forth under Terms and Conditions of the Securities
on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
This Security shall not become valid or enforceable for any
purpose unless and until the certificate of authentication hereon
shall have been manually signed by a duly authorized signatory of
the Fiscal Agent.
IN WITNESS WHEREOF, the Company has caused this Security to
be duly executed in its corporate name by the manual or facsimile
signature of a duly authorized officer.
Dated:
THERMOLASE CORPORATION
By:____________________
Name:
Title:
Attest:
_______________________
CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the
within-mentioned Fiscal Agency Agreement.
BANKERS TRUST COMPANY,
as Fiscal Agent
By:__________________________
Authorized Signatory
A-4PAGE
<PAGE>
(FORM OF FACE OF BEARER SECURITY)
THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO U.S. PERSONS EXCEPT TO QUALIFIED INSTITUTIONAL BUYERS (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN ACCORDANCE WITH
RULE 144A (IF AVAILABLE) OR OTHERWISE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS,
INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a)
OF THE UNITED STATES INTERNAL REVENUE CODE.
A-5PAGE
<PAGE>
THERMOLASE CORPORATION
(Incorporated in the Commonwealth of Delaware)
4-3/8% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2004
GUARANTEED ON A SUBORDINATED BASIS BY
THERMO ELECTRON CORPORATION
(Incorporated in the State of Delaware)
No. B-______________ U.S.$______
(CUSIP # )
ThermoLase Corporation, a corporation duly incorporated and
existing under the laws of the Commonwealth of Delaware (the
"Company"), for value received, hereby promises to pay to bearer
upon presentation and surrender of this Security the principal
sum of $_________________ United States Dollars on August 5,
2004, and to pay interest thereon from August 12, 1997,
semiannually in arrears on February 15 and August 15 in each year
(each an "Interest Payment Date"), commencing February 15, 1998,
at the rate of 4 3/8% per annum, until the principal hereof is
paid or made available for payment. Interest hereon shall be
calculated on the basis of a 360-day year comprised of twelve
30-day months. Such payments (including premium, if any) shall
be made in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment
of public and private debts, subject to any laws or regulations
applicable thereto and to the right of the Company (limited as
provided in the Fiscal Agency Agreement (as defined on the
reverse hereof)) to terminate the appointment of any paying
agency, at the London office of Bankers Trust Company located at
1 Appold Street, Broadgate, London, EC2A 2HE, England, or, if the
Securities are listed on the Luxembourg Stock Exchange and so
long as listed thereon, Bankers Trust Luxembourg, S.A., 14
Boulevard, F.D. Roosevelt, L-2450 Luxembourg, Luxembourg or at
such other offices or agencies outside the United States of
America, its territories and its possessions as the Company may
designate, by United States dollar check drawn on a bank in the
City of New York, or (if arrangements satisfactory to the Company
and the Fiscal Agent (as defined on the reverse hereof) are made)
by wire transfer to a United States dollar account maintained by
the holder at a bank outside the United States, its territories
and its possessions. Interest on this Security shall be paid
only at an office or agency located outside the United States,
its territories and its possessions and, in the case of interest
due on or before maturity, only upon presentation and surrender
at such an office or agency of the interest coupons hereto
attached as they severally mature. No payment on this Security
or any coupon will be made at the corporate trust office of the
Fiscal Agent or any other paying agency maintained by the Company
in the United States, its territories or possessions, nor will
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any payment be made by transfer to an account in, or by mail to
an address in, the United States, its territories or possessions,
except as may be permitted by United States tax laws and
regulations in effect at the time of such payment without
detriment to the Company. Notwithstanding the foregoing, payment
of this Security and coupons may be made at the office of the
Fiscal Agent in the City of New York if full payment at all
paying agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar
restrictions.
Reference is hereby made to the further provisions of this
Security set forth under Terms and Conditions of the Securities
on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Neither this Security nor any of the coupons attached hereto
shall become valid or enforceable for any purpose unless and
until the certificate of authentication hereon shall have been
manually signed by a duly authorized signatory of the Fiscal
Agent.
IN WITNESS WHEREOF, the Company has caused this Security to
be duly executed in its corporate name by the manual or facsimile
signature of a duly authorized signatory and coupons bearing the
facsimile signature of a duly authorized signatory to be annexed
hereto.
Dated: ______________, 1997
THERMOLASE CORPORATION
By:________________
Name:
Title:
Attest:
____________________
A-7PAGE
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CERTIFICATE OF AUTHENTICATION
This is one of the Securities described in the within-
mentioned Fiscal Agency Agreement.
BANKERS TRUST COMPANY,
as Fiscal Agent
By:______________________
Authorized Signatory
Dated:
A-8PAGE
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(FORM OF FACE OF COUPON ON BEARER SECURITIES)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS,
INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a)
OF THE UNITED STATES INTERNAL REVENUE CODE.
THERMOLASE CORPORATION
(Incorporated in the Commonwealth of Delaware)
4 3/8% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2004
No: _____________
U.S.$____________
Due:
Unless the Security to which this coupon appertains shall
have been called for redemption prior to the due date hereof and
payment thereof duly provided for or shall have been converted,
Thermo Cardiosystems Inc. (herein called the "Company") shall,
subject to and in accordance with the terms and conditions of the
Bearer Security and the Fiscal Agency Agreement dated as of
August 12, 1997 among the Company, Thermo Electron Corporation,
as guarantor, and Bankers Trust Company, as Fiscal Agent, pay to
the bearer, on the date set forth herein upon surrender hereof,
the amount shown hereon (together with any Additional Amount in
respect thereof which the Company may be required to pay
according to the terms of said Bearer Security) at the paying
agencies set out on the reverse hereof or at such other places
outside the United States of America, its territories and its
possessions as the Company may determine from time to time, by
United States dollar check drawn on a bank in the City of New
York, or (if arrangements satisfactory to the Company and the
Fiscal Agent are made) wire transfer to a United States dollar
account maintained by the bearer at a bank outside the United
States of America, its territories and its possessions, being
one-half year's interest then payable on said Security.
THERMOLASE CORPORATION
By:_______________________
Name:
Title:
Attest:
__________________________
A-9PAGE
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[Reverse of Coupon]
Bankers Trust Company Bankers Trust Luxembourg, S.A.
1 Appold Street 14 Boulevard, F.D. Roosevelt
Broadgate, London EC2A 2HE L-2450 Luxembourg, Luxembourg
England
A-10PAGE
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(FORM OF REVERSE OF REGISTERED AND BEARER SECURITIES)
Terms and Conditions of the Securities
1. General.
(a) This Security is one of a duly authorized issue of
Securities of the Company designated as its 4 3/8% Convertible
Subordinated Debentures Due 2004 (herein called the
"Securities"). The Company, for the benefit of the holders from
time to time of the Securities, has entered into a Fiscal Agency
Agreement dated as of August 12, 1997 (the "Fiscal Agency
Agreement") among the Company, Thermo Electron Corporation, a
corporation duly organized and existing under the laws of the
State of Delaware, as Guarantor (the "Guarantor") and Bankers
Trust Company, as Fiscal Agent, Paying Agent, Transfer Agent,
Security Registrar and Principal Conversion Agent (the "Fiscal
Agent"), to which Fiscal Agency Agreement reference is hereby
made for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the
Guarantor, the Fiscal Agent, and the holders of Securities and
any coupons appertaining thereto and of the terms upon which the
Securities are, and are to be, authenticated and delivered. The
holders of the Securities will be entitled to the benefits of, be
bound by, and be deemed to have notice of, all of the provisions
of the Fiscal Agency Agreement. A copy of the Fiscal Agency
Agreement is on file and may be inspected at the office of paying
agencies appointed by the Company.
(b) The Securities are issuable as bearer securities
(the "Bearer Securities"), with interest coupons attached, in the
denominations of U.S. $1,000 and U.S. $10,000, and as registered
securities (the "Registered Securities"), without coupons, in
denominations of U.S. $1,000 and integral multiples thereof. The
Registered Securities, and transfers thereof, shall be registered
as provided in Section 8 hereof and in the Fiscal Agency
Agreement. The holder of any Bearer Security or any coupon and
the registered holder of a Registered Security shall (to the
fullest extent permitted by applicable law) be treated at all
times, by all persons and for all purposes as the absolute owner
of such Security or coupon, as the case may be, regardless of any
notice of ownership, theft or loss or of any writing thereon.
(c) The Securities are direct and unsecured
obligations of the Company, subordinated as set forth in Section
7 hereof. There are no restrictions herein on other indebtedness
or securities which may be incurred or issued by the Company.
2. Additional Amounts. The Company will pay to the holder
of this Security or of any coupon appertaining hereto who is a
United States Alien (as defined below) such additional amounts
("Additional Amounts") as may be necessary in order that every
net payment of the principal of, premium, if any, and interest on
A-11PAGE
<PAGE>
this Security, after withholding for or on account of any
present or future tax, assessment or governmental charge imposed
upon or as a result of such payment by the United States or any
political subdivision or taxing authority thereof or therein,
will not be less than the amount provided herein or in any coupon
appertaining hereto to be then due and payable; provided,
however, that the foregoing obligation to pay Additional Amounts
shall not apply to any one or more of the following:
(a) any tax, assessment or other governmental charge
which would not have been so imposed but for (i) the existence of
any present or former connection between such holder (or between
a fiduciary, settlor, beneficiary, member or stockholder of, or a
person holding a power over, such holder, if such holder is an
estate, trust, partnership or corporation) and the United States,
including, without limitation, such holder (or such fiduciary,
settlor, beneficiary, member, stockholder or person holding a
power) being or having been a citizen or resident or treated as a
resident thereof or being or having been engaged in a trade or
business therein or being or having been present therein or
having or having had a permanent establishment therein, or (ii)
such holder's present or former status as a personal holding
company, foreign personal holding company, passive foreign
investment company, foreign private foundation or other foreign
tax-exempt entity or controlled foreign corporation for United
States tax purposes or a corporation which accumulates earnings
to avoid United States Federal income tax, or (iii) such holder's
status as a bank extending credit pursuant to a loan agreement
entered into in the ordinary course of business;
(b) any tax, assessment or other governmental charge
which would not have been so imposed but for the presentation by
the holder of this Security or any coupon appertaining hereto for
payment on a date more than 10 days after the date on which such
payment became due and payable or on the date on which payment
thereof is duly provided, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer or
personal property tax or any similar tax, assessment or other
governmental charge;
(d) any tax, assessment or other governmental charge
which would not have been imposed but for the failure to comply
with certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or
present or former connection with the United States of the holder
or beneficial owner of such Security or any related coupon if
such compliance is required by statute, regulation or ruling of
the United States or any political subdivision or taxing
authority thereof as a precondition to relief or exemption from
such tax, assessment or other governmental charge;
(e) any tax, assessment or other governmental charge
which is payable otherwise than by deduction or withholding from
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<PAGE>
payments of principal of and premium, if any, or interest on this
Security;
(f) any tax, assessment or other governmental charge
imposed on interest received by a person holding, actually or
constructively, 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote;
(g) any tax, assessment or other governmental charge
required to be withheld by any paying agent from any payment of
principal of, or premium, if any, or interest on this Security or
interest on any coupon appertaining thereto if such payment can
be made without such withholding by any other paying agent; or
(h) any tax, assessment, or other governmental charge
imposed on the disposition of this Security by a person holding
at any time, actually or constructively, Securities having a fair
market value in excess of the greater of the fair market value of
5 percent of (i) the Company's Common Stock or (ii) the
Securities;
nor will Additional Amounts be paid with respect to any
payment of the principal of, premium, if any, or interest on this
Security (or cash in lieu of issuance of shares of Common Stock
upon conversion) to a person other than the sole beneficial owner
of such payment, or that is a partnership or fiduciary to the
extent such beneficial owner, member of such partnership or
beneficiary or settlor with respect to such fiduciary would not
have been entitled to the payment of Additional Amounts had such
beneficial owner, member, beneficiary or settlor been the holder
of this Security or any coupon appertaining hereto;
The term "United States Alien" means any person who, for
United States Federal income tax purposes, is a foreign
corporation, a non-resident alien individual, a foreign
partnership, or an estate or trust the income of which is not
subject to United States Federal income tax regardless of its
source, and the term "United States" means the United States of
America (including the several States and the District of
Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
Except as specifically provided herein and in the Fiscal
Agency Agreement, the Company shall not be required to make any
payment with respect to any tax, assessment or other governmental
charge imposed by any government or any political subdivision or
taxing authority thereof or therein.
Whenever any Additional Amounts are to be paid on the
Securities, the Company will give notice to the Guarantor, the
Fiscal Agent, the Principal Paying Agent and any paying agency of
the Company, all as provided in the Fiscal Agency Agreement.
A-13PAGE
<PAGE>
3. Redemption.
(a) The Company, at its option, may redeem the
Securities, in whole or in part, at any time on or after August
15, 2000 upon notice as hereinafter prescribed, at a redemption
price equal to 100% of the principal amount thereof, together
with accrued interest to the redemption date. In the event of a
partial redemption, the Securities to be redeemed will be
selected by the Fiscal Agent not more than 75 days before the
date fixed for redemption by such method as the Fiscal Agent
shall deem fair and appropriate. Provisions of this Security that
apply to Securities called for redemption also apply to portions
of Securities called for redemption. The Fiscal Agent shall
notify the Company promptly of the Securities or portions of
Securities to be called for redemption.
(b) If, at any time, the Company shall determine that
as a result of any change in or amendment to the laws or any
regulations or rulings of the United States or any political
subdivision or taxing authority thereof or therein affecting
taxation, or any amendment to, or change in, an official
application or interpretation of such laws, regulations or
rulings, which amendment or change is announced or becomes
effective on or after August 5, 1997, the Company has or will
become obligated to pay to the holder of any Security (other than
the Registered Securities) or coupon Additional Amounts and such
obligation cannot be avoided by the Company taking reasonable
measures available to it, then the Company may, at its election
exercised at any time when such conditions continue to exist,
redeem such Securities as a whole but not in part, upon notice as
hereinafter prescribed, at a redemption price equal to 100% of
the principal amount, together with accrued interest, if any, to
the date fixed for redemption; provided that no such notice of
redemption shall be given earlier than 90 days prior to the
earliest date on which the Company would be obligated to pay such
Additional Amounts were a payment in respect of such Securities
then due; and provided further that, at the time such notice is
given, such obligations to pay such Additional Amounts remains in
effect.
Prior to any redemption of the Securities pursuant to the
preceding paragraph, the Company shall provide the Fiscal Agent
with one or more certificates (signed by the President or any
Vice President and the Treasurer or the Secretary) of the Company
on which the Fiscal Agent may conclusively rely to the effect
that the Company is entitled to redeem such Securities pursuant
to such paragraph and that the conditions precedent to the right
of the Company to redeem such Securities pursuant to such
paragraph have occurred and a written opinion of counsel (who may
be an employee of the Company or the Guarantor) stating that all
legal conditions precedent to the right of the Company to redeem
such Securities pursuant to such paragraph have occurred.
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<PAGE>
(c) Except as set forth in the next succeeding
paragraph, the Company shall redeem the Bearer Securities as a
whole but not in part, upon notice as hereinafter prescribed, at
100% of their principal amount, together with interest accrued to
the date fixed for redemption, less applicable withholding taxes,
if any, plus any applicable Additional Amounts payable, in the
event that the Company determines that payment of principal of,
premium, if any, or interest on a Bearer Security or a coupon
appertaining thereto made outside the United States by the
Company or a paying agent, based on a written opinion of counsel,
would under any present or future laws or regulations of the
United States be subject to any certification, identification or
information reporting requirement with regard to the nationality,
residence or identity of a beneficial owner of a Bearer Security
or a coupon appertaining thereto who is a United States Alien
(other than a requirement (a) that would not be applicable to a
payment made by the Company or any one of its paying agents (i)
directly to the beneficial owner or (ii) to a custodian, nominee
or other agent of the beneficial owner, or (b) that can be
satisfied by the custodian, nominee or other agent certifying
that the beneficial owner is a United States Alien, provided,
however, in each case referred to in clauses (a)(ii) and (b),
payment by such custodian, nominee or other agent of the
beneficial owner is not otherwise subject to any such
requirement). The Company shall make such determination on the
basis of a written opinion of counsel and will notify the Fiscal
Agent thereof in writing as soon as practicable, stating in the
notice the effective date of such certification, identification,
or information reporting requirement and the dates within which
the redemption shall occur, and the Fiscal Agent shall give
prompt notice thereof to the holders of the Securities in
accordance with the Fiscal Agency Agreement. The Company shall
determine the redemption date by notice to the Fiscal Agent at
least 75 days before the redemption date, unless shorter notice
is acceptable to the Fiscal Agent. Such redemption of the Bearer
Securities must take place on such date, not later than one year
after the publication of the initial notice of the Company's
determination of the existence of such certification,
identification or information reporting requirement. The Company
shall not so redeem the Bearer Securities, however, if the
Company, based on a written opinion of counsel, determines not
less than 30 days prior to the date fixed for redemption, that no
such payment would be subject to any requirement described above,
in which case the Company shall notify the Fiscal Agent, which
shall give prompt notice of that determination in accordance with
the Fiscal Agency Agreement and any earlier redemption notice
shall thereupon be revoked and of no further effect.
Notwithstanding the next preceding paragraph, if and so long
as the certification, identification or information reporting
requirement referred to in the next preceding paragraph would be
fully satisfied by payment of United States withholding, backup
withholding or similar taxes, the Company may elect, prior to
publication of the notice of redemption and in lieu of redemption
A-15PAGE
<PAGE>
of the Bearer Securities, to have the provisions of this
paragraph apply in lieu of the provisions of the next preceding
paragraph. In that event, the Company will pay such Additional
Amounts (without regard to Section 2 hereof) as are necessary in
order that, following the effective date of such requirements,
every net payment made outside the United States by the Company
or a paying agent of the principal of, premium, if any, and
interest on a Bearer Security or a coupon appertaining thereto to
a holder who is a United States Alien (without regard to a
certification, identification or information reporting
requirement as to the nationality, residence or identity of such
holder), after deduction for United States withholding, backup
withholding or similar taxes (other than a tax (i) that would not
be applicable in the circumstances referred to in the
parenthetical clause of the first sentence of the next preceding
paragraph or (ii) are imposed as a result of presentation of such
Bearer Security or coupon for payment more than 10 days after the
date on which such payment becomes due and payable or on which
payment thereof is duly provided for, whichever occurs later),
will not be less than the amount provided in the Bearer Security
or the related coupon to be then due and payable. If the Company
elects to pay such Additional Amounts and as long as it is
obligated to pay such Additional Amounts, the Company may
subsequently redeem the Bearer Securities, at any time, in whole
but not in part, upon not more than 60 days nor less than 30 days
notice, given as hereinafter prescribed, at 100% of their
principal amount, plus accrued interest to date fixed for
redemption and Additional Amounts, if any.
(d) Each Security is subject to redemption in whole or
in part (which shall be in a principal amount hereof which is
U.S. $1,000 or an integral multiple thereof) at the option of the
holder thereof on any Holder Redemption Date (as defined below)
at a redemption price equal to 100% of the principal amount
thereof, together with accrued interest, if a Redemption Event
shall occur or have occurred. For purposes hereof a "Redemption
Event" shall have occurred if the Company's Common Stock (or
other equity securities into which the Securities are then
convertible) is neither listed for trading on a United States
national securities exchange nor approved for trading on an
established automated over-the-counter trading market in the
United States. The "Holder Redemption Date" with respect to any
Redemption Event shall be the ninetieth day after the later of
the Exchange Date or the date a Redemption Event has occurred.
Notwithstanding the fact that a Security or a portion
thereof is called for redemption by the Company, each holder of a
Security desiring to exercise the option for redemption set forth
in this Section 3(d) shall, as a condition to such redemption, on
or before the close of business on the fifth day prior to the
Holder Redemption Date, surrender the Security to be redeemed in
whole or in part together with the redemption notice hereon duly
executed at the place or places specified in the notice required
by Section 3(e) and otherwise comply with the provisions of
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Section 3(f). A holder of a Security who has tendered a
redemption notice (i) will be entitled to revoke its election by
delivering a written notice of such revocation together with the
holder's non-transferable receipt for such Security to the office
or agency of the Company designated as the place for the payment
of the Securities to be so redeemed on or before the Holder
Redemption Date and (ii) will retain the right to convert its
Securities into shares of Common Stock of the Company to the
extent set forth in Section 4.
(e) Notice of redemption will be given by publication
in Authorized Newspapers (as defined in the Fiscal Agency
Agreement) on a Business Day (as defined in the Fiscal Agency
Agreement) in New York City and in London and, if the Securities
are listed on the Luxembourg Stock Exchange and so long as listed
thereon, in an Authorized Newspaper in Luxembourg, or, if either
publication in London or Luxembourg is not practical, in an
Authorized Newspaper in any country in Western Europe, and by
mail to holders of Registered Securities, all as provided in the
Fiscal Agency Agreement. In the case of a redemption in whole at
the option of the Company, notice will be given once not more
than 60 nor less than 30 days prior to the date fixed for
redemption. In the case of a partial redemption at the option of
the Company, notice will be given twice, the first such notice to
be given not more than 75 nor less than 60 days prior to the date
fixed for redemption and the second such notice to be given not
more than 60 nor less than 30 days prior to the date fixed for
redemption. In the case of a redemption by the Company at the
option of a holder of a Security pursuant to Section 3(d) hereof,
notice will be given by the Fiscal Agent setting forth the
information described below not later than 10 days after the
later of the Exchange Date or the occurrence of a Redemption
Event. Neither the failure to give notice nor any defect in any
notice given to any particular holder of a Security shall affect
the sufficiency of any notice with respect to other Securities.
Notices relating to the redemption of Securities whether at
the option of the Company or the holder hereof shall specify: the
date fixed for redemption or the Holder Redemption Date, as the
case may be; the redemption price; the date the conversion
privilege expires; the place or places of payment; and that
payment will be made upon presentation and surrender of the
Securities to be redeemed, together, in the case of a Bearer
Security, with all appurtenant coupons, if any, maturing
subsequent to the date fixed for redemption; and that interest
accrued to the date fixed for redemption (unless the redemption
date is an interest payment date) will be paid as specified in
such notice; and that, on and after said date, interest thereon
will cease to accrue. In the case of a redemption by the Company
at the option of the holder of a Security pursuant to Section
3(d), the notices given by the Fiscal Agent informing a holder of
such holder's entitlement to redeem shall also specify that a
holder electing redemption will be entitled to revoke its
election by delivering a written notice of such revocation,
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together with the holder's non-transferable receipt for such
Security, to the agency designated by the Company as the place
for the payment of the Securities to be so redeemed not later
than the fifth day prior to the Holder Redemption Date. In the
case of a redemption in part at the option of the Company,
notices shall specify the aggregate principal amount of
Securities to be redeemed and the aggregate principal amount of
Securities outstanding after such partial redemption. The first
notice shall specify the last date on which exchanges or
transfers of Securities may be made, and the second notice shall
specify the serial numbers of the Securities and the portions
thereof called for redemption. In the case of a redemption in
whole or in part by the Company, notices shall specify the date
the conversion privilege expires in accordance with Section 4(a)
hereof. Such notices shall also state that the conditions
precedent, if any, to such redemption have occurred.
(f) If (i) notice of redemption has been given in the
manner set forth in Section 3(e) hereof with respect to
Securities to be redeemed at the option of the Company, or (ii)
notice of redemption has been given by the holder of a Security
to be redeemed pursuant to Section 3(d) hereof, the Securities so
to be redeemed shall become due and payable on the applicable
redemption date specified in such notice and upon presentation
and surrender of the Securities at the place or places specified
in the notices given by the Company with respect to such
redemption, together in the case of Bearer Securities with all
appurtenant coupons, if any, maturing subsequent to the
redemption date and any related matured defaulted coupons, the
Securities shall be paid and redeemed by the Company, at the
places and in the manner and currency herein specified and at the
redemption price together with accrued interest, if any, to the
redemption date; provided, however, that interest due in respect
of coupons maturing on or prior to the redemption date shall be
payable only upon the presentation and surrender of such coupons
(at an office or agency located outside of the United States of
America). If any Bearer Security surrendered for redemption
shall not be accompanied by all appurtenant coupons maturing
after the redemption date and any related mature defaulted
coupons, such Security may be paid after deducting from the
amount otherwise payable an amount equal to the face amount of
all such missing coupons, or the surrender of such missing coupon
or coupons may be waived by the Company and the Fiscal Agent if
they are furnished with such security or indemnity as they may
require to save each of them and each other paying agency of the
Company harmless. From and after the redemption date, if monies
for the redemption of Securities shall have been available at the
office of the Fiscal Agent for redemption on the redemption date,
the Securities shall cease to bear interest, the coupons for
interest appertaining to Bearer Securities maturing subsequent to
the redemption date shall be void, the only right of the holders
of such Securities shall be to receive payment of the redemption
price together with accrued interest to the redemption date. If
monies for the redemption of the Securities are not made
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available by the Company for payment until after the redemption
date, the Securities shall not cease to bear interest until such
monies have been so made available.
(g) Accrued interest payable on any Registered
Security that is redeemed will be payable against surrender of
such Registered Security in the manner described in this Section
with respect to payments of principal on Registered Securities,
except that interest on any Registered Security that is redeemed
on a date after the close of business on any interest Record Date
and on or before the next succeeding Interest Payment Date, shall
be paid to the holder of record of such Registered Security on
the interest Record Date.
4. Conversion.
(a) Subject to and upon compliance with the provisions
of the Fiscal Agency Agreement, a holder of Securities is
entitled, at its option, at any time on or after the date that is
the later of (i) the Exchange Date and (ii) the date of the
effectiveness of the Registration Statement to be filed by the
Company under the Securities Act relating to the Common Stock
issuable upon conversion of the Restricted Securities (the
"Registration Date") and on or before the close of business on
July 31, 2004 or in the case of a Security or portion thereof
that is called for redemption by the Company, or the holder
thereof elects to have such Security or portion thereof redeemed
by the Company pursuant to Section 3(d) hereof, then in respect
of such Security or such portion thereof until and including, but
(unless the Company and the Guarantor default in making the
payment due upon redemption) not after, the close of business on
the 15th day next preceding the date fixed for redemption (or if
such date is not a business day, as described in Section 11
hereof in New York City, then the next succeeding business day),
to convert such Security (or any portion of the principal amount
thereof which is U.S. $1,000 or an integral multiple thereof), at
the principal amount thereof, or of such portion, into fully paid
and nonassessable shares ("Conversion Shares") (calculated as to
each conversion to the nearest 1/1000 of a share) of common
stock, par value $.01 per share of the Company ("Common Stock"),
at a Conversion Price equal to U.S. $17.385 aggregate principal
amount of Securities for each Conversion Share (the "Conversion
Price") (or at the current adjusted Conversion Price if an
adjustment has been made as provided herein) by surrender of the
Security, or in the case of a Security submitted for redemption
pursuant to Section 3(d) hereof, satisfactory evidence of such
submission, together with (i) if a Bearer Security, all unmatured
coupons and any matured coupons in default appertaining thereto,
and if a Registered Security (if so required by the Company or
the Fiscal Agent), instruments of transfer in form satisfactory
to the Company and the Fiscal Agent, duly executed by the
registered holder or by his duly authorized attorney, and (ii)
the conversion notice hereon duly executed (x) at the principal
corporate trust office of the Fiscal Agent, or at such other
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office or agency of the Company as may be designated by it for
such purpose in New York City, or (y) subject to any laws or
regulations applicable thereto and subject to the right of the
Company to terminate the appointment of any such conversion
agency, at the office of the Principal Paying Agent in London,
and if the Securities are listed on the Luxembourg Stock Exchange
and so long as listed thereon, Bankers Trust Luxembourg, S.A, 14
Boulevard, F.D. Roosevelt, L-2450 Luxembourg, Luxembourg or at
such other offices or agencies as the Company may designate.
In lieu of issuing shares of Common Stock upon such
conversion, the Company may elect, in its sole discretion, to pay
cash (including Additional Amounts, if any) in respect of all or
a portion of the shares of Common Stock otherwise issuable upon
such conversion based on the Market Price of such shares, all as
provided in the Fiscal Agency Agreement.
(b) In the case of a conversion after the close of
business on a Record Date next preceding any interest payment
date and before the opening of business on such interest payment
date, the holder of record of a Registered Security at such
Record Date is to receive an installment of interest on the
interest payment date. No payment or adjustment shall be made
upon any conversion for dividends on the Common Stock delivered
on conversion. Except as set forth in the first sentence of this
subsection (b), accrued interest from the immediately preceding
interest payment date until the date of conversion (together with
any Additional amounts, if any, thereon) will be paid to the
holder within five business days after presentment for conversion
on account of any interest accrued on the Securities surrendered
for conversion, except that interest on Registered Securities
surrendered for conversion after the close of business on a
Record Date and before the opening of business on the next
succeeding interest payment date shall be paid in an amount equal
to the interest payable on such interest payment date on the
principal amount being surrendered for conversion. No fractions
of shares or scrip representing fractions of shares will be
issued or delivered on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in
the Fiscal Agency Agreement. Such conversion shall be so
effected by the Company, except payment of accrued interest
(together with Additional Amounts, if any, thereon) which will be
paid by the Paying Agent in accordance with the provisions for
payment of interest (together with Additional Amounts, if any,
thereon) set forth herein.
(c) (i) In case at any time the Company shall pay or
make a dividend or other distribution on any class of capital
stock of the Company in shares of Common Stock, the Conversion
Price in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced so
that the same shall equal the price determined by multiplying
such Conversion Price by a fraction of which the numerator shall
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be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the
total number of shares of Common Stock constituting such dividend
or other distribution, such adjustment to become effective
immediately after the opening of business on the day following
the date fixed for such determination.
(ii) In the case at any time the Company shall (A)
subdivide its outstanding shares of Common Stock, (B) combine its
outstanding shares of Common Stock into a smaller number of
shares, or (C) issue by reclassification of its shares of Common
Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation) any shares of capital stock, the Conversion Price in
effect at the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the
holder of any Security surrendered for conversion after such time
shall be entitled to receive the aggregate number and kind of
shares which, if such Security had been converted immediately
prior to such time, the holder would have owned upon such
conversion and been entitled to receive upon such subdivision,
combination or reclassification. Such adjustment shall become
effective immediately after the effectiveness of such
subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall
occur.
(iii) In case at any time the Company shall fix a
record date for the issuance of rights or warrants to all holders
of its Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the current market
price per share of Common Stock (determined as provided in
paragraph (v) of this subsection (c)) on such record date, the
Conversion Price in effect at the opening of business on the day
following such record date shall be reduced so that the same
shall equal the price determined by multiplying such Conversion
Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on
such record date plus the number of shares of Common Stock which
the aggregate of the offering price of the total number of shares
so offered for subscription or purchase would purchase at such
current market price per share of Common Stock and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on such record date plus the
number of shares so offered for subscription or purchase, such
reduction to become effective immediately after the opening of
business on the day following such record date. Such reduction
shall be made successively whenever such a record date is fixed;
and in the event that such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such record date had not
been fixed.
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(iv) In case at any time the Company shall fix a
record date for the making of a distribution, by dividend or
otherwise, to all holders of its shares if Common Stock, of
evidences of its indebtedness or assets (including securities,
but excluding any dividend or distribution referred to in
paragraph (i) of this subsection (c), any rights or warrants
referred to in paragraph (iii) of this subsection (c), and any
dividend or distribution paid in cash out of the retained
earnings of the Company), then in each such case the Conversion
Price in effect after such record date shall be determined by
multiplying the Conversion Price in effect immediately prior to
such record date by a fraction, of which numerator shall be the
total number of outstanding shares of Common Stock multiplied by
the current market price per share of Common Stock (determined as
provided in paragraph (v) of this subsection (c)) on such record
date, less the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive
and described in a statement filed with the Fiscal Agent) of the
portion of the assets or evidences of indebtedness so to be
distributed, and of which denominator shall be the total number
of outstanding shares of Common Stock multiplied by such current
market price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed; and in
the event that such distribution is not so made, the Conversion
Price shall again be adjusted to be the Conversion Price which
would then be in effect if such record date has not been fixed.
(v) For the purpose of any computation under
paragraphs (iii) and (iv) of this subsection (c), the current
market price per share of Common Stock on any date shall be
deemed to be the average of the Closing Prices (as defined below)
for the 15 consecutive trading days upon which the principal
trading market for the Common Stock is open and selected by the
Company commencing not less than 20 nor more than 30 days before
the day in question. The "Closing Price" for any day shall be
the last reported sales prices regular way or, in case no such
reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case
on the American Stock Exchange or, if the Common Stock is not or
admitted to trading on such exchange, on the principal national
securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the closing sale price quoted
on the Nasdaq National Market, or if not so quoted, as determined
by the Company.
(vi) The Company may make such adjustments in the
Conversion Price, in addition to those required by paragraphs
(i), (ii) and, (iii) selected by the Company of this section, as
it considers to be advisable in order that any event treated for
United States Federal income tax purposes as a dividend of stock
or stock rights shall not be taxable to the recipients.
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(vii) No adjustment in the Conversion Price shall
be required unless such adjustment would require an increase or
decrease of at least U.S. $.25 in such Conversion Price;
provided, however, that any adjustment which by reason of this
paragraph (vii) is not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All
calculations under this subsection (c) shall be made to the
nearest cent or to the nearest 1/1000 of a share, as the case may
be.
(d) Whenever the Conversion Price is adjusted and in
the event of certain other corporate actions, as herein provided,
the Company shall give notice, all as provided in the Fiscal
Agency Agreement.
(e) The Company shall file, as soon as practicable
following the Closing Date, a shelf registration statement with
the United States Securities and Exchange Commission covering the
resale of the shares of Common Stock issuable upon conversion of
the Securities ("Registrable Securities"); provided that any
holder of any Securities or Registrable Securities shall not
sell any shares pursuant to such registration statement unless
and until it provides to the Company such information as the
Company may reasonably request for use in connection with the
identification of such holder as a selling stockholder in such
registration statement, or any prospectus included therein, and
no such sale shall be made by such holder pursuant to such
registration statement unless and until such information is
included by the Company in such registration statement or
prospectus. The Company shall in good faith use its best efforts
and at its cost to cause such registration statement to be
declared effective as promptly as practicable thereafter and to
include in such registration statement the information provided
by a holder as a selling stockholder and shall notify the Fiscal
Agent of the effectiveness thereof and agrees to use its best
efforts to (i) cause all registrations with, and to obtain any
approvals by, any governmental authority under any Federal or
state law of the United States that may be required in connection
with the conversion of the Securities into Common Stock and the
resale thereof, (ii) maintain the effectiveness of such
registrations until the date that Rule 144(k) under the
Securities Act is available for the resale of the shares of
Common Stock issuable upon conversion of the Restricted
Securities (or other securities issuable upon conversion of the
Securities) and (iii) to list the shares of Common Stock required
to be issued or delivered upon conversion of Securities (or other
securities issuable upon conversion of the Securities) prior to
such issue or delivery on such national securities exchange or
automated over-the-counter trading market where such Common Stock
is listed or traded at the time of such delivery. The Company and
the Guarantor, jointly and severally, shall, without limitation
as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each holder of Registrable Securities, the
officers, directors and agents and employees of each of them,
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each person who controls such holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, as amended) and the officers, directors,
agents and employees of any such controlling person, from and
against all losses, claims, damages, liabilities, costs
(including, without limitation, the costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any such
registration statement, or related prospectus or in any amendment
or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based
solely upon information, if any, furnished in writing to the
Company by such holder expressly for use therein; provided, that
the Company shall not be liable to any holder of Registrable
Securities to the extent that any such Losses arise out of or are
based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any preliminary prospectus
if either (a)(i) such holder failed to send or deliver as
required a copy of the final prospectus with or prior to the
delivery of written confirmation of the sale by such holder of a
Registrable Security to the person asserting the claim from which
such Losses arise and (ii) the prospectus would have completely
corrected such untrue statement or alleged untrue statement or
such omission or alleged omission; or (b)(i) such untrue
statement or alleged untrue statement, omission or alleged
omission is completely corrected in an amendment or supplement to
the prospectus and (ii) having previously been furnished by or on
behalf of the Company with copies of the prospectus as so amended
or supplemented, such holder thereafter fails to deliver as
required such prospectus as so amended or supplemented, prior to
or concurrently with the sale of a Registrable Security to the
person asserting the claim from which such Losses arise. Promptly
after receipt by an indemnified party under this Paragraph (e) of
notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be
made against the Company or the Guarantor under this Paragraph
(e) notify the Company and the Guarantor in writing of the claim
or the commencement of that action; provided, however, that the
failure to notify the Company or the Guarantor shall not relieve
it from any liability which it may have to an indemnified party
otherwise than under this Paragraph (e). If any such claim or
action shall be brought against an indemnified party, the Company
and the Guarantor shall be entitled to participate therein and,
to the extent that they wish, to assume the defense thereof.
After notice from the Company or the Guarantor to the indemnified
party of its election to assume the defense of such claim or
action, neither the Company nor the Guarantor shall be liable to
the indemnified party under this Paragraph (e) for any legal or
other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, if the
defendants in any such action include both an indemnified party
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and the Company or the Guarantor and the indemnified party shall
have reasonably concluded that there may be legal defenses
available to it and for other indemnified parties that are
different from or additional to those available to the Company or
the Guarantor, the indemnified party or parties under this
Paragraph (e) shall have the right to employ not more than one
counsel to represent them and, in that event, the reasonable fees
and expenses of not more than one such separate counsel shall be
paid by the Company or the Guarantor. Neither the Company nor
the Guarantor shall be liable for any settlement effected without
its written consent of any claim or action.
(f) The Company shall, at all times, have reserved and
available, free from preemptive rights, out of its authorized but
unissued shares of Common Stock, for the purpose of effecting the
conversion of Securities, the full number of shares of Common
Stock then issuable upon the conversion of all Securities (based
on the aggregate principal amount of Securities outstanding).
The Company covenants that all shares of Common Stock which may
be issued or delivered upon conversion of Securities will upon
issuance be fully paid and nonassessable.
(g) In case of any consolidation with, or merger of
the Company into, any other corporation, or in case of any merger
of another corporation into the Company (other than a merger
which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of
the Company), or in case of any sale or transfer, in one or more
transactions, of all or substantially all of the assets of the
Company (which shall not include the sale or transfer of any
portion of the assets of the Company to any corporation or
corporations if each of such corporations immediately following
such transfer is at least 51% owned, directly or indirectly, by
the Company, provided that such sale or transfer does not result
in the reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), the
corporation formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall
execute and deliver to the Fiscal Agent an amendment to the
Fiscal Agency Agreement providing that the holder of each
Security shall have the right during the period such Security
shall be convertible as specified in section (a) hereof to
convert such Security only into the kind and amount of
securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number
of shares of Common Stock of the Company into which such Security
might have been converted immediately prior to such
consolidation, merger, sale or transfer assuming, if such
consolidation, merger, sale or transfer is prior to the period
such Security shall be convertible as specified in subsection (a)
hereof, that the Securities were convertible at such time at the
initial Conversion Price as adjusted from August 5, 1997 to such
time pursuant to paragraphs (i), (ii), (iii), (iv) and (vi) of
subsection (c) hereof. Such amendment shall provide for
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adjustments which, for events subsequent to the effective date of
such amendment, shall be as nearly equivalent as may be
practicable to the adjustments provided for herein. The above
provisions of this subsection shall similarly apply to successive
consolidations, mergers, sales or transfers.
5. Events of Default. In the event that any of the
following ("Events of Default") shall occur and be continuing:
(a) the Company shall fail to pay when due the
principal of, or premium, if any, on any of the Securities
whether at maturity or upon redemption or otherwise; or
(b) the Company shall fail to pay any installment of
interest or any required payment of any Additional Amounts (as
described in Section 2 hereof) on any of the Securities for a
period of 10 days after the date when due; or
(c) the Company shall fail duly to perform or observe
any other term, covenant or agreement contained in any of the
Securities or in the Fiscal Agency Agreement or the Guarantor
shall fail to perform or observe any term, covenant or agreement
contained in a Guarantee endorsed on any of the Securities or in
the Fiscal Agency Agreement, for a period of 60 days after the
date on which written notice of such failure, requiring the
Company or the Guarantor, as the case may be, to remedy the same,
shall first have been given to the Company and the Fiscal Agent
by the holders of at least 25% in aggregate principal amount of
the Securities at the time outstanding; provided, however, that
in the event the Company or the Guarantor shall within the
aforesaid period of 60 days commence legal action in a court of
competent jurisdiction seeking a determination that the Company
or the Guarantor, as the case may be, had not failed duly to
perform or observe the term or terms, covenant or covenants or
agreement or agreements specified in the aforesaid notice, such
failure shall not be an Event of Default unless the same
continues for a period of 10 days after the date of any final
determination to the effect that the Company or the Guarantor had
failed to duly perform or observe one or more of such terms,
covenants or agreements; or
(d) a court having jurisdiction in the premises shall
enter a decree or order for relief in respect of the Company or
the Guarantor in an involuntary case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of the Company or the Guarantor or for any
substantial part of the property of either of them or ordering
the winding-up or liquidation of the affairs of either of them
and such decree or order shall remain unstayed and in effect for
a period of 20 consecutive days; or
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(e) the Company or the Guarantor shall commence a
voluntary case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief
in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or
similar official) of the Company or the Guarantor, as the case
may be, or for any substantial part of its property, or shall
make any general assignment for the benefit of creditors, or
shall admit in writing its inability to pay its debts as they
become due or shall take any corporate action in furtherance of
any of the foregoing; or
(f) an event of default, as defined in any indenture
or instrument evidencing or under which the Company shall have at
least $25,000,000 outstanding (or its equivalent in another
currency), in aggregate principal amount of indebtedness for
borrowed money, shall happen and be continuing and such default
shall involve the failure to pay the principal of such
indebtedness (or any part thereof), when due and payable after
the expiration of any applicable grace period with respect
thereto, or such indebtedness shall have been accelerated so the
same shall be or become due and payable prior to the date on
which the same would otherwise have become due and payable, and
failure to pay shall not have been cured by the Company within 20
days after such failure or such acceleration shall not be
rescinded or annulled within 20 days after notice thereof shall
have first been given to the Company; provided that if such event
of default under such indenture or instrument shall be remedied
or cured by the Company or waived by the holders of such
indebtedness, then the Event of Default hereunder by reason
thereof shall be deemed likewise to have been thereupon remedied,
cured or waived without further action upon the part of any of
the holders of Securities; then the holder of this Security may,
at such holder's option, declare the principal of this Security
and the interest accrued hereon (and Additional Amounts under
Section 2 hereof, if any, thereon) to be due and payable
immediately by written notice to the Company, the Guarantor and
the Fiscal Agent, and if any such Event of Default shall continue
at the time of receipt of such written notice, the principal of
this Security and the interest accrued hereon (and Additional
Amounts, if any, hereon) shall become immediately due and
payable, subject to the proviso of subsection (c) of this Section
5. Upon payment of such amount of principal, premium, if any, and
interest (and Additional Amounts pursuant to Section 2 hereof, if
any), all of the Company's obligations in respect of payment of
principal of, premium, if any, and interest on (and Additional
Amounts, if any, on) this Security shall terminate. Interest on
overdue principal, premium, if any, and interest (and Additional
Amounts, if any) shall accrue from the date on which such
principal, premium, if any, and interest (and Additional Amounts,
if any) were due and payable to the date such principal, premium,
if any, and interest (and Additional Amounts, if any) are paid or
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duly provided for, at the rate borne by the Securities (to the
extent payment of such interest shall be legally enforceable).
Any acceleration of this Security pursuant to this Section 5
shall not affect the subordination provisions of Section 7
hereof.
If an Event of Default, as defined in this Section 5, with
respect to the Securities, or an event which would, with the
passing of time or the giving of notice, or both, be an Event of
Default, shall occur and be continuing, the Company or the
Guarantor, as the case may be, shall within five Business Days of
becoming aware thereof notify the Company or the Guarantor, as
the case may be, and the Fiscal Agent in writing of such Event of
Default, and the Fiscal Agent shall thereupon promptly notify all
of the holders of the Securities of such Event of Default.
6. Merger, Consolidation, Sale, Conveyance or Assumption.
(a) The Company will not merge or consolidate with, or
sell or convey all or substantially all of its assets to, any
other corporation, unless (i) either (A) the Company shall be the
surviving corporation in the case of a merger, (B) the assets
sold or conveyed shall be owned by a corporation or corporations
each of which, immediately following such sale or conveyance, is
at least 51% owned, directly or indirectly, by the Company,
provided that such sale or conveyance does not result in the
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company, or (C) (I) the
surviving, resulting or transferee corporation shall expressly
assume the due and punctual payment (including Additional Amounts
pursuant to Section 2 hereof, if any) of all the Securities,
according to their tenor, and the due and punctual performance of
all of the covenants and obligations of the Company under the
Securities, the coupons and the Fiscal Agency Agreement and (II)
the Fiscal Agent shall have received the documentation required
in the context by the Fiscal Agency Agreement, (ii) the
surviving, resulting or transferee corporation, if not organized
and validly existing under the laws of the United States, shall
expressly agree to make payments under the Securities free of any
deduction or withholding for any and all then existing or future
withholding taxes, levies, imposts and charges whatsoever imposed
by or for the account of the jurisdiction where such successor
corporation is generally subject to taxation (or any political
subdivision or taxing authority thereof or therein) in a manner
equivalent to that set forth herein, subject to the exceptions
contained in such forms of the Securities, and (iii) the Company
or such successor corporation, as the case may be, shall not,
immediately after such merger, consolidation, sale or conveyance,
be in default in the performance of any covenants or obligations
of the Company under the Securities or the Fiscal Agency
Agreement.
(b) Upon any merger, consolidation, sale, conveyance
or assumption as provided in clause (i)(C) of Section 6(a), the
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successor or assuming corporation shall succeed to and be
substituted for, and may exercise every right and power of and be
subject to all the obligations of, the Company under the
Securities and Fiscal Agency Agreement, with the same effect as
if such successor or assuming corporation had been named as the
Company therein and herein and the Company shall be released from
its liability as obligor under the Securities and Fiscal Agency
Agreement; provided that any successor or assuming corporation
shall have the right to redeem the Securities pursuant to Section
3(b) hereof only as a result of circumstances which occur
subsequent to such merger, consolidation, sale, conveyance or
assumption and as a result of which the Company would have had
such right if the Company had remained the obligor on the
Securities.
7. Agreement of Subordination of Securities.
(a) The Company, for itself, its successors and
assigns, covenants and agrees, and each holder of Securities and
coupons by his acceptance thereof, likewise covenants and agrees,
that the payment of the principal of, premium, if any, and
interest and Additional Amounts (pursuant to Section 2 hereof) on
each and all of the Securities and coupons is hereby expressly
subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all
Senior Indebtedness of the Company (as defined below).
"Senior Indebtedness of the Company" or "Senior
Indebtedness" shall mean the principal of, premium, if any, and
interest on and all other amounts due on or with respect to the
following whether outstanding at the date of execution of the
Fiscal Agency Agreement or thereafter incurred or created:
(i) indebtedness of the Company for money borrowed by
the Company (excluding the Securities, but including, without
limitation, purchase money obligations), whether or not evidenced
by debentures, bonds, notes or other corporate debt securities or
similar instruments issued by the Company;
(ii) obligations to reimburse any bank or other person
in respect of amounts paid under letters of credit;
(iii) leases of real property, equipment or other
assets, which leases are capitalized in the Company's financial
statements in accordance with generally accepted accounting
principles;
(iv) commitment, standby and other fees due and payable
to financial institutions with respect to credit facilities
available to the Company;
(v) obligations of the Company under interest rate and
currency swaps, floors, caps or other similar arrangements
intended to hedge interest rates or currency exposure;
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(vi) indebtedness secured by any mortgage, pledge, lien
or other encumbrance on property which is owned or held by the
Company subject to such mortgage, pledge, lien or other
encumbrance, whether or not the indebtedness secured thereby
shall have been assumed by the Company;
(vii) obligations of the Company constituting
guarantees of indebtedness of or joint obligations with another
or others which would be included in the preceding clauses (i),
(ii), (iii), (iv), (v) or (vi); and
(viii) modifications, renewals, extensions or
refundings of any of the indebtedness, leases, fees or
obligations referred to in the preceding clauses (i), (ii),
(iii), (iv), (v), (vi) or (vii), or debentures, notes or other
evidences of indebtedness issued in exchange therefor;
provided that Senior Indebtedness shall not include any
particular indebtedness, lease, fee, obligation, modification,
renewal, extension, refunding or exchanged securities if, under
the express provisions of the instrument creating or evidencing
the same, or pursuant to which the same is outstanding, such
indebtedness, lease, fee or obligation or such modification,
renewal, extension, refunding or exchanged security is stated to
be not superior in right to payment to the Securities.
(b) (i) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to
the Company or to its creditors, in their capacity as such
creditors, or to its property, or in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of the
Company, whether or not involving insolvency or bankruptcy, or in
the event of any assignment for the benefit of creditors of the
Company or any marshalling of assets of the Company, then the
holders of Senior Indebtedness of the Company shall first be
entitled to receive payment in full of the principal of (and
premium, if any, on) and interest, including interest thereon
accruing after the commencement of any such proceeding, and other
amounts due on or with respect to, all Senior Indebtedness of the
Company before the holders of any of the Securities shall be
entitled to receive any payment on account of the principal of,
premium, if any, or interest and Additional Amounts (pursuant to
Section 2 hereof) on the Securities, and to that end the holders
of Senior Indebtedness of the Company shall be entitled to
receive for application in payment thereof any payment or
distribution of any kind or character, whether in cash, property
or securities, which may be payable or deliverable in any such
proceedings in respect of the Securities, other than securities
of the Company as reorganized or readjusted or securities of the
Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in this Section 7
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with respect to the Securities, to the payment of all Senior
Indebtedness of the Company, provided that the rights of the
holders of Senior Indebtedness of the Company are not altered by
such reorganization or readjustment. For the purposes of this
Section 7, no consolidation, merger, conveyance or transfer made
pursuant to the provisions of Section 6 shall be deemed to be a
liquidation, reorganization, dissolution or other winding up of
the Company.
(ii) If under the circumstances set forth in paragraph
(i) of this subsection, and notwithstanding the provisions
thereof, any payment or distribution of assets of the Company of
any kind, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or
securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment the payment of which
is subordinated, at least to the extent provided in this Section
7 with respect to the Securities, to the payment of all Senior
Indebtedness of the Company, provided that the rights of the
holders of Senior Indebtedness of the Company are not altered by
such reorganization or readjustment), shall be received by the
holders of the Securities before all Senior Indebtedness of the
Company is paid in full, such payment or distribution shall be
paid over to the holders of Senior Indebtedness of the Company,
ratably, for application to the payment of all Senior
Indebtedness of the Company remaining unpaid until all Senior
Indebtedness of the Company shall have been paid in full, after
giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness of the Company.
(iii) Upon any distribution of assets of the Company
referred to in this Section, the holders of Securities shall be
entitled to rely upon any final order or decree of a court of
competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, and the
holders of Securities shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other person
making any distribution to the holders of Securities for the
purpose of ascertaining the persons entitled to participate in
such distribution, the holders of the Senior Indebtedness of the
Company and other indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Section.
(c) (i) Upon the maturity of any Senior Indebtedness
of the Company by lapse of time, acceleration or otherwise, all
principal thereof (and premium, if any) and interest due thereon,
including interest thereon accruing after the commencement of any
proceeding of the type referred to in paragraph (i) of Section
7(b) above, and all other amounts due on or with respect thereto,
shall first be paid in full, or such payment duly provided for in
cash, before any payment, directly or indirectly, is made on
account of the principal of, premium, if any, or interest and
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Additional Amounts (pursuant to Section 2 hereof) on the
Securities or coupons.
(ii) Upon the happening of an event of default
with respect to any Senior Indebtedness of the Company, as
defined therein or in the instrument under which it is
outstanding permitting the holders to accelerate the maturity
thereof, then, unless and until such event of default shall have
been cured or waived or shall have ceased to exist, no payment
shall be made by the Company, directly or indirectly, on account
of the principal of, premium, if any, or interest and Additional
Amounts (pursuant to Section 2 hereof) on the Securities or
coupons.
(d) In case cash, securities or other property
otherwise payable or deliverable to the holders of the Securities
shall have been applied, pursuant to Section 7(b) or 7(c), to the
payment of Senior Indebtedness of the Company, then, upon the
payment in full of all Senior Indebtedness of the Company, the
holders of the Securities shall be subrogated to any rights of
any holders of Senior Indebtedness of the Company to receive any
further payment or distributions applicable to Senior
Indebtedness of the Company until the principal of, premium, if
any, and interest and Additional Amounts (pursuant to Section 2
hereof) on the Securities shall have been paid in full, and such
payments or distributions received by the holders of the
Securities and coupons, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or
distributed to the holders of Senior Indebtedness of the Company
shall, as between the Company and its creditors other than the
holders of Senior Indebtedness of the Company, on the one hand,
and the holders of the Securities, on the other hand, be deemed
to be a payment by the Company on account of Senior Indebtedness
of the Company and not on account of the Securities.
(e) No present or future holder of any Senior
Indebtedness of the Company shall be prejudiced in any way in the
right to enforce the subordination of the Securities by any act
or failure to act on the part of the Company. The provisions of
this Section are solely for the purpose of defining the relative
rights of the holders of Senior Indebtedness of the Company, on
the one hand, and the holders of the Securities, on the other
hand, against the Company and its assets, and nothing contained
in this Section shall impair, as between the Company and the
holder of any Security, the obligation of the Company, which is
unconditional and absolute, to pay to the holder thereof, the
principal thereof, premium, if any, and interest and Additional
Amounts (pursuant to Section 2 hereof) thereon as and when the
same shall become due and payable in accordance with the terms
thereof, or prevent the holder of any Security, upon default
hereunder or under such Security, from exercising all rights,
powers and remedies otherwise provided herein or therein or by
applicable law, all subject to the rights of the holders of
Senior Indebtedness of the Company under this Section to receive
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cash, property or securities otherwise payable or deliverable to
the holders of the Securities and coupons.
(f) Nothing contained in this Section or in any of the
Securities shall prevent at any time, except under the conditions
described in Sections 7(b) and (c) hereof or during the pendency
of any dissolution, winding up, liquidation or reorganization
proceedings therein referred to, the Company from making payments
at any time of principal of, premium, if any, or interest or
Additional Amounts (pursuant to Section 2 hereof) on the
Securities. Nothing contained in this Section shall prevent
conversions of Securities.
8. Replacement, Transfer and Exchange of Securities.
(a) In case any Security (including any coupons
appertaining thereto) shall at any time become mutilated,
destroyed, stolen or lost and such Security or evidence of the
loss, theft or destruction thereof (together with the indemnity
hereinafter referred to and such other documents or proof as may
be required) shall be delivered to the Fiscal Agent, a new
Security of like tenor and date with appropriate interest
coupons, if any, and having the Guarantee endorsed thereon will
be issued by the Company in exchange for the Security so
mutilated, or in lieu of the Security so destroyed, stolen or
lost, but, in the case of a destroyed, stolen or lost Security
only upon receipt of evidence satisfactory to the Fiscal Agent,
the Company and the Guarantor that such Security was destroyed,
stolen or lost, and if required by the Fiscal Agent, the Company
or the Guarantor, upon receipt also of indemnity satisfactory to
the Fiscal Agent, the Company and the Guarantor. All expenses
and reasonable charges associated with procuring such indemnity
and with the preparation, authentication and delivery of a new
Security shall be borne by the owner of the Security so
mutilated, destroyed, stolen or lost.
(b) As provided in the Fiscal Agency Agreement and
subject to certain limitations therein set forth, Bearer
Securities (with all unmatured and matured defaulted coupons
appertaining thereto) are exchangeable at, subject to applicable
laws and regulations, the offices of the paying agencies in
London and, if the Securities are listed on the Luxembourg Stock
Exchange and so long as listed thereon, Luxembourg or as
designated by the Company for such purpose pursuant to the Fiscal
Agency Agreement, for an equal aggregate principal amount of
Registered Securities in the denominations of $1,000 and integral
multiples thereof without coupons and/or Bearer Securities of
authorized denominations, and Registered Securities are
exchangeable at the office of the Fiscal Agent in New York City
or, subject to applicable laws and regulations, the offices of
the paying agencies in London and, if the Securities are listed
on the Luxembourg Stock Exchange and so long as listed thereon,
Luxembourg or as designated by the Company for such purpose
pursuant to the Fiscal Agency Agreement, for an equal aggregate
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principal amount of Registered Securities of authorized
denominations as requested by the holder surrendering the same.
Registered Securities will not be exchangeable for Bearer
Securities. The Company shall not be required (a) to exchange
Bearer Securities for Registered Securities during the period
between the close of business on each December 31 and June 30 and
the opening of business on the next succeeding interest payment
date or (b) to exchange Bearer Securities for Registered
Securities, if as a result, the Company or the Guarantor would
incur adverse consequences under United States Federal income tax
laws in effect of the time of exchange, or (c) in the event of a
redemption in part, (i) to register the transfer of Registered
Securities or to exchange Bearer Securities for Registered
Securities for a period of 15 days immediately preceding the date
notice is given identifying the serial numbers of the Securities
called for such redemption; (ii) to register the transfer or
exchange of any such Registered Securities, or portion thereof,
called for redemption; or (iii) to exchange any such Bearer
Securities called for redemption; provided, however, that a
Bearer Security called for redemption may be exchanged for a
Registered Security that is simultaneously surrendered, with
written instruction for payment on the date fixed for redemption,
unless the date fixed for redemption is during the period between
the close of business on each December 31 and June 30 and the
close of business on the next succeeding Interest Payment Date,
in which case such exchange may only be made prior to the close
of business on each December 31 and June 30 immediately preceding
the date fixed for redemption. In the event of redemption or
conversion of a Security in part only, a new Security or
Securities for the unredeemed or unconverted portion hereof will
be issued in the name of the holder thereof.
(c) The costs and expenses of effecting any exchange
or registration of transfer pursuant to the foregoing provisions,
except for the expenses of delivery by other than regular mail
(if any) and except, if the Company shall so require, the payment
of a sum sufficient to cover any tax or other governmental charge
or insurance charges that may be imposed in relation thereto,
will be borne by the Company.
(d) The Company has initially appointed as registrar
and transfer agent the Fiscal Agent acting through its office in
New York. The Company has also initially appointed Bankers Trust
Luxembourg, S.A. as a transfer agent, subject to the listing of
the Securities on the Luxembourg Stock Exchange. The Company may
at any time terminate the appointment of the registrar and
transfer agent and appoint additional or other registrars and
transfer agents or approve any change in an office through which
the registrar and transfer agent acts; provided that, until all
of the Securities have been delivered to the Fiscal Agent for
cancellation, or monies sufficient to pay the Securities have
been made available for payment and either paid or returned to
the Company as provided in the Securities, the Company will
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maintain a registrar and transfer agent in the City of New York
in the United States.
(e) For purposes of the provisions of this Security
and the Fiscal Agency Agreement, any Security authenticated and
delivered pursuant to the Fiscal Agency Agreement shall, as of
any date of determination, be deemed to be "outstanding", except
for:
(i) Securities previously canceled by the Fiscal
Agent or delivered to the Fiscal Agent for cancellation;
(ii) Securities which have been called for
redemption by the Company in accordance with Section 3 hereof or
which have become due and payable at maturity or otherwise and
with respect to which monies sufficient to pay the principal
thereof and interest thereon (including Additional Amounts, if
any) shall have been made available to the Fiscal Agent; or
(iii) Securities in lieu of or in substitution
for which other Securities have been authenticated and delivered
pursuant to the Fiscal Agency Agreement;
provided, however, that in determining whether the holders of the
requisite principal amount of outstanding Securities are present
at a meeting of holders of Securities for quorum purposes or have
given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities actually known by an
officer of the Fiscal Agent to be owned by the Company or the
Guarantor or any subsidiary thereof shall be disregarded and
deemed not to be outstanding.
9. Modifications and Amendments.
(a) Without the consent of any holders of Securities
or coupons, modifications of or amendments to the Fiscal Agency
Agreement or the Terms and Conditions of the Securities may be
made for any of the following purposes:
(i) to evidence the succession of another
corporation to the Company or the Guarantor and the assumption by
any such successor of the covenants of the Company or the
Guarantor, as the case may be, in the Fiscal Agency Agreement,
the Securities or the Guarantees;
(ii) to add to the covenants of the Company or the
Guarantor for the benefit of the holders of Securities or related
coupons, or to surrender any right or power herein conferred upon
the Company or the Guarantor;
(iii) to permit payment of principal of, premium,
if any, and interest on Bearer Securities in the United States,
provided that such payment is permitted by United States tax laws
and regulations then in effect;
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(iv) to make provision with respect to the
conversion rights of holders of Securities or coupons in the
event of a consolidation, merger or sale of substantially all of
the assets of the Company;
(v) to cure any ambiguity, to correct or
supplement any defective provision in the Fiscal Agency Agreement
which may be inconsistent with any other provision therein, or to
make any other provisions with respect to matters or questions
arising under this Security or the Fiscal Agency Agreement,
provided such action pursuant to this clause (v) will not
materially adversely affect the interests of the holders of
Securities or related coupons; or
(vi) to increase the principal amount of
Securities that may be issued pursuant to the Fiscal Agency
Agreement.
(b) Modifications and amendments to the Fiscal Agency
Agreement or to the Terms and Conditions of the Securities may be
made, and future compliance with or past default by the Company
under any of the provisions thereof may be waived, with the
written consent of the holders of not less than a majority in
aggregate principal amount of the Securities at the time
outstanding (excluding for purposes of this calculation the
aggregate principal amount of Securities held by the Company or
the Guarantor or any of its subsidiaries), or of such lesser
percentage as may act at a meeting of holders of Securities held
in accordance with the provisions set forth herein; provided that
no such modification, amendment or waiver may, without the
consent of the holder of each such Security affected thereby:
(i) waive a default in the payment of the
principal of, premium, if any, or any installment of interest on
any Security;
(ii) change the stated maturity of the principal
of, premium, if any, or any installment of interest on, any
Security, or reduce the principal amount thereof or any premium,
if any, or any installment of interest, or change the obligation
of the Company to pay Additional Amounts pursuant to Section 2
hereof (except as permitted by subsection (a) of Section 9 or by
the Fiscal Agency Agreement), or change the coin or currency in
which any Security or any premium or interest thereon is payable,
or, except as otherwise permitted or contemplated by the
provisions concerning corporate reorganizations, adversely affect
the right to redeem (pursuant to Section 3(d) hereof) or convert
any Securities as provided in Sections 3 and 4, respectively, or
modify the provisions of the Guarantees in a manner adverse to
the holders;
(iii) reduce the requirements of Section 10
hereof for the adoption of a resolution of the quorum required at
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any meeting of holders of Securities at which a resolution is
adopted, or reduce the percentage in principal amount of the
outstanding Securities the consent of whose holders is required
for any amendment or modification of the Fiscal Agency Agreement
or the Terms and Conditions of the Securities or the consent of
whose holders is required for any waiver (of compliance with
certain provisions of the Fiscal Agency Agreement or the
Securities or certain defaults hereunder and thereunder and their
consequences) provided for in the Terms and Conditions of the
Securities;
(iv) modify the obligation of the Company and the
Guarantor to maintain an office or agency in the City of New York
and outside the United States; or
(v) modify any of the provisions of this section
except to increase any such percentage or to provide that certain
other provisions of the Fiscal Agency Agreement or the Securities
cannot be modified or waived without the consent of the holder of
each outstanding Security affected thereby.
It shall not be necessary for any act of holders of
Securities under this Section to approve the particular form of
any proposed amendment, modification or waiver, but it shall be
sufficient if such act shall approve the substance thereof. Any
modifications, amendments or waivers to the Fiscal Agency
Agreement or to these Terms and Conditions will be conclusive and
binding on all holders of the Securities and any coupons
appertaining thereto, whether or not they have given such consent
or were present at such meeting and whether or not notation of
such modifications, amendments or waivers is made upon the
Securities or coupons, and on all future holders of Securities
and coupons. Any instrument given by or on behalf of any holder
of a Security in connection with any consent to any such
modification, amendment or waiver will be irrevocable once given
and will be conclusive and binding on all subsequent holders of
such Security and coupons appertaining thereto.
10. Meetings and Votes of Holders.
(a) A meeting of holders of Securities may be called
at any time and from time to time pursuant to this Section for
any of the following purposes: (i) to give any notice to the
Company, to the Guarantor or to the Fiscal Agent, or to give any
directions to the Fiscal Agent, or to consent to the waiving of
any default hereunder and its consequences, or to take any other
action authorized to be taken by holders of Securities pursuant
to these Terms and Conditions; or (ii) to take any other action
authorized to be taken by or on behalf of the holders of any
specified aggregate principal amount of the Securities under any
other provision of the Fiscal Agency Agreement, under applicable
law or under these Terms and Conditions.
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(b) Meetings of holders of Securities may be held at
such place or places in New York City or London as the Fiscal
Agent or, in case of its failure to act, the Company, the
Guarantor or the holders calling the meeting shall from time to
time determine.
The Fiscal Agent may at any time call a meeting of holders
of the Securities to be held at such time and at such place in
any of such designated locations as the Fiscal Agent shall
determine. Notice of every meeting of holders shall be made as
specified in the Fiscal Agency Agreement.
In case at any time the Company, the Guarantor or the
holders of at least 25% in aggregate principal amount of the
Securities shall have requested the Fiscal Agent to call a
meeting of the holders, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting,
and the Fiscal Agent shall not have given the first notice of
such meeting within 21 days after receipt of such request or
shall not thereafter proceed to cause the meeting to be held as
provided herein, then the Company, the Guarantor or the holders
of Securities in the amount above specified may determine the
time and the place in such designated locations for such meeting
and may call such meeting to take any action authorized herein by
giving notice thereof as provided in the Fiscal Agency Agreement.
(c) To be entitled to vote at any meeting of holders
of Securities, a person shall be (i) a holder of one or more
Securities, or (ii) a person appointed by an instrument in
writing as proxy for a holder or holders of Securities by such
holder or holders, which proxy need not be a holder of
Securities. The only persons who shall be entitled to be present
or to speak at any meeting of holders shall be the persons
entitled to vote at such meeting and their counsel and any
representatives of the Fiscal Agent and its counsel and any
representatives of the Company and its counsel and any
representatives of the Guarantor and its counsel. The persons
entitled to vote a majority in principal amount of outstanding
Securities shall constitute a quorum for the transaction of all
business specified in subsection (a) hereof. No business shall
be transacted in the absence of a quorum unless a quorum is
represented when the meeting is called to order. In the absence
of a quorum within 30 minutes of the time appointed for any such
meeting, the meeting shall, if convened at the request of the
holders of Securities, be dissolved. In any other case the
meeting shall be adjourned for a period of not less than 10 days
as determined by the chairman of the meeting prior to the
adjournment of such adjourned meeting. Notice of the reconvening
of any adjourned meeting shall be given as provided in the Fiscal
Agency Agreement. Subject to the foregoing, at the reconvening
of any meeting adjourned for a lack of a quorum the persons
entitled to vote 25% in principal amount of the Securities
outstanding shall constitute a quorum for the taking of any
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action set forth in the notice of the original meeting. Notice
of the reconvening of an adjourned meeting shall state expressly
the percentage of the aggregate principal amount of the
Securities that shall constitute a quorum. At a meeting or an
adjourned meeting duly reconvened and at which a quorum is
present as aforesaid, any resolution and all matters (except as
limited by Section 9 of these Terms and Conditions) shall be
effectively passed and decided if passed or decided by the
persons entitled to vote a majority in principal amount of the
Securities represented and voting at such meeting, provided that
such amount shall not be less than 25% in principal amount of the
Securities outstanding. Any holder of a Security who has
executed an instrument in writing appointing a person as his
proxy shall be deemed to be present for the purposes of
determining a quorum and be deemed to have voted; provided,
however, that such holder shall be considered as present or
voting only with respect to the matters covered by such
instrument in writing. Any resolution effectively passed or
decision taken at any meeting of the holders of Securities duly
held in accordance with this Section 10 shall be binding on all
the holders of Securities whether or not present or represented
at the meeting.
(d) Notwithstanding any other provision of this
Security, the Fiscal Agent may make such reasonable regulations
as it may deem advisable for any meeting of holders of Securities
in regard to proof of the holding of Securities and of the
appointment of proxies and in regard to the appointment and
duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as
it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Bearer
Securities shall be proved by the production of the Bearer
Securities or by a certificate executed, as depositary, by, and
the appointment of any proxy shall be proved by having the
signature of the person executing the proxy witnessed or
guaranteed by, in each case, any trust company, bank or banker
satisfactory to the Fiscal Agent. Such regulations may provide
that written instruments appointing proxies, regular on their
face, may be presumed valid and genuine without the proof
specified herein or other proof. The holding of Registered
Securities shall be proved by the registry books maintained in
accordance with the Fiscal Agency Agreement or by a certificate
or certificates of the Fiscal Agent in its capacity as the
Company's agent for the maintenance of such books.
(e) The Fiscal Agent shall, by an instrument in
writing, appoint a temporary chairperson and a temporary
secretary of the meeting, unless the meeting shall have been
called by the Company, the Guarantor or by the holders of
Securities as provided herein and in the Fiscal Agency Agreement,
in which case the Company, the Guarantor or the holders calling
the meeting, as the case may be, shall in like manner appoint a
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temporary chairperson and a temporary secretary. A permanent
chairperson and a permanent secretary of the meeting shall be
elected by vote of the holders of a majority in principal amount
of the Securities represented at the meeting and entitled to
vote. At any meeting each holder or proxy shall be entitled to
one vote for each U.S. $1,000 principal amount of Securities held
or represented by him; provided, however, that no vote shall be
cast or counted at any meeting in respect of the Securities
challenged as not outstanding and ruled by the chairperson of the
meeting to be not outstanding. The chairperson of the meeting
shall have no right to vote, except as a holder or proxy. Any
meeting of holders of Securities duly called at which a quorum is
present may be adjourned from time to time by vote of the holders
(or proxies for the holders) of a majority in principal amount of
the Securities represented at the meeting and entitled to vote;
and the meeting may be held as so adjourned without further
notice.
(f) The vote upon any resolution submitted to any
meeting of holders of Securities shall be written ballots on
which shall be subscribed the signatures of the holders of
Securities or of their representatives by proxy and the serial
number or numbers of the Securities held or represented by them.
The permanent chairperson of the meeting shall appoint two
inspectors of votes who shall count all votes cast at the meeting
for or against any resolution and who shall make and file with
the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record, at least
in triplicate, of the proceedings of each meeting of holders of
Securities shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts
setting forth a copy of the notice of the meeting and showing
that said notice was published as provided in the Fiscal Agency
Agreement. Each copy shall be signed and verified by the
affidavits of the permanent chairperson and secretary of the
meeting, and one of such copy shall be delivered to the Company,
another to the Guarantor and another to the Fiscal Agent to be
preserved by the Fiscal Agent, the copy delivered to the Fiscal
Agent to have attached thereto by ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
11. Business Days. Notwithstanding anything herein or in
the Fiscal Agency Agreement to the contrary, if any payment of
interest or premium or principal (or Additional Amounts, if any)
is due on a day that is not a Business Day, payment shall be made
on the next succeeding Business Day, with the same effect as if
made on the day such payment was due, and no interest shall
accrue for the period after such date. A "Business Day" is
defined, with respect to any act to be performed pursuant hereto
or to the Fiscal Agency Agreement, as any day which is not a
Saturday, Sunday or a day on which banking institutions in the
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place where such act is to occur are authorized or obligated by
applicable law, regulation or executive order to close.
12. Fiscal and Paying Agent.
(a) In acting under the Fiscal Agency Agreement and in
connection with the Securities, the Fiscal Agent is acting solely
as agent of the Company and the Guarantor and does not assume any
obligation, or relationship of agency or trust, for or with the
owner or holder of this Security or any interest coupon
appertaining hereto, except that funds held by the Fiscal Agent
for payment on this Security shall be held in trust by it and
applied as set forth herein, but need not be segregated from
other funds held by it, except as required by law. For a
description of the duties and the immunities and rights of the
Fiscal Agent under the Fiscal Agency Agreement, reference is made
to the Fiscal Agency Agreement, and the obligations of the Fiscal
Agent to the holder hereof are subject to such immunities and
rights.
(b) Any monies paid by the Company to any paying
agency for payment of principal of, premium, if any, or interest
on any Security (including Additional Amounts, if any, in respect
thereof) and remaining unclaimed for two years after such payment
has been made shall be repaid to the Company and to the extent
permitted by law the holder of any Security shall thereafter look
only to the Company or the Guarantor for any payment thereof as a
general unsecured obligation thereof and all liability of the
Fiscal Agent with respect thereto shall cease.
(c) No reference herein to the Fiscal Agency Agreement
and no provision of this Security or of the Fiscal Agency
Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of,
premium, if any, and interest (and Additional Amounts, as
described above) on this Security at the times, places and rate,
and in the coin or currency, herein prescribed or to convert or
redeem (at the request of a holder) this Security as provided
herein or in the Fiscal Agency Agreement.
Title to Bearer Securities and coupons shall pass by
delivery. As provided in the Fiscal Agency Agreement and subject
to certain limitations therein set forth, the transfer of
Registered Securities is registrable on the Security Register
upon surrender of a Registered Security for registration of
transfer at the office or agency of the Company in the City of
New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Security Registrar duly executed by, the holder thereof or
his attorney duly authorized in writing, and thereupon one or
more new Registered Securities, of authorized denominations and
for the same aggregate principal amount, having endorsed thereon
a Guarantee executed by the Guarantor, will be issued to the
designated transferee or transferees.
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13. Notices. All notices to the holders of Securities will
be published on a Business Day in an Authorized Newspaper (as
defined in the Fiscal Agency Agreement) in New York City and in
London, and, if the Securities are listed on the Luxembourg Stock
Exchange and so long as listed thereon , in Luxembourg or, if
either publication in London or Luxembourg is not practical, in
an Authorized Newspaper in any country in Western Europe. It is
expected that publication in New York City will be made in The
Wall Street Journal (Eastern edition), in London in the Financial
Times and in Luxembourg in the Luxemburger Wort. Notices shall
be deemed to have been given on the date of publication as
aforesaid or, if published on different dates, on the date of the
first such publication. A copy of each such notice will be
mailed by the Fiscal Agent, on behalf of and at the expense of
the Company, by first-class mail to each holder of a Registered
Security at the registered address of such holder as the same
shall appear in the Security Register (as defined in the Fiscal
Agency Agreement) on the day fifteen days prior to such mailing.
14. Governing Law.
(a) THE FISCAL AGENCY AGREEMENT, THE SECURITIES AND
ANY COUPONS APPERTAINING THERETO AND THE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, UNITED STATES OF AMERICA WITHOUT GIVING
EFFECT TO ITS CONFLICTS OF LAWS RULES.
(b) The Company and the Guarantor have appointed the
Fiscal Agent as its agent upon whom process may be served in any
suit, action or proceeding initially at its office located at
Four Albany Street, New York, NY 10006, with a copy to the
Company at 10455 Pacific Center Court, San Diego, California
92121-4339 and with a copy to the Guarantor at 81 Wyman Street,
Waltham, Massachusetts 02254-9046, Attention: General Counsel.
15. Authentication. This Security and any coupons
appertaining thereto shall not become valid or obligatory for any
purpose until the certificate or authentication hereon shall have
been duly signed by the Fiscal Agent or the Principal Paying
Agent acting under the Fiscal Agency Agreement.
16. Warranty of the Issuer. Subject to Section 15 hereof,
the Company hereby certifies and warrants that all acts,
conditions and things required to be done and performed and to
have happened precedent to the creation and issuance of this
Security and any coupons appertaining thereto, and to constitute
the same legal, valid and binding obligations of the Company
enforceable in accordance with their terms, have been done and
performed and have happened in due and strict compliance with all
applicable laws.
17. Delivery of Certain Information. At any time when the
Company is not subject to Section 13 or 15(d) of the Securities
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Exchange Act of 1934, as amended, upon the request of a holder
or beneficial owner of a Restricted Security, the Company will
promptly furnish or cause to be furnished such information as is
specified in Rule 144A(d)(4) under the Securities Act (or any
successor thereto) to such holder, to a prospective purchaser of
such Restricted Security designated by such holder, to such
beneficial owner or to a prospective purchaser of such Restricted
Security designated by such beneficial owner, as the case may be,
in order to permit compliance by such holder or beneficial owner
with Rule 144A under the Securities Act in connection with the
resale of such Security by such holder or beneficial owner,
provided, however, that the Company shall not be required to
furnish such information in connection with any request made on
or after the date which is three years (or the then applicable
holding period under Rule 144(k) under the Securities Act (or
successor provision)) from the later of (i) the date such
Security (or any predecessor security) was originally acquired
from the Company and (ii) the date such Security (or any
predecessor security) was last acquired from the Company or an
"affiliate" of the Company within the meaning of Rule 144 under
the Securities Act.
18. Accounting Terms. All accounting terms not otherwise
defined herein shall have the meanings assigned to them in
accordance with generally accepted accounting principles as
applied in the United States.
19. Descriptive Headings. The descriptive headings
appearing in these Terms and Conditions are for convenience of
reference only and shall not alter, limit or define the
provisions hereof.
A-43PAGE
<PAGE>
GUARANTEE OF THERMO ELECTRON CORPORATION
1. FOR VALUE RECEIVED, Thermo Electron Corporation, a
corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Guarantor"), hereby
unconditionally guarantees to the holder of the Security upon
which this Guarantee is endorsed and to each holder of any coupon
appertaining thereto the due and punctual payment of the
principal of, premium, if any, and interest and any Additional
Amounts (payable in accordance with Section 2 of such Security)
on such Security when and as the same shall become due and
payable, whether at the stated maturity or by declaration of
acceleration, call for redemption, redemption at the option of
the holder thereof or otherwise, according to the terms of such
Security and of the Fiscal Agency Agreement referred to in the
Security upon which this Guarantee is endorsed. In case of the
failure of the Company referred to in the Security upon which
this Guarantee is endorsed punctually to make any such payment of
principal, premium, if any, or interest or such Additional
Amounts, if any, the Guarantor hereby agrees to cause any such
payment to be made punctually when and as the same shall become
due and payable, whether at the stated maturity or by declaration
of acceleration, call for redemption, redemption at the option of
the holder thereof or otherwise, and as if such payment were made
by the Company.
2. The Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Security or the Fiscal
Agency Agreement, the absence of any action to enforce the same,
any waiver or consent by the holder of such Security or any such
coupon or by the Fiscal Agent with respect to any provisions
thereof or of the Fiscal Agency Agreement, the recovery of any
judgment against the Company or any action to enforce the same or
any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor. The Guarantor
hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against
the Company, protest or notice with respect to such Security or
coupon or the indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be
discharged except by complete performance of the obligations
contained in such Security and any such coupon and in this
Guarantee.
3. (a) The Guarantor will not merge or consolidate with,
or sell or convey all or substantially all of its assets to, any
other corporation, unless (i) either (A) the Guarantor shall be
the surviving corporation in the case of a merger, (B) the assets
sold or conveyed shall be owned by a corporation or corporations
which, immediately following such sale or conveyance, are at
least 51%-owned, directly or indirectly, by the Guarantor,
A-44PAGE
<PAGE>
provided that such sale or conveyance does not result in the
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Guarantor, or (C) (I)
the surviving, resulting or transferee corporation shall
expressly assume the due and punctual performance of all of the
covenants and obligations of the Guarantor under the Guarantees
and Fiscal Agency Agreement, by supplemental agreement reasonably
satisfactory to the Fiscal Agent, and (II) the Fiscal Agent shall
have received the documentation required in the context by the
Fiscal Agency Agreement and (ii) the Guarantor or such successor
corporation, as the case may be, shall not, immediately after
such merger, consolidation, sale or conveyance, be in default in
the performance of any covenants or obligations of the Guarantor
under the Guarantees or the Fiscal Agency Agreement.
(b) Upon any merger, consolidation, sale, conveyance
or assumption as provided in clause (i)(C) of Section 3(a), the
successor or assuming corporation shall succeed to and be
substituted for, and may exercise every right and power of and be
subject to all the obligations of, the Guarantor under the
Guarantees and Fiscal Agency Agreement, with the same effect as
if such successor or assuming corporation had been named as the
Guarantor therein and herein and the Guarantor shall be released
from its obligations as obligor under the Guarantees and Fiscal
Agency Agreement.
4. (a) The Guarantor, for itself, its successors and
assigns, covenants and agrees, and each holder of Securities by
his acceptance thereof, likewise covenants and agrees, that all
obligations of the Guarantor relating to payment of the principal
of, premium, if any, and interest and Additional Amounts
(pursuant to Section 2 of the Securities) on each and all of the
Securities and coupons is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Indebtedness
of the Guarantor (as defined below).
"Senior Indebtedness of the Guarantor" or "Senior
Indebtedness" shall mean the principal of, premium, if any, and
interest on and all other amounts due on or with respect to the
following, whether outstanding at the date hereof or hereafter
created or incurred:
(i) indebtedness of the Guarantor for money
borrowed by the Guarantor (excluding the Guarantees, but
including purchase money obligations) whether or not evidenced by
debentures, bonds, notes or other corporate debt securities or
similar instruments issued by the Guarantor (including the
Guarantor's obligations with respect to its 5% Senior Convertible
Debentures due 2001; provided, however, that Senior Indebtedness
shall not include (a) the Guarantor's 4-1/4% Convertible
Subordinated Debentures due 2003, the obligations represented by
which shall rank pari passu with the obligations represented
hereby in right of payment, (b) the Guarantor's subordinated
A-45PAGE
<PAGE>
guarantee of the principal, premium, if any, and interest on the
4 1/2% Convertible Subordinated Debentures Due 2004 of Thermo
Fibertek Inc., on the 6-1/2% Convertible Subordinated Debentures
due 1997 and the 4-5/8% Convertible Subordinated Debentures due
2003 of Thermo TerraTech Inc., on the 4-3/4% Convertible
Subordinated Debentures due 2004 of Thermo Cardiosystems Inc., on
the Non-Interest Bearing Convertible Subordinated Debentures Due
2003 of Thermedics Inc., on the Non-Interest Bearing Convertible
Subordinated Debentures due 2001 and the 4-7/8% Convertible
Subordinated Debentures due 2004 of Thermo Ecotek Corporation, on
the 3-3/4% Convertible Subordinated Debentures due 2000 of Thermo
Voltek Corp., on the 4-7/8% Convertible Subordinated Debentures
due 2000 of Thermo Remediation Inc., on the 5% Convertible
Subordinated Debentures due 2000 of ThermoQuest Corporation, and
on the 5% Convertible Subordinated Debentures due 2000 of Thermo
Optek Corporation, the obligations represented by which shall
rank pari passu with the obligations represented hereby in right
of payment and (c) the Guarantor's subordinated guarantee of the
obligations to redeem the common stock of ThermoLyte Corporation,
Thermo Fibergen Inc. and ThermoLase Corporation the obligations
represented by which shall rank pari passu with the obligations
represented hereby in right of payment;
(ii) obligations to reimburse any bank or other
person in respect of amounts paid under letters of credit;
(iii) leases for real property, equipment or
other assets, which leases are capitalized in the Guarantor's
consolidated financial statements in accordance with generally
accepted accounting principles;
(iv) commitment, standby and other fees due and
payable to financial institutions with respect to credit
facilities available to the Guarantor;
(v) obligations of the Guarantor under interest
rate and currency swaps, floors, caps or other similar
arrangements intended to fix or hedge interest rate obligations
or currency exposure;
(vi) indebtedness secured by any mortgage, pledge,
lien or other encumbrance on property which is owned or held by
the Guarantor subject to such mortgage, pledge, lien or other
encumbrance, whether or not the indebtedness secured thereby
shall have been assumed by the Guarantor;
(vii) obligations of the Guarantor constituting
guarantees of indebtedness of or joint obligations with another
or others which would be included in the preceding clauses (i),
(ii), (iii), (iv), (v) or (vi) (including the Guarantor's
guarantee of the principal, premium, if any, and interest on the
3-3/4% Senior Convertible Debentures due 2000 and the 4-1/2%
Senior Convertible Debentures due 2003 of Thermo Instrument
Systems Inc.); or
A-46PAGE
<PAGE>
(viii) modifications, renewals, extensions or
refundings of any of the indebtedness, leases, fees or
obligations referred to in the preceding clauses (i), (ii),
(iii), (iv), (v), (vi) and (vii), or debentures, notes or other
evidences of indebtedness issued in exchange therefor;
provided that Senior Indebtedness shall not include any
particular indebtedness, lease, fee, obligation, modification,
renewal, extension, refunding or exchanged security if, under the
express provisions of the instrument creating or evidencing the
same, or pursuant to which the same is outstanding, such
indebtedness, lease, fee or obligation or such modification,
renewal, extension, refunding or exchanged security is stated to
be not superior in right of payment to the Guarantees.
(b) (i) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to
the Guarantor or it its creditors, in their capacity as such
creditors, or to its property, or in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of the
Guarantor, whether or not involving insolvency or bankruptcy, or
in the event of any assignment for the benefit of creditors of
the Guarantor or any marshalling of assets of the Guarantor, then
the holders of Senior Indebtedness of the Guarantor shall first
be entitled to receive payment in full of the principal of (and
premium, if any) and interest, including interest thereon
accruing after the commencement of any such proceeding, and other
amounts due on or with respect to, all Senior Indebtedness of the
Guarantor before the holders of any of the Securities and coupons
shall be entitled to receive any payment on account of the
obligations of the Guarantor relating to the principal of,
premium, if any, or interest and Additional Amounts (pursuant to
Section 2 of the Securities) on the Securities and coupons, and
to that end the holders of Senior Indebtedness of the Guarantor
shall be entitled to receive for application in payment thereof
any payment or distribution of any kind or character, whether in
cash, property or securities, which may be payable or deliverable
in any such proceedings in respect of the obligations of the
Guarantor relating to the Securities and coupons, other than
securities of the Guarantor as reorganized or readjusted or
securities of the Guarantor or any other corporation provided for
by a plan of reorganization or readjustment the payment of which
is subordinate, at least to the extent provided in this Section 4
with respect to the obligations of the Guarantor relating to the
Securities and coupons, to the payment of all Senior Indebtedness
of the Guarantor, provided that the rights of the holders of
Senior Indebtedness of the Guarantor are not altered by such
reorganization or readjustment. For the purposes of this
Section 4, no consolidation, merger, conveyance or transfer made
pursuant to the provisions of Section 3 shall be deemed to be a
liquidation, reorganization, dissolution or other winding up of
the Guarantor.
A-47PAGE
<PAGE>
(ii) If under the circumstances set forth in
paragraph (i) of this subsection, and notwithstanding the
provisions thereof, any payment or distribution of assets of the
Guarantor of any kind, whether in cash, property, or securities
(other than securities of the Guarantor as reorganized or
readjusted or securities of the Guarantor or any other
corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated, at least to
the extent provided in this Section 4 with respect to the
obligations of the Guarantor relating to the Securities and
coupons, to the payment of all Senior Indebtedness of the
Guarantor, provided that the rights of the holders of Senior
Indebtedness of the Guarantor are not altered by such
reorganization or readjustment), shall be received by the holders
of the Securities in respect of the obligations of the Guarantor
before all Senior Indebtedness of the Guarantor is paid in full,
such payment or distribution shall be paid over to the holders of
Senior Indebtedness of the Guarantor, ratably, for application to
the payment of all Senior Indebtedness of the Guarantor remaining
unpaid until all Senior Indebtedness of the Guarantor shall have
been paid in full, after giving effect to any concurrent payment
or distribution to the holders of such Senior Indebtedness of the
Guarantor.
(iii) Upon any distribution of assets of the
Guarantor referred to in this Section, the holders of Securities
shall be entitled to rely upon any final order or decree of a
court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are
pending, and the holders of Securities shall be entitled to rely
upon a certificate of the liquidating trustee or agent or other
person making any distribution to the holders of Securities for
the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Indebtedness of the
Guarantor and other indebtedness of the Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Section.
(c) (i) Upon the maturity of any Senior Indebtedness
of the Guarantor by lapse of time, acceleration or otherwise, all
principal thereof (and premium, if any) and interest due thereon,
including interest thereon accruing after the commencement of any
proceeding of the type referred to in paragraph (i) of
Section 4(b) above, and all other amounts due on or with respect
thereto, shall first be paid in full, or such payment duly
provided for in cash, before any payment, directly or indirectly,
is made on account of the obligations of the Guarantor relating
to the principal of, premium, if any, or interest and Additional
Amounts (pursuant to Section 2 of the Securities) on the
Securities or coupons.
A-48PAGE
<PAGE>
(ii) Upon the happening of an event of default
with respect to any Senior Indebtedness of the Guarantor, as
defined therein or in the instrument under which it is
outstanding, permitting the holders to accelerate the maturity
thereof, then, unless and until such event of default shall have
been cured or waived or shall have ceased to exist, no payment
shall be made by the Guarantor, directly or indirectly, on
account of the obligations of the Guarantor relating to the
principal of, premium, if any, or interest and Additional Amounts
(pursuant to Section 2 of the Securities) on the Securities and
coupons.
(d) In case cash, securities or other property
otherwise payable or deliverable to the holders of the Securities
on account of the Guarantees shall have been applied, pursuant to
Section 4(b) or (c), to the payment of Senior Indebtedness of the
Guarantor, then, upon the payment in full of all Senior
Indebtedness of the Guarantor, the holders of the Securities and
coupons shall be subrogated to any rights of any holders of
Senior Indebtedness of the Guarantor, to receive any further
payments or distributions applicable to Senior Indebtedness of
the Guarantor until the obligations of the Guarantor in respect
of the Guarantees shall have been discharged in full, and such
payments or distributions received by the holders of the
Securities and coupons, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or
distributed to the holders of Senior Indebtedness of the
Guarantor, shall, as between the Guarantor and its creditors
other than the holders of Senior Indebtedness of the Guarantor,
on the one hand, and the holders of the Securities and coupons on
account of the Guarantees, on the other hand, be deemed to be a
payment by the Guarantor on account of Senior Indebtedness of the
Guarantor and not on account of the Securities and coupons.
(e) No present or future holder of any Senior
Indebtedness of the Guarantor shall be prejudiced in any way in
the right to enforce the subordination of the Guarantees by any
act or failure to act on the part of the Guarantor. The
provisions of this Section 4 are solely for the purpose of
defining the relative rights of the holders of Senior
Indebtedness of the Guarantor, on the one hand, and the holders
of the Securities and coupons on account of the Guarantees, on
the other hand, against the Guarantor and its assets, and nothing
contained in this Section 4 shall impair, as between the
Guarantor and the holder of any Security or coupon, the
obligation of the Guarantor, which is unconditional and absolute,
to perform in accordance with the terms of its Guarantees, or
prevent the holder of any Security or coupon, upon default
hereunder or under such Security or coupon, from exercising all
rights, powers and remedies otherwise provided herein or therein
or by applicable law, all subject to the rights of the holders of
Senior Indebtedness of the Guarantor under this Section 4 to
receive cash, property or securities otherwise payable or
A-49PAGE
<PAGE>
deliverable to the holders of the Securities and coupons on
account of the Guarantees.
(f) Nothing contained in this Section 4 or in any
Guarantees shall prevent at any time, except under the conditions
described in Sections 4(b) and (c) hereof or during the pendency
of any dissolution, winding up, liquidation or reorganization
proceedings therein referred to, the Guarantor from performing
its obligations under the Guarantees.
5. The Guarantor shall be subrogated to all rights of the
holders of the Securities and of any coupons against the Company
in respect of any amounts paid by the Guarantor pursuant to the
provisions of this Guarantee; provided, however, that the
Guarantor shall not be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation
until the principal of, premium, if any, and interest on and
Additional Amounts (pursuant to Section 2 of the Securities, if
any, on) all of the Securities shall have been paid in full.
6. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS RULES.
7. All terms used in this Guarantee which are defined in
the Fiscal Agency Agreement shall have the meanings assigned to
them in the Fiscal Agency Agreement.
8. Subject to the next following paragraph, the Guarantor
hereby certifies and warrants that all acts, conditions and
things required to be done and performed and to have happened
precedent to the creation and issuance of this Guarantee and to
constitute the same a legal, valid and binding obligations of the
Guarantor enforceable in accordance with their terms, have been
done and performed and have happened in due and strict compliance
with all applicable laws.
9. This Guarantee shall not become valid or obligatory for
any purpose until the certificate of authentication on the
Security upon which this Guarantee is endorsed shall have been
duly signed by the Fiscal Agent acting under the Fiscal Agency
Agreement.
A-50PAGE
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee
to be duly executed in its corporate name by the manual or
facsimile signature of a duly authorized officer.
Dated:
THERMO ELECTRON CORPORATION
By: _________________________
Name:
Title:
Attest:
_________________________
A-51PAGE
<PAGE>
TRANSFER NOTICE
Only if a Registered Security is transferred:
FOR VALUE RECEIVED, the undersigned Holder hereby sell(s),
assign(s) and transfer(s) unto ______________________________
whose taxpayer identification number is __________________ and
whose address including postal/zip code is
____________________________________ the within Security and all
rights thereunder, hereby irrevocably constituting and appointing
_________________________ attorney-in-fact to transfer said
Security on the books of the Fiscal Agent with full power of
substitution in the premises.
In connection with the transfer of this Security, the undersigned
Holder certifies that:
(Check one)
____ (a) This Security is being transferred to a
"qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933) in compliance with the exemption from
registration under the Securities Act of 1933 provided by Rule
144A.
____ (b) This Security is being transferred in an
Offshore Transaction (as defined in Regulation S under the
Securities Act of 1933) in compliance with the exemption from
registration under the Securities Act of 1933 provided by
Regulation S and in connection with which transfer the Company
has received, if so requested, an opinion of counsel
(satisfactory to it in form and substance) to the effect that the
transfer is being made pursuant to an exemption from the
registration requirements of Securities Act of 1933.
____ (c) This Security is being transferred to an
institutional investor which is an "accredited investor" (within
the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933) in a transaction that is exempt from the
registration requirements of the Securities Act of 1933 and in
connection with which transfer the Company has received, if so
requested, an opinion of counsel (satisfactory to it in form and
substance) to the effect that the transfer is being made pursuant
to an exemption from the registration requirements of Securities
Act of 1933
____ (d) This Security is being transferred to
ThermoLase Corporation.
A-52PAGE
<PAGE>
____ (e) Transfer other than those above in connection
with which the Company has received an opinion of counsel
(satisfactory to it in form and substance) to the effect that the
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act of 1933.
____ (f) This Security is being exchanged for a
beneficial interest in the Rule 144A Global Security and the
undersigned is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act of 1933).
Dated:________________________ Name: _____________________
By: _______________________
Title: ____________________
NOTICE: The signature of the Holder to this assignment must
correspond with the name as written upon the face of the within
instrument in every particular, without enlargement or any change
whatsoever.
SIGNATURE GUARANTEED
TO BE COMPLETED BY A BROKER OR DEALER IF (c) ABOVE IS CHECKED:
The undersigned represents and warrants that (i) it is a broker
or dealer registered under Section 15 of the Securities Exchange
Act of 1934, (ii) each person which will become a beneficial
owner of this Security upon transfer is an institutional investor
which is an "accredited investor" (within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933);
(iii) no general solicitation or advertising was made or used by
it in connection with the offer and sale of this Security to such
person(s); and (iv) each such person has been notified that this
Security has not been registered under the Securities Act of 1933
and is subject to the restrictions on transfer of the Security
set forth herein and in the Fiscal Agency Agreement.
Dated:________________________ __________________________
By: ______________________
IF NONE OF THE FOREGOING BOXES IS CHECKED, THE FISCAL AGENT SHALL
NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS
AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET
FORTH HEREIN, ON THE FACE HEREOF AND IN THE FISCAL AGENCY
AGREEMENT SHALL HAVE BEEN SATISFIED.
A-53PAGE
<PAGE>
CONVERSION NOTICE
If Bearer Security of denomination U.S. $1,000:
The undersigned holder of this Security hereby (i)
irrevocably exercises the option to convert this Security into
shares of Common Stock of ThermoLase Corporation (the "Company")
in accordance with the terms of this Security, and (ii) directs
that such shares be registered in the name of and delivered,
together with a check in payment for any fractional share, to the
undersigned unless a different name has been indicated below. If
shares are to be registered in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto.
Dated: _____________________
Signature
[MUST BE GUARANTEED IF STOCK IS TO BE ISSUED
IN A NAME OTHER THAN THE REGISTERED
HOLDER OF THE SECURITY]
If shares are to be registered in the
name of and delivered to a person other
than the holder, please print such
person's name and address and, if this
is a Restricted Security, complete
the Transfer Notice:
___________________________
___________________________
___________________________
HOLDER
Please print name and address of holder:
___________________________
___________________________
___________________________
A-54PAGE
<PAGE>
CONVERSION NOTICE
If (i) Registered Security or (ii) Bearer Security of
denomination U.S. $10,000:
The undersigned holder of this Security hereby irrevocably
exercises the option to convert this Security, or portion hereof
(which is U.S. $1,000 or an integral multiple thereof) below
designated, into shares of Common Stock of ThermoLase Corporation
(the "Company") in accordance with the terms of this Security,
and (ii) directs that such shares, together with a check in
payment for any fractional share and any Securities representing
any unconverted principal amount hereof, be delivered to and be
registered (if a Registered Security) in the name of the
undersigned unless a different name has been indicated below. If
shares or Securities are to be registered in the name of a person
other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto.
Signature
[MUST BE GUARANTEED IF STOCK IS TO
BE ISSUED IN A NAME OTHER THAN
THE REGISTERED HOLDER OF THE SECURITY]
Dated: _________________
If shares or Securities are to be
registered in the name of a Person
other than the registered holder,
please print such person's name and
address and, if this is a Restricted
Security, complete Transfer Notice:
___________________________
___________________________
___________________________
HOLDER
Please print name and address of holder:
___________________________
___________________________
___________________________
A-55PAGE
<PAGE>
If only a portion of the Securities is
to be converted, please indicate:
1 . Principal Amount to be converted: U.S.$________
2. Kind, amount and denomination of Securities
representing unconverted principal amount to be issued:
Bearer U.S. $_____________
(U.S. $1,000 or $10,000)
Registered U.S.$___________
Denominations: U.S.$__________
(U.S. $1,000 or an integral multiple thereof)
Registered Securities are not exchangeable for Bearer Securities.
A-56PAGE
<PAGE>
REDEMPTION NOTICE UNDER SECTION 3(d)
If Bearer Security of denomination
U.S. $ 1,000:
The undersigned holder of this Security hereby requests and
instructs the Company to redeem this Security in accordance with
the terms of Section 3(d) of this Security and directs that a
check in payment of the redemption amount be delivered to the
undersigned unless a different name has been indicated below.
The undersigned understands that this request can be revoked by
delivering written notice to the Paying Agent on or before the
Holder Redemption Date, together with the undersigned's
non-transferable receipt for such Security.
Dated:
Signature
[MUST BE GUARANTEED IF CHECK IS TO
BE MADE PAYABLE TO A NAME OTHER
THAN THE REGISTERED HOLDER OF THE
SECURITY]
If a check in payment of the redemption
amount is to be delivered to a person
other than the holder, please print
such person's name and address:
___________________________
___________________________
___________________________
HOLDER
Please print name and address of holder:
___________________________
___________________________
___________________________
A-57PAGE
<PAGE>
REDEMPTION NOTICE UNDER SECTION 3(d)
If (i) Registered Security or (ii) Bearer Security of
denomination U.S. $10,000:
The undersigned holder of this Security hereby requests and
instructs the Company to redeem this Security or portion hereof
(which is U.S. $1,000 or an integral multiple thereof) in
accordance with the terms of Section 3(d) of this Security, and
directs that a check in payment of the redemption amount be
delivered to, and any Securities representing any unredeemed
principal amount hereof be delivered to and be registered in the
name of, the undersigned unless a different name has been
indicated below. If Securities are to be registered in the name
of a person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto. The undersigned
understands that this request can be revoked by delivering
written notice to the Paying Agent on or before the Holder
Redemption Date, together with the undersigned's non-transferable
receipt for such Security.
Dated:
_________________________
Signature
[MUST BE GUARANTEED IF CHECK IS TO
BE MADE PAYABLE TO A NAME OTHER
THAN THE REGISTERED HOLDER OF THE
SECURITY]
If Securities are to be registered
in the name of, or a check in Please print name and
payment of the redemption address of holder:
amount is to be delivered to,
a person other than the holder,
please print such person's name _____________________________
and address, and if this is a
Restricted Security and any
Securities representing any _____________________________
unredeemed principal amount
hereof are to be registered in
the name of a person other than _____________________________
the undersigned, complete
Transfer Notice.
___________________________
___________________________
___________________________
A-58PAGE
<PAGE>
1. Principal Amount to be redeemed: U.S. $
2. Kind, amount and denomination of Securities representing
unredeemed principal amount to be issued:
Bearer U.S. $_____________
Denominations: U.S. $__________
(U.S. $1,000 or $10,000)
Registered U.S.$___________
Denominations: U.S.$__________
(U.S. $1,000 or an integral multiple thereof)
Registered Securities are not exchangeable for Bearer Securities.
A-59PAGE
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES(3)
The following exchanges of a part of this Rule 144A Global
Security for Registered Accredited Investor Securities, or other
Registered Securities not in global form, have been made:
Principal
Amount of Signature
this Global of
Amount of Amount of Security authorized
Decrease in Increase in following Officer of
Principal Principal such Fiscal
Amount of Amount of decrease Agent or
Amount of this Global this Global (or Security
Exchange Security Security increase) Custodian
_____________________
(3) This should be included only if the Security is issued as a
Rule 144 A Global Security.
A-60PAGE
<PAGE>
EXHIBIT B
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN THE UNITED
STATES OF AMERICA, ITS TERRITORIES, ITS POSSESSION AND OTHER
AREAS SUBJECT TO ITS JURISDICTION (THE "UNITED STATES" ) OR TO
ANY CITIZEN, NATIONAL RESIDENT OF THE UNITED STATES OR TO ANY
CORPORATION, PARTNERSHIP OR OTHER ENTITY CREATED OR ORGANIZED IN
OR UNDER THE LAWS OF THE UNITED STATES OR ANY POLITICAL
SUBDIVISION THEREOF, OR TO ANY ESTATE OR TRUST THE INCOME OF
WHICH IS SUBJECT TO UNITED STATES FEDERAL INCOME TAXATION
REGARDLESS OF ITS SOURCE OR TO ANY OTHER PERSON OR ENTITY DEEMED
A U.S. PERSON UNDER REGULATIONS UNDER THE SECURITIES ACT ("UNITED
STATES PERSON"), EXCEPT TO CERTAIN INSTITUTIONAL INVESTORS IN THE
UNITED STATES IN TRANSACTIONS NOT REQUIRED TO BE REGISTERED UNDER
THE SECURITIES ACT.
ANY UNITED STATES PERSON WHO HOLDS THIS SECURITY WILL BE
SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS,
INCLUDING THE LIMITATIONS PROVIDED IN SECTION 165(j) AND 1287(a)
OF THE UNITED STATES INTERNAL REVENUE CODE.
THIS SECURITY IS A TEMPORARY GLOBAL SECURITY, WITHOUT
COUPONS OR CONVERSION RIGHTS, EXCHANGEABLE FOR DEFINITIVE BEARER
SECURITIES WITH INTEREST COUPONS OR REGISTERED SECURITIES WITHOUT
INTEREST COUPONS. THE RIGHTS ATTACHING TO THIS GLOBAL SECURITY,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE FISCAL AGENCY
AGREEMENT (AS DEFINED HEREIN).
NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS GLOBAL
SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON
EXCEPT PURSUANT TO THE PROVISIONS HEREOF.
B-1PAGE
<PAGE>
THERMOLASE CORPORATION
(Incorporated in the State of Delaware)
4 3/8% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2004
GUARANTEED ON A SUBORDINATED BASIS BY
THERMO ELECTRON CORPORATION
(Incorporated in the State of Delaware)
TEMPORARY GLOBAL DEBENTURE
ThermoLase Corporation, a corporation duly incorporated and
existing under the laws of the State of Delaware (the "Company"),
for value received, hereby promises to pay to bearer upon
presentation and surrender of this Global Security the principal
sum of $ United States Dollars on August 5, 2004 and to
pay interest thereon, from the date hereof, semiannually in
arrears on February 15 and August 15 in each year, commencing
February 15, 1998, at the rate of 4 3/8% per annum, until the
principal hereof is paid or made available for payment; provided,
however, that interest on this Global Security shall be payable
only after the issuance of the definitive Securities for which
this Global Security is exchangeable and, in the case of
definitive Securities in bearer form, only upon presentation and
surrender (at an office or agency outside the United States, its
territories and its possessions, except as otherwise provided in
the Fiscal Agency Agreement referred to below) of the interest
coupons thereto attached as they severally mature.
This Global Security is one of a duly authorized issue of
Securities of the Company designated as specified in the title
hereof, issued and to be issued under the Fiscal Agency Agreement
dated as of August 12, 1997 (the "Fiscal Agency Agreement") among
the Company, Thermo Electron Corporation, a corporation duly
incorporated and existing under the laws of the State of
Delaware, as guarantor and Bankers Trust Company, as Fiscal agent
(the "Fiscal Agent", which term includes any successor Fiscal
agent under the Fiscal Agency Agreement). This Global Security
is a temporary security and is exchangeable in whole or from time
to time in part without charge upon request of the holder hereof
for definitive Securities in bearer form, with interest coupons
attached, or in registered form, without coupons, of authorized
denominations, (a) not earlier than the day following expiration
of the 40-day period that begins on the date hereof and (b) as
promptly as practicable following presentation of certification,
in the forms set forth as Exhibits C and F of the Fiscal Agency
Agreement for such purpose, that the beneficial owner or owners
of this Global Security (or, if such exchange is only for a part
of this Global Security, of such part) are not United States
Persons or other persons who have purchased such Debenture for
resale to United States Persons. Definitive Securities in bearer
form to be delivered in exchange for any part of this Global
B-2PAGE
<PAGE>
Security shall be delivered only outside of the United States,
its territories and its possessions. Upon any exchange of a part
of this Global Security for definitive Securities, the portion of
the principal amount hereof so exchanged shall be endorsed by the
Fiscal Agent or its agents on the Schedule of Exchanges hereto,
and the principal amount hereof shall be reduced for all purposes
by the amount so exchanged.
Until exchanged in full for definitive Securities, this
Global Security shall in all respects be entitled to the same
benefits under, and subject to the same terms and conditions of,
the Fiscal Agency Agreement as definitive Securities
authenticated and delivered thereunder, except that neither the
holder hereof nor the beneficial owners of this Global Security
shall be entitled to receive payment of interest hereon, except
as provided above, or to convert this Global Security into shares
of Common Stock of the Company or any other security, cash or
other property.
THIS GLOBAL SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES.
All terms used in this Global Security which are defined in
the Fiscal Agency Agreement shall have the meanings assigned to
them in the Fiscal Agency Agreement.
Unless the certificate of authentication hereon has been
manually executed by an authorized signatory of the Fiscal Agent,
this Global Security shall not be entitled to any benefit under
the Fiscal Agency Agreement or valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this Global
Security to be duly executed in its corporate name by its duly
authorized signatory under its corporate seal.
Dated: August __, 1997
THERMOLASE CORPORATION
By: ______________________
Name:
Title:
Attest:
_________________________
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities des/cribed in the
within-mentioned Fiscal Agency Agreement.
BANKERS TRUST COMPANY,
as Fiscal Agent
By: ____________________
Authorized Officer
B-4PAGE
<PAGE>
SCHEDULE OF EXCHANGES
Principal Remaining Notation
amount principal made on
exchanged amount behalf of
for following the
definitive such Fiscal
Date made Securities exchange Agent
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
_____________ ___________ ___________ __________
B-5PAGE
<PAGE>
GUARANTEE OF THERMO ELECTRON CORPORATION
1. FOR VALUE RECEIVED, Thermo Electron Corporation, a
corporation duly organized and existing under the laws of the
State of Delaware (herein called the "Guarantor"), hereby
unconditionally guarantees to the holder of the Security upon
which this Guarantee is endorsed and to each holder of any coupon
appertaining thereto the due and punctual payment of the
principal of, premium, if any, and interest and any Additional
Amounts (payable in accordance with Section 2 of such Security)
on such Security when and as the same shall become due and
payable, whether at the stated maturity or by declaration of
acceleration, call for redemption, redemption at the option of
the holder thereof or otherwise, according to the terms of such
Security and of the Fiscal Agency Agreement referred to in the
Security upon which this Guarantee is endorsed. In case of the
failure of the Company referred to in the Security upon which
this Guarantee is endorsed punctually to make any such payment of
principal, premium, if any, or interest or such Additional
Amounts, if any, the Guarantor hereby agrees to cause any such
payment to be made punctually when and as the same shall become
due and payable, whether at the stated maturity or by declaration
of acceleration, call for redemption, redemption at the option of
the holder thereof or otherwise, and as if such payment were made
by the Company.
2. The Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of such Security or the Fiscal
Agency Agreement, the absence of any action to enforce the same,
any waiver or consent by the holder of such Security or any such
coupon or by the Fiscal Agent with respect to any provisions
thereof or of the Fiscal Agency Agreement, the recovery of any
judgment against the Company or any action to enforce the same or
any other circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor. The Guarantor
hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against
the Company, protest or notice with respect to such Security or
coupon or the indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be
discharged except by complete performance of the obligations
contained in such Security and any such coupon and in this
Guarantee.
3. (a) The Guarantor will not merge or consolidate with,
or sell or convey all or substantially all of its assets to, any
other corporation, unless (i) either (A) the Guarantor shall be
the surviving corporation in the case of a merger, (B) the assets
sold or conveyed shall be owned by a corporation or corporations
which, immediately following such sale or conveyance, are at
least 51%-owned, directly or indirectly, by the Guarantor,
provided that such sale or conveyance does not result in the
B-6PAGE
<PAGE>
reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Guarantor, or (C) (I)
the surviving, resulting or transferee corporation shall
expressly assume the due and punctual performance of all of the
covenants and obligations of the Guarantor under the Guarantees
and Fiscal Agency Agreement, by supplemental agreement reasonably
satisfactory to the Fiscal Agent, and (II) the Fiscal Agent shall
have received the documentation required in the context by the
Fiscal Agency Agreement and (ii) the Guarantor or such successor
corporation, as the case may be, shall not, immediately after
such merger, consolidation, sale or conveyance, be in default in
the performance of any covenants or obligations of the Guarantor
under the Guarantees or the Fiscal Agency Agreement.
(b) Upon any merger, consolidation, sale, conveyance
or assumption as provided in clause (i)(C) of Section 3(a), the
successor or assuming corporation shall succeed to and be
substituted for, and may exercise every right and power of and be
subject to all the obligations of, the Guarantor under the
Guarantees and Fiscal Agency Agreement, with the same effect as
if such successor or assuming corporation had been named as the
Guarantor therein and herein and the Guarantor shall be released
from its obligations as obligor under the Guarantees and Fiscal
Agency Agreement.
4. (a) The Guarantor, for itself, its successors and
assigns, covenants and agrees, and each holder of Securities by
his acceptance thereof, likewise covenants and agrees, that all
obligations of the Guarantor relating to payment of the principal
of, premium, if any, and interest and Additional Amounts
(pursuant to Section 2 of the Securities) on each and all of the
Securities and coupons is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Indebtedness
of the Guarantor (as defined below).
"Senior Indebtedness of the Guarantor" or "Senior
Indebtedness" shall mean the principal of, premium, if any, and
interest on and all other amounts due on or with respect to the
following, whether outstanding at the date hereof or hereafter
created or incurred:
(i) indebtedness of the Guarantor for money
borrowed by the Guarantor (excluding the Guarantees, but
including purchase money obligations) whether or not evidenced by
debentures, bonds, notes or other corporate debt securities or
similar instruments issued by the Guarantor (including the
Guarantor's obligations with respect to its 5% Senior Convertible
Debentures due 2001; provided, however, that Senior Indebtedness
shall not include (a) the Guarantor's 4-1/4% Convertible
Subordinated Debentures due 2003, the obligations represented by
which shall rank pari passu with the obligations represented
hereby in right of payment, (b) the Guarantor's subordinated
guarantee of the principal, premium, if any, and interest on the
B-7PAGE
<PAGE>
4-1/2% Convertible Subordinated Debentures Due 2004 of Thermo
Fibertek Inc., on the 6-1/2% Convertible Subordinated Debentures
due 1997 and the 4-5/8% Convertible Subordinated Debentures due
2003 of Thermo TerraTech Inc., on the 4-3/4% Convertible
Subordinated Debentures due 2004 of Thermo Cardiosystems, Inc.,
on the Non-Interest Bearing Convertible Subordinated Debentures
due 2001 and the 4-7/8% Convertible Subordinated Debentures due
2004 of Thermo Ecotek Corporation, on the Non-Interest Bearing
Convertible Subordinated Debentures due 2003 of Thermedics Inc.,
on the 3-3/4% Convertible Subordinated Debentures due 2000 of
Thermo Voltek Corp., on the 4-7/8% Convertible Subordinated
Debentures due 2000 of Thermo Remediation Inc., on the 5%
Convertible Subordinated Debentures due 2000 of ThermoQuest
Corporation, and on the 5% Convertible Subordinated Debentures
due 2000 of Thermo Optek Corporation, the obligations represented
by which shall rank pari passu with the obligations represented
hereby in right of payment and (c) the Guarantor's subordinated
guarantee of the obligations to redeem the common stock of
ThermoLyte Corporation, Thermo Fibergen Inc. and ThermoLase
Corporation the obligations represented by which shall rank pari
passu with the obligations represented hereby in right of
payment;
(ii) obligations to reimburse any bank or other
person in respect of amounts paid under letters of credit;
(iii) leases for real property, equipment or
other assets, which leases are capitalized in the Guarantor's
consolidated financial statements in accordance with generally
accepted accounting principles;
(iv) commitment, standby and other fees due and
payable to financial institutions with respect to credit
facilities available to the Guarantor;
(v) obligations of the Guarantor under interest
rate and currency swaps, floors, caps or other similar
arrangements intended to fix or hedge interest rate obligations
or currency exposure;
(vi) indebtedness secured by any mortgage, pledge,
lien or other encumbrance on property which is owned or held by
the Guarantor subject to such mortgage, pledge, lien or other
encumbrance, whether or not the indebtedness secured thereby
shall have been assumed by the Guarantor;
(vii) obligations of the Guarantor constituting
guarantees of indebtedness of or joint obligations with another
or others which would be included in the preceding clauses (i),
(ii), (iii), (iv), (v) or (vi) (including the Guarantor's
guarantee of the principal, premium, if any, and interest on the
3-3/4% Senior Convertible Debentures due 2000 and the 4-1/2%
Senior Convertible Debentures due 2003 of Thermo Instrument
Systems Inc.); or
B-8PAGE
<PAGE>
(viii) modifications, renewals, extensions or
refundings of any of the indebtedness, leases, fees or
obligations referred to in the preceding clauses (i), (ii),
(iii), (iv), (v), (vi) and (vii), or debentures, notes or other
evidences of indebtedness issued in exchange therefor;
provided that Senior Indebtedness shall not include any
particular indebtedness, lease, fee, obligation, modification,
renewal, extension, refunding or exchanged security if, under the
express provisions of the instrument creating or evidencing the
same, or pursuant to which the same is outstanding, such
indebtedness, lease, fee or obligation or such modification,
renewal, extension, refunding or exchanged security is stated to
be not superior in right of payment to the Guarantees.
(b) (i) In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to
the Guarantor or it its creditors, in their capacity as such
creditors, or to its property, or in the event of any proceedings
for voluntary liquidation, dissolution or other winding up of the
Guarantor, whether or not involving insolvency or bankruptcy, or
in the event of any assignment for the benefit of creditors of
the Guarantor or any marshalling of assets of the Guarantor, then
the holders of Senior Indebtedness of the Guarantor shall first
be entitled to receive payment in full of the principal of (and
premium, if any) and interest, including interest thereon
accruing after the commencement of any such proceeding, and other
amounts due on or with respect to, all Senior Indebtedness of the
Guarantor before the holders of any of the Securities and coupons
shall be entitled to receive any payment on account of the
obligations of the Guarantor relating to the principal of,
premium, if any, or interest and Additional Amounts (pursuant to
Section 2 of the Securities) on the Securities and coupons, and
to that end the holders of Senior Indebtedness of the Guarantor
shall be entitled to receive for application in payment thereof
any payment or distribution of any kind or character, whether in
cash, property or securities, which may be payable or deliverable
in any such proceedings in respect of the obligations of the
Guarantor relating to the Securities and coupons, other than
securities of the Guarantor as reorganized or readjusted or
securities of the Guarantor or any other corporation provided for
by a plan of reorganization or readjustment the payment of which
is subordinate, at least to the extent provided in this Section 4
with respect to the obligations of the Guarantor relating to the
Securities and coupons, to the payment of all Senior Indebtedness
of the Guarantor, provided that the rights of the holders of
Senior Indebtedness of the Guarantor are not altered by such
reorganization or readjustment. For the purposes of this
Section 4, no consolidation, merger, conveyance or transfer made
pursuant to the provisions of Section 3 shall be deemed to be a
liquidation, reorganization, dissolution or other winding up of
the Guarantor.
B-9PAGE
<PAGE>
(ii) If under the circumstances set forth in
paragraph (i) of this subsection, and notwithstanding the
provisions thereof, any payment or distribution of assets of the
Guarantor of any kind, whether in cash, property, or securities
(other than securities of the Guarantor as reorganized or
readjusted or securities of the Guarantor or any other
corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinated, at least to
the extent provided in this Section 4 with respect to the
obligations of the Guarantor relating to the Securities and
coupons, to the payment of all Senior Indebtedness of the
Guarantor, provided that the rights of the holders of Senior
Indebtedness of the Guarantor are not altered by such
reorganization or readjustment), shall be received by the holders
of the Securities in respect of the obligations of the Guarantor
before all Senior Indebtedness of the Guarantor is paid in full,
such payment or distribution shall be paid over to the holders of
Senior Indebtedness of the Guarantor, ratably, for application to
the payment of all Senior Indebtedness of the Guarantor remaining
unpaid until all Senior Indebtedness of the Guarantor shall have
been paid in full, after giving effect to any concurrent payment
or distribution to the holders of such Senior Indebtedness of the
Guarantor.
(iii) Upon any distribution of assets of the
Guarantor referred to in this Section, the holders of Securities
shall be entitled to rely upon any final order or decree of a
court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are
pending, and the holders of Securities shall be entitled to rely
upon a certificate of the liquidating trustee or agent or other
person making any distribution to the holders of Securities for
the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of Senior Indebtedness of the
Guarantor and other indebtedness of the Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to
this Section.
(c) (i) Upon the maturity of any Senior Indebtedness
of the Guarantor by lapse of time, acceleration or otherwise, all
principal thereof (and premium, if any) and interest due thereon,
including interest thereon accruing after the commencement of any
proceeding of the type referred to in paragraph (i) of
Section 4(b) above, and all other amounts due on or with respect
thereto, shall first be paid in full, or such payment duly
provided for in cash, before any payment, directly or indirectly,
is made on account of the obligations of the Guarantor relating
to the principal of, premium, if any, or interest and Additional
Amounts (pursuant to Section 2 of the Securities) on the
Securities or coupons.
B-10PAGE
<PAGE>
(ii) Upon the happening of an event of default
with respect to any Senior Indebtedness of the Guarantor, as
defined therein or in the instrument under which it is
outstanding, permitting the holders to accelerate the maturity
thereof, then, unless and until such event of default shall have
been cured or waived or shall have ceased to exist, no payment
shall be made by the Guarantor, directly or indirectly, on
account of the obligations of the Guarantor relating to the
principal of, premium, if any, or interest and Additional Amounts
(pursuant to Section 2 of the Securities) on the Securities and
coupons.
(d) In case cash, securities or other property
otherwise payable or deliverable to the holders of the Securities
on account of the Guarantees shall have been applied, pursuant to
Section 4(b) or (c), to the payment of Senior Indebtedness of the
Guarantor, then, upon the payment in full of all Senior
Indebtedness of the Guarantor, the holders of the Securities and
coupons shall be subrogated to any rights of any holders of
Senior Indebtedness of the Guarantor, to receive any further
payments or distributions applicable to Senior Indebtedness of
the Guarantor until the obligations of the Guarantor in respect
of the Guarantees shall have been discharged in full, and such
payments or distributions received by the holders of the
Securities and coupons, by reason of such subrogation, of cash,
securities or other property which otherwise would be paid or
distributed to the holders of Senior Indebtedness of the
Guarantor, shall, as between the Guarantor and its creditors
other than the holders of Senior Indebtedness of the Guarantor,
on the one hand, and the holders of the Securities and coupons on
account of the Guarantees, on the other hand, be deemed to be a
payment by the Guarantor on account of Senior Indebtedness of the
Guarantor and not on account of the Securities and coupons.
(e) No present or future holder of any Senior
Indebtedness of the Guarantor shall be prejudiced in any way in
the right to enforce the subordination of the Guarantees by any
act or failure to act on the part of the Guarantor. The
provisions of this Section 4 are solely for the purpose of
defining the relative rights of the holders of Senior
Indebtedness of the Guarantor, on the one hand, and the holders
of the Securities and coupons on account of the Guarantees, on
the other hand, against the Guarantor and its assets, and nothing
contained in this Section 4 shall impair, as between the
Guarantor and the holder of any Security or coupon, the
obligation of the Guarantor, which is unconditional and absolute,
to perform in accordance with the terms of its Guarantees, or
prevent the holder of any Security or coupon, upon default
hereunder or under such Security or coupon, from exercising all
rights, powers and remedies otherwise provided herein or therein
or by applicable law, all subject to the rights of the holders of
Senior Indebtedness of the Guarantor under this Section 4 to
receive cash, property or securities otherwise payable or
B-11PAGE
<PAGE>
deliverable to the holders of the Securities and coupons on
account of the Guarantees.
(f) Nothing contained in this Section 4 or in any
Guarantees shall prevent at any time, except under the conditions
described in Sections 4(b) and (c) hereof or during the pendency
of any dissolution, winding up, liquidation or reorganization
proceedings therein referred to, the Guarantor from performing
its obligations under the Guarantees.
5. The Guarantor shall be subrogated to all rights of the
holders of the Securities and of any coupons against the Company
in respect of any amounts paid by the Guarantor pursuant to the
provisions of this Guarantee; provided, however, that the
Guarantor shall not be entitled to enforce or to receive any
payments arising out of, or based upon, such right of subrogation
until the principal of, premium, if any, and interest on and
Additional Amounts (pursuant to Section 2 of the Securities, if
any, on) all of the Securities shall have been paid in full.
6. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES
OF AMERICA WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS RULES.
7. All terms used in this Guarantee which are defined in
the Fiscal Agency Agreement shall have the meanings assigned to
them in the Fiscal Agency Agreement.
8. Subject to the next following paragraph, the Guarantor
hereby certifies and warrants that all acts, conditions and
things required to be done and performed and to have happened
precedent to the creation and issuance of this Guarantee and to
constitute the same a legal, valid and binding obligations of the
Guarantor enforceable in accordance with their terms, have been
done and performed and have happened in due and strict compliance
with all applicable laws.
9. This Guarantee shall not become valid or obligatory for
any purpose until the certificate of authentication on the
Security upon which this Guarantee is endorsed shall have been
duly signed by the Fiscal Agent acting under the Fiscal Agency
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee
to be duly executed in its corporate name by the manual or
facsimile signature of a duly authorized officer.
Dated:
THERMO ELECTRON CORPORATION
By: _________________________
Name:
Title:
Attest:
_________________________
B-13PAGE
<PAGE>
EXHIBIT C
Form of Certificate to be Given by
The Euroclear Operator and Cedel Bank, societe anonyme
CERTIFICATION
U.S. $
THERMOLASE CORPORATION
4 3/8% Convertible Subordinated Debentures
due August 5, 2004
(the "Securities")
This is to certify that, based solely on certifications we
have received in writing, by tested telex or electronic
transmission from member organizations appearing in our records
as persons being entitled to a portion of the principal amount
set forth below or to interest payable on an interest payment
date (our "Member Organizations"), substantially to the effect
set forth in the Fiscal Agency Agreement relating to the
above-captioned Securities, as of the date hereof, U.S.
$_______________ aggregate principal amount of the
above-captioned Securities is owned by persons that are not
citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the
income of which is subject to United States Federal income
taxation regardless of its source or any other person deemed a
"United States person" or a "U.S. person" under the Internal
Revenue Code of 1986, as amended, or Regulation S under the U.S.
Securities Act of 1933, as amended ("United States persons").
The following denominations of Bearer Securities are
requested:
No. of Amount
Certificates
$1,000 Denomination _____________ = $________________
$10,000 Denomination _____________ = $________________
Total Requested _____________ = $________________
We further certify (i) that we are not making available
herewith for exchange any portion of the Regulation S Global
Security excepted in such certifications and (ii) that as of the
date hereof we have not received any notification from any of our
Member Organizations to the effect that the statements made by
such Member Organization with respect to any portion of the part
submitted herewith for exchange are no longer true and cannot be
relied upon as of the date hereof. We further certify that
C-1PAGE
<PAGE>
interest payable on the interest payment dates on February 15 and
August 15 will be paid with respect to U.S. $_____________
principal amount of the Securities with respect to which we have
received from Member Organizations certificates substantially in
the form set out in Exhibit D to the Fiscal Agency Agreement
relating to the Securities that the Securities (a) are owned by a
person (other than a financial institution for purposes of resale
during the restricted period) who is not a United States person;
(b) are owned by a United States person (other than a financial
institution for purposes of resale during the restricted period)
who is (i) a foreign branch of a United States financial
institution or (ii) a United States person who acquired such
Securities through the foreign branch of a United States
financial institution and who for purposes of this certification
holds such Securities through such financial institution on the
date hereof and, in either case, such United States financial
institution has agreed, for the benefit of the Company, to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the
United States Internal Revenue Code of 1986, as from time to time
amended, and the regulations thereunder; or (c) are owned by a
financial institution for purposes of resale during the
restricted period and such financial institution has certified
that it has not acquired such Securities for purposes of resale
directly or indirectly to a United States person or to a person
within the United States or its possessions.
To the extent that we have knowledge that any of such
certificates from a Member Organization is false and to the
extent that we have not received with respect to any Securities
such certificates from Member Organization, we are not requesting
that payment be made for interest with respect thereto.
We further certify that as of the date hereof we have not
received any notification from any of our Member Organizations to
the effect that the statements made by such Member Organization
with respect to any interest payment on any portion of the
principal amount of the Securities are no longer true and cannot
be relied upon as of the date hereof. We further certify that
under the rules of the undersigned organization, each Member
Organization has agreed that any electronic certification shall
have the effect of a signed certification and that all
certifications shall be retained for at least four calendar years
following the year in which the certifications are received in
compliance with the rules set forth under Treas. Reg. Section
1.163-5(c)(2)(i)(D)(3)(i).
We undertake that any interest received by us and not paid
as provided above shall be returned to the Fiscal Agent for the
above-captioned Securities immediately prior to the expiration of
two years after such interest payment date in order to be repaid
by such Fiscal Agent to the above issuer at the end of two years
after such interest payment date.
C-2PAGE
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We understand that this certification is required in
connection with certain tax laws and, if applicable, certain
securities laws of the United States. In connection therewith,
if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or
would be relevant, we irrevocably authorize you to produce this
certification to any interested party in such proceedings.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and
its territories and possessions, including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands. As used herein, "restricted period"
means the period described in Section 1.163-5(c)(2)(i)(D)(7) of
the Treasury Regulations and "financial institution" means the
persons described in Section 1.165-12(c)(1)(v) of the Treasury
Regulations.
Dated: ____________________, 199X(4)
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, BRUSSELS OFFICE, AS OPERATOR OF
THE EUROCLEAR SYSTEM]
[CEDEL BANK, SOCIETE ANONYME]*
By:_____________________________
_______________________
(4) To be dated no earlier than the date which is 40 days after
August 12, 1997.
*Delete as appropriate.
C-3PAGE
<PAGE>
EXHIBIT D
Form of Certificate of Beneficial Ownership for
Bearer Securities to be Provided to the
Euroclear Operator or to Cedel Bank, societe anonyme
CERTIFICATION
U.S. $____________
THERMOLASE CORPORATION
4 3/8% Convertible Subordinated Debentures
due August 5, 2004
(the "Securities")
This is to certify that as of the date hereof and except as
set forth below, $___________ aggregate principal amount of the
above-mentioned Securities held by you for our account are owned
or, if this certificate is being delivered in connection with a
payment of interest, were owned, by or on behalf of, (a) a person
(other than a financial institution for purposes of resale during
the restricted period) who is not a United States person; or (b)
a United States person (other than a financial institution for
purposes of resale during the restricted period) who is (i) a
foreign branch of a United States financial institution or (ii) a
United States person acquiring such Securities through the
foreign branch of a United States financial institution and who
for purposes of this certification holds such Securities through
such financial institution on the date hereof, and, in the case
of either (i) or (ii), such United States financial institution
has agreed, for the benefit of the Company, to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the United
States Internal Revenue Code of 1986, as from time to time
amended, and the regulations thereunder; or (c) a financial
institution for purposes of resale during the restricted period
and such financial institution has not acquired such Securities
for purposes of resale directly or indirectly to a United States
person or to a person within the United States or its
possessions; and the undersigned has obtained a similar
certificate from its member organizations on which this
certificate is based; provided, however, that if the undersigned
has actual knowledge that the information contained in such a
certificate is false (and, absent documentary evidence that the
beneficial owner of such Security is not a United states person,
it will be deemed to have actual knowledge that such certificate
is false if it has a United States address for such beneficial
owner, other than a financial institution described above), the
undersigned will not deliver a Security in temporary or
definitive bearer form to the person who signed such certificate
notwithstanding the delivery of such certificate to the
undersigned.
D-1PAGE
<PAGE>
No. of
Certificates Amount
$1,000 Denomination ____________ = $________________
$10,000 Denomination ____________ = $________________
Total Requested ____________ = $________________
As used herein, (i) "United States person" means a citizen
or resident of the United States, a corporation, partnership or
other entity created or organized in or under the laws of the
United States and an estate or trust the income of which is
subject to United States Federal income taxation regardless of
its source or any other person deemed a "United States person" or
a "U.S. person" under the Internal Revenue Code of 1986, as
amended, or Regulation S under the U.S. Securities Act of 1933,
as amended, (ii) "United States" means the United States of
America (including the States and the District of Columbia) and
its territories and possessions, including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands, (iii) "restricted period" means the
period described in Section 1.163-5(c)(2)(i)(D)(7) of the
Treasury Regulations, and (iv) "financial institution" means the
persons described in Section 1.165-12(c)(1)(v) of the United
States Treasury Regulations.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your
certification relating to the Securities held by you for our
account in accordance with your operating procedures if any
applicable statement herein is not correct on such date, and in
the absence of any such notification it may be assumed that this
certification applies as of such date.
This certification excepts and does not relate to
U.S. $_______________ of such interest in the above Securities in
respect of which we are not able to certify and as to which we
understand exchange and delivery of definitive Securities cannot
be made until we do so certify.
D-2PAGE
<PAGE>
We understand that this certification is required in
connection with certain tax laws and, if applicable, certain
securities laws of the United States. In connection therewith,
if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or
would be relevant, we irrevocably authorize you to produce this
certification or a copy hereof to any interested party in such
proceedings.
Dated: ___________________, 199X(5)
[Name]
By:_________________________
Signature
As, or as agent for, the beneficial
owner[s] of the Securities to which
this certificate relates.
_______________________
(5) To be dated no earlier than the date which is 40 days after
August 12, 1997.
D-3PAGE
<PAGE>
EXHIBIT E
Form of Certificate of Beneficial Ownership
for Registered Securities to be Provided to the
Euroclear Operator or to Cedel Bank, societe anonyme
CERTIFICATION
U.S. $____________
THERMOLASE CORPORATION
4 3/8% Convertible Subordinated Debentures
due August 5, 2004
(the "Securities")
Please issue U. S. $_______ of the U.S. $________ aggregate
principal amount of the Securities held by you for our account in
registered form. We hereby certify to you that we are not a
"U.S. Person" as defined in Regulation S under the United States
Securities Act of 1933, as amended or a "United States person" as
defined under the Internal Revenue Code of 1986, as amended,
except as provided in U.S. Treasury Regulation Section
1.163-5(c)(2)(i)(D). The exact name of the beneficial holder
that the Securities are to be registered in is as follows:
The following denomination(s) of Registered Securities are
requested (integral multiples of $1,000):
No. of Amount
Denominations Certificates
$______________ _____________ = $________________
_______________ _____________ = $________________
_______________ _____________ = $________________
_______________ _____________ = $________________
Total Requested _____________ = $________________
[This certificate does not constitute such certification [or
We hereby certify that we have provided such certification] on
Form W-8 or its equivalent as may be necessary to avoid
imposition of withholding and/or back-up withholding under U.S.
federal tax law with respect to any payments of interest on the
Securities.]
E-1PAGE
<PAGE>
We irrevocably authorize you to produce this certificate or
a copy hereof to any interested party in any administrative or
proceedings with respect to the matters covered by this
certificate.
Dated: __________________, 199X(6)
Yours faithfully,
[NAME]
By: _______________________
Signature
To be completed by the account
holder as, or as agent for, the
beneficial owner(s) of the
Securities to which this
certificate relates.
_______________________
(6) To be dated no earlier than the date which is 40 days after
August 12, 1997.
E-2PAGE
<PAGE>
EXHIBIT F
Form of Certificate to be Given by
The Euroclear Operator and Cedel Bank, societe anonyme
CERTIFICATION
U.S. $_____________
THERMOLASE CORPORATION
4 3/8% Convertible Subordinated Debentures
due August 5, 2004
(the "Securities")
This is to certify that, based solely on certifications we
have received in writing, by tested telex or electronic
transmission from member organizations appearing in our records
as persons being entitled to a portion of the principal amount
set forth below (our "Member Organizations"), substantially to
the effect set forth in the Fiscal Agency Agreement, as of the
date hereof, U.S. $___________ aggregate principal amount of the
above-captioned Securities is owned by persons that are not
citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the
income of which is subject to United States Federal income
taxation regardless of its source (except as provided in U.S.
Treasury Regulation Section 1.163-5(c)(2)(i)(D)) or any other
person deemed a "U.S. person" under Regulation S under the U.S.
Securities Act of 1933, as amended.
The following denomination(s) of Registered Securities are
requested (integral multiples of $1,000):
No. of Amount
Certificates
$1,000 Denomination ______________ = $________________
$10,000 Denomination ______________ = $________________
Total Requested ______________ = $________________
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, exercise of any rights or
collection of any interest) any portion of the Regulation S
Global Security excepted in such certifications and (ii) that as
of the date hereof we have not received any notification from any
of our Member Organizations to the effect that the statements
made by such Member Organization with respect to any portion of
the part submitted herewith for exchange (or, if relevant,
F-1PAGE
<PAGE>
exercise of any rights or collection of any interest) are no
longer true and cannot be relied upon as of the date hereof.
We understand that this certification is required in
connection with certain tax laws and, if applicable, certain
securities laws of the United States. In connection therewith,
if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or
would be relevant, we irrevocably authorize you to produce this
certification to any interested party in such proceedings.
As used herein, "United States" means the United States of
America (including the States and the District of Columbia); and
its territories and possessions, including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
Dated: __________________, 199X(7)
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, BRUSSELS OFFICE, AS
OPERATOR OF THE EUROCLEAR SYSTEM]
[CEDEL BANK, SOCIETE ANONYME]
By:__________________________
_______________________
(7) To be dated no earlier than the date which is 40 days after
August 12, 1997.
F-2PAGE
<PAGE>
EXHIBIT G
FORM OF TRANSFEREE LETTER
ThermoLase Corporation
and
Ladies and Gentlemen:
We are delivering this letter in connection with the
purchase of 4 3/8% Convertible Subordinated Debentures due 2004
(the "Debentures") of ThermoLase Corporation, a Delaware
corporation (the "Company"), which are convertible into shares of
Common Stock of the Company (the "Underlying Shares" and together
with the Debentures, the "Restricted Securities"), all as
described in the Company's Offering Circular dated August 5, 1997
(the "Offering Circular").
We represent, warrant and agree as follows:
1. We understand and hereby acknowledge that the
Debentures and, prior to the effectiveness of a registration
statement filed with the Securities and Exchange Commission
relating to the resale of the Underlying Shares, the Underlying
Shares have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and may not be sold except as
permitted in the following sentence. We agree on our own behalf
and on behalf of any investor account (as hereinafter defined)
for which we are purchasing the Debentures to offer, sell or
otherwise transfer such Restricted Securities prior to the date
which is two years (or the then applicable holding period under
Rule 144(k) under the Securities Act (or successor provision))
after the later of the date of original issue and the last date
on which the Company or any affiliate of the Company was the
owner of such Restricted Securities (or any predecessor thereto)
(the "Resale Restriction Termination Date") only (a) to the
Company, (b) pursuant to a registration statement which has been
declared effective under the Securities Act, (c) for so long as
the Debentures are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person we reasonably believe is a
qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB to whom
notice is given that the transfer is being made in reliance on
Rule 144A, (d) outside the United States in a transaction meeting
the requirements of Rule 904 of Regulation S under the Securities
Act, (e) in a transaction arranged by a broker or dealer
registered under the Securities Exchange Act of 1934, as amended,
to an institutional "accredited investor" within the meaning of
subparagraph (a)(1), (2), (3), or (7) of Rule 501 under the
Securities Act (an "Institutional Accredited Investor") that is
purchasing Restricted Securities for its own account or for the
account of such Institutional Accredited Investor, for investment
purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities
G-1PAGE
<PAGE>
Act or (f) pursuant to any other available exemption from the
registration requirements of the Securities Act as confirmed in
an opinion of counsel, acceptable in form and substance to the
Company, and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other
applicable jurisdiction and subject to any requirement of law
that the disposition of our property or the property of such
investor account or accounts be at all times within our or their
control and in compliance with any applicable state securities
laws. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date. If any
resale or other transfer of the Restricted Securities is proposed
to be made pursuant to clause (e) above prior to the Resale
Restriction Termination Date, the transferor shall deliver a
letter from the transferee containing representations and
agreements substantially the same as those contained herein. We
acknowledge that the Company and the U.S. Agent reserve the right
prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Debentures and Common Stock
pursuant to clause (d), (e) or (f) above to require the delivery
of an opinion of counsel, certifications or other information
acceptable to the Company and the U.S. Agent in form and
substance.
2. We are an Institutional Accredited Investor within
the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501
under the Securities Act.
3. Any purchase of Restricted Securities by us will
be for our own account or for the account of one or more other
Institutional Accredited Investors (an "investor account") as to
which we exercise sole investment discretion.
4. We are not acquiring the Restricted Securities
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act.
5. We have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits
and risks of purchasing the Restricted Securities, and we and any
investor account for which we are acting are each able to bear
the economic risk of our or its investment.
6. We have received a copy of the Offering Circular
and acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask
such questions of representatives of the Company and the
Guarantor and receive answers thereto, as we deem necessary in
connection with our decision to purchase Restricted Securities.
We understand that the registrar and transfer agent will not
be required to accept for registration of transfer any Restricted
Securities, except upon presentation of evidence satisfactory to
the Company and the Fiscal Agent that the foregoing restrictions
G-2PAGE
<PAGE>
on transfer have been complied with. We further understand that
the Restricted Securities will be in the form of definitive
physical certificates and that such certificates will bear a
legend reflecting the substance of paragraph 1 above.
We shall provide to any person purchasing any Restricted
Securities from us a notice advising such purchaser that
transfers of the Debentures and the Underlying Shares are
restricted as set forth herein.
We understand that prior to any proposed offer of Debentures
occurring before the Resale Restriction Termination Date, we must
check the appropriate box set forth on the reverse of the
certificate evidencing such Debentures relating to the manner of
such transfer and submit the certificates to the Fiscal Agent.
In addition, we understand that prior to any proposed transfer of
Debentures or any proposed offer of Underlying Shares acquired
upon conversion of Debentures when there is not effective
registration statement covering such Underlying Shares to an
institutional accredited investor occurring before the Resale
Restriction Termination Date, we may be required to furnish to
the Company and the Fiscal Agent such certifications, legal
opinion or other information as they may reasonably require to
confirm that the proposed transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, and that
transfers occurring before the Resale Restriction Termination
Date to any other person pursuant to another available exemption
under the Securities act will require an opinion of counsel
satisfactory to the Company.
We acknowledge that you and others will rely upon our
confirmations, acknowledgments and agreements set forth herein,
and we agree to notify you promptly in writing of any of our
representations or warranties herein ceases to be accurate and
complete. You are irrevocably authorized to produce this letter
or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters
covered hereby.
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<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
_____________________________
(Name of Purchaser)
By:___________________________
Name:
Title:
Address:
Date:_______________________
EXHIBIT 10.5
MASTER REPURCHASE AGREEMENT
AGREEMENT dated as of the 1st day of January, 1994 between
Thermo Electron Corporation, a Delaware corporation ("Seller"),
and ThermoLase Corporation, a Delaware corporation (the "Buyer").
1. Applicability
From time to time Buyer and Seller may enter into
transactions in which Seller agrees to transfer to Buyer certain
securities and/or financial instruments ("Securities") against
the transfer of funds by Buyer, with a simultaneous agreement by
Buyer to transfer to Seller such Securities on demand, against
the transfer of funds by Seller. Each such transaction shall be
referred to herein as a "Transaction" and shall be governed by
this Agreement, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to either party (i)
the commencement by such party as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar
official for such party or any substantial part of its property;
or (ii) the commencement of any such case or proceeding against
such party, or another seeking such an appointment, which (A) is
consented to or not timely contested by such party, (B) results
in the entry of an order for relief, such an appointment or the
entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a
general assignment for the benefit of creditors; or (iv) the
admission in writing by a party of such party's inability to pay
such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or
other distributions thereon;
(d) "Market Value", with respect to any Securities as of
any date, the price for such Securities on such date obtained
from a generally recognized source agreed to by the parties or
the most recent closing bid quotation from such a source, plus
accrued Income to the extent not included therein (other than any
Income transferred to Seller pursuant to Paragraph 6 hereof) as
of such date (unless contrary to market practice for such
Securities);
PAGE
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(e) "Other Buyers", third parties that have entered into an
agreement with Seller that is substantially similar to this
Agreement;
(f) "Pricing Rate", a rate equal to the Commercial Paper
Composite rate for 90-day maturities provided by Merrill Lynch,
Pierce, Fenner & Smith Incorporated (or, if such rate is not
available, a substantially equivalent rate agreed to by Buyer and
Seller) plus 25 basis points, which rate shall be adjusted on
the first business day of each fiscal quarter and shall be in
effect for the entirety such fiscal quarter;
(g) "Purchase Price", the price at which Purchased
Securities are transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by
Seller to Buyer in a Transaction hereunder, and any Securities
substituted therefor in accordance with Paragraph 9 hereof. The
term "Purchased Securities" with respect to any Transaction at
any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude
Securities returned pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account
maintained by Seller containing, among other Securities, the
Purchased Securities; and
(j) "Repurchase Price", for any Purchased Security, an
amount equal to the Purchase Price paid by Buyer to Seller for
such Purchased Security.
3. Transactions
(a) A Transaction may be initiated by Buyer upon the
transfer of the Purchase Price to Seller's account. Upon such
transfer, Seller shall transfer to Buyer Purchased Securities
having a Market Value equal to 103% of the Purchase Price.
(b) Purchased Securities shall be held in custody for Buyer
by Seller in the Repurchase Collateral Account. Seller shall
indicate on its books for such account Buyer's ownership of the
Purchased Securities. Upon reasonable request from Buyer, Seller
shall provide Buyer with a complete list of Purchased Securities
owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase
from Buyer, and Buyer shall sell to Seller, for the Repurchase
Price all or any part of the Purchased Securities then owned by
Buyer.
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4. Margin Maintenance
(a) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer is less than 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller shall transfer to Buyer additional Securities ("Additional
Purchased Securities"), so that the aggregate Market Value of
such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of
such aggregate Repurchase Price.
(b) If at any time the aggregate Market Value of all
Purchased Securities then owned by Buyer exceeds 103% of the
aggregate Repurchase Price for such Purchased Securities, then
Seller may transfer Purchased Securities to Seller, so that the
aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. Interest Payments
If during any fiscal month Buyer owned Purchased Securities,
then on the first day of the next following fiscal month Seller
shall pay to Buyer an amount equal to the sum of the aggregate
Repurchase Prices of the Purchased Securities owned by Buyer at
the close of each day during the preceding fiscal month divided
by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided
by 360.
6. Income Payments and Voting Rights
Where a particular Transaction's term extends over an Income
payment date on the Purchased Securities subject to that
Transaction, Buyer shall, on the date such Income is payable,
transfer to Seller an amount equal to such Income payment or
payments with respect to any Purchased Securities subject to such
Transaction. Seller shall retain all voting rights with respect
to Purchased Securities sold to Buyer under this Agreement.
7. Security Interest
Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such
Transactions are deemed to be loans, Seller shall be deemed to
have pledged to Buyer as security for the performance by Seller
of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a
security interest in, all of the Purchased Securities with
respect to all Transactions hereunder and all proceeds thereof.
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8. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds
hereunder shall be in immediately available funds. As used
herein with respect to Securities, "transfer" is intended to have
the same meaning as when used in Section 8-313 of the
Massachusetts Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
9. Substitution
Buyer hereby grants Seller the authority to manage, in
Seller's sole discretion, the Purchased Securities held in
custody for Buyer by Seller in the Repurchase Collateral Account.
Buyer expressly agrees that Seller may (i) substitute other
Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase
Collateral Account. Substitutions shall be made by transfer to
Buyer of such other Securities and transfer to Seller of the
Purchased Securities for which substitution is being made. After
substitution, the substituted Securities shall be deemed to be
Purchased Securities. Securities which are substituted for
Purchased Securities shall have a Market Value at the time of
substitution equal to or greater than the Market Value of the
Purchase Securities for which such Securities were substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the
other that (i) it is duly authorized to execute and deliver this
Agreement, to enter into the Transactions contemplated hereunder
and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (iii) it has obtained
all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and
such authorizations are in full force and effect and (iv) the
execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance,
charter, by-law or rule applicable to it or any agreement by
which it is bound or by which any of its assets are affected. On
the date for any Transaction Buyer and Seller shall each be
deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
fails to transfer Purchased Securities upon demand for repurchase
from either Buyer or Seller, (ii) Seller or Buyer fails, after
one business day's notice, to comply with Paragraph 4 hereof,
(iii) Buyer fails to make payment to Seller pursuant to
Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5
hereof, (v) an Act of Insolvency occurs with respect to Seller
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or Buyer, (vi) any representation made by Seller or Buyer shall
have been incorrect or untrue in any material respect when made
or repeated or deemed to have been made or repeated, or (vii)
Seller or Buyer shall admit to the other its inability to, or its
intention not to, perform any of its obligations hereunder (each
an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by
written notice to the defaulting party (which option shall be
deemed to have been exercised, even if no notice is given,
immediately upon the occurrence of any Act of Insolvency), Seller
shall become obligated to repurchase, and Buyer shall become
obligated to sell, all Purchased Securities then owned by Buyer
for the Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises
or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligations
hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable,
(ii) all Income paid after such exercise or deemed exercise shall
be retained by Buyer and applied to the aggregate unpaid
Repurchase Prices owed by Seller, and (iii) Seller shall
immediately deliver to Buyer any Purchased Securities subject to
such Transactions then in Seller's possession.
(c) In all Transactions in which Buyer is the defaulting
party, upon tender by Seller of payment of the aggregate
Repurchase Prices for all such Transactions, Buyer's right, title
and interest in all Purchased Securities subject to such
Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under
subparagraph (a) of this Paragraph or the notice referred to in
clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the
defaulting party, (A) immediately sell, in a recognized market at
such price or prices as Buyer may reasonably deem satisfactory,
any or all Purchased Securities subject to such Transactions and
apply the proceeds thereof to the aggregate unpaid Repurchase
Prices and any other amounts owing by Seller hereunder or (B) in
its sole discretion elect, in lieu of selling all or a portion of
such Purchased Securities, to give Seller credit for such
Purchased Securities in an amount equal to the price therefor on
such date, obtained from a generally recognized source or the
most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by
Seller hereunder; and
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(ii) as to Transactions in which Buyer is the
defaulting party, (A) purchase securities ("Replacement
Securities") of the same class and amount as any Purchased
Securities that are not delivered by Buyer to Seller as required
hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Securities, to be deemed to have purchased
Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting
party , Buyer shall be liable to Seller (i) with respect to
Purchased Securities (other than Additional Purchased
Securities), for any excess of the price paid (or deemed paid) by
Seller for Replacement Securities therefor over the Repurchase
Price for such Purchased Securities and (ii) with respect to
Additional Purchased Securities, for the price paid (or deemed
paid) by Seller for the Replacement Securities therefor.
(f) The defaulting party shall be liable to the
nondefaulting party for the amount of all reasonable legal or
other expenses incurred by the nondefaulting party in connection
with or as a consequence of an Event of Default.
(g) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any
other agreement or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto
and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and
have been made in consideration of each other. Accordingly, each
of Buyer and Seller agrees (i) to perform all of its obligations
in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that
each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions
hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be
deemed to have been made in consideration of payments, deliveries
and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other
and netted.
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13. Entire Agreement; Severability
This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for
repurchase transactions. Each provision and agreement and
agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such
other provision or agreement.
14. Non-assignability; Termination
The rights and obligations of the parties under this
Agreement and under any Transactions shall not be assigned by
either party without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit
of the parties and their respective successors and assigns. This
Agreement may be canceled by either party upon giving written
notice to the other, except that this Agreement shall,
notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. Governing Law
This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without giving effect to the
conflict of law principles thereof.
16. No Waivers, Etc.
No express or implied waiver of any Event of Default by
either party shall constitute a waiver of any other Event of
Default and no exercise of any remedy hereunder by any party
shall constitute a wavier of its right to exercise any other
remedy hereunder. No modification or waiver of any provision of
this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in
writing and duly executed by both of the parties hereto.
19. Intent
(a) The parties recognize that each Transaction is a
"repurchase agreement" as that term is defined in Section 101 of
Title 11 of the United States Code, as amended (except insofar as
the type of Securities subject to such Transaction or the term of
such Transaction would render such definition inapplicable), and
a "securities contract" as that term is defined in Section 741 of
Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions
hereunder or to exercise any other remedies pursuant to Paragraph
11 hereof, is a contractual right to liquidate such Transaction
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as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
THERMO ELECTRON CORPORATION THERMOLASE CORPORATION
By: /s/ Melissa F. Riordan By: /s/ John C. Hansen
Melissa F. Riordan John C. Hansen
Treasurer President
EXHIBIT 10.14
THERMOLASE CORPORATION
RESTATED STOCK HOLDING ASSISTANCE PLAN
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
interpretations and decisions with regard to the Plan and the
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Stock Holding Policy and such rules and regulations as may be
established thereunder shall be final and conclusive. The
Committee may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or the Stock Holding
Policy, or in any Loan in the manner and to the extent the
Committee deems desirable to carry it into effect. No member of
the Committee shall be liable for any action or omission in
connection with the Plan or the Stock Holding Policy that is made
in good faith.
SECTION 4. Loans and Loan Limits.
The Committee has determined that the provision of Loans
from time to time to Key Employees in such amounts as to cause
such Key Employees to comply with the Stock Holding Policy is, in
the judgment of the Committee, reasonably expected to benefit the
Company and authorizes the Company to extend Loans from time to
time to Key Employees in such amounts as may be requested by such
Key Employees in order to comply with the Stock Holding Policy.
Such Loans may be used solely for the purpose of acquiring Common
Stock (other than upon the exercise of stock options or under
employee stock purchase plans) in open market transactions or
from the Company.
Each Loan shall be full recourse and evidenced by a
non-interest bearing promissory note substantially in the form
attached hereto as Exhibit A (the "Note") and maturing in
accordance with the provisions of Section 6 hereof, and
containing such other terms and conditions, which are not
inconsistent with the provisions of the Plan and the Stock
Holding Policy, as the Committee shall determine in its sole and
absolute discretion.
SECTION 5. Federal Income Tax Treatment of Loans.
For federal income tax purposes, interest on Loans shall be
imputed on any interest free Loan extended under the Plan. A Key
Employee shall be deemed to have paid the imputed interest to the
Company and the Company shall be deemed to have paid said imputed
interest back to the Key Employee as additional compensation.
The deemed interest payment shall be taxable to the Company as
income, and may be deductible to the Key Employee to the extent
allowable under the rules relating to investment interest. The
deemed compensation payment to the Key Employee shall be taxable
to the employee and deductible to the Company, but shall also be
subject to employment taxes such as FICA and FUTA.
SECTION 6. Maturity of Loans.
Each Loan to a Key Employee hereunder shall be due and
payable on demand by the Company. If no such demand is made,
then each Loan shall mature and the principal thereof shall
become due and payable on the fifth anniversary of the date of
the Loan, provided that the Committee may, in its sole and
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absolute discretion, authorize such other maturity and repayment
schedule as the Committee may determine. Each Loan shall also
become immediately due and payable in full, without demand, upon
the occurrence of any of the events set forth in the Note;
provided that the Committee may, in its sole and absolute
discretion, authorize an extension of the time for repayment of a
Loan upon such terms and conditions as the Committee may
determine.
SECTION 7. Amendment and Termination of the Plan.
The Committee may from time to time alter or amend the Plan
or the Stock Holding Policy in any respect, or terminate the Plan
or the Stock Holding Policy at any time. No such amendment or
termination, however, shall alter or otherwise affect the terms
and conditions of any Loan then outstanding to Key Employee
without such Key Employee's written consent, except as otherwise
provided herein or in the promissory note evidencing such Loan.
SECTION 8. Miscellaneous Provisions.
(a) No employee or other person shall have any claim or
right to receive a Loan under the Plan, and no employee shall
have any right to be retained in the employ of the Company due to
his or her participation in the Plan.
(b) No Loan shall be made hereunder unless counsel for the
Company shall be satisfied that such Loan will be in compliance
with applicable federal, state and local laws.
(c) The expenses of the Plan shall be borne by the Company.
(d) The Plan shall be unfunded, and the Company shall not
be required to establish any special or separate fund or to make
any other segregation of assets to assure the making of any Loan
under the Plan.
(e) Except as otherwise provided in Section 7 hereof, by
accepting any Loan under the Plan, each Key Employee shall be
conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
or the Stock Holding Policy by the Company, the Board of
Directors of the Company or the Committee.
(f) The appropriate officers of the Company shall cause to
be filed any reports, returns or other information regarding
Loans hereunder, as may be required by any applicable statute,
rule or regulation.
SECTION 9. Effective Date.
The Plan and the Stock Holding Policy shall become effective
upon approval and adoption by the Committee.
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EXHIBIT A TO STOCK HOLDING ASSISTANCE PLAN
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 to the Company
from the Employee's annual cash incentive compensation (referred
to as bonus), beginning with the first such bonus payment to
occur after the date of this Note and on each of the next four
bonus payment dates occurring prior to the Maturity Date, such
amount as may be designated by the Company but which shall not
exceed 20% of the Employee's bonus payment. 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
EXHIBIT 10.29
AMENDMENT TO OPERATING AGREEMENT
OF THERMOLASE JAPAN L.L.C.
This Agreement is made as of May 1, 1997 by and among
ThermoLase Corporation, a Delaware corporation with offices
located at 10455 Pacific Center Court, San Diego, California
92121-4339, U.S.A. ("ThermoLase"), Fox River Japan Partners,
L.P., a Delaware limited partnership with offices located at 210
E. State Street, Batavia, IL 60510 ("Fox River Japan"), and
ThermoLase Japan L.L.C. a Wyoming limited liability company with
offices c/o Fox River Japan ("ThermoLase Japan").
WHEREAS, the parties entered into an Operating Agreement
effective as of January 22, 1996 (the "Operating Agreement") in
order to commercialize technology licensed to ThermoLase Japan by
ThermoLase in the territory set forth in the Operating Agreement;
and
WHEREAS, ThermoLase, Fox River Japan, and ThermoLase Japan
desire to modify certain terms set forth in the Operating
Agreement to: (i) permit Fox River Japan to withdraw certain
funds contributed to ThermoLase Japan, and (ii) obligate each of
Fox River Japan and ThermoLase to fund equally the expenses
incurred by ThermoLase Japan for the period from May 1, 1997
through the "Review Date" which shall be the earlier of: (a) the
date on which ThermoLase Japan has received all approvals from
relevant Japanese authorities required in order to pursue the
commercialization of the technology subject to the License
Agreement between ThermoLase and ThermoLase Japan, and (b)
October 31, 1998.
NOW THEREFORE, in consideration of the mutual promises
contained herein and other good and valuable consideration, the
parties hereto hereby agree as follows:
1. ThermoLase Japan shall distribute to Fox River Japan
all funds held in accounts controlled by ThermoLase Japan to the
extent that such funds exceed an amount equal to the sum of: (i)
One Million United States Dollars (US$1,000,000), and (ii) an
amount equal to the accrued and unpaid liabilities of ThermoLase
Japan as of May 1, 1997. The distribution to Fox River Japan of
such funds shall be treated as a distribution to Fox River Japan
of a portion of its initial capital contribution, but the
distribution thereof shall have no impact on the Membership
Interests of ThermoLase and Fox River Japan in ThermoLase Japan.
2. Subject to the limitation in Section 4 below, if the
expenses incurred by ThermoLase Japan to fund activities during
the period from May 1, 1997 through the Review Date exceed Two
Million United States Dollars (US$2,000,000), Fox River Japan
shall promptly contribute to ThermoLase Japan one half of the
amount in excess of Two Million United States Dollars
(US$2,000,000).
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3. Subject to the limitation in Section 4 below,
ThermoLase shall contribute to ThermoLase Japan on a quarterly
basis amounts equal to one half of the expenses incurred by
ThermoLase Japan to fund activities during the period from May 1,
1997 through the Review Date. ThermoLase Japan shall fund such
expenses on an interim basis using funds remaining in accounts
controlled by ThermoLase Japan, and shall notify ThermoLase on a
quarterly basis, beginning not later than October 31, 1997, of
the amount of the expenses incurred by ThermoLase Japan for
activities during the period between May 1, 1997 through the end
of the relevant quarterly period. ThermoLase Japan shall provide
ThermoLase with financial statements showing in detail acceptable
to ThermoLase the expenses incurred during the relevant period,
together with a detailed schedule, in English, of the expenses
incurred. ThermoLase Japan shall provide copies and English
translations of all invoices requested by ThermoLase detailing
the expenses incurred during the relevant quarter. Within thirty
(30) days after receipt of the notice and other materials
described above, ThermoLase shall contribute to an account
controlled by ThermoLase Japan an amount equal to one half of the
expenses supported by the documentation provided to ThermoLase.
4. Neither Fox River Japan nor ThermoLase shall have any
obligation to contribute to ThermoLase Japan an amount in excess
of One Million Five Hundred Thousand United States Dollars
(US$1,500,000) to fund activities for the period between May 1,
1997 and the Review Date. For purposes of this limitation, the
contributions by Fox River Japan shall include the One Million
United States Dollars (US$1,000,000) previously contributed to
ThermoLase Japan by Fox River Japan which is being retained by
ThermoLase Japan in accordance with Section 1 of this Amendment,
plus any additional funds contributed by Fox River Japan to fund
activities undertaken by ThermoLase Japan during the period
between May 1, 1997 and the Review Date. If reasonably requested
by ThermoLase or Fox River Japan, ThermoLase Japan shall provide
ThermoLase and Fox River Japan with copies of annual audited
financial statements for ThermoLase Japan.
5. Notwithstanding the provisions of Section 10.01.a.v. of
the Operating Agreement, for the period through the Review Date,
ThermoLase Japan shall continue to use its best efforts to pursue
all activities required to obtain all required regulatory
approvals from relevant Japanese authorities in order to pursue
the commercialization of the technology subject to the License
Agreement between ThermoLase and ThermoLase Japan. Without
otherwise limiting Fox River Japan's rights under Section
10.01.a.v. of the Agreement (and notwithstanding the two year
limitation therein), Fox River Japan shall be permitted to
exercise its rights thereunder only by providing written notice
to ThermoLase, within ten (10) business days after the parties
agree on the Review Date as set forth in Section 8 below, of Fox
River Japan's desire to dissolve ThermoLase Japan.
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6. If Fox River Japan does not exercises its rights under
Section 10.01.a.v. as amended hereby, Fox River Japan shall
contribute to ThermoLase Japan, as and when required by
ThermoLase Japan to fund its continuing activities, funds in
amounts aggregating up to the amount distributed to Fox River
Japan in accordance with Section 1 of this Amendment. All such
funds shall be treated as initial capital contributions to
ThermoLase Japan.
7. None of the contributions to ThermoLase Japan
contemplated by this Amendment shall affect the Membership
Interests of Fox River Japan or ThermoLase.
8. To establish the Review Date (which shall be not later
than October 31, 1998), any of the parties hereto may notify the
other parties in writing that in its opinion all approvals from
Japanese authorities which are required to pursue the
commercialization of the technology subject to the License
Agreement between ThermoLase and ThermoLase Japan were obtained
on a particular date, and the other parties shall respond in
writing within five (5) business days after receipt of such
notice either (i) confirming such date, or (ii) identifying the
basis on which such party disagrees with the conclusion that all
required approvals were obtained on such date. The date shall be
determined upon agreement by all parties that the proper date has
been identified.
Except as amended hereby, the Operating Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed by the
parties on the date first written above.
THERMOLASE CORPORATION FOX RIVER JAPAN PARTNERS, L.P.
By: FOX RIVER JAPAN, INC.
its General Partner
By: /s/ John C. Hansen By: /s/ Joseph Ritchie
Name: John C. Hansen Name: Joseph Ritchie
Title: President and Title: President
Chief Executive Officer
THERMOLASE JAPAN L.L.C.
By its Members
THERMOLASE CORPORATION
By:/s/ John C. Hansen
Name: John C. Hansen
Title: President and Chief Executive Officer
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FOX RIVER JAPAN PARTNERS, L.P.
By: FOX RIVER JAPAN, INC.
its General Partner
By:/s/ Joseph Ritchie
Name: Joseph Ritchie
Title: President
EXHIBIT 10.30
Form of
Purchase Order and Terms
and Conditions for Purchases of Lasers by
ThermoLase Corporation from Trex Medical Corporation
ThermoLase SHIP TO: PURCHASE ORDER
Corporation
10455 Pacific Center Purchase Order No.:
619-646-5700 Court San Diego, CA Revision:
Fax 619-646-5701 92121-4339 Page:
10455 Pacific Center This Purchase Order
Court San Diego, CA BILL TO: Number Must Appear
92121-4339 on All Invoices,
10455 Pacific Center Packing Lists,
VENDOR: Court San Diego, CA Cartons and
LORAD 92121-4339 Correspondence
36 Appleridge Road Related to this
Danbury, CT 06810 Order
US
Date of Order:
Buyer:
Date of Revision:
Buyer:
Customer Acct No. Vendor No. Payment Terms Freight Terms
FOB Ship Via
Confirm to / Telephone Request / Deliver to
Part Number/ Delivery Unit
Line Description Date Quantity UnitPrice Extension Tax
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1. Acceptance of the order must be made TOTAL
by filling out, signing and returning
to the Buyer the acknowledgment copy
attached hereto. Continued....
2. The terms and conditions on the
reverse of this purchase order form
part of the order and Seller agrees to
be bound thereby. The terms and
conditions of this purchase order
shall not in any way be changed,
limited, controlled, or restricted by
any oral statements of the provisions
on any of Seller's forms, letters or
papers which are inconsistent
herewith, unless specifically agreed
to in writing.
3. Include P.O. Number on all invoices,
packing slips, package and
correspondence.
4. Invoice each shipment separately and
include packing list.
5. This order must conform with all
safety and health orders of the State
of California and OSHA Standards.
_________________
____________________________ Authorized
Vendor Authorized Signature Signature
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[Reverse Side of Purchase Order]
Terms and Conditions of Purchase
1. ACCEPTANCE: ACCEPTANCE OF THIS ORDER IS EXPRESSLY LIMITED
TO THE TERMS AND CONDITIONS CONTAINED HEREIN AND ANY
ADDITIONAL OR DIFFERENT TERMS OR CONDITIONS CONTAINED IN
SELLER'S RESPONSE HERETO SHALL BE DEEMED OBJECTED TO BY THE
BUYER WITHOUT NEED OF FURTHER NOTICE OF OBJECTION AND SELLER
SHALL BE DEEMED TO HAVE ASSENTED TO ALL TERMS AND CONDITIONS
CONTAINED HEREIN IF ANY PART OF THE DESCRIBED MERCHANDISE IS
SHIPPED.
This contract shall be construed according to the laws of
the buyer designated on this order and where applicable by
the provisions of the Uniform Commercial Code and not the
Convention for the International Sale of Goods.
2. TRANSPORTATION AND INSURANCE: Unless otherwise stated on
the face of this Order, goods are to be sold F.O.B.
destination, transportation charges must be prepaid by
Seller. Risk of loss shall be Seller's responsibility until
delivery to applicable F.O.B. point. Each container must be
labeled showing Purchase Order Number and a packing sheet
showing Purchase Order Number and Part Numbers must be
included in at least one package marked "Packing Slip
Enclosed."
3. TAXES: Any Federal tax, state or local, sales, use or
similar tax MUST be separately stated and itemized. It is
understood that unless such taxes are separately stated and
itemized, no such taxes are included in the amount billed.
Tax exemption certificates acceptable to the taxing agency
or other evidence of exemption shall be furnished in good
faith to the Seller so that Seller is relieved of the
responsibility of invoicing such taxes or will be furnished
in lieu of payment of any such taxes so invoiced.
4. DELIVERY: Time is of the essence. If Seller fails to make
delivery at the time agreed upon, Buyer reserves the right
to cancel without liability to Seller or, purchase
elsewhere, and hold Seller accountable for any additional
costs or damages incurred by Buyer. Seller shall not be
liable for delays or defaults in delivery due to causes
beyond its reasonable control, such as acts of God or public
enemy, acts of government, fire, flood, strikes and freight
embargoes. Whenever Seller believes deliveries will not be
made as scheduled, written notice setting forth the cause of
the anticipated delay shall be given immediately to Buyer.
5. CHANGES: Buyer shall have the right to make changes in this
Order, but no additional charge or change in delivery
schedule will be allowed unless authorized in writing by
Buyer. If such changes affect delivery of the amount to be
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paid by Buyer, Seller shall notify Buyer immediately, but
not later than ten (10) days, and negotiate an adjustment.
6. PACKING: All goods wrappers and containers must bear
markings and labels required by applicable federal, state
and municipal laws and regulations for the protection and
safety of persons and property. No charge will be allowed
for packing, crafting, freight, express, or other carrier's
charge unless designated on this order.
7. WARRANTY: In addition to any warranties provided by law,
the Seller warrants that the goods and services provided in
accordance with the terms hereof shall conform in all
respects to Buyer's specifications and shall be free from
defects in material and workmanship for a period of eighteen
(18) months from the date of delivery to Buyer or twelve
(12) months from the date Buyer delivers such goods to one
of its customers, whichever occurs first.
8. INSPECTION AND REJECTION: All goods are subject to
inspection by Buyer or its designee, either at Seller's
plant or at destination. Unless otherwise stated on the
face of this Order, inspection will be performed at
destination. If any of the goods are found to be defective
in material or workmanship or otherwise not in conformity
with the requirements of this Order, Buyer shall have the
right, in addition to any other rights, to (i) reject and
return the goods at Seller's expense (including Buyer's
handling charges), (ii) require that such goods be corrected
with satisfactory material or workmanship, or (iii) accept
goods and deduct for the amount due Seller the cost of
remedying such defects. If Buyer elects the foregoing (ii),
Seller at no expense to Buyer shall promptly replace same
with appropriate goods acceptable to Buyer in accordance
with Buyer's instructions. If Seller fails promptly to
replace or correct such goods in accordance with Buyer's
instructions, Buyer may (a) by contract or otherwise replace
or correct such goods and charge Seller for such costs, or
(b) terminate this Order in its entirety for default.
Seller shall provide and maintain an inspection system
acceptable to Buyer. Records of all inspection work by
Seller shall be kept complete and available to Buyer during
the performance of this Order and for such longer period as
Buyer determines. No inspection (including source
inspection), tests, approval (including design approval), or
acceptance by any of the foregoing parties shall relieve
Seller from responsibility for all defects or other failure
to meet the requirements of this Order or from any
warranties.
9. TRADEMARK PATENT AND COPYRIGHT INDEMNITY: Seller agrees to
indemnify and hold harmless Buyer, its customers and users
of the goods covered by this Order, from and against all
liability, loss, damage and expense, including reasonable
PAGE
<PAGE>
attorney's fees, resulting from any actual or claimed
infringement of any patent, copyright, trademark, trade
secret or any other right in any country with respect to any
part of the goods covered by this Order, provided that Buyer
(a) notifies Seller promptly in writing of the action; (b)
provides Seller reasonable information and assistance to
settle or defend the action; and (c) grants Seller authority
and control of the defense or settlement of the action.
If a final injunction is issued against Buyer's use of and
part of the goods, covered by this Order, Seller will at its
expense either (a) replace or modify the product so it
becomes noninfringing without reducing its performance; (b)
procure for Buyer the right to continue using the product;
(c) accept return of said product and refund to Buyer the
purchase price and any transportation and installation costs
thereof.
10. COMPLIANCE WITH APPLICABLE LAWS: Seller warrants and agrees
to observe and comply with all local, state and federal laws
and regulations affecting the price, production, sale or
delivery of the material or service under this Order,
including but not limited to the Fair Labor Standards Act of
1938 and the Occupational Safety and Health Act of 1970, and
Seller shall indemnify and save Buyer harmless from and
against any liability, expense or loss resulting from
Seller's failure to do so.
Seller warrants that it is in compliance with all applicable
federal, state and local laws, rules and regulations.
Seller agrees to comply with the following as applicable:
(i) Executive Order 11246, (ii) The Rehabilitation Act,
(iii) The Vietnam Era Veteran's Readjustment Act of 1974,
and all amendments and regulations thereof.
Seller warrants that goods furnished under this Order will
meet all requirements established under standards issued
pursuant to the authority contained in the Radiation Control
for Health and Safety Act of 1968, Seller further agrees to
indemnify and hold harmless Buyer for all damages assessed
against Buyer as a result of Seller's failure to do so and
the failure of goods furnished under this Order.
Seller certifies by acceptance of this purchase order that
none of its facilities has been listed on the Environmental
Protection Agency List of Violating Facilities for
violations of the Clear Air Act or the Clean Water Act.
11. BUYER'S PROTECTION: Unless otherwise agreed in writing, all
tools, equipment or material of every description furnished
to Seller by Buyer or specifically paid for by Buyer, and
any replacement thereof or any materials affixed or attached
thereto, shall be and remain the personal property of Buyer
and Seller shall have no interest therein whatsoever. Such
PAGE
<PAGE>
property and whenever practical each individual item
thereof, shall be plainly marked or adequately identified by
Seller as ThermoLase Corporation property, and shall be
safely stored separate and apart from Seller's property and
not commingled therewith. Seller shall not substitute any
property for Buyer's property and shall not use such
property except in filling Buyer's Order. Such property
while in Seller's custody or control shall be held at
Seller's risk, shall be completely insured by Seller at
Seller's expense in an amount equal to the replacement cost
with loss payable to Buyer, and shall be subject to removal
at Buyer's written request in which even Seller shall
prepare such properly for shipment and shall redeliver to
Buyer in the same condition as originally received by
Seller, reasonable wear and tear expected.
12. TECHNICAL INFORMATION: Seller shall not use or disclose any
data, designs, or other information belonging to or supplied
by or on behalf of Buyer, except in the performance of this
or other orders for Buyer. Upon Buyer's request such data,
designs, or other information and any copies thereof shall
be returned to Buyer. Where Buyer's data, designs or other
information are furnished to Seller's suppliers for
procurement of supplies by Seller for use in the performance
of Buyer's orders, Seller shall insert the substance of this
provision in its orders.
13. PROPRIETARY INFORMATION: Any information concerning
Seller's products, methods or manufacturing processes which
Seller discloses to Buyer incident to the provision of goods
covered by this Order shall, unless otherwise specifically
agreed to in writing by Buyer, be deemed to have been
disclosed as a part of the consideration for this Order, and
Seller agrees not to assert any claim (other than a claim
for patent infringement) against Buyer by reason of Buyer's
use or alleged use thereof.
14. TERMINATION: Buyer may terminate this Order in whole or in
part for its own convenience by written or telegraphic
notice at any time. Any claim arising out of such action
shall be presented within ten (10) days of receipt of such
written notice and be subject to negotiation between Buyer
and Seller. Such claim shall be restricted to costs
incurred or commitments made on account of the terminated
Order and shall not exceed cost of goods related to this
Order. The negotiated settlement will be reduced to writing
by Buyer and signed by Seller prior to payment of settlement
costs.
15. NON-ASSIGNMENT: Assignment of this Order or any interest
therein or any payment due or to become due thereunder
without written consent of the Buyer, shall be void.
PAGE
<PAGE>
16. WAIVER: Failure of Buyer in any one of more instances to
insist upon performance of any of the terms or conditions of
this Order, or to exercise any right or privilege, shall not
be construed as a waiver of any such terms, conditions,
rights or privileges thereafter, and the same shall continue
and remain in force and effect as if no waiver had occurred.
Additional Terms and Conditions
1. Deliverables
The quantity of units to be delivered is defined on the face of
the Purchase Order. Each unit shall be delivered with both an
SoftLight Operators and Installation Manual.
2. Acceptance
Acceptance of the SoftLight SL-100 Laser shall be at Final
Destination. A ThermoLase Corporation (TLC) Representative shall
perform the following tests and record the results on a TLC Laser
Acceptance Report (Attached) as follows:
1. Record the serial number, the software version, the number
of laser flashlamp shots and the location of the laser.
2. Insure that the data package from LORAD has been supplied.
3. Make a measurement of the laser output (at 100% full scale)
using the internal energy meter of the laser. Record the
measured energy and fluence.
4. Take several single shots and 10 Hz burns using laser burn
paper in a plastic bag.
5. Sign and date the Laser Acceptance Report.
6. Send the original Laser Acceptance Report to TLC. Retain
copy at location along with the LORAD data package.
Prior to shipment-in-place, LORAD shall perform a Final in-plant
acceptance test in accordance with LORAD Test Procedure Part
Number Revision on each
laser. The unit shall pass the in-plant acceptance test and QC
inspection. Any proposed changes to this Test Procedure shall be
submitted to TLC for approval prior to incorporation of the
changes. As a minimum the test data shall include the following:
1. Shot count at end of in-plant acceptance test.
2. Simmer losses recorded on #1, # 2 and #3.
3. False triggers on #1, #2 and #3.
4. Beam diameter that unit is calibrated for.
5. Water temperature after running for 10-15 minutes.
6. Flow rate.
7. Charge voltages on #1, #2 and #3.
8. Copy of beamview data.
9. Burns from the tower.
10. Burns out of the handpiece with the cross hair swirl so that
arm alignment can be verified.
PAGE
<PAGE>
LORAD shall provide one copy of the Final in-plant acceptance
data to TLC
3. Delivery
Delivery shall be FOB LORAD Corporation, Danbury, CT in
accordance with the Delivery Schedule and rate shown on the
Purchase Order. TLC will provide the Final Destination(s) to
LORAD. LORAD will provide one (1) copy of all shipping papers
within three (3) days of the shipment(s). ThermoLase will be
responsible for all freight charges, duty, forwarder's fee and
taxes.
Upon completion of the LORAD Final in-plant acceptance test and
Quality Control inspection, the laser shall be packed such that
it arrives at the final destination in good working order after
shipment by truck, air or ocean. Upon receipt of TLC's Final
Destination Shipping instructions, LORAD will ship, install and
checkout the laser(s) at the Final Destination. The installation
and checkout of the laser is included in the unit price.
In the event the Final Destination is outside the United States,
unless directed otherwise, LORAD shall be the Exporter of Record
therefore responsible for compliance with all US Export Laws.
LORAD shall obtain all the necessary approvals to export the
laser from the United States, property export from the US and
import into the Final Destination country. The Lasers shall be
shipped "Delivered Duty Paid (DDP)." In the event the final
destination is Japan, TLC will be the Exporter of Record and
LORAD will complete the export under TLC's name.
4. Warranty
The Warranty is included in the unit price. It includes parts,
labor and travel expenses for thirteen (13) months after the
equipment is shipped or twelve (12) after it is installed
whichever is less except for the Optics and Flashlamp. The
optics and flashlamp shall have a ninety (90) day Warranty from
the installation date. The Flashlamp life shall be greater than
20,000,000 shots.
5. Other
The actual shipping charges from LORAD, Danbury, CT to the Final
Destination and duty paid (if appropriate) shall not include G&A
or Profit and shall be a separate Line Item on the Invoice.
Exhibit 13
ThermoLase Corporation
Consolidated Financial Statements
Fiscal Year 1997
PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Statement of Operations
Nine Months
Year Ended Ended
------------------------------- -----------
(In thousands except Sept. 27, Sept. 28, Sept. 30, Sept. 30,
per share amounts) 1997 1996 1995 1995
------------------------------------------------------------------------
(Unaudited)
Revenues (Note 11)
Product revenues $ 24,196 $ 23,165 $ 23,348 $ 17,544
Service revenues 21,037 4,647 - -
-------- -------- -------- --------
45,233 27,812 23,348 17,544
-------- -------- -------- --------
Costs and Operating Expenses:
Cost of product revenues 16,499 15,063 14,714 11,424
Cost of service revenues 19,628 4,964 - -
Selling, general, and
administrative expenses
(Note 7) 22,972 9,761 8,128 6,158
Research and development
expenses 5,704 3,470 3,774 3,151
-------- -------- -------- --------
64,803 33,258 26,616 20,733
-------- -------- -------- --------
Operating Loss (19,570) (5,446) (3,268) (3,189)
Interest Income 2,110 3,482 971 789
Interest Expense (Note 8) (637) - - -
Gain (Loss) on Sale of
Investments (Note 2) - 115 (41) -
Equity in Losses of Joint
Ventures (Note 3) (700) - - -
-------- -------- -------- --------
Loss Before Income Tax Benefit (18,797) (1,849) (2,338) (2,400)
Income Tax Benefit (Note 6) 6,392 463 663 721
-------- -------- -------- --------
Net Loss $(12,405) $ (1,386) $ (1,675) $ (1,679)
======== ======== ======== ========
Loss per Share $ (.31) $ (.03) $ (.04) $ (.04)
======== ======== ======== ========
Weighted Average Shares 40,075 40,353 37,880 38,005
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
2PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Balance Sheet
Sept. 27, Sept. 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 87,843 $ 7,923
Available-for-sale investments, at quoted
market value (amortized cost of $12,509
and $44,205; Note 2) 12,493 44,132
Accounts receivable, less allowances of
$402 and $319 5,863 4,572
Inventories 3,248 4,269
Prepaid expenses 1,718 408
Prepaid income taxes (Note 6) 1,687 1,882
-------- --------
112,852 63,186
-------- --------
Property and Equipment, at Cost, Net 39,737 19,323
-------- --------
Long-term Prepaid Income Taxes (Note 6) 6,412 -
-------- --------
Other Assets 7,498 4,679
-------- --------
Cost in Excess of Net Assets of Acquired
Company 8,096 8,332
-------- --------
$174,595 $ 95,520
======== ========
3PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Balance Sheet (continued)
Sept. 27, Sept. 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Accounts payable $ 5,163 $ 5,179
Accrued payroll and employee benefits 2,590 1,008
Deferred revenue 1,355 913
Other accrued expenses 5,722 1,791
Due to parent company and affiliated companies 2,553 7,098
-------- --------
17,383 15,989
-------- --------
4 3/8% Subordinated Convertible Debentures
(Note 8) 115,000 -
-------- --------
Deferred Lease Liability 1,379 494
-------- --------
Common Stock Subject to Redemption (Note 1) 40,500 -
-------- --------
Commitments and Contingencies (Notes 3, 7, and 9)
Shareholders' Investment (Notes 4 and 5):
Common stock, $.01 par value, 100,000,000
shares authorized; 40,807,932 and
40,803,932 shares issued 408 408
Capital in excess of par value 46,379 85,813
Accumulated deficit (15,921) (3,516)
Treasury stock at cost, 2,129,549 and
116,570 shares (30,523) (3,621)
Net unrealized loss on available-for-sale
investments (Note 2) (10) (47)
-------- --------
333 79,037
-------- --------
$174,595 $ 95,520
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows
Nine Months
Year Ended Ended
---------------------------------- -----------
Sept. 27, Sept. 28, Sept. 30, Sept. 30,
(In thousands) 1997 1996 1995 1995
-------------------------------------------------------------------------
(Unaudited)
Operating Activities:
Net loss $(12,405) $ (1,386) $ (1,675) $ (1,679)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation and
amortization 4,345 1,482 836 640
Provision for losses
on accounts
receivable 83 63 153 153
(Gain) loss on sale
of investments
(Note 2) - (115) 41 -
Increase in prepaid
income taxes (6,236) (999) (735) (730)
Loss on disposal of
property and
equipment - - 125 125
Increase in deferred
lease liability 885 494 - -
Equity in losses of
joint ventures
(Note 3) 700 - - -
Changes in current
accounts, excluding
the effects of
acquisition:
Accounts
receivable (1,374) (380) (1,132) (540)
Inventories 1,021 934 (2,402) (1,101)
Other current
assets (714) 331 149 (116)
Accounts payable (16) 1,774 1,859 1,355
Other current
liabilities 3,767 2,205 2,138 1,317
-------- -------- -------- --------
Net cash provided by
(used in) operating
activities $ (9,944) $ 4,403 $ (643) $ (576)
-------- -------- -------- --------
5PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
Nine Months
Year Ended Ended
--------------------------------- -----------
Sept. 27, Sept. 28, Sept. 30, Sept. 30,
(In thousands) 1997 1996 1995 1995
-------------------------------------------------------------------------
(Unaudited)
Investing Activities:
Acquisition $ - $ - $ (197) $ -
Investment in other
assets (Notes 1 and 3) (1,144) (4,400) - -
Purchases of available-
for-sale investments (10,400) (49,500) (49,793) (49,793)
Proceeds from maturities
of available-for-sale
investments 41,500 56,525 10,700 6,000
Proceeds from sale of
available-for-sale
investments - 615 959 -
Purchases of property
and equipment (26,807) (13,230) (2,975) (1,584)
Other - - 256 101
-------- -------- -------- --------
Net cash provided by
(used in) investing
activities 3,149 (9,990) (41,050) (45,276)
-------- -------- -------- --------
Financing Activities:
Net proceeds from
issuance of
subordinated
convertible
debentures (Note 8) 112,551 - - -
Net proceeds from
issuance of Company
common stock and
sale of put options
(Note 4) 625 2,591 55,544 55,544
Repurchases of Company
common stock (26,072) - - -
Net proceeds from stock
exchange offer
(Note 1) 502 - - -
Payment of withholding
taxes related to stock
option exercises (891) (2,227) (776) (776)
-------- -------- -------- -------
Net cash provided by
financing activities $ 86,715 $ 364 $ 54,768 $ 54,768
-------- -------- -------- --------
6PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Statement of Cash Flows (continued)
Nine Months
Year Ended Ended
--------------------------------- -----------
Sept. 27, Sept. 28, Sept. 30, Sept. 30,
(In thousands) 1997 1996 1995 1995
-----------------------------------------------------------------------
(Unaudited)
Increase (Decrease)
in Cash and Cash
Equivalents $ 79,920 $ (5,223) $ 13,075 $ 8,916
Cash and Cash Equivalents
at Beginning of Period 7,923 13,146 71 4,230
-------- -------- -------- --------
Cash and Cash
Equivalents at End of
Period $ 87,843 $ 7,923 $ 13,146 $ 13,146
======== ======== ======== ========
Cash Paid For:
Income taxes $ 70 $ 12 $ 42 $ 124
Noncash Activities:
Fair value of assets
of acquired company $ - $ - $ 479 $ -
Cash paid for acquired
company - - (197) -
-------- -------- --------- --------
Liabilities assumed
of acquired company $ - $ - $ 282 $ -
======== ======== ======== ========
Exchange of common
stock for common stock
subject to redemption
(Note 1) $ 40,500 $ - $ - $ -
======== ======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Consolidated Statement of Shareholders' Investment
Nine Months
Year Ended Ended
--------------------- -----------
Sept. 27, Sept. 28, Sept. 30,
(In thousands) 1997 1996 1995
---------------------------------------------------------------------------
Common Stock, $.01 Par Value
Balance at beginning of period $ 408 $ 401 $ 188
Effect of two-for-one stock split - - 188
Net proceeds from sale of common
stock (Note 4) - - 24
Issuance of stock under employees'
and directors' stock plans - 7 1
-------- -------- --------
Balance at end of period 408 408 401
-------- -------- --------
Capital in Excess of Par Value
Balance at beginning of period 85,813 84,354 29,384
Effect of two-for-one stock split - - (188)
Net proceeds from sale of common
stock and put options (Note 4) 294 - 55,311
Activity under employees'
and directors' stock plans (2,969) 1,459 (153)
Effect of stock exchange offer (Note 1) (36,759) - -
-------- -------- --------
Balance at end of period 46,379 85,813 84,354
-------- -------- --------
Accumulated Deficit
Balance at beginning of period (3,516) (2,130) (451)
Net loss (12,405) (1,386) (1,679)
-------- -------- --------
Balance at end of period (15,921) (3,516) (2,130)
-------- -------- --------
Treasury Stock
Balance at beginning of period (3,621) (415) -
Activity under employees'
and directors' stock plans 2,409 (3,206) (415)
Purchases of Company common stock (26,072) - -
Effect of stock exchange offer (Note 1) (3,239) - -
-------- -------- --------
Balance at end of period (30,523) (3,621) (415)
-------- -------- --------
Net Unrealized Gain (Loss) on
Available-for-sale Investments
Balance at beginning of period (47) 8 (124)
Change in net unrealized gain (loss)
on available-for-sale investments
(Note 2) 37 (55) 132
-------- -------- --------
Balance at end of period (10) (47) 8
-------- -------- --------
Total Shareholders' Investment $ 333 $ 79,037 $ 82,218
======== ======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
8PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
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 locations 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). ThermoTrex is a
53%-owned public subsidiary of Thermo Electron Corporation (Thermo
Electron). As of September 27, 1997, ThermoTrex and Thermo Electron owned
a total of 26,742,204 shares of the Company's common stock, representing
69% of such stock outstanding.
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.
The Company accounts for investments in joint ventures in which it
owns between 20% and 50% using the equity method. Under the equity
method, the Company records its initial investment in each joint venture
at cost, and adjusts the carrying value of the investment to recognize
its proportionate share of the joint venture's earnings or losses. In
instances where the Company has no obligation to provide additional
funding to a joint venture, the Company discontinues applying the equity
method when its investment has been reduced to zero.
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 1997 and fiscal
1996 are for the years ended September 27, 1997, and September 28, 1996,
respectively. Fiscal 1997 and fiscal 1996 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.
9PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Revenue Recognition
The Company generally recognizes product revenues upon shipment of
its products. The Company offers a variety of treatment plans for its
spa-based hair-removal services which include one-time services and
multiple treatment plans that provide for varying numbers of treatments
or treatment periods. The Company recognizes revenue from the one-time
treatment plan upon performance of the related service. Revenues from
multiple treatment plans are recognized over the anticipated treatment
period, which, in fiscal 1997 and 1996, was six months based upon the
average service pattern for customers treated during those years.
Deferred revenue in the accompanying fiscal 1997 balance sheet represents
unearned revenue from hair-removal treatments at the Company's Spa Thira
locations that will be recognized in fiscal 1998.
The Company earns an initial technology licensing fee and ongoing
royalties from licensing its SoftLight technology to a network of
independent physicians. Initial nonrefundable technology license fees are
recorded as revenue at the time the technology is transferred to the
practitioner. Fees arising from hair-removal procedures performed by
these physicians are recognized when such procedures are performed.
The Company earns nonrefundable initial and ongoing technology
licensing fees from its international arrangements. Initial nonrefundable
technology license fees are recorded as revenue at the time the
technology is transferred. Ongoing licensing fees are recorded when
earned in accordance with contractual terms. The accompanying statement
of operations includes international licensing fees of $4,195,000 and
$2,000,000 in fiscal 1997 and 1996, respectively.
Pre-opening Spa Costs
The Company expenses all pre-opening costs associated with the
establishment and startup of its Spa Thira salons as such costs are
incurred.
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.
Stock-based Compensation Plans
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees," and related interpretations
in accounting for its stock-based compensation plans (Note 5).
Accordingly, no accounting recognition is given to stock options granted
at fair market value until they are exercised. Upon exercise, net
proceeds, including tax benefits realized, are credited to equity.
10PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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.
Loss per Share
Loss per share have been computed based on the weighted average
number of shares outstanding during the period. Because the effect of the
assumed exercise of stock options and conversion of subordinated
convertible debentures would be antidilutive, such options and
subordinated convertible debentures were not included in weighted average
shares.
Cash and Cash Equivalents
As of September 27, 1997, $49,291,000 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 U.S. government-agency securities, corporate
notes, commercial paper, money market funds, and other marketable
securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. 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. In addition, cash
equivalents as of September 27, 1997, include government-agency
securities purchased with an original maturity of three months or less.
These investments 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 2).
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) 1997 1996
---------------------------------------------------------------------
Raw materials and supplies $1,343 $1,521
Work in process and finished goods 1,905 2,748
------ ------
$3,248 $4,269
====== ======
11PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
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 - 5 to 10 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) 1997 1996
----------------------------------------------------------------------
Machinery and equipment $28,641 $14,384
Leasehold improvements 17,151 6,001
Construction in process - 958
------- ------
45,792 21,343
Less: Accumulated depreciation and amortization 6,055 2,020
------- ------
$39,737 $19,323
======= =======
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 9).
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 $894,000 and $658,000 at fiscal year-end
1997 and 1996, respectively. The Company assesses the future useful life
of this asset whenever events or changes in circumstances indicate that
the current useful life has diminished. The Company considers the future
undiscounted cash flows of the acquired business in assessing the
recoverability of this asset. If impairment has occurred, any excess of
carrying value over fair value is recorded as a loss.
12PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Deferred Lease Liability
Deferred lease liability in the accompanying balance sheet represents
facilities rent that is being recognized ratably over the respective
lease terms.
Common Stock Subject to Redemption
On April 2, 1997, the Company completed an exchange offer whereby its
shareholders had the opportunity to exchange one share of existing
Company common stock and $3.00 (in cash or Company common stock) for a
new unit consisting of one share of Company common stock and one
redemption right. The redemption right entitles the holder to sell the
related share of common stock to the Company for $20.25 during the period
from April 3, 2001, through April 30, 2001. The redemption right will
expire and become worthless if the closing price of Company common stock
is at least $26.00 for 20 of any 30 consecutive trading days. The
redemption rights are guaranteed on a subordinated basis by Thermo
Electron. ThermoTrex has agreed to reimburse Thermo Electron in the event
Thermo Electron is required to make a payment under the guarantee. In
connection with this offer, the Company issued in April 1997, 2,000,000
units in exchange for 2,261,706 shares of Company common stock and
$502,000 in cash, net of expenses. As a result of these transactions, the
Company reclassified $40,500,000 from "Shareholders' investment" to
"Common stock subject to redemption," based on the issuance of 2,000,000
redemption rights, each carrying a maximum liability to the Company of
$20.25.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Presentation
Certain amounts in fiscal 1996 have been reclassified to conform to
the presentation in the fiscal 1997 financial statements.
2. Available-for-sale Investments
The Company's debt and marketable equity securities are considered
available-for-sale investments in the accompanying balance sheet and are
carried at market value, with the difference between cost and market
value, net of related tax effects, recorded currently as a component of
shareholders' investment titled "Net unrealized gain (loss) on
available-for-sale investments."
Available-for-sale investments in the accompanying balance sheet
represents investments in government-agency securities. The difference
13PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
2. Available-for-sale Investments (continued)
between the market value and the cost basis of available-for-sale
investments was $16,000 and $73,000 at fiscal year-end, 1997 and 1996,
respectively, which represent gross unrealized losses on those
investments.
Available-for-sale investments in the accompanying 1997 balance sheet
include $6,999,000 with contractual maturities of one year or less and
$5,494,000 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, the
issuer, or both 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.
3. Joint Ventures
The Company has entered into three joint venture arrangements to
market its SoftLight system internationally. The Company currently holds
a 50% stake in each joint venture, but may increase its ownership to
above 50% pursuant to fair-value purchase options included in each
agreement. Certain of the joint venture agreements provide that the
Company's joint venture partners may, under certain conditions, elect to
sell all or part of their ownership interest back to the Company at the
fair value of such interest at the time the election is made. The Company
and its joint venture partners have committed to provide equity
contributions or loans to fund the operating needs of the joint ventures.
The Company's share of such funding commitments totals approximately
$8,200,000, of which the Company funded $1,144,000 in fiscal 1997 and
$1,667,000 in October 1997. The accompanying fiscal 1997 statement of
operations includes $700,000 of equity in losses of joint ventures,
reflecting the Company's share of losses from joint venture operations.
4. Common Stock
In April 1997, the Company completed an exchange offer whereby the
Company received 2,261,706 shares of its common stock and $502,000 in
cash, net of expenses, from its shareholders in exchange for
2,000,000 units of common stock subject to redemption (Note 1).
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.
At September 27, 1997, the Company had reserved 10,112,797 unissued
shares of its common stock for possible issuance under stock-based
compensation plans and possible issuance upon conversion of its
subordinated convertible debentures.
14PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option 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. Two other plans,
adopted in fiscal 1997 and 1995, permit the grant of a variety of stock
and stock-based awards as determined by the human resources committee of
the Company's Board of Directors (the Board Committee), including
restricted stock, stock options, stock bonus shares, or performance-based
shares. To date, only nonqualified stock options have been awarded under
these plans. The option recipients and the terms of options granted under
these plans are determined by the Board Committee. Generally, options
granted to date are exercisable immediately, but are subject to certain
transfer restrictions and the right of the Company to repurchase shares
issued upon exercise of the options at the exercise price, upon certain
events. The restrictions and repurchase rights generally lapse ratably
over 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 and ThermoTrex.
15PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
A summary of the Company's stock option information is as follows:
1997 1996 1995
---------------- ---------------- -----------------
Weighted Weighted Range of
Number Average Number Average Number Option
(Shares in of Exercise of Exercise of Prices
thousands) Shares Price Shares Price Shares per Share
--------------------------------------------------------------------------
Options outstanding, $ 1.75-
beginning of period2,820 $ 7.50 3,341 $ 5.16 2,707 $ 4.68
11.74-
Granted 341 14.97 339 25.46 872 20.53
1.75-
Exercised (173) 1.91 (746) 3.48 (184) 2.50
1.75-
Forfeited (100) 7.33 (114) 20.53 (54) 2.50
----- ----- -----
Options outstanding, $ 1.75-
end of period 2,888 $ 8.72 2,820 $ 7.50 3,341 $20.53
===== ====== ===== ====== ===== =======
$ 1.75-
Options exercisable 2,888 $ 8.72 2,820 $ 7.50 3,341 $20.53
===== ====== ===== ====== ===== =======
Options available for
grant 410 451 676
===== ===== =====
Weighted average fair
value per share of
options granted
during period $ 8.34 $14.83
====== ======
16PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
A summary of the status of the Company's stock options at September
27, 1997, is as follows:
Options Outstanding and Exercisable
-----------------------------------
Weighted
Average Weighted
Number Remaining Average
of Contractual Exercise
Range of Exercise Prices Shares Life Price
-----------------------------------------------------------------------
(Shares in thousands)
$ 1.75 - $ 8.70 1,577 4.6 years $ 2.32
8.71 - 15.65 879 6.3 years 12.87
15.66 - 22.60 98 8.3 years 17.53
22.61 - 29.55 334 8.3 years 25.47
-----
$ 1.75 - $29.55 2,888 5.7 years $ 8.72
=====
Employee Stock Purchase Program
-------------------------------
Substantially all of the Company's full-time employees are eligible
to participate in an employee stock purchase program sponsored by the
Company and Thermo Electron, under which employees can purchase shares of
the Company's and Thermo Electron's common stock. Prior to November 1,
1996, the program was sponsored by ThermoTrex and Thermo Electron. Under
this program, the applicable shares of common stock can be purchased at
the end of a 12-month period at 95% of the fair market value at the
beginning of the period, and the shares purchased are subject to a
six-month resale restriction. Prior to November 1, 1995, the applicable
shares of common stock could be purchased at 85% of the fair market value
at the beginning of the period, and the shares purchased were subject to
a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense.
As permitted by SFAS No. 123, the Company has elected to continue to
apply APB No. 25 to account for its stock-based compensation plans. Had
compensation cost for awards in fiscal 1997 and 1996 under the Company's
stock-based compensation plans been determined based on the fair value at
17PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
5. Employee Benefit Plans (continued)
the grant dates consistent with the method set forth under SFAS No. 123,
the effect on the Company's net loss and loss per share would have been
as follows:
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Net loss:
As reported $(12,405) $ (1,386)
Pro forma (12,848) (1,534)
Loss per share:
As reported $ (.31) $ (.03)
Pro forma (.32) (.04)
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to October 1, 1995, the resulting pro forma
compensation expense may not be representative of the amount to be
expected in future years. Compensation expense for options granted is
reflected over the vesting period; therefore, future pro forma
compensation expense may be greater as additional options are granted.
The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1997 1996
------------------------------------------------------------------------
Volatility 50% 50%
Risk-free interest rate 6.3% 6.3%
Expected life of options 6.1 years 6.8 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
401(k) Savings 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 $207,000, $144,000, and $108,000 in
fiscal 1997, 1996, and 1995, respectively.
18PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes
The components of the income tax benefit are as follows:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Currently refundable (payable):
Federal $ - $ 80 $ 154
State (27) 25 (82)
------ ------ ------
(27) 105 72
------ ------ ------
Deferred:
Federal 6,226 328 609
State 193 30 40
------ ------ ------
6,419 358 649
------ ------ ------
$6,392 $ 463 $ 721
====== ====== ======
The income tax benefit in the accompanying statement of operations
differs from the amounts calculated by applying the statutory federal
income tax rate of 34% to loss before income tax benefit due to the
following:
(In thousands) 1997 1996 1995
-----------------------------------------------------------------------
Income tax benefit at statutory rate $6,391 $ 629 $ 816
Differences resulting from:
State income taxes, net of federal tax 110 36 (28)
Nondeductible expenses (109) (202) (67)
------ ------ ------
$6,392 $ 463 $ 721
====== ====== ======
Prepaid income taxes in the accompanying balance sheet consist of the
following:
(In thousands) 1997 1996
-------------------------------------------------------------
Prepaid income taxes:
Net operating loss $8,232 $2,226
Inventory basis differences 534 714
Accruals and other reserves 273 207
Accrued compensation 647 212
Allowance for doubtful accounts 138 121
Other, net 95 65
------ ------
9,919 3,545
Less: Valuation allowance 1,820 1,663
------ ------
$8,099 $1,882
====== ======
19PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
6. Income Taxes (continued)
The 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 tax benefit is realized.
As of September 27, 1997, the Company had federal tax net operating loss
carryforwards of approximately $24,000,000 that begin to expire in fiscal
2009.
7. 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% of the Company's revenues in calendar
year 1995. The annual fee is reviewed and adjusted annually by mutual
agreement of the parties. For these services, the Company was charged
$452,000, $293,000, and $211,000 in fiscal 1997, 1996, and 1995,
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
$144,000, $327,000, and $175,000 in fiscal 1997, 1996, and 1995,
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 $296,000, $125,000, and $22,000 in fiscal 1997, 1996, and
1995, respectively. Currently, the cost of the area occupied by the
Company is $302,000 per year.
20PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
7. Related-party Transactions (continued)
Repurchase Agreement
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
Laser Manufacturing Arrangement
During fiscal 1997, 1996, and 1995, the Company purchased laser
systems and components at an aggregate cost of $11,390,000, $8,549,000,
and $350,000, respectively, from Trex Medical Corporation, a majority-
owned subsidiary of ThermoTrex. The Company has committed to purchase
additional laser systems and components from Trex Medical at an aggregate
cost of approximately $6,006,000.
8. Subordinated Convertible Debentures
In August 1997, the Company issued and sold at par value $115,000,000
principal amount of 4 3/8% subordinated convertible debentures due 2004.
The debentures are convertible into shares of the Company's common stock
at a conversion price of $17.385 per share and are guaranteed on a
subordinated basis by Thermo Electron. ThermoTrex has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a
payment under the guarantee.
See Note 10 for fair value information pertaining to these
debentures.
9. Commitments and Contingencies
Operating Leases
In addition to the leases described in Note 7, the Company occupies
office, manufacturing, warehouse, and service facilities under
noncancellable operating lease arrangements that expire at various dates
through 2013. The accompanying statement of operations includes expenses
from operating leases of $3,806,000, $915,000, and $316,000 in fiscal
1997, 1996, and 1995, respectively. Future minimum payments due under
noncancellable operating leases as of September 27, 1997, are $3,620,000
in fiscal 1998; $3,733,000 in fiscal 1999; $3,827,000 in fiscal 2000;
$3,821,000 in fiscal 2001; $3,879,000 in fiscal 2002; and $19,784,000 in
fiscal 2003 and thereafter. Total future minimum lease payments are
$38,664,000.
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
21PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
9. Commitments and Contingencies (continued)
Company will pay AntiCancer a royalty based on sales, subject to certain
minimum payments.
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 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.
10. 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, due to parent company and affiliated companies, and
subordinated convertible debentures. 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 2 for information pertaining to the fair
value of available-for-sale investments.
The fair value of the Company's subordinated convertible debentures,
based on quoted market prices, was $123,165,000 at September 27, 1997,
and exceeds the carrying amount primarily due to an increase in the
market price of the Company's common stock relative to the conversion
price of the debentures.
11. Export Sales
Export sales, including revenues earned from the Company's
international licensing arrangements, were less than 10% of the Company's
total revenues in fiscal 1997 and 1995, and were $2,820,000 in fiscal
1996. In general, export sales are denominated in U.S. dollars.
22PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Notes to Consolidated Financial Statements
12. Unaudited Quarterly Information
(In thousands except per share amounts)
1997 First Second Third Fourth
----------------------------------------------------------------------
Revenues $ 8,610 $11,666 $12,900 $12,057
Gross profit 1,783 2,022 2,935 2,366
Net loss (1,389) (3,699) (3,733) (3,584)
Loss per share (.03) (.09) (.09) (.09)
1996 First Second Third Fourth
----------------------------------------------------------------------
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)
23PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Report of Independent Public 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 67%-owned subsidiary
of ThermoTrex Corporation) and subsidiary as of September 27, 1997, and
September 28, 1996, and the related consolidated statements of
operations, shareholders' investment, and cash flows for the years ended
September 27, 1997, and September 28, 1996, and the nine months ended
September 30, 1995. 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 27, 1997, and
September 28, 1996, and the results of their operations and their cash
flows for the years ended September 27, 1997, and September 28, 1996, and
the nine months ended September 30, 1995, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
November 3, 1997
24PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed immediately after this Management's Discussion
and Analysis of Financial Condition and Results of Operation under the
heading "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 hair-removal 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
location (Spa Thira) in November 1995. The Company opened a total of four
spas during fiscal 1996, opened nine additional spas during fiscal 1997,
and, by October 1997, had a total of 14 domestic Spa Thira locations,
with one additional lease signed. In addition, the Company's
international arrangements resulted in the opening of spas in Paris in
May 1997 and Lugano, Switzerland, in October 1997.
In June 1996, the Company commenced a program to license to
physicians and others the right to perform the Company's patented
SoftLight hair-removal procedure. In this program, the Company licenses
its technology and receives a one-time fee and a per-procedure royalty
that varies depending on the anatomical site treated and pricing plan
selected by the client. The Company also provides the licensees with the
lasers and lotion that are necessary to perform the service.
The Company is marketing the SoftLight system internationally through
joint ventures and other licensing arrangements. In January 1996, the
Company established a joint venture in Japan. During fiscal 1997, the
Company established joint ventures in France in November 1996 and England
in September 1997, and six additional licensing arrangements: in Saudi
Arabia in November 1996; in Tunisia and Belgium in December 1996; in the
United Arab Emirates and Oman in March 1997; in Switzerland in April
1997; in Brazil in June 1997; and in the United Kingdom (excluding
England) and the Republic of Ireland in September 1997.
25PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Overview (continued)
The Company continues to pursue an extensive research and development
program to improve the efficacy and duration of its hair-removal
treatment. The Company has developed a modification to its procedure,
called SoftLight 2.0, and began introducing this procedure in its spas
and to its licensees in September 1997. Although the clinical laboratory
results are encouraging, the results are preliminary and there can be no
assurance that SoftLight 2.0 will be successful in improving the
hair-removal process. The Company believes that improvements in the
hair-removal procedure are critical elements in its ability to improve
the profitability of its business.
In March 1997, the Company filed with the FDA a 510(k) application
seeking clearance to market cosmetic skin resurfacing services utilizing
its SoftLight Rejuvenation(TM) Laser, including wrinkle- and skin-texture
treatment. This technology, which uses the same laser as the Company's
hair-removal system, is designed to improve the skin's appearance and
texture.
The Company also manufactures and markets skin-care, bath, and body
products through its CBI Laboratories, Inc. (CBI) subsidiary, which also
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).
Fiscal 1997 Compared With Fiscal 1996
Revenues increased 63% to $45,233,000 in fiscal 1997 from $27,812,000
in fiscal 1996. The Company earned revenues from hair-removal services
and related activities of $21,037,000 in fiscal 1997, compared with
$4,647,000 in fiscal 1996. The increase in revenues resulted primarily
from an increase in the number of U.S. spas to 13, nine of which opened
in fiscal 1997, compared with four spas open during fiscal 1996. The
Company changed its pricing plan in March 1997 to offer single or
multiple treatment plans, and continues to evaluate its pricing plans.
The Company defers revenue related to payments for multiple treatment
plans, 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. Revenues also increased as a result of fees
from the Company's physicians' licensing program, which was started in
the third quarter of fiscal 1996 and did not produce significant revenues
during fiscal 1996. In addition, revenues from hair-removal services and
related activities in fiscal 1997 included $4,195,000 of minimum
guaranteed payments recorded upon granting technology rights under the
Company's international licensing arrangements, compared with $2,000,000
in fiscal 1996. The amount of minimum guaranteed payments recorded by the
26PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1997 Compared With Fiscal 1996 (continued)
Company will vary depending on the Company's ability to enter into
additional international licensing arrangements and the terms of any such
arrangements. Revenues at CBI increased slightly to $24,196,000 in fiscal
1997 from $23,165,000 in fiscal 1996. A portion of CBI's revenues are
derived from sales to large retailers, which have a relatively long
buying cycle that results in periodic variations in revenues. The Company
estimates that CBI will continue to represent a decreasing portion of
total revenues as revenues from hair-removal services and related
activities increase.
The gross profit margin in fiscal 1997 was 20%, compared with 28% in
fiscal 1996. The Company's hair-removal business reported gross profit of
$1,409,000 in fiscal 1997, compared with gross profit of negative
$317,000 in fiscal 1996. Each period was impacted by the early operations
of the Spa Thira business, which has been operating below maximum
capacity as the Company develops a client base and continues refining its
process and operating procedures, and due to pre-opening costs incurred
in connection with new spa openings, offset in part by the effect of
physicians' licensing fees and minimum guaranteed payments relating to
international licensing arrangements, which have a relatively high gross
profit margin. In fiscal 1998, the effect of operating each spa below
maximum capacity, as the Company develops its client base, will continue
to have a negative impact on the Company's gross profit margin. The
Company believes that improvements in the efficacy and duration of the
SoftLight process are critical elements in its ability to improve the
profitability of its spas. The gross profit margin at CBI declined to 32%
in fiscal 1997 from 35% in fiscal 1996, as a result of a continued shift
to lower-margin products.
Selling, general, and administrative expenses as a percentage of
revenues increased to 51% in fiscal 1997 from 35% in fiscal 1996. The
increase was primarily due to costs related to expanding the Company's
administrative and management efforts for its Spa Thira business and
domestic and international licensing programs; increased marketing
efforts, including national advertising costs for the physicians'
licensing program; and legal costs associated with obtaining and
protecting the Company's patent rights.
Research and development expenses increased to $5,704,000 in fiscal
1997 from $3,470,000 in fiscal 1996, primarily due to continued
pre-clinical and clinical research related to improving the effectiveness
of the Company's hair-removal process and developing its SoftLight
Rejuvenation Laser skin-treatment, and the investigation of other health
and beauty applications for its proprietary laser technology.
Interest income decreased to $2,110,000 in fiscal 1997 from
$3,482,000 in fiscal 1996, primarily as a result of lower average
invested balances, which resulted primarily from property and equipment
expenditures for the Company's Spa Thira locations and licensing programs
and from the Company's operating loss. Interest expense represents
interest associated with the $115,000,000 principal amount of 4 3/8%
subordinated convertible debentures issued in August 1997.
27PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1997 Compared With Fiscal 1996 (continued)
Equity in losses of joint ventures in the accompanying statement of
operations represents the Company's proportionate share of losses from
its international joint ventures.
The effective tax rate approximates the statutory federal income tax
rate in fiscal 1997 due to nondeductible amortization of cost in excess
of net assets of acquired company offset by a state income tax benefit
arising from operating losses in certain states. The effective tax rate
exceeds the statutory federal income tax rate in fiscal 1996 due to
nondeductible amortization of cost in excess of net assets of acquired
company and the impact of a provision for state income taxes.
The Company believes that it is more likely than not that it will
realize a benefit from the tax asset that arises as a result of recording
a benefit from the Company's loss before income taxes. The Company
believes that future taxable income, including any income from tax
planning strategies, will be sufficient to realize such benefit within
the 15-year federal carryforward period for net operating losses.
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 business and physicians' licensing program, as
well as $2,000,000 in SoftLight licensing fees from an international
arrangement. Revenues at CBI were $23,165,000 in fiscal 1996, compared
with $23,348,000 in 1995.
During fiscal 1996, the Company opened its first four Spa Thira
locations, including two that opened in September 1996. Under the 1996
pricing structure, the majority of spa clients paid a fixed fee in
advance to receive a series of treatments, as necessary. Consequently,
the Company deferred revenue related to such payments, which was
recognized over the anticipated treatment period.
The gross profit margin in fiscal 1996 was 28%, compared with 37% in
1995. The gross profit from the Company's hair-removal business was
negative $317,000 in fiscal 1996 due to the early operations of the Spa
Thira business, which was operating below maximum capacity as the Company
developed a client base, continued refining its operating procedures, and
incurred pre-opening costs in connection with new spa openings, offset in
part by the effect of revenues from international and physicians'
arrangements. The gross profit margin at CBI declined to 35% in fiscal
1996 from 37% in 1995 as a result of a shift to lower-margin products
sold to high-volume retailers in fiscal 1996.
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. Research and development expenses decreased to
$3,470,000 in fiscal 1996 from $3,774,000 in 1995.
28PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1996 Compared With 1995 (continued)
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.
Liquidity and Capital Resources
Consolidated working capital was $95,469,000 at September 27, 1997,
compared with $47,197,000 at September 28, 1996. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$100,336,000 at September 27, 1997, compared with $52,055,000 at
September 28, 1996. Operating activities used $9,944,000 of cash during
fiscal 1997, primarily due to the Company's loss before income taxes,
depreciation, and amortization, offset in part by an increase in other
current liabilities of $3,767,000, primarily related to increases in
accrued payroll and employee benefits, as well as accrued marketing
costs.
During fiscal 1997, the Company expended $26,807,000 for purchases of
property and equipment, including the purchase of laser systems and
components at an aggregate cost of $11,390,000 from Trex Medical
Corporation, a majority-owned subsidiary of ThermoTrex. The Company has
committed to purchase additional laser systems and components from Trex
Medical at an aggregate cost of approximately $6,006,000.
In connection with certain of the Company's joint venture
arrangements, the Company provided funding of $1,144,000 during fiscal
1997 and $1,667,000 in October 1997. The Company has agreed to provide
additional funding of up to approximately $5,389,000 under these
arrangements.
In September 1996 and April 1997, the Company's Board of Directors
authorized the repurchase by the Company of up to $20,000,000 of Company
common stock through various dates ending April 1998, in the open market,
in negotiated transactions, or pursuant to the exercise by investors of
standardized put options written on the Company's common stock. In
September 1997, the Company's Board of Directors authorized the
repurchase by the Company, through September 4, 1998, of up to an
additional 1,000,000 shares of Company common stock. During fiscal 1997,
the Company repurchased 1,869,200 shares of its common stock for
$26,072,000. As of September 27, 1997, authorization to repurchase up to
an additional 644,016 shares remained outstanding.
In August 1997, the Company sold at par value $115,000,000 principal
amount of 4 3/8% subordinated convertible debentures due 2004 (Note 8).
In April 1997, the Company completed an exchange offer whereby the
Company issued 2,000,000 units, each consisting of one share of Company
common stock and one redemption right, in exchange for 2,261,706 shares
of existing Company common stock and $502,000 in cash, net of expenses
(Note 1).
29PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (continued)
The Company has signed a lease for one additional Spa Thira, which it
expects to open in fiscal 1998. Depending on its size, a spa generally
requires approximately $1,500,000 to $2,500,000 for such items as
leasehold improvements and laser systems. The Company expects to
concentrate its resources on increasing the capacity utilization of its
existing U.S. spas and expanding its physicians' licensing program and
international licensing arrangements. Construction will begin on new spas
at such time as the existing spas produce improved results from
operations. In addition, the Company expects to expend $8,000,000 to
$9,000,000 during fiscal 1998 for equipment related to its licensing
programs. The Company's future capital expenditures will primarily be
affected by the number of Spa Thira locations that are developed and the
number of physicians and other domestic and international licensees
engaged in its licensing programs. The Company expects that it will
finance its capital requirements through a combination of internal funds,
additional debt or equity financing, and/or short-term borrowings from
ThermoTrex or Thermo Electron Corporation, ThermoTrex's parent, although
it has no agreement with these companies to ensure that funds will be
available on acceptable terms or at all. The Company believes its
existing resources are sufficient to meet the capital requirements of its
existing operations for the foreseeable future.
30PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to caution
readers that the following important risk 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 1998 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. The Company continues to
study the SoftLight system to better understand the effects of the system
and to modify the system in order to increase its effectiveness and the
length of time required between treatments. The Company has developed a
modification to its procedure, SoftLight 2.0, and began introducing this
procedure in its spas and to its licensees in September 1997. Results are
preliminary and there can be no assurance that SoftLight 2.0 will be
successful in improving the hair-removal process. Failure to further
improve the SoftLight process, including extending the duration for which
hair can be removed, will limit the Company's ability to successfully
commercialize the SoftLight process. In addition, the Company is
continuing to monitor subjects and customers for the development of
possible side effects.
Uncertain Market Acceptance. Laser-based hair-removal is
significantly different from traditional 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, including other laser-based systems.
There can be no assurance that the SoftLight process will be accepted by
the general public. The Company's SoftLight Rejuvenation(TM) Laser system
is also different from current skin resurfacing treatments and, if
successfully developed, will be subject to similar market acceptance
risks.
Need to Manage Growth and to Attract Qualified Personnel. 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. The number of such persons with the
requisite skills is limited, 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
31PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Forward-looking Statements
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. There can be no assurance
that other companies or individuals are not investigating, developing, or
using 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 is aware of
several companies commercializing other laser-based hair-removal systems,
and of a number of persons whom the Company believes are infringing 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 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. There can be no assurance that
litigation relating to such a claim will not be brought against the
Company, or that the Company would prevail in all such cases, if brought.
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. There can be no
assurance that the Company can obtain patent protection with respect to
any technological improvements that may be critical to the success of the
Company.
Uncertainty of Development of SoftLight Rejuvenation Laser System.
The Company received a United States patent covering the SoftLight
Rejuvenation Laser 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 for skin
resurfacing, including wrinkle- and skin-texture treatment. The Company
has completed its clinical trials and, in March 1997, submitted a 510(k)
premarket notification application to the FDA in order to obtain FDA
clearance. The Company must obtain clearance for this use of the laser
before it can commercially market its system for skin resurfacing. There
can be no assurance that the FDA will clear the device for marketing this
use.
Need to Comply 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 resurfacing system must receive FDA clearance before it
can be commercially used in the United States for skin resurfacing. In
addition, the Company will be subject to regulatory requirements in
32PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Forward-looking Statements
certain foreign countries where the SoftLight process may be marketed.
The process of obtaining regulatory approvals is lengthy, expensive, and
inherently uncertain. No assurance can be given that the FDA will not
require the Company to perform substantial clinical trials before
clearance is granted for its SoftLight Rejuvenation Laser system. 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, which are
regulated by the FDA, and are subject to inspection. Furthermore, CBI
manufactures a few preparations, principally sun screens and
skin-bleaching agents, that are classified as over-the-counter drugs, and
CBI has an FDA license for this purpose. This license requires, among
other things, that CBI adhere to the FDA's Good Manufacturing Practices
procedures for finished pharmaceuticals, and subjects CBI's facility to
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 may also
require post-market testing and surveillance programs of drugs or devices
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/or criminal prosecutions.
Compliance with State and Foreign Regulations. The extent to which a
physician must be involved in the performance of the SoftLight laser hair
removal procedure, including his or her ability to delegate to
non-physicians the responsibility for providing particular services,
depends upon applicable state and foreign law and regulations. The
American Medical Association (AMA) has adopted the position that
"revision, destruction, incision or other structural alteration of human
tissue using [a] laser is surgery." The AMA is also encouraging state
medical societies to support, through legislation, its position that such
laser surgery should be performed only by physicians or individuals
currently licensed by the state to perform surgical services. Some state
regulatory authorities which have considered the question have determined
that the use of lasers for hair removal constitutes the practice of
medicine and have limited the right to perform laser hair removal
procedures to physicians, or imposed restrictions on the conditions under
which a physician may delegate to a non-physician responsibility for
performing laser hair removal procedures. For example, the New Jersey
Board of Medical Examiners as well as regulatory authorities in France
have taken the position that laser hair removal procedures constitute the
practice of medicine and may be performed only by physicians. Other
states and countries that have considered or are currently considering
these issues have taken or may take the position that laser hair removal
is the practice of medicine, and have imposed or may in the future impose
various conditions relating to the performance of laser hair removal.
SoftLight laser hair removal procedures are currently performed,
under varying degrees of physician supervision, by RNs, LVNs,
cosmetologists, aestheticians, and electrologists. The use of lasers for
33PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Forward-looking Statements
hair removal is a new use for lasers, and there can be no assurance that
review of the Company's business, structures, and relationships relating
to its SoftLight hair removal procedures by courts or state regulatory
authorities having jurisdiction over matters including, without
limitation, the practice of medicine, the licensure of facilities,
equipment or personnel, and franchising, will not result in
determinations that could adversely affect the operations of the Company,
or that interpretations of current laws and regulations or changes in
current laws and regulations will not make such compliance more difficult
or expensive. There can be no assurance that state regulatory authorities
will not (i) require a physician to evaluate each person for whom laser
hair removal procedures are performed, (ii) require a supervising
physician to be present at all times at the site where laser hair removal
procedures are performed, (iii) prohibit anyone other than a physician
from using a laser for hair removal, or (iv) impose other requirements
relating to the supervision of persons performing laser hair removal
procedures or the qualifications and/or training of such persons. State
regulatory authorities may also take the position that a facility at
which SoftLight hair removal procedures are performed must be licensed
under state laws relating to the licensing of health care facilities, or
that a certificate of need may be required for such facilities. To the
extent any of the foregoing occurs in states where the Company has or
plans to have operations, the current operations and expansion plans of
the Company would be adversely affected. For example, the added cost of
using physicians for tasks that could otherwise be performed by
non-physicians could be significant.
Any SoftLight Rejuvenation procedure offered by the Company or its
licensees may be subject to similar regulatory interpretations and
restrictions.
Limited Operating History. The Company has made commercial sales of
services using the SoftLight process through its spas only since November
1995 and through its physician network only since June 1996. The Company
is continuing to develop a marketing and commercialization strategy. The
Company 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 hair-removal process
will compete with electrolysis and other methods of hair removal. For
example, four laser manufacturers have received clearance from the FDA in
1997 to market lasers for hair removal and others have applied or may
apply in the future for such clearance. Competition from each of these
sources, including from persons who may attempt to infringe the Company's
patents, 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. Should it receive clearance to market the
SoftLight Rejuvenation Laser system for skin resurfacing, the Company
expects that its principal competitors will be providers of carbon
34PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Forward-looking Statements
dioxide laser resurfacing, chemical peels, and traditional spa-based
services.
International Relationships. The Company is relying on joint venture
parties and licensees providing the SoftLight process in countries
outside the United States to provide knowledge and expertise with respect
to such countries relating to business, cultural, legal, and regulatory
matters that may have a significant impact on the establishment and
operation of viable commercial SoftLight hair-removal and skin
rejuvenation businesses in those countries. There can be no assurance
that the SoftLight process and the Company's business models will (i) be
acceptable to foreign regulatory authorities or (ii) achieve wide
consumer acceptance in countries outside the U.S.
In addition, there can be no assurance that the Company will be able
to effectively manage the non-U.S. businesses without establishing
additional infrastructure to work with foreign joint venture parties and
licensees to ensure adherence to the Company's standards and the parties'
and licensees' commitments to ThermoLase.
35PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Selected Financial Information
Nine
Months
Year Ended Ended(a) Year Ended
(In thousands ----------------------------- ---------- ----------------
except per Sept. 27, Sept. 28, Sept. 30, Sept. 30, Dec. 31, Jan. 1,
share amounts) 1997(b) 1996 1995 1995(c) 1994(d) 1994
--------------------------------------------------------------------------
(Unaudited)
Statement of
Operations Data:
Revenues $ 45,233 $ 27,812 $ 23,348 $ 17,544 $ 18,682 $ 625
Income (loss)
before
cumulative
effect of
change in
accounting
principle (12,405) (1,386) (1,675) (1,679) 6 (16)
Net income
(loss) (12,405) (1,386) (1,675) (1,679) 15 (16)
Earnings (loss)
per share
before
cumulative
effect of
change in
accounting
principle (.31) (.03) (.04) (.04) - -
Earnings (loss)
per share (.31) (.03) (.04) (.04) - -
Balance Sheet Data:
Working
capital $ 95,469 $ 47,197 $ 68,691 $ 16,325 $ 3,610
Total assets 174,595 95,520 89,463 33,570 23,551
Long-term
obligations 115,000 - - - -
Common stock
subject to
redemption 40,500 - - - 14,511
Shareholders'
investment 333 79,037 82,218 28,997 (189)
(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 issuance of $115.0 million principal amount of 4 3/8%
subordinated convertible debentures and the reclassification of $40.5
million to "Common stock subject to redemption" from "Shareholders'
investment" due to the Company's stock exchange transaction.
(c) Reflects the net proceeds of the Company's private placements and
public offering of common stock.
(d) Reflects the net proceeds of the Company's initial public offering and
the adoption of SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
36PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
Common Stock and Unit Market Information
The following table shows the market range for the Company's common
stock (symbol TLZ) and units (symbol TLZ.U, each unit consisting of one
share of common stock and one redemption right) based on reported sales
prices on the American Stock Exchange for fiscal 1997 and fiscal 1996.
Common Stock Units
------------------- -----------------
Quarter High Low High Low
--------------------------------------------------------------------
Fiscal 1996 Fiscal 1996
------------------- -----------------
First $27 5/8 $17 1/4 $ - $ -
Second 31 20 7/8 - -
Third 36 1/2 24 1/4 - -
Fourth 30 3/4 19 7/8 - -
Fiscal 1997 Fiscal 1997
------------------- -----------------
First $24 7/8 $15 7/8 $ - $ -
Second 17 3/8 12 3/8 - -
Third 14 7/8 9 1/4 18 1/4 16 1/8
Fourth 18 13 1/16 18 7/8 17 1/4
As of October 31, 1997, the Company had 417 holders of record of its
common stock and 18 holders of record of its units. This does not include
holdings in street or nominee names. The closing market prices on the
American Stock Exchange for the Company's common stock and units on
October 31, 1997, were $15 3/16 per share of common stock and $18 1/2 per
unit.
Transfer Agent
American Stock Transfer & Trust Company is the transfer agent for the
Company's common stock and units and maintains holders' activity records.
The agent will respond to questions on issuance of stock and unit
certificates, change of ownership, lost stock and unit certificates, and
change of address. For these and similar matters, please direct inquiries
to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005
(718) 921-8200
Security Holder Services
Holders of ThermoLase Corporation common stock and units who desire
information about the Company are invited to contact John N. Hatsopoulos,
Chief Financial Officer and Vice President, ThermoLase Corporation, 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02254-9046, (781)
622-1111. A mailing list is maintained to enable holders whose stock or
units is held in street name, and other interested individuals, to
receive quarterly reports, annual reports, and press releases as quickly
as possible. Quarterly distribution of printed reports is limited to the
second quarter report only. All quarterly reports and press releases are
37PAGE
<PAGE>
ThermoLase Corporation 1997 Financial Statements
available through the Internet from Thermo Electron's home page
(http://www.thermo.com/subsid/tlz.html).
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
27, 1997, as filed with the Securities and Exchange Commission, may be
obtained at no charge by writing to John N. Hatsopoulos, Chief Financial
Officer and Vice President, ThermoLase Corporation, 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02254-9046.
Annual Meeting
The annual meeting of shareholders will be held on Thursday, March 5,
1998, at 9:30 a.m. at the Westin Hotel, 70 Third Avenue, Waltham,
Massachusetts.
Exhibit 21
THERMOLASE CORPORATION
Subsidiaries of the Registrant
At October 31, 1997, ThermoLase Corporation owned the following
companies:
State of Jurisdiction Registrant's
Name or Incorporation % of Ownership
------------------------------------------------------------------------
CBI Laboratories, Inc. Texas 100
ThermoLase Australia L.L.C. Delaware 100
ThermoLase France L.L.C. Delaware 50
ThermoDess S.A.S. France 50
ThermoLase England L.L.C. Delaware 50
ThermoLase UK Limited United Kingdom 100
ThermoLase Japan L.L.C. Wyoming 50
Thira Japan, Inc. Japan 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 3, 1997,
included in or incorporated by reference into ThermoLase Corporation's
Annual Report on Form 10-K for the year ended September 27, 1997, 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, Registration Statement No. 33-94658 on Form S-3,
Registration Statement No. 333-19633 on Form S-4, Registration Statement
No. 333-34467 on Form S-3 and Registration Statement No. 33-94658 on
Form S-3.
Arthur Andersen LLP
Boston, Massachusetts
December 2, 1997
<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 27, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-27-1997
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0
0
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</TABLE>
