SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended January 3, 1998.
[ ] 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
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 (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the
latest practicable date.
Class Outstanding at January 30, 1998
---------------------------- -------------------------------
Common Stock, $.01 par value 38,078,147
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMOLASE CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
January 3, September 27,
(In thousands) 1998 1997
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 68,833 $ 87,843
Available-for-sale investments, at quoted
market value (amortized cost of $14,129
and $12,509) 14,133 12,493
Accounts receivable, less allowances of
$402 in both periods 7,714 5,863
Inventories:
Raw materials and supplies 1,112 1,343
Work in process and finished goods 1,942 1,905
Prepaid expenses 1,463 1,718
Prepaid income taxes 1,687 1,687
-------- --------
96,884 112,852
-------- --------
Property and Equipment, at Cost 47,058 45,792
Less: Accumulated depreciation and
amortization 7,521 6,055
-------- --------
39,537 39,737
-------- --------
Long-term Prepaid Income Taxes 7,396 6,412
-------- --------
Note Receivable from Related Party (Note 3) 1,667 -
-------- --------
Other Assets 7,016 7,498
-------- --------
Cost in Excess of Net Assets of Acquired
Company 8,037 8,096
-------- --------
$160,537 $174,595
======== ========
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THERMOLASE CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
January 3, September 27,
(In thousands except share amounts) 1998 1997
------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 1,885 $ 5,163
Accrued payroll and employee benefits 2,502 2,590
Deferred revenue 739 1,355
Accrued interest 1,859 601
Other accrued expenses 4,926 5,121
Due to parent company and affiliated
companies 2,186 2,553
-------- --------
14,097 17,383
-------- --------
4 3/8% Subordinated Convertible Debentures 115,000 115,000
-------- --------
Deferred Lease Liability 1,441 1,379
-------- --------
Common Stock Subject to Redemption 40,500 40,500
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 100,000,000
shares authorized; 40,809,932 and
40,807,932 shares issued 408 408
Capital in excess of par value 45,990 46,379
Accumulated deficit (17,956) (15,921)
Treasury stock at cost, 2,746,301 and
2,129,549 shares (38,945) (30,523)
Net unrealized gain (loss) on available-
for-sale investments 2 (10)
-------- --------
(10,501) 333
-------- --------
$160,537 $174,595
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
------------------------
January 3, December 28,
(In thousands except per share amounts) 1998 1996
-----------------------------------------------------------------------
Revenues:
Product revenues $ 6,399 $ 6,046
Service revenues 7,050 2,564
------- -------
13,449 8,610
------- -------
Costs and Operating Expenses:
Cost of product revenues 4,386 4,015
Cost of service revenues 5,633 2,812
Selling, general, and administrative expenses 5,126 4,214
Research and development expenses 939 909
------- -------
16,084 11,950
------- -------
Operating Loss (2,635) (3,340)
Interest Income 1,418 616
Interest Expense (1,332) -
Equity in Losses of Joint Ventures (400) -
------- -------
Loss Before Income Tax Benefit (2,949) (2,724)
Income Tax Benefit 914 1,335
------- -------
Net Loss $(2,035) $(1,389)
======= =======
Basic Loss per Share (Note 4) $ (.05) $ (.03)
======= =======
Basic Weighted Average Shares (Note 4) 38,384 40,685
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
-------------------------
January 3, December 28,
(In thousands) 1998 1996
------------------------------------------------------------------------
Operating Activities:
Net loss $ (2,035) $ (1,389)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,609 691
Provision for losses on accounts
receivable - 60
Increase in prepaid income taxes (991) (1,526)
Increase in deferred lease liability 62 270
Equity in losses of joint ventures 400 -
Changes in current accounts:
Accounts receivable (1,851) 207
Inventories 194 (217)
Other current assets 235 (47)
Accounts payable (3,278) (1,978)
Other current liabilities 278 754
-------- --------
Net cash used in operating activities (5,377) (3,175)
-------- --------
Investing Activities:
Purchases of available-for-sale investments (4,000) -
Proceeds from maturities of available-
for-sale investments 2,400 26,500
Purchases of property and equipment (1,555) (7,386)
Issuance of note receivable to related
party (Note 3) (1,667) -
Other - 443
-------- --------
Net cash provided by (used in) investing
activities (4,822) 19,557
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock and sale of put options 82 384
Repurchases of Company common stock (8,806) (2,179)
Payment of withholding taxes related to
stock option exercises (87) (280)
-------- --------
Net cash used in financing activities $ (8,811) $ (2,075)
-------- --------
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THERMOLASE CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
------------------------
January 3, December 28,
(In thousands) 1998 1996
------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents $(19,010) $ 14,307
Cash and Cash Equivalents at Beginning
of Period 87,843 7,923
-------- --------
Cash and Cash Equivalents at End of Period $ 68,833 $ 22,230
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
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THERMOLASE CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by ThermoLase Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at
January 3, 1998, and the results of operations and the cash flows for the
three-month periods ended January 3, 1998, and December 28, 1996. The
Company's results of operations for the three-month periods ended January
3, 1998, and December 28, 1996, include 14 weeks and 13 weeks,
respectively. Interim results are not necessarily indicative of results
for a full year.
The consolidated balance sheet presented as of September 27, 1997,
has been derived from the consolidated financial statements that have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 27, 1997, filed
with the Securities and Exchange Commission.
2. Related-party Transaction
During the quarter ended January 3, 1998, the Company purchased laser
systems and components from Trex Medical Corporation, a majority-owned
subsidiary of ThermoTrex Corporation, the Company's parent, at an
aggregate cost of $441,000.
3. Related-party Note Receivable
In October 1997, the Company advanced $1,667,000 to ThermoLase U.K.
Limited under a note receivable, due December 31, 2003, and bearing
interest at 8.0%, payable annually. ThermoLase U.K. Limited, a subsidiary
of a joint venture that is 50%-owned by the Company, is marketing the
Company's SoftLight system in England.
4. Loss per Share
During the first quarter of fiscal 1998, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per
Share." As a result, all previously reported losses per share have been
restated; however, basic loss per share equals the Company's previously
reported loss per share for the fiscal 1997 period. Basic loss per share
has been computed by dividing net loss by the weighted average number of
shares outstanding during the period. Diluted loss per share is not
presented because the effect of assuming the conversion of convertible
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THERMOLASE CORPORATION
4. Loss per Share (continued)
obligations and the elimination of the related interest expense, and the
exercise of stock options, as well as their related income tax effects,
would be antidilutive, due to the Company's net loss in both periods. As
of January 3, 1998, there were outstanding options to purchase 2,760,520
shares of Company common stock at prices ranging from $1.75 to $29.38 per
share, and the Company had outstanding $115,000,000 principal amount of
4 3/8% subordinated convertible debentures, convertible at $17.385 per
share.
Item 2 - 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 under the heading "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal
year ended September 27, 1997, filed with the Securities and Exchange
Commission.
Overview
The Company has developed a laser-based system called SoftLight(R)
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 January 3, 1998, had a total of 14 domestic Spa Thira locations.
Rather than continuing to open additional domestic Spa Thira locations,
the Company presently intends to concentrate its resources on attempting
both to increase the capacity utilization of its existing U.S. spas and
to expand its physicians' licensing program and international licensing
arrangements, discussed below.
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THERMOLASE CORPORATION
Overview (continued)
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. In December 1997,
the Company established a joint venture to market the SoftLight system in
Australia, Cyprus, Germany, Greece, New Zealand, South Africa, and Spain.
The Company's international arrangements resulted in the opening of spas
in Paris in May 1997 and in Lugano, Switzerland, in October 1997.
In September 1997, the Company introduced a modification to its
hair-removal treatment, called SoftLight 2.0. Although clinical
laboratory results were encouraging, the Company has determined that
further modification is warranted, and accordingly continues to adjust
its treatment protocol. The Company plans to continue research and
development as it seeks to improve the efficacy and duration of its
hair-removal treatment, and believes that such improvements 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 using 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. Following discussions with the FDA in December 1997, the Company
has decided to submit additional data and to focus on claims related to
skin texture rather than wrinkle treatment, in order to expedite
clearance of the application.
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
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
Revenues increased 56% to $13,449,000 in the first quarter of fiscal
1998 from $8,610,000 in the first quarter of fiscal 1997. The Company
earned revenues from hair-removal services and related activities of
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THERMOLASE CORPORATION
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
(continued)
$7,050,000 in fiscal 1998, compared with $2,564,000 in fiscal 1997. The
increase in revenues resulted in part from an increase in the number of
U.S. spas to 14, compared with seven spas open during fiscal 1997. 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 from the Company's physicians'
licensing program also increased in fiscal 1998, primarily due to an
increase in the number of physician-licensees. In addition, revenues from
hair-removal services and related activities in fiscal 1998 included
$2,807,000 of minimum guaranteed payments recorded upon granting
technology rights under the Company's international licensing
arrangements, compared with $308,000 in fiscal 1997. Of the $2,807,000
earned in fiscal 1998, $547,000 was due upon the grant of the technology
rights during the quarter, and the balance of $2,260,000 is due on March
2, 1998. The amount of minimum guaranteed payments recorded by the
Company will vary depending on the Company's ability to enter into
additional international licensing arrangements, the availability of
additional territories, and the terms of any such arrangements. Revenues
at CBI increased to $6,399,000 in fiscal 1998 from $6,046,000 in fiscal
1997. 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 gross profit margin in the first quarter of fiscal 1998 was 26%,
compared with 21% in the first quarter of fiscal 1997. The Company's
hair-removal business reported gross profit of $1,417,000 in fiscal 1998,
compared with gross profit of negative $248,000 in fiscal 1997. Each
period was impacted by the early operations of the Spa Thira business,
which has been operating below maximum capacity as the Company seeks to
develop its client base and refine its process and operating procedures,
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 addition, fiscal
1997 was negatively impacted by pre-opening costs incurred in connection
with new spa openings. During the remainder of fiscal 1998, the effect of
operating each spa below maximum capacity, as the Company seeks to
develop its client base and expand its product lines, 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. In December 1997, the Company began introducing traditional
day spa services, such as European facials and massages, in an effort to
improve the capacity utilization of its spas. The gross profit margin at
CBI declined to 31% in fiscal 1998 from 34% in fiscal 1997, as a result
of a continued shift to lower-margin products.
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THERMOLASE CORPORATION
First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997
(continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased to 38% in the first quarter of fiscal 1998 from 49% in
the first quarter of fiscal 1997, due to an increase in revenues, offset
in part by increased spending. The spending 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 and
regulatory issues.
Research and development expenses were $939,000 in the first quarter
of fiscal 1998, compared with $909,000 in the first quarter of fiscal
1997. The Company plans to continue research and development as it seeks
to improve the efficacy and duration of its hair-removal treatment. In
addition, the Company continues to develop its SoftLight Rejuvenation
Laser skin treatment and investigate other health and beauty applications
for its proprietary laser technology.
Interest income increased to $1,418,000 in the first quarter of
fiscal 1998 from $616,000 in the first quarter of fiscal 1997, primarily
due to interest income earned on the invested proceeds from the Company's
August 1997 issuance of $115,000,000 principal amount of 4 3/8%
subordinated convertible debentures. Interest expense represents interest
associated with these debentures.
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 rates in both periods differ from the statutory
federal income tax rate due to the impact of state income taxes and
certain nondeductible expenses, including amortization of cost in excess
of net assets of acquired company.
Liquidity and Capital Resources
Consolidated working capital was $82,787,000 at January 3, 1998,
compared with $95,469,000 at September 27, 1997. Included in working
capital are cash, cash equivalents, and available-for-sale investments of
$82,966,000 at January 3, 1998, compared with $100,336,000 at September
27, 1997. Operating activities used $5,377,000 of cash during the first
quarter of fiscal 1998. An increase in accounts receivable used
$1,851,000, primarily due to the inclusion of certain receivables from
the Company's international licensing arrangements, discussed above. A
net decrease in accounts payable and other current liabilities used
$3,000,000, primarily due to certain repurchases of Company common stock
with trade dates in late fiscal 1997 and settlement dates in fiscal 1998.
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THERMOLASE CORPORATION
Liquidity and Capital Resources (continued)
During the first quarter of fiscal 1998, the Company expended
$1,555,000 for purchases of property and equipment, including the
purchase of laser systems and components at an aggregate cost of $441,000
from Trex Medical Corporation, a majority-owned subsidiary of ThermoTrex
Corporation.
In connection with certain of the Company's joint venture
arrangements, the Company provided funding of $1,667,000 during the first
quarter of fiscal 1998 (Note 3). The Company has agreed to provide
additional funding of up to approximately $5,389,000 under these
arrangements.
In September 1997, the Company's Board of Directors authorized the
repurchase by the Company of up to 1,000,000 shares of Company common
stock through September 4, 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. During the first
quarter of fiscal 1998, the Company repurchased 643,000 shares of its
common stock for $8,806,000. As of January 3, 1998, authorization to
repurchase up to an additional 1,016 shares remained outstanding.
The Company's capital expenditures during the remainder of fiscal
1998 will primarily be affected by 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 Corporation 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.
PART II - OTHER INFORMATION
Item 5 - Other Information
Effective February 1, 1998, John C. Hansen resigned as President,
Chief Executive Officer, and a director of the Company. Anne Pol, a vice
president of Thermo Electron Corporation, has been appointed interim
President of the Company, pending the appointment of a permanent
replacement. Mr. Hansen will remain as a consultant to the Company.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMOLASE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 6th day of February
1998.
THERMOLASE CORPORATION
Paul F. Kelleher
---------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------------
John N. Hatsopoulos
Chief Financial Officer and
Senior Vice President
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THERMOLASE CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------------------------------------------------------------------------
10.1 Agreement between the Company and John C. Hansen.
10.2 Amended and Restated Master Guarantee Reimbursement and Loan
Agreement dated December 12, 1997, between the Company and
Thermo Electron Corporation.
10.3 Amended and Restated Guarantee and Loan Agreement dated
December 12, 1997, between the Company and ThermoTrex
Corporation.
27 Financial Data Schedule.
EXHIBIT 10.1
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 12th day of
December, 1997, by and among Thermo Electron Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier
Majority Owned Subsidiaries ") may themselves be majority owned
subsidiaries of other Majority Owned Subsidiaries ("First Tier
Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second
Tier Majority Owned Subsidiary's Underlying Obligations may be
demanded and given without the respective First Tier Majority
Owned Subsidiary also issuing a guarantee of such Underlying
Obligation;
WHEREAS, the Parent may itself make a loan or provide other
credit to a Second Tier Majority Owned Subsidiary or its
wholly-owned subsidiaries under circumstances where the
applicable First Tier Majority Owned Subsidiary does not provide
such credit; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
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Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
Parent as a result of the Parent Guarantee. If the
Underlying Obligation is issued by a Second Tier Majority
Owned Subsidiary or a wholly-owned subsidiary thereof, and
such Second Tier Majority Owned Subsidiary is unable to
fully indemnify the Parent (because of the poor financial
condition of such Second Tier Majority Owned Subsidiary, or
for any other reason), then the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary shall indemnify and
save harmless the Parent from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees)
suffered by the Parent as a result of the Parent Guarantee.
If a Majority Owned Subsidiary or a wholly-owned subsidiary
thereof provides a Credit Support Obligation for any
subsidiary of the Parent, other than a subsidiary of such
Majority Owned Subsidiary, and the beneficiary(ies) of the
Credit Support Obligation enforce the Credit Support
Obligation, or the Majority Owned Subsidiary or its
wholly-owned subsidiary performs under the Credit Support
Obligation for any other reason, then the Parent shall
indemnify and save harmless the Majority Owned Subsidiary or
its wholly-owned subsidiary, as applicable, from any
liability, cost, expense or damage (including reasonable
attorneys' fees) suffered by the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, as a result
of the Credit Support Obligation. Without limiting the
foregoing, Credit Support Obligations include the deposit of
funds by a Majority Owned Subsidiary or a wholly-owned
subsidiary thereof in a credit arrangement with a banking
facility whereby such funds are available to the banking
facility as collateral for overdraft obligations of other
Majority Owned Subsidiaries or their subsidiaries also
participating in the credit arrangement with such banking
facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
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also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
PAGE
<PAGE>
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, 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 Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
PAGE
<PAGE>
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. If the Parent makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such
guaranty shall be enforced only after the Parent, in its
reasonable judgment, determines that the Second Tier
Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent
provides Credit Extension to a wholly-owned subsidiary of a
Second Tier Majority Owned Subsidiary, the Second Tier
Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority
of the stock of such Second Tier Majority Owned Subsidiary
hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall
be enforced only after the Parent, in its reasonable
judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
7. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
Title: Treasurer
THERMOLASE CORPORATION
By: /s/ Charles K. Wittenberg
Title: Vice President
EXHIBIT 10.2
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 12th day of
December, 1997, by and among ThermoTrex Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
PAGE
<PAGE>
Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the beneficiary(ies) of the Credit Support
Obligation enforce the Credit Support Obligation, or the
Majority Owned Subsidiary or its wholly-owned subsidiary
performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense
or damage (including reasonable attorneys' fees) suffered by
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, as a result of the Credit Support
Obligation. Without limiting the foregoing, Credit Support
Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit
arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for
overdraft obligations of other Majority Owned Subsidiaries
or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
PAGE
<PAGE>
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
PAGE
<PAGE>
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, 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 Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMOTREX CORPORATION
By: /s/ Gary S. Weinstein
Title: President
PAGE
<PAGE>
THERMOLASE CORPORATION
By: /s/ Charles K. Wittenberg
Title: Vice President
EXHIBIT 10.3
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 12th day of
December, 1997, by and among ThermoTrex Corporation (the
"Parent") and those of its subsidiaries that join in this
Agreement by executing the signature page hereto (the "Majority
Owned Subsidiaries").
WITNESSETH:
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries wish to enter into various financial
transactions, such as convertible or nonconvertible debt, loans,
and equity offerings, and other contractual arrangements with
third parties (the "Underlying Obligations") and may provide
credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent
acknowledge that the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may be unable to enter into many kinds
of Underlying Obligations without a guarantee of their
performance thereunder from the Parent (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority
Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their
wholly-owned subsidiaries may borrow funds from the Parent, and
the Parent may loan funds or provide credit to the Majority Owned
Subsidiaries and their wholly-owned subsidiaries, on a short-term
and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to
issue Parent Guarantees and providing credit, and the Majority
Owned Subsidiaries are willing to consider continuing to provide
Credit Support Obligations and to borrow funds, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each party hereto, the parties
agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee
enforce the Parent Guarantee, or the Parent performs under
the Parent Guarantee for any other reason, then the Majority
Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such
Underlying Obligation shall indemnify and save harmless the
Parent from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the
PAGE
<PAGE>
Parent as a result of the Parent Guarantee. If a Majority
Owned Subsidiary or a wholly-owned subsidiary thereof
provides a Credit Support Obligation for any subsidiary of
the Parent, other than a subsidiary of such Majority Owned
Subsidiary, and the beneficiary(ies) of the Credit Support
Obligation enforce the Credit Support Obligation, or the
Majority Owned Subsidiary or its wholly-owned subsidiary
performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense
or damage (including reasonable attorneys' fees) suffered by
the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, as a result of the Credit Support
Obligation. Without limiting the foregoing, Credit Support
Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit
arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for
overdraft obligations of other Majority Owned Subsidiaries
or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall
include not only a formal guarantee of an obligation, but
also any other arrangement where the Parent is liable for
the obligations of a Majority Owned Subsidiary or its
wholly-owned subsidiaries. Such other arrangements include
(a) representations, warranties and/or covenants or other
obligations joined in by the Parent, whether on a joint or
joint and several basis, for the benefit of the Majority
Owned Subsidiary or its wholly-owned subsidiaries and (b)
responsibility of the Parent by operation of law for the
acts and omissions of the Majority Owned Subsidiary or its
wholly-owned subsidiaries, including controlling person
liability under securities and other laws.
3. Promptly after the Parent receives notice that a beneficiary
of a Parent Guarantee is seeking to enforce such Parent
Guarantee, the Parent shall notify the Majority Owned
Subsidiary(s) obligated, either directly or indirectly
through a wholly-owned subsidiary, under the relevant
Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have
the right, at its own expense, to contest the claim of such
beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim
of such beneficiary, the Parent will not perform under the
relevant Parent Guarantee unless and until, in the Parent's
reasonable judgment, the Parent is obligated under the terms
of such Parent Guarantee to perform. Subject to the
foregoing, any dispute between a Majority Owned Subsidiary
or wholly-owned subsidiary thereof, as applicable, and a
beneficiary of a Parent Guarantee shall not affect such
PAGE
<PAGE>
Majority Owned Subsidiary's obligation to promptly indemnify
the Parent hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit
Support Obligation is seeking to enforce such Credit Support
Obligation, the Majority Owned Subsidiary shall notify the
Parent. The Parent shall have the right, at its own
expense, to contest the claim of such beneficiary. If the
Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation is given is contesting the claim
of such beneficiary, the Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, will not
perform under the relevant Credit Support Obligation unless
and until, in the Majority Owned Subsidiary's reasonable
judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the
terms of such Credit Support Obligation to perform. Subject
to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support
Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect
the Parent's obligation to promptly indemnify the Majority
Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent
may make loans and advances to the Majority Owned Subsidiary
or its wholly-owned subsidiaries on a short-term, revolving
credit basis, from time to time in such amounts as mutually
determined by the Parent and the Majority Owned Subsidiary.
The aggregate principal amount of such loans and advances
shall be reflected on the books and records of the Majority
Owned Subsidiary (or wholly-owned subsidiary, as applicable)
and the Parent. All such loans and advances shall be on an
unsecured basis unless specifically provided otherwise in
loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall pay interest on the aggregate unpaid principal amount
of such loans from time to time outstanding at a rate
("Interest Rate") equal to the rate of the Commercial Paper
Composite Rate for 90-day maturities as reported by Merrill
Lynch Capital Markets, as an average of the last five
business days of such Majority Owned Subsidiary's latest
fiscal quarter then ended, plus twenty-five (25) basis
points. The Interest Rate shall be adjusted on the first
business day of each fiscal quarter of such Majority Owned
Subsidiary pursuant to the Interest Rate formula contained
in the preceding sentence and shall be in effect for the
entirety of such fiscal quarter. Interest shall be computed
on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on
demand. The principal and accrued interest may be paid by
the Majority Owned Subsidiaries or their wholly-owned
subsidiaries, as applicable, at any time or from time to
PAGE
<PAGE>
time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then
to principal. Principal and interest shall be payable in
lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at
such other place as the Parent may designate from time to
time in writing to the Majority Owned Subsidiary. The
unpaid principal amount of any such borrowings, and accrued
interest thereon, shall become immediately due and payable,
without demand, upon the failure of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, the filing by or against the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any
jurisdiction), or the making by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, 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 Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable. In case any
payments of principal and interest shall not be paid when
due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost
of collection, including reasonable attorneys' fees.
5. All payments required to be made by a Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable,
shall be made within two days after receipt of notice from
the Parent. All payments required to be made by the Parent
shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts applicable to contracts made and performed
therein.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
first above written.
THERMOTREX CORPORATION
By: /s/ Gary S. Weinstein
Title: President
THERMOLASE CORPORATION
By: /s/ Charles K. Wittenberg
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMOLASE
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JANUARY 3,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 68,833
<SECURITIES> 14,133
<RECEIVABLES> 8,116
<ALLOWANCES> 402
<INVENTORY> 3,054
<CURRENT-ASSETS> 96,884
<PP&E> 47,058
<DEPRECIATION> 7,521
<TOTAL-ASSETS> 160,537
<CURRENT-LIABILITIES> 14,097
<BONDS> 115,000
0
0
<COMMON> 408
<OTHER-SE> 10,909
<TOTAL-LIABILITY-AND-EQUITY> 160,537
<SALES> 6,933
<TOTAL-REVENUES> 13,499
<CGS> 4,386
<TOTAL-COSTS> 10,019
<OTHER-EXPENSES> 939
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,332
<INCOME-PRETAX> (2,949)
<INCOME-TAX> (914)
<INCOME-CONTINUING> (2,035)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,035)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
