<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE +
+ CHANGED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated October 6, 1998
PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 29, 1998)
Filed pursuant to Rule 424(b)(5)
Registration No. 333-62957
$150,000,000
[THERMO ELECTRON LOGO APPEARS HERE]
NOTES DUE 200[ ]
- --------------------------------------------------------------------------------
This is a public offering by Thermo Electron Corporation of $150,000,000 of %
Notes due 200[ ]. Interest is payable on and of each year, beginning
, 1999.
Thermo Electron may redeem all or part of the Notes at any time at the greater
of their principal amount or the discounted present value of the remaining
scheduled payments of principal and interest plus, in each case, accrued and
unpaid interest. The Notes are unsecured and unsubordinated debt securities,
and are not convertible into or exchangeable for Common Stock of Thermo
Electron.
Application has been made to list the Notes on the Luxembourg Stock Exchange.
There can be no assurance that such listing will be obtained. The Notes have
been approved for clearance through the Cedel and Euroclear systems. The final
Prospectus Supplement will contain the interest rate and maturity date of the
Notes and any other information about the Notes that has been omitted from this
preliminary Prospectus Supplement.
<TABLE>
<CAPTION>
Per Note Total
-------- -------------
<S> <C> <C>
Public Offering Price................................... % $
Underwriting Discount................................... % $
Proceeds to Thermo Electron............................. % $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus Supplement or the attached Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The Notes should be delivered on or about October , 1998 through the book-
entry facilities of The Depository Trust Company.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS SALOMON SMITH BARNEY
October , 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
--------------------- ----
<S> <C>
The Company.......................................................... S-3
Use of Proceeds...................................................... S-7
Capitalization....................................................... S-8
Selected Consolidated Financial
Data................................................................ S-9
Business............................................................. S-11
Description of the Notes............................................. S-25
Certain United States Federal Tax
Considerations...................................................... S-31
Underwriting......................................................... S-34
Legal Matters........................................................ S-35
Listing and General Information...................................... S-35
</TABLE>
<TABLE>
<CAPTION>
PROSPECTUS PAGE
---------- ----
<S> <C>
Risk Factors.......................................................... 2
Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 3
The Company........................................................... 4
Use of Proceeds....................................................... 5
Ratios of Earnings to Fixed Charges................................... 5
Description of Debt Securities of the Company......................... 6
Plan of Distribution.................................................. 25
Validity of Securities................................................ 26
Experts............................................................... 26
</TABLE>
This Prospectus Supplement and the attached Prospectus contain information
about Thermo Electron and the Notes. They also refer to information contained
in other documents filed by Thermo Electron with the SEC. References to this
Prospectus Supplement or the Prospectus also mean the information contained in
such other documents. If this Prospectus Supplement is inconsistent with the
Prospectus, rely on this Prospectus Supplement.
Investors may rely only on the information in this Prospectus Supplement or
the Prospectus or in documents incorporated by reference into the Prospectus.
Thermo Electron and the Underwriters have not authorized anyone to provide any
different or additional information. These documents are not an offer to sell
or a solicitation of an offer to buy Notes to any person in any jurisdiction
where it is unlawful. Neither the delivery of these documents nor any sale of
Notes means that information in these documents is correct or complete after
the date of this Prospectus Supplement.
These documents make forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Investors should consider any
statements that are not statements of historical fact to be forward-looking
statements. The words "believes", "anticipates", "plans", "expects", "seeks",
"estimates", and similar expressions identify forward-looking statements. There
are a number of important factors that could cause the results of Thermo
Electron to differ materially from those indicated by such forward-looking
statements, including those discussed in the documents referred to in the
Prospectus under the caption "Risk Factors".
Certain jurisdictions may restrict the distribution of these documents and
the offering of the Notes. Thermo Electron and the Underwriters require persons
receiving these documents to inform themselves about and to observe any such
restrictions. Thermo Electron and the Underwriters have not taken any action
that would permit an offering of the Notes or the distribution of these
documents in any jurisdiction that requires such action.
For United Kingdom Purchasers: The Notes may not be offered or sold in the
United Kingdom other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments, whether as principal
or agent (except in circumstances that do not constitute an offer to the public
within the meaning of the Public Offers of Securities Regulations 1995 or the
Financial Services Act 1986), and these documents may only be issued or passed
on to any person in the United Kingdom if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996, as amended, or is a person to whom these documents may
otherwise lawfully be passed on.
This Prospectus Supplement and the attached Prospectus contain information
with regard to Thermo Electron. Thermo Electron accepts full responsibility for
the accuracy of the information contained in these documents and confirms,
having made all reasonable inquires, that to the best of its knowledge and
belief there are no other facts the omission of which would make any statement
herein or in the Prospectus misleading in any material respect.
S-2
<PAGE>
THE COMPANY
GENERAL DESCRIPTION OF BUSINESS
Thermo Electron Corporation ("Thermo Electron" or the "Company") is a
diversified technology company that provides instruments, systems, and services
primarily to industrial, healthcare, and environmental markets. Thermo Electron
seeks to identify major emerging needs in society that can be addressed by its
technologies. In its 42-year history, Thermo Electron has become a leader in
certain markets where continued technological innovation is integral to
success. For example, Thermo Electron is a worldwide leader in the design,
manufacture, and sale of
. analytical instruments,
. paper recycling equipment,
. heart-assist devices, and
. mammography systems.
Thermo Electron also provides a range of other specialized products,
including
. medical diagnostic equipment,
. alternative-energy systems,
. industrial process controls, and
. environmental-contamination monitors.
In addition, Thermo Electron offers a range of services, particularly the
outsourcing of environmental-liability management and laboratory analysis for
various industries, and conducts advanced-technology research and development.
Thermo Electron's ability to innovate derives, in part, from a unique
corporate structure that it developed to retain its entrepreneurial spirit
while continuing its growth. In 1983, Thermo Electron adopted a strategy of
"spinning out" certain of its businesses by selling a minority interest in
those subsidiaries to outside investors. Thermo Electron believes that this
strategy provides additional motivation and incentives for the management of
the spinout companies through the establishment of subsidiary stock-option
incentive programs, as well as capital to sustain the subsidiaries' growth.
Thermo Electron's corporate office provides its wholly and majority-owned
subsidiaries with cost-effective, centralized business development,
administrative, financial, and other resources. Thermo Electron has 29
subsidiaries that have sold minority equity interests, 23 of which are publicly
traded and six of which are privately held.
RECENT DEVELOPMENTS
On August 12, 1998, Thermo Electron announced a proposed reorganization
involving the Company and certain of its subsidiaries. The goals of the
proposed reorganization include (1) consolidating and strategically realigning
certain businesses to enhance their competitive market position and improve
management coordination and (2) increasing liquidity in the public markets by
providing larger market floats for Thermo Electron's publicly traded
subsidiaries. If completed as proposed, the reorganization would reduce the
number of the Company's majority-owned public subsidiaries from 23 to 15. It
may take up to two years to complete all aspects of the plan. Each component of
the reorganization is subject to numerous conditions, including the following
(not all of which are applicable to each component): establishment of prices
and/or exchange ratios; confirmation of anticipated tax consequences; approval
by the board of directors (including the independent directors) of each of the
affected majority-owned subsidiaries; negotiation and execution of definitive
purchase and sale or merger agreements; clearance, where necessary, by the
Securities and Exchange Commission of any necessary documents regarding the
proposed transactions; and, where appropriate, fairness opinions from one or
more investment banking firms on certain financial aspects of the transactions.
For further details regarding the proposed reorganization, see "Business."
S-3
<PAGE>
On September 29, 1998, Thermo Electron announced that it will incur
approximately $53 million of restructuring and other charges in the third
quarter, ending October 3, 1998. These charges will reduce third quarter 1998
diluted earnings per share by approximately $.17. Thermo Electron estimates
that these actions will result in 1999 operating savings totaling approximately
$30 million.
In addition, on September 29, 1998, Thermo Electron announced that it has
named Arvin H. Smith as President of Thermo Electron, effective immediately.
Mr. Smith previously served as Executive Vice President of Thermo Electron.
The Company has amended its Bylaws to increase the maximum number of
directors of the Company from twelve to thirteen. In June 1998, the Company's
Board of Directors elected Robert W. O'Leary, Chairman and Chief Executive
Officer of Premier, Inc., a strategic healthcare alliance, to the Board.
PRODUCTS AND SERVICES OF THERMO ELECTRON
Thermo Electron's products and services are divided into six segments:
. Instruments,
. Biomedical Products,
. Advanced Technology,
. Alternative Energy,
. Industrial Outsourcing, and
. Paper Recycling.
Products or services within a particular segment may be provided by more than
one subsidiary, and certain subsidiaries' products or services are included in
more than one segment. The following is a description of the principal products
and services offered by Thermo Electron in these six industry segments:
Instruments
Thermo Electron is a leading provider of monitoring, analytical, and
biomedical instrumentation and software. Thermo Electron's monitoring
instruments are used to provide on-line process control for numerous industries
and to detect and measure environmental pollutants. Its systems are also used
by industry and academia to analyze a broad range of complex molecular
compounds and elements in gases, liquids, and solids, and are applied in the
life sciences for biochemical research, clinical diagnosis, and pharmaceutical
production. This segment includes all of Thermo Electron's Thermo Instrument
Systems Inc. ("Thermo Instrument") subsidiaries.
Biomedical Products
Thermo Electron is a leading provider of mammography systems and heart-assist
devices, and supplies a wide range of medical systems and devices for
diagnostic imaging, respiratory care, neurodiagnostics, sleep analysis,
wireless monitoring, and blood management. This segment includes wholly owned
portions of Thermo Electron's Thermedics Inc. ("Thermedics") subsidiary, its
Thermo Cardiosystems Inc. ("Thermo Cardiosystems"), Trex Medical Corporation
("Trex Medical"), and ThermoLase Corporation ("ThermoLase") subsidiaries, and
its wholly owned Thermo Biomedical group of subsidiaries.
Advanced Technology
Thermo Electron conducts research and development, often sponsored by the
U.S. government, in pursuit of viable commercial opportunities for new
ventures. Its basic and applied research currently spans
S-4
<PAGE>
communications, avionics, X-ray detection, advanced materials, and lasers.
Thermo Electron also provides systems integration primarily in the fields of
information technology, advanced radar and imaging, and health systems. A
number of subsidiaries also provide various instrument systems, developed
primarily for product quality-assurance applications in industrial, food and
beverage, pharmaceutical, and electronics markets. This segment includes wholly
and majority-owned portions of Thermo Electron's ThermoTrex Corporation
("ThermoTrex") and Thermedics subsidiaries, and its Thermo Sentron Inc.
("Thermo Sentron"), Thermo Voltek Corp. ("Thermo Voltek"), Thermedics Detection
Inc. ("Thermedics Detection"), and Thermo Coleman Corporation ("Thermo
Coleman") subsidiaries.
Alternative Energy
Thermo Electron operates independent (non-utility) power plants that use
clean power processes, develops and markets clean fuels, and produces
biopesticides. Thermo Electron also manufactures intelligent traffic-control
systems, ozone-safe industrial refrigeration equipment, and low-emission
natural gas engines. This segment includes Thermo Electron's Thermo Ecotek
Corporation ("Thermo Ecotek") and Thermo Power Corporation ("Thermo Power")
subsidiaries.
Industrial Outsourcing
Thermo Electron provides outsourcing services, primarily in environmental-
liability management and infrastructure planning and design, with
specialization in municipal and industrial water-quality management, natural
resource management, and laboratory testing and analysis. This segment includes
all of Thermo Electron's Thermo TerraTech Inc. ("Thermo TerraTech")
subsidiaries.
Paper Recycling
Thermo Electron is a leading provider of systems and accessories for the
worldwide papermaking and paper recycling industry, and is developing
technology to recover valuable products generated as byproducts of the
papermaking process for use in various commercial products. This segment
includes Thermo Electron's Thermo Fibertek Inc. ("Thermo Fibertek") and Thermo
Fibergen Inc. ("Thermo Fibergen") subsidiaries.
REVENUES BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR (1)
----------------------------------- -----------------------------------------------------
JULY 4, JUNE 28,
1998 1997 1997 1996 1995
----------------- ----------------- ----------------- ----------------- -----------------
% OF % OF % OF % OF % OF
REVENUES TOTAL REVENUES TOTAL REVENUES TOTAL REVENUES TOTAL REVENUES TOTAL
---------- ----- ---------- ----- ---------- ----- ---------- ----- ---------- -----
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Instruments............. $ 803,335 42% $ 734,355 45% $1,592,314 45% $1,209,362 41% $ 782,662 35%
Biomedical Products..... 331,556 18 281,517 17 590,234 16 455,890 16 316,622 14
Advanced Technology..... 209,222 11 196,442 12 415,016 12 375,459 13 323,567 14
Alternative Energy...... 250,109 13 167,766 10 384,923 11 339,813 11 325,912 14
Industrial Outsourcing.. 169,089 9 141,710 9 305,508 8 273,894 9 210,503 9
Paper Recycling......... 131,649 7 121,338 7 278,911 8 286,312 10 317,951 14
Intersegment Sales
Elimination(2)......... (2,898) -- (4,607) -- (8,586) -- (8,172) -- (6,926) --
---------- --- ---------- --- ---------- --- ---------- --- ---------- ---
$1,892,062 100% $1,638,521 100% $3,558,320 100% $2,932,558 100% $2,270,291 100%
========== === ========== === ========== === ========== === ========== ===
</TABLE>
- --------
(1) Thermo Electron's 1997, 1996 and 1995 fiscal years set forth in this table
ended on January 3, 1998, December 28, 1996 and December 30, 1995,
respectively.
(2) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
S-5
<PAGE>
Thermo Electron is a Delaware corporation and was incorporated in 1960.
Thermo Electron completed its initial public offering in 1967 and was listed on
the New York Stock Exchange in 1980. Thermo Electron's principal executive
offices are located at 81 Wyman Street, Waltham, Massachusetts, and its
telephone number is (781) 622-1000.
For additional information about the Company's business, see "Business."
S-6
<PAGE>
USE OF PROCEEDS
The Company estimates that its net proceeds from the sale of the Notes, after
deducting the underwriting discount and offering expenses payable by the
Company, will be approximately $148,800,000.
The Company intends to transfer the net proceeds of the offering to its
majority-owned subsidiary, Thermo Power, in exchange for a note in the amount
of the net proceeds. The note from Thermo Power will have interest and maturity
terms that are equivalent to the comparable terms of the Notes. Thermo Power
intends to use such proceeds to partially repay its outstanding indebtedness to
the Company under a promissory note issued in connection with Thermo Power's
acquisition, in November 1997, of Peek plc (the "Peek Acquisition"). To finance
the Peek Acquisition, Thermo Power borrowed $160,000,000 from Thermo Electron
pursuant to a promissory note due November 1999. That note bears interest at
the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Thermo Electron as of
July 4, 1998 and as adjusted to give effect to the issuance of the Notes.
During the third quarter of 1998, Thermo Electron and its majority-owned
subsidiaries expended approximately $339 million to purchase common stock and
debentures of Thermo Electron and certain of its majority- owned subsidiaries.
<TABLE>
<CAPTION>
AS OF JULY 4, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Short-term Obligations:
Notes payable........................................ $ 78,271 $ 78,271
Current maturities of long-term obligations.......... 40,849 40,849
Common stock of subsidiary subject to redemption
($18,450 redemption value).......................... 18,293 18,293
---------- ----------
$ 137,413 $ 137,413
========== ==========
Long-term Obligations(1):
Senior convertible obligations(2).................... $ 187,292 $ 187,292
% Notes............................................ -- 150,000
Convertible subordinated obligations(3).............. 1,689,183 1,689,183
Nonrecourse tax-exempt obligations................... 33,700 33,700
Other................................................ 39,807 39,807
---------- ----------
1,949,982 2,099,982
---------- ----------
Minority Interest...................................... 840,411 840,411
---------- ----------
Long-term Common Stock of Subsidiaries Subject to
Redemption ($95,262 redemption value)................. 93,806 93,806
---------- ----------
Shareholders' Investment:
Preferred stock, $100 par value, 50,000 shares
authorized; none issued
Common stock, $1 par value, 350,000,000 shares
authorized; 166,968,457 shares issued(4)............ 166,968 166,968
Capital in excess of par value....................... 1,078,997 1,078,997
Retained earnings.................................... 1,161,918 1,161,918
Treasury stock at cost, 104,406 shares............... (4,002) (4,002)
Accumulated other comprehensive items................ (43,948) (43,948)
---------- ----------
2,359,933 2,359,933
---------- ----------
Total Capitalization (Long-term Obligations, Minority
Interest, Long-term Common Stock of Subsidiaries
Subject to Redemption and Shareholders' Investment)... $5,244,132 $5,394,132
========== ==========
</TABLE>
- -------
(1) See Note 5 of Notes to Consolidated Financial Statements of Thermo
Electron.
(2) Senior convertible obligations include $172,500,000 principal amount of 4
1/2% Senior Convertible Debentures due 2003 and $14,792,000 principal
amount of 3 3/4% Senior Convertible Debentures due 2000 issued by Thermo
Instrument Systems Inc. that are guaranteed on a senior basis by Thermo
Electron.
(3) Convertible subordinated obligations include $585,000,000 principal amount
of 4 1/4% Convertible Subordinated Debentures due 2003. Convertible
subordinated obligations also include $250,000,000 principal amount of 4%
Convertible Subordinated Debentures due 2005 issued by Thermo Instrument
Systems Inc.; $34,950,000 principal amount of 4 7/8% Convertible
Subordinated Debentures due 2000 issued by Thermo Remediation Inc.;
$2,450,000 principal amount of Non-interest bearing Convertible
Subordinated Debentures due 2001 and $44,950,000 principal amount of 4 7/8%
Convertible Subordinated Debentures due 2004 issued by Thermo Ecotek
Corporation; $31,565,000 principal amount of Non-interest bearing
Convertible Subordinated Debentures due 2003 and $15,851,000 principal
amount of 2 7/8% Convertible Subordinated Debentures due 2003 issued by
Thermedics Inc.; $111,850,000 principal amount of 4 5/8% Convertible
Subordinated Debentures due 2003 issued by Thermo TerraTech Inc.;
$5,250,000 principal amount of 3 3/4% Convertible Subordinated Debentures
due 2000 issued by Thermo Voltek Corp.; $76,641,000 principal amount of 5%
Convertible Subordinated Debentures due 2000 issued by ThermoQuest
Corporation; $78,176,000 principal amount of 5% Convertible Subordinated
Debentures due 2000 issued by Thermo Optek Corporation; $70,000,000
principal amount of 4 3/4% Convertible Subordinated Debentures due 2004
issued by Thermo Cardiosystems Inc.; $153,000,000 principal amount of 4
1/2% Convertible Subordinated Debentures due 2004 issued by Thermo Fibertek
Inc.; $115,000,000 principal amount of 4 3/8% Convertible Subordinated
Debentures due 2004 issued by ThermoLase Corporation; and $114,500,000
principal amount of 3 1/4% Convertible Subordinated Debentures due 2007
issued by ThermoTrex Corporation, all of which are guaranteed on a
subordinated basis by Thermo Electron.
(4) Does not include shares reserved for issuance under Thermo Electron's
stock-based compensation plans, shares reserved for issuance upon
conversion or exchange of outstanding convertible securities and shares
reserved for issuance under Thermo Electron's Shareholder Rights Plan. See
Note 7 of Notes to Consolidated Financial Statements of Thermo Electron.
S-8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial information presented below as of and for the fiscal
years ended January 3, 1998 and December 28, 1996 and for the fiscal year ended
December 30, 1995, has been derived from Thermo Electron's Consolidated
Financial Statements, which have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report incorporated by
reference herein. The selected financial information as of December 30, 1995
and as of and for the fiscal years ended December 31, 1994 and January 1, 1994
has been derived from Thermo Electron's Consolidated Financial Statements,
which have been audited by Arthur Andersen LLP, but have not been included or
incorporated by reference herein. This information should be read in
conjunction with Thermo Electron's Consolidated Financial Statements and
related notes incorporated by reference herein. The selected financial
information for the six months ended July 4, 1998 and June 28, 1997, has not
been audited but, in the opinion of Thermo Electron, includes all adjustments
(consisting only of normal, recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles
applied on a consistent basis. The results of operations for the six months
ended July 4, 1998 are not necessarily indicative of results for the entire
year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR
---------------------- -----------------------------------------------------------
JULY 4, JUNE 28,
1998 1997 1997 1996(1) 1995 1994(2) 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS AND SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues................ $1,892,062 $1,638,521 $3,558,320 $2,932,558 $2,270,291 $1,729,191 $1,354,508
---------- ---------- ---------- ---------- ---------- ---------- ----------
Costs and Operating
Expenses:
Cost of product and
service revenues...... 1,054,045 912,661 1,973,265 1,657,746 1,239,762 928,645 755,493
Expenses for research
and development and
new lines of
business(3)........... 186,183 160,021 337,305 301,457 272,809 233,099 183,965
Selling, general and
administrative
expenses.............. 449,841 398,497 840,692 689,248 510,564 384,715 289,282
Restructuring and other
nonrecurring costs,
net................... 4,112 4,951 1,272 37,641 21,938 650 6,616
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,694,181 1,476,130 3,152,534 2,686,092 2,045,073 1,547,109 1,235,356
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Income........ 197,881 162,391 405,786 246,466 225,218 182,082 119,152
Gain on Issuance of
Stock by Subsidiaries.. 54,206 48,880 80,055 126,599 80,815 25,283 39,863
Other Income (Expense),
Net.................... 4,958 (726) 2,626 1,486 (7,225) (989) (27,548)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before Income
Taxes, Minority
Interest and
Extraordinary Item..... 257,045 210,545 488,467 374,551 298,808 206,376 131,467
Provision for Income
Taxes.................. 91,887 70,423 174,713 110,845 98,711 70,703 33,513
Minority Interest
Expense................ 40,766 31,906 74,426 72,890 60,515 30,962 21,086
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income Before
Extraordinary Item..... 124,392 108,216 239,328 190,816 139,582 104,711 76,868
Extraordinary Item, Net
of Provision for Income
Taxes and Minority
Interest of $4,844 2,886 -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income.............. $ 127,278 $ 108,216 $ 239,328 $ 190,816 $ 139,582 $ 104,711 $ 76,868
========== ========== ========== ========== ========== ========== ==========
Earnings per Share:
Basic.................. $ .78 $ .72 $ 1.57 $ 1.35 $ 1.10 $ .90 $ .74
========== ========== ========== ========== ========== ========== ==========
Diluted................ $ .71 $ .65 $ 1.41 $ 1.17 $ .95 $ .78 $ .65
========== ========== ========== ========== ========== ========== ==========
Weighted Average Shares:
Basic.................. 162,650 150,122 152,489 141,525 126,626 116,500 104,203
========== ========== ========== ========== ========== ========== ==========
Diluted................ 179,955 175,869 176,082 175,605 158,562 151,048 130,549
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and Cash
Equivalents............ $ 610,950 $ 288,738 $ 593,580 $ 414,404 $ 462,861 $ 383,005 $ 325,989
Short-term Investments.. 1,310,377 1,004,232 929,118 1,431,881 593,802 614,915 374,450
Working Capital......... 2,515,617 1,795,935 2,001,963 2,218,617 1,317,146 1,150,732 833,839
Total Assets............ 6,436,209 5,304,637 5,795,869 5,141,244 3,786,339 3,061,935 2,507,597
Long-term Obligations... 1,949,982 1,601,299 1,742,907 1,550,342 1,118,077 1,049,850 647,592
Minority Interest....... 840,411 670,709 719,622 684,050 471,648 327,734 277,681
Long-term Common Stock
of Subsidiaries Subject
to Redemption.......... 93,806 115,114 93,312 76,525 17,513 -- 14,511
Shareholders'
Investment............. 2,359,933 1,741,890 1,997,909 1,754,369 1,309,729 1,007,486 873,720
OTHER DATA:
EBITDA(4)............... $ 280,593 $ 230,946 $ 542,796 $ 399,274 $ 333,025 $ 247,760 $ 169,960
Net Cash Provided By
Operating Activities... $ 132,210 $ 57,140 $ 269,018 $ 224,505 $ 199,096 $ 192,525 $ 101,325
Capital Expenditures.... $ 74,226 $ 48,797 $ 111,605 $ 124,541 $ 64,016 $ 65,525 $ 62,704
Ratio of EBITDA to
Interest Expense....... 5.4 5.4 5.8 4.1 4.3 4.1 5.4
Ratio of Earnings to
Fixed Charges.......... 4.9 4.9 5.2 4.2 4.2 3.6 3.2
Total Debt/Total
Capitalization and
Short-term
Obligations(5)......... 38.4% 41.2% 40.4% 40.4% 40.6% 46.1% 42.4%
Net Debt/Total
Capitalization and
Short-term
Obligations(6)......... 2.7% 11.1% 8.4% (3.4)% 5.7% 5.9% 26.4%
</TABLE>
S-9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
- --------
(1) Reflects the issuance of $585 million principal amount of Thermo Electron's
convertible debentures.
(2) Reflects the issuance of $345 million principal amount of Thermo
Electron's convertible debentures.
(3) Includes cost of research and development contracts of $79,361 and $70,957
in the six months ended July 4, 1998 and June 28, 1997, respectively, and
$143,743, $144,823, $167,120, $149,645 and $116,733 in the fiscal years
ended 1997, 1996, 1995, 1994 and 1993, respectively.
(4) EBITDA represents operating income excluding restructuring and other
nonrecurring costs and depreciation and amortization expense. EBITDA should
not be considered an alternative to operating or net income (as determined
in accordance with generally accepted accounting principles ("GAAP") as an
indicator of the Company's performance or to cash flow from operations (as
determined in accordance with GAAP)) as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended July 4, 1998 and Form 10-K for the fiscal year ended January
3, 1998.
(5) Total debt represents notes payable, current maturities of long-term
obligations and long-term obligations. Total capitalization and short-term
obligations represents long-term obligations, minority interest, common
stock of subsidiaries subject to redemption, shareholders' investment and
notes payable and current maturities of long-term obligations.
(6) Net debt represents total debt net of cash, cash equivalents and short-term
investments.
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BUSINESS
Thermo Electron Corporation is a diversified technology company that provides
instruments, systems, and services primarily to industrial, healthcare, and
environmental markets. Thermo Electron seeks to identify major emerging needs
in society that can be addressed by its technologies. In its 42-year history,
Thermo Electron has become a leader in certain markets where continued
technological innovation is integral to success. For example, Thermo Electron
is a worldwide leader in the design, manufacture, and sale of
. analytical instruments,
. paper recycling equipment,
. heart-assist devices, and
. mammography systems.
Thermo Electron also provides a range of other specialized products,
including
. medical diagnostic equipment,
. alternative-energy systems,
. industrial process controls, and
. environmental-contamination monitors.
In addition, Thermo Electron offers a range of services, particularly
industrial outsourcing of environmental-liability management and laboratory
analysis, and conducts advanced-technology research and development.
Thermo Electron's innovations derive, in part, from a unique corporate
structure that it developed to retain its entrepreneurial spirit while
continuing its growth. In 1983, Thermo Electron adopted a strategy of "spinning
out" certain of its businesses by selling a minority interest in those
subsidiaries to outside investors. Thermo Electron believes that this strategy
provides additional motivation and incentives for the management of the spinout
companies through the establishment of subsidiary stock-option incentive
programs, as well as capital to sustain the subsidiaries' growth. Thermo
Electron's corporate office provides the wholly and majority-owned subsidiaries
with cost-effective, centralized business development, administrative,
financial, and other resources. Thermo Electron has 29 subsidiaries that have
sold minority equity interests, 23 of which are publicly traded and six of
which are privately held.
On August 12, 1998, the Company announced a proposed reorganization involving
the Company and certain of its subsidiaries. The goals of the proposed
reorganization include (1) consolidating and strategically realigning certain
businesses to enhance their competitive market position and improve management
coordination and (2) increasing liquidity in the public markets by providing
larger market floats for Thermo Electron's publicly traded subsidiaries. If
completed as proposed, the reorganization would reduce the number of the
Company's majority-owned public subsidiaries from 23 to 15. It may take up to
two years to complete all aspects of the plan. Each component of the
reorganization is subject to numerous conditions, including the following (not
all of which are applicable to each component): establishment of prices and/or
exchange ratios; confirmation of anticipated tax consequences; approval by the
board of directors (including the independent directors) of each of the
affected majority-owned subsidiaries; negotiation and execution of definitive
purchase and sale or merger agreements; clearance, where necessary, by the
Securities and Exchange Commission of any necessary documents regarding the
proposed transactions; and, where appropriate, fairness opinions from one or
more investment banking firms on certain financial aspects of the transactions.
The proposed reorganization can be summarized as follows. One or more of
these transactions may not occur if the applicable conditions described above
are not satisfied.
Reorganization of Biomedical Businesses
Thermo Electron may transfer its wholly owned Thermo Biomedical group of
subsidiaries to the Company's Thermedics subsidiary. Thermo Electron would
transfer the Thermo Biomedical subsidiaries to Thermedics in exchange for
newly-issued shares of Thermedics common stock.
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Realignment of Instrument Companies
Thermedics may transfer to Thermo Electron its equity interests in each of
Thermo Sentron, Thermedics Detection and Thermo Voltek, each presently
majority-owned, publicly traded subsidiaries of Thermedics, in exchange for a
portion of the shares of Thermedics held by Thermo Electron. Thermo Electron
would then transfer its equity interests in Thermo Sentron and Thermedics
Detection to Thermo Instrument in exchange for cash.
In addition, Metrika Systems Corporation ("Metrika Systems") and ONIX Systems
Inc. ("ONIX Systems"), each majority-owned, publicly traded subsidiaries of
Thermo Instrument, and Thermo Sentron may merge to form one majority-owned,
publicly traded subsidiary of Thermo Instrument. Shareholders of each of Thermo
Sentron, ONIX Systems and Metrika Systems would receive shares of common stock
of the combined entity in exchange for their shares of common stock of Thermo
Sentron, ONIX Systems and Metrika Systems, respectively.
ThermoSpectra Corporation ("ThermoSpectra"), a majority-owned, publicly
traded subsidiary of Thermo Instrument, and Thermedics Detection may go private
and become wholly owned subsidiaries of Thermo Instrument. The public
shareholders of ThermoSpectra and Thermedics Detection would receive cash or
newly-issued shares of common stock of Thermo Instrument in exchange for their
shares of common stock of ThermoSpectra and Thermedics Detection, respectively.
Consolidation of Industrial Outsourcing Companies
The Randers Group Incorporated ("Randers") and ThermoRetec Corporation
("ThermoRetec"), both majority-owned, publicly traded subsidiaries of Thermo
TerraTech, a majority-owned, publicly traded subsidiary of Thermo Electron, and
Thermo EuroTech N.V. ("Thermo EuroTech"), a majority-owned, private subsidiary
of Thermo TerraTech, may merge into Thermo TerraTech. Shareholders of each of
ThermoRetec, Randers and Thermo EuroTech would receive shares of common stock
of Thermo TerraTech in exchange for their shares of common stock of
ThermoRetec, Randers and Thermo EuroTech, respectively.
Other Reorganizations
Thermo Coleman, a majority-owned, private subsidiary of Thermo Electron, may
merge into ThermoTrex, a majority-owned, publicly traded subsidiary of Thermo
Electron. Shareholders of Thermo Coleman, including Thermo Electron, would
receive newly-issued shares of common stock of ThermoTrex in exchange for their
shares of common stock of Thermo Coleman.
Thermo Power, a majority-owned, publicly traded subsidiary of Thermo
Electron, may go private and become a wholly-owned subsidiary of Thermo
Electron. Public shareholders of Thermo Power would receive cash or newly-
issued shares of common stock of Thermo Electron in exchange for their shares
of common stock of Thermo Power.
----------------
Thermo Electron's products and services are divided into six segments:
. Instruments,
. Biomedical Products,
. Advanced Technology,
. Alternative Energy,
. Industrial Outsourcing, and
. Paper Recycling.
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Products or services within a particular segment may be provided by more than
one subsidiary, and certain subsidiaries' products or services are included in
more than one segment. The following is a description of the principal products
and services offered by Thermo Electron in these six industry segments:
Instruments
Thermo Electron, through its Thermo Instrument subsidiary, is a worldwide
leader in the development, manufacture, and marketing of instruments used to
identify complex chemical compounds, toxic metals, and other elements in a
broad range of liquids, solids, and gases, as well as to analyze air pollution
and radioactivity. Thermo Instrument also provides instruments that control,
monitor, image, inspect, and measure various industrial processes and life
sciences phenomena.
Thermo Instrument historically has expanded both through the acquisition of
companies and product lines and through the internal development of new
products and technologies. During the past several years, Thermo Instrument has
completed a number of complementary acquisitions that have provided additional
technologies, specialized manufacturing or product-development expertise, and
broader capabilities in marketing and distribution.
For example, in March 1997, Thermo Instrument acquired 95% of Life Sciences
International PLC ("Life Sciences"), a London Stock Exchange-listed company.
Subsequently, Thermo Instrument acquired the remaining shares of Life Sciences'
capital stock. Life Sciences manufactures laboratory science equipment,
appliances, instruments, consumables, and reagents for the research, clinical,
and industrial markets.
In March 1996, Thermo Instrument completed the acquisition of a substantial
portion of the businesses constituting the Scientific Instruments Division of
Fisons plc (the "Fisons businesses"), a wholly owned subsidiary of Rhone-
Poulenc Rorer Inc. These businesses substantially added to Thermo Instrument's
research, development, manufacture, and sale of analytical instruments to
industrial and research laboratories worldwide. Thermo Instrument has since
sold certain of the Fisons businesses to certain of its public subsidiaries
that have complementary technologies and markets.
Thermo Instrument adopted Thermo Electron's spinout strategy to more clearly
focus its many instrumentation technologies on specific niche markets. To date,
Thermo Instrument has completed initial public offerings of ThermoSpectra,
ThermoQuest Corporation ("ThermoQuest"), Thermo Optek Corporation ("Thermo
Optek"), Thermo BioAnalysis Corporation ("Thermo BioAnalysis"), Metrika
Systems, Thermo Vision Corporation ("Thermo Vision"), and ONIX Systems. Thermo
Instrument's subsidiaries are outlined below:
ThermoSpectra develops, manufactures, and markets precision imaging and
inspection, temperature-control, and test and measurement instruments. These
instruments are generally combined with proprietary operations and analysis
software to provide industrial and research customers with integrated systems
that address their specific needs. As part of the proposed reorganization at
Thermo Electron, ThermoSpectra may go private and become a wholly-owned
subsidiary of Thermo Instrument. Shareholders of ThermoSpectra would receive
cash or shares of common stock of Thermo Instrument in exchange for their
shares of common stock of ThermoSpectra.
ThermoQuest is a leading provider of mass spectrometers, liquid
chromatographs, and gas chromatographs for the pharmaceutical, environmental,
and industrial marketplaces. These analytical instruments are used in the
quantitative and qualitative chemical analysis of organic and inorganic
compounds at ultratrace levels of detection. ThermoQuest also supplies
scientific equipment for the preparation and preservation of chemical samples,
and consumables for the chromatography industry.
Thermo Optek is a worldwide leader in the development, manufacture, and
marketing of analytical instruments that use a range of light- and energy-based
techniques. Thermo Optek's instruments are used in the quantitative and
qualitative chemical analysis of elements and molecular compounds in a variety
of solids, liquids, and gases.
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Thermo BioAnalysis develops, manufactures, and markets instruments,
consumables, and information-management systems used in biochemical research
and production, as well as in clinical diagnostics. Thermo BioAnalysis focuses
on three principal product areas: biomolecular instruments and consumables,
clinical laboratory equipment and supplies, and information management systems.
Metrika Systems manufactures process optimization systems that provide on-
line, real-time analysis of the elemental composition of bulk raw materials in
basic-materials production processes, including coal, cement, and minerals. In
addition, Metrika Systems manufactures industrial gauging and process-control
instruments and systems used principally by manufacturers of finished web
materials, such as sheet metal, rubber, and plastic foils, to measure and
control requirements such as thickness and coating weight of such materials. As
part of the proposed reorganization at Thermo Electron, Metrika Systems may
merge with ONIX Systems and Thermo Sentron to form a majority-owned, publicly
traded subsidiary of Thermo Instrument. Shareholders of each of Metrika
Systems, ONIX Systems and Thermo Sentron would receive shares of common stock
of the combined entity in exchange for their shares of common stock of Metrika
Systems, ONIX Systems and Thermo Sentron, respectively.
Thermo Vision designs, manufactures, and markets a diverse array of photonics
(light-based) products, including optical components, imaging sensors and
systems, lasers, optically based instruments, opto-electronics, and fiber
optics. These products are used in applications including medical diagnostics,
semiconductor production, X-ray imaging, physics research, and
telecommunications.
ONIX Systems designs, develops, markets, and services sophisticated field
measurement instruments and on-line sensors primarily for participants in
process-control industries. ONIX Systems' products gather information regarding
the flow, level, density, or composition of a particular material and, using
advanced communication techniques, communicate this information to a customer's
centralized control location. As part of the proposed reorganization at Thermo
Electron, ONIX Systems may merge with Metrika Systems and Thermo Sentron to
form a majority-owned, publicly traded subsidiary of Thermo Instrument.
Shareholders of each of ONIX Systems, Metrika Systems and Thermo Sentron would
receive shares of common stock of the combined entity in exchange for their
shares of common stock of ONIX Systems, Metrika Systems and Thermo Sentron,
respectively.
Thermo Instrument also has a wholly owned business, Thermo Monitoring
Instruments, which produces instruments and complete systems for detecting and
monitoring environmental pollutants from industrial and mobile sources, and for
detecting radioactive contamination.
Biomedical Products
Thermo Electron's Biomedical Products segment includes a number of diverse
medical products businesses, both wholly and publicly owned, that supply a wide
range of medical systems and devices for diagnostic imaging, cardiovascular
support, respiratory care, neurodiagnostics, sleep analysis, wireless patient
monitoring, and blood management. Thermo Electron's biomedical products are
sold to hospitals, clinics, universities, private-practice medical offices, and
medical research facilities. As part of the proposed reorganization at Thermo
Electron, Thermo Electron may transfer its wholly owned Thermo Biomedical group
of subsidiaries to Thermedics in exchange for newly-issued shares of Thermedics
common stock.
Thermo Electron's wholly owned Thermo Biomedical group includes Bear Medical
Systems ("Bear Medical"), which Thermo Electron acquired from Allied Healthcare
Products, Inc. in October 1997. Bear Medical designs, manufactures, and markets
respiratory products, primarily ventilators.
Also part of the Thermo Biomedical group are SensorMedics Corporation
("SensorMedics"), a leading provider of systems for pulmonary function
diagnosis and a producer of respiratory gas analyzers, physiological testing
equipment, and automated sleep-analysis systems; and Medical Data Electronics,
a manufacturer of patient-monitoring systems. Thermo Electron acquired both
companies in 1996.
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Nicolet Biomedical Inc. ("Nicolet Biomedical"), another part of the Thermo
Biomedical group, is a leading manufacturer of biomedical instruments for
assessing muscle, nerve, sleep, hearing, and brain blood-flow disorders,
various neurologic disorders, and for related work in clinical neurophysiology.
In September 1997, Nicolet Biomedical acquired IMEX Medical Systems, Inc., a
leading manufacturer of products used to evaluate peripheral vascular disease,
as well as products to detect fetal heartbeat. This subsidiary is now called
Nicolet Vascular Inc. ("Nicolet Vascular").
Another wholly owned subsidiary and part of the Thermo Biomedical group, Bird
Medical Technologies, Inc. ("Bird Medical Technologies"), develops,
manufactures, and sells respiratory-care equipment and accessories to
hospitals, subacute-care facilities, outpatient surgical centers, doctors,
dentists, the military, and to other manufacturers.
Thermo Cardiosystems, a public subsidiary of Thermedics, has developed an
implantable left ventricular-assist system ("LVAS") called HeartMate(TM) that,
when implanted alongside the natural heart, is designed to take over the
pumping function of the left ventricle for patients whose hearts are too
damaged or diseased to produce adequate blood flow. Thermo Cardiosystems has
two versions of the LVAS: a pneumatic (or air-driven) system that can be
controlled by either a bedside console or portable unit, and an electric system
that features an internal electric motor powered by an external battery-pack
worn by the patient.
The air-driven HeartMate system has received both the European Conformity
Mark and U.S. Food and Drug Administration ("FDA") approval for commercial
sale. The electric version of the LVAS, which also holds the European
Conformity Mark ("CE Mark"), received, on September 29, 1998, premarket
approval by the FDA for use as a bridge to transplant. In Europe, the device is
used both as a bridge to transplant and as an alternative to medical therapy.
In December 1996, Thermo Cardiosystems acquired the business of Nimbus
Medical, Inc., a research and development organization involved for more than
20 years in technology for ventricular-assist devices and total artificial
hearts, including high-speed rotary blood pumps, which are relatively small and
could potentially provide cardiac support in small adults and children.
Through its wholly owned Corpak Inc. subsidiary, Thermedics designs,
manufactures, and markets enteral feeding systems that introduce special
nutritional solutions into the stomach or the small intestine through tubes
entering the nose or stomach. Corpak's products include bags for nutritional
fluids, delivery pumps, associated pump sets that connect to the pumps, and
feeding tubes. In addition, Corpak markets a range of enteral feeding
supplements.
Also part of Thermo Cardiosystems is International Technidyne Corporation, a
leading manufacturer of hemostasis-management products, including blood
coagulation-monitoring instruments, and a supplier of skin-incision devices
used to draw small blood samples precisely and with minimal discomfort.
Trex Medical, a public subsidiary of ThermoTrex, designs, manufactures, and
markets a range of medical imaging systems. It is the world's leading
manufacturer of mammography equipment and minimally invasive digital breast-
biopsy systems. Trex Medical also provides general-purpose and specialty
radiographic systems, such as those used in the diagnosis and treatment of
coronary artery disease and other vascular conditions. In April 1998, Trex
Medical acquired Paris-based Trophy Radiologie, the world's largest
manufacturer of dental x-ray systems.
In early December 1997, Trex Medical submitted a 510(k) application to the
FDA seeking clearance to market its digital imaging system for mammography.
Thermo Electron believes that an advantage of digital imaging is that
radiologists can manipulate and enhance image quality to scrutinize subtle
differences that may otherwise go undetected on film-based X-rays. If the FDA
clears the digital imaging system for mammography applications, Trex Medical
plans to develop its digital technology for use in certain of its other
products.
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ThermoLase, also a public subsidiary of ThermoTrex, operates a network of
spas that offer its patented SoftLight hair-removal system, for which it
received FDA clearance in April 1995. The SoftLight(R) system uses a low-energy
dermatology laser in combination with a lotion to remove hair. In May 1998,
ThermoLase received 510(k) clearance for its laser-based skin-resurfacing
system, based on data from clinical trials.
ThermoLase currently has 14 Spa Thira locations in the U.S., and franchisees
operate spas in Lugano, Switzerland and Dubai, U.A.E., at which SoftLight hair-
removal, skin resurfacing and other spa services are offered. ThermoLase has
established a number of joint ventures and other licensing arrangements to
market its SoftLight processes internationally. ThermoLase has agreed to
terminate a joint venture in Paris, France, which operated a Spa Thira in
Paris, and to close the Paris Spa Thira. ThermoLase also licenses physicians to
use the SoftLight hair-removal system and skin resurfacing processes in their
practices. In June 1998, ThermoLase acquired The Greenhouse Spa, Inc., a luxury
destination resort spa in Arlington, Texas. On September 29, 1998, ThermoLase
announced that it plans to close its spas in Miami and Palm Beach, Florida, and
in La Jolla, California. In addition, it plans to close its spa in Paris,
France. The remaining 11 domestic spas will be converted into full-service,
luxury day spas, under the Greenhouse name.
ThermoLase manufactures and markets personal care products sold through
department stores, salons, and spas, and also manufactures the lotion that is
used in the SoftLight hair-removal process.
Advanced Technology
Thermo Electron's Advanced Technology segment includes basic and applied
research and development, often sponsored by the U.S. government, conducted to
identify viable commercial opportunities for new ventures. A number of its
subsidiaries also provide various instrument systems, developed primarily for
product quality-assurance applications in industrial, food and beverage,
pharmaceutical, and electronics markets.
Thermo Electron's ThermoTrex subsidiary conducts sponsored research and
development in order to commercialize new products based on advanced
technologies developed in its laboratories. Sponsored research and development,
conducted principally for the U.S. government, includes basic and applied
research in communications, avionics, X-ray detection, signal processing,
advanced-materials technology, and lasers.
ThermoTrex is currently developing a number of additional technologies that
it believes may have future commercial potential. These include a passive
microwave camera intended to "see" through clouds and fog to enhance safety in
aerial navigation, a space surveillance system designed to produce high-
resolution images of low-earth-orbit satellites, a rapid optical beam steering
laser radar system, and direct digital imaging systems for medical equipment to
improve image quality to aid earlier and more accurate clinical diagnoses.
As part of the proposed reorganization at Thermo Electron, Thermo Coleman, a
majority-owned, private subsidiary of Thermo Electron, may merge into
ThermoTrex. Shareholders of Thermo Coleman would receive shares of common stock
of ThermoTrex in exchange for their shares of common stock of Thermo Coleman.
A complaint naming Thermo Electron as a defendant, among others, regarding this
proposal has been filed in Delaware Chancery Court by a ThermoTrex shareholder
attempting to act on behalf of the other public shareholders of ThermoTrex. The
complaint alleges, among other things, breach of fiduciary duties by proceeding
with the proposed merger without regard to the best interests of ThermoTrex's
minority shareholders and challenges the independence of the special committee
of ThermoTrex's independent directors appointed to evaluate the proposed
merger.
Thermo Coleman provides systems engineering, technology support and
information-technology services and products. Thermo Coleman also provides
defense and environmental-systems engineering, integration and analysis
services, and advanced technology research and development, primarily to the
U.S. government. Using expertise gained from its government contract work,
Thermo Coleman designs, develops, and commercializes services and products in
areas such as information technology and sensor and measurement systems for
customers in industries including healthcare, education, aircraft production,
government, utilities, and entertainment.
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Trex Communications Corporation, a majority-owned, privately held subsidiary
of ThermoTrex, is developing laser communications technology designed to
transmit very large amounts of data quickly, and also designs and markets
interactive information and voice-response systems, as well as automated
calling equipment.
Thermo Sentron, a public subsidiary of Thermedics, designs and manufactures
high-speed precision-weighing and inspection equipment for packaging lines and
industrial production. Thermo Sentron serves two principal markets, packaged
goods and bulk materials, both of which use its products to meet quality and
productivity objectives. Customers for Thermo Sentron's checkweighers are in
the food-processing, pharmaceutical, mail-order, and other packaged-goods
businesses. Thermo Sentron also sells metal detectors with a patented self-test
feature that are used to inspect packaged products for metal contamination to
food-processing and pharmaceutical companies. Its bulk-materials product line
includes conveyor-belt scales, solid level-measurement and conveyor-monitoring
systems, and sampling systems, all sold to customers in the mining and
material-processing industries, as well as to electric utilities, chemical, and
other manufacturing companies. As part of the proposed reorganization at Thermo
Electron, Thermo Sentron may merge with ONIX Systems and Metrika Systems to
form a majority-owned, publicly traded subsidiary of Thermo Instrument.
Shareholders of each of Thermo Sentron, ONIX Systems and Metrika Systems would
receive shares of common stock of the combined entity in exchange for their
shares of common stock of Thermo Sentron, ONIX Systems and Metrika Systems,
respectively. In addition, prior to the proposed merger, Thermedics may
transfer its equity interest in Thermo Sentron to Thermo Electron for shares of
the common stock of Thermedics held by Thermo Electron. Thermo Electron, in
turn, would transfer such equity interest in Thermo Sentron to Thermo
Instrument in exchange for cash.
Thermedics Detection, another public subsidiary of Thermedics, develops,
manufactures and markets high-speed detection and measurement systems, used in
on-line industrial process applications, laboratory analysis, and security.
Thermedics Detection's industrial process instruments use ultratrace chemical
detectors, X-ray imaging, near-infrared spectroscopy, and other technologies
for quality assurance of in-process or finished products, primarily in the
food, beverage, pharmaceutical, forest products, chemical, and other consumer
products industries. In addition, Thermedics Detection's moisture analyzers
measure moisture and other product constituents, such as fats, proteins, oils,
flavorings, solvents, adhesives, and coatings, in a broad range of products as
they move along manufacturing lines. Thermedics Detection's laboratory products
use high-speed gas chromatography, electrochemistry, and other technologies for
quality assurance and regulatory compliance, primarily in the environmental,
food, beverage, chemical, pharmaceutical, and biomedical research industries.
Thermedics Detection's recently acquired Orion Research Inc. subsidiary is a
worldwide leading manufacturer of electrode-based, chemical-measurement
products that determine the quality of various substances, from food and
pharmaceuticals to water and wastewater, by measuring their pH, ions, dissolved
oxygen, and conductivity. In addition, Thermedics Detection makes explosives-
detection equipment that uses simultaneous trace particle- and vapor-detection
techniques based on its proprietary chemiluminescence and high-speed gas
chromatography technologies. Customers use these explosives-detection systems
to detect plastic and other explosives at airports and border crossings, for
other high-security screening applications, and for forensics and search
applications. As part of the proposed reorganization at Thermo Electron,
Thermedics may transfer its equity interest in Thermedics Detection to Thermo
Electron for shares of common stock of Thermedics that are held by Thermo
Electron. Thermo Electron, in turn, would transfer such equity interest in
Thermedics Detection to Thermo Instrument in exchange for cash. Subsequently,
Thermedics Detection may go private and become a wholly owned subsidiary of
Thermo Instrument. Shareholders of Thermedics Detection would receive cash or
shares of Thermo Instrument common stock in exchange for their shares of common
stock of Thermedics Detection.
Thermo Voltek, also a public subsidiary of Thermedics, designs, manufactures,
and markets test instruments and a range of products related to power
amplification, conversion, and quality. Thermo Voltek's power products are used
in communications, broadcast, research, and medical imaging applications. Its
test instruments allow manufacturers of electronic systems and integrated
circuits to test for electromagnetic compatibility. On March 30, 1998,
Thermedics approved a proposal to acquire, through a merger, all of the
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outstanding shares of common stock of Thermo Voltek that Thermedics does not
own at a price of $7.00 per share in cash. The total transaction cost to
Thermedics is estimated to be approximately $27 million, which includes
approximately $5.25 million for the redemption of the outstanding Thermo Voltek
3 3/4% convertible subordinated debentures due 2000. On September 17, 1998,
Thermo Voltek announced that its board of directors, upon recommendation of the
special committee comprised of Thermo Voltek's independent directors, voted to
proceed with Thermedics' merger proposal. Completion of this transaction is
subject to, among other things, the negotiation and execution of a definitive
merger agreement; clearance by the Securities and Exchange Commission of the
proxy materials regarding the proposed transaction; and the approval by holders
of a majority of the outstanding shares of common stock of Thermo Voltek (other
than Thermedics and Thermo Electron). Complaints naming Thermo Electron as a
defendant, among others, regarding Thermedics' proposed acquisition of Thermo
Voltek have been filed in Delaware Chancery Court by certain Thermo Voltek
shareholders attempting to act on behalf of the other public shareholders of
Thermo Voltek. The complaints allege, among other things, that the proposed
price of $7.00 per share is unfair and grossly inadequate. As part of the
proposed reorganization at Thermo Electron, Thermedics may transfer its equity
interest in Thermo Voltek to Thermo Electron for shares of common stock of
Thermedics held by Thermo Electron.
Alternative Energy
Thermo Electron's Alternative Energy segment includes the operation of
independent (non-utility) power plants that use clean power processes, the
development and marketing of clean fuels, and the manufacture and sale of
biopesticides. This segment also includes the manufacture, sale, and servicing
of intelligent traffic-control systems, industrial refrigeration equipment, gas
engines for vehicular and stationary applications and commercial cooling and
cogeneration systems.
Through its Thermo Ecotek subsidiary, Thermo Electron designs, develops,
owns, and operates independent (non-utility) electric power-generation
facilities that use environmentally responsible fuels, including agricultural
and wood wastes, referred to as "biomass." Thermo Ecotek currently operates
seven biomass facilities. Its facilities are developed and operated through
joint ventures or limited partnerships in which it has a majority interest, or
through wholly owned subsidiaries.
Thermo Ecotek intends to shift its focus from the U.S. biomass energy market
to other domestic energy projects, while continuing to pursue development of
biomass and other power-generation projects overseas. In 1996, Thermo Ecotek
formed a joint venture in Italy to develop, own, and operate biomass-fueled
electric power facilities, and in January 1998, announced a new joint
agreement, superseding a prior arrangement, through which it acquired, and
intends to expand, two district energy centers in the Czech Republic. In the
U.S., where Thermo Electron believes that utility deregulation may present
opportunities for updating aging plants, Thermo Ecotek acquired two power
plants in southern California from Southern California Edison, for
approximately $9.5 million, in March 1998, for possible refurbishing and
repowering.
Thermo Ecotek is also engaged in the production and sale of engineered clean
fuels and the development and operation of natural gas gathering, storage and
marketing businesses. In August 1995, Thermo Ecotek, through two wholly owned
subsidiaries, entered into a Limited Partnership Agreement with KFx Wyoming,
Inc., a subsidiary of KFx Inc. ("KFx"), to develop, construct, and operate a
coal-beneficiation plant near Gillette, Wyoming. The facility employs patented
"clean coal" technology owned by KFx to transform low energy, high moisture
subbituminous coal extracted from Wyoming's Powder River Basin into a low
moisture, high energy fuel with reduced sulfur. Thermo Ecotek established a new
subsidiary to exploit opportunities in the natural gas gathering, storage, and
marketing business.
In May 1996, Thermo Ecotek, through its majority-owned Thermo Trilogy
Corporation subsidiary, entered the biopesticide business by acquiring the
assets, subject to certain liabilities, of the biopesticide division of W.R.
Grace & Co., which develops, manufactures, and markets environmentally friendly
products for agricultural pest control. In January 1997, Thermo Trilogy
acquired the assets of biosys, inc., a producer of
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naturally derived biopesticides, including pheromone, neem/azadiractin,
nematodes, and virus-based products, as well as disease-resistant sugar cane,
and in November 1997, purchased the Bt biopesticide product line of Novartis
AG.
Thermo Electron, through Thermo Power, manufactures, markets, and services
intelligent traffic-control systems, industrial refrigeration equipment,
engines for vehicular and stationary applications, and commercial cooling and
cogeneration systems. Thermo Power also conducts research and development on
advanced power systems and, through its privately held ThermoLyte Corporation
subsidiary, is developing a line of gas-powered lighting products for
commercialization. As part of the proposed reorganization at Thermo Electron,
Thermo Power may go private and become a wholly-owned subsidiary of Thermo
Electron. Shareholders of Thermo Power would receive cash or shares of common
stock of Thermo Electron in exchange for their shares of common stock of Thermo
Power.
In November 1997, Thermo Power acquired Peek plc ("Peek"), based in the U.K.
Through Peek, Thermo Power offers a range of intelligent traffic-control
systems for urban traffic control, motorway management, and public
transportation management in cities worldwide. Systems include variable message
systems to advise drivers of accidents and other roadway hazards, traffic
signal-timing systems that adapt continuously to changing conditions to
minimize delays, parking guidance systems, and public transportation-management
systems that give buses priority at intersections. Peek also has developed
high-resolution video equipment to aid police officers in monitoring traffic
violations.
Through its industrial refrigeration business, Thermo Power supplies standard
and custom-designed industrial refrigeration systems used primarily by the
food-processing, petrochemical, and pharmaceutical industries. Thermo Power is
also a supplier of both remanufactured and new commercial cooling equipment for
sale or rental. The commercial cooling equipment is used primarily in
institutions and commercial buildings, as well as by service contractors.
Thermo Power also develops, manufactures, markets, and services gasoline
engines for recreational boats, propane and gasoline engines for lift trucks,
and natural gas engines for vehicular, cooling, pumping, refrigeration, and
other industrial applications.
Thermo Electron's Alternative Energy segment also includes a U.K.-based
manufacturer of steam turbines and compressors.
Industrial Outsourcing
Through its Thermo TerraTech subsidiary, Thermo Electron provides outsourcing
services, primarily in environmental-liability management and infrastructure
planning and design, specializing in the areas of municipal and industrial
water quality management, bridge and highway construction and reconstruction,
and natural resource management. Thermo TerraTech also offers comprehensive
environmental testing and analysis through a national network of laboratories
serving the pharmaceutical, food, and environmental industries. As part of the
proposed reorganization at Thermo Electron, The Randers Group Incorporated
("Randers"), a majority-owned, publicly traded subsidiary of Thermo TerraTech,
ThermoRetec Corporation ("ThermoRetec"; formerly Thermo Remediation Inc.), also
a majority-owned, publicly traded subsidiary of Thermo TerraTech, and Thermo
EuroTech N.V. ("Thermo EuroTech"), a majority-owned, private subsidiary of
Thermo TerraTech, may merge into Thermo TerraTech. Shareholders of each of
ThermoRetec, Randers, and Thermo EuroTech would receive shares of common stock
of Thermo TerraTech in exchange for their shares of common stock of
ThermoRetec, Randers, and Thermo EuroTech, respectively.
ThermoRetec is a national provider of outsourcing services for environmental
management, including industrial, nuclear, and soil remediation, as well as
waste-fluids recycling. ThermoRetec helps clients manage problems associated
with environmental compliance, waste management, and the cleanup of sites
contaminated with organic or toxic wastes.
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Randers provides comprehensive engineering and outsourcing services in such
areas as water and wastewater treatment, highway and bridge projects, process
engineering, construction management, and operational services.
Thermo EuroTech provides remediation and recycling services in Europe. Thermo
EuroTech treats oil-based contaminated soils and recycles waste oil and oily
waste streams. In February 1998, Thermo EuroTech acquired a controlling
interest in an environmental services company located in Ireland, that provides
comprehensive in-plant waste management and recycling services to high-tech
manufacturing firms in that country.
In addition, a wholly owned subsidiary of Thermo Electron provides
metallurgical heat-treating services for customers in the automotive,
aerospace, defense, and other industries. Thermo Electron also provides,
through another wholly owned business, metallurgical fabrication services,
principally on high-temperature materials, for customers in the aerospace,
medical, electronics, and nuclear industries.
Paper Recycling
Thermo Electron designs, manufactures, and sells paper recycling and
papermaking equipment and accessory products, and electroplating and aqueous
cleaning systems.
Through its Thermo Fibertek subsidiary, Thermo Electron is a leading designer
and manufacturer of processing machinery, accessories, and water-management
systems for the paper and paper recycling industries. Thermo Fibertek's custom-
engineered systems remove debris, impurities, and ink from wastepaper, and
process it into a fiber mix used to produce recycled paper. Thermo Fibertek's
principal products include custom-engineered systems and equipment for the
preparation of wastepaper for conversion into recycled paper, accessory
equipment and related consumables important to the efficient operation of
papermaking machines, and water-management systems essential for draining,
purifying, and recycling process water.
In May 1997, Thermo Fibertek acquired the majority of the assets, subject to
certain liabilities, of the stock-preparation business of The Black Clawson
Company and certain of its affiliates. In August 1997, Thermo Electron acquired
the remaining assets of the stock-preparation business of The Black Clawson
Company and such affiliates. This business, renamed Thermo Black Clawson, is a
leading supplier of recycling equipment used in processing fiber for the
manufacture of "brown paper," such as that used for corrugated boxes.
In September 1996, Thermo Fibergen became a majority-owned, public subsidiary
of Thermo Fibertek. Thermo Fibergen develops and commercializes technologies to
recover valuable components, such as water, long cellulose fiber, and minerals,
generated as byproducts of the virgin and recycled papermaking process, and to
clarify and recycle process water to be reused in papermaking. Thermo
Fibergen's GranTek Inc. subsidiary uses a patented process to convert
papermaking byproducts into granules that are used for applications including
carriers for agricultural chemicals, oil and grease absorption, and catbox
filler.
Through a wholly owned subsidiary, Thermo Electron also manufactures
electroplating systems and related waste-treatment equipment and accessories,
as well as aqueous systems for cleaning metal parts without using ozone-
damaging solvents.
RESEARCH AND DEVELOPMENT
Technology development is a central component of Thermo Electron's business
strategy, with research activities ongoing in virtually all of Thermo
Electron's subsidiaries. Thermo Electron seeks to develop ideas that have some
societal benefit and to bring those ideas to commercial markets. Many of Thermo
Electron's publicly traded subsidiaries are based on technologies that have
come from years of focused research.
For example, Thermo Cardiosystems' HeartMate(R) left ventricular-assist
system became commercially available after 30 years of research. It has helped
more than 1,200 people with congestive heart failure live longer. The core of
Thermedics Detection is its ability to detect trace amounts of unwanted
materials using
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chemiluminescence, a technology platform that is used in its instruments for a
variety of applications, ranging from food and pharmaceutical monitoring to
security screening. Thermo Fibergen was established to develop uses for
papermaking byproducts, which were previously landfilled, and also markets
biodegradable granules derived from papermaking byproducts that are used for
applications such as carriers for agricultural chemicals, oil and grease
absorption, and environmentally friendly catbox filler.
Other Thermo Electron subsidiaries have also developed innovative
technologies. Trex Medical has filed for FDA clearance of a new digital
mammography system with better resolution than conventional techniques to aid
earlier detection of breast cancer, and ThermoLase has developed a laser-based
technique for removing unwanted body hair.
Thermo Coleman and ThermoTrex share a similar charter--to develop new
technologies derived from government-funded research, and bring them to the
commercial marketplace. Thermo Coleman is developing several technologies,
including a Virtual Time Traveler(TM) and coherent laser radar for sensor and
measurement systems. ThermoTrex is also developing a number of technologies
that Thermo Electron believes hold future commercial promise, including a
passive microwave camera to enhance aerial navigation safety and a space
surveillance system.
During the first six months of 1998 and 1997, and the fiscal years ended
1997, 1996, and 1995, Thermo Electron expended $185.0 million, $158.8 million,
$335.4 million, $299.3 million, and $269.3 million, respectively, on research
and development. Of these amounts, $79.4 million, $71.0 million, $143.7
million, $144.8 million, and $167.1 million, respectively, were sponsored by
customers.
PATENTS, LICENSES AND TRADEMARKS
Thermo Electron considers patents to be important in the present operation of
its business; however, Thermo Electron does not consider any patent, or related
group of patents, to be so important that its expiration or termination would
materially affect Thermo Electron's business taken as a whole. Thermo Electron
seeks patent protection for inventions and developments made by its personnel
and incorporated into its products or otherwise falling within its fields of
interest. Patent rights resulting from work sponsored by outside parties do not
always accrue exclusively to Thermo Electron and may be limited by agreements
or contracts.
Thermo Electron protects some of its technology as trade secrets and, where
appropriate, uses trademarks or registers its products. It also enters into
license agreements with others to grant and/or receive rights to patents and
know-how.
BACKLOG
Thermo Electron's backlog of firm orders as of July 4, 1998, and June 28,
1997, was as follows:
<TABLE>
<CAPTION>
JULY 4, JUNE 28,
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Instruments............................................... $269,800 $290,800
Biomedical Products....................................... 89,000 98,300
Advanced Technology....................................... 146,200 128,800
Alternative Energy........................................ 185,100 131,300
Industrial Outsourcing.................................... 122,900 114,600
Paper Recycling........................................... 66,200 88,700
-------- --------
$879,200 $852,500
======== ========
</TABLE>
Backlog includes the uncompleted portion of research and development
contracts and the uncompleted portion of certain contracts that are accounted
for using the percentage-of-completion method. Certain of such firm orders are
cancellable by the customer upon the payment of a cancellation charge.
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<PAGE>
COMPETITION
Thermo Electron is engaged in many highly competitive industries. Following
is a description of the principal competition in each of Thermo Electron's
segments.
Instruments
Thermo Electron is one of the principal manufacturers of analytical
instrumentation. Within the markets for Thermo Electron's analytical instrument
products, Thermo Electron competes with several large corporations that have
broad product offerings, such as Hewlett-Packard Company; Perkin-Elmer Corp.;
Varian Associates, Inc.; and Hitachi, Ltd., as well as numerous smaller
companies that address particular segments of the industry or specific
geographic areas. Thermo Electron's instruments business generally competes on
the basis of technical advances that result in new products and improved
price/performance ratios, reputation among customers as a quality leader for
products and services, and active research and application-development
programs. To a lesser extent, Thermo Electron competes on the basis of price.
Biomedical Products
Competition in the markets for most of Thermo Electron's biomedical products,
including those manufactured by Thermo Cardiosystems, ThermoTrex, Nicolet
Biomedical, Bird Medical Technologies, SensorMedics, Medical Data Electronics,
Bear Medical Systems, and Nicolet Vascular is based to a large extent upon
technical performance.
Thermo Electron is aware of one other company that has received a premarket
approval ("PMA") from the FDA for an implantable LVAS that competes with Thermo
Cardiosystems' LVAS. Also, Thermo Electron is aware of one other company that
has received approval by the FDA Advisory Panel on Circulatory System Devices
and subsequent commercial approval for its cardiac-assist device. This is an
external device that is positioned on the outside of the patient's chest and is
intended for short-term use in the hospital environment. Thermo Electron is
also aware that a total artificial heart is currently undergoing clinical
trials. The requirement of obtaining FDA approval for commercial sale of an
LVAS is a significant barrier to entry into the U.S. market for these devices.
However, FDA regulations may change in the future, reducing the time and
testing required for others to obtain FDA approval. In addition, other research
groups and companies are developing cardiac-assist systems using alternative
technologies or concepts, one or more of which might prove functionally
equivalent to, or more suitable than, Thermo Electron's systems. Among products
that have been approved for commercial sale, Thermo Electron competes primarily
on the basis of performance, service capability, reimbursement status, and
price.
Thermo Electron is one of a number of competitors in the markets for
mammography and general radiographic systems and is one of two competitors in
the market for stereotactic breast-biopsy systems. Thermo Electron competes in
these markets primarily on the basis of product features, product performance,
and reputation, as well as price and service. The markets in which Thermo
Electron competes with these products are characterized by rapid technological
change. Thermo Electron believes that in order to be competitive in these
markets it must continue to be technologically innovative.
Thermo Electron's SoftLight laser hair-removal system competes with other
laser-based systems, electrolysis, and other traditional hair-removal methods,
such as shaving and waxing. Since 1997, a number of other laser manufacturers
have received clearance from the FDA to market their laser-based systems for
the removal of unwanted facial and body hair. The laser-based hair-removal
market is characterized by rapid technological change, and Thermo Electron
believes that it must continue to be technologically innovative in order to
compete in this market. In addition, the SoftLight system competes with
electrolysis providers, many of whom are small practitioners with well-
established networks of client relationships. Thermo Electron believes that
competition for its hair-removal services is based primarily on efficacy,
price, comfort, and safety.
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Advanced Technology
In its contract research and development business, Thermo Electron not only
competes with other companies and institutions that perform similar services,
but must also rely on the ability of government agencies and other clients to
obtain research and development funds for their contracts with Thermo Electron.
Thermo Electron competes for research and development programs principally on
the basis of technical innovations. As government funding becomes more scarce,
particularly for defense projects, the competition for such funding will become
more intense. In addition, as Thermo Electron's programs move from the
development stage to commercialization, it expects competition to intensify.
Thermo Sentron competes with several international and regional companies in
the market for its products. Thermo Sentron's competitors in the packaged goods
market differ from those in the bulk materials market. The principal
competitive factors in both markets are customer service and support, quality,
reliability, and price.
Thermedics Detection's product quality-assurance systems and electrode-based
chemical-measurement products compete with detection systems manufactured by
numerous companies. In the markets for these products, Thermedics Detection
competes on the basis of performance, service, durability, technology, and, to
a lesser extent, price. There are a number of competitors in the market for
instruments that detect explosives, including makers of other chemical-
detection instruments as well as enhanced X-ray detectors.
Thermo Voltek is a leading supplier of electromagnetic compatibility testing
equipment. Thermo Electron competes in this market primarily on the basis of
performance, technical expertise, reputation, and price. In the market for
power amplifiers, Thermo Voltek competes with several companies worldwide
primarily on the basis of technical expertise, reputation, and price.
Alternative Energy
The worldwide independent power market consists of numerous companies,
ranging from small startups to multinational industrial companies. In addition,
a number of regulated utilities have created subsidiaries that compete as non-
utility generators. Non-utility generators often specialize in market "niches,"
such as a specific technology or fuel or a specific region of the country where
they believe they have a market advantage. However, many non-utility
generators, including Thermo Electron, seek to develop projects on a best-
available-fuel basis. Thermo Electron competes primarily on the basis of
project experience, technical expertise, capital resources, and power pricing.
The market in which Thermo Electron's biopesticide business competes is
highly competitive and subject to rapid technological change. Several
competitors are large chemical, agrochemical and pharmaceutical companies with
greater financial, marketing, and technological resources than Thermo Electron.
Thermo Electron's biopesticide business competes primarily based on
performance, quality and price.
The market for traffic products and services is extremely competitive. Thermo
Electron expects that competition will continue to increase, with the principal
factors being price, functionality, reliability, service and support, and
vendor and product reputation, along with industry and general economic trends.
Thermo Electron believes that it is a leading manufacturer and supplier of
traffic products, and considers its major competitor to be Siemens AG. However,
the traffic market is highly fragmented and competition varies significantly
depending on the individual product.
The market for industrial refrigeration systems is highly competitive. The
industrial refrigeration market is mature, highly fragmented, and extremely
dependent on close customer contacts. Major industrial refrigeration companies,
such as Thermo Electron, account for approximately one-half of worldwide sales,
with the balance generated by many smaller companies. Thermo Electron competes
principally on the basis of its advanced control systems and overall quality,
reliability, service, and price. Thermo Electron believes it is a leader in
remanufactured refrigeration equipment. Thermo Electron competes in this market
primarily based on price, delivery time, and customized equipment.
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Industrial Outsourcing
Thermo Electron seeks to compete in the market for soil-remediation services
based on its ability to offer customers superior protection from environmental
liabilities. However, with relaxed regulatory standards in many states, Thermo
Electron faces intense competition in local markets from landfills, other
treatment technologies, and from companies competing with similar technologies,
limiting the volume of soil to be treated and the prices that can be charged by
Thermo Electron. Pricing is therefore a major competitive factor for Thermo
Electron in this market.
Thermo Electron's metallurgical services business competes in specialty
machining services. Competition is based principally on services provided,
turnaround time, and price.
Hundreds of independent analytical testing laboratories and consulting firms
compete for environmental services business nationwide. Many of these firms use
equipment and processes similar to those of Thermo Electron. Competition is
based not only on price, but also on reputation for accuracy, quality, and the
ability to respond rapidly to customer requirements. In addition, many
industrial companies have their own in-house analytical testing capabilities.
Thermo Electron believes that its competitive strength lies in certain niche
markets within which Thermo Electron is recognized for its expertise.
Paper Recycling
Thermo Electron is a leading supplier of de-inking systems for paper
recycling, accessory equipment for papermaking machines and water management
systems, and it faces significant competition in the markets for these
products. Thermo Electron competes in these markets primarily on the basis of
quality, service, technical expertise, product innovation, and price.
EMPLOYEES
As of July 4, 1998, Thermo Electron had approximately 23,400 employees.
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<PAGE>
DESCRIPTION OF THE NOTES
The following description of the Notes (referred to in the attached
Prospectus as "Debt Securities") supplements the more general description of
the Debt Securities that appears in the Prospectus. If there are any
inconsistencies between the information in this section and the information in
the Prospectus, the information in this section controls. Investors should read
this section together with the section called "Description of Debt Securities
of the Company" in the Prospectus. Any capitalized terms that are defined in
the Prospectus have the same meanings in this section unless a different
definition appears in this section. The Company qualifies the description of
the Notes by reference to the Indenture and to the First Supplemental
Indenture, each dated October , 1998, which create the Notes (collectively,
the "Indenture"). References to Thermo Electron or the Company in this section,
unless the text states otherwise or the context requires otherwise, are only to
Thermo Electron Corporation and not to its subsidiaries.
GENERAL
The Notes are an issue of the Company's Senior Securities as described in the
Prospectus. The Notes will be limited to $150,000,000 aggregate principal
amount.
The Notes will mature on October , 200[ ] and will bear interest from the
date of issuance (which the Company expects to be October , 1998) at an annual
rate of %. Interest is payable semi-annually in arrears on each and ,
beginning on , 1999, to the persons in whose names the Notes are registered
at the close of business on the or , as the case may be, next preceding
such or . Unless the Company redeems or purchases and cancels the Notes
prior to their maturity date, the Company will redeem the Notes at their
principal amount on their maturity date. If a payment date is not a weekday or
a day on which banking institutions in New York and Luxembourg are open for
business (a "Business Day"), the Company will pay interest on the next
succeeding day that is a Business Day, and no interest will accrue during the
intervening period. Payments of principal, premium, if any, and interest on the
Notes will be made through the Depository. See "Description of Debt Securities
of the Company--Global Securities" in the Prospectus. The Company will not pay
Additional Amounts on the Notes.
The Notes will be the Company's unsecured general obligations, ranking
equally with all of the Company's other unsecured and unsubordinated
indebtedness and other obligations (including pursuant to guarantees)
outstanding from time to time. The obligations represented by the Notes,
however, will be structurally subordinated to all indebtedness and other
liabilities of the Company's subsidiaries. See the discussion of this
structural subordination in the Prospectus under the caption "Description of
Debt Securities of the Company--Structural Subordination." At July 4, 1998,
Thermo Electron's consolidated subsidiaries had indebtedness (other than to
Thermo Electron), other liabilities and obligations to redeem certain of such
subsidiaries' stock included on Thermo Electron's consolidated balance sheet of
approximately $2,468,019,000. At July 4, 1998, Thermo Electron's consolidated
subsidiaries had indebtedness to Thermo Electron of approximately $452,800,000.
At July 4, 1998, Thermo Electron had approximately $297,000 of secured
obligations and approximately $30,421,000 of unsecured, unsubordinated debt and
other liabilities.
The Notes will not be convertible into or exchangeable for the Company's
Common Stock and will not be entitled to the benefit of any sinking fund.
Application has been made to list the Notes on the Luxembourg Stock Exchange.
There can be no assurance that such listing will be obtained. The Company makes
no assurance as to the liquidity of, or trading markets for, the Notes. The
Company may buy Notes on the open market or otherwise at any time.
The place of payment, place of registration of transfer and exchange and the
place of transfer and exchange for the Notes shall be the Borough of Manhattan,
The City of New York. The Corporate Trust Office of the Trustee in New York
shall be the Company's Office or Agency in the Borough of Manhattan, The City
of New York, for such purpose. The Trustee initially shall be the Security
Registrar, the Authenticating Agent, and a Paying Agent. In addition, the
Company has appointed Bankers Trust Luxembourg, S.A. as a Paying
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<PAGE>
Agent. The Trustee's Corporate Trust Office is currently located at Four Albany
Street, 4th Floor, New York, New York 10006 and Bankers Trust Luxembourg,
S.A.'s Office in Luxembourg is currently located at 14 Boulevard F.D.
Roosevelt, L-2450 Luxembourg. The Company may subsequently change or appoint a
new Office or Agency with respect to the Notes. As long as the Notes are listed
on the Luxembourg Stock Exchange (if such listing is approved and maintained),
the Company will have a paying agent and a transfer agent in Luxembourg. The
Company will publish notice of any change in the Luxembourg paying agent and
transfer agent in Luxembourg. As long as the Notes are maintained in book-entry
form, transfers and exchanges of and payments on the Notes may be made only
through the Depository.
BOOK-ENTRY SYSTEM, FORM AND DELIVERY
The Company will issue the Notes in registered form only, without interest
Coupons attached. The Company will not issue Bearer Notes or Notes in temporary
form. The Notes will be represented only by one or more Global Notes registered
in the name of Cede & Co., as the nominee of the Depository, except under the
limited circumstances described in the Prospectus. Transfers of the Notes will
be registered only through the Depository. See "Description of Debt Securities
of the Company--Global Securities" in the Prospectus for additional information
that applies to the Notes. The Company will date Notes issued in global form
the date of the original issuance of such Notes. The Notes may be in any
denomination approved by the officer(s) executing such Notes.
In the event that the Company issues Notes in definitive form, under the
limited circumstances described in the Prospectus, and the Notes are listed on
the Luxembourg Stock Exchange at such time, definitive Notes may be transferred
in whole or in part upon the surrender of the certificate to be transferred at
the office of the Company's transfer agent in Luxembourg, pursuant to the
procedures then in effect of such transfer agent and pursuant to the applicable
provisions of the Indenture. If the Holder transfers only part of a certificate
representing definitive Notes, the Company will issue a new certificate for the
balance of the Notes to the transferor. Additionally, if the Company issues
Notes in definitive form and such Notes are listed on the Luxembourg Stock
Exchange at such time, payments of principal, premium, if any, and interest on
the Notes may be made to holders in whose names the Notes in definitive form
were registered at the close of business on the related record date for such
payments pursuant to the procedures then in effect of the Company's paying
agent in Luxembourg and pursuant to the applicable provisions of the Indenture.
The Underwriters will make settlement for the Notes in immediately available
funds. The Company will make all payments of principal and interest on the
Notes in immediately available funds so long as the Notes are maintained in
book-entry form.
The Notes will trade in the Depository's Same-Day Funds Settlement System and
secondary trading activity in the Notes will therefore be required by the
Depository to settle in immediately available funds. No assurance can be given
as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
NOTICES
The Company will give notices to Holders of the Notes by mail to the Holders'
addresses as they appear in the Security Register and will also publish such
notices, so long as the Notes are listed on the Luxembourg Stock Exchange, in a
leading daily newspaper having general circulation in Luxembourg (expected to
be the Luxemburger Wort.) Any such notice shall be deemed to have been given on
the date of such publication or, if published more than once, on the date of
the first such publication.
OPTIONAL REDEMPTION
The Company may redeem the Notes, in whole or in part, at the Company's
option at any time at a redemption price equal to the greater of: (1) 100% of
their principal amount and (2) the sum of the present values of the remaining
scheduled payments of principal and interest that the Company has not yet made
on the Notes (not including the portion of any such payments of interest
accrued as of the redemption date),
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discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined in the second following paragraph and as determined on the third
Business Day preceding such redemption date); plus, in each case, accrued and
unpaid interest thereon to the redemption date. If the Company redeems or
purchases Notes under this section, the Company will cancel such Notes and will
not reissue or resell them.
"Adjusted Treasury Rate" means (i) the arithmetic mean of the yields under
the heading "Week Ending" published in the Statistical Release (as defined in
the next paragraph) most recently published prior to the date of determination
under the caption "Treasury Constant Maturities" for the maturity (rounded to
the nearest month) corresponding to the remaining life to maturity, as of the
redemption date, of the Notes being redeemed plus (ii) . If no maturity set
forth under such heading exactly corresponds to the maturity of such Notes, the
Company shall calculate yields for the two published maturities most closely
corresponding to the maturity of such Notes pursuant to the immediately
preceding sentence, and the Company shall interpolate or extrapolate the
Adjusted Treasury Rate from such yields on a straight-line basis, rounding in
each of the relevant periods to the nearest month.
"Statistical Release" means the statistical release designated "H.15(519)" or
any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively-traded United States government
securities adjusted to the constant maturities, or, if such statistical release
is not published at the time of any determination under the terms of the Notes,
then such other reasonably comparable index which the Company shall designate.
The Company will give any notice of redemption in accordance with "Notices"
above.
COVENANTS
Some capitalized terms used in this section are defined in the following
subsection,"Definitions."
Restrictions on Liens
The Indenture does not limit the amount of indebtedness that the Company or
its subsidiaries may incur. However, the Indenture requires that the Company
will not, and will not permit any Designated Subsidiary to, incur any
Indebtedness secured by a Lien:
. on any shares of stock, indebtedness or other obligations of a
Subsidiary, or
. on any Principal Property of the Company or a Designated Subsidiary;
(the Company may refer to such stock, indebtedness or other obligations and
Principal Property as "Property"), unless the Company secures or causes such
Designated Subsidiary to secure the Notes (together with, if the Company so
determines, any other Indebtedness of the Company or such Designated Subsidiary
that exists or is thereafter created ranking equally with the Notes, including
guarantees of indebtedness of others) equally and ratably with (or prior to)
such new Indebtedness, so long as such new Indebtedness is secured by a Lien on
the Property listed above. These restrictions shall not apply in the case of
Indebtedness secured by the following types of Liens:
1. Liens on Property that already exist at the time the Company or such
Designated Subsidiary acquires such Property; Liens that the Company incurs
to secure its payment of the purchase price of such Property; or Liens that
the Company or such Designated Subsidiary incurs to secure any Indebtedness
that was incurred before, at the time of or within 180 days after the
Company or such Designated Subsidiary acquires such Property in order to
finance all or part of the purchase price of such Property;
2. Liens that secure
. Indebtedness which the Company owes to one of its Designated
Subsidiaries, or
. Indebtedness owed by a Designated Subsidiary to the Company or to
another Designated Subsidiary;
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3. Liens on Property of an entity, or on the stock, indebtedness or other
obligations of such entity, that exist when (a) such entity becomes a
Designated Subsidiary, (b) such entity is merged into or consolidated with
the Company or a Designated Subsidiary or (c) the Company or a Designated
Subsidiary acquires all or substantially all of the assets of such entity,
provided that no such Lien extends to any other Property;
4. Liens on Property to secure any Indebtedness that the Company or such
Designated Subsidiary incurs to pay for all or part of the cost of
development of or improvements to such Property, which Indebtedness is
incurred before, at the time of or within 180 days after the completion of
such development or improvements;
5. Liens on Property to secure Indebtedness or other indebtedness that
the Company or such Designated Subsidiary incurs in connection with any
financing in accordance with Section 103 of the Internal Revenue Code of
1986, as amended, or any replacement law;
6. Liens that secure obligations under capital leases on assets subject
to such leases, provided that
. any such Lien attaches to such property within twelve months after
the Company or a Designated Subsidiary acquires such property, and
. such Lien attaches only to the property so acquired;
7. Liens that secure indebtedness of any successor corporation to the
Company to the extent the Indenture allows;
8. Liens that are created, incurred or assumed in connection with an
industrial revenue bond, pollution control bond or similar financing
arrangement between the Company or any Designated Subsidiary and any
federal, state or municipal government or other governmental body or quasi-
governmental agency; and
9. Any total or partial renewal, extension or replacement of any Lien
that is permitted pursuant to exceptions 1 through 8 above or any
Indebtedness secured by such excepted Lien, provided that such extension,
renewal or replacement Lien is limited to all or any part of the same
Property that secured the Lien extended, renewed or replaced (plus
improvements on such Property).
Notwithstanding the foregoing restrictions on incurring Indebtedness secured by
Liens on Property, the Company may, and may permit any Designated Subsidiary
to, incur Indebtedness secured by Liens on Property which do not fall within
the exceptions listed above, without securing the Notes on an equal basis, as
long as the total amount of all such Indebtedness outstanding (including the
amount then being incurred) is not more than 10% of the Company's Consolidated
Net Assets immediately before such Indebtedness is incurred.
Restrictions on Sale and Leaseback Transactions
The Indenture requires that the Company will not, and will not permit any
Designated Subsidiary to, enter into any arrangement (except for temporary
leases for a term of not more than three years, or except for sales or
transfers and leaseback transactions involving the acquisition or improvements
of Principal Properties provided that the amount of consideration received at
the time of sale or transfer by the Company or such Designated Subsidiary for
the property so sold or transferred shall be applied as described in (2) below)
with any lender or investor, providing for a lease back to the Company or to
any Designated Subsidiary of any Principal Property which was or will be sold
or transferred by the Company or any Designated Subsidiary to such lender or
investor or to any Person to whom the lender or investor has advanced funds
based on the security of such property, unless either
1. the Company or any Designated Subsidiary would be allowed, under
"Restrictions on Liens" above, to create Indebtedness secured by a Lien on
the property to be leased without securing the Notes on an equal basis, or
2. the Company and the Designated Subsidiaries, within the 12 months
preceding or following such sale or transfer, regardless of whether such
sale or transfer is made by the Company or by a Designated Subsidiary, have
applied or apply a total amount equal to the greater of
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. the net proceeds of the sale of the property leased pursuant to
such arrangement, or
. the fair value of the property so leased at the time of entering
into such arrangement;
(1) to the voluntary retirement of the Company's or Designated Subsidiary's
Indebtedness, which debt matures by its terms more than one year after the date
it was originally incurred; or (2) to the acquisition, development or
improvement of one or more Principal Properties.
Definitions
The following terms have the meanings set forth below when used in this
Prospectus Supplement.
"Attributable Debt" means, when used in connection with a sale and leaseback
transaction, at any date as of which the amount of such Attributable Debt is to
be determined, the lesser of (1) the fair value of the property subject to the
transaction (as determined in good faith by the Company's officers) or (2) the
present value of rent for the remaining term of the lease. Rent shall be
discounted to present value at the actual percentage rate inherent in such
lease as determined in good faith by the Company's officers, compounded
semiannually. Rent is the lesser of (1) rent for the remaining term of the
lease assuming it is not terminated or (2) rent from the date of determination
until the first possible termination date plus the termination payment then
due, if any. The remaining term of a lease includes any period for which the
lease has been extended. Rent does not include (a) amounts for maintenance,
repairs, insurance, taxes, assessments and similar charges or (b) contingent
rent, such as that based on sales. Rent may be reduced by rent that any
sublessee must pay from the date of determination for all or part of the same
property.
"Consolidated Net Assets" means the consolidated total assets of the Company
and its Subsidiaries as reflected in the Company's most recent balance sheet
prepared in accordance with generally accepted accounting principles, less (1)
current liabilities (excluding current maturities of long-term debt and
obligations under capital leases) and (2) trademarks, patents, and minority
interests of others. Consolidated Net Assets includes goodwill of the Company
and its Subsidiaries.
"Designated Subsidiary" means any Subsidiary of the Company, other than an
International Subsidiary, which is directly or indirectly wholly-owned by the
Company on the date as of which a determination is being made, whether or not
such Subsidiary was owned as of the date of the Indenture or was created or
acquired after the date of the Indenture. A Subsidiary is "wholly-owned" by a
Person or Persons if such Person or Persons own(s) all of the capital stock of
such Subsidiary, other than directors' qualifying shares or similar securities.
"Indebtedness" means, with respect to any Person, the aggregate amount
(without duplication) of:
1. all obligations for borrowed money,
2. all obligations under debentures, notes or other similar instruments;
3. all obligations to pay the deferred purchase price of property or
services, except trade accounts payable, accrued commissions and other
similar accrued current liabilities related to those obligations, in any
case not overdue, arising in the ordinary course of business;
4. all obligations under any lease (or other agreement conveying the
right to use) of property by a Person as lessee or guarantor which
generally accepted accounting principles would require to be accounted for
as a capital lease on that Person's balance sheet;
5. all reimbursement obligations under any letters of credit or bankers'
acceptances related to Indebtedness of such Person or another Person;
6. all Attributable Debt;
7. all Redeemable Stock; and
8. all guarantees of (a) obligations specified in clauses (1) through (5)
of this definition, (b) Attributable Debt and (c) Redeemable Stock, in each
case of other Persons. "Indebtedness" does not include any obligations of a
Person under a Swap Contract.
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<PAGE>
"International Subsidiary" means any Subsidiary of the Company that conducts
its principal business or has its principal assets located outside of the
United States.
"Lien" means any lien, mortgage, pledge, security interest, charge, or
encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature of a conditional sale or title
retention agreement) and any agreement to give any lien, mortgage, pledge,
security, interest, charge, or other encumbrance of any kind.
"Person" means any individual, corporation, partnership, limited liability
company, trust, joint venture, unincorporated association or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Principal Property" means any land, land improvement, building and
associated equipment or property owned or leased under a capital lease that is
located within the United States of America and has a book value greater than
3% of Consolidated Net Assets as of the date of such determination, not
including any such property financed through the issuance of tax exempt
governmental obligations, or any such property that the Board of Directors of
the Company has determined not to be of material importance to the Company's
business and that of its Designated Subsidiaries taken as a whole.
"Redeemable Stock" means any stock that by its terms matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise.
"Subsidiary" of any Person means (i) a corporation, at least a majority of
the outstanding securities of which having ordinary voting power (other than
securities having such power only by reason of the happening of a contingency)
is owned by such Person, either directly or indirectly through a Subsidiary of
such Person; or (ii) a partnership, joint venture, association, or other
business entity, if in accordance with generally accepted accounting principles
such entity is consolidated with such Person for financial statement purposes.
"Swap Contract" means any agreement relating to any transaction that is a
rate swap, basis swap, forward rate transaction, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate option,
forward transaction, cap, collar or floor transaction, currency swap, cross-
currency rate swap, swaption, currency option or any other similar transaction
(including any option to enter into any of the foregoing) or any combination of
the foregoing, and, unless the context otherwise clearly requires, any master
agreement relating to or governing any or all of the foregoing, provided that
such Swap Contract was entered into to manage risks associated with the
Company's liabilities, commitments or assets or those of any Subsidiary of the
Company and not for speculation.
"Undesignated Subsidiary" means any Subsidiary of the Company that is not a
Designated Subsidiary.
DEFEASANCE AND COVENANT DEFEASANCE
The provisions described in the Prospectus under "Description of Debt
Securities of the Company--Discharge, Defeasance and Covenant Defeasance" will
apply to the Notes. Covenant defeasance applies to the covenants described in
the Prospectus under "Description of Debt Securities of the Company--Discharge,
Defeasance and Covenant Defeasance", the covenant described in the Prospectus
under "Description of Debt Securities of the Company--Consolidation, Merger and
Sale of Assets" and the covenants described in this section under the
subheadings "Restrictions on Liens" and "Restrictions on Sale and Leaseback
Transactions."
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<PAGE>
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summarizes certain United States federal tax consequences as of
the date of this Prospectus Supplement of the purchase, ownership and
disposition of Notes by an initial purchaser of Notes that is not a United
States Person (as defined below). Except where noted, the summary deals only
with Notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code") by non-United States
Persons. As used herein, the term "United States Person" means an owner of a
Note that is, for United States federal income tax purposes,
. 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,
. an estate the income of which is subject to United States Federal income
taxation regardless of its source,
. any trust if a court within the United States is able to exercise primary
supervision of the administration thereof and one or more United States
Persons has the authority to control all substantial decisions thereof and
. any other person included within the definition of "United States Person"
under the Code and U.S. Treasury regulations.
The following summary is based upon the provisions of the Code, and on
regulations, rulings and judicial decisions under the Code as of the date of
this Prospectus Supplement. This summary does not address any state, local or
foreign tax consequences. This summary does not discuss all aspects of United
States federal taxation which may be important to non-United States Persons in
light of their individual investment circumstances, such as Notes held by
investors who are subject to special tax rules (e.g. financial institutions,
insurance companies, broker-dealers, tax-exempt organizations and private
foundations) or to persons that will hold the Notes as part of a straddle,
hedge, or synthetic security transaction for United States federal income tax
purposes. Persons in those situations may be subject to tax rules that differ
significantly from those summarized below. Special rules may also apply to
certain non-United States Persons, such as "controlled foreign corporations,"
"passive foreign investment companies" and "foreign personal holding
companies." Finally, prospective purchasers of the Notes should be aware that
tax laws frequently change. When these changes occur, the statutes,
regulations, rulings and judicial decisions giving rise to such changes may
have a retroactive effect. Accordingly, future changes in such tax laws may
cause the consequences of the purchase, ownership and disposition of the Notes
to differ significantly from the consequences summarized below. Persons
considering the purchase, ownership or disposition of the Notes should consult
their own tax advisors concerning the United States federal tax consequences in
light of their particular situations as well as any consequences arising under
the laws of any other taxing jurisdiction and any applicable tax treaties,
which may provide for a lower rate of withholding tax, exemption from or
reduction of branch profits tax, or other rules different from those described
below.
Under present United States federal income and estate tax law, and subject to
the discussion below concerning backup withholding:
(a) no United States federal withholding tax will be imposed with respect
to the payment by the Company or its Paying Agent of principal, premium, if
any, or interest on a Note owned by a non-United States Person (the
"Portfolio Interest Exception"), provided that:
1. such non-United States Person does not actually or constructively
own 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote within the meaning of section
871(h)(3) of the Code and the regulations thereunder,
2. such non-United States Person is not a controlled foreign
corporation that is related, directly or indirectly, to the Company
through stock ownership,
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<PAGE>
3. such non-United States Person is not a bank whose receipt of
interest on a Note is described in section 881(c)(3)(A) of the Code and
4. such non-United States Person satisfies the statement requirement
(described generally below) set forth in section 871(h) and section
881(c) of the Code and the regulations thereunder;
(b) no United States federal withholding tax will be imposed generally
with respect to any gain or income realized by a non-United States Person
upon the sale, exchange, redemption, retirement or other disposition of a
Note; and
(c) a Note beneficially owned by an individual who at the time of death
is a non-United States Person will not be subject to United States federal
estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote within the meaning of Section 871(h)(3) of the Code and provided that
the interest payments with respect to such Note would not have been, if
received at the time of such individual's death, effectively connected with
the conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(4) above, the beneficial owner
of such Note, or a financial institution holding the Note on behalf of such
owner, must provide, in accordance with specified procedures, a Paying Agent of
the Company with a statement to the effect that the beneficial owner is not a
United States Person (as defined in the Code). These requirements will be met
if (1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a United States Person (which
certification may be made on an Internal Revenue Service ("IRS") Form W-8 (or
substitute form)) or (2) a financial institution holding the Note on behalf of
the beneficial owner certifies, under penalties of perjury, that such statement
has been received by it and furnishes the Company or its Paying Agent, as the
case may be, with a copy thereof.
With respect to Notes held by a foreign partnership, under current law, the
Form W-8 may be provided by the foreign partnership. However, for interest and
disposition proceeds paid with respect to a Note after December 31, 1999,
unless the foreign partnership has entered into a withholding agreement with
the IRS, a foreign partnership must, in addition to providing an intermediary
Form W-8, attach an appropriate certification by each partner. Prospective
investors, including foreign partnerships and their partners, should consult
their tax advisors regarding possible additional reporting requirements.
If a non-United States Person cannot satisfy the requirements of the
Portfolio Interest Exception described in (a) above, payments on a Note made to
such non-United States Person will be subject to a 30% withholding tax unless
the beneficial owner of the Note provides the Company or its Paying Agent, as
the case may be, with a properly executed (1) IRS Form 1001 (or substitute
form) claiming an exemption from or reduction of withholding tax under the
benefit of a tax treaty or (2) IRS Form 4224 (or substitute form) stating that
interest paid on the Note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or
business in the United States.
Recently issued Treasury Regulations (the "New Regulations") modify the
requirements imposed on a non-United States Person and certain intermediaries
for establishing the recipient's status as a non-United States Person eligible
for exemption from or reduction in United States withholding tax and backup
withholding (described below). In general, the New Regulations do not
significantly alter the substantive withholding and information reporting
requirements but rather unify current certification procedures and forms and
clarify reliance standards. The New Regulations are generally effective for
payments made after December 31, 1999, subject to certain transition rules. In
addition, the New Regulations impose different conditions on the ability of
financial intermediaries acting for a non-United States Person to provide
certifications on behalf of the non-United States Person, which may include
entering into an agreement with the IRS to audit certain documentation with
respect to such certifications. The Company or its Paying Agent may request new
withholding tax exemption forms from non-United States Persons in order to
qualify for continued exemption
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<PAGE>
from withholding tax under the New Regulations when they become effective. Non-
United States Persons should consult their own tax advisors to determine the
effects of the application of the New Regulations to their particular
circumstances.
If a non-United States Person is engaged in a trade or business in the United
States and if interest on a Note is effectively connected with the conduct of
such trade or business, the non-United States Person, although generally exempt
from United States federal withholding tax if certain procedures are followed
as discussed above, will be subject to United States federal income tax on such
interest on a net income basis in the same manner as if the holder were a
United States Person. In addition, if such holder is a foreign corporation, it
may be subject to a branch profits tax equal to 30% or applicable lower tax
treaty rate on its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, interest on a Note will be
included in such foreign corporation's effectively connected earnings and
profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note by a non-United States Person generally will not be
subject to United States federal income tax unless (1) such gain or income is
effectively connected with a trade or business in the United States of the non-
United States Person, (2) in the case of a non-United States Person who is an
individual, such individual is present in the United States for 183 days or
more in the taxable year of such sale, exchange, retirement or other
disposition, and certain other conditions are met, or (3) the non-United States
Person is subject to tax pursuant to the provisions of United States tax law
applicable to certain United States expatriates.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The IRS will not require information reporting or backup withholding with
respect to payments made by the Company or its Paying Agent to non-United
States Persons if the Company or its Paying Agent has received a statement
described in (a)(4) above and the payor does not have actual knowledge that the
beneficial owner is a United States Person.
In addition, backup withholding and information reporting will not apply if
payments on a Note are paid or collected by a foreign office of a custodian,
nominee or other foreign agent on behalf of the beneficial owner of such Note,
or if a foreign office of a broker (as defined in applicable United States
Treasury regulations) pays the proceeds of the sale of a Note to the owner of
the Note. If, however, such nominee, custodian, agent or broker is, for United
States federal income tax purposes, a United States Person, a controlled
foreign corporation or a foreign person that derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the
United States, such payments will be subject to information reporting (but not
backup withholding), unless (1) such custodian, nominee, agent or broker has
documentary evidence in its records that the beneficial owner is not a United
States Person and certain other conditions are met or (2) the beneficial owner
otherwise establishes an exemption.
Payments on a Note paid to the beneficial owner of a Note by a United States
office of a custodian, nominee or agent, or the payment by the United States
office of a broker of the proceeds of sale of a Note, will be subject to both
backup withholding at a rate of 31% and information reporting unless the
beneficial owner provides the statement referred to in (a)(4) above and the
payor does not have actual knowledge that the beneficial owner is a United
States Person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be credited
toward such non-United States Person's United States federal income tax
liability, if any. To the extent that the amounts withheld exceed the non-
United States Person's tax liability, the excess may be refunded to the non-
United States Person provided the non-United States Person furnishes the
required information to the IRS. The non-United States Person must also file a
United States tax return in order to obtain a refund of the excess backup
withholding.
S-33
<PAGE>
UNDERWRITING
Lehman Brothers Inc. and Salomon Brothers Inc each have agreed to purchase
from the Company the principal amount of Notes set forth opposite its name.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------ ----------------
<S> <C>
Lehman Brothers Inc......................................... $
Salomon Brothers Inc........................................
------------
Total..................................................... $150,000,000
============
</TABLE>
The Underwriters will purchase the Notes under an Underwriting Agreement and
related Terms Agreement with the Company. The Underwriters will pay the Company
the public offering price less the underwriting discount specified on the cover
page of the final Prospectus Supplement. The Company estimates its expenses for
this offering at $250,000. Certain conditions contained in the Underwriting
Agreement must be satisfied before the Underwriters are required to purchase
the Notes. The Underwriters will either purchase all of the Notes or none of
them.
The Underwriters have advised the Company that they will offer the Notes
directly to the public initially at the public offering price and to certain
dealers at the public offering price less a selling concession not to exceed %
of the principal amount of the Notes. The Underwriters may allow and these
dealers may reallow a concession not to exceed % of the principal amount of
such Notes to other dealers. After the initial offering of the Notes, the
Underwriters may change the public offering price, the concession to selected
dealers and the reallowance to other dealers.
The Underwriters will offer the Notes subject to prior sale, withdrawal,
cancellation or modification of the offer of the Notes without notice, and to
their receipt and acceptance of the Notes. The Underwriters may reject any
order to purchase Notes.
Each Underwriter has severally represented and agreed that (1) it has not
offered or sold and will not offer or sell in the United Kingdom any Notes
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purpose of
their business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning
of the Public Offers of Securities Regulations 1995 (the "Regulations"), (2) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom and
(3) it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any document received by it in connection with the
issue of the Notes, if that person is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996, as amended, or is a person to whom the document may otherwise lawfully be
issued or passed on.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters may be required to make in respect thereof.
The Underwriters have provided investment banking services to the Company and
certain of its subsidiaries. The Underwriters may provide such services in the
future.
Application has been made to list the Notes on the Luxembourg Stock Exchange.
There can be no assurance that such listing will be obtained. The Notes have
been approved for clearance through the Cedel and Euroclear systems.
The Underwriters have advised the Company that they presently intend to make
a market in the Notes as permitted by applicable laws and regulations. The
Underwriters are not obligated to make a market in the
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<PAGE>
Notes, however, and they may discontinue such market making at any time in
their sole discretion. Accordingly, there may not be adequate liquidity or
adequate trading markets for the Notes.
The Underwriters may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 under the Securities Exchange Act of
1934, as amended. Rule 104 permits stabilizing bids to purchase a security so
long as bids do not exceed a specified maximum. Syndicate covering transactions
involve purchases of Notes in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing and
syndicate covering transactions may cause the price of the Notes to be higher
than it would otherwise be in the absence of such transactions. The
Underwriters may or may not engage in such transactions, in their discretion,
and, if such transactions are commenced, they may be discontinued without
notice.
Purchasers of the Notes may be required to pay stamp taxes and other charges
in accordance with the laws and practices of the country of purchase in
addition to the public offering price.
LEGAL MATTERS
Seth H. Hoogasian, Esq., General Counsel of the Company, will issue an
opinion on the validity of the Notes for the Company. Mr. Hoogasian is a full-
time employee and an officer of the Company and owns or has the right to
acquire 103,028 shares of Common Stock of the Company and 218,504 shares of the
common stock of the Company's subsidiaries. Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts, will issue an opinion on the validity of the Notes for
the Underwriters.
LISTING AND GENERAL INFORMATION
The Notes have been accepted for clearance through the Euroclear and Cedel
Bank clearance systems. The ISIN number for the Notes is , and the Common
Code for the Notes is . Application has been made to list the Notes on the
Luxembourg Stock Exchange. There can be no assurance that such listing will
be approved.
The Company's Board of Directors authorized the issuance and the terms of
the Notes on July 14, 1998. The Pricing Committee of the Board of Directors
authorized additional terms of the Notes on , 1998.
In connection with the application to list the Notes on the Luxembourg Stock
Exchange, the Company will file a legal notice relating to the issuance of the
Notes and copies of the Company's corporate charter, as amended, with the
Registrar of the District Court of Luxembourg (Greffier en Chef du Tribunal
d'Arrondissement de et a Luxembourg) where such documents may be examined and
copies obtained.
Copies of the Company's corporate charter, as amended, and the Indenture
(including the forms of Notes) will, so long as the Notes are listed on the
Luxembourg Stock Exchange, be available for inspection in the City of
Luxembourg at the office of the Luxembourg Paying Agent. In addition, so long
as the Notes are listed on the Luxembourg Stock Exchange, copies of the most
recent audited annual and interim unaudited quarterly financial statements of
the Company may be obtained at that office.
There has been no significant change in the financial position or operations
of the Company and its subsidiaries on a consolidated basis since January 4,
1998, except as set forth in this Prospectus Supplement, in the Prospectus or
in any document incorporated by reference into the Prospectus.
Except as set forth in this Prospectus Supplement, in the Prospectus or in
any document incorporated by reference into the Prospectus, neither the Company
nor any subsidiary is involved in any legal or arbitration proceedings, nor, to
the Company's knowledge, are any legal or arbitration proceedings pending or
threatened
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<PAGE>
involving the Company or any subsidiary, which may have or have had during the
twelve months prior to the date of this Prospectus Supplement a material
adverse effect on the financial position of the Company and its subsidiaries on
a consolidated basis.
The Underwriting Agreement, the Notes and the Indenture are governed by the
laws of the Commonwealth of Massachusetts, except that the rights, protections,
obligations, indemnities and immunities of the Trustee under the Indenture are
governed by the laws of the State of New York, without regard to the conflicts
of laws principles of either state.
The Company will mail and publish in the Luxemburger Wort copies of all
notices to holders of the Notes. The Company will publish notices in the
Luxemburger Wort as long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of that exchange so require.
Trades on the Luxembourg Stock Exchange must be capable of being settled
through Cedel Bank or Euroclear.
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<PAGE>
REGISTERED OFFICE OF THE ISSUER
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
United States
AUDITORS OF THE ISSUER
Arthur Andersen LLP
225 Franklin Street
Boston, Massachusetts 02110
United States
LEGAL ADVISER FOR THE ISSUER
(as to United States law)
Seth H. Hoogasian, Esq.
General Counsel
Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
United States
LEGAL ADVISER FOR THE UNDERWRITERS
(as to United States law)
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
United States
TRUSTEE AND PAYING AGENT
Bankers Trust Company
Four Albany Street, 4th Floor
New York, New York 10006
United States
LUXEMBOURG PAYING AGENT AND LUXEMBOURG TRANSFER AGENT
Bankers Trust Luxembourg, S.A.
14 Boulevard F.D. Roosevelt
L-2450 Luxembourg
LUXEMBOURG LISTING AGENT
Bankers Trust Luxembourg, S.A.
14 Boulevard F.D. Roosevelt
L-2450 Luxembourg
S-37
<PAGE>
PROSPECTUS
$696,328,125
THERMO ELECTRON CORPORATION
COMMON STOCK AND DEBT SECURITIES
This Prospectus may be used in connection with the offering and sale, from
time to time, together or separately, of shares of the common stock, $1.00 par
value per share (the "Common Stock") of Thermo Electron Corporation (the
"Company"), and the Company's debt securities ("Debt Securities"), which may be
either senior debt securities ("Senior Securities") or subordinated debt
securities ("Subordinated Securities"), consisting of debentures, notes and/or
other unsecured evidences of indebtedness. The Common Stock and the Debt
Securities in one or more series (collectively, the "Securities") may be
offered, separately or together, at prices and terms to be set forth in one or
more supplements to this Prospectus (each a "Prospectus Supplement") up to an
aggregate initial offering price of $696,328,125. Any Debt Securities sold
hereunder will be denominated in U.S. dollars. Specific terms of the Securities
for which this Prospectus is being delivered will be set forth in the
applicable accompanying Prospectus Supplement including, where applicable, (i)
in the case of Debt Securities, the specific designation, aggregate principal
amount, denominations, maturity, premium, rate of interest (or method of
calculation thereof) and time of payment thereof, terms for redemption at the
option of the Company or the holder, terms for any sinking fund payments,
subordination provisions, if any, terms, if any, providing for conversion of
the Debt Securities into Common Stock, the form of the Debt Securities (which
may be registered or bearer, or certificated or global), the initial public
offering price and certain other terms of the offering and sale of the Debt
Securities in respect of which this Prospectus is being delivered; and (ii) in
the case of Common Stock, the number of shares and initial public offering
price of the Common Stock and certain terms of the offering and sale thereof,
including the identity of selling securityholders, if any. The Prospectus
Supplement may also contain information, as applicable, about certain U.S.
federal income tax considerations relating to, and any listing on a securities
exchange of, the Securities for which the Prospectus Supplement is being
delivered. The Common Stock is listed on the New York Stock Exchange. Any
Common Stock offered will be listed, subject to notice of issuance, on such
exchange.
The Securities may be sold by the Company or by selling securityholders
directly or indirectly through agents, underwriters or dealers as designated
from time to time, or through a combination of such methods. See "Plan of
Distribution." The applicable accompanying Prospectus Supplement will set forth
the names of any underwriters, dealers or agents involved in the sale of the
Securities in respect of which this Prospectus is being delivered and any
applicable fee, commission or discount arrangements with them. See "Plan of
Distribution" for possible indemnification arrangements with underwriters,
dealers and agents.
This Prospectus may not be used to consummate sales of Securities unless
accompanied or, to the extent permitted by applicable law, preceded by a
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 29, 1998.
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus and the applicable
Prospectus Supplement, prospective purchasers of the Securities offered hereby
should carefully consider the risk factors set forth in the Company's most
recent Annual Report on Form 10-K.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549; and at the Commission's regional offices at 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, New York,
New York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, DC
20549, at prescribed rates. The Commission also maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company; the address of such Web site is http://www.sec.gov. The Common
Stock is listed on the New York Stock Exchange, and such material that relates
to the Company may also be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form S-
3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), of which this Prospectus constitutes a part. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is made to
the Registration Statement.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No. 1-
8002) are hereby incorporated by reference into this Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended January 3, 1998,
as amended by Amendment No. 1 on Form 10-K/A filed with the Commission on
April 3, 1998;
(b) Quarterly Report on Form 10-Q for the fiscal quarter ended April 4,
1998;
(c) Current Report on Form 8-K filed with the Commission on April 7, 1998
with respect to the Company's execution of a domestic and an international
underwriting agreement with respect to its public sale of 6,500,000 shares
of its common stock;
(d) Current Report on Form 8-K filed with the Commission on June 4, 1998
with respect to a contemplated offering by Thermo Power Corporation and
with respect to an exchange offer being conducted by Thermedics Inc.;
(e) Current Report on Form 8-K filed with the Commission on July 7, 1998
with respect to the Company's anticipated total gains from the issuance of
stock by the Company's subsidiaries for the quarter ended July 4, 1998;
(f) Current Report on Form 8-K filed with the Commission on July 22, 1998
with respect to the Company's expected operating income for the quarter
ended July 4, 1998;
(g) Quarterly Report on Form 10-Q for the fiscal quarter ended July 4,
1998;
(h) Current Report on Form 8-K filed with the Commission on September 3,
1998 with respect to changes in the executive management of the Company;
(i) Current Report on Form 8-K filed with the Commission on September
15, 1998 with respect to the retirement of the Company's Chief Financial
Officer;
(j) The description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed under the Exchange Act,
as such description may be amended from time to time; and
(k) Current Report on Form 8-K filed with the Commission on September
29, 1998 with respect to restructuring and other charges at the Company;
(l) The description of the Company's Preferred Stock Purchase Rights
which is contained in the Company's Registration Statement on Form 8-A
filed under the Exchange Act, as such description may be amended from time
to time.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
respective dates of filing of such documents. Any statement contained herein or
in a document all or any portion of which is incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such earlier statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to any person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the foregoing documents incorporated herein by reference (other than
certain exhibits to such documents). Requests for such copies should be
directed to Sandra L. Lambert, Secretary, Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046 (telephone: (781) 622-
1000). This Prospectus (including the documents incorporated by reference
herein (other than certain exhibits to such documents)) will also be obtainable
free of charge at the office of Bankers Trust Luxembourg S.A., 14 Boulevard
F.D. Roosevelt, L-2450 Luxembourg.
3
<PAGE>
THE COMPANY
The Company develops, manufactures and markets environmental monitoring and
analysis instruments; biomedical products including heart-assist devices,
respiratory care equipment, and mammography systems; paper-recycling and
papermaking equipment; alternative-energy systems; industrial process
equipment; and other specialized products. The Company also provides a range of
services for the personal care, environmental, laboratory analysis, and metals-
processing industries, and conducts advanced technology research and
development. The Company performs its business through majority-owned
subsidiaries that are partially owned by the public or by private investors, as
well as through wholly-owned subsidiaries.
The Company has developed leading market positions in many lines of business,
including environmental monitoring and analysis instruments, mammography
systems, biomass power plants, and paper-recycling equipment and papermaking
accessories. The Company is currently seeking to establish leading market
positions in the field of left ventricular-assist systems, explosives-detection
systems, thermal soil-remediation services and dedicated natural gas engines.
The Company is developing new products in its Advanced Technologies segment, as
well as other segments.
A key element in the Company's growth has been its ability to commercialize
innovative products and services emanating from research and development
activities conducted at the Company's various subsidiaries and divisions. The
Company's strategy has been to identify business opportunities arising from
social, economic and regulatory issues and seek a leading market share through
the application of proprietary technology. As part of this strategy, the
Company continues to focus on the acquisition of complementary businesses that
can be integrated into existing core businesses to leverage the Company's
access to new markets.
The Company believes that maintaining an entrepreneurial atmosphere is
essential to continuing its growth and development. In order to preserve this
environment, the Company adopted the strategy of having certain subsidiaries
sell a minority interest to outside investors. The Company believes that this
strategy provides additional motivation and incentives for the management of
the subsidiaries through the establishment of subsidiary-level stock option
incentive programs, as well as capital to support the subsidiaries' growth. The
Company's majority-owned subsidiaries are provided with centralized strategic
planning, corporate development, administrative, financial and other services
that would not be available to many independent companies of similar size.
The Company, a Delaware corporation, was incorporated on October 11, 1960,
completed its initial public offering in 1967, and was listed on the New York
Stock Exchange in 1980. The principal executive office of the Company is
located at 81 Wyman Street, Waltham, Massachusetts 02454-9046 (telephone: 781-
622-1000).
4
<PAGE>
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement, the net
proceeds from the sale of the Securities will be used by the Company for
general corporate purposes, which may include repayment of outstanding
indebtedness, capital expenditures, working capital requirements, research and
development, repurchase of its Common Stock and other securities and the
securities of any of its subsidiaries through open-market purchases or
otherwise, and possible future acquisitions. The precise amount and timing of
the application of such proceeds will depend upon the funding requirements of
the Company, and the availability and cost of other funds. Pending these uses,
the Company expects to invest the net proceeds primarily in investment grade
interest or dividend bearing instruments.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges of the Company and its subsidiaries for the periods indicated. For
purposes of computing the ratios of earnings to fixed charges, "earnings"
represent income from continuing operations before taxes, cumulative effect of
change in accounting principle and extraordinary item, adjusted for minority
interest in losses of consolidated subsidiaries and minority interest in income
of consolidated subsidiaries with fixed charges, plus fixed charges, excluding
capitalized interest. "Fixed charges" for continuing operations consist of
interest on indebtedness and amortization of debt expense, capitalized interest
and one-third of rental expense, which is deemed to be the interest component
of such rental expense.
<TABLE>
<CAPTION>
FISCAL YEAR(1) SIX MONTHS ENDED
------------------------ ----------------
1993 1994 1995 1996 1997 JULY 4, 1998
---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges... 3.21 3.63 4.17 4.18 5.15 4.94
</TABLE>
- --------
(1) The Company's fiscal years ended on January 1, 1994, December 31, 1994,
December 30, 1995, December 28, 1996 and January 3, 1998.
5
<PAGE>
DESCRIPTION OF DEBT SECURITIES OF THE COMPANY
The following description sets forth certain general terms and provisions of
the Debt Securities of the Company to which any Prospectus Supplement may
relate. The particular terms of the Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may not
apply to the Debt Securities so offered will be described in the Prospectus
Supplement relating to such Debt Securities.
The Debt Securities constitute either senior Debt Securities (the "Senior
Securities") or subordinated Debt Securities (the "Subordinated Securities").
The Senior Securities are to be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and Bankers Trust Company,
as trustee (the "Trustee"), the form of which Senior Indenture is filed as an
exhibit to the Registration Statement containing this Prospectus. The
Subordinated Securities will be issued under an Indenture (the "Subordinated
Indenture"), to be entered into between the Company and Bankers Trust Company,
as trustee (in such capacity, also the "Trustee"), the form of which
Subordinated Indenture is also filed as an exhibit to the Registration
Statement containing this Prospectus. The Senior Indenture and the Subordinated
Indenture are sometimes collectively referred to herein as the "Indentures."
The following summary of certain provisions of the Debt Securities and the
Indentures does not purport to be complete and is subject to, and qualified in
its entirety by reference to, all the provisions of the Indentures, including
the definitions therein of certain terms. Wherever particular provisions or
defined terms of the Indentures are referred to, such provisions or defined
terms are incorporated herein by reference. Certain defined terms in the
Indentures are capitalized herein. Article or section references in parentheses
are to the applicable Indenture. References in this section to the "Company"
are solely to Thermo Electron Corporation and not to any of its subsidiaries.
Unless otherwise indicated, currency amounts in this Prospectus and any
Prospectus Supplement are stated in United States dollars ("$," "U.S. Dollars"
or "dollars").
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
that may be issued thereunder and provide that Debt Securities may be issued
thereunder up to an aggregate principal amount that may be authorized from time
to time by the Company. Debt Securities may be issued in one or more series
thereunder. The Senior Securities will be unsecured obligations of the Company
and will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company. Unless otherwise indicated in the applicable
Prospectus Supplement, the Subordinated Securities will be unsecured and
subordinated in right of payment to all existing and future Senior Indebtedness
of the Company, in the manner and to the extent described below under
"Subordination of Subordinated Securities." The Company's rights as a
stockholder and the rights of its creditors, including holders of the Debt
Securities, to participate in the assets of any of the Company's subsidiaries,
as the case may be, upon a subsidiary's liquidation or recapitalization will be
subject to the prior claims of such subsidiary's creditors.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for specific terms, including (where
applicable): (1) the title or designation of such Debt Securities and the
series in which such Debt Securities shall be included; (2) the aggregate
principal amount of such Debt Securities and any limit on such aggregate
principal amount and the price or prices (expressed as a percentage of the
principal amount thereof) at which such Debt Securities will be issued; (3) if
there is more than one Trustee, the identity of the Trustees and, if not the
Trustee, the identity of each Security Registrar, and the identity of each
Paying Agent, Conversion Agent or Authenticating Agent with respect to the Debt
Securities; (4) the date or dates on which the principal of and premium, if
any, on such Debt Securities will be payable, or the method or methods, if any,
by which such date or dates will be determined; (5) the rate or rates (which
may be fixed or variable) at which such Debt Securities will bear interest, if
any, or the method or methods, if any, by which such rate or rates are to be
determined, the date or dates, if any, from which such interest will accrue
6
<PAGE>
or the method or methods, if any, by which such date or dates are to be
determined, the interest payment dates, if any, on which such interest shall be
payable and the record dates, if any, for the interest payable on Debt
Securities in registered form on any interest payment dates, whether and under
what circumstances Additional Amounts on such Debt Securities will be payable,
and the basis upon which interest will be calculated if other than that of a
360-day year of twelve 30-day months; (6) if the Debt Securities are to be
issuable in global form and are to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Debt Security) only upon receipt
of certain certificates or other documents or satisfaction of other conditions,
then the terms of such certificates, documents or conditions; (7) the place or
places where the principal of, premium, if any, and any interest or any
Additional Amounts with respect to such Debt Securities shall be payable, the
place or places where such Debt Securities may be surrendered for registration
of transfer and exchange, and the place or places of transfer, exchange or
conversion in the circumstances described in the Prospectus Supplement or in
the Indentures, if other than The City of New York; (8) the period or periods
within which, the price or prices at which and the other terms and conditions
upon which such Debt Securities may be redeemed at the option of the Company;
(9) the obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the price or
prices at which, and the terms and conditions upon which such Debt Securities
shall be redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation; (10) whether any such Debt Securities are to be issuable in
registered form ("Registered Securities") or bearer form ("Bearer Securities")
or both and, if in bearer form, the terms and conditions relating thereto,
including whether interest in respect of any portion of a temporary Bearer
Security in global form payable in respect of an interest payment date therefor
prior to the Exchange Date shall be paid to any clearing organization with
respect to the portion of such temporary Bearer Security held for its account
and any further terms and conditions relating to the crediting of such interest
payments to the persons entitled thereto, and any limitations on issuance of
such Bearer Securities (including in exchange for registered Debt Securities of
the same series); (11) the authorized denominations in which Debt Securities
will be issuable, if other than denominations of $1,000 and any integral
multiple thereof (in the case of Registered Securities) or $1,000 or $10,000
(in the case of Bearer Securities); (12) the terms, if any, on which such Debt
Securities may be exchanged for or converted into other securities of the
Company; (13) whether any such Debt Securities will be issued in temporary or
permanent global form and, if so, the identity of the depository or
depositories for such global Debt Security; (14) the index, formulas or other
method, if any, with reference to which the amount of any payment of principal
of, premium, if any, or interest on or any Additional Amounts with respect to
the Debt Securities will be determined; (15) the portion of the principal
amount of such Debt Securities which will be payable upon declaration of
acceleration of the Maturity thereof, if other than the stated principal amount
thereof; (16) any addition to, or modification or deletion of, any covenant or
Event of Default with respect to such Debt Securities; (17) the terms, if any,
upon which Debt Securities may be exchangeable for other Securities; (18) in
the case of an issue of Subordinated Securities, the subordination provisions,
if different from those described under "Subordination of Subordinated
Securities" below; (19) the applicability of any provisions described below
under "Discharge, Defeasance and Covenant Defeasance;" (20) the date(s) that
the Securities are to be dated; and (21) any other terms of such Debt
Securities not inconsistent with the provisions of the Indentures. As used in
this Prospectus and any Prospectus Supplement relating to the offering of any
Debt Securities, references to the principal of and premium, if any, and
interest, if any, on Debt Securities will be deemed to include mention of the
payment of Additional Amounts, if any, required by the terms of Debt Securities
in such context. (Section 301)
Under the Indenture, the terms of the Debt Securities of any series may
differ, and the Company, without the consent of the holders of the Debt
Securities of any series, may reopen a previous series of Debt Securities and
issue additional Debt Securities of such series. (Section 301)
Debt Securities may be issued at a discount from their stated principal
amount. United States Federal income tax considerations and other special
considerations applicable to any such Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
7
<PAGE>
Debt Securities may be issued that qualify as "Variable Rate Debt Securities"
for tax purposes. United States Federal income tax considerations and other
special considerations applicable to any such Variable Rate Debt Securities
will be described in the applicable Prospectus Supplement.
Debt Securities may also be issued that provide for the use of an index to
determine the amount of payments of principal of, premium, if any, or interest
on the series of which such Debt Securities are a part, but which do not
qualify as Variable Rate Debt Securities. Special Federal income tax,
accounting and other considerations applicable to such Indexed Securities will
be described in the applicable Prospectus Supplement.
SUBORDINATION OF SUBORDINATED SECURITIES
The Subordinated Securities will be subordinated in right of payment to the
prior payment in full of all existing and future Senior Indebtedness of the
Company. Senior Indebtedness of the Company is defined for this purpose as the
principal of, premium, if any, and interest and other amounts due on or with
respect to the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred or created: (a) indebtedness of
the Company for money borrowed by the Company (including, without limitation,
purchase money obligations and money borrowed from any of its affiliates),
whether or not evidenced by debentures, bonds, notes or other corporate debt
securities or similar instruments issued by the Company; (b) obligations to
reimburse any bank or other person in respect of amounts paid under letters of
credit; (c) leases of real property, equipment or other assets, which leases
are capitalized in the Company's financial statements in accordance with
generally accepted accounting principles; (d) commitment, standby and other
fees due and payable to financial institutions with respect to credit
facilities available to the Company; (e) obligations of the Company under
interest rate and currency swaps, floors, caps or other similar arrangements
intended to hedge interest rates or currency exposure; (f) obligations 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 obligations secured thereby shall have been
assumed by the Company; (g) obligations of the Company constituting guarantees
of indebtedness of or joint obligations with another or others which would be
included in the preceding clauses (a), (b), (c), (d), (e) or (f); and (h)
modifications, renewals, extensions or refundings of any of the indebtedness,
leases, fees or obligations referred to in the preceding clauses (a), (b), (c),
(d), (e), (f) or (g) or debentures, notes or other evidences of indebtedness
issued in exchange therefor; provided that Senior Indebtedness shall not
include any particular indebtedness, lease, fee or obligation, modification,
renewal, extension, refunding or exchanged securities if, under the express
provisions of the instrument creating or evidencing the same, or pursuant to
which the same is outstanding, such indebtedness, lease, fee or obligation or
such modification, renewal, extension or refunding thereof or exchanged
securities are stated to be not superior in right of payment to the
Subordinated Securities. (Article Seventeen of the Subordinated Indenture) The
Subordinated Securities will rank pari passu with each other. The obligations
represented by the Subordinated Securities may rank pari passu with certain
other obligations of the Company, if so indicated in the applicable Prospectus
Supplement.
Upon (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceeding
in connection therewith, relative to the Company or its creditors, as such, or
to its assets, or (b) any liquidation, dissolution or other winding up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit or creditors or
any other marshaling of assets and liabilities of the Company, all principal
of, premium, if any, and interest due upon all Senior Indebtedness must be paid
in full before the Holders of the Subordinated Securities or the Trustee are
entitled to receive or retain any assets so distributed in respect of the
Subordinated Securities. (Section 1702) Upon the maturity of any Senior
Indebtedness by lapse of time, acceleration or otherwise, such Senior
Indebtedness shall first be paid in full, or duly provided for in cash, before
any payment is made by the Company, directly or indirectly, on the Subordinated
Securities. Upon the happening of any event of default with respect to any
Senior Indebtedness, 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
8
<PAGE>
indirectly, on account of the principal of, premium, if any or interest on the
Subordinated Securities and any Coupons appertaining thereto. (Section 1703) By
reason of these provisions, in such events, Holders of the Subordinated
Securities may recover less, ratably, than other creditors of the Company,
including holders of Senior Indebtedness.
Subject to payment in full of all Senior Indebtedness of the Company, the
rights of Holders of the Subordinated Securities will be subrogated to the
rights of holders of Senior Indebtedness to receive payments or distributions
of cash, property or securities of the Company applicable to Senior
Indebtedness. (Section 1705)
The Subordinated Indenture places no limitation on the amount of additional
Senior Indebtedness or any other indebtedness that may be incurred by the
Company. The Company expects from time to time to incur additional
indebtedness, including Senior Indebtedness.
STRUCTURAL SUBORDINATION
The obligations represented by the Debt Securities are obligations
exclusively of the Company and not of its subsidiaries. Because the operations
of the Company are, in large part, conducted through subsidiaries, the cash
flow and the consequent ability to service debt of the Company, including the
obligations represented by the Debt Securities, are dependent, in part, upon
the earnings of its subsidiaries and the distribution of those earnings to the
Company or upon loans or other payments of funds by those subsidiaries to the
Company. The Company's ability to access assets held by its majority-owned
subsidiaries through dividends, loans, or other transactions is subject in each
instance to a fiduciary duty owed to the minority stockholders of the relevant
subsidiary. The subsidiaries are separate and distinct legal entities and have
no obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debt Securities or to make any funds available therefor, whether by dividends,
loans or other payments. In addition, the payment of dividends and the making
of loans and advances to the Company by its subsidiaries may be subject to
statutory restrictions, and dividends paid by a subsidiary that does not
consolidate with the Company for tax purposes will be subject to taxation.
The obligations represented by the Debt Securities will be effectively
structurally subordinated to the indebtedness and other liabilities that each
of the Company's subsidiaries owes to its creditors. Any right of the Company
to receive assets of any of its subsidiaries upon liquidation or reorganization
of such subsidiary (and the consequent right of the holders of the Debt
Securities to participate in those assets) will be effectively subordinated to
the claims of that subsidiary's creditors, except to the extent that the
Company is itself recognized as a creditor of such subsidiary, in which case
the claims of the Company would still be subject to any security interests in
the assets of such subsidiary and subordinated to any indebtedness of such
subsidiary senior to that held by the Company. In addition, any minority
stockholder of such subsidiary would be entitled to participate in the assets
of such subsidiary on the same terms as the Company (in the Company's capacity
as a stockholder of such subsidiary).
CONVERSION RIGHTS
Unless otherwise indicated in an applicable Prospectus Supplement, the
following provisions shall be applicable with respect to any Debt Security that
is convertible into Common Stock (a "Convertible Debt Security").
The Holder of any Convertible Debt Security will have the right, at the
Holder's option, to convert any portion of the principal amount of a
Convertible Debt Security that is an integral multiple of $1,000 into shares of
Common Stock at any time on or after (a) in the case of all Convertible Debt
Securities other than a temporary global Bearer Security, its date of issuance
and (b) in the case of Convertible Debt Securities represented by a temporary
global Bearer Security, the receipt of definitive Convertible Debt Securities,
and prior to the close of business on the maturity date, unless previously
redeemed or repurchased, at the Conversion Price per share set forth in an
applicable Prospectus Supplement (subject to adjustment as described below).
The right to convert a Convertible Debt Security called for redemption or
delivered for repayment will terminate at the close of business on the fifth
business day prior to the redemption date for such Convertible Debt Security or
the second business day preceding the repayment date, as the case may be,
unless the Company defaults in making the payment due upon redemption or
repayment, as the case may be. (Section 1201)
9
<PAGE>
The right of conversion attaching to any Convertible Debt Security may be
exercised by the Holder by delivering the Convertible Debt Security at the
specified office of a Conversion Agent (which in the case of a Convertible Debt
Security which is a Bearer Debt Security (a "Bearer Convertible Debt Security")
will only be the office of any Conversion Agent outside the United States),
accompanied by a duly signed and completed notice of conversion. The Conversion
Date will be the date on which the Convertible Debt Security and the duly
signed and completed notice of conversion are so delivered. As promptly as
practicable on or after the Conversion Date, the Company will issue and deliver
to the Trustee a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share; such certificate will be sent by the Trustee to the
appropriate Conversion Agent for delivery to the Holder. Accrued interest from
the immediately preceding interest payment date until the Conversion Date will
be paid within five business days after the Conversion Date. Each Bearer
Convertible Debt Security delivered for conversion must be delivered with all
Coupons maturing after the Conversion Date. Coupons maturing on or before the
Conversion Date and not in default will be payable against surrender thereof,
and Coupons so maturing but in default will continue to be payable as set forth
in the Indenture, notwithstanding the exercise of the right of conversion by
the Holder of the Convertible Debt Security to which the Coupons appertain, but
Coupons maturing after the Conversion Date will not be paid. In the case of any
Convertible Debt Security that is a Registered Debt Security which has been
converted after any Regular Record Date but on or prior to the next Interest
Payment Date (other than any such Registered Debt Security whose Maturity is
prior to such Interest Payment Date), interest the Stated Maturity of which is
on such Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest shall be paid to the Holder
of such Registered Convertible Debt Security on such Regular Record Date. No
other payment or adjustment for interest, or for any dividends in respect of
Common Stock, will be made upon conversion. Holders of Common Stock issued upon
conversion will not be entitled to receive any dividends payable to holders of
Common Stock as of any record time before the close of business on the
Conversion Date. No fractional shares will be issued upon conversion, but in
lieu thereof, an appropriate amount will be paid in cash by the Company based
on the market price of the Common Stock at the close of business on the day of
conversion. (Sections 307, 1202 and 1203)
A Holder delivering a Convertible Debt Security for conversion will not be
required to pay any stamp and similar taxes or duties in respect of the issue
or delivery of Common Stock on conversion but will be required to pay any tax
or duty which may be payable in respect of any transfer involved in the issue
or delivery of the Common Stock in a name other than that of the Holder of the
Convertible Debt Security. Certificates representing shares of Common Stock
will not be issued or delivered unless all taxes and duties, if any, payable by
the Holder have been paid. (Sections 1202 and 1208)
The Conversion Price is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock
of rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (determined as provided
in the Indenture) of the Common Stock, (c) subdivisions, combinations and
reclassifications of Common Stock and (d) distributions to all holders of
Common Stock of evidences of indebtedness of the Company, shares of capital
stock, cash or assets (including securities, but excluding those dividends,
rights, options, warrants and distributions referred to above, dividends and
distributions paid exclusively in cash out of the consolidated retained
earnings of the Company and mergers and consolidations to which the last
paragraph of this section applies). The Company reserves the right to make such
reductions in the Conversion Price in addition to those required in the
foregoing provisions as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the recipients. No adjustment of the Conversion Price
will be required to be made until the cumulative adjustments amount to 1.0% or
more of the Conversion Price. (Section 1204) Notices of any adjustments to the
Conversion Price pursuant to this paragraph will be given to all Holders in the
manner required in the Indenture. (Section 1205)
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to the stockholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness
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or assets of the Company, but generally not stock dividends on Common Stock or
rights to subscribe for Common Stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Convertible Debt
Securities are convertible is increased, such increase may be deemed for
federal income tax purposes to be the payment of a taxable dividend to Holders
of Convertible Debt Securities.
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Convertible Debt Security
then outstanding will, without the consent of the Holder of any Convertible
Debt Security or Coupon, become convertible 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 into which
such Convertible Debt Security was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Convertible Debt Security was then convertible). (Section 1211)
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENTS
The Indentures provide that the Company may issue Debt Securities in
registered form only, in bearer form only, or in both registered and bearer
form.
Unless otherwise indicated in the applicable Prospectus Supplement,
Registered Securities will be issued in denominations of $1,000 or any integral
multiple thereof, without interest Coupons, and definitive Bearer Securities
will be issued in denominations of $1,000 and $10,000, with interest Coupons
attached. (Section 302)
Unless otherwise indicated in the applicable Prospectus Supplement, the
principal, premium, if any, and interest on the Registered Securities will be
payable, Registered Securities may be surrendered for registration of transfer
or exchange and Registered Securities may be surrendered for conversion at an
office or agency to be maintained by the Company in the Borough of Manhattan,
The City of New York, provided that payments of interest with respect to any
Registered Security may be made at the option of the Company by check mailed to
the address of the person entitled thereto or by transfer to an account
maintained by the payee with a bank located in the United States. No service
charge shall be made for any registration of transfer or exchange of Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge and any other expenses that may be imposed
in connection therewith, except in certain circumstances. (Sections 305, 307
and 1002)
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest on Bearer Securities will be
made, and Bearer Securities may be presented for conversion, subject to any
applicable laws and regulations, at such office or agency outside the United
States as is specified in the applicable Prospectus Supplement and as the
Company may designate from time to time. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of interest due on Bearer Securities
on any Interest Payment Date will be made only against surrender of the Coupon
relating to such Interest Payment Date. Unless otherwise indicated in the
applicable Prospectus Supplement, no payment of principal, premium or interest
or surrender for conversion with respect to any Bearer Security will be made at
any office or agency in the United States or by check mailed to any address in
the United States or by transfer to an account maintained with a bank located
in the United States; provided, however, that payment with respect to Bearer
Securities may be made and any Bearer Securities may be surrendered for
conversion, if applicable, at the Corporate Trust Office of the applicable
Trustee or at any office or agency designated by the Company in the Borough of
Manhattan, The City of New York, if (but only if) payment of the full amount of
such principal, premium or interest or the surrender of Bearer Securities for
conversion at all offices outside of the United States maintained for such
purpose by the Company is illegal or effectively precluded by exchange controls
or similar restrictions. (Sections 307 and 1002)
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Unless otherwise indicated in the applicable Prospectus Supplement, Bearer
Securities (provided that all unmatured related Coupons and matured related
Coupons in default are attached) will be exchangeable for an equal aggregate
principal amount of Registered Securities of the same series in denominations
of $1,000 and integral multiples thereof without Coupons, and Registered
Securities will be exchangeable for an equal aggregate principal amount of
Registered Securities of different denominations, in each case without service
charge (other than the cost of delivery) but upon payment of any taxes and
other governmental charges, except in certain circumstances. Bearer Securities
may be exchanged for Registered Securities of the same series by surrender of
such Bearer Securities to be exchanged at any applicable Office or Agency for
such series, with all unmatured Coupons and all matured Coupons in default
thereto appertaining. If and so long as Registered Securities of a series are
represented solely by a global Debt Security (see "Global Securities" below), a
Bearer Security may be exchanged for a beneficial interest in such global Debt
Security only by and through a DTC Participant (as defined in "Global
Securities" below). In case a Bearer Security of any series is surrendered at
any such Office or Agency for such series in exchange for a Registered Security
of such series and like tenor after the close of business at such Office or
Agency on (i) any Regular Record Date and before the opening of business at
such Office or Agency on the relevant Interest Payment Date, or (ii) any
Special Record Date and before the opening of business at such Office or Agency
on the related date for payment of Defaulted Interest, such Bearer Security
shall be surrendered without the Coupon relating to such Interest Payment Date
or proposed date for payment of Defaulted Interest, as the case may be, and
interest or Defaulted Interest, as the case may be, shall not be payable on
such Interest Payment Date or proposed date for payment of Defaulted Interest,
as the case may be, in respect of the Registered Security issued in exchange
for such Bearer Security, but shall be payable only to the Holder of such
Coupon when due in accordance with the provisions of the Indentures. Unless
otherwise indicated in the applicable Prospectus Supplement, Registered
Securities will not be exchangeable for Bearer Securities. Registered
Securities shall be registered as provided in the Indenture. (Section 305)
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company shall not be required (i) to issue, register the transfer of or
exchange any Debt Securities during a period beginning at the opening of
business 15 days before the day of the selection for redemption of such Debt
Securities and ending at the close of business on the day of such selection, or
(ii) to register the transfer of or exchange any Registered Security so
selected for redemption in whole or in part, except, in the case of any Debt
Security to be redeemed in part, the portion thereof not to be redeemed, or
(iii) to exchange any Bearer Security so selected for redemption except, to the
extent provided with respect to such Bearer Security, that such Bearer Security
may be exchanged for a Registered Security of like tenor and the same series,
provided that such Registered Security shall be immediately surrendered for
redemption with written instruction for payment consistent with the provisions
of Indenture or (iv) to issue, register the transfer of or exchange any Debt
Security which, in accordance with its terms, has been surrendered for
repayment at the option of the holder of such Debt Security, except the
portion, if any, of such Security not to be so repaid. (Section 305)
GLOBAL SECURITIES
The Debt Securities may be issued in whole or in part in the form of one or
more global securities, each of which will be deposited with, or on behalf of,
a depository (a "Depository"). Global Debt Securities may be issued in either
registered or bearer form and in either temporary or permanent form. The
Company anticipates that Bearer Securities will be represented initially by a
temporary global Debt Security in bearer form, without interest Coupons or
conversion rights, which will be deposited on the applicable closing date on
behalf of subscribers for the Bearer Securities represented thereby with a
common depository in London for their respective accounts at Morgan Guaranty
Trust Company of New York, Brussels Office, as operator of the Euroclear
Clearance System ("Euroclear"), or Cedel Bank, S.A. ("Cedel"). Upon deposit of
the temporary global Debt Security, Euroclear or Cedel, as the case may be,
will credit each subscriber with a principal amount of Bearer Securities equal
to the principal amount thereof for which it has subscribed and paid. The
temporary global Debt Security will be exchangeable for definitive Bearer
Securities in denominations of $1,000 and $10,000 or other authorized
denominations, each with related interest Coupons attached, or Registered
Securities in denominations of $1,000 or an integral multiple thereof, if
permitted by the rules and
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procedures then in effect of Cedel, Euroclear and The Depository Trust Company
("DTC"), commencing on the exchange date specified in the applicable Prospectus
Supplement (the "Exchange Date"), if permitted. Exchange for definitive Bearer
Securities will be made only upon certification that the beneficial owners of
such Bearer Securities are not United States persons (as defined below) or
other persons who have purchased such Bearer Securities for resale to United
States persons. No Bearer Debt Security so delivered in exchange will be mailed
or otherwise delivered to any location in the United States. The temporary
global Debt Security will be exchangeable for Registered Securities in
denominations of $1,000 or an integral multiple thereof at any time without
certification of non-U.S. status; provided that such exchange is permitted by
the rules and procedures then in effect of Cedel and Euroclear, and provided,
further, that if and so long as Registered Securities of a series are
represented solely by a global Debt Security, such exchange may be effected
only by and through a DTC Participant (as defined below). A beneficial owner
must exchange its share of the global Debt Security in bearer form for
definitive Debt Securities, in either registered or bearer form, before
payments can be collected or conversion rights exercised. (Section 304) Any
additional or differing terms of the depository arrangements will be described
in the Prospectus Supplement relating to a particular series of Debt Securities
issued in the form of temporary global Debt Securities.
In addition, the Company anticipates that any global Debt Security in
registered form will be deposited with, or on behalf of DTC, and that such
global Debt Security will be permanent and will be registered in the name of
Cede & Co., DTC's nominee. The Company further anticipates that the following
provisions will apply to the Depository arrangements with respect to any such
global Debt Security in registered form. Any additional or differing terms of
the depository arrangements will be described in the Prospectus Supplement
relating to a particular series of Debt Securities issued in the form of global
Debt Securities.
So long as DTC or its nominee is the registered owner of a global Debt
Security, DTC or its nominee, as the case may be, will be considered the sole
Holder of the Debt Securities represented by such global Debt Security for all
purposes under the applicable Indenture. Except as described below, owners of
beneficial interests in a global Debt Security will not be entitled to have
Debt Securities represented by such global Debt Security registered in their
names, will not receive or be entitled to receive physical delivery of Debt
Securities in definitive form and will not be considered the owners or Holders
thereof under the applicable Indenture. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form; accordingly, such laws may limit the transferability of
beneficial interests in a global Debt Security.
Unless otherwise specified in the applicable Prospectus Supplement, each
global Debt Security in registered form will be exchangeable for definitive
Registered Securities of the same series only if (i) DTC notifies the Company
that it is unwilling or unable to continue as Depository or DTC ceases to be a
clearing agency registered under the Exchange Act (if so required by applicable
law or regulation) and, in either case, a successor Depository is not appointed
by the Company within 90 days after the Company receives such notice or becomes
aware of such ineligibility, (ii) the Company in its sole discretion determines
that the global Debt Securities shall be exchangeable for definitive Registered
Securities and delivers a Company Order to the Trustee to such effect or (iii)
there shall have occurred and be continuing an Event of Default under the
Indenture with respect to the Debt Securities of any series. Upon any such
exchange, owners of a beneficial interest in the global Debt Security or
Securities in registered form will be entitled to physical delivery of
individual Debt Securities in definitive form of like tenor, terms and rank,
equal in principal amount to such beneficial interest, and to have such Debt
Securities in definitive form registered in the names of the beneficial owners,
which names shall be provided by DTC's relevant participants (as identified by
DTC) to the Trustee. Unless otherwise described in the applicable Prospectus
Supplement, Debt Securities so issued in definitive form will be issued in
denominations of $1,000 or any integral multiple thereof, and will be issued in
registered form only, without Coupons. (Section 305)
The following is based on information furnished to the Company:
DTC will act as securities Depository for the global Debt Securities in
registered form. These Debt Securities will be issued as fully Registered
Securities registered in the name of Cede & Co. (DTC's
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partnership nominee). One fully registered Debt Security certificate will be
issued and deposited with DTC with respect to each series of Debt Securities,
each in the aggregate principal amount of such series (except that if the
aggregate principal amount of a series of Debt Securities exceeds $200 million
(or such other amount as shall be permitted by DTC from time to time) one
certificate will be issued with respect to each $200 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount of such series).
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly ("Indirect Participants"). The rules applicable
to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Debt Securities on
DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner will not receive written confirmation
from DTC of its purchase, but is expected to receive a written confirmation
providing details of the transaction, as well as periodic statements of its
holdings, from the Direct or Indirect Participant through which such Beneficial
Owner entered into the transaction. Transfers of ownership interests in Debt
Securities are accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in Debt Securities,
except in the event that use of the book-entry system for the Debt Securities
is discontinued.
To facilitate subsequent transfers, the Debt Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of the Debt Securities with DTC and their registration
in the name of Cede & Co. will effect no change in beneficial ownership. DTC
has no knowledge of the actual Beneficial Owners of the Debt Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Debt Securities are credited, which may or may not be the Beneficial
Owners. The Participants remain responsible for keeping account of their
holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants
to whose accounts the Debt Securities are credited on the record date
(identified on a list attached to the Omnibus Proxy).
Principal payments, premium payments, if any, and interest payments, if any,
on the registered Debt Securities in global form will be made to Cede & Co., as
nominee of DTC. DTC's practice is to credit Direct Participants' accounts, upon
DTC's receipt of funds and corresponding detail information from the issuer, on
the payment date in accordance with their respective holdings as shown on DTC's
records. Payments by Direct
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and Indirect Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name", and
are the responsibility of such Direct and Indirect Participants and not of DTC,
the Trustee, or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal
(premium, if any) and interest, if any, to Cede & Co. is the responsibility of
the Company or the Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
If applicable, redemption notices shall be sent to DTC. If less than all of
the Debt Securities of a series represented by global Debt Securities in
registered form are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
To the extent that any Debt Securities provide for repayment or repurchase at
the option of the Holders thereof, a Beneficial Owner shall give notice of any
option to elect to have its interest in the global Debt Security repaid by the
Company, through its Participant, to the Trustee, and shall effect delivery of
such interest in a global Debt Security by causing the Direct Participant to
transfer the Participant's interest in the global Debt Security or Securities
representing such interest, on DTC's records, to such Trustee. The requirement
for physical delivery of Debt Securities in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the global Debt
Security or Securities representing such Debt Securities are transferred by
Direct Participants on DTC's records and followed by a book-entry credit of the
tendered Debt Securities to the Trustee's account.
DTC may discontinue providing its services as Depository with respect to the
Debt Securities at any time by giving reasonable notice to the Company or the
Trustee. Under such circumstances, in the event that a successor Depository is
not appointed, Debt Security certificates are required to be printed and
delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor Depository). In that event, Debt Security
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
None of the Company, the Trustee or any applicable Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in a global Debt Security, or
for maintaining, supervising or reviewing any records relating to such
beneficial interest.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
In compliance with United States tax laws and regulations, Bearer Securities
may not be offered or sold prior to the Exchange Date specified in the
applicable Prospectus Supplement, or at any time if part of a distributor's
unsold allotment, to a person who is within the United States or to a United
States person other than (i) certain financial institutions located outside the
United States that agree in writing to comply with the requirements of Section
165(j)(3)(A), (B), or (C) of the United States Internal Revenue Code of 1986,
as amended (the "Code") and the regulations thereunder, (ii) the United States
offices of exempt distributors, or (iii) United States offices of international
organizations or foreign central banks. United States tax laws and regulations
also require that Bearer Securities not be mailed or otherwise delivered to any
location in the United States. Any underwriters, agents and dealers
participating in the offering of Debt Securities must covenant that they will
not offer or sell during the applicable restricted period (as defined in the
Code and the regulations thereunder) any Bearer Securities within the United
States or to United States persons (other than the persons described above) or
deliver in connection with the sale of Bearer Securities during the restricted
period any Bearer Securities within the United States, and that they have in
effect procedures reasonably designed to ensure that their employees and agents
who are directly engaged in selling the Bearer Securities are
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aware of the restrictions described above. No definitive Bearer Security will
be delivered in connection with its original issuance nor will interest be paid
on any Bearer Security until receipt of written certification of non-U.S.
status described above under "--Global Securities."
As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or
organized in or under the laws of the United States, any estate, the income of
which is subject to United States federal income taxation regardless of its
source, and any trust if a court within the United States is able to exercise
primary supervision of the administration thereof and one or more United States
persons has the authority to control all substantial decisions thereof, or any
other person included within the definition of United States person under the
Code and the regulations thereunder; and "United States" means the United
States of America (including the states thereof and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction.
Purchasers of Bearer Securities will be subject to certification procedures and
may be affected by certain limitations under United States tax laws. (Section
101)
Unless otherwise indicated in the applicable Prospectus Supplement, the
temporary global Bearer Security and the definitive Bearer Securities and
interest Coupons will bear the following legend: "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." The sections referred to
in such legend provide that any United States person holding a Bearer Security
or interest Coupon, with certain limited exceptions, will not be entitled to
deduct any loss incurred with respect to such Bearer Security or interest
Coupon and will not be entitled to any capital gain treatment with respect to
any sale, redemption or other disposition of such Bearer Security or interest
Coupon but will be taxed thereon at ordinary income rates instead.
REDEMPTION
Redemption at the Option of the Company
The applicable Prospectus Supplement will specify whether or not the Debt
Securities will be redeemable at the option of the Company and the terms upon
which such Debt Securities may be so redeemed.
Notice of intention to redeem redeemable Debt Securities will be given in
accordance with "Notices" below. In the case of redemption of all Debt
Securities of a series, notice will be given by the Trustee not more than 60
nor less than 20 days prior to the Redemption Date. Notices of redemption will
specify, among other things, (i) the Redemption Date; (ii) the Redemption
Price, and accrued interest, if any; (iii) in the case of a partial redemption,
the identification and aggregate principal amount of Debt Securities to be
redeemed and the aggregate principal amount of the Debt Securities which will
be outstanding after such partial redemption; (iv) that, on the Redemption
Date, the Redemption Price shall become due and payable upon each such Debt
Security or portion thereof to be redeemed, and, if applicable, that interest
thereon shall cease to accrue on and after said date; (v) if applicable, the
Conversion Price, the date on which the right to convert the Debt Securities to
be redeemed will terminate and the places where such Debt Securities, together
with all unmatured Coupons and any matured Coupons in default appertaining
thereto, may be surrendered for conversion; (vi) the place or places where such
Securities, together (in the case of Bearer Securities) with all Coupons
appertaining thereto, if any, maturing after the Redemption Date, are to be
surrendered for payment of the Redemption Price and any accrued interest and
Additional Amounts pertaining thereto; (vii) that the redemption is for a
sinking fund, if such is the case; (viii) that, unless otherwise specified in
such notice, Bearer Securities of any series, if any, surrendered for
redemption must be accompanied by all Coupons maturing subsequent to the
Redemption Date or the amount of any such missing Coupon or Coupons will be
deducted from the Redemption Price, unless security or indemnity satisfactory
to the Company, the Trustee and any Paying Agent is furnished; and (ix) if
Bearer Securities of any series are to be redeemed and any Registered
Securities of such series are not to be redeemed, and if such Bearer Securities
may be exchanged for Registered Securities not subject to redemption on the
Redemption Date, the last date, as determined by the Company, on which such
exchanges
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may be made. All redemption notices are irrevocable, except in the case of
certain redemptions for taxation reasons specified in the next succeeding
subsection. (Section 1104).
Redemption for Taxation Reasons
If the Company has or will become obligated to pay Additional Amounts (as
described below under "Payment of Additional Amounts to Non United States
Persons") as a result of any change in, or amendment to, the laws (including
any regulations or rulings promulgated thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or any change in, or amendment to, the application or official
interpretation of such laws, regulations or rulings (any such change or
amendment being herein referred to as a "Tax Law Change"), and such obligations
cannot be avoided by the Company taking reasonable measures available to it,
the Debt Securities held by Persons who are not United States persons and to
whom such Additional Amounts have or will become payable (the "Tax Affected
Debt Securities") may be redeemed, at the option of the Company, in whole but
not in part. Such redemption of Tax Affected Debt Securities shall be upon not
less than 20 nor more than 60 days' prior notice as provided under "Notices"
below, at a redemption price equal to 100% of the principal amount of the Tax
Affected Debt Securities, plus accrued interest to the redemption date and any
Additional Amounts then payable; provided, however, that (1) 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 any such Additional Amounts were a
payment in respect of the Tax Affected Debt Securities then due and (2) at the
time such notice of redemption is given, the obligation to pay such Additional
Amounts remains in effect. Prior to the publication of any notice of redemption
pursuant to this paragraph, the Company shall deliver to the Trustee (a) a
certificate stating that the Company is entitled to effect such redemption and
setting forth a statement of facts showing that the conditions precedent to the
right of the Company so to redeem have occurred and (b) an opinion of counsel
selected by the Company to the effect that the Company has or will become
obligated to pay such Additional Amounts as a result of a Tax Law Change. The
Company's right to redeem the Tax Affected Debt Securities shall continue as
long as the Company is obligated to pay such Additional Amounts,
notwithstanding that the Company shall have theretofore made payments of
Additional Amounts. (Section 1102)
In addition, if the Company determines, based upon a written opinion of
counsel selected by the Company, that, as a result of a Tax Law Change, any
payment made outside the United States by the Company or any of its Paying
Agents of the full amount of principal, premium, if any, or interest due with
respect to any Bearer Debt Security or Coupon appertaining thereto would be
subject to any certification, identification or other information reporting
requirement of any kind, the effect of which is the disclosure to the Company,
any Paying Agent or any governmental authority of the nationality, residence or
identity of a beneficial owner of such Bearer Debt Security or Coupon who is
not a United States person as defined below under "Payment of Additional
Amounts to Non United States Persons" (other than such a requirement (a) which
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 any custodian,
nominee or other agent of the beneficial owner, (b) which can be satisfied by
the custodian, nominee or other agent certifying that the beneficial owner is
not a United States person, provided that in each case referred to in clauses
(a) (ii) and (b) payment by such custodian, nominee or other agent to such
beneficial owner is not otherwise subject to any such requirement, or (c) which
would not be applicable but for the fact that a Bearer Debt Security
constitutes a "United States real property interest," as defined in Section
897(c)(1) of the Code, with respect to the beneficial owner of such Bearer Debt
Security, the Company at its election will either (x) redeem the Bearer
Securities, as a whole but not in part, at a redemption price equal to 100% of
the principal amount thereof, plus accrued interest to the redemption date, or
(y) if and so long as the conditions of the third paragraph under "Payment of
Additional Amounts to Non United States Persons" are satisfied, pay the
Additional Amounts specified in such paragraph. The Company will make such
determination and election and notify the Trustee thereof in writing as soon as
practicable, and the Trustee will promptly give notice of such determination
(the "Determination Notice"), in each case stating the effective date of such
certification, identification or information reporting requirement, whether the
Company will redeem the Bearer Securities or will pay the Additional Amounts
specified in the third paragraph under
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"Payment of Additional Amounts" and (if applicable) the last date by which the
redemption of the Bearer Securities shall take place. If the Company elects to
redeem the Bearer Securities, such redemption shall take place on a date not
later than one year after publication of the Determination Notice, as the
Company elects by notice in writing to the Trustee at least 75 days before that
date, unless shorter notice is acceptable to the Trustee. Notwithstanding the
foregoing, the Company shall not be required to so redeem the Bearer Securities
if the Company, based upon a written opinion of counsel selected by the
Company, subsequently determines, not less than 30 days prior to the Redemption
Date, that subsequent payments would not be subject to any such requirement, in
which case the Company will notify the Trustee in writing of its determination
not to so redeem the Bearer Securities, and the Trustee will promptly give
notice to the Holders of the Bearer Securities of that determination and any
earlier redemption notice will thereupon be revoked and of no further effect.
If the Company elects as provided in clause (y) above to pay Additional
Amounts, the Company may, as long as the Company is obligated to pay such
Additional Amounts, redeem all the Bearer Securities, at any time, as a whole
but not in part, at a redemption price equal to 100% of the principal amount
thereof plus accrued interest to the redemption date and any Additional Amounts
then payable. (Section 1102)
Repayment at Option of Holder
Unless otherwise specified in an applicable Prospectus Supplement, each
holder of a Convertible Debt Security shall have the right to cause the Company
to repay such Convertible Debt Security (or portions thereof in integral
multiples of $1,000) for a cash amount equal to 100% of the principal amount
thereof plus accrued interest to the redemption date and any Additional Amounts
then payable, if a Repayment Event (as defined below) occurs or has occurred.
The "Repayment Date" for this purpose shall be the ninetieth (90th) day after
the later of the Exchange Date or the date a Repayment Event has occurred.
(Section 1502) Notice with respect to the occurrence of a Repayment Event will
be given to all Holders of Convertible Debt Securities with repayment rights in
accordance with "Notices" below and not later than 30 days after the later of
the Exchange Date or the date of such Repayment Event. Notices of repayment
will specify, among other things, (i) the Repayment Date; (ii) the date by
which the repurchase right must be exercised; (iii) the price at which the
Convertible Debt Securities are to be repaid, including accrued interest and
Additional Amounts, if any; (iv) if applicable, the Conversion Price then in
effect, the date on which the right to convert the Securities to be repaid will
terminate and the place or places where such Securities, together (in the case
of Bearer Securities) with all unmatured Coupons and any matured Coupons in
default appertaining thereto, may be surrendered for conversion; and (v) a
description of the repayment right procedures that a Holder must follow and the
place or places where such Securities, together (in the case of Bearer
Securities) with all Coupons appertaining thereto, if any, maturing after the
Repayment Date, are to be surrendered for payment (or the amount of any such
missing Coupon or Coupons will be deducted from any amount due to such Holder)
and any accrued interest and Additional Amounts, if any, pertaining thereto.
(Section 1503)
To be repaid, a Convertible Debt Security must be received by the Trustee
with a duly executed written notice, substantially in the form provided on the
reverse side of such Convertible Debt Security, at the place of payment not
earlier than 60 days nor later than 30 days prior to the Repayment Date. Each
Bearer Convertible Debt Security delivered for repayment must be delivered with
all unmatured Coupons. Once notice is given by the Holder to the Paying Agent,
it is irrevocable. However, holders of Convertible Debt Securities will retain
the right to require such Convertible Debt Securities to be converted into
Common Stock until two business days prior to the Repayment Date. (Sections
1201 and 1504)
A "Repayment Event" shall have occurred if the Common Stock (or other equity
securities into which the Debt Securities are then convertible) is neither
listed for trading on a United States national securities exchange, the Nasdaq
National Market nor approved for trading on an established automated over-the-
counter trading market in the United States. (Section 1502)
Certain of the Company's existing and future agreements relating to its
indebtedness could prohibit the repayment by the Company of the Convertible
Debt Securities pursuant to the exercise by a Convertible Debt Security holder
of the foregoing option, depending on the financial circumstances of the
Company at the time
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any such repayment may occur, because such repayment could cause a breach of
certain financial ratio and/or other covenants contained in such agreements.
Such a breach may constitute an event of default under such indebtedness and
thereby restrict the Company's ability to repay the Convertible Debt
Securities. See "Subordination of Debt Securities" above.
COVENANTS OF THE COMPANY
Unless set forth in an applicable Prospectus Supplement, the Indenture will
not contain any financial covenants or similar restrictions respecting the
Company, and in the absence of such provisions, holders of the Debt Securities
will have no protection (other than their rights upon an event of default, as
described under "Events of Default" below) from adverse changes in the
Company's financial condition. The Indenture also does not contain provisions
which may afford the holders of any of the Debt Securities protection in the
event of a highly leveraged transaction or similar transaction involving the
Company. Any such provisions, if applicable to any Debt Securities, will be
described in the Prospectus Supplement or Prospectus Supplements relating
thereto.
PAYMENT OF ADDITIONAL AMOUNTS TO NON UNITED STATES PERSONS
Unless otherwise specified in an applicable Prospectus Supplement, the
Company will pay to the holder of any Debt Security or any related Coupon who
is not a United States person (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 such Debt 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 that the amount provided for in such Debt Security or in such
Coupon to be then due and payable; provided, however, that the foregoing
obligations 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, stockholder of or possessor of a power over such
Holder, if such Holder is an estate, a trust, a partnership or a
corporation) and the United States or any political subdivision or taxing
authority thereof or therein, including, without limitation, such Holder
(or such fiduciary, settlor, beneficiary, member, stockholder or possessor)
being or having been a citizen or resident of the United States or treated
as a resident thereof, or being or having been engaged in trade or business
or present therein, or having had a permanent establishment therein, (ii)
such Holder's present or former status as a personal holding company, a
foreign personal holding company with respect to the United States, a
controlled foreign corporation, a passive foreign investment company, or a
foreign private foundation or foreign tax exempt entity 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 such Debt
Security or any related Coupon for payment on a date more than 15 days
after the date on which such payment became due and payable or the date on
which payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not have
been imposed but for the failure to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the Holder or
beneficial owner of such Debt Security or any related Coupon, if compliance
is required by statute or by regulation or ruling of the United States
Treasury Department as a precondition to exemption from such tax,
assessment or other governmental charge;
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(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of,
premium, if any, or interest on such Debt Security;
(f) any tax, assessment or other governmental charge imposed as a result
of a Person's past or present actual or constructive ownership, including
by virtue of the right to convert Debt Securities, of 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 the principal of, premium,
if any, or interest on such Debt Security, if such payment can be made
without such withholding by any other Paying Agent in Western Europe;
(h) any tax, assessment or other governmental charge imposed on a Holder
that is a partnership or a fiduciary, but only to the extent that any
beneficial owner or member of the partnership or beneficiary or settlor
with respect to the fiduciary would not have been entitled to the payment
of Additional Amounts had the beneficial owner, member, beneficiary or
settlor directly received its beneficial or distributive stock of payments
on such Debt Security;
(i) any tax, assessment or other governmental charge which would not have
been imposed but for the fact that such Debt Security constitutes a "United
States real property interest," as defined in Section 897(c)(1) of the
Internal Revenue Code, and the regulations thereunder, with respect to the
beneficial owner of such Debt Security; or
(j) any combination of items (a), (b), (c), (d), (e), (f), (g), (h) and
(i) (Section 1004)
As used herein, "United States" means the United States of America
(including the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction and a "United
States person" is a person that is, for United States federal income tax
purposes, (a) a citizen or a resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof, (c)
an estate the income of which is subject to United States federal income
taxation regardless of source, (d) any trust if a court within the United
States is able to exercise primary supervision of the administration
thereof and one or more United States persons has the authority to control
all substantial decisions thereof, or (e) any other person included within
the definition of United States person under the Code and the regulations
thereunder. (Sections 101 and 1004)
Notwithstanding the foregoing, if and so long as a certification,
identification or other information reporting requirement referred to in the
second paragraph under "Redemption for Taxation Reasons" above would be fully
satisfied by payment of a backup withholding tax or similar charge, the
Company may elect, by so stating in the Determination Notice, to have the
provisions of this paragraph apply in lieu of redeeming the Bearer Debt
Security pursuant to such second paragraph. In such event, the Company will
pay as Additional Amounts such amounts as may be necessary so that every net
payment made, following the effective date of such requirements, outside the
United States by the Company or any Paying Agent of principal of, and premium,
if any, due in respect of any Bearer Debt Security, or interest represented by
any Coupon, the beneficial owner of which is not a United States person (but
without any requirement that the nationality, residence or identity of such
beneficial owner be disclosed to the Company, any Paying Agent or any
governmental authority), after deduction or withholding for or on account of
such backup withholding tax or similar charge, other than a backup withholding
tax or similar charge which is (a) the result of a certification,
identification or information reporting requirement described in the first
parenthetical clause of such second paragraph, (b) imposed as a result of the
fact that the Company or any Paying Agent has actual knowledge that the
beneficial owner of such Bearer Debt Security or Coupon is within the category
of persons described in clause (a) of the first paragraph under this heading
or (c) imposed as a result of presentation of such Bearer Debt Security or
Coupon for payment more than 15 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 for in such
Bearer Debt Security or Coupon to be then due and payable. (Section 1004)
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EVENTS OF DEFAULT
The following are Events of Default under the Indentures with respect to Debt
Securities of any series: (a) failure to pay any interest on, or any Additional
Amounts payable in respect of any interest on, any Debt Security of that series
when due, continued for 10 days, and in the case of the Subordinated
Securities, whether or not such payment is prohibited by the subordination
provisions of the Subordinated Indenture; (b) failure to pay principal or any
premium on any Debt Security of that series when due, upon maturity, redemption
or otherwise, and in the case of the Subordinated Securities, whether or not
such payment is prohibited by the subordination provisions of the Subordinated
Indenture; (c) default in the deposit of any sinking fund payment or analogous
payment, when due by the terms of the Debt Securities of that series, and in
the case of the Subordinated Securities, whether or not such payment is
prohibited by the subordination provisions of the Subordinated Indenture; (d)
failure to perform any other covenant or breach of a warranty of the Company in
the applicable Indenture (other than a covenant expressly included in such
Indenture solely for the benefit of a series of Debt Securities other than that
series) or any Debt Security of such series, continued for 60 days after
written notice as provided in the applicable Indenture; (e) any acceleration of
the maturity of any indebtedness of the Company for borrowed money in an
aggregate principal amount exceeding $25,000,000, unless otherwise specified in
the applicable Prospectus Supplement, or a failure to pay such indebtedness at
its stated maturity, if such indebtedness is not discharged or such
acceleration is not rescinded or annulled within 20 days after written notice
as provided in the Indentures; (f) certain events of bankruptcy, insolvency or
reorganization of the Company; and (g) any other Event of Default provided with
respect to Debt Securities of that series. (Section 501) No Event of Default
with respect to any particular series of Debt Securities necessarily
constitutes an Event of Default with respect to any other series of Debt
Securities. The Indentures provide that the Trustee thereunder may withhold
notice to the holders of the Debt Securities of any series of the occurrence of
a default with respect to the Debt Securities of such series (except a default
in payment of principal, premium, if any, interest, Additional Amounts, if any,
or sinking fund payments, if any) if the Trustee considers it in the interest
of the Holders to do so. (Section 602) If an Event of Default with respect to
Debt Securities of any series at the time outstanding shall occur and be
continuing, either the applicable Trustee or the Holders of at least 25% in
principal amount of the Debt Securities of that series may declare the
principal amount of all Debt Securities of that series (or if any Debt
Securities of such series are Original Issue Discount Securities or Indexed
Securities, such portion of the principal amount of such Debt Securities as may
be specified by the terms thereof) to be due and payable immediately; provided
that in the case of certain events of bankruptcy, insolvency or reorganization,
such principal amount (or portion thereof), premium, if any, interest and
Additional Amounts, if any, shall automatically become due and payable.
However, at any time after a declaration of acceleration with respect to Debt
Securities of any series has been made, but before a judgment or decree based
on such acceleration has been obtained, the Holders of a majority in principal
amount of the Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502) For information as to waiver
of default, see "Modifications, Waivers and Meetings." Reference is made to the
Prospectus Supplement relating to each series of Debt Securities which are
Original Issue Discount Securities or Indexed Securities for the particular
provisions relating to acceleration of the Maturity of a portion of the
principal amount of such Original Issue Discount Securities or Indexed
Securities upon the occurrence of an Event of Default and the continuation
thereof.
The Indentures provide that, subject to the duty of the respective Trustees
thereunder during default to act with the required standard of care, such
Trustee will be under no obligation to exercise any of its rights or powers
under the respective Indentures at the request or direction of any of the
Holders of the Debt Securities unless they shall have offered to such Trustee
reasonable indemnity. (Section 601) Subject to such provisions for
indemnification of the Trustees, the Holders of a majority in principal amount
of the Debt Securities of any series affected will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the applicable Trustee, or exercising any trust or power conferred on such
Trustee, with respect to the Debt Securities of such series. (Section 512)
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the applicable Indenture, or for the appointment
of a receiver or a trustee, or for any other remedy thereunder,
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unless (i) such Holder has previously given to the applicable Trustee written
notice of a continuing Event of Default with respect to the Debt Securities of
that series, (ii) the Holders of at least 25% in aggregate principal amount of
the Outstanding Debt Securities of that series have made written request, and
such Holder or Holders have offered reasonable indemnity to such Trustee to
institute such proceeding as trustee, and (iii) such Trustee for 60 days after
receipt of such notice has failed to institute such proceeding, and has not
received from the Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of that series a direction inconsistent with such
request, within 60 days after such notice, request and offer. (Section 507)
However, such limitations do not apply to a suit instituted by a Holder of a
Debt Security for the enforcement of payment of the principal of or any premium
or interest or Additional Amounts on such Debt Security on or after the
applicable due date specified in such Debt Security or the right to convert
such Debt Security. (Section 508)
The Company will be required to furnish to the Trustees annually a statement
as to whether there is a default in the performance or observance of certain
covenants. (Section 1005)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Upon the direction of the Company, the Indenture shall cease to be of further
effect with respect to any series of Debt Securities and any Coupons
appertaining thereto issued thereunder specified by the Company (subject to the
survival of certain provisions thereof, including the obligation to pay
Additional Amounts to the extent described below) when (i) either (A) all
outstanding Debt Securities of such series and, in the case of Bearer
Securities, all Coupons appertaining thereto, have been delivered to the
Trustee for cancellation (subject to certain exceptions) or (B) all Debt
Securities of such series have become due and payable or will become due and
payable at their stated maturity within one year and such securities are not
convertible or exchangeable for other securities or are to be called for
redemption within one year and such securities are not convertible or
exchangeable for other securities, and the Company has irrevocably deposited
with the Trustee, in trust, funds in Dollars in an amount sufficient to pay the
entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest, if any (and, to the extent that (x) the Debt
Securities of such series provide for the payment of Additional Amounts upon
the occurrence of certain events of taxation, assessment or governmental charge
with respect to payments on such Debt Securities and (y) the amount of any such
Additional Amounts is at the time of deposit reasonably determinable by the
Company, any such Additional Amounts) to the date of such deposit (if such Debt
Securities have become due and payable) or to the Maturity thereof, as the case
may be, (ii) the Company has paid all other sums payable under the Indenture
with respect to the Debt Securities of such series, and (iii) certain other
conditions are met. If the Debt Securities of any such series provide for the
payment of Additional Amounts, the Company will remain obligated, following
such deposit, to pay Additional Amounts on such Debt Securities to the extent
that the amount thereof exceeds the amount deposited in respect of such
Additional Amounts as aforesaid. (Section 401)
If so provided in the applicable Prospectus Supplement, the Company may elect
with respect to any series of Debt Securities either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for, among other things, the obligation to pay Additional Amounts, if
any, upon the occurrence of certain events of taxation, assessment or
governmental charge with respect to payments on such Debt Securities to the
extent that the amount thereof exceeds the amount deposited in respect of such
Additional Amounts as provided below, and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities, to hold moneys for payment in trust,
and, if applicable, to exchange or convert such Debt Securities into other
securities in accordance with their terms) ("defeasance"), or (b) to omit to
comply with its obligations with respect to certain restrictive covenants in
Section 1005 (Statement as to Compliance), Section 102 (Compliance Certificates
and Opinions), and, to the extent specified pursuant to Section 301, any other
covenant applicable to such Debt Securities in the Indenture, and any omission
to comply with such obligations shall not constitute a default or an Event of
Default with respect to the Debt Securities of such series ("covenant
defeasance"), in either case upon the irrevocable deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of an amount, in U.S.
dollars and/or Government Obligations (as defined in the Indenture) which
through the scheduled payment of principal and interest in
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accordance with their terms will provide money in an amount sufficient to pay
the principal of and any premium and any interest on (and, to the extent that
(x) the Debt Securities of such series provide for the payment of Additional
Amounts and (y) the amount of any such Additional Amounts is at the time of
deposit reasonably determinable by the Company, any such Additional Amounts
with respect to) such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the due dates therefor, whether upon maturity,
redemption or otherwise. (Section 402)
Such defeasance or covenant defeasance shall only be effective if, among
other things, (i) it shall not result in a breach or violation of, or
constitute a default under, the Indenture or any other material agreement to
which the Company is a party or is bound, and (ii) the Company has delivered to
the Trustee an opinion of counsel (as specified in the Indenture) to the effect
that the holders of such Debt Securities and Coupons appertaining thereto will
not recognize income, gain or loss for Federal income tax purposes as a result
of such defeasance or covenant defeasance, as the case may be, and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance had not occurred (which opinion must, in the case of defeasance but
not covenant defeasance, be based on a ruling of the Internal Revenue Service
unless there has been a change in applicable federal income tax law after the
date of execution of the Indenture such that a ruling is no longer required).
It shall also be a condition to the effectiveness of such defeasance and
covenant defeasance that no Event of Default or event which with notice or
lapse of time or both would become an Event of Default with respect to Debt
Securities and Coupons appertaining thereto of such series shall have occurred
and been continuing on the date of, or with respect to defeasance (but not
covenant defeasance) during the period ending on the 91st day after the date
of, such deposit into trust. (Section 402)
In the event the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than an Event of Default with respect
to any other covenant as to which there has been covenant defeasance, the
amount of monies and/or Government Obligations deposited with the Trustee to
effect such covenant defeasance may not be sufficient to pay amounts due on
such Debt Securities and Coupons appertaining thereto at the time of any
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting or restricting such defeasance or covenant defeasance with
respect to the Debt Securities of a particular series.
MODIFICATIONS, WAIVERS AND MEETINGS
The Indenture contains provisions permitting the Company and the Trustee
thereunder, with the consent of the holders of a majority in principal amount
of the outstanding Debt Securities of each series and affected by a
modification or amendment, to modify or amend any of the provisions of the
Indenture or of the Debt Securities of such series or the rights of the holders
of the Debt Securities of such series under the Indenture, provided that no
such modification or amendment shall, among other things, (i) change the Stated
Maturity of the principal of, or premium, if any, or any installment of
principal or interest on or Additional Amounts with respect to any Debt
Securities or any sinking fund or analogous payment with respect thereof or
reduce the principal amount thereof or any premium thereon, or the rate of
interest thereon (or modify the calculation of such rate), or change the
obligation of the Company to pay Additional Amounts, or reduce the amount of
principal of any Debt Security that would be due and payable upon an
acceleration of the maturity thereof, or adversely affect any right of
repayment at the option of any Holder, or change the provisions of the
Indentures relating to the Place of Payment for Bearer Debt Securities being
located outside the United States, or the Currency in which the principal of,
any premium or interest on, or any Additional Amounts with respect to any Debt
Security or any sinking or analogous fund payment in respect thereof, is
payable, or impair the Holder's right to institute suit to enforce the payment
of any such Debt Securities, or (ii) reduce the aforesaid percentage in
principal amount of Debt Securities of any series, the consent of the Holders
of which is required for any such modification or amendment or the consent of
whose holders is required for any waiver (of compliance with certain provisions
of the Indenture or certain defaults thereunder and their consequences) or
reduce the
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requirements for a quorum or voting at a meeting of holders of such Debt
Securities. (Section 902) The Indenture also contains provisions permitting the
Company and the Trustee, without the consent of the holders of any Debt
Securities issued thereunder, to modify or amend the Indenture in order to,
among other things, (a) add to the Events of Default or the covenants of the
Company for the benefit of the holders of all or any series of Debt Securities;
(b) to add or change any provisions of the Indenture to facilitate the issuance
of Bearer Securities; (c) to establish the form or terms of Debt Securities of
any series and any related Coupons; (d) to cure any ambiguity or correct or
supplement any provision therein which may be defective or inconsistent with
other provisions therein, or to make any other provisions with respect to
matters or questions arising under the Indenture which shall not adversely
affect the interests of the Holders of any series of Debt Securities in any
material respect; or (e) to amend or supplement any provision contained in the
Indenture, provided that such amendment or supplement does not apply to any
Outstanding Debt Securities issued prior to the date of such amendment or
supplement and entitled to the benefits of such provision. (Section 901)
The Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of any series may, on behalf of all Holders of Debt Securities
of that series, waive any past default under the Indenture with respect to Debt
Securities of that series and its consequences, except a default in the payment
of the principal of, or premium, if any, or interest on or any Additional
Amounts with respect to, any Debt Securities or any Coupons appertaining
thereto of such series or in respect of a covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Debt
Security of such series affected. (Section 513)
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of each series. (Section 1601) A meeting may be called at any
time by the Trustee, and also, upon request, by the Company or the Holders of
at least 10% in principal amount of the Outstanding Debt Securities of such
series, in any such case upon notice given in accordance with the provisions of
the Indenture. (Section 1602) Except for any consent which must be given by the
Holder of each outstanding Debt Security affected thereby, as described above,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum (as described below) is present may be adopted by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series; provided, however, that any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action which may be made, given or taken by
the Holders of a specified percentage, which is less or more than a majority,
in principal amount of the Outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting duly reconvened at which a quorum is
present by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series and the related
Coupons. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the Outstanding Debt Securities of a series, subject to
certain exceptions. (Section 1604)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of Debt Securities, may
consolidate or merge with or into, or transfer or lease its properties or
assets substantially as an entirety to, any Person, and any other Person may
consolidate or merge with and into, or transfer or lease properties or assets
substantially as an entirety to, the Company provided that (i) the Person (if
other than the Company) formed by any such consolidation or into which the
Company is merged or which acquires or leases the properties or assets of the
Company substantially as an entirety is a corporation, partnership or trust
organized and validly existing under the laws of any United States jurisdiction
or, subject to certain additional requirements, a corporation, limited
liability company, partnership or trust organized under the laws of a
jurisdiction other than the United States, that assumes the Company's
obligations on the Debt Securities and under the Indentures, (ii) immediately
after giving effect to such transaction no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of Default,
shall have happened and be continuing, and (iii) certain other conditions are
met. Upon compliance with these provisions by a successor corporation, the
Company would be relieved from its obligations under the Securities and under
the Indenture. (Article Eight)
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NOTICES
Notice to Holders of Registered Securities will be given by mail to the
addresses of such Holders as they may appear in the Security Register. Notice
to Holders of Bearer Securities, if any, will be given by publication in a
leading daily newspaper in the English language of general circulation in New
York City and, if such Debt Securities are then listed on any stock exchange
outside the United States, in a daily newspaper of general circulation in the
city that such stock exchange requires. (Section 106)
TITLE
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Person in whose name a Debt Security is registered as the absolute
owner thereof (whether or not such Debt Security may be overdue) for the
purpose of making payment and for all other purposes. Title to Bearer
Securities passes on delivery. (Section 308)
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts applicable to
agreements made or instruments entered into and, in each case, performed in
said state, except that the rights, protections, obligations, indemnities and
immunities of the Trustee under the Indentures shall be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflicts of laws principles of either state. (Section 113)
CONCERNING THE TRUSTEE
The Indentures contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received
in respect of any such claim as security or otherwise. (Section 611) The
Trustee will be permitted to engage in certain other transactions; however, if
it acquires any conflicting interest and there is a default under the Debt
Securities, it must eliminate such conflict or resign. (Section 613)
The Trustee serves as a depositary of funds of, and performs other services
for, the Company and its subsidiaries, and is trustee and fiscal agent under
several other indentures and fiscal agency agreements pursuant to which
debentures of the Company and various of its subsidiaries have been issued.
PLAN OF DISTRIBUTION
The Securities may be offered and sold by the Company or by other selling
securityholders to or through underwriters or to dealers acting as principals
for their own account, and also may be sold directly to other purchasers or
through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may receive
compensation from the Company, the selling securityholders or from purchasers
of Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions received by them from the
Company or the selling securityholders and any profit on the resale of
Securities by them may be deemed to be underwriting discounts and commissions,
under the Securities Act. Any such underwriter or agent will be identified, and
any such compensation received from the Company or the selling securityholders
will be described, in the Prospectus Supplement.
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Under agreements which may be entered into by the Company, underwriters and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Any Securities issued hereunder (other than Common Stock) will be new issues
of securities with no established trading market. The Company may not apply for
the listing of any Securities (other than the Common Stock) on any national
securities exchange or on Nasdaq. No assurance can be given as to the liquidity
of the trading market for any such Securities.
Certain of the underwriters, dealers or agents and their associates may be
customers of, engage in transactions with, and perform services for, the
Company or the selling securityholders in the ordinary course of business.
VALIDITY OF SECURITIES
The validity of the Securities to which this Prospectus relates will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of the
Company. Mr. Hoogasian is a full-time employee and an officer of the Company.
The validity of the Securities offered hereby will be passed upon for any
relevant Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston,
Massachusetts.
EXPERTS
The financial statements of the Company incorporated by reference in this
Prospectus and the financial statement schedules incorporated by reference in
the Registration Statement of which this Prospectus forms a part have been
audited by Arthur Andersen LLP, independent public accountants, to the extent
and for the periods as indicated in their reports with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said reports.
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$150,000,000
[THERMO ELECTRON LOGO APPEARS HERE]
NOTES DUE 200[ ]
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PROSPECTUS SUPPLEMENT
October , 1998
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LEHMAN BROTHERS
SALOMON SMITH BARNEY
