UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 28, 2002
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02454-9046 (Address of principal executive offices) (Zip Code) |
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------------------- ----------------------------------------- Common Stock, $1.00 par value New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange 3 1/4% Subordinated Convertible Debentures due 2007 American Stock Exchange 4% Subordinated Convertible Debentures due 2005 American Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ]
As of June 28, 2002, the aggregate market value of the voting stock held by nonaffiliates of the Registrant was approximately $2,774,137,000. The stock price used in this computation was the last sales price on that date.
As of January 24, 2003, the Registrant had 163,187,218 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Sections of Thermo Electron Corporation's definitive Proxy Statement for the Annual Meeting of Shareholders are incorporated by reference into Parts II and III of this report.
THERMO ELECTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002
TABLE OF CONTENTS
Page
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PART I
Item 1. Business 3
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15
Forward-looking Statements 28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32
Item 8. Financial Statements and Supplementary Data 33
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures 33
PART III
Item 10. Directors and Executive Officers of the Registrant 34
Item 11. Executive Compensation 34
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 34
Item 13. Certain Relationships and Related Transactions 34
Item 14. Controls and Procedures 34
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 35
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PART I
Item 1. Business
General Development of Business
Thermo Electron Corporation (also referred to in this document as "Thermo Electron," "we," the "company," or the "registrant") is a world leader in high-tech instruments. The company helps life science, laboratory, and industrial customers advance scientific knowledge, enable drug discovery, improve manufacturing processes, and protect people and the environment with instruments, scientific equipment, and sample-in/knowledge-out solutions. The company's powerful technologies help researchers make discoveries that will fight disease or prolong life. They automatically monitor and control online production to ensure the quality and safety of raw materials as well as the end-products themselves. And they are critical components embedded as enabling technologies within scientific and industrial devices.
In the late 1980s, Thermo Electron adopted a strategy of spinning out certain businesses into separate public subsidiaries in which we kept a majority ownership. By 1997, we had spun out 22 public entities serving many diverse markets. To simplify our structure, we announced in January 2000 a major reorganization that ultimately resulted in taking private all of our public subsidiaries, selling noncore businesses, and spinning off our paper recycling and medical products businesses. As part of the reorganization, we divested of businesses with aggregate annual revenues of approximately $2 billion. This reorganization was substantially completed in February 2002, when we took private Spectra-Physics, Inc., our last publicly traded subsidiary.
The businesses spun off and sold as part of our reorganization have been accounted for as discontinued operations (see "Business Segments and Products"). The company's continuing operations solely include its instrument businesses. Except where indicated, the information presented in this report pertains to our continuing operations.
Our strategy going forward is to focus on integrating our operations to improve productivity and enable us to better serve our customers with improved products, technologies, and complete integrated systems and services. We also intend to emphasize internal growth by pursuing developments in the markets that we serve that have potential for high growth. In addition, we plan to augment that growth with strategic acquisitions that expand the reach of our technology by either rounding out our product lines or bringing them to new markets.
Thermo Electron is a Delaware corporation and was incorporated in 1956. The company completed its initial public offering in 1967 and was listed on the New York Stock Exchange in 1980.
Forward-looking Statements
Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), are made throughout this Annual Report on Form 10-K. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. While the company may elect to update forward-looking statements in the future, it specifically disclaims any obligation to do so, even if the company's estimates change, and readers should not rely on those forward-looking statements as representing the company's views as of any date subsequent to the date of the filing of this report.
A number of important factors could cause the results of the company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
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Business Segments and Products
We report our business in three principal segments (also called "sectors"): Life and Laboratory Sciences, Measurement and Control, and Optical Technologies.
During 2002, the company transferred management responsibility for several businesses between sectors as follows: (1) the spectroscopy businesses were moved to the Life and Laboratory Sciences sector from the Measurement and Control sector; (2) the temperature-control businesses were moved to the Measurement and Control sector from the Optical Technologies sector; (3) the electrochemistry products business was moved to the Measurement and Control sector from the Life and Laboratory Sciences sector; and (4) the Thermo Projects unit was moved from a separate sector (previously included as "Other") to the Life and Laboratory Sciences sector. Prior-period sector information has been restated to reflect these changes.
Life and Laboratory Sciences
We address the pharmaceutical, biotechnology, academic, and other research and industrial laboratory markets, as well as the clinical laboratory and healthcare industries, through our Life and Laboratory Sciences sector. During 2002, this sector was organized as five divisions: Bioscience Technologies, Analytical Instruments, Spectroscopy, Informatics and Services, and Clinical Diagnostics.
Bioscience Technologies encompasses a broad range of instruments, consumables, and robotic systems such as microplate-based handling and reading equipment; polymerase chain reaction (PCR) thermal cyclers for deoxyribonucleic acid (DNA) amplification; magnetic particle-based molecular separation instruments; laboratory automation, software, and instruments; and single nucleotide polymorphism (SNP) scoring systems. Consumables include reagents, microtiter plates, liquid-handling pipettes, and pipette tips. Robotic systems include individual microplate movers and other instrumentation combined with sophisticated integration software to produce application-specific workstations. These products are used primarily by pharmaceutical companies for drug discovery and development, testing, and quality control, and by biotechnology companies and universities for life science research to help fight disease and prolong life. These products are typically used on the "front end" of multi-instrument systems, to prepare and handle samples prior to the samples being loaded into other, advanced instruments.
This division also includes a range of scientific equipment used for the preparation and preservation of chemical and biological samples, principally in research settings for pharmaceutical, academic, and government customers. Products include cell culture incubators, ultralow-temperature freezers, high-speed centrifuges, centrifugal vacuum concentrators, biological safety cabinets, cryopreservation storage tanks, and laboratory freeze-dryers.
Analytical Instruments includes our offerings of ion trap, quadrupole, and magnetic sector mass spectrometers (MS), liquid chromatographs (LC) and gas chromatographs (GC), and hyphenated multi-instrument combinations of these products. Our integrated solutions include state-of-the-art instrument systems, advanced software, and consumables such as the vials, syringes, and columns necessary for chromatography. Our systems are tailored to meet the rigorous demands of lab professionals in applications such as drug discovery and life science research, environmental analysis, and analytical quantitation.
A significant and growing application for these instruments is proteomics, the study of proteins. Most drugs - about 90 percent - interact with proteins, so multi-instrument systems that can rapidly identify and quantify proteins are of increasing value to pharmaceutical and biotechnology customers. We continue to introduce new systems that offer a total solution for high-throughput analysis. For example, our ProteomeXTM multidimensional LC/MS system is a complete proteomics workstation that now enables routine identification and quantitation of the thousands of proteins in a complex sample. It offers sample preparation, analysis, and knowledge management in a fully integrated system.
Spectroscopy instruments use various optical techniques to determine the elemental and molecular composition of a wide range of complex liquids and solids. We manufacture atomic absorption (AA), inductively coupled plasma (ICP), inductively coupled plasma-mass spectrometer (ICP-MS), Fourier transform infrared (FT-IR), near-infrared (NIR), Optical Emission, Raman, ultraviolet/visible (UV-Vis), fluorescence, X-ray diffractometry (XRD), and X-ray
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fluorescence (XRF) instruments - as well microscopes, sampling accessories, software, and spectral reference databases. Customers include pharmaceutical, polymer, petrochemical, food, semiconductor, energy, steel, and basic material producers, who typically use these instruments for quality assurance and quality control applications primarily in a laboratory.
Informatics and Services offers laboratory information management systems (LIMS), chromatography data systems, analytical data archival, and instrument integration solutions to customers in regulated and nonregulated industries such as pharmaceuticals, biotechnology, petrochemicals, chemicals, and food and beverage. We also provide desktop spectroscopy software for data processing, data management, 3-D data viewing, spectral reference databases, and chemometrics. These systems are critical to regulatory compliance because they facilitate the monitoring and analysis of samples by storing and organizing the massive amounts of analytical data gathered in laboratories, industrial settings, and clinical-testing sites.
We also provide a global services network of experienced consultants focused on the successful implementation of our customers' projects. Wide-ranging services include project planning, management of user workshops, defining business requirements, milestone delivery, systems integration, workflow modeling, and validation consultancy - in short, everything from installation to complete integration and automation of the laboratory.
Clinical Diagnostics provides equipment and supplies used by healthcare laboratories in doctors' offices and hospitals to detect and diagnose disease. Products in this group include sample-preparation instruments and materials to highlight abnormal cells, blood gas and ion-selective electrolyte (ISE) consumables, chemistry reagents, clinical-biochemistry instruments and automation equipment, and rapid diagnostic tests for use in physicians' offices. Our rapid diagnostic products have extremely high sensitivity and specificity to test for infectious diseases, including Group A and B Streptococcus; Influenza A and B; Chlamydia; Respiratory Syncytial Virus (RSV), the most common cause of lower respiratory tract infections in children worldwide; and Clostridium difficile Toxin A. We also supply a complete line of equipment and consumables for anatomical pathology laboratories.
Measurement and Control
We provide a range of real-time, online sensors, monitors, and control systems to customers in key industrial markets - from chemical, pharmaceutical, and food and beverage to minerals and mining, and steel - through our Measurement and Control sector. These products enable customers to control and optimize their manufacturing processes to increase quality, improve productivity, and ensure worker safety, environmental protection, and regulatory compliance. In addition, we offer a comprehensive range of fixed and portable chemical, radiation, and explosives-detection instruments to help ensure the safety of public places and people. During 2002, this sector was organized as three divisions: Process Instruments, Environmental Instruments, and Temperature Control.
Process Instruments includes a comprehensive family of online weighing and inspection equipment for consumer products, packaged goods, and bulk materials. Products for the packaged and consumer goods market ensure that each package contains the proper quantity of a specific item. For example, we use a variety of technologies, including X-ray imaging and ultratrace chemical detection, to inspect food, beverage, and pharmaceutical packages to see that they are free of physical contaminants, have the appropriate quantity of material, or have no missing or broken parts. In bulk materials, our product line includes solids-flow-monitoring and level measurement for a wide variety of process industries including food, chemicals, plastics, and pharmaceuticals.
Also included in this division are online process-optimization systems that use proprietary, ultrahigh-speed, noninvasive measurement technologies to analyze, in real time, the physical and chemical properties of streams of raw materials, such as coal, cement, minerals, and pharmaceuticals. This technology allows the entire stream of material to be analyzed and eliminates the need for off-line sampling, which can add production time, waste, and cost. We also manufacture systems that measure the total thickness, basis weight, and coating thickness of web-type finished materials, such as metal strip, plastics, foil, rubber, glass, and paper.
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In addition, we provide sophisticated systems for the field-measurement and sensor sector of the process-control market to improve efficiency, provide process and quality control, maintain regulatory compliance, and increase worker safety. These systems provide real-time data collection, analysis, and local control functions using a variety of technologies, including radiation, radar, ultrasonic, and vibrational measurement principles, as well as flow-monitoring meters, gas chromatography, mass spectrography, and X-ray fluorescence. Industries served include oil and gas, chemical, semiconductor, pharmaceutical, electric utility, minerals and mining, water and wastewater treatment, and pulp and paper.
Environmental Instruments serves four major markets: air quality, water analysis, radiation measurement and protection, and security. Air-quality instruments are used for environmental air monitoring, gas detection, and hazardous chemical detection. These include continuous gaseous and aerosol instruments for monitoring ambient air and emissions, measuring such compounds as common air pollutants, aerosols, organic halogens, and carbon. We also provide a comprehensive line of gas detectors for controlling and detecting the presence of combustible and toxic gases for worker and plant safety. These products range from simple handheld, general-purpose portable equipment to more sophisticated fixed systems.
Used both in laboratory and process environments, our water-analysis products include pH and ISE and other technologies for quality assurance and regulatory compliance, primarily in the environmental, food and beverage, chemical, pharmaceutical, and biomedical-research industries. These products determine the quality of various substances, from food and pharmaceuticals to water and wastewater, by measuring their pH, specific ion concentration, dissolved oxygen, and conductivity.
Radiation measurement and protection products monitor and detect radiation in nuclear, environmental, industrial, medical, and security applications. These products include portable and fixed radiation and contamination monitors, as well as personal dosimetry products used for protecting workers that are at risk of radiation exposure.
Our security products include a comprehensive range of fixed and portable instruments used for chemical, radiation, and explosives-detection. These products are used in airports, embassies, cargo facilities, border crossings, and other high-threat facilities. They are also used by emergency response teams and are critical for the detection and prevention of terrorist acts, as well as for the emergency and forensic response to such events.
Temperature Control systems are necessary for laser, semiconductor, analytical, medical, laboratory, industrial, and R&D applications, and we are a leading manufacturer of precision temperature-control products for these markets. Products include a complete line of heated/refrigerated circulating baths, immersion coolers, and recirculating chillers. In addition, we supply instruments that analyze materials for viscosity, surface tension, and thermal properties. Customers include the food and pharmaceutical industries as well as manufacturers of paints, inks, coatings, and adhesives, who depend on high-precision viscometers to maintain the quality and consistency of their products.
Optical Technologies
We are a leader in lasers, photonics, and semiconductor equipment and test systems. Products within the Optical Technologies sector are used in multiple markets - particularly the scientific instrument, microelectronics, industrial processes, and biomedical industries. During 2002, these products were grouped into three divisions: Lasers, Photonics, and Semiconductor.
Lasers encompasses Spectra-Physics, which is a global leader in the design, development, manufacture, and distribution of high-power semiconductor and solid-state lasers for industrial, scientific, electronics, and biomedical markets. For example, nitrogen lasers used as an ionization source in mass spectrometers enable scientists to study proteins, peptides, and other large molecules in biomedical research. High-power semiconductor lasers are used in such applications as direct-to-press printing, cosmetic and therapeutic medical procedures, and they are key in the drive to make next-generation semiconductor devices smaller, thinner, and faster. High-power solid-state lasers are used in PC board manufacturing, rapid prototyping, bioinstrumentation, metrology, and scientific research.
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Photonics includes optical and optoelectronics components and systems that make, move, and manipulate light. These products are used in a variety of applications and industries, including scientific and medical instruments and semiconductor manufacturing. For example, our diffraction gratings are used in the line-narrowing packages of excimer lasers used for photolithography systems in semiconductor manufacturing. Products also include Corion thin-film interference filters, Hilger scintillation and electro-optic crystals, Oriel optical components and instruments, and CIDTEC charged-injection device (CID) solid-state video cameras. The Book of Photon Tools offers catalog customers a full complement of laser and photonics products, as well as technical information.
Semiconductor products include compositional metrology tools, used to analyze defects in ultrathin surface layers of a semiconductor chip and in R&D for next-generation semiconductor devices. We also manufacture capital equipment used to test and produce chips, including molecular beam epitaxy (MBE) systems for the production of compound semiconductors. The largest application of these systems is for microwave devices used in cellular telephones and other high-speed wireless communications devices.
For financial information about segments, including domestic and international operations and export sales, see Note 3 to our Consolidated Financial Statements beginning on page F-1 of this report.
Sector Changes for 2003
During the first quarter of 2003, we fine-tuned the make-up of our three sectors. We have moved the compositional-metrology business (formerly in Optical Technologies) and our elemental-analyzer business (formerly in Measurement and Control) into the Life and Laboratory Sciences sector. These two businesses are part of the newly created Scientific Instruments division, which also comprises the former Spectroscopy and Analytical Instruments divisions. The new division better aligns our businesses with the way customers work. Specifically, the Life and Laboratory Sciences sector is now organized to provide all our sample preparation, handling, and storage offerings through the Bioscience Technologies division, all our analytical solutions through the Scientific Instruments division, and our information-management offerings through the Informatics and Services division. We continue to provide a full range of products and services to the distinct clinical marketplace through the Clinical Diagnostics division.
In addition, we have moved our ultrahigh-vacuum systems and semiconductor testing businesses, formerly part of the Optical Technologies sector, into the Measurement and Control sector's Temperature Control division. This brings together all of our technologies for maintaining and monitoring precise operating conditions in process environments. Our Optical Technologies sector now comprises all of our lasers and photonics offerings, which we united under the Spectra-Physics brand name.
We believe this sector alignment will help us achieve greater efficiency in our operations, increase market awareness of our product offerings in the marketplace, and capture cross-selling opportunities that exist between the formerly separate organizations. In addition, we believe this structure will enable us to better develop and provide integrated end-to-end solutions based on our customers' needs. These changes will be reflected in our financial reports beginning in the first quarter of 2003.
Discontinued Operations
As a result of our January 2000 reorganization plan, a number of businesses have been accounted for as discontinued operations. Businesses in this category included Kadant Inc., a supplier of systems to the papermaking and paper recycling industry, as well as fiber-based consumer products; and Viasys Healthcare Inc., a manufacturer of a range of medical products for diagnosis and monitoring. Kadant was spun off to shareholders in August 2001 and Viasys was spun off in November 2001. These businesses, together with a number of operating units that were sold, constituted the company's former Energy and Environment, Biomedical and Emerging Technologies, and Recycling and Resource Recovery segments. At March 7, 2003, one operating unit with revenues of $31 million in 2002 remained for sale in discontinued operations.
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New Products and Research and Development
Our business includes the development and introduction of new products and may include entry into new business sectors. We are not currently committed to any new products that require the investment of a material amount of our assets, nor do we have any definitive plans to enter new businesses that would require such an investment.
During 2002, 2001, and 2000, we spent $155.1 million, $171.6 million, and $176.8 million, respectively, on research and development.
Raw Materials
Our management team believes that we have a readily available supply of raw materials for all of our significant products from various sources. We do not anticipate any difficulties obtaining the raw materials essential to our business.
Patents, Licenses, and Trademarks
Patents are important in each segment of our business; no particular patent, or related group of patents, is so important, however, that its loss would significantly affect our operations as a whole. Generally, we seek patent protection for inventions and developments made by our personnel and incorporated into our products or otherwise falling within our fields of interest. Patent rights resulting from work sponsored by outside parties do not always accrue exclusively to the company and may be limited by agreements or contracts.
We protect some of our technology as trade secrets and, where appropriate, we use trademarks or register our products. We also enter into license agreements with others to grant and/or receive rights to patents and know-how.
Seasonal Influences
Revenues in the fourth calendar quarter are historically stronger than in the other quarters due to capital spending patterns of industrial customers.
Working Capital Requirements
There are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on our working capital.
Dependency on a Single Customer
There is no single customer the loss of which would have a material adverse effect on our business. No customer accounted for more than 10% of our total revenues in any of the past three years.
Backlog
Our backlog of firm orders at year-end 2002 and 2001 was as follows:
2002 2001
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(In thousands)
Life and Laboratory Sciences $207,643 $185,097
Measurement and Control 103,665 93,588
Optical Technologies 71,634 155,159
Intersegment (2,347) (1,220)
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$380,595 $432,624
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In the third quarter of 2002, following the company's acquisition of the
remaining minority interest in Spectra-Physics, the company conformed the Lasers
division's backlog policy to the prevailing practice at the company's other
businesses of including in backlog only product orders that are expected to ship
within six months. The Lasers division's historical practice had been to include
orders expected to ship within 12 months. This change resulted in a reduction of
backlog of $39.3 million. The remaining decrease in backlog in the Optical
Technologies sector was principally due to economic conditions facing customers
in the semiconductor and other industrial markets. We believe that virtually all
of our backlog at the end of 2002 will be filled during 2003.
Government Contracts
Although the company transacts business with various government agencies,
no government contract is of such magnitude that a renegotiation of profits or
termination of the contract at the election of the government agency would have
a material adverse effect on the company's financial results.
Competition
General
The company encounters aggressive and able competition in virtually all
of the markets we serve. Because of the diversity of our products and services,
we face many different types of competitors and competition. Our competitors
range from large organizations that produce a comprehensive array of products
and services for a variety of markets to small organizations producing a limited
number of products and services for specialized markets. In general, competitive
climates in the markets we serve are characterized by changing technology that
requires continuing research and development, as well as customer relationships.
Our success in these markets primarily depends on five factors:
- technical performance and advances in technology that result in new
products and improved price/performance ratios;
- our reputation among customers as a quality provider of products and
services;
- customer service and support;
- active research and application-development programs; and
- relative prices of our products and services.
Life and Laboratory Sciences
Bioscience Technologies. In the markets served by this division, our
principal competitors include Kendro Laboratory Products (a subsidiary of SPX
Corporation); PerkinElmer, Inc.; and Beckman Coulter, Inc.
Analytical Instruments. In the markets served by this division, our
principal competitors include Applied Biosystems Inc.; Agilent Technologies Inc.;
Waters Corporation; Shimadzu Corporation; PerkinElmer; and Bruker Daltonics Inc.
Spectroscopy. In the markets served by this division, our principal
competitors include PerkinElmer; Varian Inc.; Agilent; Shimadzu; and Bruker.
Informatics and Services. In the markets served by this division, our
principal competitors include PerkinElmer; Applied Biosystems; Beckman Coulter;
Agilent; and LabVantage Solutions.
Clinical Diagnostics. In the markets served by this division, our principal
competitors include Leica Microsystems; Sakura Finetechnical Co., Ltd.; Becton,
Dickinson and Company; and Roche-Boeringher Manheim.
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Measurement and Control
Process Instruments. In the markets served by this division, our principal
competitors include Mettler-Toledo International Inc.; Yokogawa Electric Corporation;
Fisher-Rosemount (a division of Emerson Electric Co., Inc.); Asea Brown Boveri
(Holding) Ltd.; and Endress & Hauser.
Environmental Instruments. In the markets served by this division, our
principal competitors include Danaher Corporation; Mettler-Toledo; Canberra
Industries, Inc.; and Teledyne Advanced Pollution Instrumentation.
Temperature Control. In the markets served by this division, our principal
competitors include Affinity, Inc.; Polyscience, Inc.; and Lytron Inc.
Optical Technologies
Lasers. In the markets served by this division, our principal competitors
include Coherent, Inc.; Continuum (a division of Excel Technology, Inc.); and
JDS Uniphase Corporation.
Photonics. In the markets served by this division, our principal
competitors include Jobin Yvon Inc.; New Focus, Inc.; and OCLI (a subsidiary of
JDS Uniphase).
Semiconductor. In the markets served by this division, our principal
competitors include Oxford Instruments plc.; Veeco Instruments Inc.; EDAX Inc.;
and Kratos Analytical (a subsidiary of Shimadzu).
Environmental Protection Regulations
Complying with federal, state, and local environmental protection
regulations should not significantly affect our capital spending, earnings, or
competitive position.
Number of Employees
As of December 28, 2002, we had approximately 10,900 employees.
Financial Information About Geographic Areas
Financial information about geographic areas is summarized in Note 3 to
our Consolidated Financial Statements beginning on page F-1 of this report.
Available Information
The company files annual, quarterly, and current reports, proxy
statements, and other documents with the Securities and Exchange Commission
(SEC) under the Exchange Act. The public may read and copy any materials that we
file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC
maintains a Website that contains reports, proxy and information statements, and
other information regarding issuers, including the company, that file
electronically with the SEC. The public can obtain any documents that we file
with the SEC at www.sec.gov. We also make available free of charge on or through
our own Website at www.thermo.com our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable,
amendments to those reports filed or furnished pursuant to section 13(a) of the
Exchange Act as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC.
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Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer)
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Marijn E. Dekkers 45 President and Chief Executive Officer (2000)
Richard F. Syron 59 Executive Chairman and Chairman of the Board (1999)
Guy Broadbent 39 Vice President; President, Optical Technologies (2001)
Marc N. Casper 34 Vice President; President, Life and Laboratory Sciences (2001)
Barry S. Howe 47 Vice President; President, Measurement and Control (2001)
Theo Melas-Kyriazi 43 Vice President and Chief Financial Officer (1998)
Seth H. Hoogasian 48 Vice President, General Counsel, and Secretary (2001)
Peter E. Hornstra 43 Corporate Controller and Chief Accounting Officer (2001)
Mr. Dekkers was appointed Chief Executive Officer in November 2002. He
was President and Chief Operating Officer from July 2000 to November 2002. From
June 1999 to June 2000, Mr. Dekkers served as president of Honeywell
International's (formerly Allied Signal) electronic materials division, and from
August 1997 to May 1999 he served as vice president and general manager of its
fluorine products division.
Mr. Syron was appointed Executive Chairman in November 2002. He joined
the company in June 1999 as President and Chief Executive Officer and was
appointed Chairman of the Board in January 2000. From April 1994 to May 1999,
Mr. Syron was the Chairman and Chief Executive Officer of the American Stock
Exchange Inc.
Mr. Broadbent was appointed Vice President of Thermo Electron in January
2001 and President, Optical Technologies, in October 2000. From May 2000 to
October 2000, Mr. Broadbent was vice president and general manager of the
amorphous metals division of Honeywell International, and from November 1998 to
April 2000, he was business director for Honeywell International's specialty
fluorine division. From June 1996 to October 1998, he was the marketing manager
of new business development for the plastics division of General Electric
Company.
Mr. Casper was appointed Vice President of Thermo Electron and President,
Life and Laboratory Sciences, in December 2001. From July 2000 to July 2001, Mr.
Casper was president and chief executive officer of Kendro Laboratory Products,
a life sciences company that provides sample-preparation and processing
equipment. From May 1999 to June 2000, Mr. Casper was president for the Americas
at Dade Behring Inc., a manufacturer of clinical-diagnosis products. From
January 1997 to May 1999, Mr. Casper was executive vice president for Europe,
Asia, and Intercontinental at Dade Behring Inc.
Mr. Howe was appointed Vice President of Thermo Electron in January 2001
and President, Measurement and Control, in October 2000. Since 1995, Mr. Howe
has held various operating positions at Thermo Electron. These included
President, Optical Technologies, from February 2000 to October 2000; President
and Chief Executive Officer of its Thermo Optek Corporation subsidiary from
March 1999 to February 2000; President and Chief Executive Officer of its
ThermoSpectra Corporation subsidiary from March 1998 to March 1999; and
President and Chief Executive Officer of its Thermo BioAnalysis Corporation
subsidiary from February 1995 to March 1998.
Mr. Melas-Kyriazi was appointed Chief Financial Officer in January 1999.
He joined the company in 1986 as Assistant Treasurer and served as Treasurer
from 1988 to 1994. He was named President and Chief Executive Officer of the
company's ThermoSpectra subsidiary in 1994, a position he held until becoming
Vice President of Corporate Strategy for Thermo Electron in 1998.
Mr. Hoogasian was appointed General Counsel in 1992, Vice President in
1996, and Secretary in 2001.
Mr. Hornstra was appointed Chief Accounting Officer in January 2001 and
Corporate Controller in 1996.
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Item 2. Properties
The location and general character of our principal properties by sector
as of December 28, 2002, are as follows:
Life and Laboratory Sciences
We own approximately 1,540,000 square feet of office, engineering,
laboratory, and production space, principally in Wisconsin, Ohio, California,
Massachusetts, and New York within the U.S., and in Germany, Italy, and
Switzerland. We lease approximately 1,336,000 square feet of office,
engineering, laboratory, and production space, principally in Massachusetts,
Texas, Colorado, and New York within the U.S., and in Finland, England, Japan,
and France, under various leases that expire between 2003 and 2022.
Measurement and Control
We own approximately 680,000 square feet of office, engineering,
laboratory, and production space, principally in Minnesota, New Hampshire, and
New Mexico within the U.S., and in Germany, and England. We lease approximately
1,169,000 square feet of office, engineering, laboratory, and production space,
principally in Massachusetts, Texas, Ohio, California, and Maryland within the
U.S., and in England, the Netherlands, and Australia, under various leases that
expire between 2003 and 2013.
Optical Technologies
We own approximately 230,000 square feet of office, engineering,
laboratory, and production space, principally in Arizona, Wisconsin, and
California. We lease approximately 531,000 square feet of office, engineering,
laboratory, and production space, principally in California and Massachusetts
within the U.S., and in England, under various leases that expire between 2003
and 2019.
Corporate Headquarters
We own approximately 81,000 square feet of office space in Massachusetts
and lease approximately 3,000 square feet of office space in Massachusetts under
a lease that expires in 2004.
We believe that all of these facilities are in good condition and are
suitable and adequate to meet our current needs. If we are unable to renew any
of the leases that are due to expire in the next year or two, we believe that
suitable replacement properties are available on commercially reasonable terms.
Item 3. Legal Proceedings
We are a party to a number of claims and lawsuits relating to our
business. Information regarding litigation is contained in Note 11 to our
Consolidated Financial Statements beginning on page F-1 of this report, and is
incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, whether through
the solicitation of proxies or otherwise, during our 2002 fourth fiscal quarter.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters
Market Price of Common Stock
Our common stock is traded on the New York Stock Exchange under the
symbol TMO. The following table sets forth the high and low sale prices of the
company's common stock for 2002 and 2001, as reported in the consolidated
transaction reporting system.
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2002 2001
-------------------- ---------------------
High Low High Low
------ ------ ------ ------
First Quarter $24.37 $19.30 $26.32 $17.12
Second Quarter 20.60 15.60 28.57 20.97
Third Quarter 17.80 14.50 22.02 17.38
Fourth Quarter 20.52 15.19 23.86 15.98
In August and November 2001, the company spun off to shareholders its
Kadant and Viasys Healthcare subsidiaries. Prices in the above table for periods
prior to these spinoffs have not been adjusted to reflect the spinoffs.
Holders of Common Stock
As of January 24, 2003, the company had 11,502 holders of record of its
common stock. This does not include holdings in street or nominee names.
Dividend Policy
The company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use earnings
to finance expansion and growth. Payment of dividends will rest within the
discretion of the company's Board of Directors and will depend upon, among other
factors, the company's earnings, capital requirements, and financial condition.
Securities Authorized for Issuance Under Equity Compensation Plans
The information with respect to securities authorized for issuance under
equity compensation plans is listed under the caption "Equity Compensation Plan
Information" in our definitive proxy statement to be filed with the SEC, not
later than 120 days after the close of the fiscal year. This information is
incorporated in this report by reference.
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Item 6. Selected Financial Data
2002 (a) 2001 (b) 2000 (c) 1999 (d) 1998 (e)
-------- -------- -------- -------- --------
(In millions except per share amounts)
Statement of Operations Data
Revenues $2,086.4 $2,188.2 $2,280.5 $2,294.6 $1,880.9
Operating Income 155.5 34.2 266.0 182.1 191.3
Income from Continuing Operations Before Extraordinary
Item and Cumulative Effect of Change in Accounting
Principle 195.3 49.6 62.0 37.3 93.8
Income (Loss) Before Extraordinary Item and Cumulative
Effect of Change in Accounting Principle 310.7 (0.8) (23.7) (176.0) 181.5
Net Income (Loss) 309.7 (0.8) (36.1) (174.6) 181.9
Earnings per Share from Continuing Operations Before
Extraordinary Item and Cumulative Effect of Change in
Accounting Principle:
Basic 1.16 .27 .37 .24 .58
Diluted 1.12 .27 .36 .22 .55
Earnings (Loss) per Share:
Basic 1.84 - (.22) (1.10) 1.12
Diluted 1.73 - (.22) (1.12) 1.08
Balance Sheet Data
Working Capital $ 667.8 $ 823.2 $1,737.0 $1,291.6 $2,130.1
Total Assets 3,647.1 3,825.1 4,863.0 5,071.8 5,217.9
Long-term Obligations 451.3 727.5 1,528.5 1,566.0 1,786.4
Minority Interest - 6.9 24.7 348.4 378.9
Common Stock Subject to Redemption - - - 7.7 40.5
Shareholders' Equity 2,033.3 1,908.1 2,534.0 2,013.5 2,256.1
The company's fiscal year for 2002 and earlier ended on the Saturday
closest to December 31. For 2003 and thereafter, the company's fiscal year end
will be December 31. The consolidated financial statements for fiscal years 1998
through 2001 were audited by Arthur Andersen LLP, which has ceased operations. A
copy of the report previously issued by Arthur Andersen on the company's
financial statements as of December 29, 2001, and December 30, 2000, and for
each of the three years in the period ended December 29, 2001, is included
elsewhere in this document. Such report has not been reissued by Arthur
Andersen.
(a) Reflects a $61.3 million pretax charge for restructuring and other costs;
$111.4 million of pretax gains from the sale of shares of FLIR Systems,
Inc.; a net of tax gain of $115.4 million related to the company's
discontinued operations; the repurchase and redemption of $924.9 million
of the company's debt and equity securities; and the reclassification of
the company's $71.9 million principal amount 4 3/8% subordinated
convertible debentures from long-term obligations to current liabilities
as a result of the company's decision to redeem them in April 2003. Also
reflects the adoption of SFAS No. 142, under which amortization of
goodwill ceased.
(b) Reflects a $161.6 million pretax charge for restructuring and other costs;
$35.1 million of pretax gains from the sale of shares of FLIR Systems,
Inc.; a net of tax charge of $50.4 million related to the company's
discontinued operations; a $1.0 million net of tax charge reflecting the
cumulative effect of a change in accounting principle for the adoption of
SFAS No. 133; and the reclassification of $468.1 million of subordinated
convertible debentures from long-term obligations to current liabilities
as a result of the company's decision to redeem them in March 2002. Also
reflects the spinoff of the company's Kadant and Viasys Healthcare
subsidiaries, and the repurchase of $511.4 million of the company's debt
and equity securities.
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(c) Reflects $3.4 million of pretax restructuring and other income, net; a net
of tax charge of $100 million related to the company's discontinued
operations; the issuance of company common stock valued at $448.7 million
to acquire the minority interest of certain subsidiaries; and a $12.9
million net of tax charge reflecting the cumulative effect of a change in
accounting principle for the adoption of SAB No. 101.
(d) Reflects a $65.2 million pretax charge for restructuring and other costs,
a net of tax charge of $50 million related to the company's discontinued
operations, and the February 1999 acquisition of Spectra-Physics AB.
(e) Reflects a $32.5 million pretax charge for restructuring and other costs.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Reference is made throughout this Management's Discussion and Analysis of
Financial Condition and Results of Operations to footnotes included in Notes to
Consolidated Financial Statements, beginning on page F-11 of this report.
Overview
The company develops and manufactures a broad range of products that are
sold worldwide. The company expands the product lines and services it offers by
developing and commercializing its own core technologies and by making strategic
acquisitions of complementary businesses. In January 2000, the company announced
a major reorganization plan under which it planned to sell or spin off many
noncore businesses. In 2001, the company modified the plan and sold its
power-generation business. As a result of these actions, the company's
continuing operations solely include its instrument businesses. The results of
the businesses that have been spun off, sold, or placed for sale have been
presented as discontinued operations in the accompanying financial statements.
The company's continuing operations fall into three principal business segments:
Life and Laboratory Sciences, Measurement and Control, and Optical Technologies.
The company's discussion and analysis of its financial condition and
results of operations is based upon its financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
liabilities. On an on-going basis, the company evaluates its estimates,
including those related to bad debts, inventories, intangible assets, warranty
obligations, income taxes, contingencies and litigation, restructuring, and
discontinued operations. The company bases its estimates on historical
experience, current market and economic conditions, and other assumptions that
management believes are reasonable. The results of these estimates form the
basis for judgments about the carrying value of assets and liabilities where the
values are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
The company believes the following represent its critical accounting
policies and estimates used in the preparation of its financial statements:
(a) The company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to pay amounts
due. If the financial condition of the company's customers were to
deteriorate, reducing their ability to make payments, additional
allowances would be required.
(b) The company writes down its inventories for estimated obsolescence
for differences between the cost and estimated net realizable value
based on recent usage and expected demand. If ultimate usage or
demand varies significantly from expected usage or demand, additional
writedowns may be required.
(c) The company assesses the realizability of its notes receivable based
on judgments concerning the borrower's ability to make the required
payments. If the financial condition of the borrower were to
deteriorate, charges to reduce the carrying value of notes receivable
may be necessary.
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(d) The company periodically evaluates goodwill for impairment using
market comparables for similar businesses and forecasts of discounted
future cash flows. Should the fair value of the company's goodwill
decline because of reduced operating performance, market declines, or
other indicators of impairment, charges for impairment of goodwill
may be necessary.
(e) The company reviews other intangible assets for impairment when
indication of potential impairment exists, such as a significant
reduction in cash flows associated with the assets. Should future
cash flows decline significantly from estimated amounts, charges for
impairment of other intangible assets may be necessary.
(f) In instances where the company sells equipment with an obligation to
install it at a customer site, the company assesses the complexity of
the installation to determine the timing of revenue recognition. If
the nature of the company's products and the related installation
obligations changed so that installation were to become more
complicated and lengthy, the company may be required to defer
additional revenues upon shipment of its products until completion of
installation.
(g) At the time the company recognizes revenue it provides for the
estimated cost of product warranties based primarily on historical
experience. Should product failure rates or the actual cost of
correcting product failures vary from estimates, revisions to the
estimated warranty liability would be necessary.
(h) The company estimates the degree to which tax assets and loss
carryforwards will result in a benefit based on expected
profitability by tax jurisdiction, and provides a valuation allowance
for tax assets and loss carryforwards that it believes will more
likely than not go unused. Should the company's actual future taxable
income by tax jurisdiction vary from estimates, additional allowances
may be necessary.
(i) The company estimates losses on contingencies and litigation and
provides a reserve for these losses. Should the ultimate losses on
contingencies and litigation vary from estimates, adjustments to
those reserves may be required.
(j) The company records restructuring charges for asset impairment based
on estimated future cash flows associated with the equipment and for
the cost of vacating facilities based on expected sub-rental income.
Should actual cash flows associated with impaired equipment and
sub-rental income from vacated facilities vary from estimated
amounts, adjustments may be required.
(k) The company estimates the expected proceeds from the sale of its
discontinued businesses and, when necessary, records losses to reduce
the carrying value of these businesses to estimated realizable value.
Should the actual proceeds, which would include post-closing purchase
price adjustments, vary from estimates, actual results could differ
from expected amounts.
Results of Operations
The discussion of operating income and operating income margin throughout
this Management's Discussion and Analysis of Financial Condition and Results of
Operations includes references to amounts determined in accordance with U.S.
generally accepted accounting principles (GAAP), as well as amounts that exclude
restructuring costs, gains and losses on the sale of businesses, and certain
other items that are discussed by segment below and in more detail in Note 15.
The company believes that this presentation, which is substantially consistent
with how it measures its operating performance, provides information that
investors may find useful as the items, while recurring in the years presented,
vary significantly from period to period.
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2002 Compared With 2001
Continuing Operations
Sales in 2002 were $2.086 billion, a decrease of $101.9 million, or 5%,
from 2001. Excluding the effect of acquisitions, divestitures, and currency
translation, revenues decreased $101.3 million, or 5%. Currency translation had
a favorable effect on revenues as discussed below by segment, due to the
weakening of the U.S. dollar relative to currencies of countries in which the
company operates.
Operating income was $155.5 million in 2002, compared with $34.2 million
in 2001. Segment operating income increased to $205.8 million in 2002 from $85.2
million in 2001. (Segment operating income is operating income excluding costs
incurred at the company's corporate office.) Operating and segment operating
income in 2002 were reduced by additional charges associated with a
restructuring plans initiated during the fourth quarter of 2001, other
restructuring actions initiated in 2002, and certain other costs, net (Note 15).
Operating and segment operating income in 2001 were reduced by charges
associated with restructuring plans initiated during 2001 and certain other
charges, net. The restructuring and other items in both periods are discussed by
segment below and in more detail in Note 15. Excluding the restructuring and
other costs, which totaled $58.7 million in 2002 and $147.3 million in 2001,
segment operating income was $264.5 million in 2002 and $232.4 million in 2001.
The 2001 period included $40.2 million of goodwill amortization. Amortization of
goodwill ceased following the adoption of Statement of Financial Accounting
Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," effective in
2002 (Note 1). Excluding goodwill amortization and restructuring and other
items, segment operating income totaled $272.7 million in 2001. Segment
operating income excluding goodwill amortization and restructuring and other
items decreased in 2002 due to lower revenues and the resulting reduced
profitability at a number of businesses, discussed below, offset in part by the
impact of cost-reduction and productivity initiatives.
In response to a continued downturn in semiconductor and other industrial
markets served by the company, and in an effort to further integrate business
units and reduce the number of real estate locations, the company continued
restructuring initiatives in 2002 at a number of business units. The
restructuring and related actions primarily consisted of headcount reductions,
writedowns of production equipment and abandonment of leases for
telecommunications products, and consolidation of facilities to streamline
operations and reduce costs. These actions resulted in annual cost reductions
beginning in late 2002 and continuing in early 2003 of approximately $43
million, including $7 million in the Life and Laboratory Sciences segment, $13
million in the Measurement and Control segment, and $23 million in the Optical
Technologies segment. The company expects to incur an additional $6 million of
restructuring costs in 2003 for charges associated with these actions that
cannot be recorded until incurred, such as relocation and moving costs. The
company believes that restructuring actions undertaken in 2002 will be
substantially completed by mid-2003. The company expects to identify additional
sites to consolidate in 2003 and will record charges in connection with any such
actions.
Life and Laboratory Sciences
Sales in the Life and Laboratory Sciences segment increased $25.9 million
to $1.140 billion in 2002. The favorable effects of currency translation
resulted in an increase in revenues of $21.9 million in 2002. Sales decreased
$0.5 million due to divestitures, net of acquisitions. Excluding the effect of
currency translation, divestitures, and acquisitions, revenues grew nominally,
increasing $4.5 million, or 0.4%. Increased demand for high-end technology mass
spectrometry equipment and histology and cytology products was offset in part by
weakened demand for spectroscopy instruments and sample-preparation products
that had mid-single digit percentage declines in sales, primarily due to lower
capital spending. The company believes that many pharmaceutical customers, for
example, are delaying purchases except for high-end equipment where recent
technological advances may provide a competitive advantage.
Operating income margin increased to 15.6% in 2002 from 9.5% in 2001.
(Operating income margin is segment operating income divided by segment
revenues.) The segment's operating income margin increased primarily due to the
discontinuation of goodwill amortization as a result of the adoption of SFAS No.
142 in 2002 and higher restructuring and other costs in 2001, compared with
2002. Excluding restructuring and other costs, net, of $18.3
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million in 2002 and $45.6 million in 2001, and goodwill amortization of $23.6
million in 2001, operating income margin was 17.2% in 2002 and 15.7% in 2001.
The increase in operating income margin resulted primarily from cost reduction
and productivity measures undertaken in 2001 and 2002 and, to a lesser extent,
revenue growth of higher-margin products.
In 2002, the segment recorded restructuring and other charges, net, of
$18.3 million, including $11.4 million of cash costs, primarily for severance,
abandoned facilities, and employee retention at businesses being consolidated,
and charges to cost of revenues of $0.7 million for the sale of inventory
revalued at the date of acquisition and the discontinuation of a product line.
In addition, the segment realized a net loss of $4.8 million on the sale of
assets and small business units, principally its Dynex automated diagnostics
product line, and wrote down $1.4 million of fixed assets at abandoned
facilities (Note 15). Restructuring and other costs, net, in 2001 included cash
costs of $27.3 million, primarily for severance and abandoned facilities; $8.3
million of asset writedowns; $6.9 million of charges to cost of revenues,
principally for discontinued product lines; a charge of $3.4 million for the
writeoff of in-process research and development at an acquired business; $0.7
million of noncash severance costs; and $1.0 million of gains on the sale of a
small business unit and a product line (Note 15).
Measurement and Control
Sales in the Measurement and Control segment decreased $61.9 million to
$614.4 million in 2002. Sales decreased $29.4 million due to divestitures, net
of acquisitions. The favorable effects of currency translation resulted in an
increase in revenues of $8.4 million in 2002. Excluding the effect of
divestitures, acquisitions, and currency translation, revenues decreased $40.9
million, or 7%. The decrease was due to a decline in revenues in each of the
segment's principal businesses, particularly the temperature control business,
where over half of the decrease occurred. The overall revenue decline was due to
economic conditions facing customers, particularly in the semiconductor, energy,
and steel industries. The decrease in revenues was offset in part by an increase
in sales of explosives-detection equipment in the fourth quarter of 2002
following a congressional mandate to begin screening all checked airline baggage
in the United States by the end of 2002. The company expects that a continued
downturn in markets served by the segment will unfavorably affect the segment's
revenue comparisons with corresponding prior-year periods in the near term. A
prolonged downturn could adversely affect the realizability of the segment's
assets, which may result in charges for impairment.
The principal divestitures by the segment included the July 2002 sale of
Thermo BLH and Thermo Nobel, which manufacture and sell strain-gauges, and were
placed for sale in 2001 (Note 2); the August 2001 sale of its Pharos Marine
unit, which manufactures and sells marine-navigation equipment; the April 2001
sale of the CAC and Mid South businesses, which provide the oil and gas industry
with wellhead safety and control products; and the July 2001 sale of its
ThermoMicroscopes unit, a manufacturer of scanning probe microscopes. The
principal acquisition by the segment included the July 2002 purchase of the
radiation-monitoring products business of Saint-Gobain Corporation (Note 2).
Operating income margin increased to 8.2% in 2002 from 2.5% in 2001,
primarily due to significant restructuring and other costs in 2001, and the
discontinuation of goodwill amortization as a result of the adoption of SFAS No.
142 in 2002. Operating income margin, excluding restructuring and other costs,
net, of $13.3 million in 2002 and $44.6 million in 2001, and goodwill
amortization of $12.1 million in 2001, decreased to 10.3% in 2002 from 10.9% in
2001. The decrease in operating income margin resulted primarily from the
decrease in revenues, offset in part by the effects of cost reduction and
productivity measures undertaken in 2001 and 2002.
In 2002, the segment recorded restructuring and other charges, net, of
$13.3 million, including $20.1 million of cash costs, principally for severance,
abandoned facilities, and employee retention. In addition, the segment recorded
$8.7 million of net gains, primarily from the sale of businesses, principally
its Thermo BLH and Thermo Nobel subsidiaries. In 2002, the segment recorded
charges to cost of revenues of $1.4 million for the sale of inventory revalued
at the date of acquisition and $0.5 million of asset writedowns (Note 15).
Restructuring and other costs, net,
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in 2001 included $20.7 million of cash costs, primarily for severance, abandoned
facilities, and other exit costs; $12.0 million, net, for the loss on sale of
businesses or writedowns of businesses subsequently sold; $8.2 million of
charges to cost of revenues, principally for discontinued product lines; $3.6
million of asset writedowns; $1.0 million for impairment of a note receivable;
and $0.2 million of other costs. These charges were offset in part by a gain of
$1.1 million on the sale of a building (Note 15).
Optical Technologies
Sales in the Optical Technologies segment decreased $66.7 million to
$342.2 million in 2002. The unfavorable effects of currency translation resulted
in a decrease in revenues of $1.6 million in 2002. Sales increased $0.6 million
due to the acquisition of a product line, net of divestitures. Excluding the
effect of currency translation, an acquisition, and divestitures, revenues
decreased $65.7 million, or 16%. The decrease was due to a severe slowdown in
the semiconductor and other industrial markets that has adversely affected all
of the segment's principal businesses. The semiconductor industry is highly
cyclical and is experiencing a downturn that began in 2001. The company expects
that the slowdowns in semiconductor and other industrial markets will continue
to result in unfavorable revenue comparisons with corresponding prior-year
periods in the near term. A prolonged downturn could adversely affect the
realizability of the segment's assets, which may result in charges for
impairment.
In the third quarter of 2002, following the company's acquisition of the
remaining minority interest in Spectra-Physics, the company conformed the Lasers
division's backlog policy to the prevailing practice at the company's other
businesses of including in backlog only product orders that are expected to ship
within six months. The Lasers division's historical practice had been to include
orders expected to ship within 12 months. This change resulted in a reduction of
backlog of $39.3 million. Excluding the effect of this change, the segment's
backlog decreased 38% during 2002, and totaled $71.6 million as of December 28,
2002.
Operating income margin was negative 6.5% in 2002, compared with
negative 9.1% in 2001. Excluding restructuring and other costs, net, of $27.1
million in 2002 and $57.1 million in 2001, and goodwill amortization of $4.5
million in 2001, operating income margin was 1.5% in 2002 and 5.9% in 2001. The
decrease in operating income margin was due to lower revenues at each of the
segment's principal businesses, particularly the lasers business
(Spectra-Physics), where the decline in revenues led to operating losses
although the business operated profitably in the fourth quarter of 2002,
excluding restructuring charges. The company initiated additional restructuring
actions in this business in 2002, following those announced in the fourth
quarter of 2001. These actions are discussed below and in Note 15.
In 2002, the segment recorded restructuring and other charges, net, of
$27.1 million, including $10.7 million of cash costs, principally for severance
and abandoned-equipment leases associated with suspended telecom initiatives.
The cash costs also included $0.7 million for the settlement of litigation (Note
11). In addition, this segment wrote off assets totaling $8.8 million, primarily
for abandoned telecommunication and other manufacturing equipment. The segment
also recorded a charge of $0.8 million resulting from the exchange of options to
purchase shares of Spectra-Physics for options to purchase shares of Thermo
Electron following the acquisition of the minority interest in this business in
February 2002 (Note 17). In 2002, the segment also recorded $7.0 million of
charges to cost of revenues, principally for discontinued product lines. The
charges described above were offset in part by a net gain of $0.2 million from
the sale of a small business unit and land (Note 15). Restructuring and other
costs, net, in 2001 included $24.0 million of asset writedowns, principally
fixed assets associated with telecommunication initiatives; $22.1 million of
cash costs for severance, lease obligations for abandoned equipment and
facilities, litigation loss, and other exit costs; and $11.0 million of charges
to cost of revenues for inventory writedowns (Note 15).
Other Income, Net
The company reported other income, net, of $132.5 million and $36.5
million in 2002 and 2001, respectively (Note 4). Other income, net, includes
interest income, interest expense, equity in earnings of unconsolidated
subsidiaries, gain on investments, net, and other items, net. Interest income
decreased to $47.9 million in 2002 from $68.5 million in 2001, primarily due to
lower invested cash balances following the repurchase and redemption of
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company securities, acquisitions, and, to a lesser extent, lower prevailing
interest rates. The company expects that the lower market interest rates
existing in 2003 will continue to adversely affect the yield it earns as
maturing investments originally invested at higher rates are reinvested at
current lower market rates. Following redemptions and repurchases of convertible
obligations in 2002 (Note 10) and repurchases of the company's common stock,
lower invested cash will also contribute to an expected reduction in interest
income. Interest expense decreased to $40.9 million in 2002 from $71.8 million
in 2001 as a result of the redemption, maturity, and repurchase of debentures,
as well as entering into interest-rate swap arrangements, offset in part by
interest on borrowings under securities-lending arrangements (Note 10).
During 2002 and 2001, the company had gains on investments, net, of
$123.1 million and $35.6 million, respectively. The gains included $111.4
million and $35.1 million in 2002 and 2001, respectively, from the sale of
shares of FLIR Systems, Inc. The company obtained an equity interest in FLIR as
part of the acquisition of Spectra-Physics AB in 1999. Of the total gain from
the sale of FLIR shares, $39.5 million and $14.2 million in 2002 and 2001,
respectively, represent a recovery of amounts written down in prior years.
Following a reduction in the company's percentage ownership of FLIR to less than
20%, the company no longer reports its pro-rata share of FLIR's earnings but
instead accounts for its remaining investment as an available-for-sale security
(Note 4). Gains on investments in 2001 were reduced by a charge of $2.8 million
to write down two available-for-sale securities due to impairment that the
company deemed other than temporary. The company recorded income from equity in
earnings of unconsolidated subsidiaries of $2.5 million in 2002 and $4.7 million
in 2001, primarily related to the investment in FLIR through the first quarter
of 2002. In 2001, other income, net, included $0.5 million of other expense,
principally currency losses.
Provision for Income Taxes
The company's effective tax rate was 32.3% and 38.1% in 2002 and 2001,
respectively. Excluding restructuring and other costs, net, and gains from the
sale of FLIR shares, the effective tax rate was 31.0% and 38.1% in 2002 and
2001, respectively. The effective tax rate decreased in 2002, primarily due to
the absence of nondeductible goodwill amortization following the adoption of
SFAS No. 142 and, to a lesser extent, a reorganization of the company's
subsidiaries in several European countries that resulted in a more tax-efficient
corporate structure. The effective tax rate exceeded the statutory federal
income tax rate in 2001 due to the impact of state income taxes and
nondeductible expenses, which included goodwill amortization. Excluding
restructuring and other costs, net, and goodwill amortization, the effective tax
rate was 33.1% in 2001.
Minority Interest Income
Minority interest income of $0.3 million and $5.8 million in 2002 and
2001, respectively, represents minority shareholders' allocable share of losses
at Spectra-Physics through the date on which the company acquired the minority
interest in this subsidiary in February 2002 (Note 17).
Contingent Liabilities
At year-end 2002, the company was contingently liable with respect to
certain lawsuits. An unfavorable outcome in one or more of the matters described
in Note 11 could materially affect the company's financial position as well as
its results of operations and cash flows for a particular quarterly or annual
period.
Income from Continuing Operations
Income from continuing operations before extraordinary item and
cumulative effect of change in accounting principle was $195.3 million in 2002,
compared with $49.6 million in 2001. Results in both periods were affected by
restructuring, gains on the sale of FLIR shares, and other items, discussed
above. Excluding restructuring, gains on the sale of shares of FLIR, and other
items in both periods, income from continuing operations before extraordinary
item and cumulative effect of change in accounting principle increased to $164.4
million in 2002 from $122.4 million in 2001 due to the absence of goodwill
amortization in 2002, offset in part by the reasons discussed above.
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Extraordinary Item
The company repurchased and redeemed debentures during 2002 and 2001,
resulting in an extraordinary charge of $1.0 million, net of a tax benefit of
$0.5 million, in 2002, and an extraordinary gain of $1.1 million, net of a tax
provision of $0.6 million, in 2001 (Note 10).
Cumulative Effect of Change in Accounting Principle
The company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended, in the first quarter of 2001, and recorded
an after-tax charge of $1.0 million representing the cumulative effect of the
change in accounting principle.
Recent Accounting Pronouncements
Several recent accounting pronouncements may affect the company's
financial statements in the future. These rule changes are summarized in Note 1.
Discontinued Operations
During 2002, primarily as a result of new tax regulations concerning
deductible losses from divested businesses, the company revised its estimate of
the tax consequences of business disposals in discontinued operations and
recorded a tax benefit of $46.6 million. In addition, in 2002 the company sold
its Trophy Radiologie business for $51 million in cash and principally as a
result of this transaction recorded an after-tax gain of $17.4 million. Also,
the company sold the last remaining component of its former power-generation
business in 2002 and realized a gain from the disposition totaling $13.0
million, primarily for previously unrecognized tax benefits that were realized
upon the sale.
In February 2001, the company sold its interest in Thermo Cardiosystems
Inc. to Thoratec Corporation in exchange for 19.3 million shares of Thoratec
common stock. Certain restrictions, which lapsed in August 2002, limited the
timing of the company's ability to sell these shares. The company recorded an
after-tax charge of $66.0 million in the first quarter of 2001 for a decline in
market value of Thoratec common stock as a loss on disposal of discontinued
operations. Following a sale of shares in February 2002 for net proceeds of $104
million and an after-tax gain of $38.4 million, the company owned less than 20%
of Thoratec's outstanding shares and began accounting for its investment as an
available-for-sale security in continuing operations in the first quarter of
2002, with unrealized gains or losses recorded as part of accumulated other
comprehensive items in the accompanying 2002 balance sheet (Note 17).
In 2001, the company sold a substantial portion of its discontinued
power-generation business for net proceeds of $249 million and realized an
after-tax gain of $15.6 million on the disposition.
The company is not currently aware of any known trends, events, or other
uncertainties involving discontinued operations that it expects will cause the
ultimate loss on disposal of discontinued operations to differ materially from
the amounts recorded to date. Any difference from the amounts recorded would be
reported as an adjustment to the ultimate loss on disposal of discontinued
operations.
2001 Compared With 2000
Continuing Operations
Sales in 2001 were $2.188 billion, a decrease of $92.3 million from 2000.
Excluding the effect of acquisitions, divestitures, and currency translation,
revenues increased $113.5 million, or 5%. Currency translation had an
unfavorable effect on revenues as discussed below by segment, due to the
strengthening of the U.S. dollar relative to currencies of countries in which
the company operates.
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Operating income was $34.2 million in 2001, compared with $266.0 million
in 2000. Segment operating income decreased to $85.2 million in 2001 from $319.8
million in 2000. Operating and segment operating income in 2001 were affected by
restructuring and other costs. Operating and segment operating income in 2000
were affected by gains from the sale of businesses, offset in part by
restructuring and other costs as well as a $1.7 million operating loss in the
third quarter at a business that was sold. The restructuring and other items in
both periods are discussed by segment below and in more detail in Note 15.
Excluding the restructuring and other items, which totaled $147.3 million of
expense in 2001 and $67.3 million of income in 2000, segment operating income
was $232.4 million in 2001 and $252.5 million in 2000. Segment operating income,
excluding restructuring and other items, decreased due to a reduction in segment
operating income of $10.9 million from businesses divested. The company also
recorded $2.3 million of incremental amortization expense in 2001, which
resulted primarily from the purchase of the minority interests of formerly
public subsidiaries in 2000, offset in part by lower amortization expense
following a number of divestitures. In addition, certain businesses discussed
below had lower profitability in 2001.
The company undertook restructuring actions in 2001 to reduce costs in
businesses affected by a severe slowdown in the telecommunications and
semiconductor industries as well as other market sectors hurt by a slowing
economy, including the U.S. steel and cement industries. The restructuring
actions undertaken in 2001 were substantially completed by 2002. In addition to
the actions to reduce costs, the company recorded an impairment charge for
equipment used in telecommunication manufacturing at Spectra-Physics. The
company also recorded provisions for inventories related to the discontinuation
of certain mature or unprofitable product lines and inventories made redundant
by combining businesses and for excess telecommunication inventories at
Spectra-Physics. These actions resulted in annual cost reductions of
approximately $63 million with approximately 40% beginning in the fourth quarter
of 2001 and the balance by the third quarter of 2002, including $20 million in
the Life and Laboratory Sciences segment, $22 million in the Measurement and
Control segment, $18 million in the Optical Technologies segment, and $3 million
at the company's corporate office.
Life and Laboratory Sciences
Sales in the Life and Laboratory Sciences segment increased $67.7 million
to $1.114 billion in 2001. Sales increased $17.9 million due to acquisitions.
The unfavorable effects of currency translation resulted in a decrease in
revenues of $28.1 million in 2001. Excluding the effect of acquisitions and
currency translation, revenues increased $77.9 million, or 7%. Approximately 40%
of the increase was due to higher sales of mass spectrometry products used in
proteomics and drug discovery research. Of the remaining increase, approximately
two thirds was from increased sales of biosciences equipment, including
sample-preparation equipment and microplate and liquid-handling products due to
strong demand from the drug discovery market and expanded distribution channels.
In addition, the segment reported higher revenues from clinical diagnostic
products, including rapid diagnostic tests, as well as increased sales of
spectroscopy instruments due to new product introductions.
Operating income margin decreased to 9.5% in 2001 from 11.4% in 2000. The
segment's operating income margin in both periods was affected by restructuring
and other charges, discussed below. Excluding restructuring and other costs,
net, of $45.6 million in 2001 and $24.7 million in 2000, operating income margin
was 13.6% in 2001 and 13.8% in 2000. The decrease in operating income margin was
primarily due to an increase in goodwill amortization as a result of the
purchase of the minority interests of formerly public subsidiaries. Excluding
the additional amortization expense and the restructuring and other charges,
operating income margin was 13.8% in 2001. Lower profitability due to research
and development expenditures on proteomics initiatives was offset in part by the
effect of higher revenues, discussed above.
Restructuring and other costs, net, in 2001 included cash costs of $27.3
million, primarily for severance and abandoned facilities; $8.3 million of asset
writedowns; $6.9 million of charges to cost of revenues, principally for
discontinued product lines; a charge of $3.4 million for the writeoff of
in-process research and development at an acquired business; $0.7 million of
noncash severance costs; and $1.0 million of gains on the sale of a small
business unit and a product line (Note 15). Restructuring costs in 2000
represent $13.7 million of charges to cost of revenues, principally for
discontinued product lines; $7.0 million of cash costs, primarily for severance
and abandoned facilities; and $4.0 million of asset writedowns (Note 15).
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Measurement and Control
Sales in the Measurement and Control segment decreased $204.0 million to
$676.3 million in 2001. Sales decreased $176.7 million due to divestitures, net
of acquisitions. The unfavorable effects of currency translation resulted in a
decrease in revenues of $11.4 million in 2001. Excluding the effect of
divestitures, acquisitions, and currency translation, revenues decreased $15.9
million, or 2%. The decrease in revenues was primarily due to an 11% decrease in
sales of temperature-control products due to a severe market downturn in the
semiconductor industry, and $12.7 million of lower sales of process instruments.
The lower sales of process instruments primarily included weighing and
inspection equipment due to competitive pressures, and equipment sold to the
U.S. steel and cement industries due to a downturn in those markets. The
decrease in revenue was partially offset by an $8.8 million increase in sales of
environmental-monitoring equipment due in part to increased sales of chemical
and radiation monitors as well as demand from the construction industry and
upgrades of power plants. In April 2001, the segment sold businesses that
contributed $4.4 million of the segment's internal revenue growth in 2001. A
downturn in some markets served by the segment resulted in a decline in revenues
in the third and fourth quarters of 2001 compared with the same quarters of
2000.
In 2001, the segment's principal divestitures included Pharos Marine,
ThermoMicroscopes, and the CAC and Mid South businesses. In 2000, the segment's
divestitures primarily included Spectra Precision, Nicolet Imaging Systems, and
Sierra Research and Technology, Inc. (Note 2).
Operating income margin decreased to 2.5% in 2001 from 20.6% in 2000,
primarily due to restructuring and other charges, net, in 2001 and other income,
net, in 2000. Operating income margin, excluding restructuring and other costs,
net, of $44.6 million in 2001 and other income, net, of $98.1 million in 2000,
decreased to 9.1% in 2001 from 9.5% in 2000. The decrease in operating income
margin resulted primarily from lower profitability at the business units
discussed above that had declining revenues, offset in part by the higher
revenues from sales of environmental-monitoring equipment discussed above
together with cost reduction measures initiated in 2000 and 2001.
Restructuring and other costs, net, in 2001 included $20.7 million of
cash costs, primarily for severance, abandoned facilities, and other exit costs;
$12.0 million, net, for the loss on sale of businesses or writedowns of
businesses subsequently sold; $8.2 million of charges to cost of revenues,
principally for discontinued product lines; $3.6 million of asset writedowns;
$1.0 million for impairment of a note receivable; and $0.2 million of other
costs. These charges were offset in part by a gain of $1.1 million on the sale
of a building (Note 15). The businesses for which the segment recorded a loss on
or prior to sale were ThermoMicroscopes and Pharos Marine. In 2000,
restructuring and other income, net, totaled $98.1 million and included gains on
the sale of businesses, net, of $126.7 million, and the related operating loss
of $1.7 million of one of the divested businesses in the third quarter of 2000
prior to its sale; $18.7 million of asset writedowns to reduce the carrying
value of businesses held for sale to estimated disposal value and for fixed
assets unique to certain discontinued products; $6.1 million of cash costs,
primarily for severance and facility costs; charges to cost of revenues of $2.7
million, primarily for discontinued product lines; and a gain of $0.6 million
from the termination of a lease (Note 15).
Optical Technologies
Sales in the Optical Technologies segment increased $45.0 million to
$408.9 million in 2001. Sales decreased $0.4 million due to a divestiture, net
of a small acquisition. The unfavorable effects of currency translation resulted
in a decrease in revenues of $7.0 million in 2001. Excluding the effect of a
divestiture, an acquisition, and currency translation, revenues increased $52.4
million, or 14%. The increase in revenues was due in part to $37.5 million of
increased demand for semiconductor-based lasers used in industrial, research and
development, and life sciences applications. The balance of the increase was due
to higher sales in the first half of 2001 of molecular beam epitaxy systems and
components to the semiconductor industry and, to a lesser extent, increased
sales of photonics products including gratings and other optical components used
in systems for lithography and telecommunication devices. Poor economic
conditions in the telecommunications markets resulted in a decline in segment
revenues in the third and fourth quarters of 2001 compared with the same
quarters of 2000.
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Operating income margin decreased to negative 9.1% in 2001 from 5.1% in
2000. Excluding restructuring and other costs of $57.1 million in 2001 and $6.0
million in 2000, operating income margin was 4.8% in 2001 and 6.8% in 2000. The
decrease in operating income margin excluding restructuring and other costs was
primarily due to $2.8 million of operating losses at Spectra-Physics from its
telecom product introductions and associated startup costs, compared with
profitable operations in 2000. The decrease in operating income margin was also
due to $0.9 million of higher goodwill amortization in 2001 following the
purchase of the minority interests of formerly public subsidiaries in 2000.
Restructuring and other costs, net, in 2001 included $24.0 million of
asset writedowns, principally fixed assets associated with telecommunication
initiatives; $22.1 million of cash costs for severance, lease obligations for
abandoned equipment and facilities, litigation loss, and other exit costs; and
$11.0 million of charges to cost of revenues for inventory writedowns (Note 15).
Restructuring and other costs in 2000 represent $2.9 million of charges to cost
of revenues principally for discontinued product lines, a $1.5 million writeoff
of in-process research and development at an acquired business, $1.1 million of
cash costs, and $0.5 million of asset writedowns, primarily goodwill on a
business held for sale (Note 15).
Other Income (Expense), Net
The company reported other income, net, of $36.5 million in 2001 and
other expense, net, of $81.2 million in 2000 (Note 4). Interest income increased
to $68.5 million in 2001 from $40.2 million in 2000, primarily due to proceeds
from the sale of businesses, including discontinued operations, offset in part
by cash used in 2000 and 2001 for the purchase of the minority interests of
formerly public subsidiaries and in 2001 for repurchases of the company's debt
and equity securities. Interest expense decreased to $71.8 million in 2001 from
$83.1 million in 2000, as a result of the maturity and repurchase of debentures.
The company recorded income from equity in earnings of unconsolidated
subsidiaries of $4.7 million in 2001 and incurred a net equity loss of $47.3
million in 2000, primarily related to its investment in FLIR, which undertook
significant restructuring actions in 2000. The company had gains on investments,
net, of $35.6 million in 2001 and $6.8 million in 2000. The gain in 2001
includes $35.1 million from the sale of shares of FLIR. Of the total gain from
the sale of FLIR, $14.2 million represents a recovery of previous writedowns of
FLIR. The gain in 2001 was reduced by a charge of $2.8 million to write down two
available-for-sale securities due to impairment that the company deemed other
than temporary. In 2001, other income, net, includes $0.5 million of other
expense, principally currency losses. In 2000, other expense, net, also includes
$2.3 million of net currency gains, primarily resulting from hedging activities
at Spectra-Physics, which elected early adoption of SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities."
Provision for Income Taxes
The company's effective tax rate was 38.1% and 60.7% in 2001 and 2000,
respectively. Excluding the tax effect of restructuring and other costs or
income and gains from the sale of shares of FLIR, the effective tax rate was
38.1% and 39.4% in 2001 and 2000, respectively. The effective tax rate exceeded
the statutory federal income tax rate in both periods due to the impact of state
income taxes and nondeductible expenses, including amortization of goodwill.
Minority Interest Income (Expense)
The company recorded minority interest income of $5.8 million in 2001 and
minority interest expense of $10.6 million in 2000, representing minority
shareholders' allocable share of subsidiary losses or earnings. Minority
interest expense decreased due to the purchase in 2000 of the minority interest
in all of the company's formerly public subsidiaries in continuing operations
except Spectra-Physics (Note 17). In 2001, Spectra-Physics incurred a loss and
minority interest income represents the minority shareholders' share of the
loss.
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Income from Continuing Operations
Income from continuing operations before extraordinary item and
cumulative effect of change in accounting principle was $49.6 million in 2001,
compared with $62.0 million in 2000. Results in both periods were affected by
restructuring, gains on the sale of shares of FLIR, and other items, discussed
above. Excluding the restructuring, gains on the sale of shares of FLIR, and
other items in both periods, income from continuing operations before
extraordinary item and cumulative effect of change in accounting principle
increased to $122.4 million in 2001 from $100.0 million in 2000 due to the
reasons discussed above.
Extraordinary Item
The company repurchased debentures during 2001 and 2000, resulting in
extraordinary gains of $1.1 million, net of taxes of $0.6 million, in 2001, and
$0.5 million, net of taxes of $0.3 million, in 2000 (Note 10).
Cumulative Effect of Change in Accounting Principle
The company adopted SFAS No. 133, as amended, in the first quarter of
2001 and recorded a charge representing the cumulative effect of the change in
accounting principle of $1.0 million, net of an income tax benefit of $0.7
million (Note 1). In addition, in accordance with the requirements of SEC Staff
Accounting Bulletin (SAB) No. 101 "Revenue Recognition in Financial Statements,"
the company adopted the pronouncement as of January 2, 2000, and recorded a
charge in the first quarter of 2000 representing the cumulative effect of the
change in accounting principle of $12.9 million, net of an income tax benefit of
$8.5 million and minority interest of $0.5 million (Note 16).
Discontinued Operations
The company recorded a provision of $66.0 million, net of taxes, in the
first quarter of 2001 for a decline in market value of Thoratec common stock as
a loss on disposal of discontinued operations. The Thoratec shares were obtained
in February 2001 upon the sale of the company's interest in Thermo
Cardiosystems.
In June 2001, the company sold a substantial portion of its discontinued
power-generation business for net proceeds of $249 million and realized an
after-tax gain of $15.6 million on the disposition.
The company recorded a provision of $100 million, net of taxes, in 2000
as a revision to the estimate of loss on disposal of discontinued operations
recorded in 1999. The increase in the loss resulted from lower after-tax
proceeds from the sale of noncore businesses than had been anticipated at the
time the businesses were discontinued. The company believes that deterioration
in the financial markets in the latter part of 2000, including tighter financing
terms and lower equity values, adversely affected the selling prices of the
discontinued businesses.
Liquidity and Capital Resources
Consolidated working capital was $667.8 million at December 28, 2002,
compared with $823.2 million at December 29, 2001. Included in working capital
were cash, cash equivalents, and short-term available-for-sale investments of
$875.5 million at December 28, 2002, compared with $1.042 billion at December
29, 2001. In addition, the company had $9.4 million of long-term
available-for-sale investments at December 29, 2001.
2002
Cash provided by operating activities was $102.9 million during 2002,
including $112.4 million provided by continuing operations. Payments for
restructuring actions of the company's continuing operations, principally
severance, lease costs, and other expenses of real estate consolidation, used
cash of $44.2 million, net of taxes, in 2002. Aside from cash used for
restructuring actions, a decrease in other current liabilities used cash of
$71.6 million, including $44.8 million of income tax payments and $10.8 million
of accrued interest, principally due to the debt redemption discussed in Note
10. The income tax payments include approximately $39.0 million related to gains
on investments. The use of cash of $9.5 million from discontinued operations was
principally due to the payment of liabilities, primarily for the settlement of
litigation, including a patent-infringement matter (Note 11), offset in part by
cash from tax benefits associated with discontinued operations.
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In connection with restructuring actions undertaken by continuing
operations, the company had accrued $41.6 million for restructuring costs at
December 28, 2002. The company expects to pay $22.2 million of this amount for
severance, employee retention, and other costs primarily through 2003. The
balance of $19.4 million will be paid for lease obligations over the remaining
terms of the leases, with approximately 71% to be paid through 2003 and the
remainder through 2012. In addition, at December 28, 2002, the company had
accrued $8.8 million for acquisition expenses. Accrued acquisition expenses
included $1.8 million of severance and relocation obligations, which the company
expects to pay primarily through the third quarter of 2003. The balance
primarily represents abandoned-facility payments that will be paid over the
remaining terms of the leases through 2014.
During 2002, the primary investing activities of the company's continuing
operations, excluding available-for-sale investment activities, included the
sale of other investments, acquisitions and divestitures, the collection of
notes receivable, the purchase of shares of a majority-owned subsidiary, and the
purchase of property, plant, and equipment. The company's continuing operations
received proceeds of $65.5 million from the sale of other investments,
principally shares of FLIR (Note 4), and proceeds of $23.6 million from the sale
of businesses, net of cash divested (Note 2). In addition, the company's
continuing operations expended $78.7 million for acquisitions (Note 2), $23.2
million to purchase the remaining minority-owned shares of its Spectra-Physics
subsidiary (Note 17), and $40.2 million for purchases of property, plant, and
equipment, net of dispositions. The company's continuing operations collected
$76.4 million from notes receivable, which included the repayment of Viasys
Healthcare's $33.4 million principal amount note in May 2002, the August 2002
repayment of a $25.0 million principal amount note receivable related to the
sale of a business in 2000, and partial repayment from Trimble Navigation
Limited in March 2002 (Note 2). During 2002, investing activities of the
company's discontinued operations provided $151.0 million of cash, primarily
representing proceeds of $104 million from the sale of Thoratec common stock
(Note 17) and the sale of Trophy Radiologie.
The company's financing activities used $593.0 million of cash during
2002, including $592.7 million for continuing operations. During 2002, the
company's continuing operations expended $590.7 million to redeem certain
convertible debentures. The company increased short-term notes payable by $311.1
million to partially fund debt redemptions (Note 10). The company's continuing
operations received net proceeds of $25.3 million from the exercise of employee
stock options. During 2002, the company expended $334.2 million to repurchase
its debt and equity securities, of which $285.6 million was expended to
repurchase 15.4 million shares of the company's common stock. As of December 28,
2002, the company had approximately $62 million remaining under Board of
Directors authorizations to repurchase its own securities. In February 2003, the
company's Board of Directors authorized the repurchase of an additional $100
million tranche of its own debt and equity securities through February 26, 2004.
In December 2002, the company entered into arrangements under which the company
may borrow up to $250 million for working capital needs and possible
acquisitions (Note 10).
2001
Cash provided by operating activities was $188.4 million in 2001,
including $184.4 million from continuing operations. Accounts receivable used
$19.0 million of cash, principally as a result of strong fourth quarter revenue
growth in 2001 over the fourth quarter of 2000 at the company's Life and
Laboratory Sciences segment. Accounts payable decreased $19.1 million primarily
due to a lower volume of purchasing activities resulting from slowdowns in
several businesses. Other current liabilities increased by $50.5 million,
including $39.7 million of restructuring reserves and $10.2 million of accrued
interest, due to the timing of payments.
During 2001, the company's investing activities expended $73.2 million,
net of dispositions, for purchases of property, plant, and equipment; $69.5
million for the purchase of shares of a majority-owned subsidiary; and $14.1
million, net of cash acquired, for acquisitions. In addition, the company
recorded proceeds from the sale of businesses, net of cash divested, of $46.8
million, and $43.3 million for the sale of other investments, principally shares
of FLIR.
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The company's financing activities used $696.3 million of cash during
2001, including $503.0 million for continuing operations. The company's
continuing operations expended $43.1 million for the repayment of long-term
obligations and received net proceeds of $69.9 million from the exercise of
employee stock options. In addition, the company expended $511.4 million to
repurchase its debt and equity securities in 2001. During 2001, the company's
discontinued operations used $193.3 million of cash, including cash at the
company's Kadant subsidiary, which was spun off in August 2001, and for the
repayment of debt.
2000
Cash provided by operating activities was $199.9 million in 2000,
including $57.8 million from continuing operations. Cash of $77.4 million was
used to fund an increase in inventories in response to growth at certain of the
company's business units. Of the total increase in inventories, $14.5 million
resulted from the adoption of SAB No. 101. Accounts receivable used $27.4
million of cash due to increased revenues. The increase in receivables was
reduced by $21.6 million due to the adoption of SAB No. 101. Other current
liabilities increased by $48.0 million, including $15.5 million of restructuring
reserves and $29.1 million of accrued income taxes.
During 2000, the company's investing activities expended $307.2 million
to acquire the minority interest of certain majority-owned subsidiaries; $74.0
million, net of dispositions, for purchases of property, plant, and equipment;
and $15.8 million, net of cash acquired, for acquisitions. In addition, the
company recorded proceeds from the sale of businesses, net of cash divested, of
$253.6 million. During 2000, investing activities of the company's discontinued
operations provided $394.6 million, primarily representing proceeds from the
sale of businesses.
The company's financing activities used $137.6 million of cash during
2000, including $155.5 million for continuing operations. The company's
continuing operations expended $161.2 million for the repayment of long-term
obligations, $29.2 million to repurchase its debt and equity securities, and
$14.6 million to purchase debentures of certain of the company's majority-owned
subsidiaries.
Contractual Obligations and Other Commercial Commitments
The table below summarizes, by period due or expiration of commitment,
the company's contractual obligations and other commercial commitments as of
December 28, 2002, which are principally for its continuing operations.
|
Payments Due by Period or Expiration of Commitment
-------------------------------------------------------------------------------
Less than After
1 Year 1-3 Years 4-5 Years 5 Years Total
--------- --------- --------- -------- --------
(In thousands)
Contractual Obligations and Other
Commercial Commitments:
Long-term obligations $117,144 $228,366 $ 78,471 $144,504 $568,485
Operating leases 40,312 89,356 20,017 83,072 232,757
-------- -------- -------- -------- --------
Total contractual obligations 157,456 317,722 98,488 227,576 801,242
-------- -------- -------- -------- --------
Other Commitments:
Standby letters of credit 40,549 3,676 161 169 44,555
Guarantees 25,166 2,023 8 4 27,201
-------- -------- -------- -------- --------
Total other commitments 65,715 5,699 169 173 71,756
-------- -------- -------- -------- --------
$223,171 $323,421 $ 98,657 $227,749 $872,998
======== ======== ======== ======== ========
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The company does not use special purpose entities or other
off-balance-sheet financing techniques except for operating leases and other
commitments disclosed in the previous table.
The company has no material commitments for purchases of property, plant,
and equipment and expects that for 2003, such expenditures will approximate $55
to $60 million.
The company believes that its existing resources, including cash and
investments, future cash flow from operations, and available borrowings under
credit facilities, are sufficient to meet the working capital requirements of
its existing businesses for the foreseeable future, including at least the next
24 months.
Forward-looking Statements
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, we caution readers that the following important
factors, among others, in some cases have affected, and in the future could
affect, our actual results and could cause our actual results in 2003 and beyond
to differ materially from those expressed in any forward-looking statements made
by us.
We must develop new products, adapt to rapid and significant
technological change, and respond to introductions of new products in order to
remain competitive. Our growth strategy includes significant investment in and
expenditures for product development, including in the area of proteomics. We
sell our products in several industries that are characterized by rapid and
significant technological changes, frequent new product and service
introductions, and enhancements and evolving industry standards. Without the
timely introduction of new products, services, and enhancements, our products
and services will likely become technologically obsolete over time, in which
case our revenue and operating results would suffer.
Our customers use many of our products to develop, test, and manufacture
their own products. As a result, we must anticipate industry trends and develop
products in advance of the commercialization of our customers' products. If we
fail to adequately predict our customers' needs and future activities, we may
invest heavily in research and development of products and services that do not
lead to significant revenue.
Many of our existing products and those under development are
technologically innovative and require significant planning, design,
development, and testing at the technological, product, and
manufacturing-process levels. These activities require us to make significant
investments.
Products in our markets undergo rapid and significant technological
change because of quickly changing industry standards and the introduction of
new products and technologies that make existing products and technologies
uncompetitive or obsolete. Our competitors may adapt more quickly to new
technologies and changes in customers' requirements than we can. The products
that we are currently developing, or those we will develop in the future, may
not be technologically feasible or accepted by the marketplace, and our products
or technologies could become uncompetitive or obsolete.
We sell our products and services to a number of companies that operate
in cyclical industries, which would adversely affect our results of operations
when those industries experience a downturn. The growth and profitability of
some of our businesses depend in part on sales to industries that are subject to
cyclical downturns and are experiencing slowing trends. For example, our Optical
Technologies segment depends in part on sales to the semiconductor industry and
our Measurement and Control segment depends in part on sales to the steel and
cement industries. A continued slowdown in these industries would adversely
affect sales by these segments, which in turn would adversely affect our
revenues and results of operations.
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Our business is adversely impacted by the continuing general worldwide
economic slowdown and related uncertainties affecting markets in which we
operate. Continuing adverse economic conditions worldwide could adversely impact
our business in 2003 and beyond, resulting in:
- reduced demand for some of our products;
- increased rate of order cancellations or delays;
- increased risk of excess and obsolete inventories;
- increased pressure on the prices for our products and services; and
- greater difficulty in collecting accounts receivable.
For example, continued softness in the laboratory equipment, industrial
manufacturing, and semiconductor markets could adversely affect our future
operating results.
Changes in governmental regulations may reduce demand for our products or
increase our expenses. We compete in many markets in which we and our customers
must comply with federal, state, local, and international regulations, such as
environmental, health and safety, and food and drug regulations. We develop,
configure, and market our products to meet customer needs created by those
regulations. Any significant change in regulations could reduce demand for our
products. For example, many of our instruments are marketed to the
pharmaceutical industry for use in discovering and developing drugs. Changes in
the U.S. Food and Drug Administration's regulation of the drug discovery and
development process could have an adverse effect on the demand for these
products.
Demand for most of our products depends on capital spending policies of
our customers and on government funding policies. Our customers include
manufacturers of semiconductors and products incorporating semiconductors,
pharmaceutical and chemical companies, laboratories, universities, healthcare
providers, government agencies, and public and private research institutions.
Many factors, including public policy spending priorities, available resources,
and product and economic cycles, have a significant effect on the capital
spending policies of these entities. These policies in turn can have a
significant effect on the demand for our products.
Our inability to protect our intellectual property could have a material
adverse effect on our business. In addition, third parties may claim that we
infringe their intellectual property, and we could suffer significant litigation
or licensing expense as a result. We place considerable emphasis on obtaining
patent and trade secret protection for significant new technologies, products,
and processes because of the length of time and expense associated with bringing
new products through the development process and into the marketplace. Our
success depends in part on our ability to develop patentable products and obtain
and enforce patent protection for our products both in the United States and in
other countries. We own numerous U.S. and foreign patents, and we intend to file
additional applications, as appropriate, for patents covering our products.
Patents may not be issued for any pending or future patent applications owned by
or licensed to us, and the claims allowed under any issued patents may not be
sufficiently broad to protect our technology. Any issued patents owned by or
licensed to us may be challenged, invalidated, or circumvented, and the rights
under these patents may not provide us with competitive advantages. In addition,
competitors may design around our technology or develop competing technologies.
Intellectual property rights may also be unavailable or limited in some foreign
countries, which could make it easier for competitors to capture increased
market position. We could incur substantial costs to defend ourselves in suits
brought against us or in suits in which we may assert our patent rights against
others. An unfavorable outcome of any such litigation could materially adversely
affect our business and results of operations.
We also rely on trade secrets and proprietary know-how which we seek to
protect our products, in part, by confidentiality agreements with our
collaborators, employees, and consultants. These agreements may be breached and
we may not have adequate remedies for any breach. In addition, our trade secrets
may otherwise become known or be independently developed by our competitors.
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Third parties may assert claims against us to the effect that we are
infringing on their intellectual property rights. We could incur substantial
costs and diversion of management resources in defending these claims, which
could have a material adverse effect on our business, financial condition, and
results of operations. In addition, parties making these claims could secure a
judgment awarding substantial damages, as well as injunctive or other equitable
relief, which could effectively block our ability to make, use, sell,
distribute, or market our products and services in the United States or abroad.
In the event that a claim relating to intellectual property is asserted against
us, or third parties not affiliated with us hold pending or issued patents that
relate to our products or technology, we may seek licenses to such intellectual
property or challenge those patents. However, we may be unable to obtain these
licenses on commercially reasonable terms, if at all, and our challenge of the
patents may be unsuccessful. Our failure to obtain the necessary licenses or
other rights could prevent the sale, manufacture, or distribution of our
products and, therefore, could have a material adverse effect on our business,
financial condition, and results of operations.
We have retained contingent liabilities from businesses that we have
sold. From 1997 through 2002, we divested over 60 businesses with aggregate
annual revenues in excess of $2 billion. As part of these transactions, we
retained responsibility for some of the contingent liabilities related to these
businesses, such as lawsuits, product liability claims, and potential claims by
buyers that representations and warranties we made about the businesses were
inaccurate. The resolution of these contingencies has not had a material adverse
effect on our results of operations or financial condition; however, we can not
be certain that this favorable pattern will continue.
We face a number of challenges in integrating and consolidating our
businesses. We have historically operated our businesses largely as autonomous,
unaffiliated operations. For the past few years, we have been consolidating our
operations and managing them in a more coordinated manner. The following factors
may make it difficult to successfully complete the integration and consolidation
of our operations:
- Our success in integrating our businesses depends on our ability to
coordinate or consolidate geographically separate organizations and
integrate personnel with different business backgrounds and corporate
cultures.
- Our ability to combine our businesses requires coordination of
previously autonomous administrative, sales and marketing,
distribution, and accounting and finance functions, and expansion and
integration of information and management systems.
- The integration and consolidation process could be disruptive to our
businesses.
Moreover, we may not be able to realize all of the cost savings and other
benefits that we expect to result from the integration and consolidation
process.
Our results could be impacted if we are unable to realize potential
future savings from new sourcing initiatives. As part of our corporate
consolidation over the past two years, we have undertaken significant real
estate consolidations and cost-savings initiatives relating to sourcing
materials and services purchased by us throughout our businesses. While we
anticipate continued significant savings from additional sourcing initiatives
and further real estate consolidations, future savings opportunities may be
fewer and smaller in size, and may be more difficult to achieve.
Implementation of our new branding strategy may be difficult and could
adversely affect our business. We historically operated our business largely as
autonomous, unaffiliated companies and as a result each of our businesses
independently created and developed its own brand names. We are implementing a
new marketing and branding strategy which involves the transition from multiple,
unrelated brands to two brands, Thermo Electron and Spectra-Physics. Several of
our existing brands such as Finnigan, Nicolet, and Oriel command strong market
recognition and customer loyalty. We believe the transition to the two new
brands will enhance and strengthen our collective brand image and brand
awareness across the entire company. Our success in transitioning our brands
depends on many factors, including effective communication of the transition to
our customers, acceptance and recognition by customers
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of these new brands, and successful execution of the branding campaign by our
marketing and sales teams. If we are not successful in implementing this
strategy and transitioning our brands, we may experience erosion in our product
recognition, brand image and customer loyalty, and a decrease in demand for our
products.
It may be difficult for us to implement our strategies for improving
internal growth. Some of the markets in which we compete have been flat or
declining over the past several years. To address this issue, we are pursuing a
number of strategies to improve our internal growth, including:
- finding new markets for our products, including in the area of
proteomics;
- developing new applications for our technologies;
- combining sales and marketing operations in appropriate markets to
compete more effectively;
- actively funding research and development;
- commencing key customer initiatives;
- strengthening our presence in selected geographic markets; and
- developing commercial tools and infrastructure to increase and
support cross-selling opportunities of products and services to take
advantage of our breadth in product offerings.
We may not be able to successfully implement these strategies, and these
strategies may not result in the growth of our business.
We have significant international operations, which entail the risk that
exchange rate fluctuations may negatively affect demand for our products and our
profitability. International revenues account for a substantial portion of our
revenues, and we intend to continue expanding our presence in international
markets. In 2002, our international revenues from continuing operations,
including export revenues from the United States, accounted for approximately
52% of our total revenues. International revenues are subject to the risk that
fluctuations in exchange rates may adversely affect product demand and the
profitability in U.S. dollars of products and services provided by us in
international markets, where payment for our products and services is made in
the local currency. For example, while in fiscal 2002, currency translation had
a favorable effect on revenues of our continuing operations of $28.7 million, in
fiscal 2001, the unfavorable effects of currency translation decreased revenues
of our continuing operations by $46.5 million.
We have acquired several companies and businesses; as a result we have
recorded significant goodwill on our balance sheet, which we must continually
evaluate for potential impairment. We have acquired significant intangible
assets, including approximately $1.4 billion of goodwill that we have recorded
on our balance sheet as of December 28, 2002. We assess the realizability of the
goodwill we have on our books annually as well as whenever events or changes in
circumstances indicate that the goodwill may be impaired. These events or
circumstances generally include operating losses or a significant decline in
earnings associated with the acquired business or asset. Our ability to realize
the value of the goodwill will depend on the future cash flows of these
businesses. These cash flows in turn depend in part on how well we have
integrated these businesses.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The company is exposed to market risk from changes in interest rates,
currency exchange rates, and equity prices, which could affect its future
results of operations and financial condition. The company manages its exposure
to these risks through its regular operating and financing activities.
Additionally, the company uses short-term forward contracts to manage certain
exposures to currencies. The company enters into forward currency-exchange
contracts to hedge firm purchase and sale commitments denominated in currencies
other than its subsidiaries' local currencies. The company does not engage in
extensive currency hedging activities; however, the purpose of the company's
currency hedging activities is to protect the company's local currency cash
flows related to these commitments from fluctuations in currency exchange rates.
The company's forward currency-exchange contracts principally hedge transactions
denominated in U.S. dollars, Euros, British pounds sterling, Japanese yen, and
Swiss francs. Income and losses arising from forward contracts are recognized as
offsets to losses and income resulting from the underlying exposure being
hedged. The company does not enter into speculative currency agreements.
Interest Rates
Certain of the company's short- and long-term available-for-sale
investments and long-term obligations are sensitive to changes in interest
rates. Interest rate changes would result in a change in the fair value of these
financial instruments due to the difference between the market interest rate and
the rate at the date of purchase or issuance of the financial instrument. A 10%
decrease in year-end 2002 and 2001 market interest rates would result in a
negative impact to the company of $2 million and $9 million, respectively, on
the net fair value of its interest-sensitive financial instruments.
In addition, interest rate changes would result in a change in the
company's interest expense due to variable-rate debt instruments. A 100-basis
point increase in 90-day LIBOR at December 28, 2002, would increase the
company's annual pre-tax interest expense by $4 million.
Currency Exchange Rates
The company generally views its investment in international subsidiaries
with a functional currency other than the company's reporting currency as
long-term. The company's investment in international subsidiaries is sensitive
to fluctuations in currency exchange rates. The functional currencies of the
company's international subsidiaries are principally denominated in Euros,
British pounds sterling, and Japanese yen. The effect of a change in currency
exchange rates on the company's net investment in international subsidiaries is
reflected in the "accumulated other comprehensive items" component of
shareholders' equity. A 10% depreciation in year-end 2002 and 2001 functional
currencies, relative to the U.S. dollar, would result in a reduction of
shareholders' equity of $76 million and $72 million, respectively.
The fair value of forward currency-exchange contracts is sensitive to
changes in currency exchange rates. The fair value of forward currency-exchange
contracts is the estimated amount that the company would pay or receive upon
termination of the contract, taking into account the change in currency exchange
rates. A 10% depreciation in year-end 2002 and 2001 currency exchange rates
related to the company's contracts would result in an increase in the unrealized
loss on forward currency-exchange contracts of $3.3 million and $5.1 million,
respectively. The unrealized gains or losses on forward currency-exchange
contracts resulting from changes in currency exchange rates are expected to
approximately offset losses or gains on the exposures being hedged.
Certain of the company's cash and cash equivalents are denominated in
currencies other than the functional currency of the depositor and are sensitive
to changes in currency exchange rates. A 10% depreciation in the related
year-end 2002 and 2001 currency exchange rates would result in a negative impact
of $1.2 million and $1.7 million, respectively, on the company's net income.
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Equity Prices
The company's available-for-sale investment portfolio includes equity
securities that are sensitive to fluctuations in price. In addition, the
company's convertible obligations are sensitive to fluctuations in the price of
the company's common stock. Changes in equity prices would result in changes in
the fair value of the company's available-for-sale investments and convertible
obligations due to the difference between the current market price and the
market price at the date of purchase or issuance of the financial instrument. A
10% decrease in year-end 2002 market equity prices would result in a negative
impact to the company of $9 million on the net fair value of its price-sensitive
equity financial instruments, principally its available-for-sale investments. A
10% increase in the year-end 2001 market equity prices would result in a
negative impact to the company of $7 million on the net fair value of its
price-sensitive equity financial instruments, principally its convertible
obligations.
Item 8. Financial Statements and Supplementary Data
This data is submitted as a separate section to this report. See Item 15
"Exhibits, Financial Statement Schedules, and Reports on Form 8-K."
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
In June 2002, we changed our independent accountants as reported in our
Current Report on Form 8-K dated June 21, 2002.
Our consolidated financial statements for each of the two fiscal years
ended December 29, 2001, and December 30, 2000, were audited by Arthur Andersen
LLP, independent accountants. On August 31, 2002, Arthur Andersen ceased
practicing before the SEC. Therefore, Arthur Andersen did not participate in the
preparation of this Form 10-K, did not reissue its audit report with respect to
the financial statements included in this Form 10-K, and did not consent to the
inclusion of its audit report in this Form 10-K. As a result, holders of our
securities may have no effective remedy against Arthur Andersen in connection
with a material misstatement or omission in the financial statements to which
its audit report relates. In addition, even if such holders were able to assert
such a claim, because it has ceased operations, Arthur Andersen may fail or
otherwise have insufficient assets to satisfy claims made by holders of our
securities that might arise under federal securities laws or otherwise with
respect to Arthur Andersen's audit report.
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PART III
Item 10. Directors and Executive Officers of the Registrant
The information with respect to Directors is listed under the caption
"Election of Directors" in our definitive proxy statement to be filed with the
SEC, not later than 120 days after the close of the fiscal year. This
information is incorporated in this report by reference. Information relating to
our executive officers is included in Item 1 of this report.
We are also required, under Item 405 of Regulation S-K, to provide
information concerning delinquent filers of reports under Section 16 of the
Exchange Act, as amended. This information is listed under the heading "Section
16(a) Beneficial Ownership Reporting Compliance" under the caption "Stock
Ownership" in our definitive proxy statement to be filed with the SEC, not later
than 120 days after the close of the fiscal year. This information is
incorporated in this report by reference.
Item 11. Executive Compensation
This information is listed under the caption "Executive Compensation" in
our definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. This information is incorporated in this
report by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information with respect to security ownership of certain beneficial
owners and management is listed under the caption "Stock Ownership" in our
definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. The information with respect to securities
authorized for issuance under equity compensation plans is listed under the
caption "Equity Compensation Plan Information" in our definitive proxy statement
to be filed with the SEC, not later than 120 days after the close of the fiscal
year. This information is incorporated in this report by reference.
Item 13. Certain Relationships and Related Transactions
This information is listed under the captions "Relationship with
Affiliates" and "Compensation Committee Interlocks and Insider Participation" in
our definitive proxy statement to be filed with the SEC, not later than 120 days
after the close of the fiscal year. This information is incorporated in this
report by reference.
Item 14. Controls and Procedures
The company's management, including its Chief Executive Officer and Chief
Financial Officer, has conducted an evaluation of the effectiveness of
disclosure controls and procedures within 90 days of the filing of this report
pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the disclosure
controls and procedures are effective in ensuring that information required to
be disclosed in the reports that the company files or submits under the Exchange
Act is recorded, processed, summarized, and reported within the time periods
specified in SEC rules and forms. There have been no significant changes in
internal controls, or in factors that could significantly affect internal
controls, subsequent to the date the company's management, including its Chief
Executive Officer and Chief Financial Officer, completed its evaluation.
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PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements (see Index on page F-1 of this report):
Reports of Independent Accountants
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders' Equity
Notes to Consolidated Financial Statements
(2) Consolidated Financial Statement Schedule (see Index on page F-1 of this report):
Schedule II: Valuation and Qualifying Accounts
Reports of Independent Accountants
All other schedules are omitted because they are not applicable
or not required, or because the required information is shown
either in the financial statements or in the notes thereto.
(b) Reports on Form 8-K
On December 12, 2002, the company filed a Current Report on Form 8-K with
respect to the election of Marijn Dekkers, the Registrant's president and
chief operating officer, to the position of president and chief executive
officer, and the election of Richard F. Syron, the Registrant's chairman
and chief executive officer, to the position of full-time executive
chairman.
(c) Exhibits
See the Exhibit Index on page 39.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 7, 2003 THERMO ELECTRON CORPORATION
By: /s/ Marijn E. Dekkers
-------------------------------------
Marijn E. Dekkers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of March 7, 2003.
Signature Title
--------- -----
By: /s/ Marijn E. Dekkers President, Chief Executive Officer, and Director
------------------------------ (Principal Executive Officer)
Marijn E. Dekkers
By: /s/ Richard F. Syron Chairman of the Board
------------------------------
Richard F. Syron
By: /s/ Theo Melas-Kyriazi Vice President and Chief Financial Officer
------------------------------ (Principal Financial Officer)
Theo Melas-Kyriazi
By: /s/ Peter E. Hornstra Corporate Controller and Chief Accounting Officer
------------------------------ (Principal Accounting Officer)
Peter E. Hornstra
By: /s/ Peter O. Crisp Director
------------------------------
Peter O. Crisp
By: /s/ John L. LaMattina Director
------------------------------
John L. LaMattina
By: /s/ Jim P. Manzi Director
------------------------------
Jim P. Manzi
By: /s/ Robert A. McCabe Director
------------------------------
Robert A. McCabe
By: /s/ Robert W. O'Leary Director
------------------------------
Robert W. O'Leary
By: /s/ Michael E. Porter Director
------------------------------
Michael E. Porter
By: /s/ Elaine S. Ullian Director
------------------------------
Elaine S. Ullian
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THERMO ELECTRON CORPORATION
CERTIFICATIONS
I, Marijn E. Dekkers, certify that:
1. I have reviewed this annual report on Form 10-K of Thermo Electron
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 7, 2003
/s/ Marijn E. Dekkers
-------------------------------------
Marijn E. Dekkers
President and Chief Executive Officer
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THERMO ELECTRON CORPORATION
I, Theo Melas-Kyriazi, certify that:
1. I have reviewed this annual report on Form 10-K of Thermo Electron
Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 7, 2003
/s/ Theo Melas-Kyriazi
------------------------
Theo Melas-Kyriazi
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (filed as Exhibit 1 to the Registrant's Amendment
No. 3 to Registration Statement on Form 8-A/A [File No.
1-8002] and incorporated in this document by reference).
3.2 By-laws of the Registrant, as amended and effective as of
February 27, 2003.
The Registrant agrees, pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K, to furnish to the Commission upon request, a
copy of each instrument with respect to other long-term debt
of the Registrant or its consolidated subsidiaries.
4.1 Rights Agreement dated as of October 29, 2001, between the
Registrant and American Stock Transfer & Trust Company, which
includes as Exhibit A the Form of Certificate of Designations,
as Exhibit B the Form of Rights Certificate, and as Exhibit C
the Summary of Rights to Purchase Preferred Stock (filed as
Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
4.2 Amendment No. 1 to Rights Agreement dated as of February 7,
2002, between the Registrant and American Stock Transfer &
Trust Company (filed as Exhibit 4.3 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 29,
2001 [File No. 1-8002] and incorporated in this document by
reference).
10.1 Thermo Electron Corporation Executive Retention Plan/Form of
Executive Retention Agreement (filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended October 3, 1998 [File No. 1-8002] and incorporated in
this document by reference). (Each executive officer has a
two-year agreement except Mr. Richard F. Syron and Mr. Marijn
Dekkers, each of whom has a three-year agreement, and Mr. Marc
N. Casper and Mr. Peter E. Hornstra, each of whom has a
one-year agreement.)
10.2 Revolving Credit Facility Letters from Barclays Bank PLC in
favor of the Registrant and its subsidiaries (filed as Exhibit
10.8 to the Registrant's Annual Report on Form 10-K for the
year ended January 3, 1998 [File No. 1-8002] and incorporated
in this document by reference).
10.3 Amended and Restated Deferred Compensation Plan for Directors
of the Registrant (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3,
1999 [File No. 1-8002] and incorporated in this document by
reference).
10.4 Thermo Electron Corporation Directors Stock Option Plan, as
amended and restated as of February 7, 2002 (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.5 Incentive Stock Option Plan of the Registrant (filed as
Exhibit 4(d) to the Registrant's Registration Statement on
Form S-8 [Reg. No. 33-8993] and incorporated in this document
by reference).
10.6 Amended and Restated Nonqualified Stock Option Plan of the
Registrant (filed as Exhibit 10.3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 3,
1999 [File No. 1-8002] and incorporated in this document by
reference). (Plan amended in 1984 to extend expiration date to
December 14, 1994.)
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.7 Thermo Electron Corporation Equity Incentive Plan, as amended
and restated as of February 7, 2002 (filed as Exhibit 10.10 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.8 Thermo Electron Corporation 2001 Equity Incentive Plan, as
amended and restated as of February 7, 2002 (filed as Exhibit
10.11 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.9 Thermo Electron Corporation Employees' Equity Incentive Plan,
as amended and restated as of February 7, 2002 (filed as
Exhibit 10.12 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 2001 [File No. 1-8002]
and incorporated in this document by reference).
10.10 Thermo Electron Corporation Deferred Compensation Plan,
effective November 1, 2001 (filed as Exhibit 10.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 2001 [File No. 1-8002] and incorporated in
this document by reference).
10.11 Thermo Electron Corporation 2000 Employees Equity Incentive
Plan.
Each of the plans listed in Exhibits 10.12 to 10.53 originally
provided for the grant of options to acquire the shares of the
Registrant's formerly majority-owned subsidiaries. In
connection with the reorganization of the Registrant commenced
in 1999, all of the Registrant's formerly majority-owned
subsidiaries were taken private and as a result, these plans
were frozen and all of the options originally granted under
the plans ultimately became options to purchase shares of
Common Stock of the Registrant.
10.12 Amended and Restated Thermo Electron Corporation - Thermo
Information Solutions Inc. Nonqualified Stock Option Plan
(Thermo Information Solutions merged with Thermo Coleman
Corporation on September 17, 1999, and Thermo Coleman merged
with Thermo Electron on October 15, 1999.)
10.13 Amended and Restated Thermo Information Solutions Inc. Equity
Incentive Plan (Thermo Information Solutions merged with
Thermo Coleman Corporation on September 17, 1999, and Thermo
Coleman merged with Thermo Electron on October 15, 1999.)
10.14 Amended and Restated Thermo Electron Corporation - Thermo
Power Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermo Power
merged with Thermo Electron on October 28, 1999.)
10.15 Amended and Restated Thermo Coleman Corporation Equity
Incentive Plan (Thermo Coleman merged with Thermo Electron on
October 15, 1999.)
10.16 Nonqualified Stock Option Plan of Thermo Power Corporation, as
amended (filed as Exhibit 10(i) to the Quarterly Report on
Form 10-Q of Thermo Power for the quarter ended April 3, 1993
[File No. 1-10573] and incorporated herein by reference).
(Thermo Power merged with Thermo Electron on October 28,
1999.)
10.17 Amended and Restated Thermo Electron Corporation - Trex
Communications Corporation Nonqualified Stock Option Plan
(filed as Exhibit 10.29 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended July 3, 1999 [File No.
1-8002] and incorporated in this document by reference). (Trex
Communications merged with ThermoTrex on November 8, 1999, and
ThermoTrex merged with Thermo Electron on August 14, 2000.)
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.18 Amended and Restated Trex Communications Corporation Equity
Incentive Plan (Trex Communications merged with ThermoTrex on
November 8, 1999, and ThermoTrex merged with Thermo Electron
on August 14, 2000.)
10.19 Amended and Restated Thermo Instrument Systems Inc. -
ThermoSpectra Corporation Nonqualified Stock Option Plan
(filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q of
Thermo Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (ThermoSpectra
merged with Thermo Instrument on December 9, 1999, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.20 Equity Incentive Plan of ThermoSpectra Corporation (filed as
Exhibit 10.18 to ThermoSpectra's Registration Statement on
Form S-1 [Reg. No. 33-93778] and incorporated herein by
reference). (ThermoSpectra merged with Thermo Instrument on
December 9, 1999, and Thermo Instrument merged with Thermo
Electron on June 30, 2000.)
10.21 Amended and Restated Thermo Instrument Systems - Thermo Vision
Corporation Nonqualified Stock Option Plan (filed as Exhibit
10.12 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated in this document by reference).
(Thermo Vision merged with Thermo Instrument on January 6,
2000, and Thermo Instrument merged with Thermo Electron on
June 30, 2000.)
10.22 Equity Incentive Plan of Thermo Vision Corporation (filed as
Exhibit 10.9 to the Annual Report on Form 10-K of Thermo
Vision for the fiscal year ended January 3, 1998 [File No.
1-13391] and incorporated herein by reference). (Thermo Vision
merged with Thermo Instrument on January 6, 2000, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.23 Amended and Restated Thermo Electron Corporation - Thermo
Sentron Inc. Nonqualified Stock Option Plan (filed as Exhibit
10.21 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermo Sentron
merged with Thermedics Inc. on April 4, 2000, and Thermedics
merged with Thermo Electron on June 30, 2000.)
10.24 Equity Incentive Plan of Thermo Sentron Inc. (filed as Exhibit
10.7 to Thermo Sentron's Registration Statement on Form S-1
[Reg. No. 333-806] and incorporated herein by reference).
(Thermo Sentron merged with Thermedics Inc. on April 4, 2000,
and Thermedics merged with Thermo Electron on June 30, 2000.)
10.25 Amended and Restated Thermo Electron Corporation - Thermedics
Detection Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.24 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermedics
Detection merged with Thermedics on April 12, 2000, and
Thermedics merged with Thermo Electron on June 30, 2000.)
10.26 Equity Incentive Plan of Thermedics Detection Inc. (filed as
Exhibit 10.7 to Thermedics Detection's Registration Statement
on Form S-1 [File No. 333-19199] and incorporated in this
document by reference). (Thermedics Detection merged with
Thermedics on April 12, 2000, and Thermedics merged with
Thermo Electron on June 30, 2000.)
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.27 Amended and Restated Equity Incentive Plan of Thermedics Inc.
(filed as Exhibit 10.7 to the Quarterly Report on Form 10-Q
of Thermedics for the quarter ended July 3, 1999 [File No.
1-9567] and incorporated herein by reference). (Thermedics
merged with Thermo Electron on June 30, 2000.)
10.28 Amended and Restated Thermo Electron Corporation - ONIX
Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit
10.27 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (ONIX merged with
Thermo Instrument on April 12, 2000, and Thermo Instrument
merged with Thermo Electron on June 30, 2000.)
10.29 Amended and Restated Thermo Instrument Systems Inc. - ONIX
Systems Inc. Nonqualified Stock Option Plan (filed as Exhibit
10.13 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (ONIX merged
with Thermo Instrument on April 12, 2000, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.30 Amended and Restated Equity Incentive Plan of ONIX Systems
Inc. (filed as Exhibit 10.11 to the Annual Report on Form 10-K
of ONIX for the fiscal year ended January 1, 2000 [File No.
1-13975] and incorporated herein by reference). (ONIX merged
with Thermo Instrument on April 12, 2000, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.31 Amended and Restated Equity Incentive Plan of Thermo
BioAnalysis Corporation (filed as Exhibit 10.3 to the
Quarterly Report on Form 10-Q of Thermo BioAnalysis for the
quarter ended July 3, 1999 [File No. 1-12179] and incorporated
herein by reference). (Thermo BioAnalysis merged with Thermo
Instrument on April 19, 2000, and Thermo Instrument merged
with Thermo Electron on June 30, 2000.)
10.32 Amended and Restated Thermo Instrument Systems Inc. - Metrika
Systems Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.11 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (Metrika merged
with Thermo Instrument on May 3, 2000, and Thermo Instrument
merged with Thermo Electron on June 30, 2000.)
10.33 Amended and Restated Equity Incentive Plan of Metrika Systems
Corporation (filed as Exhibit 10.3 to the Quarterly Report on
Form 10-Q of Metrika for the quarter ended July 3, 1999 [File
No. 1-13085] and incorporated herein by reference). (Metrika
merged with Thermo Instrument on May 3, 2000, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.34 Amended and Restated Thermo Instrument Systems Inc. -
ThermoQuest Corporation Nonqualified Stock Option Plan (filed
as Exhibit 10.8 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (ThermoQuest
merged with Thermo Instrument on May 11, 2000, and Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.35 Amended and Restated Equity Incentive Plan of ThermoQuest
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of ThermoQuest for the quarter ended July 3, 1999
[File No. 1-14262] and incorporated herein by reference).
(ThermoQuest merged with Thermo Instrument on May 11, 2000,
and Thermo Instrument merged with Thermo Electron on June 30,
2000.)
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.36 Amended and Restated Equity Incentive Plan of Thermo Optek
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Thermo Optek for the quarter ended July 3, 1999
[File No. 1-11757] and incorporated herein by reference).
(Thermo Optek merged with Thermo Instrument on May 11, 2000,
and Thermo Instrument merged with Thermo Electron on June 30,
2000.)
10.37 Amended and Restated Thermo Electron Corporation - The Randers
Killam Group Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.28 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Randers Killam
merged with Thermo TerraTech on May 15, 2000, and Thermo
TerraTech merged with Thermo Electron on September 22, 2000.)
10.38 Equity Incentive Plan of The Randers Killam Group Inc. (filed
as Exhibit 10.7 to the Quarterly Report on Form 10-Q of
Randers Killam for the quarter ended January 3, 1998 [File No.
0-18095] and incorporated herein by reference). (Randers
Killam merged with Thermo TerraTech on May 15, 2000, and
Thermo TerraTech merged with Thermo Electron on September 22,
2000.)
10.39 Amended and Restated Equity Incentive Plan of Thermo
Instrument Systems Inc. (filed as Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Thermo Instrument for the
quarter ended July 3, 1999 [File No. 1-9786] and incorporated
herein by reference). (Thermo Instrument merged with Thermo
Electron on June 30, 2000.)
10.40 Amended and Restated Thermo Instrument Systems Inc. - Thermo
BioAnalysis Corporation Nonqualified Stock Option Plan (filed
as Exhibit 10.9 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.41 Amended and Restated Thermo Instrument Systems Inc. - Thermo
Optek Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.10 to the Quarterly Report on Form 10-Q of Thermo
Instrument for the quarter ended July 3, 1999 [File No.
1-9786] and incorporated herein by reference). (Thermo
Instrument merged with Thermo Electron on June 30, 2000.)
10.42 Amended and Restated Thermo Electron Corporation - Thermo
Ecotek Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.10 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermo Ecotek
merged with Thermo Electron on August 10, 2000.)
10.43 Amended and Restated Nonqualified Stock Option Plan of Thermo
Ecotek Corporation (filed as Exhibit 10.6 to the Quarterly
Report on Form 10-Q of Thermo Ecotek for the quarter ended
July 3, 1999 [File No. 1-13572] and incorporated herein by
reference). (Thermo Ecotek merged with Thermo Electron on
August 10, 2000.)
10.44 Amended and Restated Thermo Electron Corporation - ThermoTrex
Corporation Nonqualified Stock Option Plan (filed as Exhibit
10.11 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (ThermoTrex
merged with Thermo Electron on August 14, 2000.)
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.45 Amended and Restated Nonqualified Stock Option Plan of
ThermoTrex Corporation (filed as Exhibit 10.2 to the Quarterly
Report on Form 10-Q of ThermoTrex for the quarter ended July
3, 1999 [File No. 1-10791] and incorporated herein by
reference). (ThermoTrex merged with Thermo Electron on August
14, 2000.)
10.46 Amended and Restated Thermo Electron Corporation - ThermoLase
Corporation Nonqualified Stock Option Plan (filed as Exhibit
10.18 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (ThermoLase
merged with Thermo Electron on August 14, 2000.)
10.47 Amended and Restated Nonqualified Stock Option Plan of
ThermoLase Corporation (filed as Exhibit 10.5 to the Quarterly
Report on Form 10-Q of ThermoLase for the quarter ended July
3, 1999 [File No. 1-13104] and incorporated herein by
reference). (ThermoLase merged with Thermo Electron on August
14, 2000.)
10.48 Amended and Restated Thermo Electron Corporation - Thermo
TerraTech Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Thermo TerraTech
merged with Thermo Electron on September 22, 2000.)
10.49 Amended and Restated Nonqualified Stock Option Plan of Thermo
TerraTech Inc. (filed as Exhibit 10.34 to the Annual Report on
Form 10-K of Thermo TerraTech for the year ended April 1, 2000
[File No. 1-09549] and incorporated herein by reference).
(Thermo TerraTech merged with Thermo Electron on September 22,
2000.)
10.50 Amended and Restated Thermo Electron Corporation - Trex
Medical Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.22 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended July 3, 1999 [File No. 1-8002] and
incorporated in this document by reference). (Trex Medical
merged with Thermo Electron on November 29, 2000.)
10.51 Amended and Restated Equity Incentive Plan of Trex Medical
Corporation (filed as Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Trex Medical for the quarter ended July 3, 1999
[File No. 1-11827] and incorporated herein by reference).
(Trex Medical merged with Thermo Electron on November 29,
2000.)
10.52 1997 Spectra-Physics Lasers, Inc. Stock Option Plan (filed as
Exhibit 10.6 of Amendment No. 1 to Spectra-Physics'
Registration Statement on Form S-1 [File No. 333-38329] and
incorporated in this document by reference). (Spectra-Physics
merged with Thermo Electron on February 25, 2002.)
10.53 2000 Spectra-Physics Lasers, Inc. Stock Option Plan (filed as
Exhibit 10.1 to Spectra-Physics' Quarterly Report on Form 10-Q
for the quarter ended September 30, 2000 [File No. 000-23461]
and incorporated in this document by reference).
(Spectra-Physics merged with Thermo Electron on February 25,
2002.)
10.54 Description of Amendments to Certain Stock Option Plans made
in February 2002 (filed as Exhibit 10.31 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
29, 2001 [File No. 1-8002] and incorporated in this document
by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.55 Form of Indemnification Agreement between the Registrant and
the directors and officers of its majority-owned subsidiaries
(filed as Exhibit 10.1 to the Registrant's Registration
Statement on Form S-4 [Reg. No. 333-90661] and incorporated in
this document by reference).
10.56 Form of Amended and Restated Indemnification Agreement between
the Registrant and its directors and officers (filed as
Exhibit 10.2 to the Registrant's Registration Statement on
Form S-4 [Reg. No. 333-90661] and incorporated in this
document by reference).
10.57 Amended and Restated Employment Agreement between the
Registrant and Mr. Marijn Dekkers (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated December 12,
2002 [File No. 1-8002] and incorporated in this document by
reference).
10.58 Amended and Restated Employment Agreement between the
Registrant and Mr. Richard F. Syron (filed as Exhibit 99.2 to
the Registrant's Current Report on Form 8-K dated December 12,
2002 [File No. 1-8002] and incorporated in this document by
reference).
10.59 Employment Offer Letter dated October 3, 2000, between the
Registrant and Mr. Guy Broadbent (filed as Exhibit 10.40 to
the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 30, 2000 [File No. 1-8002] and
incorporated in this document by reference).
10.60 Amendment to Amended and Restated Employment Agreement dated
as of March 14, 2001, between the Registrant and Mr. Richard
F. Syron (filed as Exhibit 10.41 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 30,
2000 [File No. 1-8002] and incorporated in this document by
reference).
10.61 Plan and Agreement of Distribution dated August 3, 2001,
between the Registrant and Kadant Inc. (filed as Exhibit 99.3
to the Registrant's Current Report on Form 8-K dated August 6,
2001 [File No. 1-8002] and incorporated in this document by
reference).
10.62 Tax Matters Agreement effective as of August 8, 2001, between
the Registrant and Kadant Inc. (filed as Exhibit 99.4 to the
Registrant's Current Report on Form 8-K dated August 6, 2001
[File No. 1-8002] and incorporated in this document by
reference).
10.63 Transition Services Agreement dated August 3, 2001, between
the Registrant and Kadant Inc. (filed as Exhibit 99.5 to the
Registrant's Current Report on Form 8-K dated August 6, 2001
[File No. 1-8002] and incorporated in this document by
reference).
10.64 Amendment to the Plan and Agreement of Distribution dated
December 27, 2001, between the Registrant and Kadant Inc.
(filed as Exhibit 10.48 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 2001 [File
No. 1-8002] and incorporated in this document by reference).
10.65 Plan and Agreement of Distribution dated November 15, 2001,
between the Registrant and Viasys Healthcare Inc. (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated November 15, 2001 [File No. 1-8002] and incorporated in
this document by reference).
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------- ----------------------
10.66 Tax Matters Agreement dated November 15, 2001, between the
Registrant and Viasys Healthcare Inc. (filed as Exhibit 99.3
to the Registrant's Current Report on Form 8-K dated November
15, 2001 [File No. 1-8002] and incorporated in this document
by reference).
10.67 Transition Services Agreement dated November 15, 2001, between
the Registrant and Viasys Healthcare Inc. (filed as Exhibit
99.4 to the Registrant's Current Report on Form 8-K dated
November 15, 2001 [File No. 1-8002] and incorporated in this
document by reference).
10.68 Employment Agreement dated as of November 29, 2001, between
the Registrant and Mr. Marc N. Casper (filed as Exhibit 10.54
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended December 29, 2001 [File No. 1-8002] and
incorporated in this document by reference).
10.69 Letter Agreement dated as of November 27, 2001, among SPX
Corporation, Kendro Laboratory Products, L.P., the Registrant,
and Mr. Marc N. Casper (filed as Exhibit 10.55 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 29, 2001 [File No. 1-8002] and incorporated in
this document by reference).
10.70 Master Securities Loan Agreement between Thermo Electron
Corporation and JPMorgan Chase Bank (filed as Exhibit 10.1 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 29, 2002 [File No. 1-8002] and incorporated in this
document by reference).
10.71 Master Securities Loan Agreement between Thermo Electron
Corporation and ABN AMRO Inc. (filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 29, 2002 [File No. 1-8002] and incorporated in this
document by reference).
10.72 364-Day Credit Agreement among the Registrant, the Several
Lenders thereto, Barclays Bank Plc, as Lead Arranger, Book
Runner and Administrative Agent, ABN AMRO Bank N.V., as Lead
Arranger and Syndication Agent, and Fleet National Bank and
JPMorgan Chase Bank, as co-documentation agents, dated as of
December 20, 2002.
10.73 Three-Year Credit Agreement among the Registrant, the Several
Lenders thereto, Barclays Bank Plc, as Lead Arranger, Book
Runner and Administrative Agent, ABN AMRO Bank N.V., as Lead
Arranger and Syndication Agent, and Fleet National Bank and
JPMorgan Chase Bank, as co-documentation agents, dated as of
December 20, 2002.
10.74 Executive Registry Program at the Massachusetts General
Hospital.
16.1 Letter from Arthur Andersen LLP to the Securities and Exchange
Commission, dated June 25, 2002 (filed as Exhibit 16 to the
Registrant's Current Report on Form 8-K dated June 21, 2002
[File No. 1-8002] and incorporated in this document by
reference).
21 Subsidiaries of the Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Limitation of Remedies Against Arthur Andersen LLP (Reference
is made to Item 9 of this Report.)
99.1 Certification of Marijn E. Dekkers, President and Chief
Executive Officer of the Registrant pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of Theo Melas-Kyriazi, Chief Financial Officer
of the Registrant pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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THERMO ELECTRON CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
The following Consolidated Financial Statements of the Registrant and its subsidiaries are required to be
included in Item 8:
Page
----
Report of Independent Accountants on financial statements at December 28, 2002, and for the year then ended F-2
Report of Independent Accountants on financial statements at December 29, 2001, and for the two years then ended F-3
Consolidated Statement of Operations for the years ended December 28, 2002, December 29, 2001, and December 30, 2000 F-4
Consolidated Balance Sheet as of December 28, 2002, and December 29, 2001 F-5
Consolidated Statement of Cash Flows for the years ended December 28, 2002, December 29, 2001, and December 30, 2000 F-7
Consolidated Statement of Comprehensive Income and Shareholders' Equity for the years ended December 28, 2002,
December 29, 2001, and December 30, 2000 F-9
Notes to Consolidated Financial Statements F-11
The following Consolidated Financial Statement Schedule of the Registrant and its subsidiaries is filed as
part of this Report as required to be included in Item 15(a):
Page
----
Schedule II - Valuation and Qualifying Accounts F-61
Report of Independent Accountants at December 28, 2002, and for the year then ended F-62
Report of Independent Accountants at December 29, 2001, and for the two years then ended F-63
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THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders,
Thermo Electron Corporation:
In our opinion, the accompanying consolidated balance sheet as of
December 28, 2002 and the related consolidated statement of operations,
statement of cash flows, and statement of comprehensive income and shareholders'
equity for the year then ended present fairly, in all material respects, the
financial position of Thermo Electron Corporation and its subsidiaries as of
December 28, 2002, and the results of their operations and their cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion. The consolidated financial
statements of the company as of December 29, 2001, and for each of the two years
in the period ended December 29, 2001, prior to the revisions discussed in Notes
1 and 3, were audited by other independent accountants who have ceased
operations. Those independent accountants expressed an unqualified opinion on
those financial statements in their report dated February 7, 2002, except with
respect to the matters discussed in Note 19*, as to which the date is February
25, 2002.
As disclosed in Note 1 to the consolidated financial statements, the
company changed the manner in which it accounts for goodwill and other
intangible assets upon adoption of Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" on December 30, 2001.
As discussed above, the consolidated financial statements of Thermo
Electron Corporation as of December 29, 2001, and for each of the two years in
the period ended December 29, 2001, were audited by other independent
accountants who have ceased operations. As described in Note 1, these financial
statements have been restated to include the transitional disclosures required
by Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets," which was adopted by the company on December 30, 2001. As
described in Note 3, these financial statements have also been restated to
reflect the change in the composition of the company's reportable segments. We
audited the transitional disclosures for 2001 and 2000 described in Note 1. We
also audited the adjustments described in Note 3 that were applied to restate
the 2001 and 2000 consolidated financial statements. In our opinion, all such
adjustments and transitional disclosures are appropriate and have been properly
applied. However, we were not engaged to audit, review, or apply any procedures
to the 2001 or 2000 consolidated financial statements of the company other than
with respect to such adjustments and transitional disclosures and, accordingly,
we do not express an opinion or any other form of assurance on the 2001 and 2000
consolidated financial statements taken as a whole.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 2003 (except as to the
information in Note 19, for which
the date is February 28, 2003)
*The discussion of the subsequent events discussed in Note 19 in 2001, is now
included in Note 10 and Note 17.
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THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSSUED BY ARTHUR ANDERSEN LLP.
AS DISCUSSED IN NOTE 1, THERMO ELECTRON CORPORATION HAS RESTATED ITS FINANCIAL
STATEMENTS FOR THE YEARS ENDED DECEMBER 29, 2001, AND DECEMBER 30, 2000, TO
INCLUDE THE TRANSITIONAL DISCLOSURES REQUIRED BY STATEMENT OF FINANCIAL
ACCOUNTING STANDARDS NO. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS," AND AS
DISCUSSED IN NOTE 3, THERMO ELECTRON HAS RESTATED ITS BUSINESS SEGMENT
INFORMATION TO REFLECT A TRANSFER OF MANAGEMENT RESPONSIBILITY FOR SEVERAL
BUSINESSES BETWEEN SEGMENTS. THE REVISIONS TO THE 2001 AND 2000 FINANCIAL
STATEMENTS RELATED TO THESE TRANSITIONAL DISCLOSURES AND THE CHANGE IN BUSINESS
SEGMENT INFORMATION WERE REPORTED ON BY PRICEWATERHOUSECOOPERS LLP, AS STATED IN
THEIR REPORT APPEARING HEREIN.
To the Shareholders and Board of Directors of Thermo Electron Corporation:
We have audited the accompanying consolidated balance sheets of Thermo
Electron Corporation (a Delaware corporation) and subsidiaries as of December
29, 2001, and December 30, 2000,* and the related consolidated statements of
operations, cash flows, and comprehensive loss and shareholders' investment for
each of the three years in the period ended December 29, 2001.* These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermo
Electron Corporation and subsidiaries as of December 29, 2001, and December 30,
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 29, 2001,* in conformity with
accounting principles generally accepted in the United States.
As explained in Note 1 to the consolidated financial statements,
effective December 31, 2000, the company changed its method of accounting for
derivative instruments and hedging activities through the adoption of Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended. As explained in Notes 1 and 16
to the consolidated financial statements, effective January 2, 2000, the company
changed its method of accounting for revenue recognition on certain product
shipments through the adoption of Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements."
Arthur Andersen LLP
Boston, Massachusetts
February 7, 2002 (except with respect
to the matters discussed in Note 19*, as
to which the date is February 25, 2002)
*The company's consolidated balance sheet as of December 30, 2000, and the
consolidated statements of operations, cash flows, and comprehensive loss and
shareholders' investment for the year ended January 1, 2000, are not included
in this Form 10-K. Additionally, the discussion of the subsequent events
discussed in Note 19 in 2001, is now included in Note 10 and Note 17.
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THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
2002 2001 2000
---------- ---------- ----------
Revenues (Notes 3 and 16) $2,086,355 $2,188,210 $2,280,522
---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues (Note 15) 1,158,979 1,229,588 1,258,686
Selling, general, and administrative expenses 564,656 620,104 646,920
Research and development expenses 155,121 171,614 176,756
Restructuring and other costs (income), net (Note 15) 52,146 132,702 (67,855)
---------- ---------- ----------
1,930,902 2,154,008 2,014,507
---------- ---------- ----------
Operating Income 155,453 34,202 266,015
Other Income (Expense), Net (Notes 4 and 15) 132,533 36,479 (81,184)
---------- ---------- ----------
Income from Continuing Operations Before Provision for Income Taxes, Minority
Interest, Extraordinary Item, and Cumulative Effect of Change in Accounting
Principle 287,986 70,681 184,831
Provision for Income Taxes (Note 6) (92,987) (26,929) (112,217)
Minority Interest Income (Expense) 331 5,840 (10,567)
---------- ---------- ----------
Income from Continuing Operations Before Extraordinary Item and Cumulative Effect of
Change in Accounting Principle 195,330 49,592 62,047
Income from Discontinued Operations (net of income tax provision and minority interest
of $12,249; Note 17) - - 14,228
Gain (Loss) on Disposal of Discontinued Operations, Net (includes tax benefit of
$21,008, $22,741, and $104,000; Note 17) 115,370 (50,440) (100,000)
---------- ---------- ----------
Income (Loss) Before Extraordinary Item and Cumulative Effect of Change in Accounting
Principle 310,700 (848) (23,725)
Extraordinary Item (net of income tax benefit of $522 and income tax provision of $637
and $333; Note 10) (970) 1,061 532
---------- ---------- ----------
Income (Loss) Before Cumulative Effect of Change in Accounting Principle 309,730 213 (23,193)
Cumulative Effect of Change in Accounting Principle (net of income tax benefit and
minority interest of $663 and $8,986; Notes 1 and 16) - (994) (12,918)
---------- ---------- ----------
Net Income (Loss) $ 309,730 $ (781) $ (36,111)
========== ========== ==========
Earnings per Share from Continuing Operations Before Extraordinary
Item and Cumulative Effect of Change in Accounting Principle (Note 7)
Basic $ 1.16 $ .27 $ .37
========== ========== ==========
Diluted $ 1.12 $ .27 $ .36
========== ========== ==========
Earnings (Loss) per Share (Note 7)
Basic $ 1.84 $ - $ (.22)
========== ========== ==========
Diluted $ 1.73 $ - $ (.22)
========== ========== ==========
Weighted Average Shares (Note 7)
Basic 168,572 180,560 167,462
========== ========== ==========
Diluted 186,611 183,916 170,519
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
|
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THERMO ELECTRON CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
2002 2001
---------- ----------
Assets
Current Assets:
Cash and cash equivalents $ 339,038 $ 297,557
Short-term available-for-sale investments, at quoted market value (Notes 4, 9, and 15) 536,430 744,321
Accounts receivable, less allowances of $25,576 and $26,525 429,740 410,960
Inventories (Note 15) 332,804 337,041
Deferred tax asset (Note 6) 79,057 82,766
Other current assets 54,490 92,565
---------- ----------
1,771,559 1,965,210
---------- ----------
Property, Plant, and Equipment, at Cost, Net (Note 15) 272,908 270,712
---------- ----------
Long-term Available-for-sale Investments, at Quoted Market Value (Notes 9 and 15) - 9,360
---------- ----------
Other Assets (Notes 2 and 15) 186,390 231,395
---------- ----------
Goodwill (Notes 2 and 15) 1,416,205 1,348,393
---------- ----------
$3,647,062 $3,825,070
========== ==========
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THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
2002 2001 2000
--------- --------- ---------
Operating Activities
Net income (loss) $ 309,730 $ (781) $ (36,111)
Adjustments to reconcile net income (loss) to income from continuing
operations:
Income from discontinued operations (Note 17) - - (14,228)
(Gain) loss on disposal of discontinued operations, net (Note 17) (115,370) 50,440 100,000
--------- --------- ---------
Income from continuing operations 194,360 49,659 49,661
Adjustments to reconcile income from continuing operations to net cash provided
by operating activities:
Depreciation and amortization 56,376 98,521 97,486
Noncash restructuring and other costs, net (Note 15) 11,750 41,144 22,865
Provision for losses on accounts receivable 4,114 6,316 9,264
Minority interest (income) expense (331) (5,840) 10,567
Equity in (earnings) loss of unconsolidated subsidiaries (Note 15) (2,533) (4,699) 47,315
Cumulative effect of change in accounting principle, net of income
taxes and minority interest (Notes 1 and 16) - 994 12,918
Change in deferred income taxes 23,770 (16,751) (39,700)
(Gain) loss on sale of businesses (Notes 2 and 15) (2,484) 10,943 (126,330)
Gain on investments, net (Notes 4, 9, and 15) (123,134) (35,579) (6,849)
Extraordinary item, net of income taxes (Note 10) 970 (1,061) (532)
Other noncash items, net 15,547 34,264 29,213
Other income (1,381) (511) (4,372)
Changes in current accounts, excluding the effects of
acquisitions and dispositions:
Accounts receivable 4,535 (19,041) (27,395)
Inventories 21,470 7,724 (77,356)
Other current assets 9,888 (13,097) (4,710)
Accounts payable (8,000) (19,082) 17,742
Other current liabilities (92,563) 50,472 47,982
--------- --------- ---------
Net cash provided by continuing operations 112,354 184,376 57,769
Net cash provided by (used in) discontinued operations (9,462) 4,025 142,152
--------- --------- ---------
Net cash provided by operating activities 102,892 188,401 199,921
--------- --------- ---------
Investing Activities
Purchases of available-for-sale investments (83) (680,337) (473,576)
Proceeds from sale of available-for-sale investments (Note 4) 122,094 248,036 113,220
Proceeds from maturities of available-for-sale investments 217,011 250,345 403,134
Proceeds from sale of other investments (Note 4) 65,540 43,255 6,367
Purchases of property, plant, and equipment (51,212) (84,799) (74,039)
Proceeds from sale of property, plant, and equipment 11,016 11,638 21,828
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F-7
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THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND SHAREHOLDERS' EQUITY
(In thousands)
2002 2001 2000
---------- ---------- ----------
Comprehensive Income
Net Income (Loss) $ 309,730 $ (781) $ (36,111)
---------- ---------- ----------
Other Comprehensive Items (Note 8):
Currency translation adjustment 91,261 (24,606) (44,975)
Unrealized gains (losses) on available-for-sale investments, net of
reclassification adjustment (65,894) 20,320 4,558
Unrealized gains (losses) on hedging instruments, net of reclassification
adjustment (2,828) 1,338 -
Minimum pension liability adjustment (18,949) - -
---------- ---------- ----------
3,590 (2,948) (40,417)
Minority interest - (81) 5,188
---------- ---------- ----------
3,590 (3,029) (35,229)
---------- ---------- ----------
$ 313,320 $ (3,810) $ (71,340)
========== ========== ==========
Shareholders' Equity
Common Stock, $1 Par Value:
Balance at beginning of year $ 199,816 $ 195,877 $ 167,433
Acquisition of minority interests of subsidiaries (Note 17) - - 22,553
Issuance of stock under employees' and directors' stock plans 2,136 3,939 5,891
Restoration of stock to authorized but unissued status (Note 12) (32,000) - -
---------- ---------- ----------
Balance at end of year 169,952 199,816 195,877
---------- ---------- ----------
Capital in Excess of Par Value:
Balance at beginning of year 1,758,567 1,681,452 1,052,837
Acquisition of minority interests of subsidiaries (Note 17) - - 541,434
Activity under employees' and directors' stock plans 31,669 56,542 84,840
Tax benefit related to employees' and directors' stock plans 6,696 9,461 18,000
Effect of subsidiaries' equity transactions 613 11,112 (15,659)
Restoration of stock to authorized but unissued status (Note 12) (585,400) - -
---------- ---------- ----------
Balance at end of year 1,212,145 1,758,567 1,681,452
---------- ---------- ----------
Retained Earnings:
Balance at beginning of year 509,681 1,005,857 1,041,968
Distribution of Kadant and Viasys Healthcare subsidiaries to
shareholders (Note 17) - (495,395) -
Net income (loss) 309,730 (781) (36,111)
---------- ---------- ----------
Balance at end of year $ 819,411 $ 509,681 $1,005,857
---------- ---------- ----------
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THERMO ELECTRON CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
AND SHAREHOLDERS' EQUITY - (Continued)
(In thousands)
2002 2001 2000
---------- ---------- ----------
Treasury Stock:
Balance at beginning of year $ (457,475) $ (246,228) $ (189,646)
Purchases of company common stock (285,632) (196,544) (22,826)
Activity under employees' and directors' stock plans (3,968) (12,305) (26,590)
Receipt of company common stock as repayment of notes receivable - (2,398) (6,155)
Receipt of company common stock in connection with sale of business - - (1,011)
Restoration of stock to authorized but unissued status (Note 12) 617,400 - -
---------- ---------- ----------
Balance at end of year (129,675) (457,475) (246,228)
---------- ---------- ----------
Deferred Compensation (Note 5):
Balance at beginning of year (3,157) (6,640) (3,149)
Awards under employees' stock plans (4,207) (429) (7,818)
Amortization of deferred compensation 2,272 3,700 3,725
Forfeitures under employees' stock plans 240 212 602
---------- ---------- ----------
Balance at end of year (4,852) (3,157) (6,640)
---------- ---------- ----------
Accumulated Other Comprehensive Items (Note 8):
Balance at beginning of year (99,290) (96,342) (55,925)
Other comprehensive items (45,034) (2,948) (40,417)
Reclassification of equity interests to available-for-sale investments
(Notes 4 and 17) 110,666 - -
---------- ---------- ----------
Balance at end of year (33,658) (99,290) (96,342)
---------- ---------- ----------
$2,033,323 $1,908,142 $2,533,976
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
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F-10
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
A world leader in high-tech instruments, Thermo Electron Corporation (the
company) helps life science, laboratory, and industrial customers advance
scientific knowledge, enable drug discovery, improve manufacturing processes,
and protect people and the environment with instruments, scientific equipment,
and sample-in/knowledge-out solutions. The company's powerful technologies help
researchers make discoveries that will fight disease or prolong life. They
automatically monitor and control online production to ensure the quality and
safety of raw materials as well as the end-products themselves. And they are
critical components embedded as enabling technologies within scientific and
industrial devices.
Principles of Consolidation
The accompanying financial statements include the accounts of the company
and its majority- and wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated. The company accounts for
investments in businesses in which it owns between 20% and 50% using the equity
method.
Presentation
During 2000 and 2001, the company completed the principal aspects of a
major corporate reorganization. As part of this reorganization, the company spun
off two businesses and sold a number of operating units. In addition, the
company has taken private all of its majority-owned subsidiaries in its
continuing operations, including Spectra-Physics, Inc., effective February 2002.
The results of operations of certain major lines of business that have been spun
off, sold, or placed for sale have been classified as discontinued operations in
the accompanying financial statements (Note 17).
Fiscal Year
The company has adopted a fiscal year ending the Saturday nearest
December 31. References to 2002, 2001, and 2000 are for the fiscal years ended
December 28, 2002, December 29, 2001, and December 30, 2000, respectively.
Revenue Recognition
Prior to 2000, the company generally recognized revenues upon shipment of
its products. During the fourth quarter of 2000, effective as of January 2,
2000, the company adopted Securities and Exchange Commission (SEC) Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." Under SAB No. 101, when the terms of sale include customer
acceptance provisions, and compliance with those provisions cannot be
demonstrated until customer use, revenues are recognized upon acceptance.
Revenues for products that require installation for which the installation is
essential to functionality or is not deemed inconsequential or perfunctory are
recognized upon completion of installation. Revenues for products sold where
installation is not essential to functionality and is deemed inconsequential or
perfunctory are recognized upon shipment with estimated installation costs
accrued (Note 16).
The company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to pay amounts due.
Deferred revenue in the accompanying balance sheet consists primarily of
unearned revenue on service contracts, which is recognized ratably over the
terms of the contracts. Substantially all of the deferred revenue in the
accompanying 2002 balance sheet will be recognized within one year.
Warranty Obligations
The company provides for the estimated cost of product warranties,
primarily from historical information, at the time product revenue is
recognized. While the company engages in extensive product quality programs and
processes, including actively monitoring and evaluating the quality of its
component supplies, the company's warranty obligation is affected by product
failure rates, utilization levels, material usage, service delivery costs
incurred in correcting a
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F-11
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
product failure, and supplier warranties on parts delivered to the company.
Should actual product failure rates, utilization levels, material usage, service
delivery costs, or supplier warranties on parts differ from the company's
estimates, revisions to the estimated warranty liability would be required. The
changes in the carrying amount of product warranties for the year ended December
28, 2002, are as follows (in thousands):
|
Balance at December 29, 2001 $ 26,396
Provision charged to income 17,266
Usage (19,645)
Other, net (a) 3,344
--------
Balance at December 28, 2002 $ 27,361
========
(a) Primarily represents the effects of currency translation.
Stock-based Compensation Plans and Pro Forma Stock-based Compensation Expense
The company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 5). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to shareholders' equity.
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which sets forth a fair-value-based method of
recognizing stock-based compensation expense. As permitted by SFAS No. 123, the
company has elected to continue to apply APB No. 25 to account for its
stock-based compensation plans. Had compensation cost for awards granted after
1994 under the company's stock-based compensation plans been determined based on
the fair value at the grant dates consistent with the method set forth under
SFAS No. 123, the effect on certain financial information of the company would
have been as follows:
|
2002 2001 2000
-------- -------- --------
(In thousands except
per share amounts)
Income from Continuing Operations Before Extraordinary Item and Cumulative
Effect of Change in Accounting Principle:
As reported $195,330 $ 49,592 $ 62,047
Add: Stock-based employee compensation expense included in reported
results, net of tax 3,117 2,294 2,272
Deduct: Total stock-based employee compensation expense determined under
the fair-value-based method for all awards, net of tax (27,749) (26,090) (20,855)
-------- -------- --------
Pro forma $170,698 $ 25,796 $ 43,464
======== ======== ========
Basic Earnings per Share from Continuing Operations Before Extraordinary
Item and Cumulative Effect of Change in Accounting Principle:
As reported $ 1.16 $ .27 $ .37
Pro forma $ 1.01 $ .14 $ .26
Diluted Earnings per Share from Continuing Operations Before
Extraordinary Item and Cumulative Effect of Change in Accounting
Principle:
As reported $ 1.12 $ .27 $ .36
Pro forma $ .99 $ .14 $ .25
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F-12
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (continued)
2002 2001 2000
-------- -------- --------
(In thousands except
per share amounts)
Net Income (Loss):
As reported $309,730 $ (781) $(36,111)
Add: Stock-based employee compensation expense included in reported net
income, net of tax 3,117 2,294 2,272
Deduct: Total stock-based employee compensation expense determined under
the fair-value-based method for all awards, net of tax (27,749) (26,090) (20,855)
-------- -------- --------
Pro forma $285,098 $(24,577) $(54,694)
======== ======== ========
Basic Earnings (Loss) per Share:
As reported $ 1.84 $ - $ (.22)
Pro forma $ 1.69 $ (.14) $ (.33)
Diluted Earnings (Loss) per Share:
As reported $ 1.73 $ - $ (.22)
Pro forma $ 1.60 $ (.13) $ (.33)
The weighted average fair value per share of options granted was $9.23,
$9.85, and $6.58 in 2002, 2001, and 2000, respectively. The fair value of each
option grant was estimated on the grant date using the Black-Scholes
option-pricing model assuming an expected dividend yield of zero and with the
following weighted-average assumptions:
2002 2001 2000
--------- --------- ---------
Volatility 42% 45% 35%
Risk-free Interest Rate 4.2% 4.1% 4.9%
Expected Life of Options 6.0 years 5.0 years 3.9 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option-pricing models require the input
of highly subjective assumptions, including expected stock price volatility.
Because the company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes," the
company recognizes deferred income taxes based on the expected future tax
consequences of differences between the financial statement basis and the tax
basis of assets and liabilities, calculated using enacted tax rates in effect
for the year in which the differences are expected to be reflected in the tax
return.
Earnings (Loss) per Share
Basic earnings (loss) per share has been computed by dividing net income
(loss) by the weighted average number of shares outstanding during the year.
Except where the result would be antidilutive to income from continuing
operations, diluted earnings (loss) per share has been computed assuming the
conversion of convertible obligations and the elimination of the related
interest expense, and the exercise of stock options, as well as their related
income tax effects (Note 7).
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F-13
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cash and Cash Equivalents
Cash equivalents consists principally of money market funds, commercial
paper, and other marketable securities purchased with an original maturity of
three months or less. These investments are carried at cost, which approximates
market value.
Available-for-sale Investments
The company's marketable debt and equity securities are considered
available-for-sale investments in the accompanying balance sheet and are carried
at market value, with the difference between cost and market value, net of
related tax effects, recorded in the "Accumulated other comprehensive items"
component of shareholders' equity (Notes 8 and 9). Decreases in market values of
individual securities below cost for a duration of six to nine months are deemed
indicative of other than temporary impairment and the company writes down the
carrying amount of the investments to market value through other income
(expense), net, in the accompanying statement of operations.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out or
weighted average basis) or net realizable value and include materials, labor,
and manufacturing overhead. The components of inventories are as follows:
|
2002 2001
-------- --------
(In thousands)
Raw Materials and Supplies $134,039 $149,817
Work in Progress 50,894 56,417
Finished Goods (includes $18,982 and $14,918 at customer locations) 147,871 130,807
-------- --------
$332,804 $337,041
======== ========
The company periodically reviews its quantities of inventories on hand
and compares these amounts to expected use of each particular product or product
line. The company records as a charge to cost of revenues any amounts required
to reduce the carrying value of inventories to net realizable value (Note 15).
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The company provides
for depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: buildings and improvements, 2
to 40 years; machinery and equipment, 1 to 15 years; and leasehold improvements,
the shorter of the term of the lease or the life of the asset. Property, plant,
and equipment consists of the following:
2002 2001
-------- --------
(In thousands)
Land $ 34,221 $ 33,099
Buildings and Improvements 156,812 142,697
Machinery, Equipment, and Leasehold Improvements 362,316 306,590
-------- --------
553,349 482,386
Less: Accumulated Depreciation and Amortization 280,441 211,674
-------- --------
$272,908 $270,712
======== ========
Depreciation and amortization expense of property, plant, and equipment
was $48.1 million, $51.4 million, and $52.9 million in 2002, 2001, and 2000,
respectively.
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F-14
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (continued)
Other Assets
Other assets in the accompanying balance sheet includes intangible
assets, notes receivable, deferred debt expense, other assets, and, in 2001,
prepaid pension costs and an equity-method investment in FLIR Systems, Inc.
(Note 4). Intangible assets include the costs of acquired product technology,
patents, trademarks, and other specifically identifiable intangible assets, and
are being amortized using the straight-line method over their estimated useful
lives, which range from 2 to 20 years. The company has recorded no intangible
assets with indefinite lives. The company reviews other intangible assets for
impairment when indication of potential impairment exists, such as a significant
reduction in cash flows associated with the assets. Acquired intangible assets
are as follows:
|
Accumulated
Gross Amortization Net
-------- ------------ --------
(In thousands)
December 28, 2002
Product technology $ 58,250 $(17,877) $ 40,373
Patents 41,103 (20,409) 20,694
Trademarks 4,489 (1,143) 3,346
Other 4,663 (729) 3,934
-------- -------- --------
$108,505 $(40,158) $ 68,347
======== ======== ========
December 29, 2001
Product technology $ 25,227 $(13,333) $ 11,894
Patents 40,447 (16,685) 23,762
Trademarks 2,421 (799) 1,622
Other 4,477 (1,618) 2,859
-------- -------- --------
$ 72,572 $(32,435) $ 40,137
======== ======== ========
|
The estimated future amortization expense of acquired intangible assets is as follows (in thousands):
2003 $ 9,573
2004 8,831
2005 7,036
2006 6,237
2007 5,853
2008 and thereafter 30,817
--------
$ 68,347
========
Amortization of acquired intangible assets was $8.3 million, $6.9
million, and $6.7 million in 2002, 2001, and 2000, respectively.
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F-15
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>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Goodwill
Goodwill was amortized through December 29, 2001, using the straight-line
method over periods ranging from 5 to 40 years. Accumulated amortization was
$233.0 million at year-end 2001. In June 2001, the FASB issued SFAS No. 142,
"Goodwill and Other Intangible Assets." The company adopted SFAS No. 142
effective December 30, 2001. Under SFAS No. 142, amortization of goodwill ceased
and the company assesses the realizability of this asset annually and whenever
events or changes in circumstances indicate it may be impaired. Such events or
circumstances generally include the occurrence of operating losses or a
significant decline in earnings associated with one or more of the company's
reporting units. The company estimates the fair value of its reporting units by
using market comparables for similar businesses and forecasts of discounted
future cash flows. When impairment is indicated, any excess of carrying value
over fair value is recorded as a loss (Note 15).
The company performed an initial test for impairment upon adoption of
SFAS No. 142 at December 29, 2001, and determined that goodwill was not
impaired. The company completed an annual test for impairment at December 28,
2002, and determined that goodwill was not impaired.
Pro forma results for 2001 and 2000, as if SFAS No. 142 had been adopted
at the beginning of 2000, are as follows:
|
2001 2000
-------- --------
(In thousands except
per share amounts)
Income from Continuing Operations Before Extraordinary Item and Cumulative
Effect of Change in Accounting Principle:
As reported $ 49,592 $ 62,047
Pro forma 86,390 95,495
Basic Earnings per Share from Continuing Operations Before Extraordinary
Item and Cumulative Effect of Change in Accounting Principle:
As reported .27 .37
Pro forma .48 .57
Diluted Earnings per Share from Continuing Operations Before
Extraordinary Item and Cumulative Effect of Change in Accounting
Principle:
As reported .27 .36
Pro forma .47 .55
Net Income (Loss):
As reported $ (781) $(36,111)
Pro forma 36,017 (2,663)
Basic Earnings (Loss) per Share:
As reported - (.22)
Pro forma .20 (.02)
Diluted Earnings (Loss) per Share:
As reported - (.22)
Pro forma .20 (.02)
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F-16
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies (continued)
The changes in the carrying amount of goodwill for 2002 and 2001 by
segment are as follows:
|
Life and
Laboratory Measurement Optical
Sciences and Control Technologies Total
---------- ----------- ------------ ----------
(In thousands)
Balance at December 30, 2000 $ 808,908 $ 430,531 $ 139,225 $1,378,664
Acquisitions 10,915 474 - 11,389
Amortization (23,629) (12,117) (4,478) (40,224)
Write off due to sale or planned sale of businesses (8,515) (22,455) (2,214) (33,184)
Acquisition of minority interest of subsidiary - - 45,829 45,829
Other (a) (1,975) (146) - (2,121)
Currency translation (8,283) (2,999) (678) (11,960)
---------- ---------- ---------- ----------
Balance at December 29, 2001 777,421 393,288 177,684 1,348,393
Acquisitions 22,666 2,361 - 25,027
Write off due to sale of businesses (463) (3,332) (517) (4,312)
Acquisition of minority interest of subsidiary - - 15,807 15,807
Other (a) 351 (2,239) (3,036) (4,924)
Currency translation 25,791 8,032 2,391 36,214
---------- ---------- ---------- ----------
Balance at December 28, 2002 $ 825,766 $ 398,110 $ 192,329 $1,416,205
========== ========== ========== ==========
(a) Principally represents use of previously reserved acquired net operating losses and reversal of acquisition reserves
that were not required.
Currency Translation
All assets and liabilities of the company's non-U.S. subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected in the
"Accumulated other comprehensive items" component of shareholders' equity.
Currency transaction gains and losses are included in the accompanying statement
of operations and are not material for the three years presented.
Forward Contracts
Effective in the first quarter of 2001, the company adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended, requires that all derivatives, including forward currency-exchange
contracts, be recognized on the balance sheet at fair value. Derivatives that
are not hedges must be recorded at fair value through earnings. If a derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
the derivative are either offset against the change in fair value of the hedged
item through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The company immediately records in
earnings the extent to which a hedge is not effective in achieving offsetting
changes in fair value or cash flows. Adoption of SFAS No. 133 in the first
quarter of 2001 resulted in the deferral of a gain of $1.0 million, net of tax
and minority interest, and a corresponding loss on periods prior to 2001, which
was classified as "Cumulative effect of the change in accounting principle" in
the accompanying 2001 statement of operations. This deferred gain
<
F-17
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>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
related to forward currency-exchange contracts that were marked to market
through earnings prior to the adoption of SFAS No. 133. The entire deferred gain
recorded upon adoption was reclassified into earnings during 2001 as the
underlying hedged transactions occurred.
The company uses forward currency-exchange contracts primarily to hedge
certain operational (cash-flow hedges) and balance sheet (fair-value hedges)
exposures resulting from changes in currency exchange rates. Such exposures
result from sales that are denominated in currencies other than the functional
currencies of the respective operations. These contracts principally hedge
transactions denominated in U.S. dollars, Euros, British pounds sterling,
Japanese yen, and Swiss francs. The company enters into these currency-exchange
contracts to hedge anticipated product sales and recorded accounts receivable
made in the normal course of business. Accordingly, the hedges are not
speculative in nature. As part of the company's overall strategy to manage the
level of exposure to the risk of currency-exchange fluctuations, some operating
units hedge a portion of their currency exposures anticipated over the ensuing
12-month period, using exchange contracts that have maturities of 12 months or
less. The company does not hold or engage in transactions involving derivative
instruments for purposes other than risk management.
The company records its forward currency-exchange contracts at fair value
in its balance sheet as other current assets or other accrued expenses and, for
cash-flow hedges, the related gains or losses on these contracts are deferred as
a component of accumulated other comprehensive items in the accompanying balance
sheet. These deferred gains and losses are recognized in income in the period in
which the underlying anticipated transaction occurs. Unrealized gains and losses
resulting from the impact of currency exchange rate movements on fair-value
hedges are recognized in earnings in the period in which the exchange rates
change and offset the currency losses and gains on the underlying exposure being
hedged. Cash flows resulting from currency-exchange contracts qualifying as
cash-flow hedges are recorded in the accompanying statement of cash flows in the
same category as the item being hedged. At December 28, 2002, the company had
deferred losses, net of income taxes, relating to forward currency-exchange
contracts of approximately $1.5 million, substantially all of which is expected
to be recognized as expense over the next 12 months to approximately offset
gains on the exposures being hedged. The ineffective portion of the gain or loss
on derivative instruments is recorded in other income (expense), net, in the
accompanying 2002 and 2001 statement of operations and is not material.
See Note 15 for the effect in 2000 of a majority-owned subsidiary's early
adoption of SFAS No. 133.
Prior to adoption of SFAS No. 133, gains and losses arising from forward
currency-exchange contracts were recognized as offsets to losses and gains
resulting from the exposures being hedged.
Recent Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs and is effective in 2003. The company does not
expect the adoption of this new standard to have a material impact on its
financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets." The standard provides guidance on
measuring impairment of long-lived assets and applying discontinued operations
accounting upon adoption. The company adopted the standard during the first
quarter of 2002. Adoption of the standard did not materially affect the
company's financial statements.
<
F-18
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." Adoption of the standard is generally required in 2003. Under the
standard, gains and losses on early extinguishment of debt, currently classified
by the company as extraordinary items, will no longer be treated as such but
instead will be reported as other nonoperating income or expense. Prior periods
will be restated to conform to this presentation.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which supersedes Emerging Issues
Task Force Issue (EITF) 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)." The standard affects the accounting for
restructuring charges and related activities and generally will lengthen the
timeframe for reporting of expenses relating to restructuring activities beyond
the period in which a plan is initiated. The provisions of this statement are
required to be adopted for exit or disposal activities that are initiated after
2002. The provisions of EITF 94-3 will continue to apply with regard to the
company's previously announced restructuring plans.
In November 2002, the EITF reached a final consensus on EITF Issue No.
00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The
provisions of EITF 00-21 are required to be adopted for revenue arrangements
entered into by the company after June 28, 2003, although early adoption is
permitted. EITF 00-21 addresses arrangements with customers that have multiple
deliverables such as equipment and installation and provides guidance as to when
recognition of revenue for each deliverable is appropriate. The company is
evaluating the timing and impact of adoption of EITF 00-21.
In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 clarifies that a
guarantor is required to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
initial recognition and initial measurement provisions of FIN No. 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, while the disclosure requirements are applicable in 2002. The
company is complying with the disclosure requirements of FIN No. 45 and is
evaluating the effect the other requirements may have on its financial
statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure - an amendment of FASB
Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of transition for a
voluntary change to the fair-value-based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. As
provided for in SFAS No. 123, the company has elected to apply APB No. 25
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans. APB No. 25 does not require
options to be expensed when granted with an exercise price equal to fair market
value. The company is complying with the disclosure requirements of SFAS No.
148.
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities, an Interpretation of ARB 51." The primary objectives of FIN
No. 46 are to provide guidance on the identification of entities for which
control is achieved through means other than through voting rights ("variable
interest entities" or "VIEs") and how to determine when and which business
enterprise should consolidate the VIE. This new model for consolidation applies
to an entity for which either: (a) the equity investors (if any) do not have a
controlling financial interest; or (b) the
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F-19
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
equity investment at risk is insufficient to finance that entity's activities
without receiving additional subordinated financial support from other parties.
In addition, FIN No. 46 requires that both the primary beneficiary and all other
enterprises with a significant variable interest in a VIE make additional
disclosures. The company is required to apply FIN No. 46 to all new variable
interest entities created or acquired after January 31, 2003. For variable
interest entities created or acquired prior to February 1, 2003, the company is
required to apply FIN No. 46 on July 1, 2003. The company does not expect FIN
No. 46 will have a material effect on its financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. In addition, significant estimates were made in determining
the loss on disposition of the company's discontinued operations including
post-closing adjustments (Note 17), in estimating future cash flows to quantify
impairment of assets, and in determining the ultimate loss from abandoning
leases at facilities being exited (Note 15). Actual results could differ from
those estimates.
Note 2. Acquisitions and Dispositions
Acquisitions
In July 2002, the Measurement and Control segment acquired the
radiation-monitoring products business (RMP) of Saint-Gobain Corporation to
further enhance its line of security products. The aggregate purchase price was
$31.4 million in cash. The purchase price exceeded the fair value of the
acquired net assets and, accordingly, $2.4 million has been allocated as
goodwill. RMP is a major supplier of radiation safety, security, and industrial
equipment to the U.S. market, and the leader in personal radiation monitoring in
the United Kingdom.
In a transaction undertaken in April and May 2002, the Life and
Laboratory Sciences segment acquired CRS Robotics Corporation (CRS), a Toronto
Stock Exchange-listed company, for 5.75 Canadian dollars per share
(approximately $3.68 per share). The segment subsequently renamed the business
Thermo CRS. The aggregate purchase price was $43.0 million in cash, net of cash
acquired. The purchase price exceeded the fair value of the acquired net assets
and, accordingly, $21.9 million has been allocated as goodwill. Thermo CRS is a
global supplier of lab automation robotics, software, and equipment to the
drug-discovery market. The acquisition was made to further enhance the segment's
product offering for laboratory automation equipment.
In 2002, in addition to the acquisitions of RMP and CRS, the company made
two other acquisitions for $4.3 million in cash.
<
F-20
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
The components of the purchase price allocation for 2002 acquisitions are
as follows:
|
CRS RMP Other Total
-------- -------- -------- --------
(In thousands)
Purchase Price:
Cash paid (a) $ 43,187 $ 31,367 $ 4,271 $ 78,825
Cash acquired (142) - - (142)
-------- -------- -------- --------
$ 43,045 $ 31,367 $ 4,271 $ 78,683
======== ======== ======== ========
Allocation:
Current assets $ 5,874 $ 15,620 $ 3,137 $ 24,631
Property, plant, and equipment 837 6,799 - 7,636
Acquired intangible assets 22,935 11,800 2,330 37,065
Goodwill 21,946 2,361 720 25,027
Other assets - 380 - 380
Liabilities assumed and other (8,547) (5,593) (1,916) (16,056)
-------- -------- -------- --------
$ 43,045 $ 31,367 $ 4,271 $ 78,683
======== ======== ======== ========
(a) Includes acquisition expenses.
Acquired intangible assets for 2002 acquisitions are as follows:
CRS RMP Other Total
-------- -------- -------- --------
(In thousands)
Product Technology $ 20,367 $ 8,451 $ 2,330 $ 31,148
Patents - 499 - 499
Trademarks 1,183 864 - 2,047
Other 1,385 1,986 - 3,371
-------- -------- -------- --------
$ 22,935 $ 11,800 $ 2,330 $ 37,065
======== ======== ======== ========
The weighted-average amortization periods for intangible assets acquired
in 2002 are: 11 years for product technology and patents; 6 years for
trademarks; and 8 years for other intangible assets. The weighted-average
amortization period for all intangible assets acquired in 2002 is 10 years.
In 2001 and 2000, the company made several acquisitions for $14.1 million
and $15.8 million in cash, net of cash acquired, respectively.
These acquisitions have been accounted for using the purchase method of
accounting, and the acquired companies' results have been included in the
accompanying financial statements from their respective dates of acquisition.
The aggregate cost of the acquisitions in 2001 and 2000 exceeded the estimated
fair value of the acquired net assets by $25.0 million, which was amortized
principally over 40 years through 2001. Allocation of the purchase price for
acquisitions was based on estimates of the fair value of the net assets acquired
and, for acquisitions completed
<
F-21
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
in 2002, is subject to adjustment upon finalization of the purchase price
allocation. The company has gathered no information that indicates the final
purchase price allocations will differ materially from the preliminary
estimates. Pro forma results are not presented as the acquisitions did not
materially affect the company's results of operations individually or in the
aggregate.
The company has undertaken restructuring activities at acquired
businesses. These activities, which were accounted for in accordance with EITF
95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination," have primarily included reductions in staffing levels and the
abandonment of excess facilities. In connection with these restructuring
activities, as part of the cost of acquisitions, the company established
reserves as detailed below, primarily for severance and excess facilities. In
accordance with EITF 95-3, the company finalizes its restructuring plans no
later than one year from the respective dates of the acquisitions. Accrued
acquisition expenses are included in other accrued expenses in the accompanying
balance sheet.
A summary of the changes in accrued acquisition expenses for acquisitions
completed during 2002 is as follows:
|
Abandonment
of Excess
Severance Facilities Other Total
--------- ----------- ------ ------
(In thousands)
Reserves established $1,727 $ 509 $ 487 $2,723
Payments (477) - - (477)
Currency translation 69 79 12 160
------ ------ ------ -------
Balance at December 28, 2002 $1,319 $ 588 $ 499 $2,406
====== ====== ====== ======
The principal accrued acquisition expenses for 2002 acquisitions were for
severance for approximately 102 employees at the acquired businesses, primarily
in manufacturing, research and development, and sales and service; closure of a
Thermo CRS manufacturing facility in Austria, with a lease expiring in 2003,
whose operations were consolidated into other existing facilities; and
relocation of RMP employees from the seller's operations in Ohio and the United
Kingdom to the company's facilities. The company expects to pay amounts accrued
for acquisition expenses primarily through the third quarter of 2003.
<
F-22
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
A summary of the changes in accrued acquisition expenses for acquisitions
completed before 2000 is as follows:
|
Abandonment
of Excess
Severance Facilities Other Total
--------- ----------- ------- -------
(In thousands)
Balance at January 1, 2000 $ 5,566 $11,215 $ 2,664 $19,445
Reserves established 90 111 - 201
Payments (2,971) (2,326) (1,034) (6,331)
Decrease recorded as a reduction in goodwill (279) (193) (39) (511)
Reserves of businesses sold (715) (154) (999) (1,868)
Currency translation 155 (976) (79) (900)
------- ------- ------- -------
Balance at December 30, 2000 1,846 7,677 513 10,036
Payments (467) (1,038) (358) (1,863)
Decrease recorded as a reduction in other
intangible assets (720) (194) - (914)
Currency translation (33) (219) (24) (276)
------- ------- ------- -------
Balance at December 29, 2001 626 6,226 131 6,983
Payments (353) (452) (73) (878)
Decrease recorded as a reduction in goodwill
and other intangible assets (329) - (73) (402)
Currency translation 56 648 15 719
------- ------- ------- -------
Balance at December 28, 2002 $ - $ 6,422 $ - $ 6,422
======= ======= ======= =======
The principal acquisition expenses for pre-2000 acquisitions were for
severance for approximately 776 employees across all functions and for abandoned
facilities, primarily related to the company's acquisitions of Life Sciences
International PLC in 1997, the product-monitoring businesses of Graseby Limited
in 1998, and Spectra-Physics AB in 1999. The abandoned facilities for the 1997
and 1998 acquisitions include two operating facilities in North America with
leases that expired in 2001 and four operating facilities in England with leases
expiring through 2014. The abandoned facilities at Spectra-Physics include
operating facilities in Sweden, Germany, and France with obligations that
principally expired in 2001. The amounts captioned as "other" primarily
represent employee relocation, contract termination, and other exit costs. Upon
finalization of restructuring plans or settlement of obligations for less than
the expected amount, any excess reserves have been reversed with a corresponding
decrease in goodwill or other intangible assets when no goodwill exists.
The company did not establish material reserves for restructuring
businesses acquired in 2000 or 2001.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 2. Acquisitions and Dispositions (continued)
Dispositions
In 2002 and 2001, the company's continuing operations sold several
noncore businesses for net cash proceeds of $23.6 million and $46.8 million,
respectively, and recorded $2.5 million of net pretax gains in 2002 and $10.9
million of pretax losses in 2001, which are included in restructuring and other
costs (income), net, in the accompanying statement of operations.
In July 2000, the company's Measurement and Control segment completed the
sale of its wholly owned Spectra Precision businesses to Trimble Navigation
Limited for $208.1 million in net cash proceeds and $80.0 million in seller debt
financing at an initial interest rate of 10%. The note from the buyer called for
repayment in two equal, annual installments beginning in July 2001, but
permitted extension of maturity under certain conditions. Trimble elected to
defer the note payable due in July 2001, and the company and Trimble negotiated
a change in terms in March 2002. Under the revised terms, Trimble paid $11
million of principal, together with $10 million of accrued interest. Maturity
for the remaining balance was extended to July 2004, and the amended note
carries an interest rate of 10.41% and has provisions that require earlier
repayment under certain conditions. Interest on the note is added to the note's
principal balance if payment of the interest would cause Trimble to violate
covenants under its primary bank agreements. As of December 28, 2002, the
principal balance of the note had increased to $69.1 million as a result of this
provision. The note is included in other assets in the accompanying balance
sheet. In addition, the company obtained warrants to purchase up to 376,233
shares of Trimble, of which 200,000 shares were exercisable immediately at
$15.11 per share through 2007, and the balance of which becomes exercisable for
five-year terms at various times and prices depending on the outstanding balance
of the note. At December 28, 2002, warrants to purchase an additional 35,188
shares had become exercisable at prices ranging from $9.18 to $14.46 per share.
Spectra Precision, formerly part of the Measurement and Control segment, was
acquired as part of Spectra-Physics AB in 1999 and provides the construction,
surveying, and heavy-machine industries with precision-positioning equipment.
In addition, in 2000, the company's continuing operations sold several
other noncore businesses for net cash proceeds of $45.5 million. The company
realized aggregate pretax gains of $126.3 million in 2000 from the sale of
businesses, which are included in restructuring and other costs (income), net,
in the accompanying statement of operations.
Note 3. Business Segment and Geographical Information
The company's businesses are managed in three segments:
Life and Laboratory Sciences: serves the pharmaceutical, biotechnology,
and other research and industrial laboratory markets, as well as scientists in
government and academia, with tools that enable discovery, R&D, and quality
assurance. The segment also serves the healthcare market with rapid
point-of-care diagnostic tests, and with equipment, laboratory-automation
systems, and consumables for clinical and anatomical pathology laboratories.
Measurement and Control: enables customers in key industrial markets,
including chemical, semiconductor, pharmaceutical, food and beverage, minerals
and mining, and steel, to control and optimize their manufacturing processes.
The segment's analytical tools, online process instruments, and precision
temperature-control systems increase quality, improve productivity, and ensure
worker safety, environmental protection, and regulatory compliance. The segment
also offers a comprehensive range of chemical, radiation, and
explosives-detection instruments.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
Optical Technologies: provides high-power semiconductor and solid-state
lasers, as well as other photonic components and devices used in applications
ranging from industrial and microelectronic manufacturing and scientific
research to medical diagnostics and analytical instrumentation. Under the
Spectra-Physics brand, the segment offers a broad range of photonics products,
an extensive catalog, and specialized services for the design, prototyping, and
manufacturing of optical-based equipment.
During 2002, the company transferred management responsibility for
several businesses between segments as follows: (1) the spectroscopy businesses
were moved to the Life and Laboratory Sciences segment from the Measurement and
Control segment; (2) the temperature-control businesses were moved to the
Measurement and Control segment from the Optical Technologies segment; (3) the
electrochemistry products business was moved to the Measurement and Control
segment from the Life and Laboratory Sciences segment; and (4) the Thermo
Projects unit was moved from a separate segment (previously included as "Other")
to the Life and Laboratory Sciences segment. Prior-period segment information
has been restated to reflect these changes.
|
2002 2001 2000
---------- ---------- ----------
(In thousands)
Business Segment Information
Revenues:
Life and Laboratory Sciences $1,139,671 $1,113,780 $1,046,087
Measurement and Control 614,377 676,271 880,315
Optical Technologies 342,220 408,935 363,938
Intersegment (a) (9,913) (10,776) (9,818)
---------- ---------- ----------
$2,086,355 $2,188,210 $2,280,522
========== ========== ==========
Income from Continuing Operations Before Provision for Income Taxes,
Minority Interest, Extraordinary Item, and Cumulative Effect of Change
in Accounting Principle:
Life and Laboratory Sciences (b) $ 177,664 $ 105,655 $ 119,622
Measurement and Control (c) 50,288 16,879 181,493
Optical Technologies (d) (22,139) (37,366) 18,665
---------- ---------- ----------
Total Segment Operating Income (e) 205,813 85,168 319,780
Corporate/Other (f) 82,173 (14,487) (134,949)
---------- ---------- ----------
$ 287,986 $ 70,681 $ 184,831
========== ========== ==========
Total Assets:
Life and Laboratory Sciences $1,636,778 $1,454,028 $1,526,741
Measurement and Control 958,267 1,133,303 1,164,371
Optical Technologies 409,551 521,527 493,124
Corporate (g) 642,466 716,212 775,448
Net Assets of Discontinued Operations - - 903,293
---------- ---------- ----------
$3,647,062 $3,825,070 $4,862,977
========== ========== ==========
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
2002 2001 2000
---------- ---------- ----------
(In thousands)
Depreciation:
Life and Laboratory Sciences $ 20,853 $ 21,046 $ 21,548
Measurement and Control 10,131 13,649 18,079
Optical Technologies 14,193 14,633 12,098
Corporate 2,880 2,100 1,189
---------- ---------- ----------
$ 48,057 $ 51,428 $ 52,914
========== ========== ==========
Amortization:
Life and Laboratory Sciences $ 5,323 $ 27,838 $ 24,182
Measurement and Control 1,600 13,344 15,209
Optical Technologies 1,396 5,911 4,681
Corporate - - 500
---------- ---------- ----------
$ 8,319 $ 47,093 $ 44,572
========== ========== ==========
Capital Expenditures:
Life and Laboratory Sciences $ 24,937 $ 28,307 $ 21,689
Measurement and Control 10,329 13,268 21,652
Optical Technologies 13,981 37,218 29,095
Corporate 1,965 6,006 1,603
---------- ---------- ----------
$ 51,212 $ 84,799 $ 74,039
========== ========== ==========
Geographical Information
Revenues (h):
United States $1,379,673 $1,480,033 $1,574,737
England 293,643 315,033 311,660
Germany 244,396 184,175 198,416
Other 567,649 520,133 540,445
Transfers among geographical areas (a) (399,006) (311,164) (344,736)
---------- ---------- ----------
$2,086,355 $2,188,210 $2,280,522
========== ========== ==========
Long-lived Assets (i):
United States $ 168,044 $ 199,111 $ 222,169
England 27,544 24,613 28,215
Germany 27,319 21,358 21,963
Other 57,785 46,840 38,930
---------- ---------- ----------
$ 280,692 $ 291,922 $ 311,277
========== ========== ==========
Export Sales Included in United States Revenues Above (j) $ 376,142 $ 386,799 $ 436,378
========== ========== ==========
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Business Segment and Geographical Information (continued)
(a) Intersegment sales and transfers among geographical areas are accounted for
at prices that are representative of transactions with unaffiliated
parties.
(b) Includes restructuring and other costs, net, of $18.3 million, $45.6
million, and $24.7 million in 2002, 2001, and 2000, respectively.
(c) Includes restructuring and other costs of $13.3 million and $44.6 million
in 2002 and 2001, respectively, and restructuring and other income, net, of
$99.8 million in 2000.
(d) Includes restructuring and other costs, net, of $27.1 million, $57.1
million, and $6.0 million in 2002, 2001, and 2000, respectively.
(e) Segment operating income is operating income excluding costs incurred at
the company's corporate office.
(f) Includes corporate general and administrative expenses and other income and
expense. Includes corporate restructuring and other costs of $2.6 million,
$11.5 million, and $20.5 million at the company's corporate office in 2002,
2001, and 2000, respectively. Other income and expense includes $111.4
million and $35.1 million of income in 2002 and 2001, respectively, and
$45.1 million of charges in 2000, primarily related to the company's
investment in FLIR, and other expense of $2.8 million for impairment of
investments in 2001.
(g) Primarily cash and cash equivalents, short- and long-term investments, and
property and equipment at the company's corporate office.
(h) Revenues are attributed to countries based on selling location.
(i) Includes property, plant, and equipment, net, and other long-term tangible
assets.
(j) In general, export revenues are denominated in U.S. dollars.
Note 4. Other Income (Expense), Net
The components of other income (expense), net, in the accompanying
statement of operations are as follows:
|
2002 2001 2000
-------- -------- --------
(In thousands)
Interest Income $ 47,874 $ 68,490 $ 40,151
Interest Expense (Note 10) (40,916) (71,769) (83,142)
Equity in Earnings (Loss) of Unconsolidated Subsidiaries (Note 15) 2,533 4,699 (47,315)
Gain on Investments, Net (Notes 9 and 15) 123,134 35,579 6,849
Other Items, Net (92) (520) 2,273
-------- -------- --------
$132,533 $ 36,479 $(81,184)
======== ======== ========
The company acquired 4,162,000 shares of FLIR common stock in connection
with a business acquired in 1999. FLIR designs, manufactures, and markets
thermal imaging and broadcast camera systems that detect infrared radiation or
heat emitted directly by all objects and materials. Through the first quarter of
2002, the company accounted for its investment in FLIR using the equity method
with a one quarter lag to ensure the availability of FLIR's operating results in
time to enable the company to include its pro-rata share of FLIR's results with
its own. The investment in FLIR is included in other assets in the accompanying
2001 balance sheet. In December 2001, following a sale of shares, the company's
ownership of FLIR fell below 20%. In the first quarter of 2002, the company
recorded $2.1 million of income as its share of FLIR's fourth quarter 2001
earnings through the date on which the company's ownership fell below 20%.
Effective March 30, 2002, the company accounts for its investment in FLIR as an
available-for-sale security and no longer records its share of FLIR's earnings.
As an available-for-sale security, the investment in FLIR is recorded at quoted
market value in current assets and unrealized gains or losses are recorded as a
part of accumulated other comprehensive items in the accompanying 2002 balance
sheet.
<
F-27
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Other Income (Expense), Net (continued)
The company sold 2,669,700 and 1,150,000 shares of FLIR common stock
during 2002 and 2001, respectively, and realized gains of $111.4 million and
$35.1 million, respectively. These gains included $39.5 million and $14.2
million in 2002 and 2001, respectively, from the recovery of amounts written
down in prior years. At December 28, 2002, the company owned 334,175 shares of
FLIR with a market value of $15.8 million.
During 2000, the company recorded a charge to reflect an impairment of
its investment in FLIR that was deemed to be other than temporary (Note 15).
Summary unaudited financial information for FLIR as of and for the 12
months ended September 30, 2001 and 2000, is as follows:
|
2001 2000
-------- --------
(In thousands)
Current Assets $118,093 $114,494
Noncurrent Assets 43,903 51,439
-------- --------
Total Assets $161,996 $165,933
======== ========
Current Liabilities $103,804 $132,917
Noncurrent Liabilities 8,948 4,251
Shareholders' Equity 49,244 28,765
-------- --------
Total Liabilities and Shareholders' Equity $161,996 $165,933
======== ========
Twelve Months Ended
---------------------------------
September 30, September 30,
2001 2000
------------- -------------
(In thousands)
Revenues $206,573 $181,562
Cost of Revenues 95,587 114,211
-------- --------
Gross Profit $110,986 $ 67,351
======== ========
Net Earnings (Loss) $ 18,247 $(59,992)
======== ========
<
F-28
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans
Stock-based Compensation Plans
Stock Option Plans
------------------
The company has stock-based compensation plans for its key employees,
directors, and others. These plans permit the grant of a variety of stock and
stock-based awards as determined by the human resources committee of the
company's Board of Directors (the Board Committee) or by the company's chief
executive officer in limited circumstances, including restricted stock, stock
options, stock bonus shares, or performance-based shares. Generally, options
granted prior to July 2000 under these plans are exercisable immediately, but
shares acquired upon exercise are subject to certain transfer restrictions and
the right of the company to repurchase the shares at the exercise price upon
certain events, primarily termination of employment. The restrictions and
repurchase rights lapse over periods ranging from 0-10 years, depending on the
term of the option, which may range from 3-12 years. Options granted in or after
July 2000 under these plans generally vest over three to five years, assuming
continued employment with certain exceptions. Upon a change in control of the
company, all options, regardless of grant date, become immediately exercisable
and shares acquired upon exercise cease to be subject to transfer restrictions
and the company's repurchase rights. Nonqualified options are generally granted
at fair market value, although options may be granted at a price at or above 85%
of the fair market value on the date of grant. Incentive stock options must be
granted at not less than the fair market value of the company's stock on the
date of grant. Generally, stock options have been granted at fair market value.
The company also has a directors' stock option plan that provides for the annual
grant of stock options of the company to outside directors pursuant to a formula
approved by the company's shareholders. Options awarded under this plan are
immediately exercisable and expire three to seven years after the date of grant.
Following the completion of a cash tender offer in December 2001 for all
the shares of Spectra-Physics it did not previously own, the company completed a
short-form merger with Spectra-Physics in February 2002. Options to purchase
shares of Spectra-Physics became options to purchase 2,242,000 shares of Thermo
Electron common stock, which was accounted for in accordance with the
methodology set forth in FIN No. 44, "Accounting for Certain Transactions
Involving Stock Compensation" (Note 17).
In August and November 2001, the company distributed all of its shares of
two subsidiaries to the company's shareholders (Note 17). The intrinsic value of
the options issued under the company's employee stock plans prior to the
spinoffs was maintained following the spinoffs in accordance with the
methodology set forth in FIN No. 44. The data in the accompanying tables has
been adjusted to reflect the spinoffs. Options to purchase 908,000 shares of
company common stock held by employees of these businesses were cancelled on the
dates of the spinoffs. These employees received equivalent options in stock of
their respective business.
In 2002, 2001, and 2000, the company awarded to a number of key employees
323,000, 17,120, and 372,800 shares, respectively, of restricted company common
stock or restricted units that convert into an equivalent number of shares of
common stock assuming continued employment, with some exceptions. The awards had
an aggregate value of $6.5 million, $0.4 million, and $7.8 million,
respectively. The awards generally vest over three years, assuming continued
employment, with some exceptions. Of the shares/units awarded in 2002, 112,000
units vested immediately. During 2000, restricted common stock of the company's
formerly majority-owned subsidiaries was converted into 100,715 shares of
restricted company common stock with the same terms. The company has recorded
the fair value of the restricted stock as deferred compensation in the
accompanying balance sheet and is amortizing the amount over the vesting
periods.
<
F-29
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
A summary of the company's stock option activity is as follows:
|
2002 2001 2000
-------------------- -------------------- -------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
(Shares in thousands)
Options Outstanding, Beginning of Year 19,663 $17.78 24,579 $16.62 15,849 $16.86
Granted 5,322 19.69 3,086 22.00 2,595 18.49
Assumed in mergers with subsidiaries (Note 17) 2,242 42.71 - - 16,221 14.62
Exercised (2,049) 13.03 (4,258) 13.16 (5,915) 13.53
Forfeited (2,706) 26.46 (2,836) 19.27 (4,171) 15.25
Canceled due to spinoffs - - (908) 17.53 - -
------ ------ ------
Options Outstanding, End of Year 22,472 $20.11 19,663 $17.78 24,579 $16.62
====== ====== ====== ====== ====== ======
Options Exercisable 11,391 $19.44 15,612 $16.83 23,120 $16.41
====== ====== ====== ====== ====== ======
Options Available for Grant 3,667 8,234 3,826
====== ====== ======
A summary of the status of the company's stock options at December 28, 2002, is as follows:
|
Options Outstanding Options Exercisable
------------------------------------------------ --------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of of Remaining Exercise of Exercise
Exercise Prices Shares Contractual Life Price Shares Price
----------------- ------ ---------------- -------- ------ --------
(Shares in thousands)
$ 3.49 - $ 11.20 2,731 3.1 years $ 9.17 1,986 $ 9.24
11.21 - 16.99 6,008 3.3 years 14.43 4,416 14.57
17.00 - 20.85 7,627 6.8 years 19.50 1,862 18.75
20.86 - 30.50 4,127 5.4 years 23.89 1,889 24.35
30.51 - 38.22 1,029 5.6 years 33.94 641 33.60
38.23 - 69.10 803 7.2 years 56.01 505 55.49
69.11 - $196.48 147 6.8 years 88.35 92 90.56
------ ------
$ 3.49 - $196.48 22,472 5.1 years $20.11 11,391 $19.44
====== ======
<
F-30
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
Employee Stock Purchase Plan
Qualifying employees are eligible to participate in an employee stock
purchase plan sponsored by the company. Under this program, shares of the
company's common stock may be purchased at 85% of the lower of the fair market
value at the beginning or end of the purchase period, and the shares purchased
are subject to a one-year resale restriction. Shares are purchased through
payroll deductions of up to 10% of each participating employee's gross wages.
Effective with the 2002 plan year, the company changed the fiscal year-end of
its plan from October 31 to December 31. In February 2003, the company issued
147,000 shares of its common stock for the 2002 plan year. During 2001 and 2000,
the company issued 184,000 shares and 693,000 shares, respectively, of its
common stock under this plan.
401(k) Savings Plan and Other Defined Contribution Plans
The company's 401(k) savings plan covers the majority of the company's
eligible full-time U.S. employees. Contributions to the plan are made by both
the employee and the company. Company contributions are based on the level of
employee contributions.
Certain of the company's subsidiaries offer retirement plans in lieu of
participation in the company's principal 401(k) savings plan. Company
contributions to these plans are based on formulas determined by the company.
For these plans, the company contributed and charged to expense $20.0
million, $19.0 million, and $18.0 million in 2002, 2001, and 2000, respectively.
Defined Benefit Pension Plans
Two of the company's German subsidiaries and one of its U.K. subsidiaries
have defined benefit pension plans covering substantially all full-time
employees at those subsidiaries. One of the German subsidiaries' plans is
unfunded, as permitted under the plan and applicable laws. Net periodic benefit
costs for the plans in aggregate included the following components:
|
2002 2001 2000
------- ------- -------
(In thousands)
Service Cost $ 1,778 $ 2,615 $ 2,238
Interest Cost on Benefit Obligation 4,245 3,941 3,834
Expected Return on Plan Assets (4,567) (4,951) (5,793)
Recognized Net Actuarial (Gain) Loss 106 (19) (180)
Amortization of Unrecognized Gain - - (2)
Amortization of Unrecognized Initial Obligation 37 35 36
------- ------- -------
$ 1,599 $ 1,621 $ 133
======= ======= =======
<
F-31
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5. Employee Benefit Plans (continued)
The activity under the company's defined benefit plans is as follows:
|
2002 2001
-------- --------
(In thousands)
Change in Benefit Obligation:
Benefit obligation, beginning of year $ 67,169 $ 73,772
Service cost 1,778 2,615
Interest cost 4,245 3,941
Benefits paid (2,841) (2,212)
Actuarial (gain) loss 5,999 (8,358)
Currency translation 8,814 (2,589)
-------- --------
Benefit obligation, end of year 85,164 67,169
-------- --------
Change in Plan Assets:
Fair value of plan assets, beginning of year 62,555 76,579
Company contributions 634 580
Benefits paid (2,841) (2,212)
Actual loss on plan assets (10,275) (10,064)
Currency translation 6,060 (2,328)
-------- --------
Fair value of plan assets, end of year 56,133 62,555
-------- --------
Funded Status (29,031) (4,614)
Unrecognized Net Actuarial Loss 29,997 7,126
Unrecognized Initial Obligation 40 67
-------- --------
Net Amount Recognized $ 1,006 $ 2,579
======== ========
Amounts Recognized in the Balance Sheet:
Prepaid pension asset $ - $ 16,468
Accrued pension liability (26,104) (13,956)
Other assets 40 67
Accumulated other comprehensive items 27,070 -
-------- --------
Net Amount Recognized $ 1,006 $ 2,579
======== ========
The aggregate projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $85.2 million, $80.5 million,
and $56.1 million, respectively, at year-end 2002, and $18.5 million, $17.6
million, and $5.6 million, respectively, at year-end 2001.
The weighted average rates used to determine the net periodic benefit
costs were as follows:
|
2002 2001 2000
---- ---- ----
Discount Rate 5.8% 6.1% 5.6%
Rate of Increase in Salary Levels 3.7% 4.4% 4.4%
Expected Long-term Rate of Return on Assets 7.4% 7.0% 6.9%
<
F-32
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes
The components of income from continuing operations before provision for
income taxes, minority interest, extraordinary item, and cumulative effect of
change in accounting principle are as follows:
|
2002 2001 2000
-------- -------- --------
(In thousands)
U.S. $210,171 $ 5,745 $ 91,342
Non-U.S. 77,815 64,936 93,489
-------- -------- --------
$287,986 $ 70,681 $184,831
======== ======== ========
The components of the provision for income taxes of continuing operations are as follows:
2002 2001 2000
-------- -------- --------
(In thousands)
Currently Payable:
Federal $ 54,154 $ 11,117 $ 55,819
Non-U.S. 24,115 23,572 53,586
State 1,837 3,318 8,311
-------- -------- --------
80,106 38,007 117,716
-------- -------- --------
Net Deferred (Prepaid):
Federal 11,086 (12,787) (635)
Non-U.S. 1,429 2,667 (4,535)
State 366 (958) (329)
-------- -------- --------
12,881 (11,078) (5,499)
-------- -------- --------
$ 92,987 $ 26,929 $112,217
======== ======== ========
The total provision for income taxes included in the accompanying
statement of operations is as follows:
|
2002 2001 2000
--------- --------- ---------
(In thousands)
Continuing Operations $ 92,987 $ 26,929 $ 112,217
Discontinued Operations - - 10,427
Gain/Loss on Disposal of Discontinued Operations (21,008) (22,741) (104,000)
Extraordinary Item (522) 637 333
Cumulative Effect of Change in Accounting Principle - (663) (8,543)
--------- --------- ---------
$ 71,457 $ 4,162 $ 10,434
========= ========= =========
The company receives a tax deduction upon the exercise of nonqualified
stock options by employees for the difference between the exercise price and the
market price of the underlying common stock on the date of exercise. The
provision for income taxes that is currently payable does not reflect $6.7
million, $9.5 million, and $18.0 million of such benefits of the company that
have been allocated to capital in excess of par value in 2002, 2001, and 2000,
respectively. In addition, the provision for income taxes that is currently
payable does not reflect $19.0 million of tax benefits used to reduce goodwill
in 2000.
<
F-33
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes (continued)
The provision for income taxes in the accompanying statement of
operations differs from the provision calculated by applying the statutory
federal income tax rate of 35% to income from continuing operations before
provision for income taxes, minority interest, extraordinary item, and
cumulative effect of change in accounting principle due to the following:
|
2002 2001 2000
-------- -------- --------
(In thousands)
Provision for Income Taxes at Statutory Rate $100,795 $ 24,738 $ 64,691
Increases (Decreases) Resulting From:
Federal tax credits (3,016) (2,955) (4,113)
Foreign sales corporation/extraterritorial income exclusion (2,357) (2,401) (7,325)
Losses not benefited in the year they occurred (3,192) (4,687) 1,005
Non-U.S. tax rate and tax law differential (1,873) (1,017) 301
State income taxes, net of federal tax 1,432 1,535 5,188
Nondeductible expenses 927 926 1,347
Goodwill of businesses sold 206 - 30,190
Amortization and write off of goodwill 151 13,095 11,330
Writedown and equity in loss of unconsolidated subsidiary - - 12,062
Other, net (86) (2,305) (2,459)
-------- -------- --------
$ 92,987 $ 26,929 $112,217
======== ======== ========
Net deferred tax asset in the accompanying balance sheet consists of the following:
|
2002 2001
-------- --------
(In thousands)
Deferred Tax Asset (Liability):
Net operating loss and credit carryforwards $ 66,859 $ 46,568
Reserves and accruals 49,408 52,234
Inventory basis difference 31,308 39,246
Accrued compensation 19,506 10,952
Depreciation and amortization (5,252) 11,299
Available-for-sale investments (15,162) (18,114)
Other, net 734 (2,750)
-------- --------
147,401 139,435
Less: Valuation allowance 65,476 45,370
-------- --------
$ 81,925 $ 94,065
======== ========
The company estimates the degree to which tax assets and loss
carryforwards will result in a benefit based on expected profitability by tax
jurisdiction and provides a valuation allowance for tax assets and loss
carryforwards that it believes will more likely than not go unused.
Approximately $8 million of the valuation allowance in 2002 relates to
unbenefited foreign tax credit carryforwards. The balance of the valuation
allowance primarily relates to the uncertainty surrounding the realization of
acquired tax loss and credit carryforwards. Any tax benefit resulting from the
use of acquired loss carryforwards is used to reduce goodwill.
<
F-34
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Income Taxes (continued)
At year-end 2002, the company had federal, state, and non-U.S. net
operating loss carryforwards of $3 million, $322 million, and $139 million,
respectively. Use of the carryforwards is limited based on the future income of
certain subsidiaries. The federal and state net operating loss carryforwards
expire in the years 2003 through 2021. Of the non-U.S. net operating loss
carryforwards, $12 million expire in the years 2003 through 2015, and the
remainder do not expire.
A provision has not been made for U.S. or additional non-U.S. taxes on
$576 million of undistributed earnings of international subsidiaries that could
be subject to taxation if remitted to the U.S. because the company plans to keep
these amounts permanently reinvested overseas.
Note 7. Earnings (Loss) per Share
|
2002 2001 2000
--------- --------- ---------
(In thousands except per share amounts)
Income from Continuing Operations Before Extraordinary Item and Cumulative
Effect of Change in Accounting Principle $ 195,330 $ 49,592 $ 62,047
Income from Discontinued Operations - - 14,228
Gain (Loss) on Disposal of Discontinued Operations, Net 115,370 (50,440) (100,000)
Extraordinary Item (970) 1,061 532
Cumulative Effect of Change in Accounting Principle - (994) (12,918)
--------- --------- ---------
Net Income (Loss) for Basic Earnings per Share 309,730 (781) (36,111)
Effect of:
Convertible debentures 13,986 - -
Majority-owned subsidiaries' dilutive securities - continuing operations - - (1,331)
Majority-owned subsidiaries' dilutive securities - discontinued operations - - (113)
--------- --------- ---------
Income (Loss) Available to Common Shareholders, as Adjusted for Diluted
Earnings per Share $ 323,716 $ (781) $ (37,555)
--------- --------- ---------
Basic Weighted Average Shares 168,572 180,560 167,462
Effect of:
Convertible debentures 15,952 463 238
Stock options 2,068 2,893 2,819
Contingently issuable shares 19 - -
--------- --------- ---------
Diluted Weighted Average Shares 186,611 183,916 170,519
--------- --------- ---------
<
F-35
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 7. Earnings (Loss) per Share (continued)
2002 2001 2000
--------- --------- ---------
(In thousands except per share amounts)
Basic Earnings (Loss) per Share:
Continuing operations before extraordinary item and cumulative effect of
change in accounting principle $ 1.16 $ .27 $ .37
Discontinued operations .68 (.28) (.51)
Extraordinary item (.01) .01 -
Cumulative effect of change in accounting principle - (.01) (.08)
--------- --------- ---------
$ 1.84 $ - $ (.22)
========= ========= =========
Diluted Earnings (Loss) per Share:
Continuing operations before extraordinary item and cumulative effect of
change in accounting principle $ 1.12 $ .27 $ .36
Discontinued operations .62 (.27) (.50)
Extraordinary item (.01) .01 -
Cumulative effect of change in accounting principle - (.01) (.08)
--------- --------- ---------
$ 1.73 $ - $ (.22)
========= ========= =========
Options to purchase 10,786,000, 4,755,000, and 4,726,000 shares of common
stock were not included in the computation of diluted earnings (loss) per share
for 2002, 2001, and 2000, respectively, because the options' exercise prices
were greater than the average market price for the common stock and their effect
would have been antidilutive.
The computation of diluted earnings per share for 2002 excludes the
effect of assuming the conversion of the company's 4 3/8% subordinated
convertible debentures with a principal balance of $71.9 million and convertible
at $111.83 per share, because the effect would be antidilutive. The computation
of diluted earnings (loss) per share for 2001 and 2000 excludes the effect of
all convertible debentures except the company's noninterest-bearing subordinated
convertible debentures because the effect would be antidilutive.
Note 8. Comprehensive Income
Comprehensive income combines net income (loss) and other comprehensive
items. Other comprehensive items represents certain amounts that are reported as
components of shareholders' equity in the accompanying balance sheet, including
currency translation adjustments, unrealized net of tax gains and losses on
available-for-sale investments and hedging instruments, and minimum pension
liability adjustment.
Accumulated other comprehensive items in the accompanying balance sheet
consists of the following:
|
2002 2001
--------- ---------
(In thousands)
Cumulative Translation Adjustment $ (41,448) $(132,709)
Net Unrealized Gains on Available-for-sale Investments 28,229 32,081
Net Unrealized Gains (Losses) on Hedging Instruments (1,490) 1,338
Minimum Pension Liability Adjustment (net of tax benefit of $8,121) (18,949) -
--------- ---------
$ (33,658) $ (99,290)
========= =========
<
F-36
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8. Comprehensive Income (continued)
Comprehensive income in 2002 excludes the effect of unrealized gains of
$111 million that existed at the date the company reclassified equity interests
in FLIR and Thoratec Corporation to available-for-sale investments (Notes 4 and
17).
The change in unrealized gains (losses) on available-for-sale
investments, a component of other comprehensive items in the accompanying
statement of comprehensive income and shareholders' equity, includes the
following:
|
2002 2001 2000
-------- -------- --------
(In thousands)
Unrealized Holding Gains (Losses) Arising During the Year (net of
income tax provision (benefit) of $(22,067), $12,136, and $5,257) $(34,481) $ 21,077 $ 8,668
Reclassification Adjustment for Gains Included in Net Income/ Loss
(net of income tax provision of $15,746, $505, and $2,739) (31,413) (757) (4,110)
-------- -------- --------
Net Unrealized Gains (Losses) (net of income tax provision (benefit)
of $(37,813), $11,631, and $2,518) $(65,894) $ 20,320 $ 4,558
======== ======== ========
The change in unrealized gains (losses) on hedging instruments, a
component of other comprehensive items in the accompanying statement of
comprehensive income and shareholders' equity, includes the following:
|
2002 2001
------- -------
(In thousands)
Unrealized Holding Gains (Losses) Arising During the Year (net of
income tax provision (benefit) of $(1,794) and $2,861) $(2,852) $ 4,330
Reclassification Adjustment for (Gains) Losses Included in Net
Income/Loss (net of income tax (provision) benefit of $15 and
$(1,995)) 24 (2,992)
------- -------
Net Unrealized Gains (Losses) (net of income tax provision (benefit)
of $(1,779) and $866) $(2,828) $ 1,338
======= =======
<
F-37
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 9. Available-for-sale Investments
The aggregate market value, cost basis, and gross unrealized gains and
losses of short- and long-term available-for-sale investments by major security
type are as follows:
|
Gross Gross
Market Cost Unrealized Unrealized
Value Basis Gains Losses
-------- -------- ---------- ----------
(In thousands)
2002
Corporate Bonds and Notes $431,222 $424,681 $ 6,731 $ (190)
Other 105,208 68,321 37,138 (251)
-------- -------- -------- --------
$536,430 $493,002 $ 43,869 $ (441)
======== ======== ======== ========
2001
Corporate Bonds and Notes $682,520 $666,432 $ 16,372 $ (284)
Other 71,161 37,054 34,231 (124)
-------- -------- -------- --------
$753,681 $703,486 $ 50,603 $ (408)
======== ======== ======== ========
Amortized cost for short-term available-for-sale investments was $493.0
million and $697.8 million in the accompanying 2002 and 2001 balance sheets,
respectively. Amortized cost for long-term available-for-sale investments was
$5.7 million in the accompanying 2001 balance sheet.
Short-term available-for-sale investments in the accompanying 2002
balance sheet include equity securities of $105.2 million and debt securities of
$350.7 million with contractual maturities of one year or less and $80.5 million
with contractual maturities of more than one year through five years. Actual
maturities may differ from contractual maturities as a result of the company's
intent to sell these securities prior to maturity.
The cost of available-for-sale investments that were sold was based on
specific identification in determining realized gains and losses recorded in the
accompanying statement of operations. The net gain on the sale of
available-for-sale investments resulted from gross realized gains of $126.6
million, $5.0 million, and $9.3 million, and gross realized losses of $3.5
million, $3.7 million, and $2.5 million in 2002, 2001, and 2000, respectively.
<
F-38
|
>
THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Long-term Obligations and Other Financing Arrangements
|
2002 2001
---------- ----------
(In thousands except
per share amounts)
7 5/8% Senior Notes, Due 2008 $ 141,032 $ 128,725
4% Subordinated Convertible Debentures, Due 2005, Convertible at $35.77 per Share 226,501 231,508
3 1/4% Subordinated Convertible Debentures, Due 2007, Convertible at $41.84 per Share 78,048 78,048
4 3/8% Subordinated Convertible Debentures, Due 2004, Convertible at $111.83 per Share
(called for redemption in April 2003; Note 19) 71,873 75,168
Noninterest-bearing Subordinated Convertible Debentures, Due 2003, Convertible at $61.67
per Share 31,320 31,420
2 7/8% Subordinated Convertible Debentures, Due 2003, Convertible at $28.16 per Share 11,536 11,583
4 1/2% Senior Convertible Debentures, Due 2003, Convertible at $34.42 per Share (called
for redemption in October 2002) - 145,414
4 1/4% Subordinated Convertible Debentures, Due 2003, Convertible at $32.09 per Share
(called for redemption in March 2002) - 398,498
4 5/8% Subordinated Convertible Debentures, Due 2003, Convertible at $34.22 per Share
(called for redemption in March 2002) - 69,614
4 7/8% Subordinated Convertible Debentures, Due 2004, Convertible at $32.50 per Share
(called for redemption in October 2002) - 17,650
Other 8,175 10,303
---------- ----------
568,485 1,197,931
Less: Current Maturities 117,144 470,429
---------- ----------
$ 451,341 $ 727,502
========== ==========
As a result of the spinoffs to shareholders discussed in Note 17, the
conversion price of each of the company's convertible debentures was reduced in
2001 to approximately 85% of the conversion price at December 30, 2000, in
accordance with the terms of the convertible debentures.
Outstanding debentures issued by subsidiaries that were taken private in
transactions in which the consideration paid to stockholders of the subsidiary
was Thermo Electron common stock have become convertible into the company's
common stock. Outstanding debentures issued by subsidiaries that were taken
private in transactions in which the consideration paid to stockholders of the
subsidiary was cash became convertible into an amount based on the same cash
consideration payable in the merger transactions. The interest cost of this debt
has been included as interest expense of continuing operations in the
accompanying statement of operations. No allocation of interest expense for debt
of the company's continuing operations has been made to discontinued operations.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Long-term Obligations and Other Financing Arrangements (continued)
The annual requirements for long-term obligations are as follows (in
thousands):
|
2003 $117,144
2004 1,016
2005 226,945
2006 405
2007 78,471
2008 and thereafter 144,504
--------
$568,485
========
See Note 13 for fair value information pertaining to the company's
long-term obligations.
Short-term obligations and current maturities of long-term obligations in
the accompanying balance sheet includes $75.4 million and $58.5 million at
year-end 2002 and 2001, respectively, of short-term bank borrowings and
borrowings under lines of credit of certain of the company's subsidiaries. The
weighted average interest rate for these borrowings was 2.3% and 3.1% at
year-end 2002 and 2001, respectively. Unused lines of credit for non-U.S.
subsidiaries were $180 million as of year-end 2002. The unused lines of credit
generally provide for short-term unsecured borrowings at various interest rates.
In addition, the company has facilities of $250 million discussed below.
In 2002, the company redeemed all of its outstanding 4 1/2% senior
convertible debentures due 2003, 4 1/4% and 4 5/8% subordinated convertible
debentures due 2003, and 4 7/8% subordinated convertible debentures due 2004
with the objective of reducing interest costs. The principal amounts redeemed
for the 4 1/2%, 4 1/4%, 4 5/8%, and 4 7/8% debentures were $121.1 million,
$398.4 million, $57.9 million, and $13.3 million, respectively. The redemption
price was 100% of the principal amount of the debentures plus accrued interest.
Redemptions and repurchases of subordinated convertible debentures resulted in
an extraordinary charge of $1.0 million, net of a tax benefit of $0.5 million,
in 2002, and extraordinary gains of $1.1 million and $0.5 million in 2001 and
2000, respectively. The gains are net of taxes of $0.6 million and $0.3 million
in 2001 and 2000, respectively. Effective in 2003, gains or losses resulting
from the repurchase or redemption of the company's debentures will be reported
as other nonoperating income or expense, and prior periods will be restated to
conform to this presentation (Note 1).
In connection with the 2002 debt redemption discussed above, the company
entered into securities-lending agreements with third parties under which the
company may borrow funds for short-term needs. Borrowings are collateralized by
available-for-sale investments. As of December 28, 2002, the company had
outstanding borrowings of $292.0 million under these arrangements with
maturities between January 2003 and June 2003 and a weighted average interest
rate of 1.87%. The proceeds of the borrowings were used to partially fund the
debt redemption discussed above. The company has pledged $306.6 million of
available-for-sale securities in the accompanying 2002 balance sheet as
collateral for such borrowings.
In December 2002, the company entered into revolving credit agreements
with a bank group that provide for up to $250 million of unsecured borrowings.
These arrangements consist of a 364-day revolving credit facility of $125
million that will expire in December 2003, and a three-year $125 million
revolving credit facility that will expire in December 2005. The agreements call
for interest at either a LIBOR-based rate or a rate based on the prime lending
rate of the agent bank, at the company's option. The rate at December 28, 2002,
was 2.14% under the more favorable of the two rates. The company has agreed to
certain financial covenants including interest coverage and debt-to-capital
ratios. As of year-end 2002, no borrowings were outstanding. The company may use
the credit facilities for working capital needs and possible acquisitions.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Long-term Obligations and Other Financing Arrangements (continued)
During 2002, the company entered into interest-rate swap arrangements for
its $128.7 million principal amount 7.625% senior notes, due in 2008, with the
objective of reducing interest costs. The arrangements provide that the company
will receive a fixed interest rate of 7.625%, and will pay a variable rate of
90-day LIBOR plus 2.19% (3.58% as of December 28, 2002). The swaps have terms
expiring at the maturity of the debt. The swaps are designated as fair-value
hedges and as such, are carried at fair value, which resulted in an increase in
other long-term assets and long-term debt of $12.3 million at December 28, 2002.
The swap arrangements are with different counterparties than the holders of the
underlying debt. Management believes that any credit risk associated with the
swaps is remote based on the creditworthiness of the financial institutions
issuing the swaps.
Note 11. Commitments and Contingencies
Operating Leases
The company leases portions of its office and operating facilities under
various operating lease arrangements. Income from continuing operations includes
expense from operating leases of $36.0 million, $43.9 million, and $42.2 million
in 2002, 2001, and 2000, respectively. Future minimum payments due under
noncancelable operating leases at December 28, 2002, are $40.3 million in 2003,
$36.2 million in 2004, $30.3 million in 2005, $22.9 million in 2006, $20.0
million in 2007, and $83.1 million in 2008 and thereafter. Total future minimum
lease payments are $232.8 million.
Letters of Credit and Guarantees
Outstanding letters of credit totaled $44.6 million at December 28, 2002,
including $7.4 million for businesses that have been sold. The expiration of
these credits ranges through 2012 for existing businesses and through 2003 for
businesses that have been sold.
Outstanding surety bonds totaled $26.0 million at December 28, 2002,
including $23.1 million for businesses that have been sold or included within
discontinued operations. The expiration of these bonds ranges through 2010 for
existing businesses and primarily through 2006 for businesses that have been
sold and for discontinued operations.
The letters of credit and surety bonds principally secure performance
obligations, and allow the holder to draw funds up to the face amount of the
letter of credit or bond if the applicable business unit does not perform as
contractually required.
The company has other outstanding guarantees totaling $1.2 million at
December 28, 2002, that relate to the payment of customs and third-party
indebtedness of an equity investee. These carry no expiration.
Indemnifications
In conjunction with certain transactions, primarily divestitures, the
company has agreed to indemnify the other parties with respect to certain
liabilities related to the businesses that were sold or leased properties that
were abandoned (e.g., retention of certain environmental, tax, employee, and
product liabilities). The scope and duration of such indemnity obligations vary
from transaction to transaction. Where appropriate, an obligation for such
indemnifications is recorded as a liability. Generally, a maximum obligation
cannot be reasonably estimated. Other than obligations recorded as liabilities
at the time of divestiture, historically the company has not made significant
payments for these indemnifications.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11. Commitments and Contingencies (continued)
In connection with the company's efforts to reduce the number of
facilities that it occupies, the company has vacated some of its leased
facilities or sublet them to third parties. When the company sublets a facility
to a third party, it remains the primary obligor under the master lease
agreement with the owner of the facility. As a result, if a third party vacates
the sublet facility, the company would be obligated to make lease or other
payments under the master lease agreement. The company believes that the
financial risk of default by sublessors is individually and in the aggregate not
material to the company's financial position or results of operations.
In connection with the sale of products in the ordinary course of
business, the company often makes representations affirming, among other things,
that its products do not infringe on the intellectual property rights of others
and agrees to indemnify customers against third-party claims for such
infringement. The company has not been required to make material payments under
such provisions.
Litigation and Related Contingencies
Continuing Operations
---------------------
The company has been named a defendant, along with many other companies,
in a patent-infringement lawsuit brought by the Lemelson Medical, Education &
Research Foundation, L.P. The suit asserts that products manufactured, used, or
sold by the defendants infringe one or more patents related to methods of
machine vision or computer-image analysis. The Lemelson action seeks damages,
including enhanced damages for alleged willful infringement, attorney's fees,
and injunctive relief.
During 2002, the company settled a patent-infringement matter that
Rockwell International Corp. had brought against Spectra-Physics and its Opto
Power subsidiary. Under the settlement, the company paid Rockwell $4.0 million.
The settlement was charged against a reserve established for this matter except
for $0.7 million that was included in restructuring and other costs in the
accompanying 2002 statement of operations (Note 15).
Discontinued Operations
-----------------------
The company's Thermo Coleman Corporation subsidiary has been named as a
defendant in a lawsuit initiated by two former employees. The suit alleges,
among other things, that Thermo Coleman violated the Federal False Claims Act in
connection with the performance of a government contract. The complaint seeks
the award of treble damages in an unspecified amount, plus other penalties. The
amount of billings under the contract activities in question were approximately
$7.6 million. Thermo Coleman sold its core business in 2000, but retained this
litigation as a term of the sale.
During 2002, the company settled a patent-infringement matter that
Fischer Imaging Corporation had brought against the company's former Trex
Medical subsidiary. The company sold Trex Medical in 2000, but retained this
obligation as a term of the sale. Under the settlement, the company paid Fischer
$25 million and agreed to pay an additional $7.2 million over eight years. The
portion of the settlement that was paid was charged against a reserve
established for this matter. The balance of the amount to be paid will also be
charged against the reserve as paid.
The company intends to vigorously defend the unresolved matters in
continuing and discontinued operations described above. In the opinion of
management, an unfavorable outcome in one or more of the unresolved matters
described above could materially affect the company's financial position as well
as its results of operations and cash flows for a particular quarterly or annual
period.
The company's continuing and discontinued operations are a defendant in a
number of other pending legal proceedings incidental to present and former
operations. The company does not expect the outcome of these proceedings, either
individually or in the aggregate, to have a material adverse effect on its
financial position, results of operations, or cash flows.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 12. Common and Preferred Stock
At December 28, 2002, the company had reserved 36,594,369 unissued shares
of its common stock for possible issuance under stock-based compensation plans
and for possible conversion of the company's convertible debentures.
The company has 50,000 shares of authorized but unissued $100 par value
preferred stock.
In 2002, the company restored 32,000,000 shares of common stock to
authorized but unissued status, which had been held in treasury stock.
In 2000, the company issued 22.6 million shares of its common stock
valued at $448.7 million to complete mergers with several of its formerly
majority-owned subsidiaries (Note 17).
During 1998 and 1999, in a series of transactions with an institutional
counterparty, the company sold put options and purchased call options. No cash
was exchanged as a result of these transactions. The company had the right to
settle the put options by physical settlement of the options or by net share
settlement using shares of the company's common stock. During 2000, the company
purchased 1,183,500 shares of its common stock under the call options for $17.5
million. During 1999, the company purchased 1,536,000 shares of its common stock
under the put options for $24.6 million. During 1999 and 2000, put options for
4,165,000 shares expired. No remaining obligation under the put options existed
after 2000.
The company has distributed rights under a shareholder rights plan
adopted by the company's Board of Directors to holders of outstanding shares of
the company's common stock. Each right entitles the holder to purchase one
ten-thousandth of a share (a Unit) of Series B Junior Participating Preferred
Stock, $100 par value, at a purchase price of $250 per Unit, subject to
adjustment. The rights will not be exercisable until the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an Acquiring Person) has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of common
stock (the Stock Acquisition Date), or (ii) 10 business days following the
commencement of a tender offer or exchange offer for 15% or more of the
outstanding shares of common stock.
In the event that a person becomes the beneficial owner of 15% or more of
the outstanding shares of common stock, except pursuant to an offer for all
outstanding shares of common stock approved by at least a majority of the
members of the Board of Directors, each holder of a right (except for the
Acquiring Person) will thereafter have the right to receive, upon exercise, that
number of shares of common stock that equals the exercise price of the right
divided by one-half of the current market price of the common stock. In the
event that, at any time after any person has become an Acquiring Person, (i) the
company is acquired in a merger or other business combination transaction in
which the company is not the surviving corporation or its common stock is
changed or exchanged (other than a merger that follows an offer approved by the
Board of Directors), or (ii) 50% or more of the company's assets or earning
power is sold or transferred, each holder of a right (except for the Acquiring
Person) shall thereafter have the right to receive, upon exercise, the number of
shares of common stock of the acquiring company that equals the exercise price
of the right divided by one half of the current market price of such common
stock.
At any time until 10 days following the Stock Acquisition Date, the
company may redeem the rights in whole, but not in part, at a price of $.01 per
right (payable in cash or stock). The rights expire on January 29, 2006, unless
earlier redeemed or exchanged.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 13. Fair Value of Financial Instruments
The company's financial instruments consist mainly of cash and cash
equivalents, available-for-sale investments, accounts receivable, a note
receivable from Trimble (Note 2), short-term obligations and current maturities
of long-term obligations, accounts payable, long-term obligations, and forward
currency-exchange contracts. The carrying amounts of cash and cash equivalents,
accounts receivable, short-term obligations and current maturities of long-term
obligations (excluding convertible obligations), and accounts payable
approximate fair value due to their short-term nature.
Available-for-sale investments are carried at fair value in the
accompanying balance sheet. The fair values were determined based on quoted
market prices (Note 9).
The carrying amount and fair value of the company's note receivable,
long-term obligations, and forward currency-exchange contracts are as follows:
|
2002 2001
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(In thousands)
Note Receivable $ 69,136 $ 70,002 $ 80,000 $ 80,201
======== ======== ======== ========
Current Maturities of Convertible Obligations $114,729 $112,121 $468,112 $466,720
======== ======== ======== ========
Long-term Obligations:
Convertible obligations $304,549 $292,138 $590,791 $562,264
Other 146,792 146,792 136,711 140,006
-------- -------- -------- --------
$451,341 $438,930 $727,502 $702,270
======== ======== ======== ========
Forward Currency-exchange Contracts Receivable $ 1,111 $ 1,111 $ 3,585 $ 3,585
The fair value of the note receivable was determined based on borrowing
rates available to companies of comparable creditworthiness at the respective
year ends.
The fair value of long-term obligations was determined based on quoted
market prices and on borrowing rates available to the company at the respective
year ends.
The notional amounts of forward currency-exchange contracts outstanding
totaled $89.2 million and $90.1 million at year-end 2002 and 2001, respectively.
The fair value of such contracts is the estimated amount that the company would
receive upon liquidation of the contracts, taking into account the change in
currency exchange rates.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 14. Supplemental Cash Flow Information
|
2002 2001 2000
-------- -------- --------
(In thousands)
Cash Paid For
Interest $ 51,156 $ 61,797 $ 84,380
======== ======== ========
Income taxes $ 64,309 $ 44,822 $ 93,136
======== ======== ========
Noncash Activities
Fair value of assets of acquired companies $ 94,881 $ 18,161 $ 25,114
Cash paid for acquired companies (78,825) (14,834) (17,311)
-------- -------- --------
Liabilities assumed of acquired companies $ 16,056 $ 3,327 $ 7,803
======== ======== ========
Issuance of company common stock in exchange for minority
interests of subsidiaries (Note 17) $ - $ - $448,747
======== ======== ========
Receipt of note in connection with sale of business (Note 2) $ - $ - $ 80,000
======== ======== ========
Note 15. Restructuring and Other Costs (Income), Net
2002
In response to a continued downturn in markets served by the company,
restructuring actions were initiated in 2002 in a number of business units to
reduce costs and shed unproductive assets. The restructuring and related actions
primarily consisted of headcount reductions, writedowns of production equipment
for telecommunications products at Spectra-Physics, discontinuation of three
mature or unprofitable product lines, and consolidation of facilities to
streamline operations and reduce costs. During 2002, the company recorded $61.3
million of restructuring and other charges primarily associated with these
actions, including $9.1 million of charges to cost of revenues. These charges
are detailed by segment below. The company expects to incur an additional $6
million of restructuring costs in 2003 for charges associated with these actions
that cannot be recorded until incurred, such as relocation and moving costs. The
company believes that restructuring actions undertaken in 2002 will be
substantially completed by mid-2003. The company expects to identify additional
sites to consolidate in 2003 and will record charges in connection with any such
actions.
The company recorded net restructuring and other charges by segment for
2002 as follows:
|
Life and
Laboratory Measurement Optical
Sciences and Control Technologies Corporate Total
---------- ----------- ------------ --------- -------
(In thousands)
Cost of Revenues $ 734 $ 1,384 $ 7,008 $ - $ 9,126
Restructuring and Other Costs, Net 17,572 11,910 20,102 2,562 52,146
------- ------- ------- ------- -------
$18,306 $13,294 $27,110 $ 2,562 $61,272
======= ======= ======= ======= =======
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
The components of net restructuring and other charges by segment are as
follows:
Life and Laboratory Sciences
----------------------------
The Life and Laboratory Sciences segment recorded $18.3 million of net
restructuring and other charges in 2002. The segment recorded charges to cost of
revenues of $0.7 million, which consisted of $0.5 million for the sale of
inventory revalued at the date of acquisition and $0.2 million for a
discontinued product line, and $17.6 million of other costs. These other costs
consisted of $11.4 million of cash costs, including $5.2 million of severance
for 236 employees across all functions; $2.0 million of ongoing lease costs
through 2005 for abandoned facilities described below; $1.4 million of
employee-retention costs; $0.7 million of pension costs for terminated employees
that was accrued as a pension liability; $0.5 million for the termination of a
distributor agreement; and $1.6 million of other cash costs, primarily
relocation expenses. In addition, the segment realized a net loss of $4.8
million on the sale of assets and small business units, principally its Dynex
automated diagnostics product line, and wrote down $1.4 million of fixed assets
at abandoned facilities. The abandoned-facility costs included $1.6 million of
additional expense related to a facility in Finland that was abandoned in 2001,
at which time the segment recorded estimated abandonment cost. The segment has
been unable to sublease the space and has reserved the remaining obligation
through the expiration of the lease in 2005. Other facility consolidations in
2002 included closure of three sales and services offices in the Netherlands,
the United Kingdom, and California, and a manufacturing facility in Texas. The
activities of these facilities were transferred to other locations. In addition,
certain other office and manufacturing space in Massachusetts that was abandoned
and reserved for in 2001 has been occupied by the company's Measurement and
Control segment, and consequently, the remaining reserve for abandonment of $1.5
million has been reversed.
Measurement and Control
-----------------------
The Measurement and Control segment recorded $13.3 million of net
restructuring and other charges in 2002. The segment recorded charges to cost of
revenues of $1.4 million for the sale of inventory revalued at the date of
acquisition, and $11.9 million of other costs. These other costs consisted of
$20.1 million of cash costs, including $10.7 million of severance for 352
employees across all functions; $4.9 million of ongoing lease costs through 2007
for abandoned facilities described below; $2.0 million of employee-retention
costs; and $2.5 million of other cash costs, primarily relocation expenses. The
charge also included $0.5 million of asset writedowns, and was offset by $8.7
million of net gains, primarily on the sale of businesses, principally the
segment's Thermo BLH and Thermo Nobel subsidiaries (Note 2). The charges for
severance, abandoned facilities, and other items are net of reversals of $2.4
million, $2.3 million, and $0.4 million, respectively, that the segment had
provided in 2000 and 2001. Of the total amount reversed, $2.1 million had been
initially provided in 2001 to downsize the segment's operations in Maryland.
During 2002, following a change in that operation's management, the 2001 plan to
restructure the Maryland operations was substantially revised to include closure
of the plant. The amounts provided in 2001 were reversed and all of the actions
contemplated in the 2001 plan are components of the expanded 2002 plan, recorded
in 2002. The remainder of the 2000 and 2001 plan reserves that were reversed
were not required primarily due to employee attrition and favorable settlement
of lease obligations. The facility consolidations in the 2002 plan included
closure of six manufacturing facilities in the United States and one sales and
service facility in Australia, and the transfer of their activities to other
locations.
Optical Technologies
--------------------
The Optical Technologies segment recorded $27.1 million of net
restructuring and other charges in 2002. The segment recorded charges to cost of
revenues of $7.0 million, which consisted of $6.5 million for two discontinued
product lines and $0.5 million for the sale of inventory revalued at the date of
acquisition, and $20.1 million of other costs. These other costs consisted of
$10.7 million of cash costs, including $6.4 million of severance for 315
employees across all functions; $1.6 million of ongoing lease costs, primarily
for abandoned equipment; $0.5 million of employee-retention costs; $0.7 million
for the settlement of litigation (Note 11); $1.1 million of cancellation fees
for
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
fixed asset purchases; and $0.4 million of other cash costs, primarily
relocation expenses. The charges for severance and abandoned facilities are net
of reversals of $1.3 million and $3.3 million, respectively, that the segment
had provided in 2001 and 2002. The severance reserves that were reversed were no
longer required primarily due to employee attrition. The reversal of the
abandoned facility reserves is primarily due to the favorable settlement of
lease obligations. In addition, this segment wrote off assets totaling $8.8
million, primarily for abandoned telecommunication and other manufacturing
equipment. The segment also recorded a charge of $0.8 million as a result of the
options to purchase shares of Spectra-Physics becoming options to purchase
shares of Thermo Electron, following the acquisition of the minority interest in
this business in February 2002 (Note 17). These charges were offset in part by a
$0.2 million net gain from the sale of a small business unit and land. Following
these actions in 2002, the company suspended initiatives for products that
address telecom markets based on the continuing economic downturn in these
markets.
Corporate
---------
The company recorded $2.6 million of restructuring and other charges at
its corporate office in 2002, which were primarily cash costs, principally for
third-party advisory fees. While the company no longer has any public
subsidiaries, it has numerous non-U.S. subsidiaries through which the formerly
public subsidiaries conducted business. The third-party advisory fees are being
incurred to simplify this legal structure.
2001
In response to a downturn in telecommunications, semiconductor, and other
markets served by the company's businesses and in an effort to further integrate
business units, the company initiated restructuring actions in the second
quarter of 2001 in a number of business units to reduce costs and shed
unproductive assets. Further actions were initiated in the fourth quarter of
2001. The restructuring and related actions primarily consisted of headcount
reductions, writedowns of telecommunication equipment and excess
telecommunication inventories at Spectra-Physics, discontinuation of a number of
mature or unprofitable product lines, and consolidation of facilities to
streamline operations and reduce costs. During 2001, the company recorded $158.8
million of restructuring and other charges primarily associated with these
actions, including $26.1 million of charges to cost of revenues. In addition,
the company recorded $2.8 million of other nonoperating charges during 2001.
These charges are detailed by segment below.
The company recorded net restructuring and other charges by segment for
2001 as follows:
|
Life and
Laboratory Measurement Optical
Sciences and Control Technologies Corporate Total
---------- ----------- ------------ --------- --------
(In thousands)
Cost of Revenues $ 6,863 $ 8,196 $ 11,036 $ - $ 26,095
Restructuring and Other Costs, Net 38,696 36,396 46,092 11,518 132,702
Loss on Investments - 1,983 801 - 2,784
-------- -------- -------- -------- --------
$ 45,559 $ 46,575 $ 57,929 $ 11,518 $161,581
======== ======== ======== ======== ========
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
The components of net restructuring and other charges by segment are as
follows:
Life and Laboratory Sciences
----------------------------
The Life and Laboratory Sciences segment recorded $45.6 million of net
restructuring and other charges in 2001. The segment recorded charges to cost of
revenues of $6.9 million, primarily for discontinued product lines, and $38.7
million of other costs. These other costs consisted of $27.3 million of cash
costs, including $17.1 million of severance for 570 employees across all
functions; $8.7 million of ongoing lease costs through 2012 for facilities
described below; and $1.5 million of other costs. The charge also included a
$3.4 million writeoff of in-process research and development costs at an
acquired business, $8.3 million of asset writedowns, and $0.7 million of noncash
severance costs, offset by $1.0 million of gains for the sale of a small
business unit and a product line. The writeoff of in-process research and
development was determined through established valuation techniques and was
charged to expense upon acquisition because technological feasibility had not
been established and no future alternative uses existed. The asset writedowns
principally included $5.1 million of goodwill for business units that were
closed, $2.3 million of fixed assets at facilities being consolidated, and $0.9
million of other assets. The facility consolidations included closure of 17
sales and service offices, including 16 in Europe and one in the United States,
and the closure of nine factories, including five in Europe and four in the
United States. The activities of these facilities were transferred to other
locations in those regions.
Measurement and Control
-----------------------
The Measurement and Control segment recorded $44.6 million of net
restructuring and other charges in 2001. The segment recorded charges to cost of
revenues of $8.2 million, primarily for discontinued product lines, and $36.4
million of other costs, net. These other costs consisted of $20.7 million of
cash costs, including $15.4 million of severance for 777 employees across all
functions; $4.0 million of ongoing lease costs through 2009 for facilities
described below; and $1.3 million of other cash costs. The charge also included
losses of $12.0 million on the sale of businesses and writedowns of goodwill for
businesses subsequently sold, $4.6 million of asset writedowns, and $0.2 million
of other costs, offset in part by a gain of $1.1 million on the sale of a
building. The principal businesses that were sold that resulted in losses were
noncore businesses and included Pharos Marine, a marine navigation unit, in
August 2001, and ThermoMicroscopes, a manufacturer of scanning probe
microscopes, in July 2001. The asset writedowns included $3.6 million of fixed
assets at facilities being closed and $1.0 million for impairment of a note
receivable that was a preacquisition asset of a business acquired in 1999. The
facility consolidations included closure of 12 sales and service offices,
including 11 in Europe and one in the United States, and the closure of 14
factories, including eight in the United States, five in Europe, and one in
Canada. The activities of these sales and service offices and factories were
transferred to other facilities in those regions.
This segment also recorded $2.0 million of other nonoperating charges in
2001 to write down to market value an available-for-sale investment that was a
preacquisition asset of a business acquired in 1999, due to an impairment that
the company deemed other than temporary.
Optical Technologies
--------------------
The Optical Technologies segment recorded $57.1 million of net
restructuring and other charges in 2001. The segment recorded charges to cost of
revenues of $11.0 million, primarily for excess telecommunication inventories at
Spectra-Physics and discontinued product lines, and $46.1 million of other
costs. The excess telecommunication inventories resulted from a severe slowdown
in this market and the writedown reduced the carrying value of these and other
inventories to estimated net realizable value. The $46.1 million of other costs
consisted of $22.1 million of cash
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
costs, including $5.6 million of severance for 346 employees, primarily in
manufacturing positions; $7.0 million for leases on abandoned equipment; $5.9
million of loss on litigation; $1.2 million of ongoing lease costs through 2005
for facilities described below; and $2.4 million of other cash costs. The other
cash costs primarily represented cancellation fees for fixed-asset purchases and
termination of distributor agreements. The segment also recorded $24.0 million
of asset writedowns including $21.3 million of fixed assets, principally
equipment used in telecommunication manufacturing for which estimated future
cash flows were not sufficient to recover the carrying value. The asset
writedowns also included $2.3 million of goodwill to reduce the carrying value
of two small business units held for sale to their estimated disposal value, and
$0.4 million of costs associated with an abandoned financing at Spectra-Physics.
The facility consolidations included closure of three sales and service offices,
including two in Europe and one in the United States; the closure of three
factories in the United States; and the closure of two distribution facilities
in Europe. The activities of these sites were transferred to other facilities in
those regions.
This segment also recorded $0.8 million of other nonoperating charges in
2001 to write down an investment to its market value due to an impairment that
the company deemed other than temporary.
Corporate
---------
The company recorded $11.5 million of restructuring and other charges at
its corporate office in 2001. This amount included $11.3 million of cash costs,
including $5.9 million of investment banking, consulting, and legal fees
associated with the company's reorganization plan; $3.5 million of
employee-retention costs that was accrued ratably through 2001, the period
through which the employees had to work to qualify for a payment; and $1.9
million for severance for 21 employees. The charge also included $0.2 million of
noncash severance costs.
2000
As a result of a review of existing businesses following the appointment
of a new president and chief operating officer in July 2000, the company
commenced the restructuring of a number of business units to reduce costs and
shed unproductive assets. The restructuring primarily consisted of headcount
reductions, discontinuation of a number of mature or unprofitable product lines,
and consolidation of facilities to streamline operations and reduce costs.
During 2000, the company recorded $81.4 million of restructuring and other
charges primarily associated with these actions, including $19.3 million of
charges to cost of revenues. These charges are detailed by segment below. In
addition, the company recorded other income, net, of $130.0 million and
nonoperating charges of $45.1 million during 2000, as detailed by segment below.
The company recorded net restructuring and other charges (income) by
segment for 2000 as follows:
|
Life and
Laboratory Measurement Optical
Sciences and Control Technologies Corporate Total
---------- ----------- ------------ --------- ---------
(In thousands)
Cost of Revenues $ 13,704 $ 2,665 $ 2,916 $ - $ 19,285
Restructuring and Other Costs
(Income), Net 11,006 (102,475) 3,118 20,496 (67,855)
Equity in Loss of Unconsolidated
Subsidiaries - - 47,421 - 47,421
Other Income, Net - - (2,281) - (2,281)
--------- --------- --------- --------- ---------
$ 24,710 $ (99,810) $ 51,174 $ 20,496 $ (3,430)
========= ========= ========= ========= =========
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
The components of net restructuring and other charges (income) by segment
are as follows:
Life and Laboratory Sciences
----------------------------
The Life and Laboratory Sciences segment recorded $24.7 million of
restructuring and other charges in 2000. The segment recorded charges to cost of
revenues of $13.7 million, primarily for discontinued product lines, and $11.0
million of other costs. These other costs consisted of $7.0 million of cash
costs, including $5.3 million of severance for 142 employees across all
functions; $0.8 million for ongoing lease costs through 2003 for facilities
described below; a $0.3 million provision for a lawsuit; and $0.6 million for
other exit costs. The segment also recorded $4.0 million of asset writedowns in
connection with the closure of a small business and the consolidation and
abandonment of facilities. The asset writedowns included $2.3 million of
goodwill and $1.7 million of fixed assets. The facility consolidations included
closure of sales offices in Spain, Belgium, and Japan and the transfer of their
activities to other offices, consolidation of two German units into one
facility, and the closure of a manufacturing operation in the U.K.
Measurement and Control
-----------------------
The Measurement and Control segment recorded $99.8 million of
restructuring and other income, net, in 2000. The segment recorded charges to
cost of revenues of $2.7 million, primarily for discontinued product lines, and
recorded $102.5 million of other income, net. The segment had a net gain of
$126.7 million on the sale of several businesses, primarily Spectra Precision
(Note 2), Nicolet Imaging Systems (NIS), and Sierra Research and Technology Inc.
(SRT). NIS and SRT manufacture products that include imaging systems used in
assembling complex printed circuit boards and in airbag manufacturing. Spectra
Precision, NIS, and SRT had aggregate revenues and operating income of $125.7
million and $11.0 million, respectively, in 2000 through their respective
disposal dates. The segment also recorded charges of $18.7 million for asset
writedowns including $16.1 million of goodwill to reduce the carrying value of
businesses held for sale to estimated disposal value, $2.4 million of fixed
assets unique to certain discontinued products and $0.2 million of other assets,
and recorded $6.1 million of cash costs. The cash costs included $1.6 million of
severance for 64 employees across all functions; $2.8 million of lease costs
through 2001; a $0.5 million provision for a lawsuit; and $1.2 million of other
exit costs, primarily employee-retention and relocation costs incurred in 2000.
The lease costs included amounts for the closure of sales offices in Norway, New
Zealand, and Germany, and relocation of a business unit to other facilities
within Colorado. The businesses held for sale primarily included CAC Inc. and
the Mid South Companies, which provide the oil and gas industry with wellhead
safety and control products; the Test and Measurement business, which
manufactures and sells data acquisition systems, digital oscilloscopes, and
recorders; and Pharos Marine. The segment also had other income of $0.6 million
in 2000, primarily representing a gain on the termination of a lease.
Optical Technologies
--------------------
The Optical Technologies segment recorded $6.0 million of restructuring
and other costs in 2000. The segment recorded charges to cost of revenues of
$2.9 million, primarily for discontinued product lines, and $3.1 million of
other costs. These other costs consisted of a charge of $1.5 million for
in-process research and development in connection with an acquisition; $0.5
million of asset writedowns; and $1.1 million of cash costs, including $0.4
million of severance for 22 employees across all functions, $0.3 million for
ongoing lease costs, and $0.4 million of other exit costs. The asset writedowns
primarily consisted of a writedown of goodwill in order to reduce the carrying
value of a small business unit that was held for sale to estimated disposal
value. The lease costs related to the closure of a facility in California with
lease payments that ceased in 2000.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
The Optical Technologies segment recorded a charge of $23.7 million in
2000 to write down the carrying value of its equity-method investment in FLIR
(Note 4) based on a decline in the market value of FLIR shares that the company
deemed other than temporary. The segment also recorded other noncash charges of
$23.7 million in 2000, representing the company's pro rata share of FLIR's
losses. Both of these charges were recorded to equity in earnings (loss) of
unconsolidated subsidiaries, a component of other income (expense), net, in the
accompanying statement of operations.
Prior to its acquisition by the company, Spectra-Physics elected early
adoption of SFAS No. 133. Under SFAS No. 133, Spectra-Physics is permitted under
certain conditions to enter into currency-exchange contracts to hedge probable
anticipated transactions without recording gains and losses on such contracts in
income. The company did not adopt SFAS No. 133 until 2001, and through 2000
accounted for hedging transactions under SFAS No. 52. Under SFAS No. 52, such
contracts were deemed to be speculative hedges and were marked to market with
the resulting gain or loss reported as a component of the company's results of
operations. During 2000, the company recorded income on currency-exchange
contracts entered into by Spectra-Physics of $2.3 million, which is included in
other income (expense), net, in the accompanying statement of operations.
Corporate
The company recorded $20.5 million of restructuring and other charges,
net, at its corporate office in 2000. This amount included $16.1 million of
investment banking, consulting, and legal fees associated with the company's
reorganization plan; $3.6 million of employee-retention costs that was accrued
ratably over the period through which the employees had to work to qualify for a
payment; $3.0 million of severance for 21 employees; and $1.6 million of noncash
costs. The company also recorded other income of $3.8 million, representing a
gain from the sale of an office building adjacent to the company's corporate
office.
The following table summarizes the severance actions of the company in
2000, 2001, and 2002.
|
Number of
Employees
---------
2000 Restructuring Plans
Terminations Announced in 2000 249
Terminations Occurring in 2000 (168)
Adjustment to Plan (1)
----
Remaining Terminations at December 30, 2000 80
Additional Terminations Announced in 2001 16
Terminations Occurring in 2001 (91)
Adjustment to Plan (1)
----
Remaining Terminations at December 29, 2001 4
Terminations Occurring in 2002 (4)
----
Remaining Terminations at December 28, 2002 -
====
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
Number of
Employees
---------
2001 Restructuring Plans
Terminations Announced in 2001 1,714
Terminations Occurring in 2001 (1,001)
------
Remaining Terminations at December 29, 2001 713
Additional Terminations Announced in 2002 247
Terminations Occurring in 2002 (877)
Adjustment to Plan (53)
------
Remaining Terminations at December 28, 2002 30
======
2002 Restructuring Plans
Terminations Announced in 2002 665
Terminations Occurring in 2002 (354)
------
Remaining Terminations at December 28, 2002 311
======
The following table summarizes the cash components of the company's
restructuring plans. The noncash components and other amounts reported as
restructuring and other costs (income), net, in the accompanying statement of
operations have been summarized in the notes to the tables.
|
Abandonment
of Excess
Severance Facilities Other Total
---------- ----------- ------- -------
(In thousands)
Pre-2000 Restructuring Plans
Balance at January 1, 2000 $ 4,636 $ 225 $ 564 $ 5,425
Costs incurred in 2000 - 144 - 144
2000 usage (3,625) (284) - (3,909)
Reserves reversed (6) (84) - (90)
Currency translation (22) (1) (44) (67)
------- ------- ------- -------
Balance at December 30, 2000 983 - 520 1,503
2001 usage (405) - - (405)
Currency translation (7) - (14) (21)
------- ------- ------- -------
Balance at December 29, 2001 571 - 506 1,077
2002 usage (307) - - (307)
Transfer to accrued pension costs (a) - - (534) (534)
Currency translation - - 28 28
------- ------- ------- -------
Balance at December 28, 2002 $ 264 $ - $ - $ 264
======= ======= ======= =======
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F-52
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
|
Abandonment
Employee of Excess
Severance Retention (b) Facilities Other Total
--------- ------------- ----------- -------- --------
(In thousands)
2000 Restructuring Plans
Costs incurred in 2000 (c) $ 10,469 $ 4,116 $ 3,818 $ 17,533 $ 35,936
2000 usage (6,488) (830) (1,031) (7,958) (16,307)
Reserves reversed (205) - - - (205)
Currency translation 48 (3) 33 19 97
-------- -------- -------- -------- --------
Balance at December 30, 2000 3,824 3,283 2,820 9,594 19,521
Costs incurred in 2001 328 3,472 21 5,963 9,784
2001 usage (2,415) (468) (909) (14,277) (18,069)
Reserves reversed (105) - (21) - (126)
Currency translation (44) - (45) (80) (169)
-------- -------- -------- -------- --------
Balance at December 29, 2001 1,588 6,287 1,866 1,200 10,941
Reserves reversed (d) (85) - (990) (36) (1,111)
2002 usage (1,214) (6,054) (925) (1,088) (9,281)
Currency translation 137 - 114 4 255
-------- -------- -------- -------- --------
Balance at December 28, 2002 $ 426 $ 233 $ 65 $ 80 $ 804
======== ======== ======== ======== ========
2001 Restructuring Plans
Costs incurred in 2001 (e) $ 40,076 $ 297 $ 21,058 $ 5,099 $ 66,530
2001 usage (13,585) (155) (1,180) (2,353) (17,273)
Reserves reversed (385) - (182) (90) (657)
Currency translation (14) 1 69 11 67
-------- -------- -------- -------- --------
Balance at December 29, 2001 26,092 143 19,765 2,667 48,667
Costs incurred in 2002 (f) 9,539 2,812 8,013 4,406 24,770
Reserves reversed (d) (4,900) (4) (6,831) (562) (12,297)
2002 usage (27,176) (2,558) (10,190) (4,961) (44,885)
Currency translation 2,050 24 744 115 2,933
-------- -------- -------- -------- --------
Balance at December 28, 2002 $ 5,605 $ 417 $ 11,501 $ 1,665 $ 19,188
======== ======== ======== ======== ========
2002 Restructuring Plans
Costs incurred in 2002 (g) $ 18,021 $ 1,015 $ 8,326 $ 4,496 $ 31,858
Reserves reversed (d) (77) - - - (77)
2002 usage (6,305) (50) (579) (3,850) (10,784)
Currency translation 229 2 53 42 326
-------- -------- -------- -------- --------
Balance at December 28, 2002 $ 11,868 $ 967 $ 7,800 $ 688 $ 21,323
======== ======== ======== ======== ========
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15. Restructuring and Other Costs (Income), Net (continued)
(a) Balance of accrued restructuring costs from 1998 plans related to pension
liability associated with employees terminated in 1998, which was
transferred to accrued pension costs in 2002.
(b) Employee-retention costs are accrued ratably over the period through which
employees must work to qualify for a payment. The 2000 awards were based on
specified percentages of employees' salaries and were generally awarded to
help ensure continued employment at least through completion of the
company's reorganization plan.
(c) Excludes noncash charges, net, of $4.0 million and $2.0 million in the Life
and Laboratory Sciences and Optical Technologies segments, respectively,
and noncash income, net, of $108.6 million and $2.2 million in the
Measurement and Control segment and at the company's corporate office,
respectively. Also excludes $0.3 million and $0.5 million of cash costs in
the Life and Laboratory Sciences and Measurement and Control segments,
respectively, related to two lawsuits.
(d) Represents reductions in cost of plans as described in the discussion of
restructuring actions by segment.
(e) Excludes noncash charges, net, of $11.4 million, $15.6 million, $24.0
million, and $0.2 million in the Life and Laboratory Sciences, Measurement
and Control, and Optical Technologies segments, and at the company's
corporate office, respectively, and loss on litigation of $5.9 million in
the Optical Technologies sector.
(f) Excludes net gains from the sale of businesses and other assets of $0.9
million and $2.4 million in the Life and Laboratory Sciences and
Measurement and Control segments, respectively; noncash charges of $7.0
million in the Optical Technologies segment; a cash charge of $0.7 million
recorded in accrued pension costs in the Life and Laboratory Sciences
segment; and loss on litigation of $0.7 million in the Optical Technologies
segment.
(g) Excludes noncash charges of $7.1 million, $2.3 million, and $0.2 million in
the Life and Laboratory Sciences and Optical Technologies segments and at
the company's corporate office, respectively, and net gains from the sale
of businesses and other assets of $5.8 million in the Measurement and
Control segment.
The company expects to pay accrued restructuring costs as follows:
severance, employee-retention obligations, and other costs, which primarily
represent cancellation/termination fees, primarily through 2003; and
abandoned-facility payments over lease terms expiring through 2012.
Note 16. Adoption of SAB No. 101
In December 1999, the SEC issued SAB No. 101, "Revenue Recognition in
Financial Statements," which established criteria for recording revenue when the
terms of the sale include customer acceptance provisions or an obligation of the
seller to install the product. In instances where these terms exist and the
company is unable to demonstrate that the customer's acceptance criteria has
been met prior to customer use or when the installation is essential to
functionality or is not deemed inconsequential or perfunctory, SAB No. 101
requires that revenue recognition occur at completion of installation and/or
upon customer acceptance. In accordance with the requirements of SAB No. 101,
the company adopted the pronouncement as of January 2, 2000, and recorded the
cumulative effect of the change in accounting principle on periods prior to 2000
in the restated results for the first quarter of 2000. The cumulative effect on
net income totaled $12.9 million, net of an income tax benefit of $8.5 million
and minority interest of $0.5 million. Revenues of $41.3 million in 2000 (as
restated for the adoption of SAB No. 101) related to shipments that occurred in
1999 but for which installation and/or acceptance did not occur until 2000.
These revenues were recorded in 1999 prior to the adoption of SAB No. 101 and
thus were a component in the determination of the cumulative effect of the
change in accounting principle for periods prior to 2000.
<
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Reorganization and Discontinued Operations
Reorganization
During 2000 and 2001, the company completed the principal aspects of a
major corporate reorganization. The reorganization split the company into three
independent public entities and resulted in the divestiture of a number of
businesses. The company spun off as a dividend to its shareholders Kadant Inc.
and Viasys Healthcare Inc. in August and November 2001, respectively. The
company's continuing operations solely include its instruments businesses.
During 2000, the company completed the acquisition of the minority
interest in certain of its privately held subsidiaries and all of its formerly
publicly held subsidiaries other than Spectra-Physics, Thermo Cardiosystems,
Kadant, and Thermo Fibergen. In connection with these acquisitions, the company
expended $368.6 million of cash and issued 22.6 million shares of its common
stock valued at $448.7 million. In addition, the stock options of the
subsidiaries were converted into stock options exercisable into 13.9 million
shares of company common stock. The stock options had a fair value of $115.3
million. As a result of the completion of the cash tender offers and other
repurchases, exchange offers, and stock option conversions, the company recorded
an increase in goodwill of approximately $380 million in 2000.
In 2001, the company increased its ownership in Spectra-Physics to 93.6%
through a cash tender offer of $17.50 per share. In connection with this offer,
and an earlier repurchase of Spectra-Physics shares in 2001, the company
expended $69.5 million in 2001 and recorded an increase in goodwill of $45.8
million. In February 2002, the company acquired the shares of Spectra-Physics it
did not previously own through a short-form merger at the same price as the
tender offer and Spectra-Physics ceased to be publicly traded. The company
expended $23.2 million of cash to complete the purchase of the minority interest
and recorded an increase in goodwill of $15.8 million. Options to purchase
shares of Spectra-Physics became options to purchase 2,242,000 shares of Thermo
Electron common stock, which was accounted for in accordance with the
methodology set forth in FIN No. 44, "Accounting for Certain Transactions
Involving Stock Compensation" (Note 5).
As a result of the completion of the exchange offers for its formerly
majority-owned subsidiaries, Thermo Instrument Systems Inc., Thermedics Inc.,
Thermo Ecotek Corporation, ThermoLase Corporation, ThermoTrex Corporation, and
Thermo TerraTech Inc., $790.2 million principal amount of convertible
obligations of these subsidiaries became obligations convertible into company
common stock.
Details of the transactions summarized above are as follows:
Acquisition of Minority Interests - Continuing Operations
---------------------------------------------------------
2000
Thermo Instrument completed a merger with Thermo Vision Corporation
pursuant to which Thermo Instrument acquired, for $7.00 per share in cash, all
of the outstanding shares of common stock of Thermo Vision not already owned by
Thermo Instrument or the company. The common stock of Thermo Vision ceased to be
publicly traded.
Thermo Instrument completed cash tender offers of $28.00 per share for
Thermo BioAnalysis Corporation, $9.00 per share for Metrika Systems Corporation,
and $9.00 per share for ONIX Systems Inc. in order to bring its and the
company's collective ownership of these businesses to at least 90%.
Subsequently, Thermo Instrument completed the acquisition of the outstanding
minority interest in each of these companies through short-form mergers at the
same prices as the tender offers, and their common stock ceased to be publicly
traded. Because Thermo Instrument owned more than 90% of the outstanding shares
of Thermo Optek Corporation and ThermoQuest Corporation common stock, each of
these companies were repurchased through short-form mergers at $15.00 and $17.00
per share, respectively, and their common stock ceased to be publicly traded.
<
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Reorganization and Discontinued Operations (continued)
Thermedics completed cash tender offers of $8.00 and $15.50 per share for
Thermedics Detection Inc. and Thermo Sentron Inc., respectively, in order to
bring its and the company's collective ownership of these businesses to at least
90%. Subsequently, Thermedics completed the acquisition of the outstanding
minority interest in each of these companies through short-form mergers at the
same prices as the tender offers, and their common stock ceased to be publicly
traded.
The company completed an exchange offer for Thermo Instrument in which
shares of company common stock were offered to Thermo Instrument shareholders in
exchange for their shares in order to bring the company's ownership in Thermo
Instrument to at least 90%. The exchange ratio for Thermo Instrument was 0.85
shares of company common stock for each share of Thermo Instrument common stock.
Subsequently, Thermo Instrument was spun into the company through a short-form
merger at the same exchange ratio that was offered in the exchange offer, and
its common stock ceased to be publicly traded. As a result of the completion of
the merger with Thermo Instrument, the company issued 12.6 million shares of its
common stock valued at $265.9 million.
Acquisition of Minority Interests - Discontinued Operations
-----------------------------------------------------------
2000
The company completed a merger with Thermedics pursuant to which the
company acquired all of Thermedics' outstanding shares of common stock not
already owned by the company in exchange for company common stock at a ratio of
0.45 shares for each share of Thermedics common stock. The common stock of
Thermedics ceased to be publicly traded.
The company completed a merger with Thermo TerraTech pursuant to which
the company acquired all of Thermo TerraTech's outstanding shares of common
stock not already owned by the company in exchange for company common stock at a
ratio of 0.3945 shares for each share of Thermo TerraTech common stock. The
common stock of Thermo TerraTech ceased to be publicly traded.
The company completed a merger with ThermoLase pursuant to which the
company acquired all of ThermoLase's outstanding shares of common stock not
already owned by ThermoTrex or the company in exchange for company common stock
at a ratio of 0.132 shares for each share of ThermoLase common stock. The common
stock of ThermoLase ceased to be publicly traded. In addition, under the
agreement, units of ThermoLase were modified so that each unit consisted of a
fractional share of company common stock. The units were redeemed in April 2001
for $7.5 million in cash.
The company completed a merger with ThermoTrex pursuant to which the
company acquired all of ThermoTrex's outstanding shares of common stock not
already owned by the company in exchange for company common stock at a ratio of
0.5503 shares for each share of ThermoTrex common stock. The common stock of
ThermoTrex ceased to be publicly traded.
The company completed a cash tender offer of $2.15 per share for Trex
Medical to bring its ownership of this business to at least 90%. Subsequently,
the company completed the acquisition of the outstanding minority interest in
Trex Medical through a short-form merger at the same price as the tender offer,
and the common stock of Trex Medical ceased to be publicly traded.
<
F-56
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Reorganization and Discontinued Operations (continued)
The company completed mergers with ThermoRetec Corporation and The
Randers Killam Group Inc. pursuant to which the company acquired, for $7.00 and
$4.50 per share in cash, respectively, all of the outstanding shares of common
stock of ThermoRetec and Randers Killam not already owned by Thermo TerraTech or
the company. The common stock of each of ThermoRetec and Randers Killam ceased
to be publicly traded.
Because the company owned more than 90% of the outstanding shares of
Thermo Ecotek, the company repurchased Thermo Ecotek through a short-form
merger. Thermo Ecotek shareholders received 0.431 shares of company common stock
for each share of Thermo Ecotek common stock. The common stock of Thermo Ecotek
ceased to be publicly traded.
As a result of the completion of the mergers with Thermedics, Thermo
TerraTech, ThermoLase, ThermoTrex, and Thermo Ecotek, the company issued 10.0
million shares of its common stock valued at $182.8 million.
Discontinued Operations
In January 2000, the company announced its intention to sell several of
its businesses. These businesses, together with the businesses spun off,
constituted the company's former Biomedical and Emerging Technologies and
Recycling and Resource Recovery segments, as well as the company's environmental
businesses and its Thermo Power subsidiary. In addition, in June and July 2001,
the company sold its power-generation business. In accordance with the
provisions of APB No. 30 concerning reporting the effects of disposal of a
segment of a business, the company classified the results of these businesses,
as well as the results of the businesses spun off as dividends (collectively,
"the discontinued businesses"), as discontinued operations in the accompanying
statement of operations. In 2001, net liabilities of discontinued operations
principally represents remaining obligations of the discontinued businesses
including severance, lease, litigation, and tax obligations, net of the carrying
value of the company's shares of Thoratec common stock, discussed below, and the
net assets of three remaining operating units held for sale. In 2002, the
Thoratec shares were reclassified to available-for-sale investments as discussed
below and two of the three remaining operating units were sold.
Summary operating results for 2000 of the power-generation business were
as follows (in thousands):
|
2000
--------
Revenues $120,256
Costs and Expenses 93,779
--------
Income from Discontinued Operations Before Income Taxes and Minority Interest 26,477
Income Tax Provision (10,427)
Minority Interest Expense (1,822)
--------
Income from Discontinued Operations $ 14,228
========
During 2002, the company's discontinued operations had revenues and
operating income of $82.7 million and $7.4 million, respectively. During 2001,
the company's discontinued operations had revenues and operating income of
$658.3 million and $50.4 million, respectively. During 2000, the company's
discontinued operations (excluding the power-generation business) had revenues
and an operating loss of $1.49 billion and $40.2 million, respectively. The
company received proceeds from the sale of discontinued businesses of $42.7
million, $347.8 million, and $390.1 million in 2002, 2001, and 2000,
respectively. In 2000, the company recorded a charge of $100 million, net of an
<
F-57
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Reorganization and Discontinued Operations (continued)
income tax benefit of $104 million, for changes in the actual and estimated
proceeds of businesses discontinued in 2000. Of the businesses announced for
sale, all but one with revenues of $31 million in 2002 have been sold as of
December 28, 2002.
Spinoffs
--------
On July 9, 2001, the company's Board of Directors approved the spinoff of
the company's 91%-owned Kadant subsidiary as a dividend to the company's
shareholders. On August 8, 2001, the company distributed all of its shares of
Kadant to Thermo Electron shareholders of record as of July 30, 2001.
Immediately after the distribution, the company no longer owned shares of
Kadant. The company received a ruling from the Internal Revenue Service (IRS)
that the dividend of Kadant shares qualified in large part as a tax-free
distribution for U.S. federal income tax purposes. Approximately 8% of the
shares distributed to each shareholder were taxable because the company
purchased them during the past five years. Cash distributed in lieu of
fractional shares was also taxable. The stock dividend resulted in a reduction
of net assets of discontinued operations and retained earnings of $197 million.
In connection with the spinoff, the company and Kadant entered into a
plan and agreement of distribution. The agreement provided for, among other
things, the company to continue to guarantee Kadant's $153.0 million principal
amount subordinated convertible debentures due 2004. The agreement required
Kadant to maintain certain financial ratios during the time that the company
guaranteed these obligations. In December 2002, Kadant redeemed all of its
outstanding subordinated convertible debentures.
On October 11, 2001, the company's Board of Directors approved the
spinoff of the company's wholly owned Viasys Healthcare subsidiary as a dividend
to the company's shareholders. On November 15, 2001, the company distributed all
of its shares of Viasys Healthcare to Thermo Electron shareholders of record as
of November 7, 2001. Immediately after the planned distribution, the company no
longer owned shares of Viasys Healthcare. The company received a ruling from the
IRS that the dividend of Viasys Healthcare shares qualified as a tax-free
distribution for U.S. federal income tax purposes, except that the cash received
in lieu of fractional shares was taxable. The stock dividend resulted in a
reduction of net assets of discontinued operations and retained earnings of $298
million.
The ruling from the IRS required that the spinoffs raise additional
equity capital in public offerings within one year of their spinoffs. Kadant
completed an offering in 2002 and Viasys Healthcare obtained an extension from
the IRS until November 2003 to conduct an offering.
Thermo Cardiosystems
--------------------
In February 2001, the company sold its interest in Thermo Cardiosystems
to Thoratec in exchange for 19.3 million shares of Thoratec common stock, which
represented a 34% interest that had a market value of $11.56 per share on the
date of the transaction. Certain restrictions, which lapsed in August 2002,
limited the timing of the company's ability to sell these shares. The company
accounted for the sale of Thermo Cardiosystems and the ownership of the Thoratec
shares as discontinued operations. The company recorded an after-tax charge of
$66.0 million in the first quarter of 2001 for a decline in market value of
Thoratec common stock as a loss on disposal of discontinued operations, and
thereafter, carried the shares at a new cost basis of $6.50 per share. Following
a sale of shares in February 2002 for net proceeds of $104 million and an
after-tax gain of $38.4 million, the company owned less than 20% of Thoratec's
outstanding shares. Accordingly, pursuant to SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," the company began accounting
for its investment as an available-for-sale security in continuing operations in
the first quarter of 2002. As such, the investment is recorded as quoted market
value in current assets, and unrealized gains or losses are recorded as a part
of accumulated other comprehensive items in the accompanying 2002 balance sheet.
As of December 28, 2002, the company held 7.7 million shares of Thoratec with a
market value of $62 million.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 17. Reorganization and Discontinued Operations (continued)
Power-Generation Business
-------------------------
In March 2002, the company sold the last remaining component of its
former power-generation business and realized a gain from the disposition
totaling $13.0 million, principally for previously unrecognized tax benefits
that were realized upon the sale.
In June and July 2001, the company sold the chief components of the
power-generation business for proceeds of $249 million, net of cash divested.
The company realized a gain on disposition of $15.6 million, net of tax.
Other
-----
During 2002, primarily as a result of new tax regulations concerning
deductible losses from divested businesses, the company revised its estimate of
the tax consequences of business disposals in discontinued operations and
recorded a tax benefit of $46.6 million. Also in 2002, the company sold its
Trophy Radiologie business for approximately $51 million in cash and,
principally as a result of this transaction, recorded an after-tax gain of $17.4
million. This business is engaged in the production and sale of dental X-ray
imaging systems and related software.
Note 18. Unaudited Quarterly Information
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2002
------------------------------------------------------
First (a) Second (b) Third (c) Fourth (d)
--------- ---------- --------- ----------
(In thousands except per share amounts)
Revenues $491,326 $509,113 $517,171 $568,745
Gross Profit 223,656 229,788 228,657 245,275
Income from Continuing Operations Before Extraordinary Item 64,381 49,490 38,983 42,476
Income Before Extraordinary Item 115,751 68,490 38,983 87,476
Net Income (e) 115,044 68,517 39,017 87,152
Earnings per Share from Continuing Operations Before Extraordinary
Item:
Basic .37 .29 .24 .26
Diluted .34 .28 .23 .25
Earnings per Share:
Basic .66 .40 .24 .53
Diluted .59 .38 .23 .51
Amounts reflect aggregate restructuring and other items, net, and nonoperating
items, net, as follows:
(a) Costs of $8.4 million, gains of $56.3 million from the sale of shares of
FLIR, and a net of tax gain of $51.4 million related to the company's
discontinued operations.
(b) Costs of $17.0 million, gains of $31.6 million from the sale of shares of
FLIR, and a tax benefit of $19.0 million related to the company's
discontinued operations.
(c) Costs of $8.6 million and gains of $6.6 million from the sale of shares of
FLIR.
(d) Costs of $27.2 million, gains of $16.9 million from the sale of shares of
FLIR, and a net of tax gain of $45.0 million related to the company's
discontinued operations.
(e) Extraordinary loss, net of tax, of $0.7 million and $0.3 million in the
first and fourth quarters, respectively, and nominal extraordinary income,
net of tax, in the second and third quarters.
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THERMO ELECTRON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 18. Unaudited Quarterly Information (continued)
2001
------------------------------------------------------
First (f) Second (g) Third (h) Fourth (i)
--------- ---------- --------- ----------
(In thousands except per share amounts)
Revenues $573,089 $542,472 $512,941 $559,708
Gross Profit 255,254 238,062 228,486 236,820
Income (Loss) from Continuing Operations Before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle 21,819 9,423 25,677 (7,327)
Income (Loss) Before Extraordinary Item and Cumulative Effect of
Change in Accounting Principle (44,181) 24,983 25,677 (7,327)
Net Income (Loss) (j) (45,175) 24,983 26,279 (6,868)
Earnings (Loss) per Share from Continuing Operations Before
Extraordinary Item and Cumulative Effect of Change in Accounting
Principle:
Basic .12 .05 .14 (.04)
Diluted .12 .05 .14 (.04)
Earnings (Loss) per Share:
Basic (.25) .14 .15 (.04)
Diluted (.24) .14 .14 (.04)
Amounts reflect aggregate restructuring and other items, net, and nonoperating
items, net, as follows:
(f) Costs of $12.9 million, a net of tax charge of $66.0 million related to the
company's discontinued operations, and a $1.0 million charge for the
cumulative effect of change in accounting principle for the adoption of
SFAS No. 133.
(g) Costs of $37.0 million and a net of tax gain of $15.6 million related to
the company's discontinued operations.
(h) Costs of $9.6 million and gains of $8.6 million from the sale of shares of FLIR.
(i) Costs of $102.2 million and gains of $26.5 million from the sale of shares of FLIR.
(j) Extraordinary income, net of taxes, of $0.6 million and $0.5 million in the
third and fourth quarters, respectively.
Note 19. Subsequent Event
In February 2003, the company announced that in April 2003, it will
redeem all of its outstanding 4 3/8% subordinated convertible debentures due
2004. As of December 28, 2002, the principal amount outstanding for these
debentures was $71.9 million. The redemption price is 100% of the principal
amount of the debentures, plus accrued interest. Accordingly, the obligations
have been presented as current liabilities in the accompanying 2002 balance
sheet.
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THERMO ELECTRON CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
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Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
of Year Expense Recovered Off Other (a) of Year
---------- ---------- --------- -------- --------- -------
Allowance for Doubtful Accounts
Year Ended December 28, 2002 $26,525 $ 4,114 $ 165 $(7,444) $ 2,216 $25,576
Year Ended December 29, 2001 $30,593 $ 6,316 $ 23 $(8,147) $(2,260) $26,525
Year Ended December 30, 2000 $33,650 $ 9,264 $ 450 $(7,211) $(5,560) $30,593
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Balance at Established Activity Balance
Beginning as Cost of Charged to at End
of Year Acquisitions Reserve Other (c) of Year
---------- ------------ ---------- --------- --------
Accrued Acquisition Expenses (b)
Year Ended December 28, 2002 $ 7,104 $ 2,723 $ (1,357) $ 358 $ 8,828
Year Ended December 29, 2001 $ 10,070 $ 144 $ (1,920) $ (1,190) $ 7,104
Year Ended December 30, 2000 $ 19,445 $ 352 $ (6,445) $ (3,282) $ 10,070
Balance at Provision Activity Balance
Beginning Charged to Charged to at End
of Year Expense (e) Reserve Other (f) of Year
---------- ----------- ---------- --------- --------
Accrued Restructuring Costs (d)
Year Ended December 28, 2002 $ 60,685 $ 43,143 $(65,257) $ 3,008 $ 41,579
Year Ended December 29, 2001 $ 21,024 $ 76,314 $(35,747) $ (906) $ 60,685
Year Ended December 30, 2000 $ 5,425 $ 35,785 $(20,216) $ 30 $ 21,024
(a) Includes allowance of businesses acquired and sold during the year as
described in Note 2 and the effect of currency translation.
(b) The nature of activity in this account is described in Note 2.
(c) Represents reversal of accrued acquisition expenses and corresponding
reduction of goodwill or other intangible assets resulting from
finalization of restructuring plans, the effect of currency translation
and, in 2001 and 2000, the reserves of businesses sold.
(d) The nature of activity in this account is described in Note 15.
(e) In 2002, excludes $7.5 million of noncash costs, net, primarily for asset
writedowns, and excludes a cash charge of $0.7 million recorded in accrued
pension costs, and loss on litigation of $0.7 million. In 2001, excludes
$51.1 million of noncash costs, net, primarily for asset writedowns, and
excludes a $5.9 million loss on litigation. In 2000, excludes $104.6
million of noncash income, net, primarily from the sale of businesses,
offset by provisions for asset writedowns, and excludes $0.8 million of
cash costs related to two lawsuits.
(f) Represents the effect of currency translation and, in 2002, a transfer to
accrued pension costs of $0.5 million.
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F-61
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THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Thermo Electron Corporation:
Our audit of the consolidated financial statements referred to in our
report dated February 4, 2003 (except as to the information in Note 19, for
which the date is February 28, 2003), appearing in this Annual Report on Form
10-K of Thermo Electron Corporation also included an audit of the financial
statement schedule for the year ended December 28, 2002, listed in Item 15(a)(2)
of this Form 10-K. In our opinion, the financial statement schedule for the year
ended December 28, 2002, presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. The financial statement schedule of Thermo
Electron Corporation for the years ended December 29, 2001, and December 30,
2000, were audited by other independent accountants who have ceased operations.
Those independent accountants expressed an unqualified opinion on the financial
statement schedule in their report dated February 7, 2002.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 4, 2003
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F-62
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THERMO ELECTRON CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS
THE FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP. THIS REPORT APPLIES TO
SUPPLEMENTAL SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED
DECEMBER 29, 2001, AND DECEMBER 30, 2000.
To the Shareholders and Board of Directors of Thermo Electron Corporation:
We have audited in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements included in Thermo
Electron Corporation's Annual Report to Shareholders incorporated by reference
in this Form 10-K, and have issued our report thereon dated February 7, 2002
(except with respect to the matters discussed in Note 19*, as to which the date
is February 25, 2002). Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in Item 14 on
page 13** is the responsibility of the company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
February 7, 2002
*The discussion of the subsequent events discussed in Note 19 in 2001, is now
included in Note 10 and Note 17.
**The schedule is now listed in Item 15 on page 35.
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<
>
Exhibit 3.2
As amended and effective as of February 27, 2003
THERMO ELECTRON CORPORATION
BY-LAWS
TABLE OF CONTENTS
Title Page
Article I - Stockholders 1
Section 1. Annual Meeting 1
Section 2. Special Meetings 1
Section 3. Notice of Meetings 1
Section 4. Quorum; Adjournments 1
Section 5. Voting; Proxies 2
Section 6 Inspectors of Elections 2
Section 7. Presiding Officer and Secretary 2
Section 8. List of Stockholders 3
Section 9. Advance Notice of Stockholder Nominations and Proposals 3
Section 10. Action Without Meeting 5
Article II- Directors 6
Section 1. General Powers 6
Section 2. Number and Qualification 6
Section 3. Classes of Directors 6
Section 4. Terms of Office 6
Section 5. Vacancies 7
Section 6. Resignations 7
Section 7. Meetings 7
Section 8. Notice of Meetings 7
Section 9. Quorum 7
Section 10. Action at Meeting 7
Section 11. Action by Consent 8
Section 12. Meetings by Telephone Conference Call 8
Section 13. Compensation of Directors 8
Section 14. Committees 8
(i)
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Title Page
Article III - Officers 9
Section 1. General Provisions; Qualification 9
Section 2. Election 9
Section 3. Tenure 9
Section 4. Resignation and Removal 9
Section 5. Vacancies 9
Section 6. The Chief Executive Officer 9
Section 7. The President 9
Section 8. Vice Presidents 10
Section 9. Chief Financial Officer 10
Section 10. General Counsel 10
Section 11. The Treasurer 10
Section 12. The Secretary 10
Section 13. Assistant Treasurers 10
Section 14. Assistant Secretaries 11
Section 15. Other Officers 11
Section 16. Delegation of Duties 11
Section 17. Salaries 11
Article IV - Capital Stock 11
Section 1. Certificates for Shares 11
Section 2. Transfer of Shares of Stock 11
Section 3. Lost, Stolen or Destroyed Certificates 11
Section 4. Record Date 11
Section 5. Regulations 12
Article V - General Provisions 13
Section 1. Fiscal Year 13
Section 2. Corporate Seal 13
Section 3. Waiver of Notice 13
Section 4. Voting of Securities 13
Section 5. Evidence of Authority 13
Section 6. Certificate of Incorporation 13
Section 7. Transactions with Interested Parties 13
Section 8. Severability 14
Section 9. Limitation on Stock Option Repricing 14
Article VI - Amendments 14
Section 1. By the Board of Directors 14
Section 2. By the Stockholders 14
Section 3. Certain Provisions 15
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THERMO ELECTRON CORPORATION
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors may each year fix.
Section 2. Special Meetings. Special meetings of stockholders may be called only by the Board of Directors, the Chairman of the Board of Directors, or the Chief Executive Officer. Special meetings may be held at such place, on such date, and at such time as the person(s) calling the meeting may specify. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. The Board of Directors may postpone or reschedule any previously scheduled special meeting.
Section 3. Notice of Meetings. Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise required by the Delaware General Corporation Law (meaning, here and hereinafter, the General Corporation Law of the State of Delaware, as amended and in effect from time to time, the "Delaware General Corporation Law").
Section 4. Quorum; Adjournments. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by the Certificate of Incorporation or the Delaware General Corporation Law. Where a separate vote by a class or classes or series is required, a majority of the shares of such class or classes or series present in person or represented by proxy shall constitute a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the presiding officer may adjourn the meeting to another place, date, or time. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted that could have been transacted at the original meeting.
<
> Section 5. Voting; Proxies. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder unless otherwise provided by the Delaware General Corporation Law or the Certificate of Incorporation. Each stockholder of record entitled to vote at a meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, may vote or express such consent or dissent in person or may authorize another person or persons to vote or act for the stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law, delivered in accordance with the procedure established for the meeting. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.
When a quorum is present at any meeting, the affirmative vote of holders of a majority of the stock present or represented and entitled to vote and voting affirmatively or negatively on a matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each such class or series, the holders of a majority of the stock of that class present or represented and voting affirmatively or negatively on a matter) shall constitute stockholder action on any matter to be voted upon by the stockholders at such meeting, except when a different vote is required by the Delaware General Corporation Law, the Certificate of Incorporation or these By-laws. Except as may be otherwise required by the Certificate of Incorporation, any election by stockholders of directors shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election.
Section 6. Inspectors of Elections. The Corporation may, and to the extent required by the Delaware General Corporation Law, shall, in advance of any meeting of the stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof and perform the other duties of inspectors at meetings of stockholders as set forth in the Delaware General Corporation Law. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by the Certificate of Incorporation or the Delaware General Corporation Law, shall, appoint one or more persons to act at the meeting. Each inspector, before entering the discharge of the inspector's duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of the inspector's ability.
Section 7. Presiding Officer and Secretary. The Chairman of the Board, or in the Chairman's absence, the Chief Executive Officer, or in the Chief Executive Officer's absence, the President, or in the President's absence, the Chief Financial Officer, in such order, shall call meetings of the stockholders to order, and shall act as presiding officer of such meeting. The presiding officer shall determine the order of business and the procedure at meetings, including such regulation of the manner of voting and the conduct of discussion as seem to the presiding officer in order. The presiding officer shall have the power to adjourn meetings to another place, date, and time. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. The Secretary of the Corporation, or in the Secretary's absence, any Assistant Secretary, shall act as the secretary at all meetings of the stockholders, but in the absence of the Secretary and any Assistant Secretary, the presiding officer may appoint any person to act as secretary of the meeting.
Section 8. List of Stockholders. The Secretary shall prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present.
Section 9. Advance Notice of Stockholder Nominations and Proposals.
1. Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the Corporation's notice with respect to such meeting, (b) by or at the direction of the Board or (c) by any stockholder of record of the Corporation who was a stockholder of record at the time of the giving of the notice provided for in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 9.
2. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of the foregoing paragraph, (1) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (2) such business must be a proper matter for stockholder action under the Delaware General Corporation Law, (3) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in subclause (c)(iii) of this paragraph, such stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation's voting shares required under the Delaware General Corporation Law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation's voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice, and (4) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 9, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 9. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than 60 or more than 75 days prior to the first anniversary (the "Anniversary") of the date on which the Corporation first mailed its proxy materials for the preceding year's annual meeting of stockholders; provided, however, that if the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and such person's written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made; (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made (i) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (ii) the class and number of shares of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation's voting shares required under the Delaware General Corporation Law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation's voting shares to elect such nominee or nominees (an affirmative statement of such intent, a "Solicitation Notice").
3. Notwithstanding anything in the second sentence of the second paragraph of this Section 9 to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least 70 days prior to the Anniversary, a stockholder's notice required by this By-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.
4. Only persons nominated in accordance with the procedures set forth in
this Section 9 shall be eligible to serve as directors and only such business
shall be conducted at an annual meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section 9. The presiding officer of the meeting shall have the power and the
duty to determine whether a nomination or any business proposed to be brought
before the meeting has been made in accordance with the procedures set forth in
these By-laws and, if any proposed nomination or business is not in compliance
with these By-laws, to declare that such defective proposed business or
nomination shall not be presented for stockholder action at the meeting and
shall be disregarded.
5. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board or (b) by any stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies
with the procedures set forth in this Section 9, including, without limitation, the procedures regarding Solicitation Notices. Nominations by stockholders of persons for election to the Board may be made at such a special meeting of stockholders if the stockholder's notice required by the second paragraph of this Section 9 shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.
For purposes of this Section 9, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
Notwithstanding the foregoing provisions of this Section 9, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to matters set forth in this
Section 9. Nothing in this Section 9 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
Section 10. Action Without Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Deliveries made to the Corporation's registered office in Delaware shall be by hand or certified or registered mail, return receipt requested. Each such written consent shall bear the date of signature of each stockholder who signs the consent. No written consent shall be effective to take the corporate action referred to therein unless written consents signed by a number of stockholders sufficient to take such action are delivered to the Corporation in the manner specified in this paragraph within sixty (60) days of the earliest dated consent so delivered.
If action is taken by consent of stockholders and in accordance with the foregoing, there shall be filed with the records of the meetings of stockholders the writing or writings comprising such consent.
If action is taken by less than unanimous consent of stockholders, prompt notice of the taking of such action without a meeting shall be given to those who have not consented in writing and a certificate signed and attested to by the Secretary of the Corporation that such notice was given shall be filed with the records of the meetings of stockholders.
In the event that the action consented to is such as would have required the filing of a certificate under any provision of the Delaware General
Corporation Law, if such action had been voted upon by the stockholders at a meeting thereof, the certificate filed under such provision shall state, in lieu of any statement required by such provision concerning a vote of stockholders, that written consent has been given under Section 228 of the Delaware General Corporation Law.
ARTICLE II - DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the Corporation except as otherwise provided by the Certificate of Incorporation or the Delaware General Corporation Law. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by the Certificate of Incorporation or the Delaware General Corporation Law, may exercise the powers of the full Board of Directors until the vacancy is filled. The Board of Directors may appoint a Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and shall perform such duties and possess such powers as are assigned to the Chairman by the Board of Directors.
Section 2. Number and Qualification. Except as otherwise required by the Certificate of Incorporation, the number of directors that shall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three (3). The number of directors may be increased at any time by resolution of the Board of Directors. The number of directors may be decreased at any time and from time to time by a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation, removal or expiration of the term of one or more directors. A majority of the Board of Directors shall be comprised of directors who are outside directors within the meaning of Treasury Regulation of ss.1/162-27 as in effect on January 1, 2002.
Section 3. Classes of Directors. The Board of Directors shall be divided into three classes as nearly as equal in number as possible. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly as equal as possible. Such classes shall consist of one class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1986; a second class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1987; and a third class of directors who shall be elected for a three-year term expiring at the annual meeting of stockholders held in 1988. At each annual meeting of stockholders beginning in 1986, the successors of the class of directors whose term expires at that annual meeting shall be elected for a three-year term.
Section 4. Terms of Office. Subject to Section 5 of this Article II, each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided that the term of each director shall be subject to the election and qualification of such director's successor and to such director's earlier death, resignation or removal.
Section 5. Vacancies. Except as otherwise required by the Certificate of Incorporation or the Delaware General Corporation Law, any vacancy in the Board of Directors, however occurring, or any newly-created directorship resulting from an enlargement of the size of the Board of Directors, shall be filled only by vote of a majority of the directors then in office, even if less than a quorum, or by the sole remaining director and not by the stockholders. A director elected to fill a vacancy shall be elected for the unexpired term of such director's predecessor in office, and a director chosen to fill a newly created directorship shall hold office until the next election of the class for which such director shall have been chosen, subject in each case to the election and qualification of the director's successor and to the director's earlier death, resignation or removal.
Section 6. Resignations. Any director may resign by delivering a written resignation to the Corporation at its principal office or to the Chief Executive Officer or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
Section 7. Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place, either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, a majority of the total number of the whole Board of Directors, or by one director in the event that there is only a single director in office and may held at any time and place, within or without the State of Delaware, as specified by the person(s) calling the meeting.
Section 8. Notice of Meetings. No notice of the annual or other regular meetings of the Board of Directors need be given. Notice of any special meeting of directors shall be given to each director by the Secretary. Notice to each director shall be duly given by mailing the same not later than the second business day before the meeting, or by giving notice in person, by fax, by telephone, or by any other electronic means not later than four hours before the meeting. No notice of a meeting need be given if all directors are present in person. Any business may be transacted at any meeting of the Board of Directors, whether or not specified in a notice of the meeting.
Section 9. Quorum. A majority of the total number of the whole Board of Directors shall constitute a quorum at all meetings of the Board of Directors. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time to a different date, place, or time without further notice (or waiver of notice) other than announcement at the meeting, until a quorum shall be present.
Section 10. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of the directors present shall be sufficient to take any action, unless a different vote is specified by the Delaware General Corporation Law, the Certificate of Incorporation or these By-laws.
Section 11. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent to the action in writing, and the written consents are filed with the minutes of proceedings of the Board of Directors or committee.
Section 12. Meetings by Telephone Conference Call. Directors or any members of any committee designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation by such means shall constitute presence in person at such meeting.
Section 13. Compensation of Directors. Directors may be paid such compensation for their services and such reimbursement for expenses of attendance at meetings of the Board of Directors or committees of the Board of Directors as the Board of Directors or any committee to which the Board has delegated responsibility for establishing director compensation may from time to time determine. No such payment shall preclude any director from serving the Corporation or any of its parent, subsidiary, or affiliate corporations in any other capacity and receiving compensation for such service.
Section 14. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. In addition to other committees that the Board may designate from time to time, the Board shall designate a Human Resources Committee, an Audit Committee, a Nominating and Corporate Governance Committee and a Shareholder Rights Plan Committee, each of which shall be, as of January 1, 2003, comprised only of directors of the Corporation who shall have been determined by the Board of Directors to be outside directors within the meaning of Treasury Regulation ss.1.162-27 as in effect on January 1, 2002. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members of the committee present at any meeting and not disqualified from voting, whether or not the member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the Delaware General Corporation Law, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers that may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-laws for the Board of Directors. A majority of the members of a committee shall constitute a quorum unless the committee consist of one or two members, in which event, one member shall constitute a quorum. All matters shall be determined by a majority vote of the committee members present.
ARTICLE III - OFFICERS
Section 1. General Provisions; Qualification. The officers of the Corporation shall be a Chief Executive Officer, a President, a Chief Financial Officer, a General Counsel, a Treasurer and a Secretary, and may include one or more Vice Presidents, one or more Assistant Treasurers and one or more Assistant Secretaries and such other officers as the Board of Directors may deem appropriate. Any two or more offices may be held by the same person.
Section 2. Election. The Chief Executive Officer, the President, the Chief Financial Officer, the General Counsel, the Treasurer and Secretary shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting.
Section 3. Tenure. Except as otherwise provided by the Delaware General Corporation Law, by the Certificate of Incorporation or by these By-laws, each officer shall hold office until such officer's successor is elected and qualified, unless a different term is specified in the vote choosing or appointing such officer, or until such officer's earlier death, resignation or removal.
Section 4. Resignation and Removal. Any officer may resign by delivering a written resignation to the Corporation at its principal office or to the Chief Executive Officer or the Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at some other time or upon the happening of some other event. Any officer may be removed at any time, with or without cause by vote of the Board of Directors.
Section 5. Vacancies. The Board of Directors may at any time fill any vacancy occurring in any office for any reason. Each such successor shall hold office for the unexpired term of such successor's predecessor and until such successor's successor is elected and qualified, or until such successor's earlier death, resignation or removal.
Section 6. The Chief Executive Officer. The Chief Executive Officer shall be the principal executive officer of the Corporation. Subject to the control of the Board of Directors, the Chief Executive Officer shall have general charge of the business and affairs of the Corporation. The Chief Executive Officer shall employ and discharge employees and agents of the Corporation, except such as shall hold their offices by appointment of the Board of Directors, but the Chief Executive Officer may delegate these powers to other officers as to employees under their immediate supervision. The Chief Executive Officer shall have such other powers and perform such other duties as may be prescribed by the Board of Directors.
Section 7. The President. The Board of Directors may appoint an officer of the Corporation to serve as the President of the Corporation. The President shall perform such of the duties of the Chief Executive Officer of the Corporation on behalf of the Corporation as may be assigned to the President from time to time by the Board of Directors or the Chief Executive Officer. In the absence or inability of the Chief Executive Officer to act, the President
shall have and possess all of the powers and discharge all of the duties of the Chief Executive Officer, subject to the control of the Board of Directors.
Section 8. Vice Presidents. Each Vice President shall have such powers and perform such duties as the Board of Directors, the Chief Executive Officer, or the President may from time to time prescribe.
Section 9. Chief Financial Officer. The Board of Directors shall appoint an officer to serve as the Chief Financial Officer of the Corporation. The Chief Financial Officer shall be responsible for the Corporation's public financial reporting obligations and shall have such further powers and duties as are incident to the position of Chief Financial Officer, subject to the direction of the Chief Executive Officer and the Board of Directors.
Section 10. General Counsel. The Board of Directors shall appoint an officer to serve as the General Counsel of the Corporation. The General Counsel shall be the chief legal officer of the Corporation and shall be responsible for all legal affairs of the Corporation, and shall have such further powers and duties as are incident to the position of General Counsel.
Section 11. The Treasurer. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to the Treasurer by the Board of Directors or the Chief Executive Officer. In addition, subject to the direction of the Board of Directors, the Treasurer shall perform such duties and have such powers as are incident to the office of treasurer, including, without limitation, the duty and power to keep and be responsible for all funds and securities of the Corporation, to deposit funds of the Corporation in depositories, to disburse such funds, to make proper accounts of such funds, and to render statements of all such transactions and of the financial condition of the Corporation. The Treasurer shall report directly to the Chief Executive Officer.
Section 12. The Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders and shall attend to the giving and serving of all notices of the Corporation. The Secretary shall have custody of the seal of the Corporation and shall affix the seal to all certificates of shares of stock of the Corporation and to such other papers or documents as may be proper and, when the seal is so affixed, the Secretary shall attest the same by the Secretary's signature wherever required. The Secretary shall have charge of the stock certificate book, transfer book, and stock ledger, and such other books and papers as the Board of Directors may direct. The Secretary shall, in general, perform all the duties of secretary, subject to the control of the Board of Directors.
Section 13. Assistant Treasurers. In the absence or inability of the Treasurer to act, any Assistant Treasurer may perform all the duties and exercise all of the powers of the Treasurer, subject to the control of the Board of Directors. An Assistant Treasurer shall also perform such other duties as the Board of Directors, the Chief Executive Officer, or the Treasurer may from time to time prescribe.
Section 14. Assistant Secretaries. In the absence or inability of the Secretary to act, any Assistant Secretary may perform all the duties and exercise all the powers of the Secretary, subject to the control of the Board of Directors. An Assistant Secretary shall also perform such other duties as the Board of Directors, the Chief Executive Officer, or the Secretary may from time to time prescribe.
Section 15. Other Officers. Other officers shall perform such duties and have such powers as may from time to time be assigned to them by the Board of Directors.
Section 16. Delegation of Duties. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may confer, for the time being, the powers or duties, or any of them, of such officer upon any other officer, or upon any director.
Section 17. Salaries. Officers of the Corporation shall be entitled to such salaries, compensation, or reimbursement as shall be fixed or allowed from time to time by the Board of Directors.
ARTICLE IV - CAPITAL STOCK
Section 1. Certificates for Shares. Each stockholder shall be entitled to a certificate signed by, or in the name of the Corporation by, the Chairman of the Board, the Chief Executive Officer, or the President or a Vice President, and by the Secretary or an Assistant Secretary, or Treasurer or an Assistant Treasurer, certifying the class and number of shares of record owned by such stockholder. Any or all of the signatures may be a facsimile.
Section 2. Transfer of Shares of Stock. Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 3 of this Article IV of these By-laws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
Section 3. Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors or transfer agent may establish concerning proof of such loss, theft, or destruction and concerning the giving of a satisfactory bond or bonds of indemnity.
Section 4. Record Date.
(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, or to receive payment of any dividend or other distribution or allotment of any rights or to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may, except as otherwise required by the Delaware General Corporation Law, fix a record date,
which record date shall not precede the date on which the resolution fixing the record date is adopted and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of any meeting of stockholders, nor more than sixty (60) days prior to the time for such other action as hereinbefore described; provided, however, that if no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and, for determining stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or to exercise any rights of change, conversion, or exchange of stock or for any other purpose, the record date shall be at the close of business on the day on which the Board of Directors adopts a resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written notice to the Secretary of the Corporation, request the Board of Directors to fix a record date. The Board of Directors shall promptly, but in all events within ten (10) days after the date on which such a request is received by the Secretary, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within ten (10) days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or any officer or agent of the Corporation having custody of the book in which proceeding of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board of Directors adopts the resolution taking such prior action.
Section 5. Regulations. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish.
ARTICLE V - General Provisions
Section 1. Fiscal Year. Except as from time to time otherwise designated by the Board of Directors, the fiscal year of the Corporation shall end on December 31, beginning with the fiscal year ending December 31, 2003.
Section 2. Corporate Seal. The corporate seal shall be in such form as may be approved by the Board of Directors. The corporate seal may be altered from time to time by the Board.
Section 3. Waiver of Notice. Whenever any notice whatsoever is required to be given by the Delaware General Corporation Law, by the Certificate of Incorporation or by these By-laws, a written waiver of such notice signed by the person entitled to such notice or such person's duly authorized attorney, whether before or after the time of the event for which notice is to be given shall be deemed equivalent to the notice required to be given to such person. Neither the business nor the purpose of any meeting need be specified in such a waiver. The appearance of such person at such meeting in person or by proxy, shall constitute waiver of notice except attendance for the sole purpose of objecting to the timeliness or lack of notice.
Section 4. Voting of Securities. Subject always to the specific directions of the Board of Directors, any officer of the Corporation may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this Corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this Corporation. The Board of Directors, by resolution from time to time, may confer like powers upon any other person or persons.
Section 5. Evidence of Authority. A certificate by the Secretary, or an Assistant Secretary as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall as to all persons who rely on the certificate in good faith be conclusive evidence of such action.
Section 6. Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed to refer to the Third Amended and Restated Certificate of Incorporation of the Corporation, as amended, restated and in effect from time to time.
Section 7. Transactions with Interested Parties. No contract or transaction between the Corporation and one or more of the directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors that authorizes the contract or transaction or solely because the interested directors' votes are counted for such purpose, if:
(1) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;
(2) The material facts as to the director's or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction.
Section 8. Severability. Any determination that any provision of these By-laws is for any reason inapplicable, illegal, or ineffective shall not affect or invalidate any other provision of these By-laws.
Section 9. Limitation on Stock Option Repricing. No stock option granted to an officer or director of the Corporation shall, after issuance, be repriced to a lower exercise price (other than adjustments for stock splits, stock dividends, spinoffs, recapitalizations and like events), without the prior affirmative vote of the holders of a majority of the shares of capital stock of the Corporation present at a stockholders meeting in person or by proxy and entitled to vote thereon.
ARTICLE VI - AMENDMENTS
Section 1. By the Board of Directors. In furtherance and not in limitation of the powers conferred by the Delaware General Corporation Law and the Certificate of Incorporation, the Board of Directors is expressly authorized to alter, amend or repeal any provision of these By-laws or make new by-laws.
Section 2. By the Stockholders. Except as otherwise provided in Section 3 of this Article VI, the stockholders of the Corporation shall have the power to alter, amend or repeal any provision of these By-laws or make new by-laws by affirmative vote of the holders of a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote, voting together as a single class; provided, however, that the power of the stockholders to, alter, amend or repeal any provision of these By-laws or make any new by-laws is further subject to any affirmative vote of the holders of any particular class or series of capital stock of the Corporation as may be required by the Delaware General Corporation Law, the Certificate of Incorporation, or these By-laws.
Section 3. Certain Provisions. Notwithstanding any other provision of the Delaware General Corporation Law, the Certificate of Incorporation, or these By-laws (including Section 2 of this Article VI), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to alter, amend or repeal, or make any new by-laws inconsistent with, Article II or this Article VI of these By-laws. This Section 3 is not intended to abrogate or otherwise affect the power of the Board of Directors to amend Article II or Article VI pursuant to Section 1 of this Article VI.
Exhibit 10.11
THERMO ELECTRON CORPORATION
2000 EMPLOYEES EQUITY INCENTIVE PLAN
As adopted and in effect as of June 27, 2000
1. Purpose
The purpose of this 2000 Employees Equity Incentive Plan (the "Plan") is to secure for Thermo Electron Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board of Directors. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of grant).
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 960,000 shares. Such shares shall consist solely of treasury shares held by the Corporation.
If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan.
5. Eligibility
Employees of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. Directors and executive officers of the Company shall not be eligible to receive Awards under the Plan, unless such Award shall be exempt from shareholder approval at the time of such Award under Rule 312.03 of the New York Stock Exchange, as the same may be amended from time to time. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant.
An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to purchase Common Stock at a specified exercise price. Options granted under the
Plan shall be options that are not intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") applicable to incentive stock options ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than 85% of the fair market value per share of Common Stock as of the date of grant. The Board shall not have the authority to reprice outstanding stock options held by Participants who are then directors or executive officers of the Company, except to the extent permitted under Section 10.6 of the Plan in connection with adjustments in the event of certain transactions.
6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state that the option grant is intended to qualify as a non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall
establish and communicate to the option holder at the time that such offer is made.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock, which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides (by specific explicit reference to Section 9.2 below). If a Change in Control occurs while any Awards are outstanding, then, effective upon the Change in Control, (i) each outstanding stock option or other stock-based Award awarded under the Plan that was not previously exercisable and vested shall become immediately exercisable in full and will no longer be subject to a right of repurchase by the Company, (ii) each outstanding restricted stock award or other stock-based Award subject to restrictions and to the extent not fully vested, shall be deemed to be fully vested, free of restrictions and no longer subject to a right of repurchase by the Company, and (iii) deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation will be waived and removed as to deferred stock Awards and performance Awards; performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Award or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of any capital stock of Thermo Electron Corporation ("Thermo Electron") if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either (i) the then-outstanding shares of common stock of Thermo Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power of the then-outstanding securities of Thermo Electron entitled to vote generally in the election of directors (the "Outstanding TMO Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by Thermo Electron, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Thermo Electron or any corporation controlled by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of Thermo Electron (the "Thermo Board") (or, if applicable, the Board of Directors of a successor corporation to Thermo Electron), where the term "Continuing Director" means at any date a member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Thermo Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Electron or a sale or other disposition of all or substantially all of the assets of Thermo Electron in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Thermo Electron or substantially all of Thermo Electron's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by Thermo Electron or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no Award (other than an Award in the form of an outright transfer of cash or Common Stock
not subject to any restrictions) may be transferred other than by will or the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above, and
(ii) appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards affected
by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with
respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent.
EXHIBIT 10.12
THERMO ELECTRON CORPORATION
THERMO INFORMATION SOLUTIONS INC. NONQUALIFIED STOCK OPTION PLAN
As amended and restated effective as of May 21, 1999
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock (the "Common Stock"), of Thermo Information Solutions Inc. ("Subsidiary"), a subsidiary of Thermo Electron Corporation (the "Company"), by persons selected by the Board of Directors (or a committee thereof) in its sole discretion, including directors, executive officers, key employees and consultants of the Company and its subsidiaries, and to provide additional incentive for them to promote the success of the business of the Company and Subsidiary. The Plan is intended to be a nonstatutory stock option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of Directors of the Company.
3. Stock Subject to Plan
Subject to adjustment as provided in Section 11, the total number of shares of Common Stock reserved and available for issuance under the Plan shall be 150,000 shares. Shares to be issued upon the exercise of options granted under the Plan shall be shares of Subsidiary beneficially owned by the Company. If any option expires or terminates for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for options thereafter to be granted.
4. Administration
The Plan will be administered by the Board of Directors of the Company (the "Board"). Subject to the provisions of the Plan, the Board shall have complete authority, in its discretion, to make the following determinations with respect to each option to be granted by the Company: (a) the person to receive the option (the "Optionee"); (b) the time of granting the option; (c) the number of shares subject thereto; (d) the option price; (e) the option period; and (f) the terms and conditions of options granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts); (g) waive compliance by an optionee with any obligation to be performed by him or her under an option; (h) waive any term or condition of an option; (i) cancel an existing option in whole or in part with the consent of an Optionee; (j) grant replacement options; (k) accelerate the vesting or lapse of any restrictions of any option; and (l) adopt the form of instruments evidencing options under the Plan and change such forms from time
to time. In making such determinations, the Board may take into account the nature of the services rendered by the Optionees, their present and potential contributions to the success of the Company and/or one or more of its subsidiaries, and such other factors as the Board in its discretion shall deem relevant. Subject to the provisions of the Plan, the Board shall also have complete authority to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the terms and provisions of the respective option agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act").
5. Eligibility
An option may be granted to any person selected by the Board in its sole discretion.
6. Time of Granting Options
The granting of an option shall take place at the time specified by the Board. Only if expressly so provided by the Board shall the granting of an option be regarded as taking place at the time when a written option agreement shall have been duly executed and delivered by or on behalf of the Company and the Optionee to whom such option shall be granted. The agreement shall provide, among other things, that it does not confer upon an Optionee any right to continue in the employ of the Company and/or one or more of its subsidiaries or to continue as a director or consultant of the Company, and that it does not interfere in any way with the right of the Company or any such subsidiary to terminate the employment of the Optionee at any time if the Optionee is an employee, to remove the Optionee as a director of the Company if the Optionee is a director, or to terminate the services of the Optionee if the Optionee is a consultant.
7. Option Period
An option may become exercisable immediately or in such installments, cumulative or noncumulative, as the Board may determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by written notice of intent to exercise the option, specifying the number of shares of stock with respect to which the option is then being exercised. The notice shall be accompanied by payment in the form of cash or shares of Subsidiary Common Stock (the "Tendered Shares") with a then current market value equal to the option price of the shares to be purchased; provided, however, that such Tendered Shares shall have been acquired by the Optionee more than six months prior to
the date of exercise, unless such requirement is waived in writing by the Company. Against such payment the Company shall deliver or cause to be delivered to the Optionee a certificate for the number of shares then being purchased, registered in the name of the Optionee or other person exercising the option. If any law or applicable regulation of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company, Subsidiary or the Optionee to take any action in connection with shares being purchased upon exercise of the option, exercise of the option and delivery of the certificate or certificates for such shares shall be postponed until completion of the necessary action, which shall be taken at the Company's expense.
9. Transferability
Except as may be authorized by the Board, in its sole discretion, no Option may be transferred other than by will or the laws of descent and distribution, and during a Optionee's lifetime an option requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which options granted to an Optionee shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the option executed and delivered by or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Board, in its sole discretion, may determine the manner in which options shall vest, the rights of the Company to repurchase the shares issued upon the exercise of any option and the manner in which such rights shall lapse, and the terms upon which any option granted shall terminate. The Board shall have the right to accelerate the date of exercise of any installment or to accelerate the lapse of the Company's repurchase rights. All of such terms shall be specified in a written option agreement executed and delivered by or on behalf of the Company and the Optionee to whom such option shall be granted.
11. Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 3 above, and
(ii) appropriate adjustments to the number and kind of shares of stock or
securities subject to Options then outstanding or subsequently granted, any
exercise prices relating to Options and any other provisions of Awards affected
by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company, any transaction which results in Thermo Electron Corporation ceasing to be the beneficial owner of a majority of the
then-outstanding shares of Common Stock, or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding Options to avoid distortion in the operation of the Plan.
12. Change in Control
12.1 Impact of Event
In the event of a "Change in Control" as defined in Section 12.2, the
following provisions shall apply, unless the agreement evidencing the Option
otherwise provides (by specific explicit reference to Section 12.2 below). If a
Change in Control occurs while any Options are outstanding, then, effective upon
the Change in Control, (i) each outstanding stock option granted under the Plan
that was not previously exercisable and vested shall become immediately
exercisable in full and will no longer be subject to a right of repurchase by
the Company, (ii) each outstanding Option subject to restrictions and to the
extent not fully vested, shall be deemed to be fully vested, free of
restrictions and no longer subject to a right of repurchase by the Company, and
(iii) performance of other conditions (other than conditions relating solely to
the passage of time, continued employment or affiliation) will continue to apply
unless otherwise provided in the agreement evidencing the Option or in any other
agreement between the Optionee and the Company or unless otherwise agreed by the
Board.
12.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership of any capital stock of Thermo Electron Corporation ("Thermo
Electron") if, after such acquisition, such Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either
(i) the then-outstanding shares of common stock of Thermo Electron (the
"Outstanding TMO Common Stock") or (ii) the combined voting power of the
then-outstanding securities of Thermo Electron entitled to vote generally in the
election of directors (the "Outstanding TMO Voting Securities"); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change in Control: (i) any acquisition by Thermo
Electron, (ii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Thermo Electron or any corporation controlled by
Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of Thermo Electron (the "Thermo Board") (or, if applicable, the Board of Directors of a successor corporation to Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July 1, 1999 or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Thermo Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Electron or a sale or other disposition of all or substantially all of the assets of Thermo Electron in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Thermo Electron or substantially all of Thermo Electron's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by Thermo Electron or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete liquidation or dissolution of Thermo Electron.
13. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in respect of shares as to which their options shall not have been exercised, certificates issued and delivered and payment as herein provided made in full, and shall have no rights with respect to such shares not expressly conferred by this Plan.
14. Stock Reserved
The Company shall at all times during the term of the options reserve and keep available such number of shares of the Common Stock as will be sufficient to satisfy the requirements of this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith.
15. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the Company, will be required to give a representation in form satisfactory to counsel for the Company that he will not transfer, sell or otherwise dispose of the shares received upon exercise of the option at any time purchased by him, upon exercise of any portion of the option, in a manner which would violate the Securities Act of 1933, as amended, and the regulations of the Securities and Exchange Commission thereunder and the Company may, if required or at its discretion, make a notation on any certificates issued upon exercise of options to the effect that such certificate may not be transferred except after receipt by the Company of an opinion of counsel satisfactory to it to the effect that such transfer will not violate such Act and such regulations.
16. Tax Withholding
The Company shall have the right to deduct from payments of any kind otherwise due to an Optionee any federal, state or local taxes of any kind required by law to be withheld with respect to any shares issued upon exercise of options under the Plan (the "withholding requirements"). The Board will have the right to require that the Optionee or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock pursuant to exercise of an option. If and to the extent that such withholding is required, the Board may permit the Optionee or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirements.
17. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 17, the Board may at any time or times amend the Plan or any outstanding Option for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Options. No amendment of the Plan or any agreement evidencing Options under the Plan may adversely affect the rights of any participant under any Option previously granted without such participant's consent.
EXHIBIT 10.13
THERMO INFORMATION SOLUTIONS INC.
EQUITY INCENTIVE PLAN
As amended and restated effective as of December 16, 1999
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Information Solutions Inc. (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 500,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 300,000 shares of Common Stock.
An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock.
6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock, which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides (by specific explicit reference to Section 9.2 below). If a Change in Control occurs while any Awards are outstanding, then, effective upon the Change in Control, (i) each outstanding stock option or other stock-based Award awarded under the Plan that was not previously exercisable and vested shall become immediately exercisable in full and will no longer be subject to a right of repurchase by the Company, (ii) each outstanding restricted stock award or other stock-based Award subject to restrictions and to the extent not fully vested, shall be deemed to be fully vested, free of restrictions and no longer subject to a right of repurchase by the Company, and (iii) deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation will be waived and removed as to deferred stock Awards and performance Awards; performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Award or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of any capital stock of Thermo Electron Corporation ("Thermo Electron") if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either
(i) the then-outstanding shares of common stock of Thermo Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power of the then-outstanding securities of Thermo Electron entitled to vote generally in the election of directors (the "Outstanding TMO Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by Thermo Electron, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Thermo Electron or any corporation controlled by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of Thermo Electron (the "Thermo Board") (or, if applicable, the Board of Directors of a successor corporation to Thermo Electron), where the term "Continuing Director" means at any date a member of the Thermo Board (i) who was a member of the Thermo Board as of July 1, 1999 or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Thermo Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Electron or a sale or other disposition of all or substantially all of the assets of Thermo Electron in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Thermo Electron or substantially all of Thermo Electron's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by Thermo Electron or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by will or the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above, and
(ii) appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards affected
by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent.
EXHIBIT 10.15
THERMO COLEMAN CORPORATION
EQUITY INCENTIVE PLAN
As amended and restated effective as of December 16, 1999
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo Coleman Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall be effective when made (unless otherwise specified by the Board at the time of
grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 1,050,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 600,000 shares of Common Stock.
An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock.
6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock, which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides (by specific explicit reference to Section 9.2 below). If a Change in Control occurs while any Awards are outstanding, then, effective upon the Change in Control, (i) each outstanding stock option or other stock-based Award awarded under the Plan that was not previously exercisable and vested shall become immediately exercisable in full and will no longer be subject to a right of repurchase by the Company, (ii) each outstanding restricted stock award or other stock-based Award subject to restrictions and to the extent not fully vested, shall be deemed to be fully vested, free of restrictions and no longer subject to a right of repurchase by the Company, and (iii) deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation will be waived and removed as to deferred stock Awards and performance Awards; performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Award or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial
ownership of any capital stock of Thermo Electron Corporation ("Thermo
Electron") if, after such acquisition, such Person beneficially owns (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either
(i) the then-outstanding shares of common stock of Thermo Electron (the
"Outstanding TMO Common Stock") or (ii) the combined voting power of the then-outstanding securities of Thermo Electron entitled to vote generally in the election of directors (the "Outstanding TMO Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by Thermo Electron, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Thermo Electron or any corporation controlled by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of Thermo Electron (the "Thermo Board") (or, if applicable, the Board of Directors of a successor corporation to Thermo Electron), where the term "Continuing Director" means at any date a member of the Thermo Board (i) who was a member of the Thermo Board as of July 1, 1999 or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Thermo Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Electron or a sale or other disposition of all or substantially all of the assets of Thermo Electron in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Thermo Electron or substantially all of Thermo Electron's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by Thermo Electron or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by will or the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above, and
(ii) appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards affected
by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent.
EXHIBIT 10.18
TREX COMMUNICATIONS CORPORATION
EQUITY INCENTIVE PLAN
As amended and restated effective as of June 25, 1999
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for Trex Communications Corporation (the "Company") and its Stockholders the benefits arising from capital stock ownership by employees and Directors of, and consultants to, the Company and its subsidiaries or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries. The Plan is intended to accomplish these goals by enabling the Company to offer such persons equity-based interests, equity-based incentives or performance-based stock incentives in the Company, or any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company (the "Board"). The Board shall have full power to interpret and administer the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan and Awards, and full authority to select the persons to whom Awards will be granted ("Participants"), determine the type and amount of Awards to be granted to Participants (including any combination of Awards), determine the terms and conditions of Awards granted under the Plan (including terms and conditions relating to events of merger, consolidation, dissolution and liquidation, change of control, vesting, forfeiture, restrictions, dividends and interest, if any, on deferred amounts), waive compliance by a participant with any obligation to be performed by him or her under an Award, waive any term or condition of an Award, cancel an existing Award in whole or in part with the consent of a Participant, grant replacement Awards, accelerate the vesting or lapse of any restrictions of any Award and adopt the form of instruments evidencing Awards under the Plan and change such forms from time to time. Any interpretation by the Board of the terms and provisions of the Plan or any Award thereunder and the administration thereof, and all action taken by the Board, shall be final, binding and conclusive on all parties and any person claiming under or through any party. No Director shall be liable for any action or determination made in good faith. The Board may, to the full extent permitted by law, delegate any or all of its responsibilities under the Plan to a committee (the "Committee") appointed by the Board and consisting of two or more members of the Board, each of whom shall be deemed a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the "Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board of Directors, subject to the approval of the Plan by the Corporation's Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of shares of Common Stock reserved and available for distribution under the Plan shall be 1,800,000 shares. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the Participant for delivery of such shares terminates without having been exercised in full, is forfeited or is otherwise terminated without a payment being made to the Participant in the form of Common Stock, or if any shares of Common Stock subject to restrictions are repurchased by the Company pursuant to the terms of any Award or are otherwise reacquired by the Company to satisfy obligations arising by virtue of any Award, such shares shall be available for distribution in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its subsidiaries, or other persons who are expected to make significant contributions to the future growth and success of the Company and its subsidiaries shall be eligible to receive Awards under the Plan. The Board, or other appropriate committee or person to the extent permitted pursuant to the last sentence of Section 2, shall from time to time select from among such eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based interest, equity-based incentive or performance-based stock incentive in Common Stock of the Company or any combination thereof. The type, terms and conditions and restrictions of an Award shall be determined by the Board at the time such Award is made to a Participant; provided however that the maximum number of shares permitted to be granted under any Award or combination of Awards to any Participant during any one calendar year may not exceed 500,000 shares of Common Stock.
An Award shall be made at the time specified by the Board and shall be subject to such conditions or restrictions as may be imposed by the Board and shall conform to the general rules applicable under the Plan as well as any special rules then applicable under federal tax laws or regulations or the federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased upon exercise of an option shall be determined by the Board, provided however, the exercise price shall not be less than the par value per share of Common Stock.
6.1.2 Option Grants. The granting of an option shall take place at the time specified by the Board. Options shall be evidenced by option agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including but not limited to vesting and forfeiture provisions, acceleration, change of control, protection in the event of merger, consolidations, dissolutions and liquidations) as the Board shall deem advisable. Option agreements shall expressly state whether an option grant is intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or times (which may be immediately or in such installments as the Board shall determine) and on such terms and conditions as the Board shall specify. The option agreements shall specify the terms and conditions applicable in the event of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an option shall be paid for as follows: (1) in cash or by check (subject to such guidelines as the Company may establish for this purpose), bank draft or money order payable to the order of the Company or (2) if so permitted by the instrument evidencing the option (or in the case of a non-statutory option, by the Board at or after grant of the option), (i) through the delivery of shares of Common Stock that have been outstanding for at least six months (unless the Board expressly approves a shorter period) and that have a fair market value (determined in accordance with procedures prescribed by the Board) equal to the exercise price, (ii) by delivery of a promissory note of the option holder to the Company, payable on such terms as are specified by the Board, (iii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iv) by any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a payment in cash, shares of Common Stock, deferred stock or restricted stock, an option previously granted, based on such terms and conditions as the Board shall establish and communicate to the option holder at the time that such offer is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the Plan and each option agreement evidencing an incentive stock option shall be construed so that each incentive stock option shall be an incentive stock option as defined in Section 422 of the Code or any statutory provision that may replace such Section, and any provisions thereof that cannot be so construed shall be disregarded. Instruments evidencing incentive stock options must contain such provisions as are required under applicable provisions of the Code. Incentive stock options may be granted only to employees of the Company and its subsidiaries. The exercise price of an incentive stock option shall not be less than 100% (110% in the case of an incentive stock option granted to a more than ten percent Stockholder of the Company) of the fair market value of the Common Stock on the date of grant, as determined by the Board. An incentive stock option may not be granted after the tenth anniversary of the date on which the Plan was adopted by the Board and the latest date on which an incentive stock option may be exercised shall be the tenth anniversary (fifth anniversary, in the case of any incentive stock option granted to a more than ten percent Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire shares of Common Stock upon payment of the purchase price subject to restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be evidenced by restricted stock agreements. Such agreements shall conform to the requirements of the Plan, and may contain such other provisions (including restriction and forfeiture provisions, change of control, protection in the event of mergers, consolidations, dissolutions and liquidations) as the Board shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted stock agreement shall lapse, restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of, and upon certain conditions specified in the restricted stock agreement, must be resold to the Company for the price, if any, specified in such agreement. The restrictions shall lapse at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which the restrictions on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of restricted stock will have all of the rights of a Stockholder with respect to such shares including the right to receive dividends and to vote such shares. Unless the Board otherwise determines, certificates evidencing shares of restricted stock will remain in the possession of the Company until such shares are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock shall be determined by the Board, in its sole discretion, but such price may not be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide that any or all the Common Stock delivered pursuant to an Award will be restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to any Participant shares of Common Stock free of restrictions under the Plan for a price determined by the Board, but which may not be less than the par value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the recipient to receive shares of deferred stock, which is Common Stock to be delivered in the future. Delivery of the Common Stock will take place at such time or times, and on such conditions, as the Board may specify. The Board may at any time accelerate the time at which delivery of all or any part of the Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the time any Award described in this Section 6 is granted, provide that, at the time Common Stock would otherwise be delivered pursuant to the Award, the Participant will instead receive an instrument evidencing the right to future delivery of deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to receive, without payment, an amount, in cash or Common Stock or a combination thereof (such form to be determined by the Board), following the attainment of performance goals. Performance goals may be related to personal performance, corporate performance, departmental performance or any other category of performance deemed by the Board to be important to the success of the Company. The Board will determine the performance goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at the time any Award described in this Section 6 is granted, impose the condition (in addition to any conditions specified or authorized in this Section 6 of the Plan) that performance goals be met prior to the Participant's realization of any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common Stock to be acquired pursuant to an Award shall be the price determined by the Board, provided that such price shall not be less than the par value of the Common Stock. Except as otherwise provided in the Plan, the Board may determine the method of payment of the exercise price or purchase price of an Award granted under the Plan and the form of payment. The Board may determine that all or any part of the purchase price of Common Stock pursuant to an Award has been satisfied by past services rendered by the Participant. The Board may agree at any time, upon request of the Participant, to defer the date on which any payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the grant to the Participant of any Award, in connection with the purchase of Common Stock under the Award or with the payment of any obligation incurred or recognized as a result of the Award. The Board will have full authority to decide whether the loan is to be secured or unsecured or with or without recourse against the borrower, the terms on which the loan is to be repaid and the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is made or at a later date, provide for and make a cash payment to the participant not to exceed an amount equal to (a) the amount of any federal, state and local income tax or ordinary income for which the Participant will be liable with respect to the Award, plus (b) an additional amount on a grossed-up basis necessary to make him or her whole after tax, discharging all the participant's income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the following provisions shall apply, unless the agreement evidencing the Award otherwise provides (by specific explicit reference to Section 9.2 below). If a Change in Control occurs while any Awards are outstanding, then, effective upon the Change in Control, (i) each outstanding stock option or other stock-based Award awarded under the Plan that was not previously exercisable and vested shall become immediately exercisable in full and will no longer be subject to a right of repurchase by the Company, (ii) each outstanding restricted stock award or other stock-based Award subject to restrictions and to the extent not fully vested, shall be deemed to be fully vested, free of restrictions and no longer subject to a right of repurchase by the Company, and (iii) deferral limitations and conditions that relate solely to the passage of time, continued employment or affiliation will be waived and removed as to deferred stock Awards and performance Awards; performance of other conditions (other than conditions relating solely to the passage of time, continued employment or affiliation) will continue to apply unless otherwise provided in the agreement evidencing the Award or in any other agreement between the Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or more of subsections (a) through (d) below (including an event or occurrence that constitutes a Change in Control under one of such subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership of any capital stock of Thermo Electron Corporation ("Thermo Electron") if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or more of either
(i) the then-outstanding shares of common stock of Thermo Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power of the then-outstanding securities of Thermo Electron entitled to vote generally in the election of directors (the "Outstanding TMO Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition by Thermo Electron, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Thermo Electron or any corporation controlled by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this definition; or
(b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board of Directors of Thermo Electron (the "Thermo Board") (or, if applicable, the Board of Directors of a successor corporation to Thermo Electron), where the term "Continuing Director" means at any date a member of the Thermo Board (i) who was a member of the Thermo Board as of July 1, 1999 or (ii) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Thermo Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (ii) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving Thermo Electron or a sale or other disposition of all or substantially all of the assets of Thermo Electron in one or a series of transactions (a "Business Combination"), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns Thermo Electron or substantially all of Thermo Electron's assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the "Acquiring Corporation") in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding TMO Common Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by Thermo Electron or by the Acquiring Corporation) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among Participants, prescribed by the Board from time to time. Such instruments may be in the form of agreements to be executed by both the Participant and the Company or certificates, letters or similar instruments which need not be executed by the participant but acceptance of which will evidence agreement to the terms thereof. Such instruments shall conform to the requirements of the Plan and may contain such other provisions (including provisions relating to events of merger, consolidation, dissolution and liquidations, change of control and restrictions affecting either the agreement or the Common Stock issued thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing the Award, the receipt of an Award will not give a Participant rights as a Stockholder with respect to any shares covered by an Award until the date of issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove any restriction from shares previously delivered under the Plan (a) until all conditions of the Award have been satisfied or removed, (b) until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, (c) if the outstanding Common Stock is at the time listed on any stock exchange, until the shares have been listed or authorized to be listed on such exchange upon official notice of issuance, and (d) until all other legal matters in connection with the issuance and delivery of such shares have been approved by the Company's counsel. If the sale of Common Stock has not been registered under the Securities Act of 1933, as amended, the Company may require, as a condition to exercise of the Award, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of such act and may require that the certificates evidencing such Common Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the participant's legal representative, the Company will be under no obligation to deliver Common Stock pursuant to such exercise until the Company is satisfied as to the authority of such representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered, the Board will have the right to require that the participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Board with regard to such requirements, prior to the delivery of any Common Stock. If and to the extent that such withholding is required, the Board may permit the participant or such other person to elect at such time and in such manner as the Board provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Common Stock having a value calculated to satisfy the withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no Award (other than an Award in the form of an outright transfer of cash or Common Stock not subject to any restrictions) may be transferred other than by will or the laws of descent and distribution, and during a Participant's lifetime an Award requiring exercise may be exercised only by him or her (or in the event of incapacity, the person or persons properly appointed to act on his or her behalf). The Board may, in its discretion, determine the extent to which Awards granted to a Participant shall be transferable, and such provisions permitting or acknowledging transfer shall be set forth in the written agreement evidencing the Award executed and delivered by or on behalf of the Company and the Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of shares,
or other distribution with respect to holders of Common Stock other than normal
cash dividends, the Board will make (i) appropriate adjustments to the maximum
number of shares that may be delivered under the Plan under Section 4 above, and
(ii) appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provisions of Awards affected
by such change.
(b) In the event of any recapitalization, merger or consolidation involving the Company, any transaction in which the Company becomes a subsidiary of another entity, any sale or other disposition of all or a substantial portion of the assets of the Company or any similar transaction, as determined by the Board, the Board in its discretion may make appropriate adjustments to outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer upon any person any right to continued employment with the Company or any subsidiary or interfere in any way with the right of the Company or subsidiary to terminate any employment relationship at any time or to increase or decrease the compensation of such person. Except as specifically provided by the Board in any particular case, the loss of existing or potential profit in Awards granted under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board at the time. For purposes of this Plan, transfer of employment between the Company and its subsidiaries shall not be deemed termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and the amount of any compensation deemed to be received by an employee as a result of any exercise or purchase of Common Stock pursuant to an Award or sale of shares received under the Plan, will not constitute "earnings" or "compensation" with respect to which any other employee benefits of such employee are determined, including without limitation benefits under any pension, stock ownership, stock purchase, life insurance, medical, health, disability or salary continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls on a Saturday, Sunday or legal holiday, such action may be taken on the next succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are foreign nationals or employed outside the United States or both, on such terms and conditions different from those specified in the Plan, as may, in the judgment of the Board, be necessary or desirable to further the purpose of the Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the Board. Subject to the last sentence of this Section 11, the Board may at any time or times amend the Plan or any outstanding Award for any purpose that may at the time be permitted by law, or may at any time terminate the Plan as to any further grants of Awards. No amendment of the Plan or any agreement evidencing Awards under the Plan may adversely affect the rights of any participant under any Award previously granted without such participant's consent.
EXHIBIT 10.72
EXECUTION
VERSION
$125,000,000
364-DAY CREDIT AGREEMENT
among
THERMO ELECTRON CORPORATION,
as Borrower,
The Several Lenders from Time to Time Parties Hereto,
ABN AMRO BANK N.V.,
as Syndication Agent,
FLEET NATIONAL BANK and
JPMORGAN CHASE BANK,
as Co-Documentation Agents,
and
BARCLAYS BANK PLC,
as Administrative Agent
BARCLAYS Capital, as Lead Arranger and Bookrunner ABN AMRO BANK N.V., as Lead Arranger
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Definitional Provisions..................................................................16
1.3 Exchange Rates.................................................................................16
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................................................17
2.1 Commitments....................................................................................17
2.2 Procedure for Borrowing........................................................................17
2.3 Fees...........................................................................................18
2.4 Optional Termination or Reduction of Commitments...............................................18
2.5 Optional Prepayments...........................................................................19
2.6 Mandatory Prepayments..........................................................................19
2.7 Conversion and Continuation Options............................................................19
2.8 Limitations on Eurocurrency Tranches...........................................................20
2.9 Repayment of Loans; Extension of Termination Date..............................................20
2.10 Interest Rates and Payment Dates...............................................................20
2.11 Computation of Interest and Fees...............................................................21
2.12 Inability to Determine Interest Rate...........................................................21
2.13 Pro Rata Treatment and Payments................................................................22
2.14 Requirements of Law............................................................................24
2.15 Taxes..........................................................................................26
2.16 Indemnity......................................................................................27
2.17 Change of Lending Office.......................................................................28
2.18 Replacement of Lenders.........................................................................28
2.19 Judgment Currency..............................................................................29
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................................................29
3.1 Financial Condition............................................................................29
3.2 No Change......................................................................................30
3.3 Existence; Compliance with Law.................................................................30
3.4 Power; Authorization; Enforceable Obligations..................................................30
3.5 No Legal Bar...................................................................................30
3.6 Litigation.....................................................................................31
3.7 Ownership of Property; Liens...................................................................31
3.8 Taxes..........................................................................................31
3.9 Federal Regulations............................................................................31
3.10 ERISA..........................................................................................31
3.11 Investment Company Act; Other Regulations......................................................32
3.12 Use of Proceeds................................................................................32
3.13 Environmental Matters..........................................................................32
3.14 Accuracy of Information, etc...................................................................33
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SECTION 4. CONDITIONS PRECEDENT...........................................................................33
4.1 Conditions to Initial Loans....................................................................33
4.2 Conditions to Each Loan........................................................................34
SECTION 5. AFFIRMATIVE COVENANTS..........................................................................34
5.1 Financial Statements...........................................................................34
5.2 Certificates; Other Information................................................................35
5.3 Payment of Obligations.........................................................................35
5.4 Maintenance of Existence; Compliance...........................................................36
5.5 Maintenance of Property; Insurance.............................................................36
5.6 Inspection of Property; Books and Records; Discussions.........................................36
5.7 Notices........................................................................................36
5.8 Environmental Laws.............................................................................37
SECTION 6. NEGATIVE COVENANTS.............................................................................37
6.1 Financial Condition Covenants..................................................................37
6.2 Standby and Performance Letters of Credit......................................................38
6.3 Indebtedness of Subsidiaries...................................................................38
6.4 Liens..........................................................................................38
6.5 Fundamental Changes............................................................................40
6.6 Disposition of Property........................................................................40
6.7 Investments....................................................................................40
6.8 Transactions with Affiliates...................................................................42
6.9 Changes in Fiscal Periods......................................................................42
6.10 Lines of Business..............................................................................42
SECTION 7. EVENTS OF DEFAULT..............................................................................42
SECTION 8. THE AGENTS.....................................................................................44
8.1 Appointment....................................................................................44
8.2 Delegation of Duties...........................................................................45
8.3 Exculpatory Provisions.........................................................................45
8.4 Reliance by Administrative Agent...............................................................45
8.5 Notice of Default..............................................................................46
8.6 Non-Reliance on Agents and Other Lenders.......................................................46
8.7 Indemnification................................................................................46
8.8 Agent in Its Individual Capacity...............................................................47
8.9 Successor Administrative Agent.................................................................47
8.10 Syndication Agent and Co-Documentation Agents..................................................47
SECTION 9. MISCELLANEOUS..................................................................................47
9.1 Amendments and Waivers.........................................................................47
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9.2 Notices........................................................................................48
9.3 No Waiver; Cumulative Remedies.................................................................49
9.4 Survival of Representations and Warranties.....................................................49
9.5 Payment of Expenses and Taxes..................................................................49
9.6 Successors and Assigns; Participations and Assignments.........................................50
9.7 Adjustments; Set-off...........................................................................53
9.8 Counterparts...................................................................................54
9.9 Severability...................................................................................54
9.10 Integration....................................................................................54
9.11 Governing Law..................................................................................54
9.12 Submission To Jurisdiction; Waivers............................................................54
9.13 Acknowledgements...............................................................................55
9.14 Confidentiality................................................................................55
9.15 WAIVERS OF JURY TRIAL..........................................................................56
SCHEDULES:
1.1 Commitments
6.3(b) Existing Indebtedness
6.4(f) Existing Liens
6.6 Certain Dispositions
EXHIBITS:
A Form of Compliance Certificate
B Form of Closing Certificate
C Form of Assignment and Assumption
D Form of Legal Opinion of Seth Hoogasian
E Form of Exemption Certificate
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364-DAY CREDIT AGREEMENT, dated as of December 20, 2002 (this "Agreement"), among THERMO ELECTRON CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), ABN AMRO BANK N.V., as syndication agent (in such capacity, the "Syndication Agent"), FLEET NATIONAL BANK and JPMORGAN CHASE BANK, as co-documentation agents (in such capacity, the "Co-Documentation Agents"), and BARCLAYS BANK PLC, as administrative agent (in such capacity, the "Administrative Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Barclays Bank PLC as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Barclays Bank PLC in connection with extensions of credit to debtors). Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based upon the ABR.
"Acquired Indebtedness": Indebtedness of any Person outstanding on the date
(i) such Person is acquired by the Borrower or any of its Subsidiaries or (ii)
such Indebtedness is assumed by the Borrower or any of its Subsidiaries in
connection with the acquisition of a business of such Person, in each case in a
transaction permitted by Section 6.7(f) or (h), provided that such Indebtedness
was not created in contemplation or in connection with such acquisition.
"Administrative Agent": Barclays Bank PLC, as the lead arranger of the Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.
"Affected Foreign Currency": as defined in Section 2.12(c).
"Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 15% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
"Agents": the collective reference to the Syndication Agent, the Co-Documentation Agents, and the Administrative Agent.
"Agreement": as defined in the preamble hereto.
"Agreement Currency": as defined in Section 2.19(b).
"Approved Fund": as defined in Section 9.6(b).
"Assignee": as defined in Section 9.6(b).
"Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit C.
"Available Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment then in effect over (b) the sum of (i) such Lender's Dollar Loans and (ii) the Dollar Equivalent of such Lender's Foreign Currency Loans.
"Benefitted Lender": as defined in Section 9.7(a).
"Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, that, when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for international business (including dealings in Dollar deposits) in the London interbank market; provided, further, when used in connection with Eurocurrency Loans denominated in Euros, the term "Business Day" shall also exclude any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) (or, if such clearing system ceases to be operative, such other clearing system (if any) determined by the Administrative Agent to be a suitable replacement) is not open for settlement of payment in Euros.
"Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within three years from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or bank
deposits (including those maintained to facilitate payments, distributions and
collections) having maturities of eighteen months or less from the date of
acquisition issued by or with any Lender or by or with any commercial bank
organized under the laws of the United States or any state thereof or by any
financial institution organized in any foreign country recognized by the United
States, in each case rated at least A- by S&P, or A-3 by Moody's; (c) (i)
commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody's, , or
carrying an equivalent rating by a nationally recognized rating agency, if both
of the Rating Agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of acquisition or (ii)
commercial paper issued by Ford Motor Company, Ford Motor Credit Company,
DaimlerChrysler NA Holdings, John Deere Capital Corp., John Deere Credit Inc.,
Deere & Co., Walt Disney Company, General Motors Corp., or General Motors
Acceptance Corp., which at the time of purchase is rated at least A-2 by S&P, or
P-2 by Moody's, and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days, with respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A- by S&P or A-3 by Moody's; (f) securities with maturities or
put features of six months or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank satisfying
the requirements of clause (b) of this definition; (g) asset-backed or
mortgaged-backed securities rated AAA by either S&P or Moody's, (h) corporate
bonds or notes with maturities of three years or less and rated at least BBB- by
S&P or Baa3 by Moody's, (i) money market mutual or similar funds that invest
primarily in assets satisfying the requirements of clauses (a) through (h) of
this definition; or (j) money market funds that (i) comply with the criteria set
forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended,
(ii) are rated AAA by S&P or Aaa by Moody's and (iii) have portfolio assets of
at least $5,000,000,000.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Co-Documentation Agents": as defined in the preamble hereto.
"Commitment": as to any Lender, the obligation of such Lender, if any, to make Loans in an aggregate Dollar and Dollar Equivalent principal amount not to
exceed the amount set forth under the heading "Commitment" opposite such Lender's name on Schedule 1.1 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Commitments is $125,000,000.
"Commitment Period": the period from and including the Closing Date to the Termination Date.
"Commitment Utilization Percentage": on any day, the percentage equivalent of a fraction (a) the numerator of which is the sum of (i) the Total Loans outstanding on such day and (ii) the "Total Loans" under the Other Agreement outstanding on such day and (b) the denominator of which is the sum of (i) the Total Commitments in effect on such day (or, on any day after termination of the Total Commitments, the Total Commitments in effect immediately preceding such termination) and (ii) the "Total Commitments" under the Other Agreement in effect on such day (or, on any day after termination of the "Total Commitments" under the Other Agreement, the "Total Commitments" under the Other Agreement in effect immediately preceding such termination).
"Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit A.
"Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.14, 2.15, 2.16 or 9.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.
"Confidential Information Memorandum": the Confidential Information Memorandum dated October 2002 and furnished to certain Lenders.
"Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business) and (f) any extraordinary, unusual or non-recurring cash expenses or losses to the extent that they do not exceed, in the aggregate, $25,000,000 during such period (provided that, in connection with the calculation of Consolidated EBITDA for any period of four consecutive fiscal quarters which includes the second, third and/or fourth fiscal quarters of the Borrower's 2002 fiscal year, the Borrower shall also be entitled to add back, as cash expenses or losses of the type covered by this clause, an amount equal to $9,001,000 for such second fiscal quarter, $13,174,000 for such third fiscal quarter and/or, as the case may be, $15,000,000 for such fourth fiscal quarter) minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (i) interest income, (ii) any extraordinary, unusual or non-recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash gains on the sales of assets outside of the ordinary course of business), (iii) any extraordinary, unusual or non-recurring cash income or gains to the extent they exceed, in the aggregate, $25,000,000 during such period, (iv) income tax credits (to the extent not netted from income tax expense) and (v) any other non-cash income.
"Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.
"Consolidated Interest Expense": for any period, total interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP).
"Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth": at any date, all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Total Capitalization": at any date, the sum of (a) Consolidated Net Worth on such date and (b)Consolidated Total Debt or such date.
"Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt to Capitalization Ratio": on any date, the ratio of (a) Consolidated Total Debt on such date to (b) Consolidated Total Capitalization on such date.
"Continuing Directors": the directors of the Borrower on the Closing Date, and each other director whose election by the board of directors of the Borrower, or whose nomination for election by the stockholders of the Borrower, was approved by a vote of at least a majority of the directors who were either directors on the Closing Date or whose election or nomination for election was previously so approved.
"Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
"Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollar Equivalent": at any time or during any period as to any amount denominated in a Foreign Currency, the amount of Dollars that may be purchased with such amount of such Foreign Currency at the applicable rate of exchange determined in accordance with Section 1.3.
"Dollar Loans": as defined in Section 2.1.
"Dollars" and "$": dollars in lawful currency of the United States.
"Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.
"Eurocurrency Applicable Margin": as determined pursuant to the Pricing Grid.
"Eurocurrency Base Rate": with respect to an Interest Period pertaining to any Eurocurrency Loan, the rate of interest determined on the basis of the rate for deposits in Dollars or the relevant Foreign Currency, as the case may be, for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate Screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on such page of the Telerate Screen (or otherwise on the Telerate Service), the "Eurocurrency Base Rate" shall instead be the interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the average of the rates at which deposits in Dollars or the relevant Foreign Currency, as the case may be, approximately equal in principal amount to the portion of the Eurocurrency Tranche of the Lender serving as Administrative Agent for a maturity comparable to such Interest
Period, are offered by the principal London office of Barclays Bank for immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period.
"Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate.
"Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):
"Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
"Eurocurrency Tranche": the collective reference to Eurocurrency Loans denominated in the same currency made by the Lenders to the Borrower, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Eurocurrency Loans shall originally have been made on the same day).
"Euros": the single currency of participating member states of the European Monetary Union introduced in accordance with the provisions of Article 109(1)4 of the Treaty of Rome of March 25, 1957 (as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993) as amended from time to time) and as referred to in legislative measures of the European Union for the introduction of, changeover to or operating of the euro in one or more member states.
"Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Excess Utilization Day": each day on which the Commitment Utilization Percentage exceeds 50%.
"Exchange Rate": on any day, with respect to any currency, the rate at which such currency may be exchanged into any other currency, as set forth at approximately 11:00 A.M., London time, on such date on the Reuters World Currency Page for such currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be selected by the Administrative Agent, or, in the event no such service is selected, such Exchange Rate shall instead be the arithmetic average of the
spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of the relevant currency for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error; provided, further, that in any event, the Administrative Agent shall provide the Borrower with reasonable details of the source for such rate.
"Facility Fee": as defined in Section 2.3(a).
"Facility Fee Rate": as determined pursuant to the Pricing Grid.
"Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Barclays Bank PLC from three federal funds brokers of recognized standing selected by it.
"Fee Payment Date": (a) the third Business Day following the last day of each March, June, September and December, (b) the Termination Date and (c) the date the Commitments shall have been terminated and the principal of the Loans shall have been paid in full.
"Foreign Currency": each of Euros, Sterling and Yen.
"Foreign Currency Loans": as defined in Section 2.1.
"Funding Office": the office of the Administrative Agent specified in
Section 9.2 or such other office as may be specified from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 3.1(b).
"Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
"Group Members": the collective reference to the Borrower and its Subsidiaries (or, in the case of Sections 7(e), (f) and (h) only, its Significant Subsidiaries).
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
obligation, including a reimbursement, counterindemnity or similar obligation,
of the guaranteeing Person that guarantees or in effect guarantees, or which is
given to induce the creation of a separate obligation by another Person
(including any bank under any letter of credit) that guarantees or in effect
guarantees, any Indebtedness (the "primary obligations") of any other third
Person (the "primary obligor") in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be deemed to
be the lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is made and (b)
the maximum amount for which such guaranteeing person may be liable pursuant to
the terms of the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (excluding
accounts payable and accrued expenses), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party or applicant under or in
respect of bankers' acceptances, (g) all reimbursement obligations of such
Person in respect of drawings or payments made under letters of credit, surety
or performance bonds or other similar arrangements that are not satisfied within
three Business Days following the date of receipt by such Person of notice of
such drawing or payment, (h) the liquidation value of all manditorily redeemable
preferred Capital Stock of such Person, (i) all Guarantee Obligations of such
Person in respect of obligations of the kind referred to in clauses (a) through
(f) and (h) above, (j) all obligations of the kind referred to in clauses (a)
through (i) above secured by any Lien on property (including accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation (it being understood that
obligations in respect of a Permitted Receivables Securitization shall not
constitute Indebtedness), and (k) for the purposes of Section 7(e) only, all
obligations of such Person in respect of Swap Agreements. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
"Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any Eurocurrency Loan having an
Interest Period of three months or less, the last day of such Interest Period,
(c) as to any Eurocurrency Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
(d) as to any Loan (other than any Loan that is an ABR Loan), the date of any
repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurocurrency Loan, (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, in the case of Loans denominated in Dollars, and 10:00 A.M., New York City time, in the case of Foreign Currency Loans, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period that would extend beyond the Termination Date, unless the Termination Date has been extended pursuant to Section 2.9, in which case the Borrower may not select an Interest Period that would extend beyond December 19, 2004; and
(iii)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
"Investments": as defined in Section 6.7.
"Judgment Currency": as defined in Section 2.19(b).
"Lender": as defined in the preamble hereto; provided that unless context otherwise requires each reference to the Lenders shall be deemed to include any Conduit Lender.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Notes and any amendment, waiver, supplement or other modification to any of the foregoing.
"Loan Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the Total Commitments or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding.
"Loans": as defined in Section 2.1.
"London Banking Day": any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.
"Margin Stock": as defined in Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes": as defined in Section 2.15(a).
"Non-U.S. Lender": as defined in Section 2.15(d).
"Notes": the collective reference to any promissory note evidencing Loans.
"Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.
"Other Agreement": the Three-Year Credit Agreement, dated as of the date hereof, among the Borrower, the several banks and other financial institutions or entities from time to time parties thereto, ABN Amro Bank N.V., as syndication agent, and Barclays Bank PLC, as administrative agent, as amended, supplemented or otherwise modified or replaced from time to time.
"Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 9.6(c).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Receivables Securitization": any Receivables Securitization Transaction, provided that the aggregate amount of the financing represented by such transactions at any one time outstanding does not exceed $200,000,000.
"Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is covered by
and subject to ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pricing Grid": the table set forth below (expressed in basis points):
Rating Agency Rating Facility Fee Eurocurrency Utilization Term-Out Premium
Rate Applicable Margin Fee Rate
----------------------------------- ---------------- --------------------- ---------------- -------------------
Greater than or
equal to A/A2 ............. 7.0 28.0 7.5 12.5
----------------------------------- ---------------- --------------------- ---------------- -------------------
A-/A3 ..................... 8.0 32.0 12.5 25.0
----------------------------------- ---------------- --------------------- ---------------- -------------------
BBB+/Baa1 ................. 10.0 52.5 12.5 25.0
----------------------------------- ---------------- --------------------- ---------------- -------------------
BBB/Baa2 .................. 12.5 62.5 12.5 25.0
----------------------------------- ---------------- --------------------- ---------------- -------------------
BBB-/Baa3 ................. 17.5 70.0 25.0 25.0
----------------------------------- ---------------- --------------------- ---------------- -------------------
Less than BBB-/Baa3
or No Rating .............. 25.0 112.5 37.5 50.0
----------------------------------- ---------------- --------------------- ---------------- -------------------
|
In any case where the Ratings of the two Rating Agencies are at different levels, the higher Rating will determine the Facility Fee Rate, the Eurocurrency Applicable Margin, the Utilization Fee Rate and the Term-Out Premium unless the S&P and Moody's Ratings are more than one level apart, in which case the Rating one level above the lower Rating will be determinative. Each change in a Rating by a Rating Agency shall be effective on the date such change is announced by such Rating Agency, and if such change in Rating shall result in a change in the Facility Fee Rate, Eurocurrency Applicable Margin, Utilization Fee Rate or Term-Out Premium, such latter change shall be effective on the effective date of such change in Rating.
"Properties": as defined in Section 3.13(a).
"Rating Agencies" Moody's and S&P.
"Ratings" the ratings from time to time established by the Rating Agencies for senior, unsecured, non-credit-enhanced long-term debt of the Borrower.
"Receivables": accounts receivable of the Borrower or any of its Subsidiaries (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), and all proceeds thereof and rights (contractual and other) and collateral related thereto.
"Receivables Securitization Transaction": with respect to the Borrower
and/or any of its Subsidiaries, the transfer of Receivables by any such Person
to a trust, partnership, corporation or other entity in a transaction in which
(x) the transferred Receivables, after giving effect to such transaction, are
not, in accordance with GAAP, treated as assets on the books of the Borrower and
its Subsidiaries and (y) the liabilities of the transferee trust, partnership,
corporation or other entity, after giving effect to such transaction, are not,
in accordance with GAAP, treated as liabilities on the books of the Borrower and
its Subsidiaries.
"Refunding Borrowing": a borrowing of Loans which, after application of the proceeds thereof, results in no net increase in the aggregate outstanding principal amount of Loans made by any Lender.
"Register": as defined in Section 9.6(b).
"Regulation U": Regulation U of the Board as in effect from time to time.
"Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of the Total Commitments then in effect or, if the Commitments have been terminated, the then outstanding Loans.
"Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
"Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower.
"Restricted Margin Stock": Margin Stock owned by the Borrower or any Subsidiary which represents not more than 25% of the aggregate value (determined in accordance with Regulation U), on a consolidated basis, of the property and assets of the Borrower and the Subsidiaries (including any Margin Stock) that is subject to the provisions of Section 6 (including Section 6.4).
"SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
"SEC Filings": as defined in Section 3.1.
"Significant Subsidiary": any Subsidiary which is a "Significant Subsidiary," as defined in Regulation S-X part 210.1-02 of the Code of Federal Regulations.
"Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.
"Specified Swap Agreement": any Swap Agreement entered into by the Borrower and any Lender or affiliate thereof in respect of interest rates or currency exchange rates.
"Sterling": British Pounds Sterling, the lawful currency of the United Kingdom.
"Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Swap Agreement": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a "Swap Agreement".
"S&P": Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.
"Syndication Agent": as defined in the preamble hereto.
"Term-Out Period": the period from but excluding the Termination Date to and including December 19, 2004.
"Term-Out Premium": as determined pursuant to the Pricing Grid.
"Termination Date": December 19, 2003 or, if the Termination Date shall be extended in accordance with Section 2.9, December 19, 2004.
"Total Commitments": at any time, the aggregate amount of the Commitments of the Lenders then in effect.
"Total Loans": at any time, the sum of (a) the aggregate amount of the Dollar Loans outstanding at such time and (b) the aggregate Dollar Equivalent of the Foreign Currency Loans outstanding at such time.
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurocurrency Loan.
"United States": the United States of America.
"Unrestricted Margin Stock": any Margin Stock owned by the Borrower or any Subsidiary which is not Restricted Margin Stock.
"Utilization Fee Rate": as determined pursuant to the Pricing Grid.
"Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
"Yen": the lawful currency of Japan.
1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time.
(c) The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
1.3 Exchange Rates. For purposes of calculating (a) the aggregate Dollar Equivalent of Foreign Currency Loans outstanding at any time during any period and (b) the Dollar Equivalent of any Foreign Currency Loan at the time of the making of such Loan pursuant to Section 2.1, the Administrative Agent will at least once during each calendar month and at such other times as it in its sole discretion decides to do so (including on or prior to the date of any borrowing and the last day of any Interest Period), determine the respective rate of exchange into Dollars of each Foreign Currency (which rate of exchange shall be based upon the Exchange Rate in effect on the date of such determination). Such rates of exchange so determined on each such determination date shall, for purposes of the calculations described in the preceding sentence, be deemed to remain unchanged and in effect until the next such determination date.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans in Dollars ("Dollar Loans") or in any Foreign Currency (the "Foreign Currency Loans", and together with the Dollar Loans, the "Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender's Commitment. The Borrower shall not request and no Lender shall be required to make any Loan if, after making such Loan, the Total Loans shall exceed the Total Commitments then in effect. During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof, provided, that the Commitments shall be reduced on the Termination Date to an amount equal to the amount of the Total Loans then outstanding and, if the Total Loans shall at any time or from time to time be reduced thereafter (whether as a result of a prepayment, a change in exchange rates or otherwise), the Commitments shall be reduced pro rata simultaneously by an amount equal to such reduction in the Total Loans, and provided, further, that on and after the Termination Date, no Loans may be made which are not Refunding Borrowings. The Dollar Loans may from time to time be Eurocurrency Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7. All Foreign Currency Loans shall be Eurocurrency Loans.
2.2 Procedure for Borrowing. (a) The Borrower may borrow Dollar Loans
during the Commitment Period on any Business Day, provided that the Borrower
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent (a) prior to 10:00 A.M., New York City
time, three Business Days prior to the requested Borrowing Date, in the case of
Eurocurrency Loans or (b) prior to 11:00 A.M., New York City time, on the
requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount
and Type of Dollar Loans to be borrowed, (ii) the requested Borrowing Date, and
(iii) in the case of Eurocurrency Loans, the respective amounts of each such
Type of Loan and the respective lengths of the initial Interest Period therefor.
Any Dollar Loans made on the Closing Date shall initially be ABR Loans. Each
borrowing of Dollar Loans under the Commitments shall be in an amount equal to
(x) in the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if the
then aggregate Available Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurocurrency Loans, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such Office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(b) The Borrower may borrow Foreign Currency Loans during the Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, three Business
Days prior to the requested Borrowing Date), specifying (i) the requested
Borrowing Date, (ii) the respective amounts of each Foreign Currency Loan in
each Foreign Currency and (iii) the respective lengths of the initial Interest
Period therefor. Each Foreign Currency Loan under the Commitments shall be in an
amount equal to (x) in the case of Foreign Currency Loans denominated in
Sterling, (pound)7,000,000 or a whole multiple of (pound)500,000 in excess
thereof, (y) in the case of Foreign Currency Loans denominated in Euros,
(euro)10,000,000 or a whole multiple of (euro)1,000,000 in excess thereof, and
(z) in the case of Foreign Currency Loans denominated in Yen, Y1,000,000,000 or
a whole multiple of Y100,000,000 in excess thereof. Upon receipt of any such
notice from the Borrower, the Administrative Agent shall promptly notify each
Lender thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, London time, in each case, on the
Borrowing Date requested by the Borrower in funds immediately available in the
relevant Foreign Currency to the Administrative Agent. Such borrowing will then
be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower on the books of such Office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent or by wire transfer of such
amounts to an account designated in writing by the Borrower to the
Administrative Agent in connection with the relevant borrowing.
2.3 Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (a "Facility Fee") for the period from and including the date hereof to the date upon which the Commitments shall have terminated and all Loans shall have been paid in full, computed at a rate per annum equal to the Facility Fee Rate on the average daily amount of the Commitment of such Lender (whether or not utilized) during the period for which payment is made (or, if any Lender continues to have any Loans after its Commitment terminates, on the average daily amount of such Lender's Loans from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Loans outstanding), payable in arrears on each Fee Payment Date.
(b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender in arrears on each Fee Payment Date, a utilization fee (a "Utilization Fee") at a rate per annum equal to the Utilization Fee Rate for each Excess Utilization Day during the period covered by such Fee Payment Date on such Lender's Loans then outstanding on such Excess Utilization Day.
(c) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates as set forth in the Fee Letter, dated as of November 1, 2002, between the Borrower and the Administrative Agent, and in any other fee agreements between the Borrower and the Administrative executed after the date of this Agreement, and to perform any other obligations contained therein.
2.4 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided that no such termination or reduction of Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Loans, the Total Loans would exceed the Total Commitments. Any such reduction shall be in an amount equal to $10,000,000, or
an integral multiple of $1,000,000 in excess thereof, and shall reduce permanently the Commitments then in effect.
2.5 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent not later than 10:00
A.M., New York City time, three Business Days prior to the date of prepayment,
in the case of Eurocurrency Loans, and not later than 11:00 A.M., New York City
time, one Business Day prior to the date of prepayment, in the case of ABR
Loans, which notice shall specify the date and amount of prepayment and whether
the prepayment is of Eurocurrency Loans or ABR Loans and, if such prepayment is
of Foreign Currency Loans, the applicable Foreign Currency; provided, that if a
Eurocurrency Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.16. Upon receipt of any such notice the Administrative
Agent shall promptly notify each Lender thereof. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with (except in the case of Loans that are ABR
Loans) accrued interest to such date on the amount prepaid. Partial prepayments
of Dollar Loans shall be in an aggregate principal amount of $10,000,000 or a
whole multiple of $1,000,000 in excess thereof. Partial prepayments of Foreign
Currency Loans shall be in a minimum principal amount of (x) (pound)7,000,000 or
a whole multiple of (pound)500,000 in excess thereof, in the case of Foreign
Currency Loans denominated in Sterling, (y) (euro)10,000,000 or a whole multiple
or (euro)1,000,000 in excess thereof, in the case of Foreign Currency Loans
denominated in Euros, and (z) Y1,000,000,000 or a whole multiple or Y100,000,000
in excess thereof, in the case of Foreign Currency Loans denominated in Yen.
2.6 Mandatory Prepayments. If, on any date, the Total Loans outstanding on such date exceed 102% of the Total Commitments in effect on such date, the Borrower shall, without notice or demand, promptly (but in any event, within three Business Days of such date) prepay such outstanding Loans in an aggregate principal amount such that, after giving effect thereto, the Total Loans do not exceed the Total Commitments. Any amounts prepaid pursuant to this Section shall be accompanied by interest accrued to the date of such prepayment on the principal so prepaid and any amounts payable under Section 2.16 in connection therewith.
2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to ABR Loans by giving the Administrative Agent irrevocable notice of such election not later than 11:00 A.M., New York City time, one Business Day prior to the date of conversion, provided that any such conversion of Eurocurrency Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert its ABR Loans to Eurocurrency Loans denominated in Dollars by giving the Administrative Agent irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor) not later than 11:00 A.M., New York City time, three Business Days prior to the date of conversion, provided that no ABR Loan may be converted into a Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof.
(b) Any Eurocurrency Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurocurrency Loan denominated in Dollars may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such continuation, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso any such Loans denominated in Dollars shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period and, if the Borrower shall fail to give such notice of continuation of a Foreign Currency Loan, such Foreign Currency Loan shall be automatically continued for an Interest Period of one month. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
2.8 Limitations on Eurocurrency Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurocurrency Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that no more than ten Eurocurrency Tranches shall be outstanding at any one time.
2.9 Repayment of Loans; Extension of Termination Date. The Borrower hereby unconditionally promises to pay to each Lender on the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 7), the unpaid principal amount of each Loan made by such Lender. Notwithstanding the foregoing, the Borrower may request, in a notice provided to the Administrative Agent not less than 30 nor more than 60 days prior to the Termination Date, that the Loans comprising any Borrowing outstanding on the Termination Date mature on December 19, 2004, and the unpaid principal amount of such Loans shall then be due and payable on such date. The Administrative Agent shall promptly notify each relevant Lender of such request. Any extension of the Termination Date pursuant to this Section shall be subject to the satisfaction of the conditions set forth in Section 4.2 on the Termination Date to the same extent as if the Lenders were requested to make Loans on the Termination Date. The Borrower hereby further agrees to pay interest in immediately available funds at the office of the Administrative Agent on the unpaid principal amount of such Loans from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.10.
2.10 Interest Rates and Payment Dates. (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such day plus the Eurocurrency Applicable Margin and plus, during the Term-Out Period (if it occurs), the Term-Out Premium.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus, during the Term-Out Period (if it occurs), the Term-Out Premium.
(c) (i) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% and (ii) if all or a portion of any interest payable on any Loan or any facility fee or utilization fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to ABR Loans plus 2% (unless such overdue amount is denominated in a Foreign Currency, in which case such overdue amount shall bear interest of a rate per annum equal to the highest rate then applicable under this Agreement to Foreign Currency Loans denominated in such Foreign Currency plus 2%), in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.
2.11 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to (i) ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed and (ii) Foreign Currency Loans denominated in Sterling, interest shall be calculated on the basis of a 365-day year for actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the Eurocurrency Applicable Margin, the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the relevant Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.10(a).
2.12 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period,
(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurocurrency Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to the relevant Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, or
(c) the Administrative Agent determines (which determination shall be conclusive and binding upon the Borrower) that deposits in the applicable currency are not generally available, or cannot be obtained by the relevant Lenders, in the applicable market (any Foreign Currency affected by the circumstances described in clause (a), (b) or (c) is referred to as an "Affected Foreign Currency"),
then the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders as soon as practicable thereafter. If such notice is given (x) pursuant to clause (a) or (b) of this Section 2.12 in respect of Eurocurrency Loans denominated in Dollars, then (i) any Eurocurrency Loans denominated in Dollars requested to be made on the first day of such Interest Period shall be made as ABR Loans, (ii) any ABR Loans that were to have been converted on the first day of such Interest Period to Eurocurrency Loans denominated in Dollars shall be continued as ABR Loans and (iii) any outstanding Eurocurrency Loans denominated in Dollars shall be converted, on the last day of the then-current Interest Period, to ABR Loans and (y) in respect of any Foreign Currency Loans, then (i) any Foreign Currency Loans in an Affected Foreign Currency requested to be made on the first day of such Interest Period shall not be made and (ii) any outstanding Foreign Currency Loans in an Affected Foreign Currency shall be due and payable on the last day of the then-current Interest Period. Until such relevant notice has been withdrawn by the Administrative Agent, no further Eurocurrency Loans denominated in Dollars or Foreign Currency Loans in an Affected Foreign Currency shall be made or continued as such, nor shall the Borrower have the right to convert ABR Loans to Eurocurrency Loans denominated in Dollars.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any facility fee or utilization fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Loan Percentages of the Lenders.
(b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders.
(c) All payments (including prepayments) to be made by the Borrower, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at its Funding Office, in immediately available funds. Except as otherwise specified in this Agreement, amounts owing hereunder on account of principal and interest on Loans shall be paid in the currency in which such Loan was borrowed, and amounts owing hereunder on account of fees shall be paid in Dollars. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately
preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its share of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making such
amount available to the Administrative Agent, and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the Administrative Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to the
Administrative Agent, on demand, (i) in the case of amounts denominated in
Dollars, such amount with interest thereon at a rate equal to the greater of (x)
the Federal Funds Effective Rate and (y) a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation, for
the period until such Lender makes such amount immediately available to the
Administrative Agent or (ii) in the case of amounts denominated in Foreign
Currencies, such amount with interest thereon at a rate determined by the
Administrative Agent to be the cost to it of funding such amount until such
Lender makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to
any amounts owing under this paragraph shall be conclusive in the absence of
manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days after such
Borrowing Date, the Administrative Agent shall also be entitled to recover (i)
in the case of amounts denominated in Dollars, such amount with interest thereon
at the rate per annum applicable to ABR Loans, on demand, from the Borrower or
(ii) in the case of amounts denominated in Foreign Currencies, such amount with
interest thereon at a rate determined by the Administrative Agent to be the sum
of (x) the cost to it of funding such amount plus (y) the Eurocurrency
Applicable Margin, on demand, from the Borrower. The failure or refusal of any
Lender to make available to the Administrative Agent such Lender's share of such
borrowing shall not relieve any other Lender from its several obligation
hereunder to make available to the Administrative Agent the amount of such other
Lender's share of such borrowing. Nothing herein shall be deemed to limit the
rights of the Borrower against any Lender that has failed or refused to make
available such Lender's share of any borrowing.
(e) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each relevant Lender to which any amount which was made available pursuant to the preceding sentence, (i) in the case of amounts denominated in Dollars, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate and (ii) in the case of amounts denominated in Foreign Currencies, such amount with interest thereon at a rate per annum determined by the Administrative Agent to be the cost to it of funding such
amount. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower with respect to such payment.
2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurocurrency Rate; or
(iii) shall impose on such Lender any other condition relating to
funding of assets that would include the Eurodollar Loans or the income or
earnings in respect thereof (except for Non-Excluded Taxes covered by
Section 2.15 and changes in the rate of tax on the overall net income of
such Lender);
and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender reasonably deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall, promptly after its receipt of a notice with respect thereto in accordance with Section 2.14(d), pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof by a Governmental Authority charged with the interpretation or administration thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, after such Lender has provided written notice in accordance with Section 2.14(d) to the Borrower requesting compensation for such reduction under this paragraph, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.
(c) If any Governmental Authority of the jurisdiction of any Foreign Currency (or any other jurisdiction in which the funding operations of any Lender shall be conducted with respect to such Foreign Currency) shall have in effect any reserve, liquid asset or similar requirement with respect to any category of deposits or liabilities customarily used to fund loans in such Foreign Currency, or by reference to which interest rates applicable to loans in such Foreign Currency are determined, and the result of such requirement shall be to increase the cost to such Lender of making or maintaining any Foreign Currency Loan in such Foreign Currency, and such Lender shall deliver to the Borrower a written notice in accordance with Section 2.14(d) requesting compensation for such additional cost under this paragraph, then the Borrower will pay to such Lender on each Interest Payment Date with respect to each affected Foreign Currency Loan an amount that will compensate such Lender for such additional cost.
(d) If any Lender becomes entitled to claim any additional amounts, compensation or additional costs pursuant to this Section, it shall deliver a written notice in accordance with this paragraph to the Borrower (with a copy to the Administrative Agent) requesting such additional amounts, compensation or additional costs and notifying the Borrower of the event by reason of which it has become so entitled. Such Lender agrees to use reasonable efforts to deliver such notice promptly following the time at which it becomes aware of the event giving rise to such additional amounts, compensation or additional cost payable (provided that the failure by such Lender to give such notice promptly shall not adversely affect any of its rights hereunder). A certificate as to any additional amounts, compensation or additional costs payable to any Lender pursuant to this Section 2.14 submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. Notwithstanding anything to the contrary contained in paragraphs (a), (b) and (c) above, the Borrower shall not be required to compensate a Lender pursuant to such paragraphs for any amounts incurred more than three months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided further that, if the circumstances giving rise to such claim have a retroactive effect, then such three-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrower pursuant to this Section 2.14 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(e) Notwithstanding any other provision of this Agreement, if (x) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by a Governmental Authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof shall make it unlawful for any Lender to make or maintain any Foreign Currency Loan or to give effect to its obligations as contemplated hereby with respect to any Foreign Currency Loan, or (y) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls, but excluding conditions otherwise covered by this Section 2.14) which would make it impracticable for any Lender to make or maintain Foreign Currency Loans denominated in the relevant Foreign Currency after the date hereof to, or for the account of, the Borrower, then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Foreign Currency Loans (in the affected Foreign Currency or Currencies) will not thereafter (for the duration of such unlawfulness or change in conditions) be made by such Lender or Lenders hereunder (or be continued for additional Interest Periods), whereupon any request for a Foreign Currency Loan (in the affected Foreign Currency or Currencies) or to continue a Foreign Currency Loan (in the affected Foreign Currency or Currencies), as the case may be, for an additional Interest Period) shall, as to such Lender only, be of no force and effect, unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Foreign Currency Loans (in the affected Foreign Currency or Currencies), made by it be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be (unless repaid by the Borrower), in which event all such Foreign Currency Loans (in the affected Foreign Currency or Currencies) shall be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, as of the effective date of such notice as provided in paragraph (f) below and at the Exchange Rate on the date of such conversion or, at the option of the Borrower, repaid on the last day of the then current Interest Period with respect thereto.
In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal made thereafter that would otherwise have been applied to repay the converted Foreign Currency Loans of such Lender shall instead be applied to repay the ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, made by such Lender resulting from such conversion.
(f) For purposes of Section 2.14(e), a notice to the Borrower by any Lender shall be effective as to each Foreign Currency Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Foreign Currency Loan; in all other cases such notice shall be effective on the date of receipt thereof by the Borrower.
2.15 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure.
(d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in
Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or,
in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender, to the extent such
Non-U.S. Lender is legally able to deliver such replacement forms.. Each
Non-U.S. Lender shall promptly notify the Borrower at any time it determines
that it is no longer in a position to provide any previously delivered
certificate to the Borrower (or any other form of certification adopted by the
U.S. taxing authorities for such purpose).
(e) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.16 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurocurrency Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurocurrency Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.17 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.14 or 2.15(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal, regulatory or other disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.14 or 2.15(a).
2.18 Replacement of Lenders. The Borrower shall be permitted to replace any
Lender that (a) requests reimbursement for amounts owing pursuant to Section
2.14 or 2.15(a) or (b) defaults in its obligation to make Loans hereunder, with
a replacement financial institution; provided that (i) such replacement does not
conflict with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii) prior to any
such replacement, such Lender shall have taken no action under Section 2.17 so
as to eliminate the continued need for payment of any amounts owing pursuant to
Section 2.14 or 2.15(a), (iv) the replacement financial institution shall
purchase, at par (unless the Lender being replaced otherwise agrees to accept a
lesser payment in its discretion), all Loans and other amounts owing to such
replaced Lender on or prior to the date of replacement, (v) the Borrower shall
be liable to such replaced Lender under Section 2.16 if any Eurocurrency Loan
owing to such replaced Lender shall be purchased other than on the last day of
the Interest Period relating thereto, (vi) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vii) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of Section 9.6 (provided that the
Borrower shall be obligated to pay the registration and processing fee referred
to therein), (viii) until such time as such replacement shall be consummated,
the Borrower shall pay all additional amounts (if any) required pursuant to
Section 2.14 or 2.15(a), as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.
2.19 Judgment Currency. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.
(b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower as a separate obligation and notwithstanding any such judgment, agrees to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender, as of the date of this Agreement (except as to the representations and warranties made as of a date certain, which shall be true and correct as of such date) and as of the date such representations and warranties are deemed to be made under Section 4.2(a), that:
3.1 Financial Condition. The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at January 1, 2000, December 30, 2000 and December 29, 2001 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Arthur Andersen LLP, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such dates, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 28, 2002, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). As of the date of this Agreement, no Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, other than those that (i) are not material to the Borrower and its Subsidiaries taken as a whole or (ii) are reflected in the most recent financial statements referred to in this paragraph or in the Borrower's most recent report on Form 10-K and any subsequent reports on Form 10-Q or Form 8-K filed with the SEC prior to the date of this Agreement (such filings, the "SEC Filings"). During the period from December 29, 2001 to and including the date of this Agreement there has been no Disposition by any Group Member of any part of its business or property material to the Borrower and its Subsidiaries taken as a whole except as set forth in the most recent financial statements referred to in this paragraph or in the Borrower's SEC Filings.
3.2 No Change. Since December 29, 2001, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
3.3 Existence; Compliance with Law. Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to conform to the requirements of clauses (a) through (d) could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations. The Borrower has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder. The Borrower has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required of any Group Member in connection with the borrowings by the Borrower hereunder or with the execution, delivery and performance by the Borrower, or the validity or enforceability against the Borrower, of this Agreement or any of the Loan Documents. Each Loan Document has been duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, the execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings
hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation.
3.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues that could reasonably be expected to have a Material Adverse Effect.
3.7 Ownership of Property; Liens. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 6.4.
3.8 Taxes. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member).
3.9 Federal Regulations. No part of the proceeds of any Loans will be used for any purpose that violates the provisions of Regulation U or any of the other Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
3.10 ERISA. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred that could reasonably be expected to have a Material Adverse Effect, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount that is material in relation to Consolidated Net Worth. Except as in the aggregate could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to
any liability under ERISA that, in the aggregate, could reasonably be expected to result in a Material Adverse Effect if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent under circumstances that could reasonably be expected to result in a Material Adverse Effect.
3.11 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.
3.12 Use of Proceeds. The proceeds of the Loans shall be used by the Borrower and its Subsidiaries for working capital, non-hostile acquisitions, repurchases of Capital Stock, debentures and other securities of the Borrower, the refinancing of present and future debt and general corporate purposes.
3.13 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by any Group Member (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;
(b) no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any Group Member (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any Group Member in connection with the Properties or
otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and
(g) no Group Member has assumed any liability of any other Person under Environmental Laws.
3.14 Accuracy of Information, etc. No statement or information contained in this Agreement, the Confidential Information Memorandum or any other document, certificate or statement furnished by or on behalf of the Borrower to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement) when taken together with the SEC Filings, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loans requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loans, of the following conditions precedent:
(a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered by the Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the Borrower and each Person listed on Schedule 1.1.
(b) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date. All such amounts will be paid by wire transfer on the Closing Date.
(c) Closing Certificate; Certified Certificate of Incorporation. The Administrative Agent shall have received a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit B, with appropriate insertions and attachments, including the certificate of incorporation of the Borrower.
(d) Legal Opinions. The Administrative Agent shall have received the legal opinion of Seth Hoogasian, General Counsel of the Borrower and its Subsidiaries,
substantially in the form of Exhibit D. Such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.
(e) Other Agreement. The Other Agreement shall have been executed and delivered by the Borrower and all other parties thereto, and the Closing Date (as defined therein) shall have occurred thereunder.
4.2 Conditions to Each Loan. The agreement of each Lender to make any Loan (other than a Refunding Borrowing) requested to be made by it on any date (including its initial Loan) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents (other than representations and warranties made as of a specified earlier date, which shall be true and correct as of such earlier date) shall be true and correct on and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such borrowing that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall and (except in the case of Sections 5.1, 5.2, 5.4(a)(i) and 5.7) shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PriceWaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods. Notwithstanding anything to the contrary contained in this Section 5.1, the Borrower shall not be required to deliver any financial statements to the Administrative Agent with respect to any period for which it has timely filed its Form 10-K or Form 10-Q, as the case may be, with the SEC (provided that such Form 10-K or Form 10-Q, as the case may be, is publicly available on the SEC's website (or a similar website) within the time periods required by this Section).
5.2 Certificates; Other Information. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) within the time period in which the Borrower is required to deliver any financial statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, the Borrower during the period covered by such financial statements has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by the Borrower with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be;
(b) as soon as available, and in any event no later than 60 days after the end of each fiscal year of the Borrower, a reasonably detailed consolidated budget (set forth on a quarter by quarter basis) for the following fiscal year;
(c) unless publicly available at such time on the SEC's website (or a similar website), within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; and
(d) promptly, such additional financial and other information as any Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature that, if not paid, could reasonably be expected to result in a Material Adverse Effect, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.
5.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew and keep in full force and effect the Borrower's organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises of each such Group Member necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 6.5 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) except to the extent that, in the aggregate, non-compliance could not reasonably be expected to have a Material Adverse Effect, comply with all Contractual Obligations and Requirements of Law.
5.5 Maintenance of Property; Insurance. Except to the extent that, in the aggregate, non-compliance could not reasonably be expected to have a Material Adverse Effect, (a) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.
5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions material to the Borrower and its Subsidiaries, taken as a whole, in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with officers and employees of the Group Members and with their independent certified public accountants.
5.7 Notices. Promptly after the Borrower becomes aware thereof, give notice to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual Obligation of any Group Member or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Group Member (i) in which the amount involved is $10,000,000 or more and not covered by insurance or (ii) which relates to any Loan Document;
(d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan which could reasonably be expected to have a Material Adverse Effect, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, (ii) the institution of proceedings or the taking of any other action by the PBGC with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan, or (iii) the institution of proceedings or the taking of any other action by the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan which, in the case of this clause (iii), could reasonably be expected to have a Material Adverse Effect; and
(e) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Group Member proposes to take with respect thereto.
5.8 Environmental Laws. Comply in all material respects with all applicable Environmental Laws, and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except to the extent that the failure to comply, or obtain and comply, therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending on any fiscal quarter of the Borrower ending on or after the fiscal quarter ending on March 29, 2003 to be less than 3.75:1.00.
(b) Consolidated Total Debt to Total Capitalization Ratio. Permit the Consolidated Total Debt to Consolidated Total Capitalization Ratio at the end of any fiscal quarter of the Borrower ending on or after the fiscal quarter ending on March 29, 2003 to be greater than 0.50:1.00.
6.2 Standby and Performance Letters of Credit. Permit at any one time outstanding the sum of (a) the aggregate then undrawn face amount of surety and performance bonds, bank guarantees and standby and performance letters of credit as to which the Borrower and/or any Subsidiary is or are the account party and which do not secure or otherwise assure the payment of Indebtedness and (b) the aggregate then unreimbursed amount of all amounts paid in respect of drawings under such surety and performance bonds, bank guarantees and letters of credit to exceed $200,000,000.
6.3 Indebtedness of Subsidiaries. In the case of any Subsidiary, create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness of such Subsidiary, except:
(a) Indebtedness of such Subsidiary to the Borrower or any other Subsidiary and Guarantee Obligations of any Subsidiary with respect to Indebtedness of the Borrower or any other Subsidiary;
(b) (i) Indebtedness outstanding on the date hereof and described on Schedule 6.3(b), and additional Indebtedness incurred after the date hereof under the revolving credit arrangements described on Schedule 6.3(b) in an aggregate principal amount at any one time outstanding not to exceed the commitments or limits existing with respect thereto on the date hereof and described on such Schedule, and (ii) Indebtedness under any replacements, refinancings, refundings, renewals or extensions of the Indebtedness described in clause (i) (without increasing the principal amount above the commitments or limits, or shortening the maturity thereof to a date earlier than the maturity, respectively, thereof described on Schedule 6.3(b));
(c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 6.4(g) in an aggregate principal amount not to exceed the greater of $25,000,000 or 2.5% of Consolidated Net Worth at any one time outstanding; and
(d) additional Indebtedness in an aggregate principal amount for all Subsidiaries (on a consolidated basis) not to exceed the greater of $100,000,000 or 10.1% of Consolidated Net Worth at any one time outstanding.
6.4 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property (other than any Lien on Margin Stock created, incurred or assumed at a time when such Margin Stock constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof (or, in the case of Liens securing Indebtedness in respect of the securities lending arrangements with JPMorgan Chase Bank and ABN AMRO Inc. described on Schedule 6.4(f), Liens created with respect thereto) and described on Schedule 6.4(f) securing Indebtedness described on such Schedule, or Liens on the assets that are subject to such existing Liens securing any replacement or refinancing of such Indebtedness; provided that Indebtedness in respect of the securities lending arrangements with JPMorgan Chase Bank and ABN AMRO Inc. described on Schedule 6.4(f) may not be replaced or refinanced beyond December 31, 2003; and provided, further that (i) no Lien permitted by this Section 6.4(f) is spread to cover any additional property after the Closing Date and (ii) the amount of Indebtedness secured thereby is not increased beyond the commitments or limits described on Schedule 6.4(f);
(g) Liens securing Indebtedness incurred (in the case of any Subsidiary, pursuant to Section 6.3(c) or (d)) to finance the acquisition of fixed or capital assets or Liens on such fixed or capital assets securing any refinancing of such Indebtedness, provided that (i) such Liens (other than those securing any such refinancing Indebtedness) shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) (in the case of any Subsidiary) the amount of Indebtedness secured thereby is not increased;
(h) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased;
(i) other incidental Liens that (i) are not, in the aggregate, material to the Borrower and its Subsidiaries taken as a whole, (ii) do not secure Indebtedness and (iii) do not cover at any time assets having an aggregate fair market value in excess of $10,000,000;
(j) Liens incurred pursuant to a Permitted Receivables Securitization on the Receivables that are subject thereto;
(k) Liens on assets of a Subsidiary securing Acquired Indebtedness permitted by Section 6.3(d) in an aggregate principal amount for all such Subsidiaries not to exceed $75,000,000 at any one time outstanding; provided that such Liens are not spread to other assets of such Subsidiary following the consummation of the applicable acquisition; and
(l) Liens securing Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding.
6.5 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or any other Subsidiary;
(b) any Subsidiary of the Borrower may Dispose of any or all of its assets
(i) to the Borrower or any other Subsidiary (upon voluntary liquidation or
otherwise) or (ii) pursuant to a Disposition permitted by Section 6.6;
(c) any Investment expressly permitted by Section 6.7 may be structured as a merger, consolidation or amalgamation; and
(d) any Subsidiary may be liquidated, wound up or dissolved, as deemed appropriate by the Borrower.
6.6 Disposition of Property. Dispose of any of its property (other than any property which, at the time of any Disposition thereof, constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by clause (i) of Section 6.5(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any other Subsidiary;
(e) the Dispositions listed on Schedule 6.6;
(f) the Disposition during any period of four consecutive fiscal quarters of the Borrower, commencing with the four-quarter period ending on January 3, 2004, of other property having an aggregate book value not to exceed $200,000,000 at the beginning of such period, provided that the Borrower shall deliver to the Administrative Agent written notice ten Business Days in advance of any Disposition in excess of $50,000,000;
(g) Dispositions of Receivables pursuant to a Permitted Receivables Securitization;
(h) Dispositions of Investments permitted by Section 6.7(b); and
(i) Dispositions by any Group Member to the Borrower or any of its Subsidiaries.
6.7 Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) obligations in respect of letters of credit, surety and performance bonds and bank guarantees permitted by Section 6.2, and Guarantee Obligations permitted by Section 6.3;
(d) loans and advances to employees of any Group Member in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $5,000,000 at any one time outstanding;
(e) intercompany Investments by any Group Member in the Borrower or any Subsidiary;
(f) non-hostile acquisitions of businesses or the acquisition (through
merger or otherwise) of or Investments in Persons if (i) in the case of the
acquisition of the Capital Stock of any Person (whether by merger or otherwise),
such Person has become a Subsidiary of the Borrower as a result of thereof and
(ii) after giving pro forma effect to such acquisition or Investment, there is
no Default or Event of Default (it being understood and agreed that in
determining pro forma compliance with Section 6.1, such covenants shall be
recomputed as of the most recent fiscal-quarter-end date for which financial
statements shall have been delivered pursuant to Section 5.1, adjusted (x) in
the case of Section 6.1(a), to recompute Consolidated EBITDA to give effect to
such acquisition or Investment as if it had occurred on the first day of the
applicable four-quarter period and to recompute Consolidated Interest Expense
for such period to include the additional interest that would have accrued
during such period in respect of Indebtedness acquired or assumed in connection
with such acquisition or Investment if such acquisition or Investment had
occurred on the first day of such period and in respect of any Indebtedness
incurred to finance such acquisition or Investment if such Indebtedness had been
incurred on such day (and had borne interest throughout such period at the rate
per annum applicable thereto on the date it was incurred) and (y) in the case of
Section 6.1(b), to recompute Consolidated Total Debt to include therein all
Indebtedness acquired, assumed or incurred by the Borrower and its Subsidiaries
in connection with and to finance such acquisition or Investment and to
recompute Consolidated Net Worth to give effect to such acquisition or
Investment);
(g) Investments consisting of promissory notes received as proceeds of Dispositions permitted by Section 6.6; and
(h) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower and its Subsidiaries in an aggregate amount
(valued at cost) not to exceed $200,000,000 during any period of four consecutive fiscal quarters of the Borrower, commencing with the four-quarter period ending on January 3, 2004.
6.8 Transactions with Affiliates. Enter into any transaction, including any
purchase, sale, lease or exchange of property, the rendering of any service or
the payment of any management, advisory or similar fees, with any Affiliate
(other than the Borrower or any other Group Member) unless such transaction (a)
is (i) otherwise permitted under this Agreement and (ii) upon fair and
reasonable terms no less favorable to the relevant Group Member than it would
obtain in a comparable arm's length transaction with a Person that is not an
Affiliate or (b) involves, when taken together with all other transactions
covered by this clause (b) entered into during any fiscal year, $1,000,000 or
less.
6.9 Changes in Fiscal Periods. Change the Borrower's method of determining fiscal years and quarters without prior written notice to the Administrative Agent.
6.10 Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by the Borrower herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or
(c) the Borrower shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 5.4(a) (with respect to the Borrower only), Section 5.7(a) or Section 6 of this Agreement; or
(d) the Borrower shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders; or
(e) any Group Member shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond
the period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created; or (iii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder
or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case of any
such Indebtedness constituting a Guarantee Obligation) to become payable (other
than any such default, event or condition arising solely out of the violation by
the Borrower or any Subsidiary of any covenant in any way restricting the
Borrower's, or any such Subsidiary's, right or ability to sell, pledge or
otherwise dispose of Unrestricted Margin Stock); provided, that a default, event
or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii) and
(iii) of this paragraph (e) shall have occurred and be continuing with respect
to Indebtedness the outstanding principal amount of which exceeds in the
aggregate $15,000,000; or
(f) (i) any Group Member shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Group Member shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Group Member any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against any Group Member any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets that results in the entry of
an order for any such relief that shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
any Group Member shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Group Member or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any
Group Member or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 40% of the outstanding common stock of the Borrower; or (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.
SECTION 8. THE AGENTS
8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither any Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable to any Lender for any action lawfully taken or omitted to be taken by
it or such Person under or in connection with this Agreement or any other Loan
Document (except to the extent that any of the foregoing are found by a final
and nonappealable decision of a court of competent jurisdiction to have resulted
from its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agents under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Loan Party a party thereto to perform its obligations hereunder or
thereunder. The Agents shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.
8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Loan Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Loan Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 7(a) or Section 7(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
8.10 Syndication Agent and Co-Documentation Agents. Neither the Syndication Agent nor any Co-Documentation Agent shall have any duties or responsibilities hereunder in its capacity as such.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and the Borrower may, or, with the written consent of the Required Lenders, the Administrative Agent and the Borrower may, from time to
time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder (except in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Required Lenders)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 9.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all Lenders; (iv) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent; or (v) add additional currencies as Foreign Currencies in which Foreign Currency Loans may be made under this Agreement without the written consent of all the Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy) and shall not be effective until received, provided that any notice given by the Administrative Agent pursuant to the final paragraph of Section 7 shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received. All such notices, requests and demands shall be addressed as follows, in the case of the Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:
Borrower: Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: Treasurer
Telecopy: 781-622-1181
Telephone: 781-622-1000
With a copy to:
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Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: General Counsel
Telecopy: 781-622-1283
Telephone: 781-622-1000
Administrative Agent: Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Charles Ray
Telecopy: 212-412-5306
Telephone: 212-412-3355
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Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Administrative Agent, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate, (b) after the occurrence and during the continuance of an Event of Default, to pay or reimburse each Lender and the Administrative Agent for all its reasonable out-of-pocket costs and expenses
incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent and (c) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including reasonable fees and expenses of counsel) with respect to such Lender or Administrative Agent being a party to this Agreement or any other Loan Document, or the enforcement or performance of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Group Member or any of the Properties (all the foregoing in this clause (c), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or the breach by such Indemnitee of its obligations under this Agreement. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 9.5 shall be payable not later than 10 days after written demand therefor. Statements payable by the Borrower pursuant to this Section 9.5 shall be submitted to Office of the General Counsel (Telephone No. (781) 622-1000) (Telecopy No. (781) 622-1283), at the address of the Borrower set forth in Section 9.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 9.5 shall survive repayment of the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, or, if an Event of Default has occurred and is continuing, any other Person; and
(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of any Commitment to an assignee that is a Lender with a Commitment immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;
(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and
(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire.
For the purposes of this Section 9.6, the term "Approved Fund" has the following meaning:
"Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) below, from and after the effective date specified in each Assignment
and Assumption the Assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.15, 2.16 and 9.5). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.6
shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 9.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.7(b) as though it were a Lender, provided such Participant shall be subject to Section 9.7(a) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. Any Participant that is a Non-U.S. Lender shall not be
entitled to the benefits of Section 2.15 unless such Participant complies with
Section 2.15(d).
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
(e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.
(f) Notwithstanding the foregoing, any Lender may assign its rights and
obligations to a Conduit Lender organized and administered by such Lender,
provided that such assignment shall be subject to all the requirements of the
definition of the term "Conduit Lender" in Section 1.1. Notwithstanding the
foregoing, any Conduit Lender may assign any or all of the Loans it may have
funded hereunder to its designating Lender without the consent of the Borrower
or the Administrative Agent and without regard to the limitations set forth in
Section 9.6(b). Each of the Borrower, each Lender and the Administrative Agent
hereby confirms that it will not institute against a Conduit Lender or join any
other Person in instituting against a Conduit Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
state bankruptcy or similar law, for one year and one day after the payment in
full of the latest maturing commercial paper note issued by such Conduit Lender;
provided, however, that each Lender designating any Conduit Lender hereby agrees
to indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.
9.7 Adjustments; Set-off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender, if any Lender (a "Benefitted Lender") shall receive any payment of all or part of the Obligations owing to it (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right after the occurrence and during the
continuation of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Borrower, the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
9.11 Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
9.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and Holdings and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.
9.14 Confidentiality. Each of the Administrative Agent and each Lender agrees on its own behalf and on behalf of each Affiliate thereof to keep confidential all non-public information provided to it by any Group Member, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof solely for the purposes of, or otherwise in connection with, this Agreement, (b) subject to an express agreement to maintain the confidentiality of such information in compliance with the provisions of this Section (which may be a standing agreement between such Lender and such Transferee), to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, in each case who have a need to know such information in accordance with customary business practices (it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if required to do so in connection with any litigation
or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. Unless specifically prohibited by applicable law or court order, the Administrative Agent and each Lender shall, prior to any disclosure under clause (d), (e) or (f) above to (x) any Governmental Authority that does not have supervisory, regulatory or other similar authority with respect to the Administrative Agent or such Lender, as the case may be, and that is seeking such disclosure solely in connection with an investigation, litigation or other proceeding that does not otherwise involve the Administrative Agent or such Lender, as the case may be, or (y) any other Person that is not a Governmental Entity, notify the Borrower of any request for the disclosure of any such non-public information so as to provide the Borrower with the reasonable opportunity to obtain a protective order or other comparable relief.
9.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
[Rest of page left intentionally blank]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
THERMO ELECTRON CORPORATION
By: /s/ Kenneth J. Apicerno
--------------------------------------
Name: Kenneth J. Apicerno
Title: Treasurer
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BARCLAYS BANK PLC, as Administrative Agent and as a Lender
By: /s/ John Giannone
--------------------------------------
Name: John Giannone
Title: Director
|
ABN AMRO BANK N.V., as Syndication Agent and as a Lender
By: /s/ Richard Scrage James S. Kreitler
--------------------------------------
Name: Richard Scrage James S. Kreitler
Title: Vice President Senior Vice
President
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FLEET NATIONAL BANK, as Co-
Documentation Agent and as a Lender
By: /s/ Debra E. DelVecchio
--------------------------------------
Name: Debra E. DelVecchio
Title: Director
|
JPMORGAN CHASE BANK, as Co-
Documentation Agent and as a Lender
By: /s/ Dawn Lee Lum
--------------------------------------
Name: Dawn Lee Lum
Title: Vice President
|
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NY BRANCH, as a Lender
By: /s/ Lillian Kim
--------------------------------------
Name: Lillian Kim
Title: Authorized Signatory
|
INTESABCI S.P.A., NEW YORK BRANCH, as a Lender
By: /s/ F. Maffei
--------------------------------------
Name: F. Maffei
Title: Vice President
By: /s/ J. Dickerhof
--------------------------------------
Name: J. Dickerhof
Title: Vice President
|
KEY CORPORATE CAPITAL INC., as a Lender
By: /s/ Jeff Kalinowski
--------------------------------------
Name: Jeff Kalinowski
Title: Vice President
|
NORDEA BANK FINLAND PLC, as a Lender
By: /s/ Thomas P. Hickey
--------------------------------------
Name: Thomas P. Hickey
Title: Vice President
By: /s/ Henrik M. Steffensen
--------------------------------------
Name: Henrik M. Steffensen
Title: First Vice President
|
Exhibit 10.73
EXECUTION
VERSION
$125,000,000
THREE-YEAR CREDIT AGREEMENT
among
THERMO ELECTRON CORPORATION,
as Borrower,
The Several Lenders from Time to Time Parties Hereto,
ABN AMRO BANK N.V.,
as Syndication Agent,
FLEET NATIONAL BANK and
JPMORGAN CHASE BANK,
as Co-Documentation Agents,
and
BARCLAYS BANK PLC,
as Administrative Agent
BARCLAYS Capital, as Lead Arranger and Bookrunner ABN AMRO BANK N.V., as Lead Arranger
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Definitional Provisions..................................................................16
1.3 Exchange Rates.................................................................................16
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS................................................................16
2.1 Commitments....................................................................................16
2.2 Procedure for Borrowing........................................................................17
2.3 Fees...........................................................................................18
2.4 Optional Termination or Reduction of Commitments...............................................18
2.5 Optional Prepayments...........................................................................18
2.6 Mandatory Prepayments..........................................................................19
2.7 Conversion and Continuation Options............................................................19
2.8 Limitations on Eurocurrency Tranches...........................................................19
2.9 Repayment of Loans.............................................................................20
2.10 Interest Rates and Payment Dates...............................................................20
2.11 Computation of Interest and Fees...............................................................20
2.12 Inability to Determine Interest Rate...........................................................21
2.13 Pro Rata Treatment and Payments................................................................21
2.14 Requirements of Law............................................................................23
2.15 Taxes..........................................................................................26
2.16 Indemnity......................................................................................27
2.17 Change of Lending Office.......................................................................27
2.18 Replacement of Lenders.........................................................................28
2.19 Judgment Currency..............................................................................28
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................................................29
3.1 Financial Condition............................................................................29
3.2 No Change......................................................................................29
3.3 Existence; Compliance with Law.................................................................29
3.4 Power; Authorization; Enforceable Obligations..................................................30
3.5 No Legal Bar...................................................................................30
3.6 Litigation.....................................................................................30
3.7 Ownership of Property; Liens...................................................................30
3.8 Taxes..........................................................................................30
3.9 Federal Regulations............................................................................31
3.10 ERISA..........................................................................................31
3.11 Investment Company Act; Other Regulations......................................................31
3.12 Use of Proceeds................................................................................31
3.13 Environmental Matters..........................................................................31
3.14 Accuracy of Information, etc...................................................................32
SECTION 4. CONDITIONS PRECEDENT...........................................................................33
4.1 Conditions to Initial Loans....................................................................33
4.2 Conditions to Each Loan........................................................................33
SECTION 5. AFFIRMATIVE COVENANTS..........................................................................34
5.1 Financial Statements...........................................................................34
5.2 Certificates; Other Information................................................................34
5.3 Payment of Obligations.........................................................................35
5.4 Maintenance of Existence; Compliance...........................................................35
5.5 Maintenance of Property; Insurance.............................................................35
5.6 Inspection of Property; Books and Records; Discussions.........................................36
5.7 Notices........................................................................................36
5.8 Environmental Laws.............................................................................36
SECTION 6. NEGATIVE COVENANTS.............................................................................37
6.1 Financial Condition Covenants..................................................................37
6.2 Standby and Performance Letters of Credit......................................................37
6.3 Indebtedness of Subsidiaries...................................................................37
6.4 Liens..........................................................................................38
6.5 Fundamental Changes............................................................................39
6.6 Disposition of Property........................................................................39
6.7 Investments....................................................................................40
6.8 Transactions with Affiliates...................................................................41
6.9 Changes in Fiscal Periods......................................................................41
6.10 Lines of Business..............................................................................41
SECTION 7. EVENTS OF DEFAULT..............................................................................41
SECTION 8. THE AGENTS.....................................................................................44
8.1 Appointment....................................................................................44
8.2 Delegation of Duties...........................................................................44
8.3 Exculpatory Provisions.........................................................................44
8.4 Reliance by Administrative Agent...............................................................45
8.5 Notice of Default..............................................................................45
8.6 Non-Reliance on Agents and Other Lenders.......................................................45
8.7 Indemnification................................................................................46
8.8 Agent in Its Individual Capacity...............................................................46
8.9 Successor Administrative Agent.................................................................46
8.10 Syndication Agent and Co-Documentation Agents..................................................47
SECTION 9. MISCELLANEOUS..................................................................................47
9.1 Amendments and Waivers.........................................................................47
9.2 Notices........................................................................................48
9.3 No Waiver; Cumulative Remedies.................................................................49
9.4 Survival of Representations and Warranties.....................................................49
9.5 Payment of Expenses and Taxes..................................................................49
9.6 Successors and Assigns; Participations and Assignments.........................................50
9.7 Adjustments; Set-off...........................................................................53
9.8 Counterparts...................................................................................53
9.9 Severability...................................................................................54
9.10 Integration....................................................................................54
9.11 Governing Law..................................................................................54
9.12 Submission To Jurisdiction; Waivers............................................................54
9.13 Acknowledgements...............................................................................54
9.14 Confidentiality................................................................................55
9.15 WAIVERS OF JURY TRIAL..........................................................................55
SCHEDULES:
1.1 Commitments
6.3(b) Existing Indebtedness
6.4(f) Existing Liens
6.6 Certain Dispositions
EXHIBITS:
A Form of Compliance Certificate
B Form of Closing Certificate
C Form of Assignment and Assumption
D Form of Legal Opinion of Seth Hoogasian
E Form of Exemption Certificate
|
THREE-YEAR CREDIT AGREEMENT, dated as of December 20, 2002 (this "Agreement"), among THERMO ELECTRON CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), ABN AMRO BANK N.V., as syndication agent (in such capacity, the "Syndication Agent"), FLEET NATIONAL BANK and JPMORGAN CHASE BANK, as co-documentation agents (in such capacity, the "Co-Documentation Agents"), and BARCLAYS BANK PLC, as administrative agent (in such capacity, the "Administrative Agent").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Barclays Bank PLC as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Barclays Bank PLC in connection with extensions of credit to debtors). Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based upon the ABR.
"Acquired Indebtedness": Indebtedness of any Person outstanding on the date
(i) such Person is acquired by the Borrower or any of its Subsidiaries or (ii)
such Indebtedness is assumed by the Borrower or any of its Subsidiaries in
connection with the acquisition of a business of such Person, in each case in a
transaction permitted by Section 6.7(f) or (h), provided that such Indebtedness
was not created in contemplation or in connection with such acquisition.
"Administrative Agent": Barclays Bank PLC, as the lead arranger of the Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents, together with any of its successors.
"Affected Foreign Currency": as defined in Section 2.12(c).
"Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 15% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.
"Agents": the collective reference to the Syndication Agent, the Co-Documentation Agents, and the Administrative Agent.
"Agreement": as defined in the preamble hereto.
"Agreement Currency": as defined in Section 2.19(b).
"Approved Fund": as defined in Section 9.6(b).
"Assignee": as defined in Section 9.6(b).
"Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit C.
"Available Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Commitment then in effect over (b) the sum of (i) such Lender's Dollar Loans and (ii) the Dollar Equivalent of such Lender's Foreign Currency Loans.
"Benefitted Lender": as defined in Section 9.7(a).
"Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).
"Borrower": as defined in the preamble hereto.
"Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.
"Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, that, when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for international business (including dealings in Dollar deposits) in the London interbank market; provided, further, when used in connection with Eurocurrency Loans denominated in Euros, the term "Business Day" shall also exclude any day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer System (TARGET) (or, if such clearing system ceases to be operative, such other clearing system (if any) determined by the Administrative Agent to be a suitable replacement) is not open for settlement of payment in Euros.
"Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within three years from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or bank
deposits (including those maintained to facilitate payments, distributions and
collections) having maturities of eighteen months or less from the date of
acquisition issued by or with any Lender or by or with any commercial bank
organized under the laws of the United States or any state thereof or by any
financial institution organized in any foreign country recognized by the United
States, in each case rated at least A- by S&P, or A-3 by Moody's; (c) (i)
commercial paper of an issuer rated at least A-1 by S&P or P-1 by Moody's, , or
carrying an equivalent rating by a nationally recognized rating agency, if both
of the Rating Agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of acquisition or (ii)
commercial paper issued by Ford Motor Company, Ford Motor Credit Company,
DaimlerChrysler NA Holdings, John Deere Capital Corp., John Deere Credit Inc.,
Deere & Co., Walt Disney Company, General Motors Corp., or General Motors
Acceptance Corp., which at the time of purchase is rated at least A-2 by S&P, or
P-2 by Moody's, and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days, with respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A- by S&P or A-3 by Moody's; (f) securities with maturities or
put features of six months or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank satisfying
the requirements of clause (b) of this definition; (g) asset-backed or
mortgaged-backed securities rated AAA by either S&P or Moody's, (h) corporate
bonds or notes with maturities of three years or less and rated at least BBB- by
S&P or Baa3 by Moody's, (i) money market mutual or similar funds that invest
primarily in assets satisfying the requirements of clauses (a) through (h) of
this definition; or (j) money market funds that (i) comply with the criteria set
forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as amended,
(ii) are rated AAA by S&P or Aaa by Moody's and (iii) have portfolio assets of
at least $5,000,000,000.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 shall have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
"Co-Documentation Agents": as defined in the preamble hereto.
"Commitment": as to any Lender, the obligation of such Lender, if any, to make Loans in an aggregate Dollar and Dollar Equivalent principal amount not to
exceed the amount set forth under the heading "Commitment" opposite such Lender's name on Schedule 1.1 or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Commitments is $125,000,000.
"Commitment Period": the period from and including the Closing Date to the Termination Date.
"Commitment Utilization Percentage": on any day, the percentage equivalent of a fraction (a) the numerator of which is the sum of (i) the Total Loans outstanding on such day and (ii) the "Total Loans" under the Other Agreement outstanding on such day and (b) the denominator of which is the sum of (i) the Total Commitments in effect on such day (or, on any day after termination of the Total Commitments, the Total Commitments in effect immediately preceding such termination) and (ii) the "Total Commitments" under the Other Agreement in effect on such day (or, on any day after termination of the "Total Commitments" under the Other Agreement, the "Total Commitments" under the Other Agreement in effect immediately preceding such termination).
"Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit A.
"Conduit Lender": any special purpose corporation organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument; provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 2.14, 2.15, 2.16 or 9.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.
"Confidential Information Memorandum": the Confidential Information Memorandum dated October 2002 and furnished to certain Lenders.
"Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business) and (f) any extraordinary, unusual or non-recurring cash expenses or losses to the extent that they do not exceed, in the aggregate, $25,000,000 during such period (provided that, in connection with the calculation of Consolidated EBITDA for any period of four consecutive fiscal quarters which includes the second, third and/or fourth fiscal quarters of the Borrower's 2002 fiscal year, the Borrower shall also be entitled to add back, as cash expenses or losses of the type covered by this clause, an amount equal to $9,001,000 for such second fiscal quarter, $13,174,000 for such third fiscal quarter and/or, as the case may be, $15,000,000 for such fourth fiscal quarter) minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (i) interest income, (ii) any extraordinary, unusual or non-recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash gains on the sales of assets outside of the ordinary course of business), (iii) any extraordinary, unusual or non-recurring cash income or gains to the extent they exceed, in the aggregate, $25,000,000 during such period, (iv) income tax credits (to the extent not netted from income tax expense) and (v) any other non-cash income.
"Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.
"Consolidated Interest Expense": for any period, total interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to bankers' acceptance financing and net costs under Swap Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP).
"Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Worth": at any date, all amounts that would, in conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Total Capitalization": at any date, the sum of (a) Consolidated Net Worth on such date and (b) Consolidated Total Debt or such date.
"Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt to Capitalization Ratio": on any date, the ratio of (a) Consolidated Total Debt on such date to (b) Consolidated Total Capitalization on such date.
"Continuing Directors": the directors of the Borrower on the Closing Date, and each other director whose election by the board of directors of the Borrower, or whose nomination for election by the stockholders of the Borrower, was approved by a vote of at least a majority of the directors who were either directors on the Closing Date or whose election or nomination for election was previously so approved.
"Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
"Default": any of the events specified in Section 7, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Disposition": with respect to any property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.
"Dollar Equivalent": at any time or during any period as to any amount denominated in a Foreign Currency, the amount of Dollars that may be purchased with such amount of such Foreign Currency at the applicable rate of exchange determined in accordance with Section 1.3.
"Dollar Loans": as defined in Section 2.1.
"Dollars" and "$": dollars in lawful currency of the United States.
"Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.
"Eurocurrency Applicable Margin": as determined pursuant to the Pricing Grid.
"Eurocurrency Base Rate": with respect to an Interest Period pertaining to any Eurocurrency Loan, the rate of interest determined on the basis of the rate for deposits in Dollars or the relevant Foreign Currency, as the case may be, for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate Screen as of 11:00 A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on such page of the Telerate Screen (or otherwise on the Telerate Service), the "Eurocurrency Base Rate" shall instead be the interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the average of the rates at which deposits in Dollars
or the relevant Foreign Currency, as the case may be, approximately equal in principal amount to the portion of the Eurocurrency Tranche of the Lender serving as Administrative Agent for a maturity comparable to such Interest Period, are offered by the principal London office of Barclays Bank for immediately available funds in the London interbank market at approximately 11:00 A.M., London time, two Business Days prior to the commencement of such Interest Period.
"Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate.
"Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.
"Eurocurrency Tranche": the collective reference to Eurocurrency Loans denominated in the same currency made by the Lenders to the Borrower, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Eurocurrency Loans shall originally have been made on the same day).
"Euros": the single currency of participating member states of the European Monetary Union introduced in accordance with the provisions of Article 109(1)4 of the Treaty of Rome of March 25, 1957 (as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992 and came into force on November 1, 1993) as amended from time to time) and as referred to in legislative measures of the European Union for the introduction of, changeover to or operating of the euro in one or more member states.
"Event of Default": any of the events specified in Section 7, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.
"Excess Utilization Day": each day on which the Commitment Utilization Percentage exceeds 50%.
"Exchange Rate": on any day, with respect to any currency, the rate at which such currency may be exchanged into any other currency, as set forth at approximately 11:00 A.M., London time, on such date on the Reuters World Currency Page for such currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be selected by the Administrative Agent, or, in the event no such service is selected, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its
foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of the relevant currency for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error; provided, further, that in any event, the Administrative Agent shall provide the Borrower with reasonable details of the source for such rate.
"Facility Fee": as defined in Section 2.3(a).
"Facility Fee Rate": as determined pursuant to the Pricing Grid.
"Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by Barclays Bank PLC from three federal funds brokers of recognized standing selected by it.
"Fee Payment Date": (a) the third Business Day following the last day of each March, June, September and December, (b) the Termination Date and (c) the date the Commitments shall have been terminated and the principal of the Loans shall have been paid in full.
"Foreign Currency": each of Euros, Sterling and Yen.
"Foreign Currency Loans": as defined in Section 2.1.
"Funding Office": the office of the Administrative Agent specified in
Section 9.2 or such other office as may be specified from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United States as in effect from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 3.1(b).
"Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
"Group Members": the collective reference to the Borrower and its Subsidiaries (or, in the case of Sections 7(e), (f) and (h) only, its Significant Subsidiaries).
"Guarantee Obligation": as to any Person (the "guaranteeing person"), any
obligation, including a reimbursement, counterindemnity or similar obligation,
of the guaranteeing Person that guarantees or in effect guarantees, or which is
given to induce the creation of a separate obligation by another Person
(including any bank under any letter of credit) that guarantees or in effect
guarantees, any Indebtedness (the "primary obligations") of any other third
Person (the "primary obligor") in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be deemed to
be the lower of (a) an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is made and (b)
the maximum amount for which such guaranteeing person may be liable pursuant to
the terms of the instrument embodying such Guarantee Obligation, unless such
primary obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"Indebtedness": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (excluding
accounts payable and accrued expenses), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party or applicant under or in
respect of bankers' acceptances, (g) all reimbursement obligations of such
Person in respect of drawings or payments made under letters of credit, surety
or performance bonds or other similar arrangements that are not satisfied within
three Business Days following the date of receipt by such Person of notice of
such drawing or payment, (h) the liquidation value of all manditorily redeemable
preferred Capital Stock of such Person, (i) all Guarantee Obligations of such
Person in respect of obligations of the kind referred to in clauses (a) through
(f) and (h) above, (j) all obligations of the kind referred to in clauses (a)
through (i) above secured by any Lien on property (including accounts and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation (it being understood that
obligations in respect of a Permitted Receivables Securitization shall not
constitute Indebtedness), and (k) for the purposes of Section 7(e) only, all
obligations of such Person in respect of Swap Agreements. The Indebtedness of
any Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.
"Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding and
the final maturity date of such Loan, (b) as to any Eurocurrency Loan having an
Interest Period of three months or less, the last day of such Interest Period,
(c) as to any Eurocurrency Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period and
(d) as to any Loan (other than any Loan that is an ABR Loan), the date of any
repayment or prepayment made in respect thereof.
"Interest Period": as to any Eurocurrency Loan, (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, in the case of Loans denominated in Dollars, and 10:00 A.M., New York City time, in the case of Foreign Currency Loans, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period that would extend beyond the Termination Date; and
(iii) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month.
"Investments": as defined in Section 6.7.
"Judgment Currency": as defined in Section 2.19(b).
"Lender": as defined in the preamble hereto; provided that unless context otherwise requires each reference to the Lenders shall be deemed to include any Conduit Lender.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).
"Loan Documents": this Agreement, the Notes and any amendment, waiver, supplement or other modification to any of the foregoing.
"Loan Percentage": as to any Lender at any time, the percentage which such Lender's Commitment then constitutes of the Total Commitments or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Loans then outstanding constitutes of the aggregate principal amount of the Loans then outstanding.
"Loans": as defined in Section 2.1.
"London Banking Day": any day on which banks in London are open for general banking business, including dealings in foreign currency and exchange.
"Margin Stock": as defined in Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the business, property, operations or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes": as defined in Section 2.15(a).
"Non-U.S. Lender": as defined in Section 2.15(d).
"Notes": the collective reference to any promissory note evidencing Loans.
"Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise.
"Other Agreement": the 364-Day Credit Agreement, dated as of the date hereof, among the Borrower, the several banks and other financial institutions or entities from time to time parties thereto, ABN Amro Bank N.V., as syndication agent, and Barclays Bank PLC, as administrative agent, as amended, supplemented or otherwise modified or replaced from time to time.
"Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 9.6(c).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any ---- successor).
"Permitted Receivables Securitization": any Receivables Securitization Transaction, provided that the aggregate amount of the financing represented by such transactions at any one time outstanding does not exceed $200,000,000.
"Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is covered by
and subject to ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
13
"Pricing Grid": the table set forth below (expressed in basis points):
--------------------------------- ------------------ ------------------------------------ ---------------------
Rating Agency Rating Facility Fee Eurocurrency Utilization
Rate Applicable Margin Fee Rate
--------------------------------- ------------------ ------------------------------------ ---------------------
Greater than or
equal to A/A2 ............. 8.0 27.0 7.5
--------------------------------- ------------------ ------------------------------------ ---------------------
A-/A3 ..................... 10.0 30.0 12.5
--------------------------------- ------------------ ------------------------------------ ---------------------
BBB+/Baa1 ................. 12.5 50.0 12.5
--------------------------------- ------------------ ------------------------------------ ---------------------
BBB/Baa2 .................. 15.0 60.0 12.5
--------------------------------- ------------------ ------------------------------------ ---------------------
BBB-/Baa3 ................. 22.5 65.0 25.0
--------------------------------- ------------------ ------------------------------------ ---------------------
Less than BBB-/Baa3
or No Rating .............. 30.0 107.5 37.5
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In any case where the Ratings of the two Rating Agencies are at different levels, the higher Rating will determine the Facility Fee Rate, the Eurocurrency Applicable Margin and the Utilization Fee Rate unless the S&P and Moody's Ratings are more than one level apart, in which case the Rating one level above the lower Rating will be determinative. Each change in a Rating by a Rating Agency shall be effective on the date such change is announced by such Rating Agency, and if such change in Rating shall result in a change in the Facility Fee Rate, Eurocurrency Applicable Margin or Utilization Fee Rate, such latter change shall be effective on the effective date of such change in Rating.
"Properties": as defined in Section 3.13(a).
"Rating Agencies" Moody's and S&P.
"Ratings" the ratings from time to time established by the Rating Agencies for senior, unsecured, non-credit-enhanced long-term debt of the Borrower.
"Receivables": accounts receivable of the Borrower or any of its Subsidiaries (including any thereof constituting or evidenced by chattel paper, instruments or general intangibles), and all proceeds thereof and rights (contractual and other) and collateral related thereto.
"Receivables Securitization Transaction": with respect to the Borrower
and/or any of its Subsidiaries, the transfer of Receivables by any such Person
to a trust, partnership, corporation or other entity in a transaction in which
(x) the transferred Receivables, after giving effect to such transaction, are
not, in accordance with GAAP, treated as assets on the books of the Borrower and
its Subsidiaries and (y) the liabilities of the transferee trust, partnership,
corporation or other entity, after giving effect to such transaction, are not,
in accordance with GAAP, treated as liabilities on the books of the Borrower and
its Subsidiaries.
"Refunding Borrowing": a borrowing of Loans which, after application of the proceeds thereof, results in no net increase in the aggregate outstanding principal amount of Loans made by any Lender.
"Register": as defined in Section 9.6(b).
"Regulation U": Regulation U of the Board as in effect from time to time.
"Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. 4043.
"Required Lenders": at any time, the holders of more than 50% of the Total Commitments then in effect or, if the Commitments have been terminated, the then outstanding Loans.
"Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
"Responsible Officer": the chief executive officer, president or chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower.
"Restricted Margin Stock": Margin Stock owned by the Borrower or any Subsidiary which represents not more than 25% of the aggregate value (determined in accordance with Regulation U), on a consolidated basis, of the property and assets of the Borrower and the Subsidiaries (including any Margin Stock) that is subject to the provisions of Section 6 (including Section 6.4).
"SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.
"SEC Filings": as defined in Section 3.1.
"Significant Subsidiary": any Subsidiary which is a "Significant Subsidiary," as defined in Regulation S-X part 210.1-02 of the Code of Federal Regulations.
"Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.
"Specified Swap Agreement": any Swap Agreement entered into by the Borrower and any Lender or affiliate thereof in respect of interest rates or currency exchange rates.
"Sterling": British Pounds Sterling, the lawful currency of the United Kingdom.
"Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Swap Agreement": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries shall be a "Swap Agreement".
"S&P": Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies, Inc.
"Syndication Agent": as defined in the preamble hereto.
"Termination Date": December 20, 2005.
"Total Commitments": at any time, the aggregate amount of the Commitments of the Lenders then in effect.
"Total Loans": at any time, the sum of (a) the aggregate amount of the Dollar Loans outstanding at such time and (b) the aggregate Dollar Equivalent of the Foreign Currency Loans outstanding at such time.
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurocurrency Loan.
"United States": the United States of America.
"Unrestricted Margin Stock": any Margin Stock owned by the Borrower or any Subsidiary which is not Restricted Margin Stock.
"Utilization Fee Rate": as determined pursuant to the Pricing Grid.
"Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.
"Yen": the lawful currency of Japan.
1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time.
(c) The words "hereof", "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
1.3 Exchange Rates. For purposes of calculating (a) the aggregate Dollar Equivalent of Foreign Currency Loans outstanding at any time during any period and (b) the Dollar Equivalent of any Foreign Currency Loan at the time of the making of such Loan pursuant to Section 2.1, the Administrative Agent will at least once during each calendar month and at such other times as it in its sole discretion decides to do so (including on or prior to the date of any borrowing and the last day of any Interest Period), determine the respective rate of exchange into Dollars of each Foreign Currency (which rate of exchange shall be based upon the Exchange Rate in effect on the date of such determination). Such rates of exchange so determined on each such determination date shall, for purposes of the calculations described in the preceding sentence, be deemed to remain unchanged and in effect until the next such determination date.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans in Dollars ("Dollar Loans") or in any Foreign Currency (the "Foreign Currency Loans", and together with the Dollar Loans, the "Loans") to the Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of such Lender's Commitment. The Borrower shall not request and no Lender shall be required to make any Loan if, after making such Loan, the Total Loans shall exceed the Total Commitments then in effect.
During the Commitment Period the Borrower may use the Commitments by borrowing, prepaying the Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. The Dollar Loans may from time to time be Eurocurrency Loans or ABR Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7. All Foreign Currency Loans shall be Eurocurrency Loans.
2.2 Procedure for Borrowing. (a) The Borrower may borrow Dollar Loans
during the Commitment Period on any Business Day, provided that the Borrower
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent (a) prior to 10:00 A.M., New York City
time, three Business Days prior to the requested Borrowing Date, in the case of
Eurocurrency Loans or (b) prior to 11:00 A.M., New York City time, on the
requested Borrowing Date, in the case of ABR Loans), specifying (i) the amount
and Type of Dollar Loans to be borrowed, (ii) the requested Borrowing Date, and
(iii) in the case of Eurocurrency Loans, the respective amounts of each such
Type of Loan and the respective lengths of the initial Interest Period therefor.
Any Dollar Loans made on the Closing Date shall initially be ABR Loans. Each
borrowing of Dollar Loans under the Commitments shall be in an amount equal to
(x) in the case of ABR Loans, $1,000,000 or a whole multiple thereof (or, if the
then aggregate Available Commitments are less than $1,000,000, such lesser
amount) and (y) in the case of Eurocurrency Loans, $10,000,000 or a whole
multiple of $1,000,000 in excess thereof. Upon receipt of any such notice from
the Borrower, the Administrative Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent crediting the account of the Borrower on the books
of such Office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
(b) The Borrower may borrow Foreign Currency Loans during the Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, three Business
Days prior to the requested Borrowing Date), specifying (i) the requested
Borrowing Date, (ii) the respective amounts of each Foreign Currency Loan in
each Foreign Currency and (iii) the respective lengths of the initial Interest
Period therefor. Each Foreign Currency Loan under the Commitments shall be in an
amount equal to (x) in the case of Foreign Currency Loans denominated in
Sterling, (pound)7,000,000 or a whole multiple of (pound)500,000 in excess
thereof, (y) in the case of Foreign Currency Loans denominated in Euros,
(euro)10,000,000 or a whole multiple of (euro)1,000,000 in excess thereof, and
(z) in the case of Foreign Currency Loans denominated in Yen, Y1,000,000,000 or
a whole multiple of Y100,000,000 in excess thereof. Upon receipt of any such
notice from the Borrower, the Administrative Agent shall promptly notify each
Lender thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, London time, in each case, on the
Borrowing Date requested by the Borrower in funds immediately available in the
relevant Foreign Currency to the Administrative Agent. Such borrowing will then
be made available to the Borrower by the Administrative Agent crediting the
account of the Borrower on the books of such Office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent or by wire transfer of such amounts to an account designated in writing by the Borrower to the Administrative Agent in connection with the relevant borrowing.
2.3 Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (a "Facility Fee") for the period from and including the date hereof to the date upon which the Commitments shall have terminated and all Loans shall have been paid in full, computed at a rate per annum equal to the Facility Fee Rate on the average daily amount of the Commitment of such Lender (whether or not utilized) during the period for which payment is made (or, if any Lender continues to have any Loans after its Commitment terminates, on the average daily amount of such Lender's Loans from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Loans outstanding), payable in arrears on each Fee Payment Date.
(b) The Borrower agrees to pay to the Administrative Agent for the account of each Lender in arrears on each Fee Payment Date, a utilization fee (a "Utilization Fee") at a rate per annum equal to the Utilization Fee Rate for each Excess Utilization Day during the period covered by such Fee Payment Date on such Lender's Loans then outstanding on such Excess Utilization Day.
(c) The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates as set forth in the Fee Letter, dated as of November 1, 2002, between the Borrower and the Administrative Agent, and in any other fee agreements between the Borrower and the Administrative executed after the date of this Agreement, and to perform any other obligations contained therein. 2.4 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided that no such termination or reduction of Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Loans, the Total Loans would exceed the Total Commitments. Any such reduction shall be in an amount equal to $10,000,000, or an integral multiple of $1,000,000 in excess thereof, and shall reduce permanently the Commitments then in effect.
2.4 Optional Termination or Reduction of Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments; provided that no such termination or reduction of Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Loans, the Total Loans would exceed the Total Commitments. Any such reduction shall be in an amount equal to $10,000,000, or an integral multiple of $1,000,000 in excess thereof, and shall reduce permanently the Commitments then in effect.
2.5 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent not later than 10:00
A.M., New York City time, three Business Days prior to the date of prepayment,
in the case of Eurocurrency Loans, and not later than 11:00 A.M., New York City
time, one Business Day prior to the date of prepayment, in the case of ABR
Loans, which notice shall specify the date and amount of prepayment and whether
the prepayment is of Eurocurrency Loans or ABR Loans and, if such prepayment is
of Foreign Currency Loans, the applicable Foreign Currency; provided, that if a
Eurocurrency Loan is prepaid on any day other than the last day of the Interest
Period applicable thereto, the Borrower shall also pay any amounts owing
pursuant to Section 2.16. Upon receipt of any such notice the Administrative
Agent shall promptly notify each Lender thereof. If any such notice is given,
the amount specified in such notice shall be due and payable on the date
specified therein, together with (except in the case of Loans that are ABR
Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Dollar Loans shall be in an aggregate principal amount of $10,000,000 or a whole multiple of $1,000,000 in excess thereof. Partial prepayments of Foreign Currency Loans shall be in a minimum principal amount of (x) (pound)7,000,000 or a whole multiple of (pound)500,000 in excess thereof, in the case of Foreign Currency Loans denominated in Sterling, (y) (euro)10,000,000 or a whole multiple or (euro)1,000,000 in excess thereof, in the case of Foreign Currency Loans denominated in Euros, and (z) Y1,000,000,000 or a whole multiple or Y100,000,000 in excess thereof, in the case of Foreign Currency Loans denominated in Yen.
2.6 Mandatory Prepayments. If, on any date, the Total Loans outstanding on such date exceed 102% of the Total Commitments in effect on such date, the Borrower shall, without notice or demand, promptly (but in any event, within three Business Days of such date) prepay such outstanding Loans in an aggregate principal amount such that, after giving effect thereto, the Total Loans do not exceed the Total Commitments. Any amounts prepaid pursuant to this Section shall be accompanied by interest accrued to the date of such prepayment on the principal so prepaid and any amounts payable under Section 2.16 in connection therewith.
2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to ABR Loans by giving the Administrative Agent irrevocable notice of such election not later than 11:00 A.M., New York City time, one Business Day prior to the date of conversion, provided that any such conversion of Eurocurrency Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert its ABR Loans to Eurocurrency Loans denominated in Dollars by giving the Administrative Agent irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor) not later than 11:00 A.M., New York City time, three Business Days prior to the date of conversion, provided that no ABR Loan may be converted into a Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof.
(b) Any Eurocurrency Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurocurrency Loan denominated in Dollars may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined in its or their sole discretion not to permit such continuation, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso any such Loans denominated in Dollars shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period and, if the Borrower shall fail to give such notice of continuation of a Foreign Currency Loan, such Foreign Currency Loan shall be automatically continued for an Interest Period of one month. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.
2.8 Limitations on Eurocurrency Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of
Eurocurrency Loans and all selections of Interest Periods shall be in such amounts and be made pursuant to such elections so that no more than ten Eurocurrency Tranches shall be outstanding at any one time.
2.9 Repayment of Loans. The Borrower hereby unconditionally promises to pay to each Lender on the Termination Date (or such earlier date as the Loans become due and payable pursuant to Section 7), the unpaid principal amount of each Loan made by such Lender. The Borrower hereby further agrees to pay interest in immediately available funds at the office of the Administrative Agent on the unpaid principal amount of such Loans from time to time from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.10.
2.10 Interest Rates and Payment Dates. (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such day plus the Eurocurrency Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR.
(c) (i) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% and (ii) if all or a portion of any interest payable on any Loan or any facility fee or utilization fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then applicable to ABR Loans plus 2% (unless such overdue amount is denominated in a Foreign Currency, in which case such overdue amount shall bear interest of a rate per annum equal to the highest rate then applicable under this Agreement to Foreign Currency Loans denominated in such Foreign Currency plus 2%), in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.
2.11 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to (i) ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed and (ii) Foreign Currency Loans denominated in Sterling, interest shall be calculated on the basis of a 365-day year for actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the Eurocurrency Applicable Margin, the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as
soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the relevant Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.10(a).
2.12 Inability to Determine Interest Rate. If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period,
(b) the Administrative Agent shall have received notice from the Required Lenders that the Eurocurrency Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to the relevant Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, or
(c) the Administrative Agent determines (which determination shall be conclusive and binding upon the Borrower) that deposits in the applicable currency are not generally available, or cannot be obtained by the relevant Lenders, in the applicable market (any Foreign Currency affected by the circumstances described in clause (a), (b) or (c) is referred to as an "Affected Foreign Currency"),
then the Administrative Agent shall give telecopy or telephonic notice
thereof to the Borrower and the relevant Lenders as soon as practicable
thereafter. If such notice is given (x) pursuant to clause (a) or (b) of this
Section 2.12 in respect of Eurocurrency Loans denominated in Dollars, then (i)
any Eurocurrency Loans denominated in Dollars requested to be made on the first
day of such Interest Period shall be made as ABR Loans, (ii) any ABR Loans that
were to have been converted on the first day of such Interest Period to
Eurocurrency Loans denominated in Dollars shall be continued as ABR Loans and
(iii) any outstanding Eurocurrency Loans denominated in Dollars shall be
converted, on the last day of the then-current Interest Period, to ABR Loans and
(y) in respect of any Foreign Currency Loans, then (i) any Foreign Currency
Loans in an Affected Foreign Currency requested to be made on the first day of
such Interest Period shall not be made and (ii) any outstanding Foreign Currency
Loans in an Affected Foreign Currency shall be due and payable on the last day
of the then-current Interest Period. Until such relevant notice has been
withdrawn by the Administrative Agent, no further Eurocurrency Loans denominated
in Dollars or Foreign Currency Loans in an Affected Foreign Currency shall be
made or continued as such, nor shall the Borrower have the right to convert ABR
Loans to Eurocurrency Loans denominated in Dollars.
2.13 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any
facility fee or utilization fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Loan Percentages of the Lenders.
(b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Lenders.
(c) All payments (including prepayments) to be made by the Borrower, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the relevant Lenders, at its Funding Office, in immediately available funds. Except as otherwise specified in this Agreement, amounts owing hereunder on account of principal and interest on Loans shall be paid in the currency in which such Loan was borrowed, and amounts owing hereunder on account of fees shall be paid in Dollars. The Administrative Agent shall distribute such payments to the relevant Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.
(d) Unless the Administrative Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its share of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making such
amount available to the Administrative Agent, and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not made available to the Administrative Agent by the
required time on the Borrowing Date therefor, such Lender shall pay to the
Administrative Agent, on demand, (i) in the case of amounts denominated in
Dollars, such amount with interest thereon at a rate equal to the greater of (x)
the Federal Funds Effective Rate and (y) a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation, for
the period until such Lender makes such amount immediately available to the
Administrative Agent or (ii) in the case of amounts denominated in Foreign
Currencies, such amount with interest thereon at a rate determined by the
Administrative Agent to be the cost to it of funding such amount until such
Lender makes such amount immediately available to the Administrative Agent. A
certificate of the Administrative Agent submitted to any Lender with respect to
any amounts owing under this paragraph shall be conclusive in the absence of
manifest error. If such Lender's share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days after such
Borrowing Date, the Administrative Agent shall also be entitled to recover (i)
in the case of amounts denominated in Dollars, such amount with interest thereon
at the rate per annum applicable to ABR Loans, on demand, from the Borrower or
(ii) in the case of amounts denominated in Foreign Currencies, such amount with
interest thereon at a rate determined by the Administrative Agent to be the sum
of (x) the cost to it of funding such amount plus (y) the Eurocurrency Applicable Margin, on demand, from the Borrower. The failure or refusal of any Lender to make available to the Administrative Agent such Lender's share of such borrowing shall not relieve any other Lender from its several obligation hereunder to make available to the Administrative Agent the amount of such other Lender's share of such borrowing. Nothing herein shall be deemed to limit the rights of the Borrower against any Lender that has failed or refused to make available such Lender's share of any borrowing.
(e) Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each relevant Lender to which any amount which was made available pursuant to the preceding sentence, (i) in the case of amounts denominated in Dollars, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate and (ii) in the case of amounts denominated in Foreign Currencies, such amount with interest thereon at a rate per annum determined by the Administrative Agent to be the cost to it of funding such amount. Nothing herein shall be deemed to limit the rights of the Administrative Agent or any Lender against the Borrower with respect to such payment.
2.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurocurrency Rate; or
(iii) shall impose on such Lender any other condition relating to funding of assets that would include the Eurodollar Loans or the income or earnings in respect thereof (except for Non-Excluded Taxes covered by Section 2.15 and changes in the rate of tax on the overall net income of such Lender);
and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender reasonably deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall, promptly after its receipt of a notice with respect thereto in accordance with Section 2.14(d), pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable.
(b) If any Lender shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof by a Governmental Authority charged with the interpretation or administration thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount reasonably deemed by such Lender to be material, then from time to time, after such Lender has provided written notice in accordance with Section 2.14(d) to the Borrower requesting compensation for such reduction under this paragraph, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.
(c) If any Governmental Authority of the jurisdiction of any Foreign Currency (or any other jurisdiction in which the funding operations of any Lender shall be conducted with respect to such Foreign Currency) shall have in effect any reserve, liquid asset or similar requirement with respect to any category of deposits or liabilities customarily used to fund loans in such Foreign Currency, or by reference to which interest rates applicable to loans in such Foreign Currency are determined, and the result of such requirement shall be to increase the cost to such Lender of making or maintaining any Foreign Currency Loan in such Foreign Currency, and such Lender shall deliver to the Borrower a written notice in accordance with Section 2.14(d) requesting compensation for such additional cost under this paragraph, then the Borrower will pay to such Lender on each Interest Payment Date with respect to each affected Foreign Currency Loan an amount that will compensate such Lender for such additional cost.
(d) If any Lender becomes entitled to claim any additional amounts, compensation or additional costs pursuant to this Section, it shall deliver a written notice in accordance with this paragraph to the Borrower (with a copy to the Administrative Agent) requesting such additional amounts, compensation or additional costs and notifying the Borrower of the event by reason of which it has become so entitled. Such Lender agrees to use reasonable efforts to deliver such notice promptly following the time at which it becomes aware of the event giving rise to such additional amounts, compensation or additional cost payable (provided that the failure by such Lender to give such notice promptly shall not adversely affect any of its rights hereunder). A certificate as to any additional amounts, compensation or additional costs payable to any Lender pursuant to this Section 2.14 submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. Notwithstanding anything to the contrary contained in paragraphs (a), (b)
and (c) above, the Borrower shall not be required to compensate a Lender pursuant to such paragraphs for any amounts incurred more than three months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided further that, if the circumstances giving rise to such claim have a retroactive effect, then such three-month period shall be extended to include the period of such retroactive effect. The obligations of the Borrower pursuant to this Section 2.14 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
(e) Notwithstanding any other provision of this Agreement, if (x) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by a Governmental Authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof shall make it unlawful for any Lender to make or maintain any Foreign Currency Loan or to give effect to its obligations as contemplated hereby with respect to any Foreign Currency Loan, or (y) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls, but excluding conditions otherwise covered by this Section 2.14) which would make it impracticable for any Lender to make or maintain Foreign Currency Loans denominated in the relevant Foreign Currency after the date hereof to, or for the account of, the Borrower, then, by written notice to the Borrower and to the Administrative Agent:
(i) such Lender may declare that Foreign Currency Loans (in the affected Foreign Currency or Currencies) will not thereafter (for the duration of such unlawfulness or change in conditions) be made by such Lender or Lenders hereunder (or be continued for additional Interest Periods), whereupon any request for a Foreign Currency Loan (in the affected Foreign Currency or Currencies) or to continue a Foreign Currency Loan (in the affected Foreign Currency or Currencies), as the case may be, for an additional Interest Period) shall, as to such Lender only, be of no force and effect, unless such declaration shall be subsequently withdrawn; and
(ii) such Lender may require that all outstanding Foreign Currency Loans (in the affected Foreign Currency or Currencies), made by it be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be (unless repaid by the Borrower), in which event all such Foreign Currency Loans (in the affected Foreign Currency or Currencies) shall be converted to ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, as of the effective date of such notice as provided in paragraph (f) below and at the Exchange Rate on the date of such conversion or, at the option of the Borrower, repaid on the last day of the then current Interest Period with respect thereto.
In the event any Lender shall exercise its rights under (i) or (ii) above, all payments and prepayments of principal made thereafter that would otherwise have been applied to repay the converted Foreign Currency Loans of such Lender shall instead be applied to repay the ABR Loans or Eurocurrency Loans denominated in Dollars, as the case may be, made by such Lender resulting from such conversion.
(f) For purposes of Section 2.14(e), a notice to the Borrower by any Lender shall be effective as to each Foreign Currency Loan made by such Lender, if lawful, on the last day of the Interest Period currently applicable to such Foreign Currency Loan; in all other cases such notice shall be effective on the date of receipt thereof by the Borrower.
2.15 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure.
(d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in
Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the
Borrower and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender, to the extent such Non-U.S. Lender is legally able to deliver such replacement forms.. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose).
(e) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.16 Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurocurrency Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurocurrency Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
2.17 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 2.14 or 2.15(a) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal, regulatory or other
disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 2.14 or 2.15(a).
2.18 Replacement of Lenders. The Borrower shall be permitted to replace any
Lender that (a) requests reimbursement for amounts owing pursuant to Section
2.14 or 2.15(a) or (b) defaults in its obligation to make Loans hereunder, with
a replacement financial institution; provided that (i) such replacement does not
conflict with any Requirement of Law, (ii) no Event of Default shall have
occurred and be continuing at the time of such replacement, (iii) prior to any
such replacement, such Lender shall have taken no action under Section 2.17 so
as to eliminate the continued need for payment of any amounts owing pursuant to
Section 2.14 or 2.15(a), (iv) the replacement financial institution shall
purchase, at par (unless the Lender being replaced otherwise agrees to accept a
lesser payment in its discretion), all Loans and other amounts owing to such
replaced Lender on or prior to the date of replacement, (v) the Borrower shall
be liable to such replaced Lender under Section 2.16 if any Eurocurrency Loan
owing to such replaced Lender shall be purchased other than on the last day of
the Interest Period relating thereto, (vi) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vii) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of Section 9.6 (provided that the
Borrower shall be obligated to pay the registration and processing fee referred
to therein), (viii) until such time as such replacement shall be consummated,
the Borrower shall pay all additional amounts (if any) required pursuant to
Section 2.14 or 2.15(a), as the case may be, and (ix) any such replacement shall
not be deemed to be a waiver of any rights that the Borrower, the Administrative
Agent or any other Lender shall have against the replaced Lender.
2.19 Judgment Currency. (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.
(b) The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower as a separate obligation and notwithstanding any such judgment, agrees to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender, as of the date of this Agreement (except as to the representations and warranties made as of a date certain, which shall be true and correct as of such date) and as of the date such representations and warranties are deemed to be made under Section 4.2(a), that:
3.1 Financial Condition. The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at January 1, 2000, December 30, 2000 and December 29, 2001 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from Arthur Andersen LLP, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such dates, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 28, 2002, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). As of the date of this Agreement, no Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, other than those that (i) are not material to the Borrower and its Subsidiaries taken as a whole or (ii) are reflected in the most recent financial statements referred to in this paragraph or in the Borrower's most recent report on Form 10-K and any subsequent reports on Form 10-Q or Form 8-K filed with the SEC prior to the date of this Agreement (such filings, the "SEC Filings"). During the period from December 29, 2001 to and including the date of this Agreement there has been no Disposition by any Group Member of any part of its business or property material to the Borrower and its Subsidiaries taken as a whole except as set forth in the most recent financial statements referred to in this paragraph or in the Borrower's SEC Filings.
3.2 No Change. Since December 29, 2001, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
3.3 Existence; Compliance with Law. Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all
Requirements of Law except to the extent that the failure to conform to the requirements of clauses (a) through (d) could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
3.4 Power; Authorization; Enforceable Obligations. The Borrower has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder. The Borrower has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required of any Group Member in connection with the borrowings by the Borrower hereunder or with the execution, delivery and performance by the Borrower, or the validity or enforceability against the Borrower, of this Agreement or any of the Loan Documents. Each Loan Document has been duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, the execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation.
3.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues that could reasonably be expected to have a Material Adverse Effect.
3.7 Ownership of Property; Liens. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 6.4.
3.8 Taxes. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member).
3.9 Federal Regulations. No part of the proceeds of any Loans will be used for any purpose that violates the provisions of Regulation U or any of the other Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.
3.10 ERISA. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred that could reasonably be expected to have a Material Adverse Effect, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by an amount that is material in relation to Consolidated Net Worth. Except as in the aggregate could not reasonably be expected to have a Material Adverse Effect, neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA that, in the aggregate, could reasonably be expected to result in a Material Adverse Effect if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent under circumstances that could reasonably be expected to result in a Material Adverse Effect.
3.11 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.
3.12 Use of Proceeds. The proceeds of the Loans shall be used by the Borrower and its Subsidiaries for working capital, non-hostile acquisitions, repurchases of Capital Stock, debentures and other securities of the Borrower, the refinancing of present and future debt and general corporate purposes.
3.13 Environmental Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by any Group Member (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law;
(b) no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by any Group Member (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business;
(e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of any Group Member in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and
(g) no Group Member has assumed any liability of any other Person under Environmental Laws.
3.14 Accuracy of Information, etc. No statement or information contained in this Agreement, the Confidential Information Memorandum or any other document, certificate or statement furnished by or on behalf of the Borrower to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement) when taken together with the SEC Filings, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loans requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such Loans, of the following conditions precedent:
(a) Credit Agreement. The Administrative Agent shall have received this Agreement, executed and delivered by the Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the Borrower and each Person listed on Schedule 1.1.
(b) Fees. The Lenders and the Administrative Agent shall have received all fees required to be paid, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel), on or before the Closing Date. All such amounts will be paid by wire transfer on the Closing Date.
(c) Closing Certificate; Certified Certificate of Incorporation. The Administrative Agent shall have received a certificate of the Borrower, dated the Closing Date, substantially in the form of Exhibit B, with appropriate insertions and attachments, including the certificate of incorporation of the Borrower.
(d) Legal Opinions. The Administrative Agent shall have received the legal opinion of Seth Hoogasian, General Counsel of the Borrower and its Subsidiaries, substantially in the form of Exhibit D. Such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require.
(e) Other Agreement. The Other Agreement shall have been executed and delivered by the Borrower and all other parties thereto, and the Closing Date (as defined therein) shall have occurred thereunder.
4.2 Conditions to Each Loan. The agreement of each Lender to make any Loan (other than a Refunding Borrowing) requested to be made by it on any date (including its initial Loan) is subject to the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents (other than representations and warranties made as of a specified earlier date, which shall be true and correct as of such earlier date) shall be true and correct on and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date.
Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such borrowing that the conditions contained in this Section 4.2 have been satisfied.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall and (except in the case of Sections 5.1, 5.2, 5.4(a)(i) and 5.7) shall cause each of its Subsidiaries to:
5.1 Financial Statements. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PriceWaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP (subject to the absence of footnotes with respect to unaudited quarterly statements) applied (except as approved by such accountants or officer, as the case may be, and disclosed in reasonable detail therein) consistently throughout the periods reflected therein and with prior periods. Notwithstanding anything to the contrary contained in this Section 5.1, the Borrower shall not be required to deliver any financial statements to the Administrative Agent with respect to any period for which it has timely filed its Form 10-K or Form 10-Q, as the case may be, with the SEC (provided that such Form 10-K or Form 10-Q, as the case may be, is publicly available on the SEC's website (or a similar website) within the time periods required by this Section).
5.2 Certificates; Other Information. Furnish to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) within the time period in which the Borrower is required to deliver any financial statements pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, the
Borrower during the period covered by such financial statements has observed or performed all of its covenants and other agreements, and satisfied every condition contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by the Borrower with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be;
(b) as soon as available, and in any event no later than 60 days after the end of each fiscal year of the Borrower, a reasonably detailed consolidated budget (set forth on a quarter by quarter basis) for the following fiscal year;
(c) unless publicly available at such time on the SEC's website (or a similar website), within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; and
(d) promptly, such additional financial and other information as any Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature that, if not paid, could reasonably be expected to result in a Material Adverse Effect, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.
5.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew and keep in full force and effect the Borrower's organizational existence and (ii) take all reasonable action to maintain all rights, privileges and franchises of each such Group Member necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 6.5 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) except to the extent that, in the aggregate, non-compliance could not reasonably be expected to have a Material Adverse Effect, comply with all Contractual Obligations and Requirements of Law.
5.5 Maintenance of Property; Insurance. Except to the extent that, in the aggregate, non-compliance could not reasonably be expected to have a Material Adverse Effect, (a) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.
5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions material to the Borrower and its Subsidiaries, taken as a whole, in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with officers and employees of the Group Members and with their independent certified public accountants.
5.7 Notices. Promptly after the Borrower becomes aware thereof, give notice to the Administrative Agent (which shall promptly make a copy thereof available to each Lender, including by posting on a secure website):
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual Obligation of any Group Member or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting any Group Member (i) in which the amount involved is $10,000,000 or more and not covered by insurance or (ii) which relates to any Loan Document;
(d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan which could reasonably be expected to have a Material Adverse Effect, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, (ii) the institution of proceedings or the taking of any other action by the PBGC with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan, or (iii) the institution of proceedings or the taking of any other action by the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan which, in the case of this clause (iii), could reasonably be expected to have a Material Adverse Effect; and
(e) any development or event that has had or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the relevant Group Member proposes to take with respect thereto.
5.8 Environmental Laws. Comply in all material respects with all applicable Environmental Laws, and obtain and comply in all material respects with and maintain any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws, except to the extent that the failure to comply, or obtain and comply, therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in effect or any Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:
6.1 Financial Condition Covenants.
(a) Consolidated Interest Coverage Ratio. Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending on any fiscal quarter of the Borrower ending on or after the fiscal quarter ending on March 29, 2003 to be less than 3.75:1.00.
(b) Consolidated Total Debt to Total Capitalization Ratio. Permit the Consolidated Total Debt to Consolidated Total Capitalization Ratio at the end of any fiscal quarter of the Borrower ending on or after the fiscal quarter ending on March 29, 2003 to be greater than 0.50:1.00.
6.2 Standby and Performance Letters of Credit. Permit at any one time outstanding the sum of (a) the aggregate then undrawn face amount of surety and performance bonds, bank guarantees and standby and performance letters of credit as to which the Borrower and/or any Subsidiary is or are the account party and which do not secure or otherwise assure the payment of Indebtedness and (b) the aggregate then unreimbursed amount of all amounts paid in respect of drawings under such surety and performance bonds, bank guarantees and letters of credit to exceed $200,000,000.
6.3 Indebtedness of Subsidiaries. In the case of any Subsidiary, create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness of such Subsidiary, except:
(a) Indebtedness of such Subsidiary to the Borrower or any other Subsidiary and Guarantee Obligations of any Subsidiary with respect to Indebtedness of the Borrower or any other Subsidiary;
(b) (i) Indebtedness outstanding on the date hereof and described on Schedule 6.3(b), and additional Indebtedness incurred after the date hereof under the revolving credit arrangements described on Schedule 6.3(b) in an aggregate principal amount at any one time outstanding not to exceed the commitments or limits existing with respect thereto on the date hereof and described on such Schedule, and (ii) Indebtedness under any replacements, refinancings, refundings, renewals or extensions of the Indebtedness described in clause (i) (without increasing the principal amount above the commitments or limits, or shortening the maturity thereof to a date earlier than the maturity, respectively, thereof described on Schedule 6.3(b));
(c) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 6.4(g) in an aggregate principal amount not to exceed the greater of $25,000,000 or 2.5% of Consolidated Net Worth at any one time outstanding; and
(d) additional Indebtedness in an aggregate principal amount for all Subsidiaries (on a consolidated basis) not to exceed the greater of $100,000,000 or 10.1% of Consolidated Net Worth at any one time outstanding.
6.4 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property (other than any Lien on Margin Stock created, incurred or assumed at a time when such Margin Stock constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, except:
(a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof (or, in the case of Liens securing Indebtedness in respect of the securities lending arrangements with JPMorgan Chase Bank and ABN AMRO Inc. described on Schedule 6.4(f), Liens created with respect thereto) and described on Schedule 6.4(f) securing Indebtedness described on such Schedule, or Liens on the assets that are subject to such existing Liens securing any replacement or refinancing of such Indebtedness; provided that Indebtedness in respect of the securities lending arrangements with JPMorgan Chase Bank and ABN AMRO Inc. described on Schedule 6.4(f) may not be replaced or refinanced beyond December 31, 2003; and provided, further that (i) no Lien permitted by this Section 6.4(f) is spread to cover any additional property after the Closing Date and (ii) the amount of Indebtedness secured thereby is not increased beyond the commitments or limits described on Schedule 6.4(f);
(g) Liens securing Indebtedness incurred (in the case of any Subsidiary, pursuant to Section 6.3(c) or (d)) to finance the acquisition of fixed or
capital assets or Liens on such fixed or capital assets securing any refinancing of such Indebtedness, provided that (i) such Liens (other than those securing any such refinancing Indebtedness) shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) (in the case of any Subsidiary) the amount of Indebtedness secured thereby is not increased;
(h) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased;
(i) other incidental Liens that (i) are not, in the aggregate, material to the Borrower and its Subsidiaries taken as a whole, (ii) do not secure Indebtedness and (iii) do not cover at any time assets having an aggregate fair market value in excess of $10,000,000;
(j) Liens incurred pursuant to a Permitted Receivables Securitization on the Receivables that are subject thereto;
(k) Liens on assets of a Subsidiary securing Acquired Indebtedness permitted by Section 6.3(d) in an aggregate principal amount for all such Subsidiaries not to exceed $75,000,000 at any one time outstanding; provided that such Liens are not spread to other assets of such Subsidiary following the consummation of the applicable acquisition; and
(l) Liens securing Indebtedness in an aggregate principal amount not to exceed $25,000,000 at any one time outstanding.
6.5 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or any other Subsidiary;
(b) any Subsidiary of the Borrower may Dispose of any or all of its assets
(i) to the Borrower or any other Subsidiary (upon voluntary liquidation or
otherwise) or (ii) pursuant to a Disposition permitted by Section 6.6;
(c) any Investment expressly permitted by Section 6.7 may be structured as a merger, consolidation or amalgamation; and
(d) any Subsidiary may be liquidated, wound up or dissolved, as deemed appropriate by the Borrower.
6.6 Disposition of Property. Dispose of any of its property (other than any property which, at the time of any Disposition thereof, constitutes Unrestricted Margin Stock), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by clause (i) of Section 6.5(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any other Subsidiary;
(e) the Dispositions listed on Schedule 6.6;
(f) the Disposition during any period of four consecutive fiscal quarters of the Borrower, commencing with the four-quarter period ending on January 3, 2004, of other property having an aggregate book value not to exceed $200,000,000 at the beginning of such period, provided that the Borrower shall deliver to the Administrative Agent written notice ten Business Days in advance of any Disposition in excess of $50,000,000;
(g) Dispositions of Receivables pursuant to a Permitted Receivables Securitization;
(h) Dispositions of Investments permitted by Section 6.7(b); and
(i) Dispositions by any Group Member to the Borrower or any of its Subsidiaries.
6.7 Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) obligations in respect of letters of credit, surety and performance bonds and bank guarantees permitted by Section 6.2, and Guarantee Obligations permitted by Section 6.3;
(d) loans and advances to employees of any Group Member in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $5,000,000 at any one time outstanding;
(e) intercompany Investments by any Group Member in the Borrower or any Subsidiary;
(f) non-hostile acquisitions of businesses or the acquisition (through merger or otherwise) of or Investments in Persons if (i) in the case of the
acquisition of the Capital Stock of any Person (whether by merger or otherwise),
such Person has become a Subsidiary of the Borrower as a result of thereof and
(ii) after giving pro forma effect to such acquisition or Investment, there is
no Default or Event of Default (it being understood and agreed that in
determining pro forma compliance with Section 6.1, such covenants shall be
recomputed as of the most recent fiscal-quarter-end date for which financial
statements shall have been delivered pursuant to Section 5.1, adjusted (x) in
the case of Section 6.1(a), to recompute Consolidated EBITDA to give effect to
such acquisition or Investment as if it had occurred on the first day of the
applicable four-quarter period and to recompute Consolidated Interest Expense
for such period to include the additional interest that would have accrued
during such period in respect of Indebtedness acquired or assumed in connection
with such acquisition or Investment if such acquisition or Investment had
occurred on the first day of such period and in respect of any Indebtedness
incurred to finance such acquisition or Investment if such Indebtedness had been
incurred on such day (and had borne interest throughout such period at the rate
per annum applicable thereto on the date it was incurred) and (y) in the case of
Section 6.1(b), to recompute Consolidated Total Debt to include therein all
Indebtedness acquired, assumed or incurred by the Borrower and its Subsidiaries
in connection with and to finance such acquisition or Investment and to
recompute Consolidated Net Worth to give effect to such acquisition or
Investment);
(g) Investments consisting of promissory notes received as proceeds of Dispositions permitted by Section 6.6; and
(h) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower and its Subsidiaries in an aggregate amount (valued at cost) not to exceed $200,000,000 during any period of four consecutive fiscal quarters of the Borrower, commencing with the four-quarter period ending on January 3, 2004.
6.8 Transactions with Affiliates. Enter into any transaction, including any
purchase, sale, lease or exchange of property, the rendering of any service or
the payment of any management, advisory or similar fees, with any Affiliate
(other than the Borrower or any other Group Member) unless such transaction (a)
is (i) otherwise permitted under this Agreement and (ii) upon fair and
reasonable terms no less favorable to the relevant Group Member than it would
obtain in a comparable arm's length transaction with a Person that is not an
Affiliate or (b) involves, when taken together with all other transactions
covered by this clause (b) entered into during any fiscal year, $1,000,000 or
less.
6.9 Changes in Fiscal Periods. Change the Borrower's method of determining fiscal years and quarters without prior written notice to the Administrative Agent.
6.10 Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest
on any Loan, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by the Borrower herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or
(c) the Borrower shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 5.4(a) (with respect to the Borrower only), Section 5.7(a) or Section 6 of this Agreement; or
(d) the Borrower shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders; or
(e) any Group Member shall (i) default in making any payment of any
principal of any Indebtedness (including any Guarantee Obligation, but excluding
the Loans) on the scheduled or original due date with respect thereto; or (ii)
default in making any payment of any interest on any such Indebtedness beyond
the period of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created; or (iii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder
or beneficiary) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or (in the case of any
such Indebtedness constituting a Guarantee Obligation) to become payable (other
than any such default, event or condition arising solely out of the violation by
the Borrower or any Subsidiary of any covenant in any way restricting the
Borrower's, or any such Subsidiary's, right or ability to sell, pledge or
otherwise dispose of Unrestricted Margin Stock); provided, that a default, event
or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall
not at any time constitute an Event of Default unless, at such time, one or more
defaults, events or conditions of the type described in clauses (i), (ii) and
(iii) of this paragraph (e) shall have occurred and be continuing with respect
to Indebtedness the outstanding principal amount of which exceeds in the
aggregate $15,000,000; or
(f) (i) any Group Member shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or any Group Member shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against any Group Member any case, proceeding or other action of a
nature referred to in clause (i) above that (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against any Group Member any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets that results in the entry of
an order for any such relief that shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
any Group Member shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of any Group Member or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) any Group Member or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $10,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or
(i) (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 40% of the outstanding common stock of the Borrower; or (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.
SECTION 8. THE AGENTS
8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.
8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care.
8.3 Exculpatory Provisions. Neither any Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable to any Lender for any action lawfully taken or omitted to be taken by
it or such Person under or in connection with this Agreement or any other Loan
Document (except to the extent that any of the foregoing are found by a final
and nonappealable decision of a court of competent jurisdiction to have resulted
from its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agents under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Loan Party a party thereto to perform its obligations hereunder or
thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.
8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.
8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.
8.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Loan Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Loan Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity.
8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 7(a) or Section 7(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.
8.10 Syndication Agent and Co-Documentation Agents. Neither the Syndication Agent nor any Co-Documentation Agent shall have any duties or responsibilities hereunder in its capacity as such.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and the Borrower may, or, with the written consent of the Required Lenders, the Administrative Agent and the Borrower may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, reduce the stated rate of any interest or fee payable hereunder (except in connection with the waiver of applicability of any post-default increase in interest rates (which waiver shall be effective with the consent of the Required Lenders)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 9.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, in each case without the written consent of all Lenders; (iv) amend, modify or waive any provision of Section 9 without the written consent of the Administrative Agent; or (v) add additional currencies as Foreign Currencies in which Foreign Currency Loans may be made under this Agreement without the written consent of all the Lenders. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the
Lenders and the Administrative Agent shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy) and shall not be effective until received, provided that any notice given by the Administrative Agent pursuant to the final paragraph of Section 7 shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received. All such notices, requests and demands shall be addressed as follows, in the case of the Borrower and the Administrative Agent, and as set forth in an administrative questionnaire delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:
Borrower: Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: Treasurer
Telecopy: 781-622-1181
Telephone: 781-622-1000
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454-9046
Attention: General Counsel
Telecopy: 781-622-1283
Telephone: 781-622-1000
Administrative Agent: Barclays Bank PLC
222 Broadway
New York, New York 10038
Attention: Charles Ray
Telecopy: 212-412-5306
Telephone: 212-412-3355
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Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Section 2 unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Administrative Agent, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Administrative Agent shall deem appropriate, (b) after the occurrence and during the continuance of an Event of Default, to pay or reimburse each Lender and the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel to each Lender and of counsel to the Administrative Agent and (c) to pay, indemnify, and hold each Lender and the Administrative Agent and their respective officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including reasonable fees and expenses of counsel) with respect to such Lender or Administrative Agent being a party to this Agreement or any other Loan Document, or the enforcement or performance of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Group Member or any of the Properties (all the foregoing in this clause (c), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee or the breach by such Indemnitee of its obligations under this Agreement. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 9.5 shall be payable not later than 10 days after written demand therefor. Statements payable by the Borrower pursuant to this Section 9.5 shall be submitted to Office of the General Counsel (Telephone No. (781) 622-1000) (Telecopy No. (781) 622-1283), at the address of the Borrower set forth in Section 9.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 9.5 shall survive repayment of the Loans and all other amounts payable hereunder.
9.6 Successors and Assigns; Participations and Assignments. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.
(b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the Borrower shall be required for an assignment to a Lender, or, if an Event of Default has occurred and is continuing, any other Person; and
(B) the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of any Commitment to an assignee that is a Lender with a Commitment immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional conditions:
(A) except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if
any;
(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and
(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire.
For the purposes of this Section 9.6, the term "Approved Fund" has the following meaning:
"Approved Fund" means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) below, from and after the effective date specified in each Assignment
and Assumption the Assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.14, 2.15, 2.16 and 9.5). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.6
shall be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
(v) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
(c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Administrative Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 9.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.7(b) as though it were a Lender, provided such Participant shall be subject to Section 9.7(a) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater payment under Section 2.14 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 2.15 unless such Participant complies with Section 2.15(d).
(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto.
(e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.
(f) Notwithstanding the foregoing, any Lender may assign its rights and obligations to a Conduit Lender organized and administered by such Lender, provided that such assignment shall be subject to all the requirements of the definition of the term "Conduit Lender" in Section 1.1. Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower
or the Administrative Agent and without regard to the limitations set forth in
Section 9.6(b). Each of the Borrower, each Lender and the Administrative Agent
hereby confirms that it will not institute against a Conduit Lender or join any
other Person in instituting against a Conduit Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
state bankruptcy or similar law, for one year and one day after the payment in
full of the latest maturing commercial paper note issued by such Conduit Lender;
provided, however, that each Lender designating any Conduit Lender hereby agrees
to indemnify, save and hold harmless each other party hereto for any loss, cost,
damage or expense arising out of its inability to institute such a proceeding
against such Conduit Lender during such period of forbearance.
9.7 Adjustments; Set-off. (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender, if any Lender (a "Benefitted Lender") shall receive any payment of all or part of the Obligations owing to it (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right after the occurrence and during the continuation of an Event of Default, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower, as the case may be. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.
9.9 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Borrower, the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
9.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.
9.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and Holdings and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.
9.14 Confidentiality. Each of the Administrative Agent and each Lender agrees on its own behalf and on behalf of each Affiliate thereof to keep confidential all non-public information provided to it by any Group Member, the Administrative Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or any affiliate thereof solely for the purposes of, or otherwise in connection with, this Agreement, (b) subject to an express agreement to maintain the confidentiality of such information in compliance with the provisions of this Section (which may be a standing agreement between such Lender and such Transferee), to any actual or prospective Transferee or any direct or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, in each case who have a need to know such information in accordance with customary business practices (it being understood that the Person to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. Unless specifically prohibited by applicable law or court order, the Administrative Agent and each Lender shall, prior to any disclosure under clause (d), (e) or (f) above to (x) any Governmental Authority that does not have supervisory, regulatory or other similar authority with respect to the Administrative Agent or such Lender, as the case may be, and that is seeking such disclosure solely in connection with an investigation, litigation or other proceeding that does not otherwise involve the Administrative Agent or such Lender, as the case may be, or (y) any other Person that is not a Governmental Entity, notify the Borrower of any request for the disclosure of any such non-public information so as to provide the Borrower with the reasonable opportunity to obtain a protective order or other comparable relief.
9.15 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
THERMO ELECTRON CORPORATION
By: /s/ Kenneth J. Apicerno
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Name: Kenneth J. Apicerno
Title: Treasurer
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BARCLAYS BANK PLC, as Administrative Agent and as a Lender
By: /s/ John Giannone
----------------------------------------
Name: John Giannone
Title: Director
|
ABN AMRO BANK N.V., as Syndication Agent and as a Lender
By: /s/ Richard Scrage /s/ James S. Kreitler
----------------------------------------
Name: Richard Scrage James S. Kreitler
Title: Vice President Senior Vice President
|
FLEET NATIONAL BANK, as Co-
Documentation Agent and as a Lender
By: /s/ Debra E. DelVecchio
----------------------------------------
Name: Debra E. DelVecchio
Title: Director
|
JPMORGAN CHASE BANK, as Co-
Documentation Agent and as a Lender
By: /s/ Dawn Lee Lum
----------------------------------------
Name: Dawn Lee Lum
Title: Vice President
|
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NY BRANCH, as a Lender
By: /s/ Lillian Kim
--------------------------------------
Name: Lillian Kim
Title: Authorized Signatory
|
INTESABCI S.P.A., NEW YORK BRANCH, as a Lender
By: /s/ F. Maffei
--------------------------------------
Name: F. Maffei
Title: Vice President
By: /s/ J. Dickerhof
--------------------------------------
Name: J. Dickerhof
Title: Vice President
|
KEY CORPORATE CAPITAL INC., as a Lender
By: /s/ Jeff Kalinowski
--------------------------------------
Name: Jeff Kalinowski
Title: Vice President
|
NORDEA BANK FINLAND PLC, as a Lender
By: /s/ Thomas P. Hickey
--------------------------------------
Name: Thomas P. Hickey
Title: Vice President
By: /s/ Henrik M. Steffensen
--------------------------------------
Name: Henrik M. Steffensen
Title: First Vice President
|
Exhibit 10.74
MASSACHUSETTS
GENERAL HOSPITAL
The MGH Executive Registry and
Corporate Care Program
101 Merrimac Street, M01-201
Boston, Massachusetts 02114-4719
Tel: 617.726.4444, Fax: 617.726.4249
Welcome to the Executive Registry Program at the Massachusetts General Hospital!
As an Executive Registry member you are entitled to a world of benefits. The Executive Registry was designed to meet the needs of busy executives for rapid, discrete access to the best health care possible. The Executive Registry provides:
o Hospital assistance services including coordination of routine and emergency inpatient admissions, outpatient primary or specialty care, second opinions and follow-up care
o Health care planning for members and their families who relocate to another city or country
o Predeparture services such as coordinating services for immunizations
o Global emergency transportation coordination
Professional staff assist with arranging local care at the MGH during business hours. After hours health care assistance is available around the clock, twenty-four hours a day, seven days a week, through the specialized emergency paging system.
The primary objective of the Executive Registry program is to be the facilitator of the highest quality medical care for executives while traveling both domestically and internationally, but we are also committed to facilitating the same excellent care at any time of need to the executive and his/her immediate dependent family members. While traveling, either for business or pleasure, Executive Registry members can obtain care at any affiliate worldwide. The toll free number on the back of your Executive Registry card routes the caller to the nearest Executive Registry location, and program staff assist with arranging care.
The Executive Registry adds value to your current health care coverage. The program is not a substitute or replacement for a health insurance plan, but it is a very valuable supplementary service which will ensure ready access to some of the finest medical care to be found both domestically and abroad.
Please call 617-726-4444 to access the Executive Registry services or if you have questions regarding your benefit.
EXHIBIT 21
THERMO ELECTRON CORPORATION
Subsidiaries of the Registrant
As of February 28, 2003, Thermo Electron Corporation owned the following companies:
------------------------------------------------------------------------------------------------------------------------------------
STATE OR
JURISDICTION OF PERCENT OF
NAME INCORPORATION OWNERSHIP
------------------------------------------------------------------------------------------------------------------------------------
Thermo CRS Holdings Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo CRS Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
CRS Robotics Inc. Michigan 100
------------------------------------------------------------------------------------------------------------------------------------
Robocon GmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
CRS Robotics France SARL France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Coleman Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Coleman Services Incorporated Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Information Solutions Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Peter Brotherhood Holdings Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Aircogen Ltd. England 80
------------------------------------------------------------------------------------------------------------------------------------
Peter Brotherhood Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Peter Brotherhood Pension Fund Trustees Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Realty Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron, S.A. de C.V. Mexico 100
------------------------------------------------------------------------------------------------------------------------------------
Fi SA France 100
------------------------------------------------------------------------------------------------------------------------------------
Gulf Precision, Inc. Arizona 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil-Keystone Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
Loftus Furnace Company Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
NAPCO, Inc. Connecticut 100
------------------------------------------------------------------------------------------------------------------------------------
North East Surgical Tool Corp. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Staten Island Cogeneration Corporation New York 100
------------------------------------------------------------------------------------------------------------------------------------
TE Great Lakes Inc. Michigan 100
------------------------------------------------------------------------------------------------------------------------------------
TEC Cogeneration Inc. Florida 100
------------------------------------------------------------------------------------------------------------------------------------
South Florida Cogeneration Associates Florida 50*
------------------------------------------------------------------------------------------------------------------------------------
North County Resource Recovery Associates California 100*
(50% of which is owned directly by
Thermo Securities Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Export Inc. Barbados 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Foundation, Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Leasing Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Capital Company LLC Delaware 50
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Orion Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Orion Research Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Orion Puerto Rico Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Russell pH Limited Scotland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Keytek LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermedics Detection de Argentina S.A. Argentina 99
(additionally 1% of the shares are owned
directly by Thermo Detection Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection de Mexico, S.A. C.V. Mexico 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermedics Detection Scandinavia AS Norway 100
------------------------------------------------------------------------------------------------------------------------------------
1
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Thermo Allen Coding Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Allen Coding Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Weighing & Inspection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Best Checkweighers Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Intertest (UK) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Goring Kerr Detection Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Goring Kerr (NZ) Limited New Zealand 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron Canada Inc. Canada 95
(additionally, 5% of the shares are owned directly by Thermo Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Ramsey France S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Allen France France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Ramsey Italia S.R.L. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey TecnoEuropa S.r.l. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Xuzhou Ramsey Technology Development Co., Limited China 50*
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron Australia Pty. Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hitech Electrocontrols Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hitech Licenses Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hitech Metal Detectors Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Westerland Engineering Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Westerland Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Sentron (South Africa) Pty. Ltd. South Africa 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Voltek Europe B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Comtest Italia S.R.L. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Comtest Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
UVC Realty Corp. New York 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Administrative Services Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
KFP Operating Company, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
KFx Fuel Partners, L.P. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron of Maine, Inc. Maine 100
------------------------------------------------------------------------------------------------------------------------------------
Gorbell/Thermo Electron Power Company Maine 80*
------------------------------------------------------------------------------------------------------------------------------------
Star/RESC LLC Texas 75
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Foundation, Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Metallurgical Services, Inc. Texas 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Eberline Corporation New Mexico 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Life Sciences Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Denley Instruments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron (Management Services) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Comdata Services Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Lipshaw Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Luckham Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Phicom Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Southions Investments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Sungei Puntar Rubber Estate Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Westions Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Whale Scientific Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Forma Scientific Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences (Europe) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
E-C Apparatus Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Shandon (Germany) Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Savant Instruments Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
2
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Helmet Securities Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
International Equipment Company Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Kft Hungary 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International, Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
LSI (US) Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
LSI North America Service Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International Holdings BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Labsystems OY Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Labsystems (Shanghai) Co. Ltd. China 90
------------------------------------------------------------------------------------------------------------------------------------
Thermo Labsystems India Pvt. Ltd. India 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Clinical Labsystems Oy Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems (Hong Kong) Limited Hong Kong 99
------------------------------------------------------------------------------------------------------------------------------------
JSC Thermo Labsystems Russia 95
------------------------------------------------------------------------------------------------------------------------------------
Labinstruments Oy Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International (Poland) SP z O.O Poland 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems Christioan-Gassauer-Fleissner GmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
Britlowes Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Commendstar Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Consumer & Video Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Video Communications Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Greensecure Projects Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hybaid Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Equibio Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Cell One S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems Ges mbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
Omnigene Limited England 58.5
------------------------------------------------------------------------------------------------------------------------------------
Shenbridge Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Southern Instruments Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Finishlong Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Gamma-Metrics Minerals Pty Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Gamma-Metrics Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron India Private Limited India 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo MF Physics Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Radiometrie U.S.A., Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
ONIX Systems Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Process Instruments GP, LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Process Instruments LP Texas 99.9
(an additional 0.1% of Thermo Process Instruments LP is owned by Thermo Process
Instruments GP, LLC)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Measuretech Canada Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Onix Holdings Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
CAC UK Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Measurement Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Peek Measurement Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Sarasota Data Products Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Sarasota Instrumentation Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Onix Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo ONIX B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
VG Gas Analysis Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Quadropols Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
VG Systems Japan K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
3
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Thermo Projects OY Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Scientific Instruments Corporation Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron German Holdings Inc. Delaware 35.4
(7.2% of shares are owned directly by TDI Inc. of VA, 6.6% of shares
are owned directly by Thermo Radiometrie Corporation, 19.3% of shares
are owned directly by Thermo Electron Corporation, 29.3% of shares
are owned directly by Thermo Finnigan LLC, 2.2% of shares are owned
directly by Thermo Detection Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Vacuum Generators Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
FI Instruments Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Spectronic Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
SLM International Inc. Illinois 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Elemental Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
A.R.L. Applied Research Laboratories S.A. Switzerland 100
------------------------------------------------------------------------------------------------------------------------------------
Fisons Instruments (Proprietary) Limited South Africa 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Wissenschaftliche Gerate GesmbH Austria 100
------------------------------------------------------------------------------------------------------------------------------------
Baird Do Brazil Representacoes Ltda. Brazil 100
------------------------------------------------------------------------------------------------------------------------------------
Beijing Baird Analytical Instrument Technology Co. Limited China 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Cahn Corporation Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
Mattson Instruments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek Italia S.p.A. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Unicam S.A. Belgium 100
------------------------------------------------------------------------------------------------------------------------------------
Nicolet Japan K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo VG Systems Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Norlab Instruments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Spectroscopy Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Elemental Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Unicam Export Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Nuclear Enterprises Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Planweld Holding Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Hilger Analytical Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Nicolet Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Nippon Jarrell-Ash Co Ltd. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments (Canada) Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Unicam Analytical Inc. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek Materials Analysis (S.E.A.) Pte Limited Singapore 100
------------------------------------------------------------------------------------------------------------------------------------
Gould Instrument Systems, Inc. Ohio 100
------------------------------------------------------------------------------------------------------------------------------------
Gould & Nicolet S.A. France 95
(additionally, 5% of the shares are owned directly by
Thermo Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Kevex X-Ray Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo NESLAB Inc. New Hampshire 100
------------------------------------------------------------------------------------------------------------------------------------
Nicolet Instrument Technologies Inc. Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Noran Inc. Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoSpectra Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Nicolet Technologies Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Spectrace Instruments Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Sweden Forvaltning AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics AB Sweden 99
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Holdings USA, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Canada Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Holdings Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
4
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Decorex Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Holdings S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Saroph B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra Precision (Asia) Pte. Ltd. Singapore 100
------------------------------------------------------------------------------------------------------------------------------------
Saroph Sweden AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Labsystems Sweden AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnnigan AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments Nordic AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Life Sciences AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie Oy Finland 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Nobel AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Nobel Electronique S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Nobel Elektronikk A/S Norway 100
------------------------------------------------------------------------------------------------------------------------------------
AB Givareteknik Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Laser Analytical Systems GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Laser Analytical Systems, Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Semiconductor Lasers, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Laser Data Systems, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics France S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Lasers B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Lasers Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan MAT S.R.L. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoQuest AB Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Thermoquest Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan MAT China, Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan Australia Pty. Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan Mat Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments Australia Pty. Limited Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan Properties, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Business Trust Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
TMOI Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Forma Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo IEC Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Savant Inc. New York 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Masslab Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
H.D. Technologies Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Life Sciences International (HK) Limited Hong Kong 100
------------------------------------------------------------------------------------------------------------------------------------
TMQ SEG (Hong Kong) Limited Hong Kong 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan Italia S.p.A. Italy 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan AG Switzerland 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoQuest K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Fisons Instruments NV Belgium 100
------------------------------------------------------------------------------------------------------------------------------------
Fisons Instruments K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Haake Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
5
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Holding European Operations Corp. Delaware 85
(an additional 15% is owned by Thermo Electron German Holdings Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Luxembourg Holding S.a.r.l. Luxembourg 100
------------------------------------------------------------------------------------------------------------------------------------
Grond en Watersaneringstechniek Nederland B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Holding BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments NV Belgium 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finance Company BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Nicolet Technologies BV Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Separation Products B.V. B.A. Belgium 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
ThIS Gas Analysis Systems B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Euroglas B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Deutschland Verwaltvngs GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Luxembourg S.a.r.l. Luxembourg 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Deutschland GmbH & Co. KG Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioSciences GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan GmbH Germany 90
(additionally, 10% of the shares are owned
directly by Thermo Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Life Sciences GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Nicolet GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Haake GmbH Germany 90
(additionally, 10% of the shares are owned
directly by Thermo Electron Scientific
Instruments Corporation)
------------------------------------------------------------------------------------------------------------------------------------
ESM Andersen Instruments GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
ITC Grundstucksverwaltungs GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
ITC Grundstucksverwaltungs GmbH & Co. Germany 90
(additionally 10% of the shares are owned by
Thermo Securities Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo BLH GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Shandon GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie GmbH Germany 90
(additionally 10% of the shares are owned
directly by Thermo Electron Corporation)
------------------------------------------------------------------------------------------------------------------------------------
ESM Eberline Instruments GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems Vertriebs GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Ramsey GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Nobel Elektronik GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Detection GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoSpectra GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Gould Nicolet Messtechnik GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo NORAN GmbH Germany 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoSpectra B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo TLH (U.K.) Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo TLH L.P. Delaware 99.99*
(additionally 0.01% is owned by Thermo TLH (U.K.) Limited
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioStar Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo DMA Inc. Texas 100
------------------------------------------------------------------------------------------------------------------------------------
DMA Latinoamericana S.A. de C.V. Mexico 50
------------------------------------------------------------------------------------------------------------------------------------
6
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Labsystems (SEA) Pte. Ltd. Singapore 100
------------------------------------------------------------------------------------------------------------------------------------
Fastighets AB Skrubba Sweden 100
------------------------------------------------------------------------------------------------------------------------------------
Dynex Technologies spol. s.r.o. Czech Republic 100
------------------------------------------------------------------------------------------------------------------------------------
TDI Inc. of VA Virginia 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Projects Limited (BVI) England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Bioanalysis Japan K.K. Japan 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Shandon Ltd. England 100
------------------------------------------------------------------------------------------------------------------------------------
Anglia Scientific Instruments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Shandon Southern Instruments Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Shandon Inc. Pennsylvania 100
------------------------------------------------------------------------------------------------------------------------------------
E-C Apparatus Corporation Florida 100
------------------------------------------------------------------------------------------------------------------------------------
Whale Scientific Corporation Colorado 100
------------------------------------------------------------------------------------------------------------------------------------
ALKO Diagnostic Corporation Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis (Guernsey) Ltd. Channel Islands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo BioAnalysis Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Fast U.K. Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Projects Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Toolquip Group Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Toolquip International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Medquip International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Labquip International Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Simple Paper Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Shockblock Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Electron Holding France SA. (Additionally owned by 47.52% by Thermo Electron France 22.59
Corporation and 29.9% owned by Thermo Electron Scientific Instruments Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo VG Scientific France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Finnigan France France 100
------------------------------------------------------------------------------------------------------------------------------------
Finnigan Automass S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hypersil S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Konelab SA France 100
------------------------------------------------------------------------------------------------------------------------------------
Shandon France S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Radiometrie France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments SAS France 100
------------------------------------------------------------------------------------------------------------------------------------
Rutter Instrumentation S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek EURL France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems S.A.R.L. France 100
------------------------------------------------------------------------------------------------------------------------------------
Rheo S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Labsystems S.A. France 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems (Australia) Pty Limited Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo LabSystems Inc. Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Trace Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Trace BioSciences Pty. Ltd. Australia 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Trace BioSciences NZ Limited New Zealand 99
------------------------------------------------------------------------------------------------------------------------------------
Trace America, Inc. Florida 100
------------------------------------------------------------------------------------------------------------------------------------
Herbos Dijaganosticka Croatia 50
------------------------------------------------------------------------------------------------------------------------------------
Shanghai Long March Chiron Trace Medical Science Co. Ltd. China 22
------------------------------------------------------------------------------------------------------------------------------------
Thermo Environmental Instruments Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Gastech Ltd. Canada 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Andersen Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
7
|
THERMO ELECTRON CORPORATION
------------------------------------------------------------------------------------------------------------------------------------
Thermo Instruments do Brasil Ltda. Brazil 100
(1% of which shares are owned directly
by Thermo Elemental Inc.)
------------------------------------------------------------------------------------------------------------------------------------
Van Hengel Holding B.V. Netherlands 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Optek S.A. Spain 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Franklin Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Syracuse Inc. New York 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Hilger Crystals Limited England 100
------------------------------------------------------------------------------------------------------------------------------------
Spectra-Physics Stratford Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Power Corporation Massachusetts 100
------------------------------------------------------------------------------------------------------------------------------------
ACI Holdings Inc. New York 100
------------------------------------------------------------------------------------------------------------------------------------
T-Lyte Corporation Delaware 98
------------------------------------------------------------------------------------------------------------------------------------
TTT Metals of Minnesota, Inc. Minnesota 100
------------------------------------------------------------------------------------------------------------------------------------
TTT Metals of California, Inc. California 100
------------------------------------------------------------------------------------------------------------------------------------
TTT Metals of Wisconsin Inc. Wisconsin 100
------------------------------------------------------------------------------------------------------------------------------------
TMA/Hanford, Inc. Washington 100
------------------------------------------------------------------------------------------------------------------------------------
RGPC Inc. Michigan 100
------------------------------------------------------------------------------------------------------------------------------------
Lancaster Laboratories LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo EuroTech (Delaware) Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo EuroTech Ireland Ltd. Ireland 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoRetec Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
GeoWest Golden Inc. Colorado 100
------------------------------------------------------------------------------------------------------------------------------------
GeoWest TriTechnics of Ohio, LLC Colorado 100
------------------------------------------------------------------------------------------------------------------------------------
RETEC Thermal, Inc. Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
TRI Oak Ridge LLC Delaware 50
(additionally, 50% of the shares are owned
directly by Coleman Services Incorporated)
------------------------------------------------------------------------------------------------------------------------------------
TRUtech L.L.C. Delaware 47.5*
------------------------------------------------------------------------------------------------------------------------------------
Thermo Securities Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Eberline LLC Delaware 51
(49% owned by Thermo BioAnalysis Corporation)
------------------------------------------------------------------------------------------------------------------------------------
Thermo Technology Ventures Inc. Idaho 100
------------------------------------------------------------------------------------------------------------------------------------
Plasma Quench Investment Limited Partnership Delaware 60*
------------------------------------------------------------------------------------------------------------------------------------
ThermoLase LLC Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
ThermoLase Japan L.L.C. Wyoming 50*
------------------------------------------------------------------------------------------------------------------------------------
Trex Medical Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Trex Medical Systems Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
Thermo Corporation Delaware 100
------------------------------------------------------------------------------------------------------------------------------------
* Joint Venture/Partnership
8
|
|
|
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (Nos. 33-00182, 33-8993, 33-8973, 33-16460, 33-16466, 33-25052, 33-37865, 33-37867, 33-36223, 33-52826, 33-52804, 33-52806, 33-52800, 33-37868, 33-51187, 33-51189, 33-54347, 33-54453, 33-65237, 33-61561, 33-58487, 333-19535, 333-14265, 333-90761, 333-90823, 333-94627, 333-48432, 333-46408, 333-43702, 333-43698, 333-40578, 333-40576, 333-33070, 333-33062, 333-33068, 333-33064, 333-33058, 333-33066, 333-33060, 333-33074, 333-33072, 333-62004, 333-76670, 333-83470), and Forms S-3 (Nos. 333-01277, 333-01893, 333-34909-01, 333-62957, 333-32035-01, 333-60024) of Thermo Electron Corporation of our report dated February 4, 2003, except as to the information in Note 19, for which the date is February 28, 2003, relating to the financial statements, which appears in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated February 4, 2003 relating to the financial statement schedule, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 6, 2003
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Thermo Electron Corporation (the "Company") for the period ended December 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Marijn E. Dekkers, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Marijn E. Dekkers
-------------------------------------
Dated: March 7, 2003 Marijn E. Dekkers
President and Chief Executive Officer
|
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Thermo Electron Corporation (the "Company") for the period ended December 28, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Theo Melas-Kyriazi, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Theo Melas-Kyriazi
-----------------------
Dated: March 7, 2003 Theo Melas-Kyriazi
Chief Financial Officer
|