-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CkqEeP3w/fzxywFFKpIXIsk8HDPLmtrSLVx0r2AEoKJtqbEUYHTc7IXWHWP/LOjA bRmGAGQJFbMRZMji8vgdUw== /in/edgar/work/20000622/0000796038-00-000016/0000796038-00-000016.txt : 20000920 0000796038-00-000016.hdr.sgml : 20000920 ACCESSION NUMBER: 0000796038-00-000016 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000622 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO TERRATECH INC CENTRAL INDEX KEY: 0000796038 STANDARD INDUSTRIAL CLASSIFICATION: [8734 ] IRS NUMBER: 042925807 STATE OF INCORPORATION: DE FISCAL YEAR END: 0403 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09549 FILM NUMBER: 659278 BUSINESS ADDRESS: STREET 1: 85 FIRST AVENUE STREET 2: P O BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02454-9046 BUSINESS PHONE: 7813701640 MAIL ADDRESS: STREET 1: 81 WYMAN STREET STREET 2: P O BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02454-9046 FORMER COMPANY: FORMER CONFORMED NAME: THERMO PROCESS SYSTEMS INC DATE OF NAME CHANGE: 19920703 10-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------------------------------------------- FORM 10-K (mark one) [ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended April 1, 2000 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-9549 THERMO TERRATECH INC. (Exact name of Registrant as specified in its charter) Delaware 04-2925807 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 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, $.10 par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for at least the past 90 days. Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference into Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by nonaffiliates of the Registrant as of April 28, 2000, was approximately $16,872,000. As of April 28, 2000, the Registrant had 18,956,855 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Fiscal 2000 Annual Report to Shareholders for the year ended April 1, 2000, are incorporated by reference into Parts I and II. The information required by Item III of Form 10-K will be filed as an amendment to this Form 10-K no later than 120 days after April 1, 2000, and such information is incorporated by reference from such filing. PART I Item 1. Business (a) General Development of Business Thermo TerraTech Inc. (the Company or the Registrant) provides industrial outsourcing services and manufacturing support encompassing a broad range of specializations. The Company operates in four segments: environmental- liability management, engineering and design, laboratory testing, and metal treating. Thermo Electron Corporation, the majority owner of the Company, has announced a proposed reorganization involving certain of Thermo Electron's subsidiaries, including the Company. Under this plan, the Company and its subsidiaries, ThermoRetec Corporation and The Randers Killam Group Inc., would be merged into Thermo Electron. As a result, all three companies would become privately held subsidiaries of Thermo Electron. The mergers of ThermoRetec and Killam were effective in June and May 2000, respectively. The public shareholders of ThermoRetec and Killam received $7.00 and $4.50 per share, respectively, in cash in exchange for their shares. The merger between the Company and Thermo Electron is expected to be complete in the third quarter of calendar 2000. The public shareholders of the Company are expected to receive common stock in Thermo Electron in exchange for their shares. The number of Thermo Electron shares to be issued to Thermo TerraTech minority shareholders will be determined at the time of the merger transaction, according to the following conditions: If during the 20 trading days immediately prior to the effective date of the merger the average closing price of Thermo Electron common stock is less than $18.75, Thermo TerraTech shareholders would receive common stock worth the equivalent of $7.50 per share of Thermo TerraTech common stock. However, Thermo Electron may elect to terminate the agreement if it would be required to issue 1.8 million or more shares of Thermo Electron common stock. If the average closing price of Thermo Electron common stock is between $18.75 and $23.125, each share of Thermo TerraTech common stock would be exchanged for .4 shares of Thermo Electron common stock. If the average closing price of Thermo Electron common stock is greater than $23.125, Thermo TerraTech shareholders would receive Thermo Electron common stock worth the equivalent of $9.25 per share of Thermo TerraTech common stock. The completion of this transaction is subject to numerous conditions, as outlined in Note 15 to Consolidated Financial Statements in the Registrant's Fiscal 2000* Annual Report to Shareholders, which statements are incorporated herein by reference. In May 1999, the Company announced the planned sale of several businesses by its subsidiaries. In connection with these proposed sales, the Company incurred pretax charges totaling approximately $59 million in fiscal 2000 and expects to incur an additional $2 million in fiscal 2001. On January 31, 2000, Thermo Electron announced that it plans to sell all of the businesses of the Company. This action is part of a major reorganization plan under which Thermo Electron will spin in, spin off, and sell various businesses to focus solely on its core measurement and detection instruments business. The Environmental-liability Management segment includes the Company's ThermoRetec subsidiary, which is a national provider of environmental-liability and resource-management services. Through a nationwide network of offices, ThermoRetec historically offered these and related consulting services in four areas: consulting and engineering, nuclear remediation, soil remediation, and fluids recycling. In February 2000, ThermoRetec entered into a letter of intent to sell five of its six remaining soil-recycling facilities. The transaction is expected to be completed before the end of July 2000, although there can be no assurance that ThermoRetec will complete this sale. In March 2000, ThermoRetec sold its sixth soil-recycling facility. As of April 1, 2000, the Company owned 70% of ThermoRetec's outstanding common stock. As noted above, ThermoRetec has become a privately held subsidiary, jointly owned by the Company and Thermo Electron. The Company's majority-owned Thermo EuroTech N.V. subsidiary, located in the Netherlands, specializes in converting "off-spec" and contaminated petroleum fluids into - -------------------- * References to fiscal 2000, 1999, and 1998 herein are for the fiscal years ended April 1, 2000, April 3, 1999, and April 4, 1998, respectively. 2 useable oil products. Thermo EuroTech also provides in-plant waste management and recycling services through its Ireland-based Green Sunrise Holdings Ltd. subsidiary. In August 1999, Green Sunrise acquired the outstanding stock of Dempsey Drums Limited, an Ireland-based service provider specializing in the supply, disposal, and reconditioning of steel and plastic drums and other specialized containers. On May 3, 2000, the Company entered into a letter of intent to sell the outstanding stock of Green Sunrise. As of April 1, 2000, the Company owned 88% of Thermo EuroTech's outstanding common stock. The Engineering and Design segment includes the Company's Killam subsidiary, which historically provided comprehensive engineering and outsourcing services in four areas: water and wastewater treatment, process engineering and construction, highway and bridge engineering, and infrastructure engineering. In January 2000, Killam sold its Randers division, a process engineering and construction business. In April 2000, Killam sold the assets of its BAC Killam Inc. subsidiary, a highway and bridge engineering business. As of April 1, 2000, the Company owned approximately 95% of Killam's outstanding common stock. As noted above, Killam has become a privately held subsidiary, jointly owned by the Company and Thermo Electron. This segment also includes the Company's wholly owned Normandeau Associates Inc. subsidiary, which provides consulting services that address natural resource management issues. The Company's wholly owned Thermo Analytical Inc. subsidiary, which represents the Laboratory Testing segment, operates analytical laboratories that provide environmental- and pharmaceutical-testing services, primarily to commercial clients throughout the U.S. The Metal Treating segment performs metallurgical processing services using thermal-treatment equipment at locations in California, Minnesota, and Wisconsin. The Company sold the businesses comprising this segment in June 2000. The Company was incorporated on May 30, 1986, as an indirect, wholly owned subsidiary of Thermo Electron. As of April 1, 2000, Thermo Electron owned 16,605,286 shares of the Company's common stock, representing 88% of such stock outstanding. Thermo Electron develops, manufactures, and sells measurement and detection instruments used in virtually every industry to monitor, collect, and analyze data that provide knowledge for the user. For example, Thermo Electron's powerful analysis technologies help researchers sift through data to unlock the mysteries of DNA or develop new drugs; allow manufacturers to fabricate ever-smaller components required to carry greater amounts of information, faster; or monitor and control industrial processes on-line to ensure that critical quality standards are met efficiently. Forward-looking Statements Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Annual Report on Form 10-K. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in the Registrant's Fiscal 2000 Annual Report to Shareholders, which statements are incorporated herein by reference. (b) Financial Information About Segments Financial information concerning the Company's segments is summarized in Note 13 to Consolidated Financial Statements in the Registrant's Fiscal 2000 Annual Report to Shareholders, which information is incorporated herein by reference. 3 (c) Description of Business (i) Principal Services and Products Environmental-liability Management The Company provides environmental consulting and remediation construction management to clients in the transportation, refining, chemical, wood-treating, gas, and electric utility industries across the nation. The Company offers a broad array of remedial solutions to help clients manage problems associated with environmental compliance, resource management, and the remediation of industrial sites contaminated with various wastes and residues. The Company provides particular expertise in bioremediation and in managing wastes from manufactured-gas plants, refineries, and railroad properties. The Company also performs cleanups of hazardous waste sites for government and industry as a prime construction contractor and completes predesigned remedial action contracts at sites containing hazardous, toxic, and radioactive wastes. Under contracts with federal and state governments, and other public and private sector clients, the Company also provides project management and construction services for the remediation of hazardous and nonhazardous wastes. Most of this contract work is obtained through a bid process, with the job being awarded to the best qualified bidder. In addition, the Company helps public utilities, government institutions, and Fortune 500 companies develop and implement management and computer-based systems that aid in the collection and application of environmental and resource-management data. By helping to establish or improve a customer's environmental-compliance program, the Company's customized services promote and support the integration of environmental-management functions with everyday business activities. The Company's services help multinational companies accurately estimate and control the cost of their environmental-compliance and health and safety efforts. The Company also develops measurement systems that track clients' progress toward their stated environmental performance goals. The Company provides services to remove radioactive contaminants from sand, gravel, and soil, as well as health physics services, radiochemistry laboratory services, radiation dosimetry services, radiation-instrument calibration and repair services, and radiation-source production. As part of its radiation and nuclear/health physics services business, the Company provides site surveys for radioactive materials and on-site samples, as well as analysis in support of decontamination programs and dosimetry services to measure personnel exposure. In addition, using its proprietary segmented-gate system technology, the Company removes radioactive contaminants from sand, gravel, and soil. A substantial part of the Company's health physics services has been performed under the U.S. Department of Energy's remedial action programs. The Company designs and operates facilities for the remediation of nonhazardous soil. The Company's soil-recycling centers are environmentally secure facilities for receiving, storing, and processing petroleum-contaminated soils. Each site consists principally of a soil-remediation unit and a soil-storage area. The Company currently provides soil-remediation services at facilities in California, Oregon, Washington, Maryland, and New York. During fiscal 1999, the Company announced plans to close two soil-recycling facilities, of which one was closed in March 1999 and the other was sold in March 2000. In addition, during fiscal 2000, ThermoRetec announced plans to sell three additional soil-recycling facilities. In February 2000, ThermoRetec signed a letter of intent to sell its five remaining soil-recycling facilities, including the three announced in May 1999. The transaction is expected to be completed before the end of July 2000, although there can be no assurance that ThermoRetec will complete this sale. The market for remediation of petroleum-contaminated soils, as with many other waste markets, was created by environmental regulations. The market for soil-remediation services has been driven largely by state programs to enforce the Environmental Protection Agency's (EPA's) underground storage tank (UST) regulations and to fund cleanups. UST compliance requirements and attendant remediation costs are often beyond the financial capabilities of 4 individuals and smaller companies. To address this problem, some states established tax-supported trust funds to assist in the financing of UST compliance and remediation. Many states have realized that the number of sites requiring remediation and the costs of compliance are substantially higher than were originally estimated. As a result, several states have significantly reduced compliance requirements and altered regulatory approaches and standards in order to reduce the costs of cleanup. More lenient regulatory standards, reduced enforcement, and uncertainty with respect to such changes have already resulted in lower levels of cleanup activity in most states where the Company conducts business, which had a material adverse effect on the Company's business in recent years. Although the Company expects this market to remain viable for some time after April 1, 2000, there can be no assurance that this business will not decline in future years. The Company offers a full spectrum of environmental services related to managing and recycling nonhazardous, liquid, and solid materials generated by business and industry. The Company's client base is largely public retail and industrial businesses, but also includes municipalities, public utilities, railroads, the mining industry, and government agencies. The materials managed by the Company for its customers primarily are used oils and oil-contaminated waters, which are continuously generated as part of the customers' operations. As such, the Company provides services for its customers on a recurring basis. The Company processes the materials it collects into products for resale and/or recycling, such as fuel, glycol, steel, and clean water. The Company has expanded its services to include a variety of field technical services, including on-site waste sampling and testing, emergency response, and tank cleaning. Thermo EuroTech specializes in processing "off-spec" mixtures of oil that contain water, ash, and sediment into commercially tradable end products used in blending. The end products of this process are commercial grade oils that can be blended to make diesel fuels and marine fuels or be used as a feed material. Thermo EuroTech's North Refinery facility has historically received a large percentage of its oil feedstock from the former Soviet Union. North Refinery no longer receives any oil from that nation, due to political and economic changes that have made the transportation of waste oil difficult. To overcome this loss of supply, Thermo EuroTech has taken steps to replace and diversify its feedstock suppliers. In addition, Thermo EuroTech has applied to Dutch authorities for licenses to broaden the variety of waste streams that could be treated at North Refinery. North Refinery may experience future disruptions in deliveries. Any disruptions in supply could have a material adverse effect on the Company's results of operation. In addition, North Refinery has received a one-year exemption from the environmental authorities in the Netherlands and the United Kingdom allowing it to export refined oil, which would otherwise be regulated as "waste" under the environmental regulations of those countries. If North Refinery is unable after that time to qualify its exported oil as non-waste quality oil, or if North Refinery is unable to extend the length of its exemption, the Company's results of operations could be materially adversely affected. Thermo EuroTech also provides in-plant waste management and recycling services through its Ireland-based Green Sunrise subsidiary. In August 1999, Green Sunrise acquired the outstanding stock of Dempsey Drums Limited, an Ireland-based service provider specializing in the supply, disposal, and reconditioning of steel and plastic drums and other specialized containers. On May 3, 2000, the Company entered into a letter of intent to sell the outstanding stock of Green Sunrise. During fiscal 2000, 1999, and 1998, the Company derived revenues of $166.2 million, $159.1 million, and $141.1 million, respectively, from environmental-liability management services. 5 Engineering and Design The Company historically provided comprehensive engineering and outsourcing services in such areas as water and wastewater treatment, process engineering and construction, highway and bridge engineering, and infrastructure engineering. In January 2000, Killam sold its Randers division, a process engineering and construction business. In April 2000, Killam sold the assets of its BAC Killam Inc. subsidiary, a highway and bridge engineering business. A substantial portion of the Company's engineering and design services sales are made to existing customers on a repeat basis. Engineering and design services are often performed as multiyear studies. In addition to federal, state, and local governments, customers include public utilities, waste management companies, oil refineries, mining companies, architectural and engineering firms, and a variety of service companies involved with real estate transactions. The Company specializes in the design, planning, and construction observation of municipal and privately owned water treatment plants, wastewater treatment plants, and hazardous wastewater facilities. The Company provides full-service contract operations to plant owners in the public and private sectors. These services facilitate regulatory compliance; optimize day-to-day plant operations; reduce costs; provide competent, experienced personnel; and promote good community relations. Until the January 2000 sale of the Randers division, the Company provided design engineering, project management, and construction services for industrial clients in the manufacturing, pharmaceutical, and chemical-processing industries, principally in the Mid-West, Massachusetts, and West Virginia. In addition, the Company provides a broad range of consulting services, which address transportation planning and design, and transportation and environmental consulting, professional engineering, and architectural services. During fiscal 2000, 1999, and 1998, the Company derived revenues of $79.6 million, $91.8 million, and $84.6 million, respectively, from engineering and design services. Laboratory Testing The Company provides comprehensive laboratory-based services for the environmental and pharmaceutical industries. Analytical laboratory services consist of a comprehensive range of analytical tests to detect and measure organic contaminants and inorganic contaminants in samples of soil, water, air, industrial wastes, and biological materials. The Company also provides testing services for major pharmaceutical companies in support of new healthcare drug development. During fiscal 2000, 1999, and 1998, the Company derived revenues of $44.8 million, $40.5 million, and $37.5 million, respectively, from laboratory testing services. Metal Treating Prior to June 2000, the Company performed metallurgical processing services using thermal-treatment equipment at locations in California, Minnesota, and Wisconsin. Through its Holcroft Division, which was sold in October 1997, the Company designed, manufactured, and installed computer-controlled, custom-engineered, thermal-processing systems used to treat primary metals and metal parts. The Company sold the remaining businesses comprising this segment in June 2000. During fiscal 2000, 1999, and 1998, the Company derived revenues of $17.2 million, $19.3 million, and $36.6 million, respectively, from metal treating services and process systems. 6 (ii) New Products The Company has made no commitments to new products that would require the investment of a material amount of the Company's assets. (iii)Raw Materials Since the Company's business is primarily service oriented, it does not involve the processing of raw materials and is not dependent on fluctuations in the supply or price of raw materials, except as described above. To date, the Company has not experienced any difficulty in obtaining any of the materials or components used in its operations and does not foresee any such difficulty in the future. The Company has multiple sources for all of its significant raw material needs. Prior to fiscal 1996, a large percentage of oil feedstock at Thermo EuroTech's North Refinery division came from the former Soviet Union. Thermo EuroTech no longer receives any oil from that nation as a result of political and economic changes that make transportation of waste oil difficult. To overcome this loss of supply, Thermo EuroTech has taken steps to replace and diversify its feedstock suppliers. However, no assurance can be given that it will not experience future disruptions in deliveries. (iv) Patents, Licenses, and Trademarks The Company currently owns or has rights under licenses to a number of U.S. patents. Although the Company believes that patent protection provides it with competitive advantages with respect to certain portions of its business and will continue to seek patent protection when appropriate, the Company also believes that its business depends primarily upon trade secrets and the technical and marketing expertise of its personnel. (v) Seasonal Influences A majority of the Company's businesses experience seasonal fluctuations. A majority of the Company's soil-remediation sites, as well as the Company's fluids-recycling sites, experience declines in revenues if severe weather conditions occur. Site remediation work and certain environmental testing services may decline in winter months as a result of severe weather conditions. In Europe, Thermo EuroTech may experience a decline in the feedstock delivered to and from its facilities during winter months due to frozen waterways. (vi) Working Capital Requirements In general, there are no special inventory requirements or credit terms extended to customers that would have a material adverse effect on the Company's working capital. (vii)Dependency on a Single Customer No single customer accounted for more than 10% of the Company's revenues in any of the past three years. 7 (viii)Backlog The Company's backlog of firm orders at fiscal year-end 2000 and 1999 was:
(In thousands) 2000 1999 - -------------------------------------------------------------------------------------- --------- --------- Environmental-liability Management $ 46,671 $47,635 Engineering and Design 58,465 62,136 Laboratory Testing 3,611 2,517 Metal Treating 300 300 -------- -------- $109,047 $112,588 ======== ======== These amounts include the backlog of all of the Company's subsidiaries, with the exception of soil-recycling, fluids-recycling, and in-plant waste management and recycling services, which are provided on a current basis pursuant to purchase orders. Included in the Company's backlog at fiscal year-end 2000 and 1999 is the incomplete portion of contracts that are accounted for using the percentage-of-completion method. The Company believes that substantially all of the backlog at April 1, 2000, will be completed during fiscal 2001. Certain of these orders are subject to cancellation by the customer upon payment of a cancellation charge and all government contracts are subject to termination at any time by the government without penalty. The Engineering and Design segment backlog at fiscal year-end 2000 includes $17,298,000 at the Company's BAC Killam subsidiary, which was sold in April 2000. In addition, the businesses comprising the Metal Treating segment were sold in June 2000. (ix) Government Contracts Approximately 8%, 6%, and 4% of the Company's revenues in fiscal 2000, 1999, and 1998, respectively, were derived from contracts or subcontracts with the federal government that are subject to renegotiation of profits or termination. The Company does not have any knowledge of threatened or pending renegotiation or termination of any material contract or subcontract. (x) Competition Many of the Company's businesses are engaged in highly competitive, regional markets, with competition coming from numerous small firms offering limited services, as well as much larger firms that offer an array of services. Environmental-liability Management In the market for consulting and engineering services, the Company competes with numerous regional and local companies as well as a number of national remediation contractors. The Company competes primarily on the basis of value, with the vast majority of the contracts it seeks awarded on the basis of scope, effectiveness, and cost. Other competitive factors for the Company's consulting and engineering businesses include: reputation; experience; breadth and quality of services offered; and technical, managerial, and business proficiency. The type of radiation and nuclear/health physics services offered by the Company are also offered by many large national companies. The Company competes primarily on the basis of its proprietary technology and price. Competition in the soil-remediation business is intense. The Company's principal competitors are landfills, including major landfill companies. The Company also currently competes with companies offering a wide range of disposal options, including other fixed-site, thermal-treatment facilities, operators of mobile thermal-treatment 8 facilities, bioremediation and vapor-extraction facilities, and, in certain states, with asphalt plants and brick kilns that use the contaminated soil in their production processes. Competition in the soil-remediation market has always been highly localized, consisting mostly of single-site or single-unit operators. Competitive conditions limit the prices charged by the Company in each local market for soil-remediation services. Pricing is therefore a major competitive factor for the Company. The Company believes competition and price pressure will remain intense for the foreseeable future. Competition in the fluids recycling market is highly fragmented and ranges in size from small, under-capitalized private enterprises to larger national public companies. At both ends of this spectrum, the industry continues to consolidate and restructure. The Company competes primarily on the basis of quality and price. Thermo EuroTech faces competition for oil from other oil processors and blenders and from a company with a similar distillation technology in Italy. The market for blending oils is very large and oils such as Thermo EuroTech's end products represent a very small percentage of the total market. Green Sunrise is the leading integrated service provider in an emerging, still fragmented market. The Company believes that no one competitor offers Green Sunrise's complete line of services and no single firm is dominant in any of Green Sunrise's primary service areas. Thermo EuroTech competes primarily on the basis of price. Engineering and Design The Company's engineering and design businesses are engaged in highly competitive markets in all of its service areas. These markets tend to be regional. In its geographic service area, competition consists of small, one- to three-person firms offering a limited scope of services, as well as much larger firms that may be regional, national, or international in the scope of services they offer. The principal competitive factors for the Company are: reputation; experience; price; breadth and quality of services offered; and technical, managerial, and business proficiency. Laboratory Testing Hundreds of independent analytical testing laboratories and consulting firms compete for business nationwide. Many of these firms use equipment and processes similar to those of the Company. Competition is based not only on price, but also on reputation for accuracy, quality, and the ability to respond rapidly to customer requirements. In addition, many industrial companies have their own in-house analytical testing capabilities. The Company believes that its competitive strength lies in the quality of its services. Metal Treating The market for metal-treating services is typically regional and competitive. All regions in which the Company had facilities contained numerous competitors. In addition, in-house heat-treating facilities provided a major source of competition. The Company competed in this segment on the basis of services provided, turnaround time, and price. The Company sold the businesses comprising this segment in June 2000. (xi) Environmental Protection Regulations The Company believes that compliance by the Company with federal, state, and local environmental protection regulations will not have a material adverse effect on its capital expenditures, earnings, or competitive position. (xii)Number of Employees As of April 1, 2000, the Company employed approximately 2,700 persons. Approximately 300 of these persons were employed by the BAC Killam and Metal Treating businesses, which were sold subsequent to year-end. 9
(d) Financial Information About Geographic Areas The Company's sales in foreign locations are currently insignificant. (e) Executive Officers of the Registrant
Name Age Present Title (Fiscal Year First Became Executive Officer) ------------------- --- --------------------------------------------------------- Brian D. Holt 50 President and Chief Executive Officer (2001) Emil C. Herkert 62 Vice President (1996) Jeffrey L. Powell 41 Vice President (1994) Christine L. Leonard 35 Vice President, Finance and Administration (2001) Theo Melas-Kyriazi 40 Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) (1999) Each executive officer serves until his successor is chosen or appointed by the Board of Directors and qualified or until earlier resignation, death, or removal. Mr. Holt was appointed President and Chief Executive Officer of the Company in May 2000. Mr. Holt has been President and Chief Executive Officer of Thermo Ecotek Corporation, another majority-owned subsidiary of Thermo Electron, since February 1994 and is Chief Operating Officer, Energy and Environment, for Thermo Electron, a position he has held since September 1998. Mr. Herkert has served as President of Killam Associates, a subsidiary of Killam, since 1977 and was appointed Chief Executive Officer of Randers Killam in May 1997. Mr. Powell served as President of ThermoRetec and as its Chief Executive Officer from its inception in 1993 and from May 1997, respectively, until April 1998, when he was named Senior Vice President of ThermoRetec. Ms. Leonard has served as Controller of the Company since August 1996 and was appointed Vice President, Finance and Administration, in June 2000. Ms. Leonard was Controller of Thermo EuroTech from July 1995 to August 1996. Mr. Melas-Kyriazi was appointed Chief Financial Officer of the Company and Thermo Electron on January 1, 1999. He joined Thermo Electron in 1986 as Assistant Treasurer, and became Treasurer in 1988. He was named President and Chief Executive Officer of ThermoSpectra Corporation, a subsidiary of Thermo Instrument Systems Inc., in 1994, a position he held until becoming Vice President of Corporate Strategy for Thermo Electron in 1998. Mr. Melas-Kyriazi remains a Vice President of Thermo Electron. Mr. Melas-Kyriazi is a full-time employee of Thermo Electron, but devotes such time to the affairs of the Company as the Company's needs reasonably require. Item 2. Properties The location and general character of the Company's principal properties by segment as of April 1, 2000, are: Environmental-liability Management The Company owns approximately 112,000 square feet of office, engineering, laboratory, and production space, principally in Ireland, California, and the Netherlands, and leases approximately 175,000 square feet of office, engineering, laboratory, and production space pursuant to leases expiring in fiscal 2001 through 2007, principally in Colorado, New Mexico, Pennsylvania, Massachusetts, and Washington. The Company also owns approximately 78 acres in Maryland, California, and Oregon, from which it provides soil-remediation services. The Company leases approximately 2 acres in New York pursuant to a lease expiring in fiscal 2005 and 5 acres in Washington on a month-to-month basis, from which it provides soil-remediation services. The Company leases approximately six acres in Arizona and one site in Nevada, pursuant to leases expiring in fiscal 2003 and fiscal 2001, respectively, upon which it has constructed fluids storage and processing equipment. 10 The Company occupies approximately 15 acres in Delfzijl, the Netherlands, consisting of office space, distillation facilities, and oil storage tanks, pursuant to a lease expiring in 2059. The lease is cancelable without penalty in fiscal 2009. Engineering and Design The Company owns approximately 65,000 square feet of office, engineering, and laboratory space in New Jersey and Michigan, and leases approximately 160,000 square feet of office, engineering, and laboratory space pursuant to leases expiring in fiscal 2001 through 2008, principally in Pennsylvania, New Jersey, New Hampshire, Florida, and New York. Of these amounts, BAC Killam owned approximately 9,000 square feet of office and engineering space in New Jersey and leased approximately 26,000 square feet of office and engineering space, primarily in New York. The Company sold the assets of BAC Killam on April 14, 2000. Laboratory Testing The Company owns approximately 185,000 square feet of office and laboratory space in Pennsylvania, and leases approximately 7,000 square feet of office and laboratory space in Michigan pursuant to a lease expiring in fiscal 2001. Metal Treating Prior to the June 2000 sale of the businesses comprising this segment, the Company owned approximately 140,000 square feet of office, laboratory, and production space in Minnesota and Wisconsin, and leased approximately 330,000 square feet of office, laboratory, and production space in California pursuant to leases expiring in fiscal 2005. The Company believes that these facilities are in good condition and are adequate for its present operations and that other suitable space is readily available if any of such leases are not extended. With respect to leases expiring in the near future, in the event the Company does not renew such leases, the Company believes suitable alternate space is available for lease on acceptable terms. Item 3. Legal Proceedings Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. 11 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Information concerning the market and market price for the Registrant's Common Stock, $.10 par value, and dividend policy are included under the sections labeled "Common Stock Market Information" and "Dividend Policy" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data The information required under this item is included under the sections labeled "Selected Financial Information" and "Dividend Policy" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required under this item is included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated herein by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information required under this item is included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data The Registrant's Consolidated Financial Statements as of April 1, 2000, are included in the Registrant's Fiscal 2000 Annual Report to Shareholders and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III The information required by Items 10, 11, 12, and 13 of Form 10-K will be filed as part of an amendment to this Form 10-K no later than 120 days after April 1, 2000, the end of the Registrant's fiscal year covered by this Form 10-K. 12 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a,d) Financial Statements and Schedules (1)The consolidated financial statements set forth in the list below are filed as part of this Report. (2)The consolidated financial statement schedule set forth in the list below is filed as part of this Report. (3)Exhibits filed herewith or incorporated herein by reference are set forth in Item 14(c) below. List of Financial Statements and Schedules Referenced in this Item 14 Information incorporated by reference from Exhibit 13 filed herewith: Consolidated Statement of Operations Consolidated Balance Sheet Consolidated Statement of Cash Flows Consolidated Statement of Comprehensive Income and Shareholders' Investment Notes to Consolidated Financial Statements Report of Independent Public Accountants Financial Statement Schedule filed herewith: Schedule II: Valuation and Qualifying Accounts All other schedules are omitted because they are not applicable or not required, or because the required information is shown either in the financial statements or the notes thereto. (b) Reports on Form 8-K On February 11, 2000, the Company filed a Current Report on Form 8-K dated as of January 28, 2000, with respect to the sale of the Randers division of The Randers Killam Group Inc., a subsidiary of the Company. On March 21, 2000, the Company filed a Current Report on Form 8-K dated as of March 6, 2000, with respect to the sale of a soil-remediation facility by ThermoRetec Corporation, a subsidiary of the Company. (c) Exhibits See Exhibit Index on the page immediately preceding exhibits. 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized. Date: June 23, 2000 THERMO TERRATECH INC. By: /s/ Brian D. Holt Brian D. Holt 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 June 23, 2000. Signature Title By: /s/ Brian D. Holt President, Chief Executive Officer, and Director Brian D. Holt By: /s/ Theo Melas-Kyriazi Vice President and Chief Financial Officer Theo Melas-Kyriazi (Principal Financial and Accounting Officer) By: /s/ John P. Appleton Chairman of the Board and Director John P. Appleton By: /s/ Donald E. Noble Director Donald E. Noble By: /s/ William A. Rainville Director William A. Rainville By: /s/ Polyvios C. Vintiadis Director Polyvios C. Vintiadis 14 Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo TerraTech Inc.: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Thermo TerraTech Inc.'s Annual Report to Shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated May 18, 2000 (except with respect to the matters discussed in Note 17, as to which the date is June 1, 2000). 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 consolidated financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. Arthur Andersen LLP Boston, Massachusetts May 18, 2000 15
SCHEDULE II THERMO TERRATECH INC. Valuation and Qualifying Accounts (In thousands)
Description Provision Accounts Accounts Other (a) Balance Balance at Charged to Recovered Written at End Beginning Expense Off of Year of Year - ----------------------------------- ----------- ----------- ----------- ----------- ----------- ---------- Allowance for Doubtful Accounts Year Ended April 1, 2000 $ 3,577 $ 715 $ (674) $(1,110) $ 187 $ 2,695 Year Ended April 3, 1999 $ 4,450 $ 2,085 $ (45) $(2,479) $ (434) $ 3,577 Year Ended April 4, 1998 $ 3,838 $ 1,141 $ - $ (773) $ 244 $ 4,450
Description Balance at Provision Cash Other (d) Balance Beginning Charged to Payments at End of Year Expense (c) of Year - ------------------------------------- ------------- -------------- ------------ ------------- ------------ Accrued Restructuring Costs (b) Year Ended April 1, 2000 $1,719 $ 6,219 $ (895) $ (1,136) $5,907 Year Ended April 3, 1999 $ - $ 2,095 $ (376) $ - $1,719 (a) Includes allowances of businesses acquired during the year as described in Note 2 to Consolidated Financial Statements in the Registrant's Fiscal 2000 Annual Report to Shareholders. The fiscal 1999 amount includes an acquired company's reserves that were not required and were therefore reversed to cost in excess of net assets of acquired companies. (b) The nature of activity in this account is described in Note 11 to Consolidated Financial Statements in the Registrant's Fiscal 2000 Annual Report to Shareholders. (c) Excludes provision of $50.8 million in fiscal 2000, primarily for write-downs of cost in excess of net assets of acquired companies and fixed assets, and $8.1 million in fiscal 1999, for fixed asset and intangible asset write-downs. (d) Includes reserves reversed due to sale of businesses and the effect of currency translation. 16 EXHIBIT INDEX Exhibit Number Description of Exhibit 2.1 Purchase and Sale Agreement executed October 6, 1997, by and among Remediation Technologies, Inc., RETEC Thermal, Inc., TETRA Thermal, Inc., and TETRA Technologies, Inc. (filed as Exhibit 2.1 to Thermo Remediation Inc.'s Current Report on Form 8-K dated October 6, 1997 [File No. 1-12636] and incorporated herein by reference). 2.2 Assignment and Assumption Agreement executed October 6, 1997, by and among Remediation Technologies, Inc., RETEC Thermal, Inc., TETRA Thermal, Inc., and TETRA Technologies, Inc. (filed as Exhibit 2.2 to Thermo Remediation Inc.'s Current Report on Form 8-K dated October 6, 1997 [File No. 1-12636] and incorporated herein by reference). 2.3 Asset Purchase Agreement dated as of October 10, 1997, between the Registrant and Holcroft L.L.C. (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 2.4 $2,218,000.00 Principal Promissory Note issued by Holcroft L.L.C. to the Registrant (filed as Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 2.5 $663,117.82 Principal Promissory Note issued by Holcroft L.L.C. to the Registrant (filed as Exhibit 2.3 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 2.6 Subordination Agreement dated as of October 10, 1997, between the Registrant and Comerica Bank (filed as Exhibit 2.4 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 2.7 Stock Purchase and Sale Agreement dated May 12, 1997, by and between the Registrant and Thomas R. Eurich, Michael J. Krivitzky, Thomas J. McEnhill, and Bruce M. Bourdon (filed as Exhibit (iv) to Amendment No. 3 to Schedule 13D filed by Thermo Electron Corporation, Thermo Power Corporation, and the Registrant on May 13, 1997, and incorporated herein by reference). 2.8 Amendment No. 1 dated September 19, 1997, to Stock Purchase and Sale Agreement dated May 12, 1997, by and between the Registrant and Thomas R. Eurich, Michael J. Krivitzky, Thomas J. McEnhill, and Bruce M. Bourdon (filed as Exhibit 2.5 to The Randers Group Incorporated's Annual Report on Form 10-K for the fiscal year ended April 4, 1998 [File No. 0-18095] and incorporated herein by reference). 2.9 Reserved. 2.10 Stock Purchase Agreement entered on September 19, 1997, by and between the Registrant and The Randers Group Incorporated (filed as Exhibit (vii) to Amendment No. 4 to Schedule 13D filed by Thermo Electron Corporation and the Registrant on October 3, 1997, and incorporated herein by reference). 2.11 Amendment No. 1 dated as of April 4, 1998, to Stock Purchase Agreement entered on September 19, 1997, by and between the Registrant and The Randers Group Incorporated (filed as Exhibit 2.8 to The Randers Killam Group Incorporated's Annual Report on Form 10-K for the fiscal year ended April 4, 1998 [File No. 0-18095] and incorporated herein by reference). 17 Exhibit Number Description of Exhibit 2.12 Agreement by and among the Registrant, The Randers Group Incorporated, Thomas R. Eurich, Michael J. Krivitzky, Thomas J. McEnhill, Bruce M. Bourdon, and David A. Wiegerink (filed as Exhibit 10 to The Randers Group Incorporated's Current Report on Form 8-K dated October 3, 1997 [File No. 0-18095] and incorporated herein by reference). 2.13 Agreement and Plan of Merger dated as of October 19, 1999, by and among Thermo Electron Corporation, TTT Acquisition Corporation, and the Registrant (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K relating to events occurring on October 19, 1999 [File No. 1-9549] and incorporated herein by reference). 2.14 Asset Purchase Agreement by and among RGI Muskegon, Inc. (as Buyer), Randers Engineering, Inc., Redeco, Inc., Viridian Technology, Inc., and Randers Group Property Corporation (as Sellers), and The Randers Killam Group Inc. (as Seller's Parent) dated January 28, 2000 (filed as Exhibit 2.1 to The Randers Killam Group Inc.'s Current Report on Form 8-K dated as of January 28, 2000 [File No. 0-18095] and incorporated herein by reference). 2.15 Amendment No. 1 to Agreement and Plan of Merger dated as of April 12, 2000, by and among Thermo Electron Corporation, TTT Acquisition Corporation, and the Registrant (filed as Appendix A-1 to Thermo Electron Corporation's Amendment No. 2 to its Registration Statement on Form S-4 [Reg. No. 333-90661] and incorporated herein by reference). 2.16 Asset Purchase Agreement dated March 6, 2000, by and among TPST Soil Recyclers of California, Inc. and Nove Investments I, LLC (filed as Exhibit 2.1 to ThermoRetec Corporation's Form 8-K dated as of March 21, 2000 [File No. 1-12636] and incorporated herein by reference). 2.17 Asset Purchase Agreement by and among BAC Killam, Inc. and The Randers Killam Group Inc. (as Sellers) and Hatch Mott McDonald, Inc. (as Buyer), dated as of March 31, 2000 (filed as Exhibit 2.1 to The Randers Killam Group Inc.'s Form 8-K dated as of April 14, 2000 [File No. 0-18095] and incorporated herein by reference). 2.18 Asset Purchase Agreement by and among the Registrant, Metallurgical, Inc., Cal-Doran Metallurgical Services, Inc., and Metal Treating Inc. (as Sellers) and Lindberg Corporation (as Buyer), dated as of May 31, 2000 (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated as of June 1, 2000 [File No. 1-9549] and incorporated herein by reference). 3.1 Restated Certificate of Incorporation, as amended (filed as Exhibit 99 to the Registrant's Registration Statement on Form S-2 [Reg. No. 333-02269] and incorporated herein by reference). 3.2 Bylaws of the Registrant (filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 2, 1988 [File No. 1-9549] and incorporated herein by reference). 4.1 Fiscal Agency Agreement dated as of May 2, 1996, among the Registrant, Thermo Electron Corporation, and Chemical Bank, as Fiscal Agent (filed as Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 30, 1996 [File No. 1-9549] and incorporated herein by reference). The Registrant hereby agrees, pursuant to Item 601(b)(4)(iii) (A) of Regulation S-K, to furnish to the Commission, upon request, a copy of each other instrument with respect to other long-term debt of the Company or its subsidiaries. 18 Exhibit Number Description of Exhibit 10.1 Thermo Electron Corporate Charter as amended and restated effective January 3, 1993 (filed as Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1993 [File No. 1-9549] and incorporated herein by reference). 10.2 Amended and Restated Corporate Services Agreement dated January 3, 1993, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1993 [File No. 1-9549] and incorporated herein by reference). 10.3 Agreement of Lease dated December 31, 1985, between Claridge Properties Ltd. and Thermo Electron Corporation (filed as Exhibit 10(c) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). 10.4 Assignment of Lease dated December 31, 1985, between Thermo Electron Corporation and TMO, Inc. (filed as Exhibit 10(d) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). 10.5 Sublease dated March 30, 1986, between TMO, Inc. and Holcroft/Loftus, Inc. (filed as Exhibit 10(e) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). 10.6 Lease Amending Agreement dated January 1, 1995, between Claridge Properties Ltd., Thermo Electron Corporation, and TMO, Inc. (filed as Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 1, 1995 [File No. 1-9549] and incorporated by reference). 10.7 Second Amendment to Sublease dated as of October 10, 1997, between the Registrant and TMO, Inc. (filed as Exhibit 2.5 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 10.8 Sublease dated as of October 10, 1997, between the Registrant and Holcroft L.L.C. (filed as Exhibit 2.6 to the Registrant's Current Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and incorporated herein by reference). 10.9 Exclusive License and Marketing Agreement dated March 22, 1990, among TPS Technologies Inc., Holcroft Inc., and Thermo Soil Recyclers Inc. (filed as Exhibit 10(q) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1990 [File No. 1-9549] and incorporated herein by reference). 10.10 Form of Indemnification Agreement with Directors and Officers (filed as Exhibit 10(k) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 30, 1991 [File No. 1-9549] and incorporated herein by reference). 10.11 Development Agreement dated September 15, 1991, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(l) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 1991 [File No. 1-9549] and incorporated herein by reference). 19 Exhibit Number Description of Exhibit 10.12 Amended and Restated Development Agreement dated January 2, 1992, between Thermo Electron Corporation and the Registrant (filed as Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 28, 1992 [File No. 1-9549] and incorporated herein by reference). 10.13 Asset Transfer Agreement dated as of October 1, 1993, among the Registrant, TPS Technologies Inc., and Thermo Remediation Inc. (filed as Exhibit 2.3 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.14 Exclusive License Agreement dated as of October 1, 1993, among the Registrant, TPS Technologies Inc., and Thermo Remediation Inc. (filed as Exhibit 2.4 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.15 Non-Competition and Non-Disclosure Agreement dated as of October 1, 1993, among the Registrant, TPS Technologies Inc., and Thermo Remediation Inc. (filed as Exhibit 2.5 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.16 Tax Allocation Agreement dated as of June 1, 1992, between the Registrant and Thermo Remediation Inc. (filed as Exhibit 10.3 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.17 Agreement of Partnership dated May 16, 1994, among Terra Tech Labs Inc. (a wholly owned subsidiary of the Registrant) and Eberline Analytical Corporation, Skinner & Sherman, Inc., TMA/NORCAL Inc., Normandeau Associates Inc., Bettigole Andrews & Clark Inc., Fellows, Read & Associates Inc., and Thermo Consulting Engineers Inc. (each a wholly owned subsidiary of Thermo Instrument Systems Inc.; filed as Exhibit 1 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 16, 1994 [File No. 1-9549] and incorporated herein by reference). 10.18 Promissory Note dated May 16, 1994, issued by the Registrant to Thermo Electron Corporation (filed as Exhibit 2 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 16, 1994 [File No. 1-9549] and incorporated herein by reference). 10.19 Agreement of Dissolution of Partnership dated May 9, 1995, among Thermo Terra Tech (the Partnership), Terra Tech Labs, Inc. (a wholly owned subsidiary of the Registrant) and Eberline Analytical Corporation, Skinner & Sherman, Inc., TMA/NORCAL Inc., Normandeau Associates Inc., Bettigole Andrews & Clark Inc., Fellows, Read & Associates Inc., and Thermo Consulting Engineers Inc. (each a wholly owned subsidiary of Thermo Instrument Systems Inc.; filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 9, 1995 [File No. 1-9549] and incorporated herein by reference). 10.20 Stock Purchase Agreement dated May 9, 1995, between the Registrant and Thermo Instrument Systems Inc. (filed as Exhibit 2.2 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 9, 1995 [File No. 1-9549] and incorporated herein by reference). 10.21 Note dated May 17, 1995, from the Registrant to Thermo Electron Corporation (filed as Exhibit 2.3 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 9, 1995 [File No. 1-9549] and incorporated herein by reference). 20 Exhibit Number Description of Exhibit 10.22 Stock Purchase and Note Issuance Agreement dated as of November 22, 1993, between the Registrant and Thermo Remediation Inc. (filed as Exhibit 10.11 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.23 $2,650,000 principal amount Subordinated Convertible Note dated as of November 22, 1993, made by Thermo Remediation Inc., issued to the Registrant (filed as Exhibit 10.12 to Thermo Remediation Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein by reference). 10.24 Stock Purchase and Sale Agreement made and entered into on February 6, 1995, to be effective as of January 29, 1995, by and between Nord Est S.A., the Registrant, and Emil C. Herkert, Kenneth L. Zippler, Franklin O. Williamson, Jr., Fletcher N. Platt, Jr., Eugene J. Destefano, Meint Olthof, and Stanley P. Kaltnecker, Jr. (filed as Exhibit 1 to the Registrant's Current Report on Form 8-K relating to the events occurring on February 6, 1995 [File No. 1-9549] and incorporated herein by reference). 10.25 Agreement and Plan of Merger dated as of June 28, 1995, by and among the Registrant, Eberline Acquisition Inc., Thermo Remediation Inc., and Eberline Holdings Inc. (filed as Appendix B to Thermo Remediation Inc.'s Proxy Statement for the Annual Meeting held on December 13, 1995 [File No. 1-12636] and incorporated herein by reference). 10.26 $28,000,000 Secured Promissory Note dated as of January 29, 1995, issued by the Registrant to Nord Est S.A. (filed as Exhibit 2 to the Registrant's Current Report on Form 8-K relating to the events occurring on February 6, 1995 [File No. 1-9549] and incorporated herein by reference). 10.27 $38,000,000 Promissory Note dated as of February 21, 1995, issued by the Registrant to Thermo Electron Corporation (filed as Exhibit 3 to the Registrant's Current Report on Form 8-K relating to the events occurring on February 6, 1995 [File No. 1-9549] and incorporated herein by reference). 10.28 Asset Purchase Agreement by and among Thermo Analytical Inc. (as Buyer); Lancaster Laboratories, Inc. and Clewmark Holdings (as Sellers); and Earl H. Hess, Anita F. Hess, Kenneth E. Hess, J. Wilson Hershey, and Carol D. Hess (as the principal owners of Sellers) (filed as Exhibit 1 to the Registrant's Current Report on Form 8-K relating to the events occurring on May 10, 1995 [File No. 1-9549] and incorporated herein by reference). 10.29 Agreement and Plan of Merger dated as of the first day of December 1995, by and among Thermo Remediation Inc., TRI Acquisition Inc., and Remediation Technologies, Inc. (filed as Exhibit 2(a) to the Registrant's Current Report on Form 8-K relating to the events occurring on December 8, 1995 [File No. 1-9549] and incorporated herein by reference). 10.30 Purchase and Sale Agreement dated as of December 20, 1994, by and among TPS Technologies Inc., TPST Soil Recyclers of Maryland Inc., Rafich Corporation, Harry Ratrie, John C. Cyphers, and J. Thomas Hood (filed as Exhibit 1 to Thermo Remediation Inc.'s Current Report on Form 8-K for the events occurring on December 21, 1994 [File No. 1-12636] and incorporated herein by reference). 10.31 Stock Purchase Agreement entered into on March 29, 1995, by and among Stalt Holding, B.V., Beheersmaatschappij J. Amerika N.V., A.J. Van Es, J.B. Van Es and D.A. Slager, and the Registrant (filed as Exhibit 1 to the Registrant's Current Report on Form 8-K relating to the events occurring on March 29, 1995 [File No. 1-9549] and incorporated herein by reference). 21 Exhibit Number Description of Exhibit 10.32 Amended and Restated Thermo TerraTech Inc. - The Randers Group Incorporated Nonqualified Stock Option Plan. 10.33 Incentive Stock Option Plan of the Registrant (filed as Exhibit 10(h) to the Registrant's Registration Statement on Form S-1 [Reg. No. 33-6763] and incorporated herein by reference). (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Nonqualified Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989, and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989.) 10.34 Amended and Restated Nonqualified Stock Option Plan of the Registrant. (Maximum number of shares issuable in the aggregate under this plan and the Registrant's Incentive Stock Option Plan is 1,850,000 shares, after adjustment to reflect share increases approved in 1987, 1989, and 1992, 6-for-5 stock splits effected in July 1988 and March 1989, and 3-for-2 stock split effected in September 1989.) 10.35 Amended and Restated Deferred Compensation Plan for Directors of the Registrant. 10.36 Amended and Restated Equity Incentive Plan. 10.37 Amended and Restated Directors Stock Option Plan. 10.38 Amended and Restated Thermo TerraTech Inc. (formerly Thermo Process Systems Inc.) - Thermo Remediation Inc. Nonqualified Stock Option Plan. In addition to the stock-based compensation plans of the Registrant, the executive officers of the Registrant may be granted awards under stock-based compensation plans of Thermo Electron for services rendered to the Registrant or to such affiliated corporations. The terms of such plans are substantially the same as those of the Registrant's Equity Incentive Plan. 10.39 Restated Stock Holdings Assistance Plan and Form of Executive Loan (filed as Exhibit 10.42 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 29, 1997 [File No. 1-9549] and incorporated herein by reference). 10.40 Deferred Compensation Agreement dated September 16, 1996, between Elson T. Killam Associates Inc. and Emil C. Herkert (filed as Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1998 [File No. 1-9549] and incorporated herein by reference). 10.41 Addendum dated 1990, to Deferred Compensation Agreement dated September 16, 1986, between Elson T. Killam Associates Inc. and Emil C. Herkert (filed as Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1998 [File No. 1-9549] and incorporated herein by reference). 10.42 Amendment No. 1, dated April 27, 1990, to Deferred Compensation Agreement dated September 16, 1986, between Elson T. Killam Associates Inc. and Emil C. Herkert (filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 1998 [File No. 1-9549] and incorporated herein by reference). 22 Exhibit Number Description of Exhibit 10.43 Master Cash Management, Guarantee Reimbursement, and Loan Agreement dated as of June 1, 1999, between the Registrant and Thermo Electron Corporation (filed as Exhibit 10.43 to the Registrant's Annual Report on Form 10-K for the fiscal year ended April 3, 1999 [File No. 1-9549] and incorporated herein by reference). 10.44 Master Cash Management, Guarantee Reimbursement, and Loan Agreement dated as of June 1, 1999, between ThermoRetec Corporation and Thermo Electron Corporation (filed as Exhibit 10.17 to ThermoRetec Corporation's Annual Report on Form 10-K for the fiscal year ended April 3, 1999 [File No. 1-12636] and incorporated herein by reference). 10.45 Master Cash Management, Guarantee Reimbursement, and Loan Agreement dated as of June 1, 1999, between The Randers Killam Group Inc. and Thermo Electron Corporation (filed as Exhibit 10.18 to The Randers Killam Group Inc.'s Annual Report on Form 10-K for the fiscal year ended April 3, 1999 [File No. 0-18095] and incorporated herein by reference). 10.46 Retention Agreement dated as of November 17, 1999, between Thermo Electron Corporation and John P. Appleton. 10.47 Retention Agreement between the Registrant and Emil C. Herkert. 10.48 Retention Agreement between the Registrant and Jeffrey L. Powell. 13 Annual Report to Shareholders for the fiscal year ended April 1, 2000 (only those portions incorporated herein by reference). 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule.
EX-13 2 0002.txt Exhibit 13 Thermo TerraTech Inc. Consolidated Financial Statements Fiscal 2000 Thermo TerraTech Inc. 2000 Financial Statements Consolidated Statement of Operations Year Ended April 1, April 3, April 4,
(In thousands except per share amounts) 2000 1999 1998 - ------------------------------------------------------------------------- ---------- ----------- --------- Revenues $307,329 $ 310,039 $298,786 -------- --------- -------- Costs and Operating Expenses: Cost of revenues (Note 11) 243,382 247,610 245,111 Selling, general, and administrative expenses (Note 7) 44,891 46,224 41,941 Restructuring costs (Note 11) 56,981 10,217 - -------- --------- -------- 345,254 304,051 287,052 -------- --------- -------- Operating Income (Loss) (37,925) 5,988 11,734 Interest Income 2,810 2,185 4,163 Interest Expense (includes $243, $162, and $593 to parent company) (8,743) (8,981) (10,778) Gain on Sale of Unconsolidated Subsidiary (Note 2) - - 3,012 Equity in Earnings of Unconsolidated Subsidiary - - 174 Other Income, Net - - 209 -------- --------- -------- Income (Loss) Before Provision for Income Taxes, Minority (43,858) (808) 8,514 Interest, and Extraordinary Item Provision for Income Taxes (Notes 4 and 11) 2,522 1,786 5,146 Minority Interest (Income) Expense (3,054) (1,173) 95 -------- --------- -------- Income (Loss) Before Extraordinary Item (43,326) (1,421) 3,273 Extraordinary Item, Net of Provision for Income Taxes of $71 (Note 5) 107 - - -------- --------- -------- Net Income (Loss) $(43,219) $ (1,421) $ 3,273 ======== ========= ======== Earnings (Loss) per Share (Note 14) Basic $ (2.27) $ (.07) $ .18 ======= ======== ======== Diluted $ (2.27) $ (.07) $ .17 ======= ======== ======== Weighted Average Shares (Note 14) Basic 19,033 19,402 18,700 ======== ========= ======== Diluted 19,033 19,402 18,978 ======== ========= ======== The accompanying notes are an integral part of these consolidated financial statements.
2
Thermo TerraTech Inc. 2000 Financial Statements Consolidated Balance Sheet April 1, April 3, (In thousands) 2000 1999 - ----------------------------------------------------------------------------------- ----------- --------- Assets Current Assets: Cash and cash equivalents (includes $41,667 under repurchase $ 4,157 $ 43,013 agreements with parent company in fiscal 1999) Advance to affiliate 47,748 - Accounts receivable, less allowances of $2,695 and $3,577 51,537 58,933 Unbilled contract costs and fees 20,875 19,974 Inventories 2,001 1,869 Deferred tax asset (Note 4) 8,075 6,921 Other current assets 3,304 3,665 -------- -------- 137,697 134,375 -------- -------- Property, Plant, and Equipment, at Cost, Net (Note 11) 69,956 91,514 -------- -------- Other Assets (Note 11) 8,971 15,949 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Notes 2 and 11) 87,929 108,627 -------- -------- $304,553 $350,465 ======== ======== 3 Thermo TerraTech Inc. 2000 Financial Statements Consolidated Balance Sheet (continued) April 1, April 3, (In thousands except share amounts) 2000 1999 - ----------------------------------------------------------------------------------- ----------- --------- Liabilities and Shareholders' Investment Current Liabilities: Short-term obligations and current maturities of long-term $ 19,322 $ 17,618 obligations (includes borrowings from affiliate of $8,965 and $9,228; Note 5) Advance from affiliate 1,158 - Subordinated convertible debentures (includes $4,300 of 37,950 - related-party debt; Note 5) Accounts payable 15,164 17,404 Accrued payroll and employee benefits 12,443 12,771 Accrued restructuring costs (Note 11) 5,907 1,719 Other accrued expenses 12,617 15,298 Due to parent company and affiliated companies 2,403 2,522 -------- -------- 106,964 67,332 -------- -------- Deferred Income Taxes (Note 4) 1,451 3,538 -------- -------- Other Deferred Items 1,118 1,076 -------- -------- Long-term Obligations (Notes 5 and 10): Subordinated convertible debentures (includes $1,659 and 116,637 156,799 $4,695 of related-party debt) Other 1,476 1,818 -------- -------- 118,113 158,617 -------- -------- Minority Interest 25,337 27,745 -------- -------- Commitments and Contingencies (Note 6) Shareholders' Investment (Notes 3 and 8): Common stock, $.10 par value, 75,000,000 shares authorized; 1,961 1,958 19,607,752 and 19,583,773 shares issued Capital in excess of par value 71,220 70,633 Retained earnings (accumulated deficit) (17,321) 25,898 Treasury stock at cost, 653,647 and 543,319 shares (5,042) (4,130) Deferred compensation (Note 3) (189) (252) Accumulated other comprehensive items 941 (1,950) -------- -------- 51,570 92,157 -------- -------- $304,553 $350,465 ======== ======== The accompanying notes are an integral part of these consolidated financial statements.
4
Thermo TerraTech Inc. 2000 Financial Statements Consolidated Statement of Cash Flows Year Ended April 1, April 3, April 4, (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- -------- ---------- -------- Operating Activities Net income (loss) $(43,219) $ (1,421) $ 3,273 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 14,215 16,823 14,784 Noncash restructuring costs (Note 11) 50,762 8,122 - Gain on sale of unconsolidated subsidiary (Note 2) - - (3,012) Equity in earnings of unconsolidated subsidiary - - (174) Minority interest (income) expense (3,054) (1,173) 95 Provision for losses on accounts receivable 715 2,085 1,141 Other noncash items 2,523 199 327 Change in deferred income taxes (3,328) 443 (1,583) Gain on purchase of subordinated convertible debentures (Note 5) (107) - - Changes in current accounts, excluding the effects of acquisitions and dispositions: Accounts receivable 5,985 (643) (11,154) Inventories and unbilled contract costs and fees (4,139) (2,026) (3,353) Other current assets (446) (176) 1,715 Accounts payable (1,934) 55 5,507 Other current liabilities 4,793 7,653 (1,038) -------- --------- ------- Net cash provided by operating activities 22,766 29,941 6,528 -------- --------- ------- Investing Activities Acquisitions, net of cash acquired (Note 2) (2,016) (643) (12,746) Advances to affiliate, net (46,590) - - Proceeds from maturities of available-for-sale investments - 2,006 16,372 Proceeds from maturity of held-to-maturity investments - 14,065 13,935 Purchases of property, plant, and equipment (13,265) (17,415) (18,460) Proceeds from sale of businesses (Note 2) - - 19,722 Issuances of notes receivable - - (569) Collection of long-term notes receivable 3,807 605 - Purchases of other assets (859) (1,570) (1,993) Other, net 1,418 474 2,464 -------- --------- ------- Net cash provided by (used in) investing activities $(57,505) $ (2,478) $18,725 -------- --------- ------- 5 Thermo TerraTech Inc. 2000 Financial Statements Consolidated Statement of Cash Flows (continued) Year Ended April 1, April 3, April 4, (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- ---------- ----------- --------- Financing Activities Increase in short-term obligations to fund an acquisition (Note 2) $ 2,286 $ - $ - Repayment of notes payable (includes $38,000 to parent company (1,640) (14,748) (52,878) in fiscal 1998) Proceeds from issuance of Company and subsidiaries' common 1,028 58 1,148 stock (Note 9) Repurchase of Company and subsidiaries' common stock and (5,857) (3,390) (7,355) subordinated convertible debentures Issuance of short-term obligations - - 6,171 Dividends paid by subsidiary to minority shareholders (409) (805) (751) Other, net 295 (180) - -------- --------- ------- Net cash used in financing activities (4,297) (19,065) (53,665) -------- --------- ------- Exchange Rate Effect on Cash 180 (96) (49) -------- --------- ------- Increase (Decrease) in Cash and Cash Equivalents (38,856) 8,302 (28,461) Cash and Cash Equivalents at Beginning of Year 43,013 34,711 63,172 -------- --------- ------- Cash and Cash Equivalents at End of Year $ 4,157 $ 43,013 $34,711 ======== ========= ======= See Note 12 for supplemental cash flow information. The accompanying notes are an integral part of these consolidated financial statements. 6 Thermo TerraTech Inc. 2000 Financial Statements Consolidated Statement of Comprehensive Income and Shareholders' Investment Year Ended April 1, April 3, April 4, (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- ---------- ----------- --------- Comprehensive Income Net Income (Loss) $(43,219) $ (1,421) $ 3,273 -------- -------- ------- Other Comprehensive Items: Foreign currency translation adjustment 986 147 (1,071) Unrealized gains (losses) on available-for-sale investments - 3 (10) -------- -------- ------- 986 150 (1,081) -------- -------- ------- Minority Interest Income (Expense) 74 (284) 461 -------- -------- ------- $(42,159) $ (1,555) $ 2,653 ======== ======== ======= Shareholders' Investment Common Stock, $.10 Par Value: Balance at beginning of year $ 1,958 $ 1,958 $ 1,830 Issuance of stock under employees' and directors' stock plans 3 - - Conversions of subordinated convertible debentures - - 128 ------- -------- ------- Balance at end of year 1,961 1,958 1,958 ------- -------- ------- Capital in Excess of Par Value: Balance at beginning of year 70,633 70,437 62,610 Activity under employees' and directors' stock plans (152) (130) (5,490) Tax benefit related to employees' and directors' stock plans 50 181 655 Effect of outstanding put rights 1,271 (1,271) - Conversions of subordinated convertible debentures (Note 5) - - 13,092 Effect of majority-owned subsidiaries' equity transactions (582) 1,416 (430) ------- -------- ------- Balance at end of year 71,220 70,633 70,437 ------- -------- ------- Retained Earnings (Accumulated Deficit): Balance at beginning of year 25,898 27,319 24,046 Net income (loss) (43,219) (1,421) 3,273 ------- -------- ------- Balance at end of year (17,321) 25,898 27,319 ------- -------- ------- Treasury Stock: Balance at beginning of year (4,130) (484) (3,941) Activity under employees' and directors' stock plans 653 411 6,637 Purchases of Company common stock (1,565) (4,057) (3,180) ------- -------- ------- Balance at end of year $(5,042) $ (4,130) $ (484) ------- -------- ------- 7 Thermo TerraTech Inc. 2000 Financial Statements Consolidated Statement of Comprehensive Income and Shareholders' Investment (continued) Year Ended April 1, April 3, April 4, (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- ---------- ----------- --------- Deferred Compensation (Note 3): Balance at beginning of year $ (252) $ - $ - Activity under employees' stock plans (45) (252) - Amortization of deferred compensation 108 - - ------- ------- ------- Balance at end of year (189) (252) - ------- ------- ------- Accumulated Other Comprehensive Items: Balance at beginning of year (1,950) (2,100) (1,019) Other comprehensive items 986 150 (1,081) Write-off of cumulative foreign currency translation adjustment (Note 11) 1,905 - - ------- ------- ------- Balance at end of year 941 (1,950) (2,100) ------- ------- ------- $51,570 $92,157 $97,130 ======= ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 8 Thermo TerraTech Inc. 2000 Financial Statements Notes to Consolidated Financial Statements 1. Nature of Operations and Summary of Significant Accounting Policies Nature of Operations Thermo TerraTech Inc. (the Company) provides industrial outsourcing services and manufacturing support encompassing a broad range of specializations. The Company operates in four segments: environmental-liability management, engineering and design, laboratory testing, and metal treating. Relationship with Thermo Electron Corporation The Company was incorporated on May 30, 1986, as an indirect, wholly owned subsidiary of Thermo Electron Corporation. As of April 1, 2000, Thermo Electron owned 16,605,286 shares of the Company's common stock, representing 88% of such stock outstanding. On October 19, 1999, the Company entered into a definitive agreement and plan of merger with Thermo Electron, pursuant to which Thermo Electron would acquire all of the outstanding shares of Company common stock held by shareholders other than Thermo Electron in exchange for Thermo Electron common stock (Note 15). On January 31, 2000, Thermo Electron announced that it plans to sell all of the businesses of the Company. This action is part of a major reorganization plan under which Thermo Electron will spin in, spin off, and sell various businesses to focus solely on its core measurement and detection instruments business. Principles of Consolidation The accompanying financial statements include the accounts of the Company; its wholly owned subsidiaries; its majority-owned public subsidiaries, ThermoRetec Corporation and The Randers Killam Group Inc.; and its majority-owned, privately held Thermo EuroTech N.V. subsidiary. All material intercompany accounts and transactions have been eliminated. The Company accounted for its investment in a business in which it owned 50% using the equity method. In October 1997, the Company sold this investment (Note 2). Fiscal Year The Company has adopted a fiscal year ending the Saturday nearest March 31. References to fiscal 2000, 1999, and 1998 are for the fiscal years ended April 1, 2000, April 3, 1999, and April 4, 1998, respectively. Fiscal years 2000 and 1999 each included 52 weeks; fiscal 1998 included 53 weeks. Revenue Recognition For the majority of its operations, the Company recognizes revenues upon completion of the services it renders. Revenues and profits on substantially all contracts are recognized using the percentage-of-completion method. Revenues recorded under the percentage-of-completion method were $112,388,000 in fiscal 2000, $109,798,000 in fiscal 1999, and $117,464,000 in fiscal 1998. The percentage of completion is determined by relating either the actual costs or actual labor incurred to date to management's estimate of total costs or total labor, respectively, to be incurred on each contract. If a loss is indicated on any contract in process, a provision is made currently for the entire loss. The Company's contracts generally provide for billing of customers upon the attainment of certain milestones specified in each contract. Revenues earned on contracts in process in excess of billings are classified as unbilled contract costs and fees in the accompanying balance sheet. There are no significant amounts included in the accompanying balance sheet that are not expected to be recovered from existing contracts at current contract values, or that are not expected to be collected within one year, including amounts that are billed but not paid under retainage provisions. Amounts billed in excess of revenues recognized are included in other accrued expenses in the accompanying balance sheet. Revenues from soil-remediation services are recognized as soil is processed and the Company bills customers upon receipt of contaminated soil at its remediation centers. 9 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Equity in Earnings of Unconsolidated Subsidiary Equity in earnings of unconsolidated subsidiary in the accompanying statement of operations represents the Company's proportionate share of income from a 50% investment in RETEC/TETRA L.C., acquired in December 1995 through ThermoRetec's acquisition of RETEC. In October 1997, ThermoRetec sold its 50% limited-liability interest in RETEC/TETRA to TETRA Thermal, Inc. (Note 2). Stock-based Compensation Plans The Company applies Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock-based compensation plans (Note 3). 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' investment. Income Taxes The Company and Thermo Electron have a tax allocation agreement under which the Company and certain of its subsidiaries, exclusive of foreign operations, are included in Thermo Electron's consolidated federal and certain state income tax returns. The agreement provides that in years in which the Company has taxable income, it will pay to Thermo Electron amounts comparable to the taxes the Company would have paid if it had filed separate tax returns. If Thermo Electron's equity ownership of the Company were to drop below 80%, the Company would be required to file its own federal income tax return. In accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," the Company recognizes deferred income taxes based on the expected future tax consequences of differences between the financial statement basis and the tax basis of assets and liabilities calculated using enacted tax rates in effect for the year in which the differences are expected to be reflected in the tax return. Earnings (Loss) per Share Basic earnings (loss) per share have 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, diluted earnings (loss) per share have been computed assuming the exercise of stock options and warrants, as well as their related income tax effects. Diluted earnings (loss) per share for all periods exclude the effect of assuming the conversion of convertible obligations and the elimination of the related interest expense and the exercise of put rights, because the result would be antidilutive. Cash and Cash Equivalents The Company, along with other European-based subsidiaries of Thermo Electron, participates in a cash management arrangement in the Netherlands with a wholly owned subsidiary of Thermo Electron. Under this arrangement, participants' balances are pooled for interest calculation purposes. Interest under this arrangement is based on Euro market rates. The Company has access to a $9,020,000 line of credit under this arrangement. Thermo Electron guarantees all of the obligations of each participant in this arrangement. At fiscal year-end 2000, the Company had $2,228,000 invested and $8,965,000 borrowed under this arrangement (Note 5). At fiscal year-end 1999, $40,625,000 of the Company's cash equivalents were invested in a repurchase agreement with Thermo Electron. Under this agreement, the Company in effect lent excess cash to Thermo Electron, which Thermo Electron collateralized with investments principally consisting of corporate notes, U.S. government-agency securities, commercial paper, money market funds, and other marketable securities, in the amount of at least 103% of such obligation. The Company's funds subject to the repurchase agreement were readily convertible into cash by the Company. The repurchase agreement earned a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. Effective June 1999, the Company adopted a new cash management arrangement with Thermo Electron, described below, that replaces the repurchase agreement. At fiscal year-end 1999, the Company had $1,042,000 invested and $9,228,000 borrowed under a similar arrangement in the Netherlands. 10 1. Nature of Operations and Summary of Significant Accounting Policies (continued) At fiscal year-end 2000 and 1999, the Company's cash equivalents also included investments in a money market fund, which has an original maturity of three months or less. Cash equivalents are carried at cost, which approximates market value. Advance to/from Affiliate Effective June 1999, the Company and Thermo Electron commenced use of a new domestic cash management arrangement. Under the new arrangement, amounts advanced to Thermo Electron by the Company for domestic cash management purposes bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points, set at the beginning of each month. Thermo Electron is contractually required to maintain cash, cash equivalents, and/or immediately available bank lines of credit equal to at least 50% of all funds invested under this cash management arrangement by all Thermo Electron subsidiaries other than wholly owned subsidiaries. The Company has the contractual right to withdraw its funds invested in the cash management arrangement upon 30 days' prior notice. In addition, under the new domestic cash management arrangement, amounts borrowed from Thermo Electron for domestic cash management purposes bear interest at the 30-day Dealer Commercial Paper Rate plus 150 basis points, set at the beginning of each month. The Company had $1,158,000 of borrowings under this arrangement at fiscal year-end 2000 (Note 5). Inventories Inventories are stated at the lower of cost (on an average-cost basis) or market value and include materials, labor, and overhead. The components of inventories are:
(In thousands) 2000 1999 - ----------------------------------------------------------------------------------- ----------- ---------- Raw Materials and Supplies $ 239 $ 640 Work in Process and Finished Goods 1,762 1,229 ------ ------ $2,001 $1,869 ====== ====== 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 primarily using the straight-line method over the estimated useful lives of the property as follows: buildings and improvements, 5 to 40 years; machinery and equipment, 2 to 12 years; and leasehold improvements, the shorter of the term of the lease or the life of the asset. Soil-remediation units, which accounted for 5% and 8% of the Company's machinery and equipment, net, at fiscal year-end 2000 and 1999, respectively, are depreciated based on an hourly rate that is computed by estimating total hours of operation for each unit. Property, plant, and equipment consists of: (In thousands) 2000 1999 - ----------------------------------------------------------------------------------- ----------- --------- Land $ 6,272 $ 7,741 Buildings 37,709 42,161 Machinery, Equipment, and Leasehold Improvements 92,286 101,317 -------- ------- 136,267 151,219 Less: Accumulated Depreciation and Amortization 66,311 59,705 -------- ------- $ 69,956 $91,514 ======== ======= 11 1. Nature of Operations and Summary of Significant Accounting Policies (continued) Other Assets Other assets in the accompanying balance sheet includes the costs of acquired technology and other specifically identifiable intangible assets that are being amortized using the straight-line method over their estimated useful lives, which range from 5 to 20 years. These assets were $2,680,000 and $3,291,000, net of accumulated amortization of $7,382,000 and $6,771,000, at fiscal year-end 2000 and 1999, respectively. Cost in Excess of Net Assets of Acquired Companies The excess of cost over the fair value of net assets of acquired companies is amortized using the straight-line method over periods ranging from 20 to 40 years. Accumulated amortization was $19,365,000 and $16,725,000 at fiscal year-end 2000 and 1999, respectively. The Company assesses the future useful life of this asset and other long-lived assets whenever events or changes in circumstances indicate that the current useful life has diminished (Note 11). Such events or circumstances generally would include the occurrence of operating losses or a significant decline in earnings associated with the acquired business or asset. The Company considers the future undiscounted cash flows of the acquired companies in assessing the recoverability of this asset. The Company assesses cash flows before interest charges and when impairment is indicated, writes the asset down to fair value. If quoted market values are not available, the Company estimates fair value by calculating the present value of future cash flows. If impairment has occurred, any excess of carrying value over fair value is recorded as a loss. Foreign Currency All assets and liabilities of the Company's foreign 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' investment. In the accompanying fiscal 2000 statement of operations, a $1,905,000 write-off of cumulative foreign currency translation loss is included in restructuring costs (Note 11). Foreign currency transaction gains and losses are included in the accompanying statement of operations and are not material for the three years presented. Comprehensive Income Comprehensive income combines net income and "other comprehensive items," which represents certain amounts that are reported as components of shareholders' investment in the accompanying balance sheet, including foreign currency translation adjustments and unrealized net of tax gains and losses on available-for-sale investments. At fiscal year-end 2000 and 1999, the balance of accumulated other comprehensive items represents the Company's cumulative translation adjustment. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Presentation Certain amounts in fiscal 1999 have been reclassified to conform to the presentation in the fiscal 2000 financial statements. 12 2. Acquisitions and Dispositions Acquisitions In August 1999, a subsidiary of the Company acquired the outstanding stock of Dempsey Drums Limited for $2,286,000 in cash and 1,605 shares of the subsidiary's common stock valued at $384,000. Dempsey Drums, an Ireland-based service provider, specializes in the supply, disposal, and reconditioning of steel and plastic drums and other specialized containers. During fiscal 1999, the Company, through ThermoRetec, acquired one company for $576,000 in cash and paid an additional $67,000 for a post-closing adjustment relating to a fiscal 1998 acquisition. In May 1997, the Company purchased a controlling interest in The Randers Group Incorporated, a publicly traded provider of design, engineering, project management, and construction services for industrial clients in the manufacturing, pharmaceutical, and chemical-processing industries. The Company purchased 1,420,000 shares of Randers' common stock from certain members of Randers' management, and 84,000 shares from Thermo Power Corporation, an affiliate of the Company, at a price of $3.125 per share, for an aggregate cost of $4,700,000. Following these transactions, the Company owned approximately 53.3% of Randers' outstanding common stock. In addition, Thermo Electron owned approximately 8.9% of Randers' outstanding common stock. Subsequently, in September 1997, the Company entered into a definitive agreement to transfer The Killam Group Inc., its wholly owned engineering and consulting businesses, to Randers in exchange for newly issued shares of Randers' common stock. Effective April 4, 1998, the agreement was amended to provide that the price for these businesses would equal $70,644,407, the book value of the transferred businesses as of April 4, 1998. The number of new shares of Randers' common stock issued to the Company equaled such book value divided by $3.125, or 22,606,210 shares. In January 1999, the Randers shareholders approved the listing of these shares on the American Stock Exchange and an amendment to Randers' certificate of incorporation changing Randers' name to The Randers Killam Group Inc. Upon such issuance, the Company and Thermo Electron owned approximately 94.8% and 1.0%, respectively, of Randers Killam's outstanding common stock. The Company sold the Randers division in January 2000, as discussed in "Dispositions" below. In addition, during fiscal 1998, ThermoRetec made three acquisitions for an aggregate purchase price of $5,665,000 in cash and 459,613 shares of ThermoRetec's common stock, valued at $2,850,000. In fiscal 1998, Thermo EuroTech made an acquisition of 70% of the outstanding shares of a business for $4,400,000 in cash and a commitment to issue 69,200 shares of Thermo EuroTech's common stock valued at $275,000. As of April 1, 2000, these shares had not been issued. In lieu of issuing these shares, the Company plans to pay the fair value of the shares, which was approximately $240,000 as of April 1, 2000. These acquisitions have been accounted for using the purchase method of accounting, and their results have been included in the accompanying financial statements from their respective dates of acquisition. The aggregate cost of these acquisitions, excluding the Randers division, exceeded the estimated fair value of the acquired net assets by $12,660,000. Allocation of the purchase price for these acquisitions was based on estimates of the fair value of the net assets acquired and, for Dempsey Drums, is subject to adjustment upon finalization of the purchase price allocation. The Company has gathered no information that indicates the final allocation will differ materially from the preliminary estimates. Pro forma data is not presented since the acquisitions were not material to the Company's results of operations. Dispositions In March 2000, ThermoRetec sold the assets of a soil-recycling facility for $400,000 in cash, of which $200,000 was placed in escrow. The release of the escrowed funds to TPST is contingent upon the satisfaction of certain post-closing conditions, primarily the achievement of fuel efficiency targets for certain equipment. If certain of the post-closing conditions are not satisfied, some or all of the escrowed funds will be returned to the buyer. The purchase price of the assets was determined by the parties in arms-length negotiations. The Company recognized a nominal loss on the sale. 13 2. Acquisitions and Dispositions (continued) In January 2000, the Company sold substantially all of the assets and liabilities of the Randers division, exclusive of certain real estate, to a new corporation formed by a former vice president and director of Randers Killam. The aggregate sales price of $538,000 consists of a promissory note secured by certain real estate. The promissory note is payable in monthly installments with a final maturity in 2003 and bears interest at 8.0%. In addition, the acquirer assumed $776,000 of mortgage debt. Due to the fact that the Company received no cash consideration at the time of sale, the sale of the real estate is being accounted for under the deposit method. Under the deposit method, the Company did not record the note receivable and continues to report the property that was sold as well as the existing mortgage debt in the accompanying balance sheet. Future cash receipts from the acquirer will be reported as a deposit on the contract. The Company incurred a $3,309,000 loss on the sale, which has been included in restructuring costs in the accompanying fiscal 2000 statement of operations (Note 11). In October 1997, ThermoRetec sold its 50% limited-liability interest in RETEC/TETRA L.C. to TETRA Thermal, Inc. for $8,825,000 in cash. The Company realized a pretax gain of $3,012,000 on the sale, which is classified as "gain on sale of unconsolidated subsidiary" in the accompanying statement of operations. In addition, in October 1997, the Company sold substantially all of the assets of its Holcroft Division, its thermal-processing equipment business, excluding certain accounts receivable, to Holcroft L.L.C., an affiliate of Madison Capital Partners. The sale price for the transferred assets consisted of $10,897,000 in cash, two promissory notes for principal amounts aggregating $2,881,000, and the assumption by Holcroft L.L.C. of certain liabilities of the Holcroft Division. After recording a post-closing purchase price adjustment, the Company incurred a nominal loss on the sale. This business contributed $17,330,000 and $893,000 to revenues and operating income, respectively, in fiscal 1998. 3. Employee Benefit Plans Stock-based Compensation Plans Stock Option Plans The Company has stock-based compensation plans for its key employees, directors, and others. Two of these plans permit the grant of nonqualified and incentive stock options. A third plan permits the grant of a variety of stock and stock-based awards as determined by the human resources committee of the Company's Board of Directors (the Board Committee), including restricted stock, stock options, stock bonus shares, or performance-based shares. The option recipients and the terms of options granted under these plans are determined by the Board Committee. Generally, options granted to date are exercisable immediately, but are subject to certain transfer restrictions and the right of the Company to repurchase shares issued upon exercise of the options at the exercise price, upon certain events. The restrictions and repurchase rights generally lapse ratably over a one- to ten-year period, depending on the term of the option, which may range from five to twelve years. Nonqualified stock options may be granted at any price determined by the Board Committee, although incentive stock options must be granted at not less than the fair market value of the Company's stock on the date of grant. Generally, all options have been granted at fair market value. The Company also has a directors' stock option plan that provides for the grant of stock options to outside directors pursuant to a formula approved by the Company's shareholders. Options awarded under this plan are exercisable six months after the date of grant and expire three to seven years after the date of grant. In addition to the Company's stock-based compensation plans, certain officers and key employees may also participate in the stock-based compensation plans of Thermo Electron. In November 1998, the Company's employees, excluding its officers and directors, were offered the opportunity to exchange previously granted options to purchase shares of Company common stock for an amount of options equal to half of the number of options previously held, exercisable at a price equal to the fair market value at the time of the exchange offer. Holders of options to acquire 1,182,000 shares at a weighted average exercise price of $8.80 elected 14 3. Employee Benefit Plans (continued) to participate in this exchange and, as a result, received options to purchase 591,000 shares of Company common stock at $4.50 per share, which are included in the fiscal 1999 grants in the table below. The other terms of the new options are the same as the exchanged options except that the holders may not sell shares purchased pursuant to such new options for six months from the exchange date. The options exchanged were canceled by the Company. In February and April 1999, the Company awarded 59,300 shares of restricted Company common stock to certain key employees. The shares had an aggregate value of $297,000 and vest three years from the date of award, assuming continued employment, with certain exceptions. The Company has recorded the fair value of the restricted stock as deferred compensation in the accompanying balance sheet and is amortizing such amount over the vesting period. A summary of the Company's stock option activity is:
2000 1999 1998 ------------------ ------------------ ------------------ Weighted Weighted Average Average Exercise Exercise Price Price Weighted Number Number Number Average of of of Exercise (Shares in thousands) Shares Shares Shares Price - ---------------------------------------------- -------- ---------- -------- ---------- --------- --------- Options Outstanding, Beginning of Year 1,757 $6.38 1,986 $8.87 2,558 $6.99 Granted - - 1,111 4.78 296 7.67 Exercised (92) 4.65 - - (696) 1.36 Forfeited (226) 7.05 (158) 8.28 (172) 9.35 Canceled due to exchange - - (1,182) 8.80 - - ----- ------ ------ Options Outstanding, End of Year 1,439 $6.39 1,757 $6.38 1,986 $8.87 ===== ===== ====== ===== ====== ===== Options Exercisable 1,439 $6.39 1,757 $6.38 1,986 $8.87 ===== ===== ====== ===== ====== ===== Options Available for Grant 484 351 327 ===== ====== ====== A summary of the status of the Company's stock options at April 1, 2000, is:
Options Outstanding and Exercisable --------------------------------------------------- Range of Exercise Prices Number Weighted Weighted of Average Average Shares Remaining Exercise (In thousands) Contractual Life Price - --------------------------------------------- -------------------- ------------------- ------------------ $ 4.16 - $ 5.72 879 4.4 years $4.75 5.73 - 7.29 43 3.9 years 6.70 7.30 - 8.86 127 5.3 years 8.28 8.87 - 10.40 390 3.4 years 9.42 ----- $ 4.16 - $ 10.40 1,439 4.2 years $6.39 ===== 15 3. Employee Benefit Plans (continued) Employee Stock Purchase Program Substantially all of the Company's full-time employees are eligible to participate in an employee stock purchase program sponsored by the Company and Thermo Electron. Prior to November 1, 1998, the applicable shares of common stock could be purchased at the end of a 12-month period at 95% of the fair market value at the beginning of the period and the shares purchased were subject to a six-month resale restriction. Effective November 1, 1998, the applicable shares of common stock may be purchased at 85% of the lower of the fair market value at the beginning or end of the plan year, 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. During fiscal 2000 and 1998, the Company issued 8,289 and 13,976, respectively, of its common stock under this program. No shares were issued under this program during fiscal 1999. Pro Forma Stock-based Compensation Expense In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-based Compensation," which sets forth a fair-value based method of recognizing stock-based compensation expense. As permitted by SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account for its stock-based compensation plans. Had compensation cost for awards granted after fiscal 1995 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 the Company's net income (loss) and earnings (loss) per share would have been: (In thousands except per share amounts) 2000 1999 1998 - ----------------------------------------------------------------------- ----------- ----------- --------- Net Income (Loss): As reported $ (43,219) $ (1,421) $ 3,273 Pro forma (44,237) (3,172) 2,218 Basic Earnings (Loss) per Share: As reported (2.27) (.07) .18 Pro forma (2.32) (.16) .12 Diluted Earnings (Loss) per Share: As reported (2.27) (.07) .17 Pro forma (2.32) (.16) .12 Because the method prescribed by SFAS No. 123 has not been applied to options granted prior to April 2, 1995, the resulting pro forma compensation expense may not be representative of the amount to be expected in future years. Pro forma compensation expense for options granted is reflected over the vesting period; therefore, future pro forma compensation expense may be greater as additional options are granted. The weighted average fair value per share of options granted was $1.45 and $2.27 in fiscal 1999 and 1998, respectively. No options were granted in fiscal 2000. The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:
1999 1998 - ----------------------------------------------------------------------- ----------- ----------- --------- Volatility 28% 27% Risk-free Interest Rate 4.9% 5.6% Expected Life of Options 4.0 years 3.6 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 16 3. Employee Benefit Plans (continued) options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 401(k) Savings Plan The majority of the Company's full-time U.S. employees are eligible to participate in Thermo Electron's 401(k) savings plan. Contributions to this 401(k) savings plan are made by both the employee and the Company. Company contributions are based upon the level of employee contributions. For this plan, the Company contributed and charged to expense $651,000, $650,000, and $955,000 in fiscal 2000, 1999, and 1998, respectively. Other Retirement Plans Certain of the Company's subsidiaries offer other retirement plans in lieu of participation in the Thermo Electron 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 $4,378,000, $4,258,000, and $3,585,000 in fiscal 2000, 1999, and 1998, respectively. 4. Income Taxes The components of income (loss) before provision for income taxes, minority interest, and extraordinary item are:
(In thousands) 2000 1999 1998 - --------------------------------------------------------------------- ----------- ------------ ----------- Domestic $(22,143) $ 179 $ 8,812 Foreign (21,715) (987) (298) -------- -------- -------- $(43,858) $ (808) $ 8,514 ======== ======== ======== The components of the provision for income taxes are: (In thousands) 2000 1999 1998 - --------------------------------------------------------------------- ------------ ----------- ----------- Currently Payable (Prepaid): Federal $ 2,760 $2,232 $ 2,688 State 1,990 1,415 1,330 Foreign 1,209 (78) (110) ------- ------ ------- 5,959 3,569 3,908 ------- ------ ------- Net Deferred (Prepaid): Federal (2,997) (1,365) 1,035 State (440) (201) 203 Foreign - (217) - ------- ------ ------- (3,437) (1,783) 1,238 ------- ------ ------- $ 2,522 $1,786 $ 5,146 ======= ====== ======= 17 4. Income Taxes (continued) The Company and its majority-owned subsidiaries receive a tax deduction upon 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 $207,000, $676,000, and $928,000 in fiscal 2000, 1999, and 1998, respectively, of such benefits of the Company and its majority-owned subsidiaries that have been allocated to capital in excess of par value, directly or through the effect of majority-owned subsidiaries' equity transactions. 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 34% to income (loss) before provision for income taxes, minority interest, and extraordinary item due to: (In thousands) 2000 1999 1998 - --------------------------------------------------------------------- ------------ ----------- ----------- Provision (Benefit) for Income Taxes at Statutory Rate $(14,912) $ (275) $ 2,895 Differences Resulting From: Amortization and write-off of cost in excess of net assets 7,561 898 739 of acquired companies Unbenefited foreign loss 6,811 - - State income taxes, net of federal tax 1,023 801 1,012 Nondeductible expenses 163 90 64 Dividend from less than 80%-owned subsidiary - 122 118 Other, net 1,876 150 318 -------- ------- -------- $ 2,522 $ 1,786 $ 5,146 ======== ======= ======== Deferred tax asset and deferred income taxes in the accompanying balance sheet consist of:
(In thousands) 2000 1999 - --------------------------------------------------------------------- ------------ ----------- ----------- Deferred Tax Asset: Net operating loss and tax credit carryforward $10,343 $ 6,597 Reserves and accruals 5,939 3,519 Accrued compensation 1,328 2,315 Allowance for doubtful accounts 42 212 Other 766 179 ------- ------- 18,418 12,822 Less: Valuation allowance 10,343 4,814 ------- ------- $ 8,075 $ 8,008 ======= ======= Deferred Income Taxes: Depreciation $ 1,351 $ 3,637 Other deferred items 100 (99) ------- ------- $ 1,451 $ 3,538 ======= ======= 18 4. Income Taxes (continued) The valuation allowance relates to the uncertainty surrounding the realization of the tax benefits attributable primarily to state and foreign operating loss carryforwards. The valuation allowance increased in fiscal 2000 as a result of certain losses that arose during the year. Of the total fiscal 2000 valuation allowance, $168,000 will be used to reduce cost in excess of net assets of acquired companies when any portion of the related deferred tax asset is recognized. The Company has not recognized a deferred tax liability for the difference between the book basis and tax basis of its investment in the common stock of its domestic subsidiaries (such difference relates primarily to unremitted earnings and gains on issuance of stock by subsidiaries) because the Company does not expect this basis difference to become subject to tax at the parent level. The Company believes it can implement certain tax strategies to recover its investment in its domestic subsidiaries tax-free. The net operating loss carryforward primarily consists of $22,750,000 of foreign carryforwards, which do not expire, and $27,110,000 of state carryforwards, substantially all of which expire in 2003. 5. Short- and Long-term Obligations Short-term Obligations At fiscal year-end 2000, the Company had borrowings of $8,965,000 under an arrangement with a wholly owned subsidiary of Thermo Electron (Note 1). The interest rate for these borrowings was 4.20%. At fiscal year-end 1999, $9,228,000 was outstanding under a similar arrangement, bearing interest at 4.00%. At fiscal year-end 2000, the Company had borrowings of $1,158,000 under an arrangement with Thermo Electron (Note 1). The interest rate on these borrowings was 6.35% at fiscal year-end 2000. Thermo EuroTech has access to approximately $8,000,000 under a line of credit denominated in Irish punts. At fiscal year-end 2000 and 1999, borrowings were $7,905,000 and $6,705,000, respectively, bearing interest at 3.60%. In addition, Thermo EuroTech has short-term borrowings outstanding of $1,710,000 at fiscal year-end 2000, bearing interest at 8.00%. 19 5. Short- and Long-term Obligations (continued) Long-term Obligations (In thousands except per share amounts) 2000 1999 - ----------------------------------------------------------------------------------- ----------- ---------- 4 5/8% Subordinated Convertible Debentures, Due 2003, Convertible at $111,850 $111,850 $15.90 per Share (includes $1,659 and $515 held by Thermo Electron) 4 7/8% Subordinated Convertible Debentures, Due May 2000, Convertible 37,950 37,950 into Shares of ThermoRetec at $17.92 per Share (includes $4,300 and $4,180 held by Thermo Electron) 2 1/2% Subordinated Convertible Debentures, Due 2001, Convertible into 4,787 6,999 Shares of Thermo EuroTech (Delaware) Inc. at $5.25 per Share 6.25% Mortgage Loan, Payable in Monthly Installments of $9, With - 1,063 Balloon Payment in May 1999 Mortgage Loan, Payable in Monthly Installments of $5, With Final 769 856 Payment in 2003 (a) Other 1,449 1,584 -------- -------- 156,805 160,302 Less: Current Maturities 38,692 1,685 -------- -------- $118,113 $158,617 ======== ======== (a) Bears interest at Prime Rate, which was 9.00% at April 1, 2000. During fiscal 1999, the Company reorganized the capital structure of Thermo EuroTech by offering shareholders the right to exchange their common shares in Thermo EuroTech for 2 1/2% subordinated convertible debentures due 2001 (the Debentures) issued by a new wholly owned Delaware subsidiary of the Company, known as Thermo EuroTech (Delaware) Inc. (TETD). As of October 31, 1998, when the exchange offer expired, 1,646,854 common shares had been exchanged by Thermo EuroTech's shareholders for the Debentures having an aggregate principal amount equal to $6,999,000. The reacquisition of these shares was accounted for using the purchase method of accounting. Following the transaction, TETD owned 78% of Thermo EuroTech's outstanding common shares. The Debentures are guaranteed on a subordinated basis by Thermo Electron. During fiscal 2000, the Company purchased $2,212,000 principal amount of the 2 1/2% subordinated convertible debentures for $2,034,000 in cash, resulting in an extraordinary gain of $107,000, net of taxes of $71,000. The 4 5/8% and 4 7/8% subordinated convertible debentures are guaranteed on a subordinated basis by Thermo Electron. The Company has agreed to reimburse Thermo Electron in the event Thermo Electron is required to make a payment under the guarantees. The 4 7/8% debentures were paid in cash in May 2000. The annual requirements for long-term obligations as of April 1, 2000, are $38,692,000 in fiscal 2001; $5,302,000 in fiscal 2002; $720,000 in fiscal 2003; $111,961,000 in fiscal 2004; $90,000 in fiscal 2005; and $40,000 in fiscal 2006 and thereafter. Total requirements of long-term obligations are $156,805,000. See Note 10 for information pertaining to the fair value of the Company's long-term obligations. 20 6. Commitments and Contingencies Operating Leases The Company leases land, office, operating facilities, and equipment under operating leases expiring or cancelable at various dates through fiscal 2009. The accompanying statement of operations includes expenses from operating leases of $6,308,000, $6,273,000, and $5,822,000 in fiscal 2000, 1999, and 1998, respectively. Future minimum payments due under noncancelable operating leases at April 1, 2000, are $4,358,000 in fiscal 2001; $2,656,000 in fiscal 2002; $1,508,000 in fiscal 2003; $952,000 in fiscal 2004; $514,000 in fiscal 2005; $1,000,000 in fiscal 2006 and thereafter. Total future minimum lease payments are $10,988,000. See Note 7 for an office and manufacturing facility leased from Thermo Electron. Contingencies The Company is contingently liable with respect to lawsuits and other matters that arose in the ordinary course of business. In the opinion of management, these contingencies will not have a material adverse effect upon the financial position of the Company or its results of operations. 7. Related-party Transactions Corporate Services Agreement The Company and Thermo Electron have a corporate services agreement under which Thermo Electron's corporate staff provides certain administrative services, including certain legal advice and services, risk management, certain employee benefit administration, tax advice and preparation of tax returns, centralized cash management, and certain financial and other services, for which the Company currently pays Thermo Electron annually an amount equal to 0.8% of the Company's revenues. In calendar 1997, the Company paid an amount equal to 1.0% of the Company's revenues. For these services, the Company was charged $2,459,000, $2,480,000, and $2,845,000 in fiscal 2000, 1999, and 1998, respectively. The fee is reviewed and adjusted annually by mutual agreement of the parties. The corporate services agreement is renewed annually but can be terminated upon 30 days' prior notice by the Company or upon the Company's withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines the relationship among Thermo Electron and its majority-owned subsidiaries). Management believes that the service fee charged by Thermo Electron is reasonable and that such fees are representative of the expenses the Company would have incurred on a stand-alone basis. For additional items such as employee benefit plans, insurance coverage, and other identifiable costs, Thermo Electron charges the Company based upon costs attributable to the Company. In fiscal 2000 and 1999, Thermo Electron billed the Company an additional $7,000 and $157,000, respectively, for certain administrative services required by the Company that were not covered by the corporate services agreement. Development Agreement The Company and Thermo Electron entered into a development agreement under which Thermo Electron agreed to fund up to $4,000,000 of the direct and indirect costs of the Company's development of soil-remediation centers. As of October 2, 1993, all such funding under this agreement was completed. In exchange for this funding, the Company granted Thermo Electron a royalty equal to approximately 3% of net revenues from soil-remediation services performed at the centers developed under the agreement. The royalty payments may cease if the amounts paid by the Company yield a certain internal rate of return to Thermo Electron on the funds advanced to the Company under the agreement. Two sites were developed under this agreement. The Company paid royalties of $196,000, $186,000, and $115,000 in fiscal 2000, 1999, and 1998, respectively, relating to this agreement, which are included in selling, general, and administrative expenses in the accompanying statement of operations. 21 7. Related-party Transactions (continued) Operating Lease In addition to the operating leases discussed in Note 6, the Company leases an office and operating facility from Thermo Electron. The accompanying statement of operations includes expenses from this operating lease of $166,000 in fiscal 2000, 1999, and 1998. The future minimum payments due under the lease as of April 1, 2000, are $166,000 in each of fiscal 2001 through 2006. Total future minimum lease payments are $996,000. In June 2000, the Company sold the business that was the lessee under this arrangement (Note 17). The buyer purchased the building from Thermo Electron. Other Related-party Transactions The Company purchases and sells products and services in the ordinary course of business with other companies affiliated with Thermo Electron. Sales of services to such affiliated companies totaled $288,000, $379,000, and $320,000 in fiscal 2000, 1999, and 1998, respectively. Purchases of products and services from such affiliated companies total $641,000, $231,000, and $938,000 in fiscal 2000, 1999, and 1998, respectively. Cash Management The Company invests excess cash in arrangements with Thermo Electron as discussed in Note 1. Short- and Long-term Obligations See Note 5 for a description of short- and long-term obligations of the Company held by Thermo Electron. 8. Common Stock At fiscal year-end 1998, 847,678 put rights were attached to certain shares of Company common stock which were previously issued in connection with an acquisition. The put rights obligated the Company, at the holders' option, to purchase shares of the Company's common stock for $8.00 per share at any time through January 2002. At the time a holder elected to tender shares, the Company had the option to net cash settle the obligation in lieu of purchasing the shares. During fiscal 2000 and 1999, the Company repurchased 423,854 and 423,824 shares of common stock, respectively, under such arrangements and settled the put right obligation. At April 1, 2000, the Company had 700,500 warrants outstanding to purchase shares of its common stock, which are exercisable at prices ranging from $10.00 to $11.34 per share and expire in fiscal 2001. The warrants were issued in fiscal 1992 and 1993 in connection with private placements completed by three of ThermoRetec's soil-remediation subsidiaries. At April 1, 2000, the Company had reserved 9,733,648 unissued shares of its common stock for possible issuance under stock-based compensation plans, conversion of the 4 5/8% subordinated convertible debentures, and exercise of warrants. 9. Transactions in Stock of Subsidiaries Dividends declared by ThermoRetec were $1,356,000, $2,610,000, and $2,504,000 in fiscal 2000, 1999, and 1998, respectively. Dividends declared by ThermoRetec include $947,000, $1,798,000, and $1,736,000 in fiscal 2000, 1999, and 1998, respectively, that were allocated to the Company. Dividends declared in fiscal 2000 were paid in cash and in fiscal 1999 and 1998 were reinvested in 611,957 shares and 254,833 shares, respectively, of ThermoRetec's common stock pursuant to ThermoRetec's Dividend Reinvestment Plan.
22 9. Transactions in Stock of Subsidiaries (continued) The Company's percentage ownership of its majority-owned subsidiaries at year end was:
2000 1999 1998 - ------------------------------------------------------------------------- ---------- ---------- ---------- ThermoRetec 70% 70% 69% Randers Killam (a) 95% 95% 53% Thermo EuroTech 88% 78% 56% (a) Upon issuance of 22,606,210 shares of Randers Killam common stock to the Company, as described in Note 2, the Company owned approximately 95% of Randers Killam's outstanding common stock. 10. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, advance to affiliate, accounts receivable, short-term obligations and current maturities of long-term obligations, accounts payable, due to parent company and affiliated companies, and long-term obligations. The carrying amounts of these financial instruments, with the exception of long-term obligations, approximate fair value due to their short-term nature. 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 carrying amount and fair value of the Company's long-term obligations are:
2000 1999 -------------------- --------------------- Carrying Fair Carrying Fair (In thousands) Amount Value Amount Value - -------------------------------------------------------------- ---------- ---------- ---------- ---------- Subordinated Convertible Debentures $116,637 $102,097 $156,799 $ 139,587 Other 1,476 1,476 1,818 1,818 -------- -------- -------- --------- $118,113 $103,573 $158,617 $ 141,405 ======== ======== ======== ========= 11. Restructuring Costs Fiscal 2000 Plan In May 1999, the Company announced that its majority-owned subsidiaries planned to sell several businesses. At the time of the decision, the businesses that were to be sold were considered outside the future focus of the Company and its subsidiaries because of low growth prospects, marginal profitability, or the need to invest significant capital to achieve desired returns. The businesses proposed to be sold include the used-oil processing operation of Thermo EuroTech, N.V.; three soil-recycling facilities of ThermoRetec, in addition to the sites previously announced, discussed below; and the Randers division, BAC Killam Inc., and E3-Killam Inc. businesses of Randers Killam. The Randers Killam businesses provide engineering and construction services, including transportation planning and design. In connection with these actions, the Company recorded $58,694,000 of restructuring and related costs during fiscal 2000, including restructuring costs of $56,981,000, a tax asset write-off of $1,055,000, and an inventory provision of $658,000. In the accompanying statement of operations, the tax write-off is included in provision for income taxes and the inventory provision is included in cost of revenues. Restructuring costs include a $21,113,000 write-down of cost in excess of net assets of acquired companies to reduce the carrying value of the businesses 23 11. Restructuring Costs (continued) proposed to be sold to the estimated proceeds from their sale; a $19,997,000 write-down of fixed assets to their estimated disposal value; $2,985,000 for ongoing lease costs for facilities that will be exited in connection with the sale of certain businesses; $2,494,000 for estimated land reclamation costs; $5,517,000 for losses, primarily on the sale of the Randers division (Note 2) and BAC Killam (Note 17); a $1,905,000 charge for the cumulative foreign currency translation loss adjustment related to Thermo EuroTech's used-oil processing business; a $1,788,000 write-off of intangible assets related to license acquisition costs at the used-oil processing business; $645,000 for severance costs for 44 employees across all functions, 14 of whom were terminated in fiscal 2000; a $442,000 write-off of other current assets associated with the businesses to be sold; and $95,000 for retention bonuses paid. The tax write-off represents a deferred tax asset that will not be realized as a result of selling Thermo EuroTech's used-oil processing business. The inventory provision also relates to exiting this business. The write-down of fixed assets principally relates to special-purpose equipment in the used-oil processing and soil-recycling businesses. The effects of these charges reduced depreciation and amortization expense, thereby reducing the Company's pretax operating loss by approximately $3,013,000 during fiscal 2000. Fiscal 1999 Plan During fiscal 1999, the Company recorded $10,217,000 of restructuring costs, which were accounted for in accordance with Emerging Issues Task Force Pronouncement (EITF) 94-3. Of these restructuring costs, $9,176,000 was recorded by ThermoRetec in connection with the closure of two soil-recycling facilities. ThermoRetec took this action after a period of operating losses at the facilities, which it believes arose from relaxed enforcement of state rules concerning disposal of contaminated soils and the availability of alternative disposal options to customers. The costs include a $6,238,000 write-down of fixed assets to their estimated disposal value of $895,000 and a $1,884,000 write-off of intangible assets, including $715,000 of cost in excess of net assets of acquired companies, as well as $1,054,000 for ongoing lease costs and severance for 13 employees, 6 of whom were terminated in fiscal 1999 and none of whom were terminated in fiscal 2000. ThermoRetec closed one soil-recycling facility in March 1999 and sold the second soil-recycling facility in March 2000. The Company suspended depreciation on the assets written down following the write-down. In addition, the Company recorded $1,041,000 of restructuring costs for abandoned-facility payments relating to the consolidation of the facilities of another business. The annual savings from the consolidation of these facilities totals $0.2 million and such savings began in September 1998, the date of abandonment. All businesses announced for sale prior to the January 2000 decision by Thermo Electron to sell all of the businesses of the Company reported aggregate revenues and operating loss, prior to restructuring and related costs, of $35,016,000 and $1,830,000, respectively, in fiscal 2000 and $54,369,000 and $1,640,000, respectively, in fiscal 1999. The aggregate net assets to be sold of $5,576,000 at April 1, 2000, include net assets of $2,284,000 in the Engineering and Design segment and $3,292,000 in the Environmental-liability Management segment. Although there can be no assurance concerning the timing of the completion of the sale of any of these businesses, the Company expects that the remaining sales will primarily occur in the first half of fiscal 2001. 24 11. Restructuring Costs (continued)
Substantially all of the restructuring and related costs to date have been noncash charges except for amounts recorded as accrued restructuring costs. A summary of the changes in accrued restructuring costs, which the Company expects to pay primarily over the first six months of fiscal 2001, is as follows:
Severance Facility- Land Other Total (In thousands) closing Reclamation Costs - ------------------------------------ ------------- ------------- -------------- ------------- ------------ Fiscal 1999 Plan Balance at April 4, 1998 $ - $ - $ - $ - $ - Provision charged to expense 213 1,882 - - 2,095 Usage (101) (275) - - (376) ------ ------ ------ ------ ------ Balance at April 3, 1999 112 1,607 - - 1,719 Usage (78) (69) - - (147) Reserves reversed due to (34) (665) - - (699) sale of businesses ------ ------ ------ ------ ------ Balance at April 1, 2000 $ - $ 873 $ - $ - $ 873 ====== ====== ====== ====== ====== Fiscal 2000 Plan Balance at April 3, 1999 $ - $ - $ - $ - $ - Provision charged to expense 645 2,985 2,494 95 6,219 Usage (239) (222) (192) (95) (748) Currency translation - (191) (246) - (437) ------ ------ ------ ------ ------ Balance at April 1, 2000 $ 406 $2,572 $2,056 $ - $5,034 ====== ====== ====== ====== ====== The Company expects to incur additional restructuring costs of approximately $2,100,000, primarily during the remainder of calendar 2000, for severance, employee retention, and relocation expenses. Pursuant to the requirements of EITF 94-3, these costs are not permitted as charges until they are incurred. In February 2000, ThermoRetec signed a letter of intent to sell its five remaining soil-remediation facilities, including three facilities announced for sale earlier in fiscal 2000. The transaction is expected to be completed before the end of July 2000, although there can be no assurance that ThermoRetec will complete this sale. Revenues and operating income before restructuring charges of the five soil-remediation facilities that will be sold aggregated $23,376,000 and $3,432,000, respectively, in fiscal 2000, and $19,795,000 and $1,729,000, respectively, in fiscal 1999. 25 12. Supplemental Cash Flow Information
(In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- ----------- ---------- --------- Cash Paid For: Interest $ 7,942 $ 8,244 $ 10,363 Income taxes $ 4,440 $ 3,025 $ 4,041 Noncash Activities: Fair value of assets of acquired companies $ 3,328 $ 643 $ 29,477 Cash paid for acquired companies (2,286) (643) (14,765) Issuance of subsidiary common stock for acquired companies (384) - (3,125) --------- -------- -------- Liabilities assumed of acquired companies $ 658 $ - $ 11,587 ========= ======== ======== Issuance of subsidiary subordinated convertible debentures in $ - $ 6,999 $ - exchange for subsidiary common stock (Note 5) Conversions of subordinated convertible debentures $ - $ - $ 13,220 Company common stock received in settlement of a note receivable $ - $ 668 $ - Notes receivable received upon sale of business (Note 2) $ - $ - $ 2,881 13. Business Segment Information The Company organizes and manages its businesses by individual functional operating entity. The Company has combined its operating entities into four segments: Environmental-liability Management, Engineering and Design, Laboratory Testing, and Metal Treating. In classifying entities into a particular segment, the Company aggregates businesses with similar economic characteristics, services, methods of providing services, customers, and regulatory environments. The Environmental-liability Management segment is a national provider of environmental-liability and resource-management services, offering these and related consulting services in four areas: consulting and engineering, nuclear remediation, soil remediation, and fluids recycling. The Engineering and Design segment provides comprehensive engineering and outsourcing services such as water and wastewater treatment; highway and bridge engineering; infrastructure engineering; and, prior to the January 2000 sale of the Randers division (Note 2), process engineering and construction. In addition, this segment provides consulting services that address natural resource management issues. In April 2000, the Company sold the assets of its BAC Killam subsidiary, which performed the Company's highway and bridge engineering services (Note 17). The Laboratory Testing segment operates analytical laboratories that provide environmental- and pharmaceutical-testing services. The Metal Treating segment performs metallurgical processing services using thermal-treatment equipment. Until the October 1997 sale of its equipment division (Note 2), this segment also designed, manufactured, and installed advanced custom-engineered, thermal-processing systems. In June 2000, the Company sold the remaining businesses comprising this segment (Note 17). 26 13. Business Segment Information (continued) (In thousands) 2000 1999 1998 - --------------------------------------------------------------------------- ---------- --------- --------- Revenues: Environmental-liability Management (a) $ 166,157 $159,094 $141,115 Engineering and Design (b) 79,638 91,839 84,566 Laboratory Testing (c) 44,759 40,523 37,485 Metal Treating 17,246 19,274 36,618 Intersegment sales elimination (d) (471) (691) (998) --------- -------- -------- $ 307,329 $310,039 $298,786 ========= ======== ======== Income (Loss) Before Provision for Income Taxes, Minority Interest, and Extraordinary Item: Environmental-liability Management (e) $ (30,218) $ (3,644) $ (454) Engineering and Design (f) (13,271) 4,406 6,303 Laboratory Testing 6,553 5,206 4,363 Metal Treating 1,685 2,339 4,278 Corporate (g) (2,674) (2,319) (2,756) --------- -------- -------- Total operating income (loss) (37,925) 5,988 11,734 Interest and other expense, net (5,933) (6,796) (3,220) --------- -------- -------- $ (43,858) $ (808) $ 8,514 ========= ======== ======== Total Assets: Environmental-liability Management $ 149,234 $168,723 $166,925 Engineering and Design 88,935 106,301 102,394 Laboratory Testing 51,465 48,434 43,557 Metal Treating 12,898 11,509 12,795 Corporate (h) 2,021 15,498 34,855 --------- -------- -------- $ 304,553 $350,465 $360,526 ========= ======== ======== Depreciation and Amortization: Environmental-liability Management $ 7,128 $ 9,245 $ 7,672 Engineering and Design 2,306 3,117 3,003 Laboratory Testing 3,901 3,527 2,865 Metal Treating 872 834 1,007 Corporate 8 100 237 --------- -------- -------- $ 14,215 $ 16,823 $ 14,784 ========= ======== ======== 27 13. Business Segment Information (continued) (In thousands) 2000 1999 1998 - ------------------------------------------------------------------------- ---------- ---------- ---------- Capital Expenditures: Environmental-liability Management $ 5,161 $ 8,385 $ 8,916 Engineering and Design 1,355 1,632 1,759 Laboratory Testing 4,093 6,463 7,018 Metal Treating 2,656 1,053 764 Corporate - (118) 3 ------- ------- ------- $13,265 $17,415 $18,460 ======= ======= ======= (a) Includes intersegment sales of $7,000 and $82,000 in fiscal 1999 and 1998, respectively. (b) Includes intersegment sales of $27,000, $60,000, and $73,000 in fiscal 2000, 1999, and 1998, respectively. (c) Includes intersegment sales of $444,000, $624,000, and $843,000 in fiscal 2000, 1999, and 1998, respectively. (d) Intersegment sales are accounted for at prices that are representative of transactions with unaffiliated parties. (e) Includes restructuring and related costs of $38,368,000 and $9,176,000 in fiscal 2000 and 1999, respectively (Note 11). (f) Includes restructuring costs of $19,271,000 and $1,023,000 in fiscal 2000 and 1999 (Note 11). (g) Primarily general and administrative expenses. (h) Primarily cash, cash equivalents, and advance to affiliate. 14. Earnings (Loss) per Share Basic and diluted earnings (loss) per share were calculated as follows: (In thousands except per share amounts) 2000 1999 1998 - ------------------------------------------------------------------------- ----------- ----------- --------- Basic Net Income (Loss) $(43,219) $ (1,421) $ 3,273 -------- -------- ------- Weighted Average Shares 19,033 19,402 18,700 -------- -------- ------- Basic Earnings (Loss) per Share $ (2.27) $ (.07) $ .18 ======== ======== ======= Diluted Net Income (Loss) $(43,219) $ (1,421) $ 3,273 Effect of Majority-owned Subsidiaries' Dilutive Securities - (2) (13) -------- -------- ------- Income (Loss) Available to Common Shareholders, as Adjusted $(43,219) $ (1,423) $ 3,260 -------- -------- ------- Weighted Average Shares 19,033 19,402 18,700 Effect of Stock Options - - 278 -------- -------- ------- Weighted Average Shares, as Adjusted 19,033 19,402 18,978 -------- -------- ------- Diluted Earnings (Loss) per Share $ (2.27) $ (.07) $ .17 ======== ======== ======= Options to purchase 597,000, 1,980,000, and 1,156,000 shares of common stock were not included in the computation of diluted earnings (loss) per share for fiscal 2000, 1999, and 1998, respectively. Their effect would have been antidilutive because the exercise price was greater than the average market price for the common stock and, in fiscal 2000 and 1999, due to the Company's net loss position. In addition, the computation of diluted earnings (loss) 28 14. Earnings (Loss) per Share (continued) per share for each period excludes the effect of assuming the conversion of convertible obligations because the effect would be antidilutive. The calculation for each period excluded $111,850,000 principal amount of 4 5/8% subordinated convertible debentures, convertible at $15.90 per share. An extraordinary gain recorded by the Company decreased basic and diluted loss per share by $.01 in fiscal 2000 (Note 5). 15. Proposed Merger On October 19, 1999, the Company entered into a definitive agreement and plan of merger, as amended, with Thermo Electron, pursuant to which Thermo Electron would acquire all of the outstanding shares of Company common stock held by shareholders other than Thermo Electron in exchange for Thermo Electron common stock worth between $7.50 and $9.25 per share of Company common stock. The number of Thermo Electron shares to be issued to Thermo TerraTech minority shareholders will be determined at the time of the merger transaction, according to the following conditions: If during the 20 trading days immediately prior to the effective date of the merger the average closing price of Thermo Electron common stock is less than $18.75, Thermo TerraTech shareholders would receive common stock worth the equivalent of $7.50 per share of Thermo TerraTech common stock. However, Thermo Electron may elect to terminate the agreement if it would be required to issue 1.8 million or more shares of Thermo Electron common stock. If the average closing price of Thermo Electron common stock is between $18.75 and $23.125, each share of Thermo TerraTech common stock would be exchanged for .4 shares of Thermo Electron common stock. If the average closing price of Thermo Electron common stock is greater than $23.125, Thermo TerraTech shareholders would receive Thermo Electron common stock worth the equivalent of $9.25 per share of Thermo TerraTech common stock. At the same time, the Company's two subsidiaries, ThermoRetec and Randers Killam, also entered into merger agreements with Thermo Electron, pursuant to which all of the shares of common stock of those companies held by stockholders other than the Company and Thermo Electron would be acquired for $7.00 and $4.50 per share, respectively, without interest, in cash. The mergers of ThermoRetec and Randers Killam were completed effective June and May 2000, respectively. The Board of Directors of the Company approved the merger agreement based on a recommendation by a special committee of the Board of Directors, consisting of an independent director of the Company. The completion of the Company's merger is subject to certain conditions, including shareholder approval of the merger agreement and the completion of review by the Securities and Exchange Commission of certain required filings. Thermo Electron intends to vote all of its shares of common stock of the Company in favor of approval of the merger agreement and, therefore, approval of the merger agreement is assured. This merger is expected to be completed in the third quarter of calendar 2000. Following the merger, the Company's common stock would cease to be publicly traded. 29
16. Unaudited Quarterly Information (In thousands except per share amounts)
2000 First Second Third Fourth - ---------------------------------------------------------- ----------- ----------- ----------- ----------- Revenues $ 75,908 $ 78,036 $ 80,846 $ 72,539 Gross Profit (a) 15,694 16,420 17,617 14,216 Income (Loss) Before Extraordinary Item (45,094) 1,207 86 475 Net Income (Loss) (b) (45,094) 1,207 182 486 Earnings (Loss) per Share: Basic (2.37) .06 .01 .03 Diluted (2.37) .06 .01 .02 1999 First Second (c) Third Fourth - ---------------------------------------------------------- ----------- ----------- ----------- ----------- Revenues $ 76,693 $ 77,177 $ 80,400 $ 75,769 Gross Profit 15,648 15,143 15,851 15,787 Net Income (Loss) 1,001 (3,696) 771 503 Basic and Diluted Earnings (Loss) per Share .05 (.19) .04 .03 (a) Reflects a pretax charge of $658,000 for restructuring in the first quarter. (b) Reflects pretax charges of $55,910,000, $120,000, $2,207,000, and $457,000 for restructuring and related costs in the first, second, third, and fourth quarters, respectively. (c) Reflects a pretax charge of $10,217,000 for restructuring costs. 17. Subsequent Events On April 14, 2000, BAC Killam sold all of its assets for $3,341,000, of which approximately $1,374,000 was paid in cash at the closing. The balance represents accounts receivable of BAC Killam that will be collected by the buyer and be paid to the Company upon collection (less a five percent collection fee). On June 1, 2000, the Company sold substantially all of the assets and liabilities of its Metallurgical, Inc., Cal-Doran Metallurgical Services, Inc., and Metal Treating Inc. subsidiaries for $15,700,000 in cash, subject to adjustment based on the difference between the net assets as of the closing date of the sale and $8,323,000. The selling price includes $1,092,000 of real estate leased by the businesses sold that was owned by Thermo Electron. The Company agreed to indemnify the buyer for expenses incurred by the buyer in excess of $1,000,000, but not to exceed $3,500,000, from certain potential environmental liabilities. The Company has not recorded a liability in connection with this indemnity because the amount that would likely be paid by the Company, if any, cannot be reasonably estimated. 30 Thermo TerraTech Inc. 2000 Financial Statements Report of Independent Public Accountants To the Shareholders and Board of Directors of Thermo TerraTech Inc.: We have audited the accompanying consolidated balance sheet of Thermo TerraTech Inc. (a Delaware corporation and an 88%-owned subsidiary of Thermo Electron Corporation) and subsidiaries as of April 1, 2000, and April 3, 1999, and the related consolidated statements of operations, cash flows, and comprehensive income and shareholders' investment for each of the three years in the period ended April 1, 2000. 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 consolidated 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 TerraTech Inc. and subsidiaries as of April 1, 2000, and April 3, 1999, and the results of their operations and their cash flows for each of the three years in the period ended April 1, 2000, in conformity with accounting principles generally accepted in the United States. Arthur Andersen LLP Boston, Massachusetts May 18, 2000 (except with respect to the matters discussed in Note 17, as to which the date is June 1, 2000) 31 Thermo TerraTech Inc. 2000 Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed immediately after this Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Forward-looking Statements." Overview The Company provides industrial outsourcing services and manufacturing support encompassing a broad range of specializations. The Company operates in four segments: environmental-liability management, engineering and design, laboratory testing, and metal treating. Environmental-liability Management The Company's ThermoRetec Corporation subsidiary, jointly owned with Thermo Electron Corporation, is a national provider of environmental-liability and resource-management services. ThermoRetec offers these and related consulting services in four areas: consulting and engineering, nuclear remediation, soil remediation, and fluids recycling. In February 2000, ThermoRetec signed a letter of intent to sell its remaining soil-recycling facilities. The transaction is expected to be completed before the end of July 2000, although there can be no assurance that ThermoRetec will complete this sale (Note 11). The Company's majority-owned Thermo EuroTech N.V. subsidiary, located in the Netherlands, specializes in converting "off-spec" and contaminated petroleum fluids into useable oil products. The Company intends to exit this business, as discussed in the results of operations. Thermo EuroTech also provides in-plant waste management and recycling services through its Ireland-based Green Sunrise Holdings Ltd. subsidiary. In August 1999, Green Sunrise acquired the outstanding stock of Dempsey Drums Limited, an Ireland-based service provider specializing in the supply, disposal, and reconditioning of steel and plastic drums and other specialized containers (Note 2). Engineering and Design The Company's The Randers Killam Group Inc. subsidiary, jointly owned with Thermo Electron Corporation, provides comprehensive engineering and outsourcing services such as water and wastewater treatment, process engineering and construction, highway and bridge engineering, and infrastructure engineering. In January 2000, Randers Killam sold its Randers division, a process engineering and construction business (Note 2). In April 2000, Randers Killam sold the assets of its BAC Killam Inc. subsidiary, a highway and bridge engineering business (Note 17). The Company's wholly owned Normandeau Associates Inc. subsidiary provides consulting services that address natural resource management issues. Laboratory Testing The Company's wholly owned Thermo Analytical Inc. subsidiary operates analytical laboratories that provide environmental- and pharmaceutical-testing services, primarily to commercial clients throughout the U.S. Metal Treating The Company performs metallurgical processing services using thermal-treatment equipment at locations in California, Minnesota, and Wisconsin. The Company sold the businesses comprising this segment in June 2000 (Note 17). On January 31, 2000, Thermo Electron Corporation, the majority owner of the Company, announced that it plans to sell all of the businesses of the Company. 32 Thermo TerraTech Inc. 2000 Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Fiscal 2000 Compared With Fiscal 1999 Total revenues were $307.3 million in fiscal 2000, compared with $310.0 million in fiscal 1999. Revenues from the Environmental-liability Management segment increased to $166.2 million in fiscal 2000 from $159.1 million in fiscal 1999. Excluding intrasegment sales, revenues at ThermoRetec increased to $152.8 million in fiscal 2000 from $141.6 million in fiscal 1999, primarily due to higher revenues from a large remedial-construction contract that is expected to continue through fiscal 2001. Revenues from Thermo EuroTech decreased $4.2 million to $13.3 million due to a decrease in sales of usable oil products and a decrease in revenues relating to contracts to perform soil-remediation services overseas and to process oil-based muds. These decreases were offset in part by $1.6 million of revenues from Dempsey Drums, which was acquired in August 1999 (Note 2). Revenues from the Engineering and Design segment decreased to $79.6 million in fiscal 2000 from $91.8 million in fiscal 1999, primarily due to lower contract revenue resulting in part from a recession in the chemical industry and the sale of the Randers division in January 2000 (Note 2). Revenues from the Laboratory Testing segment increased to $44.8 million in fiscal 2000 from $40.5 million in fiscal 1999, due to higher demand resulting from new industrial customers. Revenues from the Metal Treating segment decreased to $17.2 million in fiscal 2000 from $19.3 million in fiscal 1999, due to weakness in the agricultural equipment and commercial aerospace industries. The Metal Treating segment businesses were sold in June 2000 (Note 17). The gross profit margin increased to 21% in fiscal 2000 from 20% in fiscal 1999. Excluding the effect of a $0.7 million write-off of inventory in the Environmental-liability Management segment in fiscal 2000 (Note 11), the gross profit margin increased primarily due to a $2.5 million reduction of depreciation expense in fiscal 2000 as a result of certain write-offs in the Environmental-liability Management and Engineering and Design segments (Note 11). The gross profit margin from the Engineering and Design segment increased to 25% in fiscal 2000 from 23% in fiscal 1999, due to a decrease in low-margin contract revenue. Selling, general, and administrative expenses as a percentage of revenues remained constant at 15% in fiscal 2000 and 1999. In connection with the planned sale of businesses discussed in Note 11, the Company recorded $57.0 million of restructuring costs in fiscal 2000. Of these restructuring costs, $37.7 million was recorded by the Environmental-liability Management segment and $19.3 million was recorded by the Engineering and Design segment. These charges represent the excess of book value of the businesses proposed to be sold over the estimated proceeds from their sale, a write-down of fixed assets to their estimated disposal value, ongoing lease obligations, land reclamation costs, losses on the sale of certain of these businesses, a charge for a cumulative translation adjustment, write-offs of intangible and other assets, and severance costs. During fiscal 1999, the Company recorded $10.2 million of restructuring costs (Note 11). Of these restructuring costs, $9.2 million was recorded by ThermoRetec in the Environmental-liability Management segment in connection with the closure of two soil-recycling facilities. ThermoRetec took this action after a period of operating losses at the facilities, which it believes arose from relaxed enforcement of state rules concerning disposal of contaminated soils and the availability of alternative disposal options to customers. The costs include a write-down of fixed assets to their estimated disposal value and a write-off of intangible assets, including cost in excess of net assets of acquired companies, as well as other closure costs. In addition, the Company recorded $1.0 million of restructuring costs for abandoned-facility payments relating to the consolidation of the facilities of another business. Interest income increased to $2.8 million in fiscal 2000 from $2.2 million in fiscal 1999, primarily as the result of higher average invested balances. Interest expense decreased to $8.7 million in fiscal 2000 from $9.0 million in fiscal 1999, primarily due to lower average debt balances as a result of repurchases of subordinated convertible debentures and repayments of debt made by the Company in fiscal 2000. 33 Fiscal 2000 Compared With Fiscal 1999 (continued) The Company recorded income tax provisions of $2.5 million and $1.8 million in fiscal 2000 and 1999, respectively, on pretax losses in both periods, primarily due to the effect of nondeductible amortization and write-off of cost in excess of net assets of acquired companies and foreign losses for which a tax benefit was not recorded. In addition, the tax provision recorded in fiscal 2000 includes a $1.1 million write-off of deferred tax assets (Note 11). The Company recorded minority interest income of $3.1 million and $1.2 million in fiscal 2000 and 1999, respectively, primarily due to losses incurred by the Company's majority-owned subsidiaries. During fiscal 2000, the Company purchased $2.2 million principal amount of 2 1/2% subordinated convertible debentures, convertible into shares of Thermo EuroTech (Delaware) Inc., for $2.0 million in cash, resulting in an extraordinary gain of $107,000, net of taxes of $71,000 (Note 5). Fiscal 1999 Compared With Fiscal 1998 Total revenues were $310.0 million in fiscal 1999, compared with $298.8 million in fiscal 1998. Metal Treating segment revenues decreased to $19.3 million in fiscal 1999 from $36.6 million in fiscal 1998, due to the sale of the Company's thermal-processing equipment business in October 1997, which contributed revenues of $17.3 million in fiscal 1998 (Note 2). Revenues from the Environmental-liability Management segment increased 13% to $159.1 million in fiscal 1999 from $141.1 million in fiscal 1998. Excluding intrasegment sales, revenues at ThermoRetec increased to $141.6 million in fiscal 1999 from $127.1 million in fiscal 1998, primarily due to $8.6 million of higher revenues from consulting and engineering services at RETEC and, to a lesser extent, the inclusion of $6.2 million of revenues from businesses acquired in fiscal 1998. Revenues from ThermoRetec's soil-remediation services increased $6.4 million in fiscal 1999, resulting from higher volumes of soil processed. These increases were offset in part by a decrease in revenues resulting from a decline in the number of contracts in process at ThermoRetec's eastern United States construction operations (formerly IEM Sealand). Revenues from Thermo EuroTech increased $3.5 million to $17.5 million due to the inclusion for the full fiscal 1999 period of revenues from Green Sunrise, which was acquired in February 1998 and added incremental revenues of $6.4 million, offset in part by a decrease in sales of useable oil products. Revenues from the Engineering and Design segment increased to $91.8 million in fiscal 1999 from $84.6 million in fiscal 1998, primarily due to increased revenues from two construction and labor management contracts, which are expected to be completed by the end of the first quarter of fiscal 2000. Engineering and Design segment revenues also increased $3.5 million due to the inclusion for the full fiscal 1999 period of revenues from Randers, acquired May 1997. Revenues from the Laboratory Testing segment increased to $40.5 million in fiscal 1999 from $37.5 million in fiscal 1998 due to higher demand. The gross profit margin increased to 20% in fiscal 1999 from 18% in fiscal 1998. The gross profit margin from the Environmental-liability Management segment increased to 16% in fiscal 1999 from 11% in fiscal 1998, primarily due to a $2.3 million reduction in losses on certain remedial-construction contracts, higher utilization of billable personnel at RETEC, a $1.6 million increase in gross profit at the Company's soil-recycling sites primarily due to higher volumes of soil processed, and $0.4 million of lower depreciation expense following suspension of depreciation at two soil-recycling sites. To a lesser extent, the gross profit margin from the Environmental-liability Management segment increased due to higher margins at Thermo EuroTech as a result of the inclusion of higher-margin revenues at Green Sunrise. The gross profit margin was 40% at Green Sunrise in fiscal 1999. The gross profit margin from the Engineering and Design segment decreased to 23% in fiscal 1999 from 25% in fiscal 1998, primarily due to a change in the mix of contracts. Selling, general, and administrative expenses as a percentage of revenues increased slightly to 15% in fiscal 1999 from 14% in fiscal 1998, primarily due to the absence of lower relative expenses at the Company's Metal Treating segment due to the sale of the thermal-processing equipment business in fiscal 1998 and higher relative expenses at Green Sunrise, which was acquired in February 1998. During fiscal 1999, the Metal Treating segment and Green Sunrise had selling, general and administrative expenses as a percent of revenues of 9% and 30%, respectively. In addition, selling, general, and administrative expenses at the Environmental-liability Management segment increased due to a $0.8 million increase in provision for uncollectible accounts and a $0.4 million increase in administrative costs associated with ThermoRetec's name change. 34 Fiscal 1999 Compared With Fiscal 1998 (continued) During fiscal 1999, the Company recorded $10.2 million of restructuring costs. Of these restructuring costs, $9.2 million was recorded by ThermoRetec in the Environmental-liability Management segment in connection with the closure of two soil-recycling facilities. ThermoRetec took this action after a period of operating losses at the facilities, which it believes arose from relaxed enforcement of state rules concerning disposal of contaminated soils and the availability of alternative disposal options to customers. The costs include a write-down of fixed assets to their estimated disposal value and a write-off of intangible assets, including cost in excess of net assets of acquired companies, as well as other closure costs. These facilities reported aggregated revenues and operating losses of $2.2 million and $0.8 million, respectively, in fiscal 1998, and aggregated revenues and operating losses prior to the decision to close the facilities of $1.8 million and $0.1 million, respectively, in fiscal 1999. In addition, the Company recorded $1.0 million of restructuring costs for abandoned-facility payments relating to the consolidation of the facilities of another business (Note 11). The annual savings from consolidating these facilities total $0.2 million and such savings began in September 1998, the date of abandonment. Interest income decreased to $2.2 million in fiscal 1999 from $4.2 million in fiscal 1998, primarily as a result of lower average invested balances. Interest expense decreased to $9.0 million in fiscal 1999 from $10.8 million in fiscal 1998, primarily due to the repayment of a note payable in February and May 1998, the repayment of a promissory note to Thermo Electron Corporation, and the conversion of the Company's 6 1/2% subordinated convertible debentures during fiscal 1998, offset in part by increased borrowings at Thermo EuroTech during fiscal 1999 and the issuance of $7.0 million principal amount of 2 1/2% convertible subordinated debentures due 2001 (Note 5). Equity in earnings of unconsolidated subsidiary in fiscal 1998 represented ThermoRetec's proportionate share of income from a joint venture. Gain on sale of unconsolidated subsidiary in fiscal 1998 resulted from ThermoRetec's sale of its interest in this joint venture (Note 2). The Company recorded income tax expense of $1.8 million in fiscal 1999 on a pretax loss primarily due to the effect of nondeductible amortization and write off of cost in excess of net assets of acquired companies. The effective tax rate in fiscal 1998 was 60%. This rate exceeded the statutory federal income tax rate primarily due to the impact of state income taxes and the nondeductible amortization of cost in excess of net assets of acquired companies. The Company recorded minority interest income of $1.2 million in fiscal 1999, compared with minority interest expense of $0.1 million in fiscal 1998, primarily due to the effect of a net loss at ThermoRetec in fiscal 1999. Liquidity and Capital Resources Consolidated working capital was $30.7 million at April 1, 2000, compared with $67.0 million at April 3, 1999. Working capital decreased $38.0 million as a result of the reclassification of subordinated convertible debentures due May 2000 to current liabilities. Cash and cash equivalents were $4.2 million at April 1, 2000, compared with $43.0 million at April 3, 1999. In addition, as of April 1, 2000, the Company had $47.7 million invested in an advance to affiliate. Prior to the use of a new domestic cash management arrangement between the Company and Thermo Electron Corporation, which became effective June 1999, amounts invested with Thermo Electron were included in cash and cash equivalents. Of the total cash and cash equivalents at April 1, 2000, $3.9 million was held by the Company's majority-owned subsidiaries and the balance was held by the Company and its wholly owned subsidiaries. The total $47.7 million advance to affiliate at April 1, 2000, was advanced by the Company's majority-owned subsidiaries. During fiscal 2000, $22.8 million of cash was provided by operating activities. During this period, $4.8 million of cash was provided by an increase in other current liabilities, primarily due to an increase in accrued restructuring costs. The Company expects to pay the $5.9 million balance of accrued restructuring costs primarily over the first six months of fiscal 2001. A decrease in accounts receivable provided $6.0 million of cash, primarily at ThermoRetec due to the timing of billings and, to a lesser extent, at the Engineering and Design segment due to a decrease in revenues. 35 Liquidity and Capital Resources (continued) These decreases were offset in part by increased accounts receivable at the Laboratory Testing segment, primarily as a result of increased laboratory testing revenues. An increase in inventories and unbilled contract costs and fees used $4.1 million of cash, primarily at ThermoRetec, due to the timing of billings, offset in part by a decrease at the Engineering and Design segment due to the effect of a decline in revenues. Excluding advance to affiliate activity, the Company's investing activities in fiscal 2000 primarily consisted of $3.8 million received from the collection of long-term notes receivable, an acquisition, and capital additions. In August 1999, a subsidiary of the Company acquired Dempsey Drums Limited for $2.0 million in cash, net of cash acquired, and the issuance of shares of the subsidiary's common stock valued at $0.4 million (Note 2). The Company expended $13.3 million for purchases of property, plant, and equipment in fiscal 2000 and expects to spend approximately $12 million for capital additions during fiscal 2001. In January 2000, the Company sold substantially all of the assets and liabilities of the Randers division in exchange for a $538,000 note receivable due 2003 (Note 2). In March 2000, the Company sold the assets of a soil-recycling facility for $400,000 in cash, of which $200,000 was placed in escrow and has not yet been received (Note 2). The Company's financing activities used cash of $4.3 million in fiscal 2000. During this period, the Company used cash of $3.8 million for the repurchase of Company and subsidiary common stock, including Company stock subject to certain put rights on shares issued in connection with an acquisition. As of April 1, 2000, the Company has no further cash obligation pursuant to put rights. In addition, the Company used $2.0 million for the repurchase of subordinated convertible debentures and $1.6 million for the repayment of debt (Note 5). These uses of cash were offset in part by $2.3 million borrowed to finance an acquisition (Note 2). In April and June 2000, the Company sold two of its businesses for $16.0 million in cash, subject to a post-closing adjustment (Note 17). In May 2000, ThermoRetec's $38.0 million principal amount 4 7/8% subordinated convertible debentures matured. To finance a portion of the debt repayment, the Company borrowed approximately $10 million under its domestic cash management arrangement with Thermo Electron (Note 1). The Company generally expects to have positive cash flow from its existing operations. Thermo Electron has expressed its willingness to advance up to $15 million to the Company for short-term liquidity in the event that the need arises. Accordingly, the Company believes that its existing resources and potential borrowings from Thermo Electron are sufficient to meet the capital requirements of its existing operations for at least the next 18 months. Market Risk The Company is exposed to market risk from changes in interest rates, foreign 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. Foreign Currency Exchange Rates The Company generally views its investment in foreign subsidiaries with a functional currency other than the Company's reporting currency as long-term. The Company's investment in foreign subsidiaries is sensitive to fluctuations in foreign currency exchange rates. The functional currencies of the Company's foreign subsidiaries are principally denominated in Dutch guilders. The effect of a change in foreign exchange rates on the Company's net investment in foreign subsidiaries is reflected in the "Accumulated other comprehensive items" component of shareholders' investment. A 10% appreciation in fiscal year-end 2000 functional currencies, relative to the U.S. dollar, would result in a $1.1 million reduction of shareholders' investment. A 10% depreciation in fiscal year-end 1999 functional currencies, relative to the U.S. dollar, would result in a $1.1 million reduction of shareholders' investment. 36 Market Risk (continued) Equity Prices The Company's and its subsidiaries' subordinated convertible debentures are sensitive to fluctuations in the price of Company or subsidiary common stock into which the debentures are convertible. Changes in equity prices would result in changes in the fair value of the Company's and its subsidiaries' subordinated convertible debentures due to the difference between the current market price and the market price at the date of issuance of the debentures. Upon the fiscal 2001 merger of the Company and Thermo Electron, the Company's subordinated convertible debentures will be assumed by Thermo Electron. After the merger, the Company's subordinated convertible debentures will be convertible into shares of Thermo Electron common stock, rather than into the Company's common stock. A 10% increase in fiscal year-end 1999 market equity prices would result in a negative impact to the Company of $1.0 million on the fair value of its subordinated convertible debentures. Interest Rates The Company's subordinated convertible debentures are sensitive to changes in interest rates. Interest rate changes would result in a change in the fair value of the Company's and its subsidiaries' subordinated convertible debentures due to the difference between the market interest rate and the rate at the date of issuance of the debentures. A 10% decrease in fiscal year-end 2000 and 1999 market interest rates would result in a negative impact to the Company of $2.2 million and $0.2 million, respectively, on the fair value of its subordinated convertible debentures. The Company's cash, cash equivalents, advance to affiliate, and variable-rate short- and long-term obligations are sensitive to changes in interest rates. Interest rate changes would result in a change in interest income and expense due to the difference between the current interest rates on cash, cash equivalents, advance to affiliate, and the variable-rate short- and long-term obligations and the rate that these financial instruments may adjust to in the future. A 10% decrease in fiscal year-end 2000 and 1999 interest rates would result in a negative impact of $0.1 million and $0.1 million, respectively, on the Company's net income. Year 2000 As of the date of this report, the Company has completed its year 2000 initiatives which included: (i) testing and upgrading significant information technology systems and facilities; (ii) assessing the year 2000 readiness of its key suppliers, vendors, and customers; and (iii) developing contingency plans. As a result of completing these initiatives, the Company believes that all of its material information technology systems and critical non-information technology systems are year 2000 compliant. In addition, the Company is not aware of any significant supplier or vendor that has experienced material disruption due to year 2000 issues. The Company has also developed a contingency plan to allow its primary business operations to continue despite disruptions due to year 2000 problems, if any, that might yet arise in the future. The costs incurred to date by the Company in connection with the year 2000 issue have not been material. While the Company to date has been successful in minimizing negative consequences arising from year 2000 issues, there can be no assurance that in the future the Company's business operations or financial condition may not be impacted by year 2000 problems, such as increased warranty claims, vendor and supplier disruptions, or litigation relating to year 2000 issues. 37 Thermo TerraTech Inc. 2000 Financial Statements Forward-looking Statements In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause its actual results in fiscal 2001 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Dependence on Environmental Regulation. Federal, state, and local environmental laws govern each of the markets in which the Company conducts business, as well as many of the Company's operations. The markets for many of the Company's services, including industrial-remediation services, nuclear-remediation services, hazardous waste-remedial construction services, soil-remediation services, waste-fluids recycling services, engineering and design services, and laboratory services, and the standards governing most aspects of the construction and operation of the Company's facilities, were directly or indirectly created by, and depend on, the existence and enforcement of those laws. These laws and regulations may change in the future, requiring new technologies or stricter standards with which the Company must comply. In addition, these laws and regulations could be made more lenient in the future, thereby reducing the size of the markets addressed by the Company. Any such change in federal, state, and local environmental laws and regulations may have a material adverse effect on the Company's business. Responsibility for establishing and enforcing certain federal policies, such as the federal underground storage tank policy, has been delegated to the states, which are not only required to establish regulatory programs, but are also permitted to impose more stringent requirements than are otherwise required by federal law. Certain states have adopted a "risk-based" approach to prioritizing site cleanups and setting cleanup standards, which attempts to balance the costs of remediation against the potential harm to human health and the environment from leaving sites unremediated. Additional states may adopt these policies, which could reduce the size of the potential market addressed by the Company. Potential Environmental and Regulatory Liability. The Company's operations are subject to comprehensive laws and regulations related to the protection of the environment. Among other things, these laws and regulations impose requirements to control air, soil, and water pollution, and regulate health, safety, zoning, land use, and the handling and transportation of hazardous and nonhazardous materials. These laws and regulations also impose liability for remediation and cleanup of environmental contamination, both on-site and off-site, resulting from past and present operations. These requirements may also be imposed as conditions to operating permits or licenses that are subject to renewal, modification, or revocation. Laws and regulations may require the Company to modify, supplement, replace, or curtail its operating methods, facilities, or equipment at costs which may be substantial without any corresponding increase in revenue. The Company is also potentially subject to monetary fines, penalties, remediation, cleanup or stop orders, injunctions, or orders to cease or suspend its practices. The outcome of any proceedings and associated costs and expenses could have a material adverse impact on the Company's business. In addition, the Company is subject to numerous laws and regulations related to the protection of human health and safety. Such laws and regulations may impose liability on the Company for exposure of its employees to radiation or other hazardous contamination or failure to isolate and remove radioactive or other hazardous contaminants from soil. The Company attempts to operate its business to minimize its exposure to environmental and other regulatory liabilities. Although no claims giving rise to such liabilities have been asserted by the Company's customers or employees to date, such claims could be asserted in the future against the Company. Uncertainty of Funding. Remediation compliance requirements and related costs are often beyond the financial capabilities of individuals and small companies. To address this problem, some states have established tax-supported trust funds to assist in the financing of compliance and site remediation. As a consequence, in many of the states in which the Company markets its soil remediation services, the majority, and in some cases virtually all, of the soil remediated by the Company is paid for by large companies and/or these state trust funds. Any substantial decrease in this funding could have a material adverse effect on the Company's business and financial performance. Many states have realized that the number of sites requiring remediation and the costs of compliance are substantially higher than 38 were originally estimated. As a result, several states have relaxed enforcement activities and others have reduced compliance requirements in order to reduce the costs of cleanup. These factors have already resulted in lower levels of cleanup activity in some states and have had a material adverse effect on the Company's business. Continued de-emphasis on enforcement activities and/or further reductions in compliance requirements will have an even more severe adverse effect on the Company's business. The Company depends on funding from the federal and state governments, and their agencies and instrumentalities, for compensation for its services. For example, ThermoRetec's nuclear-remediation business provides a large portion of its services directly or indirectly to the U.S. Department of Energy (DOE) and the Company's engineering and design businesses perform significant amounts of services for state and municipal governments. Competition. The markets for many of the Company's services are regional and are characterized by intense competition from numerous local competitors. Some of the Company's competitors have greater technical and financial resources than those of the Company. As a result, they may be able to adapt more quickly to new or emerging technologies and changes in customer requirements, or to devote greater resources to the promotion and sale of their services than the Company. Competition could increase if new companies enter the market or its existing competitors expand their service lines. The Company's current technology, technology under development, or ability to develop new technologies may not be sufficient to enable it to compete effectively with its competitors. Seasonal Influences. A majority of the Company's businesses experience seasonal fluctuations. A majority of the Company's soil-remediation sites, as well as the Company's fluids-recycling sites, experience declines in revenues if severe weather conditions occur. Site remediation work and certain environmental testing services, such as the services provided by Lancaster Laboratories, RETEC, Randers, and Thermo NUtech, may decline in winter months as a result of severe weather conditions. In Europe, Thermo EuroTech may experience a decline in the feedstock delivered to and from its facilities during winter months due to frozen waterways. Possible Obsolescence Due to Technological Change. Technological developments are expected to continue at a rapid pace in the environmental services industry. The Company's technologies could be rendered obsolete or uneconomical by technological advances by one or more companies that address the Company's markets or by future entrants into the industry. The Company may not have the resources to, or otherwise be successful in, developing responses to technological advances by others. Dependence of Thermo EuroTech on Availability of Waste Oil Supplies and Ability to Export Refined Oil. Thermo EuroTech's North Refinery facility has historically received a large percentage of its oil feedstock from the former Soviet Union. North Refinery no longer receives any oil from that nation, due to political and economic changes that have made the transportation of waste oil difficult. To overcome this loss of supply, North Refinery has taken steps to replace and diversify its feedstock suppliers. North Refinery may experience future disruptions in deliveries. Any disruptions in supply could have a material adverse effect on the Company's results of operations. In addition, North Refinery has received a one-year exemption from the environmental authorities in The Netherlands and the United Kingdom allowing it to export refined oil, which would otherwise be regulated as "waste" under the environmental regulations of those countries. If North Refinery is unable after that time to qualify its exported oil as non-waste quality oil, or if North Refinery is unable to extend the length of its exemption, the Company's results of operations could be materially adversely affected. Potential Professional Liability. The Company's business exposes it to potential liability for the negligent performance of its services, and the Company could face substantial liability to clients and third parties for damages resulting from faulty designs or other professional services. The Company currently maintains professional errors and omissions insurance, but this insurance may not provide sufficient coverage in the event of a claim, and the Company may not be able to maintain such coverage on acceptable terms, if at all. A professional liability claim could result in a material adverse effect on the Company's business, financial condition, and results of operations. 39 Dependence on Sales to Government Entities. A significant portion of the Company's revenues is derived from municipalities, state governments, and government utility authorities. Any decreases in purchases by these entities, including decreases resulting from shifts in priorities or overall budgeting limitations, could have a material adverse effect on the Company's business, financial condition, and results of operations. In addition, most of the Company's contracts require the Company to perform specific services for a fixed fee. Contracts with governmental entities often permit the purchaser to cancel the agreement at any time. A significant overrun in the Company's expenses or cancellation of a significant contract could also result in a material adverse effect on the Company's business, financial condition, and results of operations. The Company's contracts with governmental entities are also subject to other risks, including contract suspensions; protests by disappointed bidders of contract awards, which can result in the re-opening of the bidding process; and changes in government policies or regulations. Risks Associated with Cash Management Arrangement with Thermo Electron. The Company participates in a cash management arrangement with its parent company, Thermo Electron. Under this cash management arrangement, the Company lends its excess cash to Thermo Electron on an unsecured basis. The Company has the contractual right to withdraw its funds invested in the cash management arrangement upon 30 days' prior notice. Thermo Electron is contractually required to maintain cash, cash equivalents, and/or immediately available bank lines of credit equal to at least 50% of all funds invested under the cash management arrangement by all Thermo Electron subsidiaries other than wholly owned subsidiaries. The funds are held on an unsecured basis and therefore are subject to the credit risk of Thermo Electron. The Company's ability to receive its cash upon notice of withdrawal could be adversely affected if participants in the cash management arrangement demand withdrawal of their funds in an aggregate amount in excess of the 50% reserve required to be maintained by Thermo Electron. In the event of a bankruptcy of Thermo Electron, the Company would be treated as an unsecured creditor and its right to receive funds from the bankruptcy estate would be subordinated to secure creditors and would be treated on a pari passu basis with all other unsecured creditors. Further, all cash withdrawn by the Company from the cash management arrangement within one year before the bankruptcy would be subject to rescission. The inability of Thermo Electron to return the Company's cash on a timely basis or at all could have a material adverse effect on the Company's results of operations and financial position. 40 Thermo TerraTech Inc. 2000 Financial Statements Selected Financial Information
(In thousands except per share amounts) 2000 (a) 1999 (b) 1998 (c) 1997 (d) 1996 - -------------------------------------------------- ---------- ----------- ---------- ---------- --------- Statement of Operations Data Revenues $307,329 $ 310,039 $298,786 $278,503 $220,484 Income (Loss) Before Extraordinary Item (43,326) (1,421) 3,273 (162) 3,447 Net Income (Loss) (43,219) (1,421) 3,273 (162) 3,447 Earnings (Loss) per Share: Basic (2.27) (.07) .18 (.01) .20 Diluted (2.27) (.07) .17 (.01) .18 Balance Sheet Data Working Capital $ 30,733 $ 67,043 $ 69,319 $ 77,315 $ 66,008 Total Assets 304,553 350,465 360,526 393,784 333,656 Long-term Obligations 118,113 158,617 153,144 165,186 155,384 Shareholders' Investment 51,570 92,157 97,130 83,526 85,870 (a) Reflects a $58.7 million pretax charge for restructuring and related costs. (b) Reflects a $10.2 million pretax charge for restructuring costs. (c) Reflects a $3.0 million pretax gain from ThermoRetec's sale of its investment in a joint venture. (d) Reflects $7.8 million of restructuring costs and a loss $1.5 million relating to the sale of the Company's J. Amerika division. Also reflects the issuance of $115.0 million principal amount of 4 7/8% subordinated convertible debentures, and a gain on issuance of stock by subsidiary of $1.5 million. 41 Thermo TerraTech Inc. 2000 Financial Statements Common Stock Market Information The Company's common stock is traded on the American Stock Exchange under the symbol TTT. The following table sets forth the high and low sales prices of the Company's common stock for fiscal 2000 and 1999, as reported in the consolidated transaction reporting system.
Fiscal 2000 Fiscal 1999 Quarter High Low High Low - -------------------------------------------------------------- ---------- ---------- ---------- ---------- First $5 13/16 $3 7/8 $6 3/4 $4 1/2 Second 5 15/16 4 1/2 5 3 3/4 Third 6 13/16 5 1/4 4 5/8 3 15/16 Fourth 8 1/2 6 3/4 5 3/4 4 3/8 As of April 28, 2000, the Company had 1,244 holders of record of its common stock. This does not include holdings in street or nominee names. The closing market price on the American Stock Exchange for the Company's common stock on April 28, 2000, was $7 1/2 per share. Common stock of the Company's ThermoRetec Corporation and The Randers Killam Group Inc. subsidiaries were traded on the American Stock Exchange (symbols THN and RGI, respectively) until June 6, 2000, and May 16, 2000, respectively. 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.
EX-10.32 3 0003.txt Exhibit 10.32 THERMO TERRATECH INC. THE RANDERS KILLAM GROUP INC. NONQUALIFIED STOCK OPTION PLAN As amended and restated effective as of 9/10/99 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock (the "Common Stock"), of The Randers Killam Group Inc. ("Subsidiary"), a subsidiary of Thermo TerraTech Inc. (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 300,000 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 1 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. 2 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, 3 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 Optioneet 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 4 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. 5 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. 6 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. 7 EX-10.34 4 0004.txt Exhibit 10.34 THERMO TERRATECH INC. NONQUALIFIED STOCK OPTION PLAN As amended and restated effective as of 9/10/99] 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock (the "Common Stock"), of Thermo TerraTech Inc. ("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. 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 and the Company's Incentive Stock Option Plan in the aggregate shall be 1,850,000 shares. Shares to be issued upon the exercise of options granted under the Plan may be either authorized but unissued shares or shares held by the Company in its treasury. 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; (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 1 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 2 respect to which the option is then being exercised. The notice shall be accompanied by payment in the form of cash or shares of 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 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 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. 3 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 4 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. 5 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. 6 EX-10.35 5 0005.txt Exhibit 10.35 THERMO TERRATECH INC. DEFERRED COMPENSATION PLAN FOR DIRECTORS As amended and restated as of 9/10/99 Section 1. Participation. Any director of Thermo TerraTech Inc. (the "Company") may elect to have such percentage as he or she may specify of the fees otherwise payable to him or her deferred and paid to him or her as provided in this Plan. A director who is also an employee of the Company or any subsidiary or parent of the Company, shall not be eligible to participate in this Plan. Each election shall be made by notice in writing delivered to the Secretary of the Company, in such form as the Secretary shall designate, and each election shall be applicable only with respect to fees earned subsequent to the date of the election for the period designated in the form. The term "participant" as used herein refers to any director who shall have made an election. No participant may defer the receipt of any fees to be earned after the later to occur of either (a) the date on which the participant shall retire from or otherwise cease to engage in his or her principal occupation or employment or (b) the date on which he or she shall cease to be a director of the Company, or such earlier date as the Board of Directors of the Company, with the participant's consent, may designate (the "deferral termination date"). In the event that the participant's deferral termination date is the date on which he or she ceases to engage in his or her principal occupation or employment, the participant or a personal representative shall advise the Company of that date by written notice delivered to the Secretary of the Company. Section 2. Establishment of Deferred Compensation Accounts. There shall be established for each participant an account to be designated as that participant's deferred compensation account. Section 3. Allocations to Deferred Compensation Accounts. There shall be allocated to each participant's deferred compensation account, as of the end of each quarter, an amount equal to his or her fees for that quarter which that participant shall have elected to have deferred pursuant to Section 1. Section 4. Stock Units and Stock Unit Accounts. All amounts allocated to a participant's deferred compensation account pursuant to Section 3 and Section 5 shall be converted, at the end of each quarter, into stock units by dividing the accumulated balance in the deferred compensation account as of the end of that quarter by the average last sale price per share of the Company's common stock as reported in The Wall Street Journal, for the five business days up to and including the last business day of that quarter. The number of stock units, so determined, rounded to the nearest one-hundredth of a share, shall be credited to a separate stock unit account to be established for the participant, and the 1 aggregate value thereof as of the last business day of that quarter shall be charged to the participant's deferred compensation account. No amounts credited to the participant's deferred compensation account pursuant to Section 5 subsequent to the close of the fiscal year in which occurs the participant's deferral termination date shall be converted into stock units. Any such amount shall be distributed in cash as provided in Section 8. A maximum number of 25,000 shares of the Company's common stock may be represented by stock units credited under this Plan, subject to proportionate adjustment in the event of any stock dividend, stock split or other capital change affecting the Company's common stock. Section 5. Cash Dividend Credits. Additional credits shall be made to a participant's deferred compensation account, until all distributions shall have been made from the participant's stock unit account, in amounts equal to the cash dividends (or the fair market value of dividends paid in property other than dividends payable in common stock of the Company) which the participant would have received from time to time had he or she been the owner on the record dates for the payment of such dividends of the number of shares of the Company's common stock equal to the number of units in his or her stock unit account on those dates. Section 6. Stock Dividend Credits. Additional credits shall be made to a participant's stock unit account, until all distributions shall have been made from the participant's stock unit account, of a number of units equal to the number of shares of the Company's common stock, rounded to the nearest one-hundredth share, which the participant would have received from time to time as stock dividends had he or she been the owner on the record dates for the payments of such stock dividends of the number of units of the Company's common stock equal to the number of units credited to his or her stock unit account on those dates. Section 7. Adjustments in the Event of Certain Transactions. 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 number of units then credited to a partipant's stock unit account shall be appropriately adjusted on the same basis. 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 terminate the Plan pursuant to Section 11. Section 8. Distribution of Stock and Cash After Participant's Deferral Termination Date. When a participant's deferral termination date shall occur, the Company shall become obligated to make the distributions prescribed in the following paragraphs (a) and (b). 2 (a) The Company shall distribute to the participant the number of shares of the common stock of the Company which shall equal the total number of units accumulated in his or her stock unit account as of the close of the fiscal year in which the participant's deferral termination date occurs. Such distribution of stock shall be made in ten annual installments, unless, at least six months prior to his or her deferral termination date, the participant shall have elected, by notice in writing filed with the Secretary of the Company, to have such distribution made in five annual installments. In either such case, the installments shall be of as nearly equal number of shares as practicable, adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of units remaining in the participant's stock unit account. The first such installment shall be distributed within 60 days after the close of the fiscal year in which the participant's deferral termination date occurs. The remaining installments shall be distributed at annual intervals thereafter. Anything herein to the contrary notwithstanding, the Company shall have the option, if its Board of Directors shall by resolution so determine, in lieu of making distribution in ten or five annual installments as set forth above, with the participant's consent, to distribute stock or any remaining installments thereof in a single distribution at any time following the close of the fiscal year in which the participant's deferral termination date occurs. Distribution of stock made hereunder may be made from shares of common stock held in the treasury and/or from shares of authorized but previously unissued shares of common stock. (b) The Company shall distribute to the participant sums in cash equal to the balance credited to his or her deferred compensation account as of the close of the fiscal year in which his or her deferral termination date occurs plus such additional amounts as shall be credited thereto from time to time thereafter pursuant to Section 5. The cash distribution shall be made on the same dates as the annual distributions made pursuant to paragraph (a) above, and each cash distribution shall consist of the entire balance credited to the participant's deferred compensation account at the time of the annual distribution. If a participant's deferral termination date shall occur by reason of his or her death or if he or she shall die after his or her deferral termination date but prior to receipt of all distributions of stock and cash provided for in this Section 8, all stock and cash remaining distributable hereunder shall be distributed to such beneficiary as the participant shall have designated in writing and filed with the Secretary of the Company or, in the absence of designation, to the participant's personal representative. Such distributions shall be made in the same manner and at the same intervals as they would have been made to the participant had he or she continued to live. Section 9. Participant's Rights Unsecured. The right of any participant to receive distributions under Section 8 shall be an unsecured claim against the general assets of the Company. The Company may but shall not be obligated to acquire shares of its outstanding common stock from time to time in anticipation of its obligation to make such distributions, but no participant shall have any rights in or against any shares of stock so acquired by the Company. All such stock shall constitute general assets of the Company and may be disposed of by the Company at such time and for such purposes as it may deem appropriate. 3 10. Change in Control 10.1 Impact of Event In the event of a "Change in Control" as defined in Section 10.2, the Plan shall terminate and full distribution shall be made from all participants' deferred compensation accounts and stock unit accounts effective upon the Change of Control. 10.2 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 4 (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. Section 11. Amendment and Termination of the Plan. The Board of Directors of the Company may amend or terminate the Plan at any time and from time to time, provided, however, that no amendment adversely affecting credits already made to any participant's deferred compensation account or stock unit account may be made without the consent of that participant or, if that participant has died, that participant's beneficiary. Upon termination of the Plan, the Company shall be obligated to distribute to the participant either of the following as the Board of Directors of the Company, in its sole discretion, may determine: (i) the number of shares of the common stock of the Company which shall equal the total number of units accumulated in the participant's stock unit account as of the effective date of termination of the Plan or (ii) a sum in cash equal to the balance credited to the participant's deferred compensation account as of the effective date of termination of the Plan. 5 EX-10.36 6 0006.txt Exhibit 10.36 THERMO TERRATECH INC. EQUITY INCENTIVE PLAN As amended and restated effective as of 9/10/99 1. Purpose The purpose of this Equity Incentive Plan (the "Plan") is to secure for Thermo TerraTech 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"). 1 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 1,750,000 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 200,000 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. 2 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. 3 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. 4 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 5 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. 6 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 7 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. 8 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. 9 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. 10 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. 11 EX-10.37 7 0007.txt Exhibit 10.37 THERMO TERRATECH INC. DIRECTORS STOCK OPTION PLAN As amended and restated effective as of 9/9/99 1. Purpose The purpose of this Directors Stock Option Plan (the "Plan") of Thermo TerraTech Inc. (the "Company") is to encourage ownership in the Company by outside directors of the Company whose services are considered essential to the Company's growth and progress and to provide them with a further incentive to become directors and to continue as directors of the Company. The Plan is intended to be a nonstatutory stock option plan. 2. Administration The Board of Directors, or a Committee (the "Committee") consisting of one or more directors of the Company appointed by the Board of Directors, shall supervise and administer the Plan. Grants of stock options under the Plan and the amount and nature of the options to be granted shall be automatic in accordance with Section 5. However, all questions of interpretation of the Plan or of any stock options granted under it shall be determined by the Board of Directors or the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. 3. Participation in the Plan Directors of the Company who are not employees of the Company or any subsidiary or parent of the Company shall be eligible to participate in the Plan. Directors who receive grants of stock options in accordance with this Plan are sometimes referred to herein as "Optionees." 4. Stock Subject to the Plan The maximum number of shares that may be issued under the Plan shall be 75,000 shares of the Company's Common Stock (the "Common Stock"), subject to adjustment as provided in Section 9. Shares to be issued upon the exercise of options granted under the Plan may be either authorized but unissued shares or shares held by the Company in its treasury. 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. 1 5. Terms and Conditions A. Annual Stock Option Grants Each Director of the Company who meets the requirements of Section 3 and who is holding office immediately following the Annual Meeting of Stockholders commencing with the Annual Meeting of Stockholders held in calendar year 1995, shall be granted an option to purchase 1,000 shares of Common Stock at the close of business on the date of such Annual Meeting. B. General Terms and Conditions Applicable to All Grants. 1. Options shall be immediately exercisable at any time from and after the grant date and prior to the date which is the earliest of: (a) three years after the grant date for options granted under Section 5(A), (b) two years after the Optionee ceases to serve as a director of the Company, Thermo Electron or any subsidiary of Thermo Electron (one year in the event the Optionee ceases to meet the requirements of this Subsection by reason of his or her death), or (c) the date of dissolution or liquidation of the Company. 2. The exercise price at which Options are granted hereunder shall be the average of the closing prices reported by the national securities exchange on which the Common Stock is principally traded for the five trading days immediately preceding and including the date the option is granted or, if such security is not traded on an exchange, the average last reported sale price for the five-day period on the NASDAQ National Market List, or the average of the closing bid prices for the five-day period last quoted by an established quotation service for over-the-counter securities, or if none of the above shall apply, the last price paid for shares of the Common Stock by independent investors in a private placement. 3. All options shall be evidenced by a written agreement substantially in such form as shall be approved by the Board of Directors or Committee, containing terms and conditions consistent with the provisions of this Plan. 6. Exercise of Options A. Exercise/Consideration 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 Common Stock of the Company (the shares so tendered referred to herein as "Tendered Shares") with a then current market value equal to the exercise price of the shares to be purchased; provided, however, that such Tendered Shares shall have been acquired 2 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 or the Director 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. B. Tax Withholding The Company shall have the right to deduct from payments of any kind otherwise due to the 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. Subject to the prior approval of the Company, which may be withheld by the Company in its sole discretion, the Optionee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company to withhold shares of Common Stock otherwise issuable pursuant to the exercise of an option or (ii) by delivering to the Company shares of Common Stock already owned by the Optionee. The shares so delivered or withheld shall have a fair market value equal to such withholding obligation. The fair market value of the shares used to satisfy such withholding obligation shall be determined by the Company as of the date that the amount of tax to be withheld is to be determined. Notwithstanding the foregoing, no election to use shares for the payment of withholding taxes shall be effective unless made in compliance with any applicable requirements of Rule 16b-3. 7. 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 an Optionee's lifetime an Option 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. 8. Limitation of Rights to Continue as a Director Neither the Plan, nor the quantity of shares subject to options granted under the Plan, nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a Director for any period of time, or at any particular rate of compensation. 3 9. 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 Options then outstanding or subsequently granted, any exercise prices relating to Options and any other provisions of Options 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 Options to avoid distortion in the operation of the Plan. 10. 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 or the written agreement evidencing options granted hereunder. 11. 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 permit the exercise in full of all options granted under this Plan and shall pay all other fees and expenses necessarily incurred by the Company in connection therewith. 12. Securities Laws Restrictions A. Investment Representations. The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. B. Compliance with Securities Laws. Each option shall be subject to the requirement that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such option upon any securities exchange 4 or under any state or federal law, or the consent or approval of any governmental or regulatory body, or that the disclosure of non-public information or the satisfaction of any other condition is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification, or to satisfy such condition. 13. Change in Control A. Impact of Event In the event of a "Change in Control" as defined in Section 13(A), the following provisions shall apply, unless the agreement evidencing the Award otherwise provides (by specific explicit reference to Section 13(B) below). If a Change in Control occurs while any Options are outstanding, then, effective upon the Change in Control, each outstanding Option 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. B. 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 5 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. 14. Amendment of the Plan The provisions of Sections 3 and 5 of the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, or the rules thereunder. Subject to the foregoing, the Board of Directors may at any time, and from time to time, modify or amend the Plan in any respect, except that if at any time the approval of the Stockholders of the Company is required as to such modification or amendment under Rule 16b-3, the Board of Directors may not effect such modification or amendment without such approval. The termination or any modification or amendment of the Plan shall not, without the consent of an Optionee, affect his or her rights under an option previously granted to him or her. With the consent of the Optionees affected, the Board of Directors may amend outstanding option agreements in a manner not inconsistent with the Plan. The Board of Directors shall have the right to amend 6 or modify the terms and provisions of the Plan and of any outstanding option to the extent necessary to ensure the qualification of the Plan under Rule 16b-3. 15. Effective Date of the Plan The Plan shall become effective when adopted by the Board of Directors, but no option granted under the Plan shall become exercisable until six months after the Plan is approved by the Stockholders of the Company. 16. Notice Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the Secretary of the Company and shall become effective when it is received. 17. Governing Law The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Delaware. 7 EX-10.38 8 0008.txt Exhibit 10.38 THERMO TERRATECH INC. THERMORETEC CORPORATION. NONQUALIFIED STOCK OPTION PLAN As amended and restated effective as of 9/10/99 1. Purpose This Nonqualified Stock Option Plan (the "Plan") is intended to encourage ownership of Common Stock (the "Common Stock"), of ThermoRetec Corporation ("Subsidiary"), a subsidiary of Thermo TerraTech Inc. (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 1 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 2 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. 3 (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 Optioneet 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 4 (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. 5 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. 6 EX-10.46 9 0009.txt Exhibit 10.46 RETENTION AGREEMENT This Retention Agreement (the "Agreement"), dated as of November 17, 1999, is entered into between Thermo Electron Corporation, a Delaware corporation with its principal place of business at 81 Wyman Street, Waltham, Massachusetts 02454 (the "Company"), and John P. Appleton residing at P.O. Box 2034, 75 Marina Heights, New Castle, New Hampshire 03854. The Company has announced a reorganization plan which includes the potential sale of certain businesses ("Businesses") of Thermo TerraTech Inc., a Delaware corporation ("Thermo TerraTech"), which is a majority-owned subsidiary of the Company. The Company recognizes that your past contributions to the Company and to Thermo TerraTech have contributed to the success of both companies and that your continued involvement will be necessary in order to, among other things, facilitate the sale of the Businesses and to assure a smooth transition for potential buyers. The Company desires to retain your services through March 31, 2002 and in promoting and expediting the sale of the Businesses and that you are desirous of being employed by the Company through March 31, 2002 and of assisting the Company in facilitating the sale of the Businesses and performing other corporate duties reasonably consistent with your previous duties with the Company and Thermo TerraTech as they may be reasonably assigned to you from time to time. In consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties agree as follows: 1. Term of Retention. The Company hereby agrees to retain you, and you hereby agree to continue your employment with the Company, upon the terms set forth in this Agreement, for the period commencing on the date hereof, and continuing until the earlier of March 31, 2002 or termination in accordance with the provisions of Section 4 (such period, the "Retention Period"). For purposes hereof, the last day of the Retention Period shall be referred to herein as the "Retention Termination Date." 2. Capacity. During the term of the Agreement, you shall perform your normal managerial work duties and, in addition shall exert your best efforts to promote and expedite the sale of the Businesses and the closing of such sales. You shall be based at your home office in New Castle, New Hampshire, and shall report to the Chief Operating Officer, Energy and Environment or such officer or officers of the Company designated by such Chief Operating Officer. In addition, you will be available to travel from time to time as your duties hereunder reasonably require, consistent with your past business travel on behalf of the Company and Thermo TerraTech. In no event shall you be required to relocate your residence. You shall be subject to the supervision of, and shall have such authority as is reasonably delegated to you by, the Chief Operating Officer, Energy and Environment or his designee. You hereby accept the terms of such retention and agree to undertake the duties and responsibilities inherent in such position and such other duties and responsibilities as the Chief Operating Officer, Energy and Environment or his designee shall from time to time reasonably assign to you. Further, commencing April 1, 2000 through the end of the Retention Period, your employment status will be reduced from full-time to part-time. It is anticipated that in your capacity as a part-time employee, you will work, on average, approximately 20 hours per week, although the parties expect that the nature of your duties will require you to work substantially more than 20 hours during certain weeks and substantially less than 20 hours during other weeks. You agree to abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein that may be adopted from time to time by the Company. You may engage in outside consulting and other outside business activities with third parties or serve in any part-time industry, trade, profession, governmental, or academic position, provided that such activities and position do not interfere with your duties hereunder. 3. Compensation and Benefits. 3.1 Base Salary. The Company shall pay you, at such times as the Company pays its employees in general, an annualized base salary at the following rates: a. From April 1, 1999 through March 31, 2000 - $225,000 b. From April 1, 2000 through March 31, 2001 - $112,500 c. From April 1, 2001 through March 31, 2002 - $112,500 3.2 Bonus. a. Reference Bonus. For the period from April 1, 1999 to March 31, 2000 ("Fiscal 2000"), you shall be entitled to participate in the Company's bonus plan with a reference bonus of $105,000. You understand that you may receive a bonus of $0 to $210,000 under such plan depending upon the extent of the achievement of certain individual performance goals and business objectives. The goals and business objectives for Fiscal 2000 are set forth on Exhibit A hereto. b. Additional Bonus. For the period beginning April 1, 2000 and ending on the Retention Termination Date, you shall be entitled to an additional bonus, in an amount to be determined by the Company, for the completion of specific tasks assigned to you by the Company's Chief Operating Officer, Energy and Environment, including efforts in completing the sale of the Businesses. If such tasks are completed, you shall be entitled to a minimum bonus of $100,000 and a maximum bonus of $300,000, the actual bonus to be dependent upon the degree to which you are able to complete the tasks assigned to you. This bonus, if due and payable, will be paid in two annual installments, with the first installment, in an amount equal to at least $50,000, to be paid on April 1, 2001. This additional bonus will be payable to you at the end of the Retention Period. You agree to use your best efforts, business judgment and skill in completing such tasks assigned to you. 3.3 Fringe Benefits. You shall be entitled to participate in all benefit programs that the Company establishes and makes available to its employees from time to time to the extent that your position, tenure, salary, age, part-time status, health and other qualifications make you eligible to participate, which programs that exist as of the date of this Agreement are set forth in Exhibit B, it being understood that these programs may be subject to change from time to time; provided, however, as of April 1, 2000, you will not continue to earn vacation or sick leave. You shall, however, be entitled to continue to participate in the executive car allowance program and the executive medical reimbursement program during the Retention Period. 3.4 Reimbursement of Expenses. The Company shall promptly reimburse you for all reasonable travel, entertainment and other expenses incurred or paid by you in connection with, or related to, the performance of your duties, responsibilities or services under this Agreement, upon presentation by you of documentation, expense statements, vouchers and/or such other supporting information as the Company may request; provided, however, that the amount available for such travel, entertainment and other expenses may reasonably be fixed in advance by the Chief Operating Officer, Energy and Environment. 4. Termination. This Agreement shall terminate upon the occurrence of any of the following: 4.1 At the election of the Company without Cause (as defined below), at any time, immediately upon written notice to you; 4.2 At the election of the Company, for Cause, immediately upon written notice by the Company to you. For the purposes of this Section 4, "Cause" for termination shall mean your (a) conviction of a felony, or a misdemeanor involving material fraud or material dishonesty, (b) material fraud or material dishonesty in the course of your employment with the Company, (c) wilful misconduct that is materially injurious to the Company or its subsidiaries and affiliates and (d) gross neglect of your duties and responsibilities under the terms of this Agreement. 4.3 Upon your death or disability. As used in this Agreement, the term "disability" shall mean your inability, due to a physical or mental disability, for a period of 90 days, whether or not consecutive, during any 360-day period to perform the services contemplated under this Agreement. A determination of disability shall be made by a physician satisfactory to both you and the Company; provided that if you and the Company do not agree on a physician, you and the Company shall each select a physician and these two together shall select a third physician, whose determination as to disability shall be binding on all parties; or 4.4 At your election, upon not less than 30 days prior written notice of termination. 5. Effect of Termination. 5.1 Termination by the Company or at your Election. In the event this Agreement is terminated by the Company pursuant to Section 4.1 or Section 4.2 or at your election pursuant to Section 4.4, the Company shall pay to you the compensation and benefits which would otherwise be payable to you through the date of termination; provided, however, that if the Agreement is terminated by the Company pursuant to Section 4.1, the Company shall also pay you a severance payment of an amount equal to (i) the balance of the base salary amounts otherwise payable to you for the period from the date of termination to March 31, 2002 as set forth in Section 3.1 plus (ii) the difference between $100,000 and the amount of additional bonus, if any, previously paid to you pursuant to Section 3.2(b) prior to the date of termination plus (iii) if the termination occurs prior to March 31, 2000, the bonus amount due and payable to you pursuant to Section 3.2(a), if any. 5.2 Termination for Death or Disability. If this Agreement is terminated as a result of your death or because of disability pursuant to Section 4.3, the Company shall pay to your estate or to you, as the case may be, the compensation and benefits which would otherwise be payable to you through the date of termination because of death or disability. 5.3 Survival. Notwithstanding anything herein to the contrary, Sections 8 through 17 of this Agreement shall survive the termination of this Agreement. 6. Options. During the Retention Period you shall be entitled to retain your stock options in the Company and any of its subsidiaries, subject to the terms and conditions of such options. On the Retention Termination Date, these stock options will no longer vest and no further lapsing of the Company's and its subsidiaries' repurchase rights will occur. You will then have until the earlier of (i) either 90 days or two years after the Retention Termination Date, depending on the term of the option as specified by the Company's Stock Option Manager or (ii) the expiration of the exercise period, to exercise your vested options; provided, however, notwithstanding the foregoing, you will have until the expiration of the exercise period of your vested options in each of the Company, Thermo Instrument Systems Inc., and Thermo TerraTech to exercise such vested options. If you do not exercise your vested options by the specified deadline, your options will be canceled, and you will have no further rights with respect to your options. 7. Resignation. You hereby agree that on April 1, 2000 you will resign, effective as of such date, all of your positions as an officer of the Company and as an officer and director of all of the Company's subsidiaries and affiliates other than your positions as (i) director of Thermo TerraTech and (ii) director of Green Sunrise Group, Inc. The Company agrees that effective April 1, 2000, it shall use its best efforts to cause you to become, and to maintain you as, non-executive chairman of the board of directors of Thermo TerraTech if Thermo TerraTech is a public company on such date. The Company's obligation to use its best efforts to maintain you as non-executive chairman shall cease when Thermo TerraTech is no longer a public company. Further, you hereby agree that on the Retention Termination Date you will resign, effective as of such date, your position as director and non-executive chairman of the board of directors of Thermo TerraTech and as director of Green Sunrise Group, Inc. 8. Cooperation: You agree to reasonably cooperate with the Company at the Company's sole cost and expense with respect to all matters arising during or related to your employment, including but not limited to cooperation in connection with any governmental investigation, litigation or regulatory or other proceeding which may have arisen or which may arise following the signing of this Agreement. 9. Waiver of Jury Trial: Each of the parties hereby expressly, knowingly and voluntarily waives all benefit and advantage of any right to a trial by jury, and each agrees that he or it will not at any time insist upon, or plead or in any manner whatsoever claim or take the benefit or advantage of, a trial by jury in any action arising in connection with this Agreement. 10. Restriction on Purchase or Sale of Common Stock: You understand that you will continue to be a "Reporting Person" for purposes of Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations promulgated thereunder, for the period ending on the date which is the earlier of (i) the date that the shares of Thermo TerraTech are no longer registered under Section 12 of the Exchange Act and (ii) six months after the Retention Termination Date, and that during that period you are required to preclear transactions in the Company's and its affiliates' securities with the Company's Stock Transaction Coordinator, Ms. Pauline I. Northern. The Company agrees to continue to provide you with notices, reminders and other communications and assistance provided by the Company to its officers to assist them in their compliance with Section 16 of the Exchange Act. You are also urged to contact the Corporate Secretary of the Company, Ms. Sandra L. Lambert, should you have any questions regarding compliance with the insider trading regulations under the federal securities laws. 11. Loans. You have an outstanding loan balance of $61,867.50 under the ThermoRetec Corporation Stock Holding Assistance Plan and an outstanding loan balance of $137,607.00 under the Thermo TerraTech Stock Holding Assistance Plan. You hereby agree that promptly upon consummation of the proposed merger of Thermo Retec with the Company, you will repay in full the entire outstanding loan balance of $61,867.50 under the ThermoRetec Stock Holding Assistance Plan. Further, you agree that on the Retention Termination Date, you will repay the entire outstanding loan balance under the Thermo TerraTech Stock Holding Assistance Plan by selling back to the Company all or part, as necessary, of the 20,000 shares of Thermo TerraTech common stock you acquired under the Thermo TerraTech Stock Holding Assistance Plan or, if applicable, the shares of Company common stock into which such shares may have been converted (the "Shares") at their then current market price. The amount to be paid to you for the purchase of these Shares will be applied to your outstanding loan balance reducing the amount of the outstanding loan balance. If after such Shares are sold, there remains an outstanding loan balance, then such remaining loan balance will be forgiven and will be deemed to be additional gross wages, and as such, will be reported as wages on your W-2 statement. Also, you agree that until such loan is paid off, you will provide security to the Company, as may reasonably be requested, to secure your obligations under such outstanding loan, including pledging such Shares to the Company. 12. Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed effective upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party at the address shown above, or at such other address or addresses as either party shall designate to the other in accordance with this Section 12. 13. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter of this Agreement; provided, however, nothing contained herein is intended to or shall supersede or modify your Executive Retention Agreement with the Company. 14. Amendment. This Agreement may be amended or modified only by a written instrument executed by all of the parties hereto. 15. Governing Law. This Agreement and all issues relating to this Agreement and the transactions contemplated hereby shall be governed by, enforced under and construed in accordance with the laws of the Commonwealth of Massachusetts without giving effect to any choice or conflict of law provision or rule that would cause the application of laws of any jurisdiction other than those of the Commonwealth of Massachusetts. 16. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of all of the parties hereto and their respective successors and assigns, including any corporation with which, or into which, the Company may be merged or which may succeed to its respective assets or business; provided, however, that your obligations are personal and shall not be assigned by you. 17. Miscellaneous. 17.1 No delay or omission by the Company or you in exercising any right under this Agreement shall operate as a waiver of that or any other right. A waiver or consent given by the Company or you on any one occasion shall be effective only in that instance and shall not be construed as a bar or waiver of any right on any other occasion. 17.2 The captions of the sections of this Agreement are for convenience of reference only and in no way define, limit or affect the scope or substance of any section of this Agreement. 17.3 In case any provision of this Agreement shall be invalid, illegal or otherwise unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above. THERMO ELECTRON CORPORATION By: ----------------------------------- Title: Chief Operating Officer, Energy and Environment ---------------------------------- John P. Appleton Exhibit A Goals for fiscal 2000: - - As soon as possible but no later than December 31, 1999 identify a qualified replacement - - Meet 1999 calendar year budget (JPA CY 99) dated January 7, 1999 (before any agreed upon restructuring charges or reserves). - - Prepare a career development and succession plan for TerraTech and its subsidiaries by December 31, 1999. - - Provide assistance, as requested, in order to facilitate the roll-up of the TerraTech subsidiaries into Thermo Electron by February 28, 2000. - - Assist in the evaluation and potential sale of some or all of the TerraTech business units. - - Perform such other duties as may be assigned to you in accordance with the Agreement by the Chief Operating Officer, Energy and Environment of the Company. Exhibit B 1. Health Plans (a) Prudential Comprehensive Medical Plan (b) Tufts Health Plan Point of Service (c) Tufts Health Plan (HMO) (d) Harvard Pilgrim Health Care (HMO) 2. Dental Plans (a) Prudential Dental Basic (b) Prudential Dental Plus 3. Life Insurance and Accidental Death and Dismemberment (AD&D) (On a reduced basis based on your hours worked and upon the attainment of age 65) 4. Business Travel Accident Insurance 5. Thermo Electron Choice Plan 6. Employee Stock Purchase Plan All as more fully described in the Thermo Electron Corporation Corporate Office Orientation Booklet. EX-10.47 10 0010.txt Exhibit 10.47 Executive Retention Agreement THIS AGREEMENT by and between THERMO ELECTRON CORPORATION, a Delaware corporation (the "Company"), and Emil C. Herkert (the "Executive") is made as of December 3, 1998 (the "Effective Date"). WHEREAS, the Company recognizes that, as is the case with many publicly-held corporations, the possibility of a change in control of the Company exists and that such possibility, and the uncertainty and questions which it may raise among key personnel, may result in the departure or distraction of key personnel to the detriment of the Company and its stockholders; WHEREAS, the Board of Directors of the Company (the "Board") has determined that appropriate steps should be taken to reinforce and encourage the continued employment and dedication of the Company's key personnel without distraction from the possibility of a change in control of the Company and related events and circumstances; and NOW, THEREFORE, as an inducement for and in consideration of the Executive remaining in its employ, the Company agrees that the Executive shall receive the severance benefits set forth in this Agreement in the event the Executive's employment with the Company is terminated under the circumstances described below subsequent to a Change in Control (as defined in Section 1.1). 1. Key Definitions. As used herein, the following terms shall have the following respective meanings: 1.1 "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 Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership of any capital stock of the Company 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 the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company 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 the Company, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation 1 controlled by the Company, or (iii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (c) of this Section 1.1; or (b) such time as the Continuing Directors (as defined below) do not constitute a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term "Continuing Director" means at any date a member of the Board (i) who was a member of the Board on the date of the execution of this Agreement 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 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 Board; or (c) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company 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 Company Common Stock and Outstanding Company 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 the Company or substantially all of the Company'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 Company Common Stock and Outstanding Company Voting Securities, respectively; and (ii) no Person (excluding the Acquiring Corporation or any employee benefit plan (or related trust) maintained or sponsored by the Company 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 the Company of a complete liquidation or dissolution of the Company. 1.2 "Change in Control Date" means the first date during the Term (as defined in Section 2) on which a Change in Control occurs. Anything in this 2 Agreement to the contrary notwithstanding, if (a) a Change in Control occurs, (b) the Executive's employment with the Company is terminated prior to the date on which the Change in Control occurs, and (c) it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Agreement the "Change in Control Date" shall mean the date immediately prior to the date of such termination of employment. 1.3 "Cause" means the Executive's willful engagement in illegal conduct or gross misconduct after the Change in Control Date which is materially and demonstrably injurious to the Company. For purposes of this Section 1.3, no act or failure to act by the Executive shall be considered "willful" unless it is done, or omitted to be done, in bad faith and without reasonable belief that the Executive's action or omission was in the best interests of the Company. 1.4 "Good Reason" means the occurrence, without the Executive's written consent, of any of the events or circumstances set forth in clauses (a) through (g) below. Notwithstanding the occurrence of any such event or circumstance, such occurrence shall not be deemed to constitute Good Reason if, prior to the Date of Termination specified in the Notice of Termination (each as defined in Section 3.2(a)) given by the Executive in respect thereof, such event or circumstance has been fully corrected and the Executive has been reasonably compensated for any losses or damages resulting therefrom (provided that such right of correction by the Company shall only apply to the first Notice of Termination for Good Reason given by the Executive). (a) the assignment to the Executive of duties inconsistent in any material respect with the Executive's position (including status, offices, titles and reporting requirements), authority or responsibilities in effect immediately prior to the earliest to occur of (i) the Change in Control Date, (ii) the date of the execution by the Company of the initial written agreement or instrument providing for the Change in Control or (iii) the date of the adoption by the Board of Directors of a resolution providing for the Change in Control (with the earliest to occur of such dates referred to herein as the "Measurement Date") or a material diminution in such position, authority or responsibilities; (b) a reduction in the Executive's annual base salary as in effect on the Measurement Date or as the same was or may be increased thereafter from time to time; (c) the failure by the Company to (i) continue in effect any material compensation or benefit plan or program (including without limitation any life insurance, medical, health and accident or disability plan and any vacation or automobile program or policy) (a "Benefit Plan") in which the Executive participates or which is applicable to the Executive immediately prior to the Measurement Date, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or 3 program, (ii) continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than the basis existing immediately prior to the Measurement Date (iii) award cash bonuses to the Executive in amounts and in a manner substantially consistent with past practice in light of the Company's financial performance or (iv) continue to provide any material fringe benefit enjoyed by Executive immediately prior to the Measurement Date; (d) a change by the Company in the location at which the Executive performs his principal duties for the Company to a new location that is both (i) outside a radius of 50 miles from the Executive's principal residence immediately prior to the Measurement Date and (ii) more than 30 miles from the location at which the Executive performed his principal duties for the Company immediately prior to the Measurement Date; or a requirement by the Company that the Executive travel on Company business to a substantially greater extent than required immediately prior to the Measurement Date; (e) the failure of the Company to obtain the agreement from any successor to the Company to assume and agree to perform this Agreement, as required by Section 6.1; (f) a purported termination of the Executive's employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3.2(a); or (g) any failure of the Company to pay or provide to the Executive any portion of the Executive's compensation or benefits due under any Benefit Plan within seven days of the date such compensation or benefits are due, or any material breach by the Company of this Agreement or any employment agreement with the Executive. The Executive's right to terminate his employment for Good Reason shall not be affected by his incapacity due to physical or mental illness. 1.5 "Disability" means the Executive's absence from the full-time performance of the Executive's duties with the Company for 180 consecutive calendar days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. 2. Term of Agreement. This Agreement, and all rights and obligations of the parties hereunder, shall take effect upon the Effective Date and shall expire upon the first to occur of (a) the expiration of the Term (as defined below) if a Change in Control has not occurred during the Term, (b) the date 18 months after the Change in Control Date, if the Executive is still employed by the Company as of such later date, or (c) the fulfillment by the Company of all of its obligations under Sections 4 and 5.2 if the Executive's employment with the Company terminates within 18 months following the Change in Control Date. 4 "Term" shall mean the period commencing as of the Effective Date and continuing in effect through December 31, 2003; provided, however, that commencing on January 1, 2003 and each January 1, thereafter, the Term shall be automatically extended for one additional year unless, not later than 90 days prior to the scheduled expiration of the Term (or any extension thereof), the Company shall have given the Executive written notice that the Term will not be extended. 3. Employment Status; Termination Following Change in Control. 3.1 Not an Employment Contract. The Executive acknowledges that this Agreement does not constitute a contract of employment or impose on the Company any obligation to retain the Executive as an employee and that this Agreement does not prevent the Executive from terminating employment at any time. If the Executive's employment with the Company terminates for any reason and subsequently a Change in Control shall occur, the Executive shall not be entitled to any benefits hereunder except as otherwise provided pursuant to Section 1.2. 3.2 Termination of Employment. (a) If the Change in Control Date occurs during the Term, any termination of the Executive's employment by the Company or by the Executive within 18 months following the Change in Control Date (other than due to the death of the Executive) shall be communicated by a written notice to the other party hereto (the "Notice of Termination"), given in accordance with Section 7. Any Notice of Termination shall: (i) indicate the specific termination provision (if any) of this Agreement relied upon by the party giving such notice, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) specify the Date of Termination (as defined below). The effective date of an employment termination (the "Date of Termination") shall be the close of business on the date specified in the Notice of Termination (which date may not be less than 15 days or more than 120 days after the date of delivery of such Notice of Termination), in the case of a termination other than one due to the Executive's death, or the date of the Executive's death, as the case may be. In the event the Company fails to satisfy the requirements of Section 3.2(a) regarding a Notice of Termination, the purported termination of the Executive's employment pursuant to such Notice of Termination shall not be effective for purposes of this Agreement. (b) The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting any such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. 5 (c) Any Notice of Termination for Cause given by the Company must be given within 90 days of the occurrence of the event(s) or circumstance(s) which constitute(s) Cause. Prior to any Notice of Termination for Cause being given (and prior to any termination for Cause being effective), the Executive shall be entitled to a hearing before the Board of Directors of the Company at which he may, at his election, be represented by counsel and at which he shall have a reasonable opportunity to be heard. Such hearing shall be held on not less than 15 days prior written notice to the Executive stating the Board of Directors' intention to terminate the Executive for Cause and stating in detail the particular event(s) or circumstance(s) which the Board of Directors believes constitutes Cause for termination. (d) Any Notice of Termination for Good Reason given by the Executive must be given within 90 days of the occurrence of the event(s) or circumstance(s) which constitute(s) Good Reason. 4. Benefits to Executive. 4.1 Stock Acceleration. If the Change in Control Date occurs during the Term, then, effective upon the Change in Control Date, (a) each outstanding option to purchase shares of Common Stock of the Company held by the Executive shall become immediately exercisable in full and will no longer be subject to a right of repurchase by the Company and (b) each outstanding restricted stock award shall be deemed to be fully vested and will no longer be subject to a right of repurchase by the Company. 4.2 Compensation. If the Change in Control Date occurs during the Term and the Executive's employment with the Company terminates within 18 months following the Change in Control Date, the Executive shall be entitled to the following benefits: (a) Termination Without Cause or for Good Reason. If the Executive's employment with the Company is terminated by the Company (other than for Cause, Disability or Death) or by the Executive for Good Reason within 18 months following the Change in Control Date, then the Executive shall be entitled to the following benefits: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: (1) the sum of (A) the Executive's base salary through the Date of Termination, (B) the product of (x) the annual bonus paid or payable (including any bonus or portion thereof which has been earned but deferred) for the most recently completed fiscal year and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (C) the amount of any compensation previously deferred by the Executive (together with any accrued interest or 6 earnings thereon) and any accrued vacation pay, in each case to the extent not previously paid (the sum of the amounts described in clauses (A), (B), and (C) shall be hereinafter referred to as the "Accrued Obligations"); and (2) the amount equal to the sum of (x) the Executive's highest annual base salary in any twelve-month period (on a rolling basis) during the five-year period prior to the Change in Control Date and (y) the Executive's highest annual bonus in any twelve-month period (on a rolling basis) during the five-year period prior to the Change in Control Date. (ii) for one year after the Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue to provide benefits to the Executive and the Executive's family at least equal to those which would have been provided to them if the Executive's employment had not been terminated, in accordance with the applicable Benefit Plans in effect on the Measurement Date or, if more favorable to the Executive and his family, in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies; provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive a particular type of benefits (e.g., health insurance benefits) from such employer on terms at least as favorable to the Executive and his family as those being provided by the Company, then the Company shall no longer be required to provide those particular benefits to the Executive and his family; (iii) to the extent not previously paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive following the Executive's termination of employment under any plan, program, policy, practice, contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"); and (iv) for purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits to which the Executive is entitled, the Executive shall be considered to have remained employed by the Company until one year after the Date of Termination. (b) Resignation without Good Reason; Termination for Death or Disability. If the Executive voluntarily terminates his employment with the Company within 18 months following the Change in Control Date, excluding a termination for Good Reason, or if the Executive's employment with the Company is terminated by reason of the Executive's death or Disability within 18 months following the Change in Control Date, then the Company shall (i) pay the Executive (or his estate, if applicable), in a lump sum in cash within 30 days after the Date of Termination, the Accrued Obligations and (ii) timely pay or provide to the Executive the Other Benefits. 7 (c) Termination for Cause. If the Company terminates the Executive's employment with the Company for Cause within 18 months following the Change in Control Date, then the Company shall (i) pay the Executive, in a lump sum in cash within 30 days after the Date of Termination, the sum of (A) the Executive's annual base salary through the Date of Termination and (B) the amount of any compensation previously deferred by the Executive, in each case to the extent not previously paid, and (ii) timely pay or provide to the Executive the Other Benefits. 4.3 Taxes. (a) In the event that the Company undergoes a "Change in Ownership or Control" (as defined below), and thereafter, the Executive becomes eligible to receive "Contingent Compensation Payments" (as defined below) the Company shall, as soon as administratively feasible after the Executive becomes so eligible determine and notify the Executive (with reasonable detail regarding the basis for its determinations) (i) which of the payments or benefits due to the Executive following such Change in Ownership or Control constitute Contingent Compensation Payments, (ii) the amount, if any, of the excise tax (the "Excise Tax") payable pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), by the Executive with respect to such Contingent Compensation Payment and (iii) the amount of the "Gross-Up Payment" (as defined below) due to the Executive with respect to such Contingent Compensation Payment. Within 30 days after delivery of such notice to the Executive, the Executive shall deliver a response to the Company (the "Executive Response") stating either (A) that he agrees with the Company's determination pursuant to the preceding sentence or (B) that he disagrees with such determination, in which case he shall indicate which payment and/or benefits should be characterized as a Contingent Compensation Payment, the amount of the Excise Tax with respect to such Contingent Compensation Payment and the amount of the Gross-Up Payment due to the Executive with respect to such Contingent Compensation Payment. If the Executive states in the Executive Response that he agrees with the Company's determination, the Company shall make the Gross-Up Payment to the Executive within three business days following delivery to the Company of the Executive Response. If the Executive states in the Executive Response that he disagrees with the Company's determination, then, for a period of 15 days following delivery of the Executive Response, the Executive and the Company shall use good faith efforts to resolve such dispute. If such dispute is not resolved within such 15-day period, such dispute shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. The Company shall, within three business days following delivery to the Company of the Executive Response, make to the Executive those Gross-Up Payments as to which there is no dispute between the Company and the Executive regarding whether they should be made. The balance of the Gross-Up Payments shall be made within three business days following the resolution of such dispute. The amount of any payments to be made to the Executive following the resolution of such dispute shall be increased by the amount of the accrued interest thereon computed at the prime rate announced from time to time by The Wall Street Journal compounded monthly from the date that such payments originally were due. In the event that 8 the Executive fails to deliver an Executive Response on or before the required date, the Company's initial determination shall be final. (b) For purposes of this Section 4.3, the following terms shall have the following respective meanings: (i) "Change in Ownership or Control" shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code. (ii) "Contingent Compensation Payment" shall mean any payment (or benefit) in the nature of compensation that is made or supplied to a "disqualified individual" (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company. (iii) "Gross-Up Payment" shall mean an amount equal to the sum of (i) the amount of the Excise Tax payable with respect to a Contingent Compensation Payment and (ii) the amount necessary to pay all additional taxes imposed on (or economically borne by) the Executive (including the Excise Taxes, state and federal income taxes and all applicable withholding taxes) attributable to the receipt of such Gross-Up Payment. For purposes of the preceding sentence, all taxes attributable to the receipt of the Gross-Up Payment shall be computed assuming the application of the maximum tax rates provided by law. 4.4 Outplacement Services. In the event the Executive is terminated by the Company (other than for Cause, Disability or Death), or the Executive terminates employment for Good Reason, within 18 months following the Change in Control Date, the Company shall provide outplacement services through one or more outside firms of the Executive's choosing up to an aggregate of $15,000, with such services to extend until the earlier of (i) 12 months following the termination of Executive's employment or (ii) the date the Executive secures full time employment. 4.5 Mitigation. The Executive shall not be required to mitigate the amount of any payment or benefits provided for in this Section 4 by seeking other employment or otherwise. Further, except as provided in Section 4.2(a)(ii), the amount of any payment or benefits provided for in this Section 4 shall not be reduced by any compensation earned by the Executive as a result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company or otherwise. 9 5. Disputes. 5.1 Settlement of Disputes; Arbitration. All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board of Directors of the Company and shall be in writing. Any denial by the Board of Directors of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board of Directors shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim. Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Boston, Massachusetts, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. 5.2 Expenses. The Company agrees to pay as incurred, to the full extent permitted by law, all legal, accounting and other fees and expenses which the Executive may reasonably incur as a result of any claim or contest (regardless of the outcome thereof) by the Company, the Executive or others regarding the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment or benefits pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. 6. Successors. 6.1 Successor to Company. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a breach of this Agreement and shall constitute Good Reason if the Executive elects to terminate employment, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as defined above and any successor to its business or assets as aforesaid which assumes and agrees to perform this Agreement, by operation of law or otherwise. 6.2 Successor to Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amount would still be payable to the Executive or his family hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. 10 7. Notice. All notices, instructions and other communications given hereunder or in connection herewith shall be in writing. Any such notice, instruction or communication shall be sent either (i) by registered or certified mail, return receipt requested, postage prepaid, or (ii) prepaid via a reputable nationwide overnight courier service, in each case addressed to the Company, at 81 Wyman Street, Waltham, Massachusetts and to the Executive at the Executive's principal residence as currently reflected on the Company's records (or to such other address as either the Company or the Executive may have furnished to the other in writing in accordance herewith). Any such notice, instruction or communication shall be deemed to have been delivered five business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or one business day after it is sent via a reputable nationwide overnight courier service. Either party may give any notice, instruction or other communication hereunder using any other means, but no such notice, instruction or other communication shall be deemed to have been duly delivered unless and until it actually is received by the party for whom it is intended. 8. Miscellaneous. 8.1 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 8.2 Injunctive Relief. The Company and the Executive agree that any breach of this Agreement by the Company is likely to cause the Executive substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Executive shall have the right to specific performance and injunctive relief. 8.3 Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the Commonwealth of Massachusetts, without regard to conflicts of law principles. 8.4 Waivers. No waiver by the Executive at any time of any breach of, or compliance with, any provision of this Agreement to be performed by the Company shall be deemed a waiver of that or any other provision at any subsequent time. 8.5 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but both of which together shall constitute one and the same instrument. 8.6 Tax Withholding. Any payments provided for hereunder shall be paid net of any applicable tax withholding required under federal, state or local law. 8.7 Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any 11 officer, employee or representative of any party hereto in respect of the subject matter contained herein; and any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and cancelled. 8.8 Amendments. This Agreement may be amended or modified only by a written instrument executed by both the Company and the Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. THERMO ELECTRON CORPORATION By: Anne Pol -------------------------------------- Senior Vice President, Human Resources EXECUTIVE /s/ Emil C. Herkert -------------------------------------------- Emil C. Herkert 12 EX-10.48 11 0011.txt Exhibit 10.48 ThermoRetec Corporation 9 Damonmill Square. Suite 3A Concord, MA 01742-2851 January 31, 2000 Jeff Powell 1 Walnut Street Acton, MA 01720 Dear Jeff: Thermo Electron Corporation announced today a reorganization of the parent company, in which certain company assets, including those of ThermoRetec, will be sold. This announcement represents both a challenge and an opportunity for us as ThermoRetec employees. Since your past contributions have been integral to the success of our own company, I believe your continued involvement with ThermoRetec will be necessary to facilitate the sale of our business and to assure a smooth transition for a potential buyer or buyers. Retention and Transaction Bonuses Accordingly, in order to provide an incentive for you to remain with ThermoRetec through the completion of the sale of three of the ThermoRetec Business Units (as defined below), we will pay you both a retention bonus ("Retention Bonus") and a transaction bonus ("Transaction Bonus"). The Retention Bonus will be payable to you upon the sale of the three ThermoRetec Business Units for which you have direct or indirect management responsibility and shall be equal to 100% of your base salary as of the end of calendar 1999, that is, $150,000. This Retention Bonus will be paid to you in one lump sum on or before 30 days following the sale of all of the ThermoRetec Business Units listed in the table below. In addition to the Retention Bonus, we agree to pay you an additional Transaction Bonus in recognition of your efforts to maximize the price ThermoRetec receives for selling the three Business Units listed below. The following table describes the Transaction Bonus you will be eligible to receive if the combined sales price for the ThermoRetec Business Units listed below is equal to or greater than the combined Threshold Price for these Business Units. Sales price shall be the stated purchase price after required adjustments in the respective purchase and sale agreements (for example, adjustments to the closing balance sheet). The bonus amount will be based on the combined threshold price and incentive amounts for the three businesses. Jeff Powell January 31, 2000 Page 2 Business Incentive Amount Threshold Price ThermoRetec Nuclear Services $28,000 $17,000,000 ThermoRetec Soil Recycling $25,000 $15,000,000 ThermoRetec Fluids Recycling $22,000 $13,000,000 Combined Business Units $75,000 $45,000,000 Additionally, if the sales price of the combined business units exceeds the combined Threshold Price listed above, you will be paid 1.0 % of the difference between the actual sales price and this Threshold Price. Example: If these ThermoRetec Business Units were sold for $50,000,000 your total incentive for achieving that sales price would be $125,000. This includes $75,000 for achieving the $45,000,000 combined sales price and an additional $50,000 for the $5,000,000 over the $45,000,000 target price ($5,000,000 x .01 = $50,000). The Transaction Bonus will be paid to you on or before 30 days following the sale of the three business units with which you are involved. Terms of Agreement 1. ThermoRetec agrees to continue to employ you on the same terms and with the same benefits as you currently enjoy, as an employee-at-will. In return, you agree to remain in such employ and to continue to devote your full time and best efforts to ThermoRetec as an employee-at-will until the closing date of the sale of the ThermoRetec Business Units with which you are involved. 2. You understand that ThermoRetec retains the right to terminate your services without "cause" (as defined below), and you retain the right to terminate your services from ThermoRetec at any time. If ThermoRetec terminates you for its convenience and without cause, you will be paid your full and unreduced Retention Bonus in accordance with the terms of this letter, even if no sale has taken place. If you terminate your employment prior to the sale closing date, or ThermoRetec terminates your employment for cause , you will forfeit any and all payments that you would be entitled to under this agreement. 3. For the purposes of this agreement, "cause" shall be determined by ThermoRetec in the exercise of good faith and reasonable judgement and will include any breach of this agreement by you or any act by you of gross personal misconduct, insubordination, misappropriation of funds, fraud, dishonesty, gross neglect of or failure to perform the duties Jeff Powell January 31, 2000 Page 3 reasonably required of you pursuant to this agreement, engaging in activities that are competitive with ThermoRetec's business or any conduct which is in willful violation of any applicable law or regulation pertaining to the business. 4. For purposes of this agreement we agree that your ThermoRetec Business Units will be considered sold when any person or entity (other than another Thermo Electron business unit) purchases substantially all of the assets or shares of those Business Units. Accordingly, neither a Retention nor a Transaction Bonus will be paid to you if you participate as a prospective owner in a management buy-out of these or any other ThermoRetec Business Units. The ThermoRetec Business Units are: ThermoRetec Consulting & Engineering, ThermoRetec Nuclear Services, ThermoRetec Soil Recycling, and ThermoRetec Fluids Recycling. 5. You understand that all payments made under this agreement are subject to appropriate federal, state, city or other tax withholding requirements. In exchange for our covenants to you under this agreement, you hereby release ThermoRetec and its parent, subsidiaries and affiliates, and each of their respective agents, employees, directors, and officers, (hereafter, the "Releasees") of and from any and all costs, liabilities, losses, expenses, and compensation, (hereafter, "Claims"), which you had, have or may hereafter have or assert against the Releasees for any wrongful termination of employment, including termination based on age, sex, race, disability or other discrimination under the Civil Rights Act of 1964 as amended, the Age Discrimination in Employment Act of 1967, or other federal, state, or local laws prohibiting such discrimination, or under federal, state, or local employment laws, provided, however, that this release shall not apply to any claims other than for wrongful termination that you may have against ThermoRetec, including claims under this letter agreement. 6. You acknowledge that this agreement supersedes any prior agreements or understandings, whether oral or written, between you and ThermoRetec pertaining to any incentive payments being offered to employees of businesses being sold in connection with the reorganization, and that this agreement constitutes the entire agreement between us. The next few months are apt to be both stressful and challenging for all of us. I'm hopeful this agreement will provide you some personal security regarding the inevitable changes ahead. I know that I will need your help and understanding in the next few months, as well as your continued assistance and support. You have my personal pledge that I will do my best to help you and our people emerge from this experience with pride, with our dignity intact, and with a bright Jeff Powell January 31, 2000 Page 4 future. If you have any questions regarding any of the terms of this agreement, please do not hesitate to contact me. Once you have read and understood the terms of this agreement, please indicate your agreement by signing below on the line above your typewritten name, make a copy for your records, and return the original document to me no later than February 11, 2000. Sincerely yours, /s/ Robert W. Dunlap --------------------------------------------- Robert W. Dunlap, President & CEO ThermoRetec Corporation Accepted and agreed: /s/ Jeffrey L. Powell February 7, 2000 - ---------------------------------- -------------------------------------- NAME Date Release of Claims and Signature of Acceptance In exchange for the Enhanced Severance Program offered to me by ThermoRetec Corporation in this Agreement dated April 10, 2000 (the "Agreement"), I hereby release ThermoRetec Corporation and Thermo Electron Corporation, their subsidiaries and affiliates (collectively the "Corporation") and its officers, directors, employees and legal predecessors from all claims, liabilities and causes of action, whether known or unknown, which I have, may have, or claim to have against the Corporation based upon or arising out of my employment with the Corporation, other than claims arising out of the Agreement. I hereby agree not to file any lawsuit to assert such claims, which include, but are not limited to any claims for breach of contract, wrongful termination, or age, sex, race, disability or other discrimination under the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or any other federal, state, or local laws prohibiting such discrimination. As used herein, the Corporation includes any and all parents, divisions or subsidiaries of the Corporation. I understand that I have been advised to seek the advice of an attorney, if I so choose, prior to signing this release and that I am giving up any legal claims I have against the Corporation by signing this release. I further understand that I may have 21 days to consider this agreement, that I may revoke it at any time during the 7 days after I sign it, and that it shall not become effective until that 7-day revocation period has passed. I fully understand my right to take 21 days to consider signing this release and, after having sufficient time to consider my options, I hereby waive my right to take the full 21 day period. I acknowledge that I am signing this release knowingly, willingly and voluntarily in exchange for the additional severance payment described in the Agreement. I acknowledge that I have carefully read and fully understand this Release of All Claims and I have not relied on any statement, written or oral, which is not set out in this document. /s/ Robert W. Dunlap /s/ Jeffrey L. Powell - ------------------------------------- ------------------------------------- Robert W. Dunlap Jeffrey L. Powell April 12, 2000 ------------------------------------- Date ThermoRetec Corporation 9 Damonmill Square, Suite 3A Concord. MA 01742-2851 April 10, 2000 Jeffrey L. Powell 1 Walnut Street Acton, MA 01720 Dear Jeff: This letter confirms our discussion and outlines the Enhanced Severance Program which shall be offered to you in the event that your employment is terminated without "Cause" (as defined below) or as a result of "Change in Control" (as defined below) of ThermoRetec Corporation ("Retec"). The availability of the Enhanced Severance Program, upon an employee's separation, is conditioned upon and will require the execution of a release of claims (a sample of which is attached to this letter). If you do not execute the release of claims, you will only be eligible to receive the Retention Bonus and Transaction Bonus previously negotiated. If you accept employment comparable to your present position with another entity that is a subsidiary or affiliate of Thermo Electron Corporation, you will not be eligible for the Enhanced Severance Program. Also, if you participate as an equity owner in a management buyout of Retec or any Retec subsidiary you will not be eligible for the Enhanced Severance Program. In order to maintain eligibility for any of the below outlined benefits, Retec requires that you remain a regular active employee of Retec unless your employment is terminated without Cause or as a result of a Change in Control of ThermoRetec Corporation. For purposes of the Agreement, "Cause" shall be determined by Retec in the exercise of good faith and reasonable judgement. "Cause" will include but not be limited to breach of this Agreement by you, any act by you of gross personal misconduct, gross insubordination, material misappropriation of funds, fraud, dishonesty, gross neglect of or failure to perform the duties reasonably required of you pursuant to your employment, engaging in activities that are competitive with Retec's business or any conduct which is in willful violation of any applicable law or regulation pertaining to Retec's business. "Change in Control" shall mean the merger, consolidation, reorganization liquidation, dissolution, or similar transaction entered into by Retec (except with Thermo Electron Corporation or an affiliate thereof), the sale or disposition of 50% or more of the existing assets of RETEC in one or a series of transactions, or the change in ownership of 50% or more of the beneficial ownership of the outstanding shares of common stock of RETEC. If (i) you are terminated without cause or (ii) if as a result of such Change in Control you are terminated and not offered a position by Retec or a successor entity with comparable salary, compensation, bonus and benefits, or if your principal work location is moved by more than 50 miles, you will be eligible for the Enhanced Severance Program. However, if as a result of a Change in Control you are offered by Retec or a successor entity a position with comparable Jeffrey L. Powell ThermoRetec April 10, 2000 salary, compensation, bonus and benefits and your principal work location is not moved by more than 50 miles, you will not be eligible for the Enhanced Severance Program. Salary Continuation Beginning the day following your termination date, you shall be placed on salary continuation through the regular payroll system, at your regular biweekly salary for a period of 52 weeks. Vacation Accrued but unused vacation will be paid to you with the first check covering the salary continuation period. Vacation payments will be calculated using your regular biweekly base compensation. You will not accrue additional vacation credit beyond your termination date. Medical, Dental, and Life Insurance Through the end of your salary continuation period, you may continue to participate in any medical, dental and/or life insurance programs in which you are currently enrolled, provided that you pay the regular employee portion of these benefits where applicable. Once medical and dental coverage ceases, you will be notified of your eligibility to continue medical and dental coverage under the provisions of COBRA. STD and LTD Both short-term and long-term disability coverage will cease as of your last day of active employment. Employee Assistance Program This program will continue to be available to you and your dependents through the end of your salary continuation period. Employee Stock Purchase Plan You will continue to be eligible for participation under the normal plan rules through the end of your salary continuation period. 401K Plan You will continue to be eligible for participation under the normal plan rules through the end of your salary continuation period. Jeffrey L. Powell ThermoRetec April 10, 2000 Outplacement Program The company will arrange, at no cost to you, outplacement counseling services through Keystone Associates. Keystone will coordinate the delivery of these services at their offices in Burlington, Massachusetts. You shall be eligible to begin receiving these services immediately upon termination, or you may schedule the start of this program anytime within 90 days after the date of your termination. The major elements of this comprehensive program include: - - Counseling - Resume development - Research skills - Self assessment and job targeting - Effective correspondences - Networking and other search techniques - Interview training - - Administrative Support - Office space and private telephone line with voice mail - Research assistance - Reference library The outplacement services described above will be available for a period of four months, renewable (should you need additional services) for an additional period of four months. I am hopeful these benefits, should you qualify for them, will be helpful to you in establishing new career directions after your long and fruitful career with Retec and Thermo Electron. Thank you for all your efforts over many years of employment with our corporation. Sincerely yours, /s/ Robert W. Dunlap - ---------------------------------------- Robert W. Dunlap President ThermoRetec Corporation EX-21 12 0012.txt Exhibit 21 THERMO TERRATECH INC. Subsidiaries of the Registrant As of June 5, 2000, Thermo TerraTech Inc. owned the following companies:
NAME STATE OR PERCENT OF JURISDICTION OF OWNERSHIP INCORPORATION - ------------------------------------------------------------------------------------------------------------ Holcroft (Canada) Limited Canada 100 Holcroft Corporation Delaware 100 Holcroft GmbH Germany 100 TTT Metals of Minnesota, Inc. Minnesota 100 TTT Metals of California, Inc. California 100 TTT Metals of Wisconsin, Inc. Wisconsin 100 Normandeau Associates, Inc. New Hampshire 100 TMA/Hanford, Inc. Washington 100 The Randers Killam Group Inc. Delaware 95 (additionally, 5% of the shares are owned directly by Thermo Electron Corporation) Clark-Trombley Consulting Engineers, Inc. Michigan 100 Thermo REI Inc. Michigan 100 Randers Engineering of Massachusetts, Inc. Michigan 100 RGPC Inc. Michigan 100 Thermo RDC Inc. Michigan 100 Thermo VTC Inc. Michigan 100 The Killam Group, Inc. Delaware 100 CarlanKillam Consulting Group, Inc. Florida 100 CarlanKillam Consulting Group of Alabama, Inc. Alabama 100 Thermo Consulting & Design Inc. Delaware 100 Engineering Technology and Knowledge Corporation Delaware 100 Elson T. Killam Associates, Inc. New Jersey 100 BAC Killam Inc. New York 100 N.H. Bettigole Co., Inc. Delaware 100 CarlanKillam Construction Services, Inc. Florida 100 Duncan, Lagnese and Associates, Incorporated Pennsylvania 100 E3-Killam, Inc. New York 100 Killam Associates, Inc. Ohio 100 Killam Management and Operational Services, Inc. New Jersey 100 Fellows, Read & Associates, Inc. New Jersey 100 Killam Associates, New England Inc. Delaware 100 George A. Schock & Associates, Inc. New Jersey 100 Jennison Engineering, Inc. Vermont 100 Thermo Analytical Inc. Delaware 100 Skinner & Sherman, Inc. Massachusetts 100 Thermo EuroTech (Delaware) Inc. Delaware 87.70 (additionally, 10.79% of the shares are owned directly by Thermo Electron Corporation) Thermo EuroTech N.V. Netherlands Grond- & Watersaneringstechniek Nederland B.V. Netherlands 100 Refining & Trading Holland B.V. Netherlands 100 Thermo EuroTech Ireland Ltd. Ireland 100 NAME STATE OR PERCENT OF JURISDICTION OF OWNERSHIP INCORPORATION - ------------------------------------------------------------------------------------------------------------ Green Sunrise Holdings Ltd. Ireland 70 AutoRod Ltd. Ireland 100 Green Sunrise Industries Ltd. Ireland 100 GreenStar Recycling Ltd. Ireland 100 Pipe & Drain Services Ltd. Ireland 100 Dempsey Drums Ltd. Ireland 70 GreenStar Products Ltd. Ireland 70 ThermoRetec Corporation Delaware 70 (additionally, 30% of the shares are owned directly by Thermo Electron Corporation) Benchmark Environmental Corporation New Mexico 100 Eberline Holdings Inc. Delaware 100 Eberline Analytical Corporation New Mexico 100 Thermo Hanford Inc. Delaware 100 TMA/NORCAL Inc. California 100 ThermoRetec Construction Corporation Virginia 100 ThermoRetec Resource Planning & Management Systems Corporation Connecticut 100 ThermoRetec Consulting Corporation Delaware 100 GeoWest Golden Inc. Colorado 100 GeoWest TriTechnics of Ohio, LLC Colorado 100 Retec North Carolina, Inc. North Carolina 100 Retec Engineering P.C. New York 100 RETEC Thermal, Inc. Delaware 100 Thermo Fluids Inc. Delaware 100 TPS Technologies Inc. Florida 100 TPST Soil Recyclers of California Inc. California 100 California Hydrocarbon, Inc. Nevada 100 TPST Soil Recyclers of Maryland Inc. Maryland 100 Todds Lane Limited Partnership Maryland 100* (1% of which is owned directly by TPS Technologies Inc.) TPST Soil Recyclers of New York Inc. New York 100 TPST Soil Recyclers of Oregon Inc. Oregon 100 TPST Soil Recyclers of Washington Inc. Washington 100 TRI Oak Ridge 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* *Joint Venture/Partnership
EX-23 13 0013.txt Exhibit 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference of our reports dated May 18, 2000 (except with respect to the matters discussed in Note 17, as to which the date is June 1, 2000), included in or incorporated by reference into Thermo TerraTech Inc.'s Annual Report on Form 10-K for the year ended April 1, 2000, and into the Company's previously filed Registration Statements as follows: Registration Statement No. 333-02269 on Form S-2, Registration Statement No. 33-16462 on Form S-8, Registration Statement No. 33-16464 on Form S-8, Registration Statement No. 33-16465 on Form S-8, Registration Statement No. 333-2055 on Form S-3, Registration Statement No. 33-52824 on Form S-8, Registration Statement No. 033-65307 on Form S-8, Registration Statement No. 033-65283 on Form S-8, Registration Statement No. 033-65281 on Form S-8, Registration Statement No. 33-86194 on Form S-8, and Registration Statement No. 333-86073 on Form S-8. Arthur Andersen LLP Boston, Massachusetts June 19, 2000 EX-27 14 0014.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO TERRATECH INC.'S ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED APRIL 1,2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR APR-01-2000 APR-01-2000 4,157 0 54,232 2,695 2,001 137,697 136,267 66,311 304,553 106,964 116,454 0 0 1,961 49,609 304,553 0 307,329 0 243,382 56,981 715 8,743 (43,858) 2,522 (43,326) 0 107 0 (43,219) (2.27) (2.27)
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