-----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, JH/HD+iyCyfnDIJbQceWFtm6V9gAv4CjjiVMJeRtu1lvtt4X82Ya/fVPOhswGsuG 3HXShcieg/sBQfbletynpw== 0000813895-98-000005.txt : 19980206 0000813895-98-000005.hdr.sgml : 19980206 ACCESSION NUMBER: 0000813895-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980103 FILED AS OF DATE: 19980205 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: THERMO POWER CORP CENTRAL INDEX KEY: 0000813895 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 042891371 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10573 FILM NUMBER: 98522718 BUSINESS ADDRESS: STREET 1: 81 WYMAN ST STREET 2: PO BOX 9046 CITY: WALTHAM STATE: MA ZIP: 02254-9046 BUSINESS PHONE: 6176221000 MAIL ADDRESS: STREET 1: 81 WYMAN STREET CITY: WALTHAM STATE: MA ZIP: 02254 FORMER COMPANY: FORMER CONFORMED NAME: TECOGEN INC DATE OF NAME CHANGE: 19920703 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------------------------------ FORM 10-Q (mark one) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarter Ended January 3, 1998. [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number 1-10573 THERMO POWER CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 04-2891371 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 81 Wyman Street, P.O. Box 9046 Waltham, Massachusetts 02254-9046 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (781) 622-1000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Class Outstanding at January 30, 1998 ---------------------------- ------------------------------- Common Stock, $.10 par value 11,819,973 PAGE PART I - FINANCIAL INFORMATION Item 1 - Financial Statements THERMO POWER CORPORATION Consolidated Balance Sheet (Unaudited) Assets January 3, September 27, (In thousands) 1998 1997 ------------------------------------------------------------------------ Current Assets: Cash and cash equivalents $ 39,667 $ 19,347 Available-for-sale investments, at quoted market value (amortized cost of $9,132 and $9,129) 9,169 9,171 Accounts receivable, less allowances of $13,699 and $757 57,975 21,012 Unbilled contract costs and fees 9,743 4,856 Inventories: Raw materials 31,346 17,570 Work in process 4,893 1,077 Finished goods 6,407 1,237 Prepaid income taxes 4,376 3,118 Other current assets 2,112 219 Due from parent company and affiliated companies, net (Note 3) 18,794 - -------- -------- 184,482 77,607 -------- -------- Rental Assets, at Cost 13,620 13,645 Less: Accumulated depreciation and amortization 3,459 3,369 -------- -------- 10,161 10,276 -------- -------- Property, Plant, and Equipment, at Cost 33,935 19,637 Less: Accumulated depreciation and amortization 9,313 9,046 -------- -------- 24,622 10,591 -------- -------- Long-term Available-for-sale Investments, at Quoted Market Value (amortized cost of $2,301 in fiscal 1997; Note 3) - 2,200 -------- -------- Other Assets 261 236 -------- -------- Cost in Excess of Net Assets of Acquired Companies (Note 3) 156,932 7,082 -------- -------- $376,458 $107,992 ======== ======== 2PAGE THERMO POWER CORPORATION Consolidated Balance Sheet (continued) (Unaudited) Liabilities and Shareholders' Investment January 3, September 27, (In thousands except share amounts) 1998 1997 ------------------------------------------------------------------------ Current Liabilities: Notes payable (Note 3) $ 25,692 $ - Accounts payable 36,697 9,622 Accrued payroll and employee benefits 9,721 3,133 Billings in excess of contract costs and fees 6,000 1,353 Accrued income taxes (Note 3) 3,568 1,620 Accrued warranty costs 5,343 3,435 Common stock of subsidiary subject to redemption ($18,450 redemption value) 18,138 - Accrued acquisition expenses (Note 3) 14,892 - Other accrued expenses (Note 3) 28,131 3,240 Due to parent company and affiliated companies - 496 -------- -------- 148,182 22,899 -------- -------- Deferred Income Taxes 993 114 -------- -------- Long-term Obligations (in fiscal 1998 includes $160,000 due to parent company; Note 3) 160,392 252 -------- -------- Common Stock of Subsidiary Subject to Redemption ($18,450 redemption value) - 18,059 -------- -------- Shareholders' Investment: Common stock, $.10 par value, 30,000,000 shares authorized; 12,493,371 shares issued 1,249 1,249 Capital in excess of par value 55,332 55,283 Retained earnings 14,866 13,811 Treasury stock at cost, 680,148 and 578,124 shares (4,631) (3,636) Cumulative translation adjustment 51 - Net unrealized gain (loss) on available- for-sale investments 24 (39) -------- -------- 66,891 66,668 -------- -------- $376,458 $107,992 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 3PAGE THERMO POWER CORPORATION Consolidated Statement of Income (Unaudited) Three Months Ended ------------------------- January 3, December 28, (In thousands except per share amounts) 1998 1996 ----------------------------------------------------------------------- Revenues $63,562 $28,786 ------- ------- Costs and Operating Expenses: Cost of revenues 45,249 24,533 Selling, general, and administrative expenses 13,435 3,780 Research and development expenses 1,729 644 ------- ------- 60,413 28,957 ------- ------- Operating Income (Loss) 3,149 (171) Interest Income (includes $180 from related party in fiscal 1998; Note 3) 589 451 Interest Expense (includes $1,175 to related party in fiscal 1998; Note 3) (1,425) (5) ------- ------- Income Before Provision for Income Taxes and Minority Interest 2,313 275 Provision for Income Taxes 1,069 193 Minority Interest Expense 189 78 ------- ------- Net Income $ 1,055 $ 4 ======= ======= Basic and Diluted Earnings per Share (Note 2) $ .09 $ - ======= ======= Weighted Average Shares (Note 2): Basic 11,898 12,489 ======= ======= Diluted 11,912 12,504 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4PAGE THERMO POWER CORPORATION Consolidated Statement of Cash Flows (Unaudited) Three Months Ended ------------------------- January 3, December 28, (In thousands) 1998 1996 ----------------------------------------------------------------------- Operating Activities: Net income $ 1,055 $ 4 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 2,534 523 Minority interest expense 189 78 Increase in deferred income taxes (671) - Other noncash items (17) (68) Changes in current accounts, excluding the effects of acquisition: Accounts receivable (3,354) (386) Inventories 7,333 2,009 Unbilled contract costs and fees (1,587) (1,154) Other current assets (38) (351) Accounts payable 1,457 (2,438) Other current liabilities 1,177 975 --------- --------- Net cash provided by (used in) operating activities 8,078 (808) --------- --------- Investing Activities: Acquisition, net of cash acquired (Note 3) (143,743) - Proceeds from sale and maturities of available-for-sale investments - 1,000 Increase in rental assets (389) (529) Proceeds from sale of rental assets 314 878 Purchases of property, plant, and equipment (1,497) (786) Proceeds from sale of property, plant, and equipment 1,210 - Other (9) - --------- --------- Net cash provided by (used in) investing activities (144,114) 563 --------- --------- Financing Activities: Issuance of long-term obligation to parent company (Note 3) 160,000 - Decrease in short-term notes payable (2,924) - Purchases of Company common stock (1,129) - Net proceeds from issuance of Company common stock 183 71 Repayment of long-term obligations (44) (14) --------- --------- Net cash provided by financing activities $ 156,086 $ 57 --------- --------- 5PAGE THERMO POWER CORPORATION Consolidated Statement of Cash Flows (continued) (Unaudited) Three Months Ended ------------------------- January 3, December 28, (In thousands) 1998 1996 ----------------------------------------------------------------------- Exchange Rate Effect on Cash $ 270 $ - --------- --------- Increase (Decrease) in Cash and Cash Equivalents 20,320 (188) Cash and Cash Equivalents at Beginning of Period 19,347 29,852 --------- --------- Cash and Cash Equivalents at End of Period $ 39,667 $ 29,664 ========= ========= Noncash Activities (Note 3): Fair value of assets of acquired company $ 271,109 $ - Cash paid for acquired company (159,324) - Cash paid in prior year for acquired company (2,301) - Cash to be paid for remaining outstanding shares of tender offer (5,111) - --------- --------- Liabilities assumed of acquired company $ 104,373 $ - ========= ========= Sale of acquired business to related party $ 19,117 $ - ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 6PAGE THERMO POWER CORPORATION Notes to Consolidated Financial Statements 1. General The interim consolidated financial statements have been prepared by Thermo Power Corporation (the Company) without audit and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at January 3, 1998, and the results of operations and cash flows for the three-month periods ended January 3, 1998, and December 28, 1996. The Company's results of operations for the three-month periods ended January 3, 1998, and December 28, 1996, include 14 weeks and 13 weeks, respectively. Interim results are not necessarily indicative of results for a full year. The consolidated balance sheet presented as of September 27, 1997, has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1997, filed with the Securities and Exchange Commission. 2. Earnings per Share During the first quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." As a result, all previously reported earnings per share have been restated; however, basic and diluted earnings per share equals the Company's previously reported earnings per share for the fiscal 1997 period. Basic earnings per share have been computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share have been computed assuming the exercise of stock options and their related income tax effect. 7PAGE THERMO POWER CORPORATION 2. Earnings per Share (continued) Basic and diluted earnings per share were calculated as follows: Three Months Ended ------------------------ January 3, December 28, (In thousands except per share amounts) 1998 1996 ----------------------------------------------------------------------- Basic Net income $ 1,055 $ 4 ------- ------- Weighted average shares 11,898 12,489 ------- ------- Basic earnings per share $ .09 $ - ======= ======= Diluted Net income $ 1,055 $ 4 ------- ------- Weighted average shares 11,898 12,489 Effect of stock options 14 15 ------- ------- Weighted average shares, as adjusted 11,912 12,504 ------- ------- Diluted earnings per share $ .09 $ - ======= ======= The computation of diluted earnings per share excludes the effect of assuming the exercise of certain outstanding stock options because the effect would be antidilutive. As of January 3, 1998, there were 874,999 of such options outstanding, with exercise prices ranging from $9.05 to $17.53 per share. 3. Acquisition On November 6, 1997, the Company declared unconditional in all respects its cash tender offer for the outstanding ordinary shares of Peek plc (Peek). The aggregate cost to acquire all outstanding Peek ordinary shares, including related expenses, is estimated at approximately $166,736,000. The purchase price includes $2,301,000 that was paid for shares acquired in fiscal 1997, classified as "Long-term available-for-sale investments" in the accompanying September 27, 1997, balance sheet, and $5,111,000 accrued for the purchase of the remaining Peek ordinary shares outstanding, classified as "Other accrued expenses" in the accompanying January 3, 1998, balance sheet. The Company made payments for the remaining Peek ordinary shares outstanding in the second quarter of fiscal 1998. Peek develops, markets, installs, and services equipment to monitor and regulate traffic flow in cities and towns around the world. In addition, through its Field Data business, Peek develops and markets field measurement products. 8PAGE THERMO POWER CORPORATION 3. Acquisition (continued) To finance the acquisition of Peek, the Company borrowed $160,000,000 from Thermo Electron Corporation pursuant to a promissory note due November 1999, and bearing interest at the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the beginning of each quarter. Subsequent to Peek's acquisition by the Company, the Company reached an agreement with ONIX Systems Inc., a majority-owned subsidiary of Thermo Instrument Systems Inc., to sell Peek's Field Data business, effective November 6, 1997, for $19,117,000, which was classified as "Due from parent company and affiliated companies" in the accompanying January 3, 1998, balance sheet. Thermo Instrument is a majority-owned subsidiary of Thermo Electron. The Company received payment from ONIX for the sale of the Field Data business in January 1998. The components of the sales price for the Field Data business consist of the net tangible book value of the Field Data business, cost in excess of net assets of acquired company, and the estimated tax liability relating to the sale. The cost in excess of net assets of acquired company was determined based upon a percentage of the Company's total cost in excess of net assets of acquired company associated with its acquisition of Peek, based on the 1997 revenues of the Field Data business relative to Peek's total 1997 consolidated revenues. The acquisition has been accounted for using the purchase method of accounting and its results have been included in the accompanying financial statements from the date of acquisition. The cost of the acquisition exceeded the estimated fair value of the acquired net assets by $150,710,000, which is being amortized over 40 years. Allocation of the purchase price was based on estimates of the fair value of the net assets acquired and is subject to adjustment upon finalization of the purchase price allocation. Based on unaudited data, the following table presents selected financial information for the Company and Peek on a pro forma basis, assuming the companies had been combined since the beginning of fiscal 1997. The results of Peek exclude the results of businesses sold by Peek prior to its acquisition by the Company and Peek's Field Data business, which was sold to ONIX effective November 6, 1997. Three Months Ended ------------------------- January 3, December 28, (In thousands except per share amounts) 1998 1996 ------------------------------------------------------------------------ Revenues $ 81,648 $108,579 Net income 376 10,072 Basic and diluted earnings per share .03 .81 The pro forma results are not necessarily indicative of future operations or the actual results that would have occurred had the acquisition of Peek been made at the beginning of fiscal 1997. 9PAGE THERMO POWER CORPORATION 3. Acquisition (continued) In connection with the acquisition of Peek, the Company has undertaken a restructuring of the acquired business. The restructuring activities will primarily include reductions in staffing levels and abandonment of excess facilities. In connection with these restructuring activities the Company established reserves totaling $15,101,000 for estimated severance, excess facilities, and other exit costs associated with the acquisition, none of which was expended during the first quarter of fiscal 1998. This amount was recorded as a cost of the acquisition of Peek in accordance with Emerging Issues Task Force Pronouncement 95-3 (EITF 95-3). As of January 3, 1998, unresolved matters related to the restructuring of Peek include completing the identification of specific employees for termination and locations to be abandoned or consolidated, as well as other decisions concerning the integration of the acquired businesses into the Company. In accordance with EITF 95-3, finalization of the Company's plan for restructuring Peek will not occur beyond one year from the date of acquisition. Any changes to estimates of these costs will be recorded as adjustments to cost in excess of net assets of acquired companies. Notes payable in the accompanying January 3, 1998, balance sheet includes $25,060,000 of borrowings at Peek. As of January 3, 1998, Peek had outstanding promissory notes aggregating $17,470,000 and borrowings under a line of credit totaling $7,590,000. The promissory notes bear interest at variable rates and are due on demand as a result of Peek's violations of certain debt covenants. The weighted average interest rate on the promissory notes outstanding as of January 3, 1998, was 6.40%. The Company expects to repay the promissory notes during the second quarter of fiscal 1998. Borrowings under the line of credit are payable on demand and are denominated in British pounds sterling. As of January 3, 1998, the remaining amount available under the line of credit was 400,000 British pounds sterling. Borrowings under the line of credit bear interest at applicable London interbank market rates plus 45 basis points (6.89% at January 3, 1998). Borrowings under the line of credit are guaranteed by Thermo Electron. Peek enters into forward contracts to hedge certain firm purchase and sale commitments denominated in currencies other than its subsidiaries' local currencies. The purpose of Peek's foreign currency hedging activities is to protect Peek's local currency cash flows related to these commitments from fluctuations in foreign exchange rates. Because Peek's forward contracts are entered into as hedges against existing foreign currency exposures, there generally is no effect on the income statement since gains or losses on the customer contract offset gains or losses on the forward contract. 10PAGE THERMO POWER CORPORATION Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, are made throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks," "estimates," and similar expressions are intended to identify forward-looking statements. There are a number of important factors that could cause the results of the Company to differ materially from those indicated by such forward-looking statements, including those detailed under the heading "Forward-looking Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the fiscal year ended September 27, 1997, filed with the Securities and Exchange Commission. Overview The Company's business is divided into four segments: Traffic Control, Industrial Refrigeration Systems, Engines, and Cooling and Cogeneration Systems. Through the Company's Peek subsidiary, acquired November 1997, the Traffic Control segment develops, markets, installs, and services equipment to monitor and regulate traffic flow in cities and towns around the world. Peek offers a wide range of products, including hardware, such as detectors, counter classifiers, traffic signals and controllers, and variable message signs, as well as traffic management systems that integrate these products to ease roadway congestion, improve safety, and collect data. Traffic management systems include variable message systems to advise drivers of accidents and other roadway hazards, traffic signal-timing systems that adapt continuously to changing conditions to minimize delays, video systems to give real-time analysis of traffic flows at intersections and on highways, and automatic toll-collection systems. The Company also offers high-resolution video equipment to aid police officers in capturing the information necessary to charge individuals with motor vehicle violations such as speeding and red light violations. The Company's results of operations and financial position for fiscal 1998 are expected to be affected significantly by the acquisition of Peek. Funding patterns of governmental entities, as well as seasonality, are expected to result in fluctuations in quarterly revenues and income of the Traffic Control segment. As a result of these factors, Peek has historically experienced relatively higher sales and net income in the second and fourth calendar quarters and relatively lower sales and net income in the first and third calendar quarters. Additionally, a portion of the Traffic Control segment's revenues result from the sale of large systems, the timing of which can lead to variability in the Company's quarterly revenues and income. 11PAGE THERMO POWER CORPORATION Overview (continued) A significant portion of the Traffic Control segment's revenues originate outside the U.S., principally in Europe. Foreign divisions and subsidiaries principally sell in their local currencies and generally seek to charge their customers in the same currency as their operating costs. However, the Company's financial performance and competitive position can be affected by currency exchange rate fluctuations affecting the relationship between the U.S. dollar and foreign currencies. The Company reduces its exposure to currency fluctuations through the use of forward contracts. Since the operations of the Traffic Control segment are conducted principally in Europe, the Company's operating results could be adversely affected by capital spending and economic conditions in Europe. Through the Company's FES division, the Industrial Refrigeration Systems segment supplies standard and custom-designed industrial refrigeration systems used primarily by the food-processing, petrochemical, and pharmaceutical industries. NuTemp, Inc. is a supplier of both remanufactured and new industrial refrigeration and commercial cooling equipment for sale or rental. NuTemp's industrial refrigeration equipment is used primarily in the food-processing, petrochemical, and pharmaceutical industries, and its commercial cooling equipment is used primarily in institutions and commercial buildings, as well as by service contractors. The demand for NuTemp's equipment is typically highest in the summer months and can be adversely affected by cool summer weather. Within the Engines segment, the Company's Crusader Engines division manufactures gasoline engines for recreational boats; propane and gasoline engines for lift trucks; and natural gas engines for vehicular, cooling, pumping, refrigeration, and other industrial applications. The Cooling and Cogeneration Systems segment consists of the Company's Tecogen division and the Company's ThermoLyte Corporation subsidiary. Tecogen designs, develops, markets, and services packaged cooling and cogeneration systems fueled principally by natural gas for sale to a wide range of commercial, institutional, industrial, and multi-unit residential users. Certain large-capacity cooling systems are manufactured for Tecogen by FES, and the cogeneration systems are manufactured for Tecogen by Crusader. Tecogen also conducts research and development of natural gas-engine technology and on applications of thermal energy. ThermoLyte is developing and commercializing various gas-powered lighting products. 12PAGE THERMO POWER CORPORATION Overview (continued) The Company's revenues by industry segment are as follows: Three Months Ended ------------------------- January 3, December 28, (In thousands) 1998 1996 ----------------------------------------------------------------------- Traffic Control $38,752 $ - Industrial Refrigeration Systems 17,009 19,146 Engines 5,124 5,407 Cooling and Cogeneration Systems 2,958 4,616 Intersegment sales elimination (281) (383) ------- ------- $63,562 $28,786 ======= ======= The Company will be required to modify or replace portions of its software and hardware, including the software and hardware of Peek, so that it will function properly in the year 2000. Costs associated with purchasing software and hardware that is year 2000 compliant, excluding costs associated with Peek, is included in estimated capital expenditures for the remainder of fiscal 1998, disclosed in liquidity and capital resources. The cost of such new software and hardware will be capitalized and amortized over it's useful life, and is not expected to have a material effect on the Company's results of operations. The Company is in the process of assessing the impact of the year 2000 issue on the operations of Peek, including the development of cost estimates for, and the extent of any programming changes that might be required to address, this issue. At this time, the Company is unable to determine the materiality of the year 2000 issue at Peek. Results of Operations First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997 Total revenues increased to $63,562,000 in the first quarter of fiscal 1998 from $28,786,000 in the first quarter of fiscal 1997, due to the inclusion of $38,752,000 of revenues from Peek, acquired November 1997. Peek's revenues are not necessarily indicative of future quarterly operating results due to funding patterns of governmental entities and seasonality. Industrial Refrigeration Systems segment revenues decreased to $17,009,000 in fiscal 1998 from $19,146,000 in fiscal 1997, primarily due to lower demand for standard industrial refrigeration packages at FES and lower demand for reconditioned cooling equipment at NuTemp. Engines segment revenues decreased to $5,124,000 in fiscal 1998 from $5,407,000 in fiscal 1997, primarily due to decreased sales of marine-engine related products. Cooling and Cogeneration Systems segment revenues decreased to $2,958,000 in fiscal 1998 from $4,616,000 in fiscal 1997, principally due to decreased revenues from gas-fueled cooling systems. 13PAGE THERMO POWER CORPORATION First Quarter Fiscal 1998 Compared With First Quarter Fiscal 1997 (continued) The gross profit margin increased to 29% in the first quarter of fiscal 1998 from 15% in the first quarter of fiscal 1997, primarily due to a 35% gross profit margin at Peek. The gross profit margin at Peek is not necessarily indicative of future quarterly operating results for the reasons discussed above. The gross profit margin for the Industrial Refrigeration Systems segment increased to 22% in fiscal 1998 from 18% in fiscal 1997, primarily due to lower warranty expenses and manufacturing efficiencies at FES. The gross profit margin for the Engines segment increased to 8% in fiscal 1998 from 3% in fiscal 1997, primarily due to a decrease in sales of lower-margin marine-engine related products. The gross profit margin for the Cooling and Cogeneration Systems segment increased to 19% in fiscal 1998 from 18% in fiscal 1997, primarily due to a decrease in sales of lower-margin gas-fueled cooling systems. Selling, general, and administrative expenses as a percentage of revenues increased to 21% in the first quarter of fiscal 1998 from 13% in the first quarter of fiscal 1997, principally due to relatively higher selling, general, and administrative expenses as a percentage of revenues at Peek. Research and development expenses increased to $1,729,000 in fiscal 1998 from $644,000 in fiscal 1997, due to the inclusion of $1,154,000 of research and development expenses at Peek. Interest income increased to $589,000 in the first quarter of fiscal 1998 from $451,000 in the first quarter of fiscal 1997, principally due to interest earned on the receivable from ONIX Systems Inc. relating to the sale of Peek's Field Data business (Note 3). Interest expense increased $1,420,000 due to borrowings in November 1997 from Thermo Electron Corporation to finance the acquisition of Peek (Note 3), and the inclusion of $245,000 of interest expense at Peek. The effective tax rate decreased to 46% in the first quarter of fiscal 1998 from 70% in the first quarter of fiscal 1997. These rates exceeded the statutory federal income tax rate primarily due to nondeductible amortization of cost in excess of net assets of acquired companies, an increase in the valuation allowance for net operating loss carryforwards and other tax assets of the Company's ThermoLyte subsidiary, and the impact of state income taxes. The effective tax rate declined from fiscal 1997 to fiscal 1998 principally due to the smaller relative effect of the valuation allowance required at ThermoLyte. Minority interest expense increased to $189,000 in the first quarter of fiscal 1998 from $78,000 in the first quarter of fiscal 1997 due to minority interest expense on Peek's earnings relating to Peek shares tendered after November 6, 1997, through January 16, 1998. As of January 16, 1998, the Company had acquired all of the Peek outstanding ordinary shares. 14PAGE THERMO POWER CORPORATION Liquidity and Capital Resources Consolidated working capital was $36,300,000 at January 3, 1998, compared with $54,708,000 at September 27, 1997. Included in working capital are cash, cash equivalents, and available-for-sale investments of $48,836,000 at January 3, 1998, compared with $28,518,000 at September 27, 1997. Of the $48,836,000 balance at January 3, 1998, $15,037,000 was held by ThermoLyte, and the remainder was held by the Company and its wholly owned subsidiaries. At January 3, 1998, $13,611,000 of the Company's cash and cash equivalents was held by its foreign subsidiaries. While this cash can be used outside of the United States, repatriation of this cash into the United States would be subject to a United States tax. Additionally, working capital at January 3, 1998, was reduced by common stock of subsidiary subject to redemption of $18,138,000, which represents ThermoLyte's common stock, redeemable in December 1998 or 1999, the redemption value of which is $18,450,000. During the first quarter of fiscal 1998, $8,078,000 of cash was provided by operating activities. Cash provided by the Company's operating results was improved by a reduction in inventories of $7,333,000, offset in part by an increase in accounts receivable of $3,354,000. The decrease in inventories and increase in accounts receivable resulted primarily at Peek, due to the timing of shipments. The increase in accounts receivable at Peek was offset in part by a decrease in accounts receivable principally at Crusader, NuTemp, and FES, due to a decrease in sales. During the first quarter of fiscal 1998, the Company's primary investing activities included $143,743,000 expended for the Peek acquisition (Note 3), net of cash acquired, $1,886,000 expended for purchases of rental assets and property, plant, and equipment, and $1,524,000 in proceeds received from the sale of rental assets and property, plant, and equipment. At January 3, 1998, $5,111,000 was accrued for Peek shares acquired in the second quarter of fiscal 1998 in completion of the Company's acquisition of Peek (Note 3). The Company received payment of $19,117,000, relating to the sale of Peek's Field Data business, from ONIX in January 1998 (Note 3). During the remainder of fiscal 1998, the Company expects to make capital expenditures for the purchase of rental assets and property, plant, and equipment of approximately $13,600,000, including approximately $550,000 for software and hardware that is year 2000 compliant. The Company's financing activities provided $156,086,000 of cash in the first quarter of fiscal 1998. The Company borrowed $160,000,000 from Thermo Electron to finance the acquisition of Peek (Note 3) and expended $1,129,000 of cash for the purchase of Company common stock. The Company's Board of Directors has authorized the repurchase, through March 17, 1998, of up to $5,000,000 of its own securities. Any such purchases would be funded from working capital. As of January 3, 1998, $258,000 remained under the Company's authorization. 15PAGE THERMO POWER CORPORATION Liquidity and Capital Resources (continued) The Company's $160,000,000 promissory note to Thermo Electron is due in November 1999. Thermo Electron has indicated its intention to require that the Company's indebtedness to Thermo Electron be repaid only to the extent the Company's liquidity and cash flow permit. The Company believes its existing resources are sufficient to meet the capital requirements of its existing operations for the foreseeable future, except for repayment of the promissory note to Thermo Electron as discussed above. PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits See Exhibit Index on the page immediately preceding the exhibits. (b) Reports on Form 8-K On November 21, 1997, the Company filed a Current Report on Form 8-K pertaining to its tender offer for all of the outstanding shares of Peek plc. On January 20, 1998, the Company filed an amendment on Form 8-K/A, the purpose of which was to file the financial information required by Form 8-K concerning this acquisition. 16PAGE THERMO POWER CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of the 5th day of February 1998. THERMO POWER CORPORATION Paul F. Kelleher --------------------------- Paul F. Kelleher Chief Accounting Officer John N. Hatsopoulos --------------------------- John N. Hatsopoulos Chief Financial Officer and Senior Vice President 17PAGE THERMO POWER CORPORATION EXHIBIT INDEX Exhibit Number Description of Exhibit ------------------------------------------------------------------------ 2.1 Share Purchase Agreement dated as of January 29, 1998, among the Company, ONIX Systems Inc., Radley Services Ltd., and Peek Corporation. 10.1 Amended and Restated Master Guarantee Reimbursement and Loan Agreement dated as of December 10, 1997, between the Company and Thermo Electron Corporation. 27 Financial Data Schedule. EX-2.1 2 EXHIBIT 2.1 SHARE PURCHASE AGREEMENT This AGREEMENT is dated as of January 29, 1998 by and among (i) Radley Services Ltd. ("Radley") and Peek Corporation ("PC"), on the one hand, (ii) ONIX Systems Inc., on the other hand ("Buyer"), and (iii) Thermo Power Corporation, a Massachusetts corporation ("Thermo"). Thermo, Radley and PC are sometimes referred to herein collectively as the Sellers. WHEREAS, Sellers desire to sell all of the issued and outstanding shares of each of (i) Peek Measurement Ltd., a company organized under the laws of England ("PML"), (ii) Brandt Instruments Inc., a company organized under the laws of the State of Delaware ("Brandt") and (iii) Peek Measurement Inc., a company organized under the laws of the State of Texas ("PMI") to Buyer, and Buyer desires to purchase such shares from the Sellers; NOW, THEREFORE, in consideration of the premises and mutual promises and agreements set forth herein, the parties hereto hereby agree as follows: 1. Purchase and Sale of Shares. (a) PC hereby sells, assigns, transfers, conveys, and delivers to Buyer 100% of the issued and outstanding shares of capital stock of each of Brandt (the "Brandt Shares") and PMI (the "PMI Shares") and (ii) Radley hereby sells, assigns, transfers, conveys, and delivers to Buyer 100% of the issued and outstanding share capital of PML (the "PML Shares," collectively with the Brandt Shares and PMI Shares, the "Shares"). In consideration for the Shares, Buyer shall pay to Sellers an aggregate of $19,116,825 in cash (the "Purchase Price") plus interest on such amount for the period beginning November 6, 1997 and ending on the date of payment of the Purchase Price, at a rate equal to the 90-day Commercial Paper Composite Rate for 90-day maturities as reported by Merrill Lynch Capital Markets, as an average of the last five business days of the Buyer's latest fiscal quarter, plus 25 basis points, reset each quarter. The parties acknowledge and agree that the Purchase Price represents the sum of (i) the aggregate net tangible assets of PML, Brandt and PMI (collectively, the "Peek Measurement Business") (assumed to be $5,559,000) as of the date of Thermo's acquisition of the Peek Measurement Business as part of the acquisition on November 6, 1997, by Thermo of Peek plc (the "Peek plc Business"), plus (ii) a percentage of the total goodwill associated with Thermo's acquisition of the Peek plc Business equal to the total revenues of the Peek Measurement Business for the 1997 fiscal year relative to the total revenues of the Peek plc Business for such period, plus (iii) $1,038,825, representing the estimated tax liability of Thermo relating to the transfer of the Peek Measurement Business to Buyer. PAGE 2. Further Assurances. At the request of Buyer at any time on or after the date hereof, Sellers will execute and deliver such further instruments of transfer and conveyance and take such other action as Buyer reasonably may request effectively to assign and transfer to Buyer any of the Shares. 3. Sellers' Representations and Warranties. Each Seller represents and warrants that: (a) Organization and Existence. Such Seller is a company organized and existing under the laws of its respective jurisdiction of organization. (b) Approval of Transactions. Each Seller has obtained all necessary corporate authorizations and approvals, and has taken all actions required for the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. (c) No Conflict. Neither the execution nor delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor the fulfillment of or compliance with the terms and provisions hereof will (1) conflict with the charter documents or by-laws of such Seller, (2) violate any current provisions of law, administrative regulation, or court decree applicable to such Seller or (3) conflict with or result in a breach of any of the terms, conditions or provisions of or constitute default under any material agreement or instrument to which such Seller, or any Peek Measurement Business entity, is a party or by which each is bound. (d) Ownership of Assets and Shares; Authority to Transfer. The Shares are not encumbered and are freely transferable by the respective Seller. PC holds good and marketable title to the Brandt Shares and the PMI Shares and no third party is entitled to claim any right thereto or make any claim thereon. Radley holds good and marketable title to the PML Shares and no third party is entitled to claim any right thereto or make any claim thereon. The transfer of the Shares to Buyer pursuant to this Agreement will vest in Buyer title to the Shares, free and clear of all liens, claims, equities, options, calls, voting trusts, agreements, commitments and encumbrances whatsoever. 4. Buyer's Representations and Warranties. (a) Organization and Existence. The Buyer is a company organized and existing under the laws of its jurisdiction of organization. (b) Approval of Transactions. The Buyer has obtained all necessary corporate authorizations and approvals, and has taken all actions required for the execution and delivery of this 2PAGE Agreement and the consummation of the transactions contemplated hereby. (c) No Conflict. Neither the execution nor delivery of this Agreement, nor the consummation of the transactions herein contemplated, nor the fulfillment of or compliance with the terms and provisions hereof will (1) conflict with the charter documents or by-laws of the Buyer, (2) violate any current provisions of law, administrative regulation, or court decree applicable to the Buyer or (3) conflict with or result in a breach of any of the terms, conditions or provisions of or constitute default under any material agreement or instrument to which the Buyer is a party or by which it is bound. 3PAGE 5. Indemnification. (a) Sellers jointly and severally agree to indemnify and hold harmless Buyer from any and all damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened actions) incurred by Buyer as a result of (i) the inaccuracy of any representation or warranty contained in Section 3 hereof or (ii) the breach by Sellers of any provision hereof. (b) Buyer agrees to indemnify and hold harmless Sellers from any and all damages, losses, liabilities, costs and expenses (including, without limitation, settlement costs and any reasonable legal, accounting or other expenses for investigating or defending any actions or threatened actions) incurred by Sellers as a result of (i) the inaccuracy of any representation or warranty contained in Section 4 hereof or (ii) the breach by Buyer of any provision hereof. (c) Whenever any claim shall arise for indemnification hereunder, the party seeking indemnification (the "Indemnified Party") shall promptly notify the other party or parties from whom indemnification is sought (as the case may be, the "Indemnifying Party") of the claim and, when known, the facts constituting the basis for such claim. In the event of any such claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the notice to the Indemnifying Party shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. The Indemnified Party shall not settle or compromise any claim by a third party for which the Indemnified Party is entitled to indemnification hereunder without the prior consent of the Indemnifying Party, unless suit shall have been instituted against the Indemnified Party and the Indemnifying Party shall not have taken control of such suit after notification thereof as provided in Section 5(d) of this Agreement. (d) In connection with any claim giving rise to indemnity hereunder resulting from or arising out of any claim or legal proceeding by a person who is not a party to this Agreement, the Indemnifying Party at its sole cost and expense may, upon notice to the Indemnified Party, assume the defense of any such claim or legal proceeding if it acknowledges to the Indemnified Party its obligations to indemnify the Indemnified Party with respect to all elements of such claim. The Indemnified Party shall be entitled to participate in (but not control) the defense of any such action, with its counsel and at its own expense. If the Indemnifying Party does not assume the defense of any such claim or litigation resulting therefrom within 30 days after the date the Indemnifying Party is notified of such claim pursuant to Paragraph 5(c) hereof, (i) the Indemnified Party may defend against such claim or litigation, 4PAGE after giving notice of the same to the Indemnifying Party, on such terms as are appropriate in the Indemnified Party's reasonable judgment, and (ii) the Indemnifying Party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. 6. Effective Date. The transfer of the Shares shall be deemed to be effective as of November 6, 1997. 7. Captions. The captions and headings to the various sections, paragraphs and exhibits of this Agreement are for convenience of reference only and shall not affect or control the meaning or interpretation of any of the provisions of this Agreement. 8. Integration. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein. 9 Notices and Communications. Any notice or other communication shall be in writing and shall be personally delivered, or sent by overnight or second day courier or by first class mail, return receipt requested, to the party to whom such notice or other communication is to be given or made at such party's address set forth below, or to such other address as such party shall designate by written notice to the other party as follows: If to Sellers or Thermo Power Corporation: Thermo Power Corporation c/o Thermo Electron Corporation 81 Wyman Street P.O. Box 9046 Waltham, MA 02254-9046 Attn.: General Counsel If to Buyer: ONIX Systems Inc. c/o Thermo Electron Corporation 81 Wyman Street P.O. Box 9046 Waltham, MA 02254-9046 Attn.: General Counsel provided that any notice of change of address, and any notice or other communication given otherwise than as specified above shall be effective only upon receipt; and further that any presumption of receipt by the addressee shall be inoperable during the period of any interruption in Postal Service. 10. Survival of Representations and Warranties. All representations and warranties made by Sellers or Buyer in this 5PAGE Agreement shall survive the execution and delivery of this Agreement. 11. Governing Law; Assignment. This Agreement is to be construed, interpreted, applied and governed in all respects in accordance with the laws of the Commonwealth of Massachusetts, without regard to its conflict of laws provisions, is to take effect as a sealed instrument, is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns and may be canceled, modified or amended only by a written instrument executed by Thermo, Sellers and Buyer. No party hereto may assign its rights hereunder without prior written consent of the other party. 12. Guaranty. Thermo hereby unconditionally guarantees all of the obligations of the other Sellers under this Agreement. 13. Counterparts. This Agreement may be executed in counterparts, all of which together shall for all purposes constitute one Agreement, binding on the parties hereto notwithstanding that such parties have not signed the same counterpart. [Remainder of Page Intentionally Left Blank] 6PAGE IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. SELLERS: RADLEY SERVICES LTD. PEEK CORPORATION By: J. Timothy Corcoran By: J. Timothy Corcoran ---------------------------- -------------------------- Title: Authorized Signatory Title: Chariman ------------------------- ----------------------- BUYER: THERMO: ONIX SYSTEMS INC. THERMO POWER CORPORATION By: William J. Zolner By: J. Timothy Corcoran ----------------------- --------------------- Title: President & CEO Title: President & CEO -------------------- ------------------ EX-10.1 3 EXHIBIT 10.1 AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT AND LOAN AGREEMENT This AGREEMENT is entered into as of the 10th day of December, 1997 by and among Thermo Electron Corporation (the "Parent") and those of its subsidiaries that join in this Agreement by executing the signature page hereto (the "Majority Owned Subsidiaries"). WITNESSETH: WHEREAS, the Majority Owned Subsidiaries and their wholly-owned subsidiaries wish to enter into various financial transactions, such as convertible or nonconvertible debt, loans, and equity offerings, and other contractual arrangements with third parties (the "Underlying Obligations") and may provide credit support to, on behalf of or for the benefit of, other subsidiaries of the Parent ("Credit Support Obligations"); WHEREAS, the Majority Owned Subsidiaries and the Parent acknowledge that the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be unable to enter into many kinds of Underlying Obligations without a guarantee of their performance thereunder from the Parent (a "Parent Guarantee") or without obtaining Credit Support Obligations from other Majority Owned Subsidiaries; WHEREAS, the Majority Owned Subsidiaries and their wholly-owned subsidiaries may borrow funds from the Parent, and the Parent may loan funds or provide credit to the Majority Owned Subsidiaries and their wholly-owned subsidiaries, on a short-term and unsecured basis; WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority Owned Subsidiaries ") may themselves be majority owned subsidiaries of other Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries"); WHEREAS, for various reasons, Parent Guarantees of a Second Tier Majority Owned Subsidiary's Underlying Obligations may be demanded and given without the respective First Tier Majority Owned Subsidiary also issuing a guarantee of such Underlying Obligation; WHEREAS, the Parent may itself make a loan or provide other credit to a Second Tier Majority Owned Subsidiary or its wholly-owned subsidiaries under circumstances where the applicable First Tier Majority Owned Subsidiary does not provide such credit; and WHEREAS, the Parent is willing to consider continuing to issue Parent Guarantees and providing credit, and the Majority Owned Subsidiaries are willing to consider continuing to provide PAGE Credit Support Obligations and to borrow funds, on the terms and conditions set forth below; NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party hereto, the parties agree as follows: 1. If the Parent provides a Parent Guarantee of an Underlying Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the Parent Guarantee, or the Parent performs under the Parent Guarantee for any other reason, then the Majority Owned Subsidiary that is obligated, either directly or indirectly through a wholly-owned subsidiary, under such Underlying Obligation shall indemnify and save harmless the Parent from any liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If the Underlying Obligation is issued by a Second Tier Majority Owned Subsidiary or a wholly-owned subsidiary thereof, and such Second Tier Majority Owned Subsidiary is unable to fully indemnify the Parent (because of the poor financial condition of such Second Tier Majority Owned Subsidiary, or for any other reason), then the First Tier Majority Owned Subsidiary that owns the majority of the stock of such Second Tier Majority Owned Subsidiary shall indemnify and save harmless the Parent from any remaining liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Parent as a result of the Parent Guarantee. If a Majority Owned Subsidiary or a wholly-owned subsidiary thereof provides a Credit Support Obligation for any subsidiary of the Parent, other than a subsidiary of such Majority Owned Subsidiary, and the beneficiary(ies) of the Credit Support Obligation enforce the Credit Support Obligation, or the Majority Owned Subsidiary or its wholly-owned subsidiary performs under the Credit Support Obligation for any other reason, then the Parent shall indemnify and save harmless the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, from any liability, cost, expense or damage (including reasonable attorneys' fees) suffered by the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, as a result of the Credit Support Obligation. Without limiting the foregoing, Credit Support Obligations include the deposit of funds by a Majority Owned Subsidiary or a wholly-owned subsidiary thereof in a credit arrangement with a banking facility whereby such funds are available to the banking facility as collateral for overdraft obligations of other Majority Owned Subsidiaries or their subsidiaries also participating in the credit arrangement with such banking facility. 2. For purposes of this Agreement, the term "guarantee" shall include not only a formal guarantee of an obligation, but PAGE also any other arrangement where the Parent is liable for the obligations of a Majority Owned Subsidiary or its wholly-owned subsidiaries. Such other arrangements include (a) representations, warranties and/or covenants or other obligations joined in by the Parent, whether on a joint or joint and several basis, for the benefit of the Majority Owned Subsidiary or its wholly-owned subsidiaries and (b) responsibility of the Parent by operation of law for the acts and omissions of the Majority Owned Subsidiary or its wholly-owned subsidiaries, including controlling person liability under securities and other laws. 3. Promptly after the Parent receives notice that a beneficiary of a Parent Guarantee is seeking to enforce such Parent Guarantee, the Parent shall notify the Majority Owned Subsidiary(s) obligated, either directly or indirectly through a wholly-owned subsidiary, under the relevant Underlying Obligation. Such Majority Owned Subsidiary(s) or wholly-owned subsidiary thereof, as applicable, shall have the right, at its own expense, to contest the claim of such beneficiary. If a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is contesting the claim of such beneficiary, the Parent will not perform under the relevant Parent Guarantee unless and until, in the Parent's reasonable judgment, the Parent is obligated under the terms of such Parent Guarantee to perform. Subject to the foregoing, any dispute between a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, and a beneficiary of a Parent Guarantee shall not affect such Majority Owned Subsidiary's obligation to promptly indemnify the Parent hereunder. Promptly after a Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, receives notice that a beneficiary of a Credit Support Obligation is seeking to enforce such Credit Support Obligation, the Majority Owned Subsidiary shall notify the Parent. The Parent shall have the right, at its own expense, to contest the claim of such beneficiary. If the Parent or the subsidiary of the Parent on whose behalf the Credit Support Obligation is given is contesting the claim of such beneficiary, the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, will not perform under the relevant Credit Support Obligation unless and until, in the Majority Owned Subsidiary's reasonable judgment, the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is obligated under the terms of such Credit Support Obligation to perform. Subject to the foregoing, any dispute between the Parent or the subsidiary of the Parent on whose behalf the Credit Support Obligation was given, on the one hand, and a beneficiary of a Credit Support Obligation, on the other, shall not affect the Parent's obligation to promptly indemnify the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, hereunder. PAGE 4. Upon the request of a Majority Owned Subsidiary, the Parent may make loans and advances to the Majority Owned Subsidiary or its wholly-owned subsidiaries on a short-term, revolving credit basis, from time to time in such amounts as mutually determined by the Parent and the Majority Owned Subsidiary. The aggregate principal amount of such loans and advances shall be reflected on the books and records of the Majority Owned Subsidiary (or wholly-owned subsidiary, as applicable) and the Parent. All such loans and advances shall be on an unsecured basis unless specifically provided otherwise in loan documents executed at that time. The Majority Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall pay interest on the aggregate unpaid principal amount of such loans from time to time outstanding at a rate ("Interest Rate") equal to the rate of the Commercial Paper Composite Rate for 90-day maturities as reported by Merrill Lynch Capital Markets, as an average of the last five business days of such Majority Owned Subsidiary's latest fiscal quarter then ended, plus twenty-five (25) basis points. The Interest Rate shall be adjusted on the first business day of each fiscal quarter of such Majority Owned Subsidiary pursuant to the Interest Rate formula contained in the preceding sentence and shall be in effect for the entirety of such fiscal quarter. Interest shall be computed on a 360-day basis. The aggregate principal amount outstanding and accrued interest thereon shall be payable on demand. The principal and accrued interest may be paid by the Majority Owned Subsidiaries or their wholly-owned subsidiaries, as applicable, at any time or from time to time, in whole or in part, without premium or penalty. All payments shall be applied first to accrued interest and then to principal. Principal and interest shall be payable in lawful money of the United States of America, in immediately available funds, at the principal office of the Parent or at such other place as the Parent may designate from time to time in writing to the Majority Owned Subsidiary. The unpaid principal amount of any such borrowings, and accrued interest thereon, shall become immediately due and payable, without demand, upon the failure of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, to pay its debts as they become due, the insolvency of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, the filing by or against the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, of any petition under the U.S. Bankruptcy Code (or the filing of any similar petition under the insolvency law of any jurisdiction), or the making by the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, of an assignment or trust mortgage for the benefit of creditors or the appointment of a receiver, custodian or similar agent with respect to, or the taking by any such person of possession of, any property of the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable. In case any payments of principal and interest shall not be paid when PAGE due, the Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, further promises to pay all cost of collection, including reasonable attorneys' fees. 5. If the Parent makes a loan or provides other credit ("Credit Extension") to a Second Tier Majority Owned Subsidiary, the First Tier Majority Owned Subsidiary that owns the majority of the stock of such Second Tier Majority Owned Subsidiary hereby guarantees the Second Tier Majority Owned Subsidiary's obligations to the Parent thereunder. Such guaranty shall be enforced only after the Parent, in its reasonable judgment, determines that the Second Tier Majority Owned Subsidiary is unable to fully perform its obligations under the Credit Extension. If the Parent provides Credit Extension to a wholly-owned subsidiary of a Second Tier Majority Owned Subsidiary, the Second Tier Majority Owned Subsidiary hereby guarantees it wholly-owned subsidiary's obligations to the Parent thereunder and the First Tier Majority Owned Subsidiary that owns the majority of the stock of such Second Tier Majority Owned Subsidiary hereby guarantees the Second Tier Majority Owned Subsidiary's obligations to the Parent hereunder. Such guaranty by the First Tier Majority Owned Subsidiary shall be enforced only after the Parent, in its reasonable judgment, determines that the Second Tier Majority Owned Subsidiary is unable to fully perform its guaranty obligation hereunder. 6. All payments required to be made by a Majority Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall be made within two days after receipt of notice from the Parent. All payments required to be made by the Parent shall be made within two days after receipt of notice from the Majority Owned Subsidiary. 7. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts applicable to contracts made and performed therein. PAGE IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written. THERMO ELECTRON CORPORATION By: Melissa F. Riordan ------------------------------ Title: Treasurer THERMO POWER CORPORATION By: J. Timothy Corcoran ------------------------------ Title: President and Chief Executive Officer EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO POWER CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JANUARY 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS Oct-03-1998 JAN-03-1998 39,667 9,169 71,674 13,699 42,646 184,482 33,935 9,313 376,458 148,182 160,392 0 0 1,249 65,642 376,458 63,562 63,562 45,249 45,249 1,729 30 1,425 2,313 1,069 1,055 0 0 0 1,055 .09 .09
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