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 July 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12137
THERMO FIBERGEN INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3311544
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8 Alfred Circle
Bedford, Massachusetts 01730
(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 July 30, 1999
Common Stock, $.01 par value 14,312,400
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO FIBERGEN INC.
Consolidated Balance Sheet
(Unaudited)
<S> <C> <C> <C> <C>
Assets
July 3, January 2,
(In thousands) 1999 1999
- ------------------------------------------------------------------------------------ ----------- ----------
Current Assets:
Cash and cash equivalents $ 137 $ 6,748
Advance to affiliate (Note 5) 5,329 -
Available-for-sale investments, at quoted market value (amortized cost 45,987 48,206
of $46,034 and $48,210)
Accounts receivable, less allowance of $30 2,051 1,188
Inventories:
Raw materials and supplies 180 151
Finished goods 266 334
Prepaid income taxes and other current assets 393 366
Due from parent company and affiliated companies 361 300
-------- --------
54,704 57,293
-------- --------
Property, Plant, and Equipment, at Cost 11,317 11,175
Less: Accumulated depreciation and amortization 2,749 2,250
-------- --------
8,568 8,925
-------- --------
Other Assets 761 802
-------- --------
Cost in Excess of Net Assets of Acquired Company 3,979 4,096
-------- --------
$68,012 $71,116
======== ========
2
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THERMO FIBERGEN INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
July 3, January 2,
(In thousands except share amounts) 1999 1999
- ------------------------------------------------------------------------------------- ----------- ---------
Current Liabilities:
Accounts payable $ 331 $ 327
Accrued payroll and employee benefits 322 325
Accrued income taxes 374 -
Other accrued liabilities 544 732
------- -------
1,571 1,384
------- -------
Deferred Income Taxes 230 230
------- -------
Common Stock Subject to Redemption ($60,116 redemption value), 4,715,000 58,802 58,260
shares issued and outstanding
------- -------
Shareholders' Investment:
Common stock, $.01 par value, 25,000,000 shares authorized; 10,000,000 100 100
shares issued
Capital in excess of par value 11,145 11,145
Retained earnings 19 -
Treasury stock at cost, 402,600 shares (3,825) -
Accumulated other comprehensive items (Note 2) (30) (3)
------- -------
7,409 11,242
------- -------
$68,012 $71,116
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
3
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THERMO FIBERGEN INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
Revenues $ 2,253 $1,317
------- ------
Costs and Operating Expenses:
Cost of revenues 1,229 801
Selling, general, and administrative expenses 859 891
Research and development expenses 354 408
------- ------
2,442 2,100
------- ------
Operating Loss (189) (783)
Interest Income 660 792
------- ------
Income Before Provision for Income Taxes 471 9
Provision for Income Taxes 189 4
------- ------
Net Income $ 282 $ 5
======= ======
Basic and Diluted Earnings per Share (Note 3) $ .02 $ -
======= ======
Weighted Average Shares (Note 3):
Basic 14,377 14,715
======= ======
Diluted 15,489 16,340
======= ======
The accompanying notes are an integral part of these consolidated financial
statements.
4
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THERMO FIBERGEN INC.
Consolidated Statement of Income
(Unaudited)
Six Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
Revenues $ 4,327 $2,660
------- ------
Costs and Operating Expenses:
Cost of revenues 2,339 1,592
Selling, general, and administrative expenses 1,737 1,688
Research and development expenses 659 820
------- ------
4,735 4,100
------- ------
Operating Loss (408) (1,440)
Interest Income 1,343 1,644
------- ------
Income Before Provision for Income Taxes 935 204
Provision for Income Taxes 374 82
------- ------
Net Income $ 561 $ 122
======= ======
Earnings per Share (Note 3):
Basic $ .04 $ .01
======= ======
Diluted $ .03 $ .01
======= ======
Weighted Average Shares (Note 3):
Basic 14,523 14,715
======= ======
Diluted 16,115 16,445
======= ======
The accompanying notes are an integral part of these consolidated financial
statements.
5
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THERMO FIBERGEN INC.
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
July 3, July 4,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
Operating Activities:
Net income $ 561 $ 122
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 659 489
Other noncash items - 208
Changes in current accounts:
Accounts receivable (863) 93
Inventories 39 178
Other current assets (11) (31)
Accounts payable 4 566
Other current liabilities 501 (16)
-------- -------
Net cash provided by operating activities 890 1,609
-------- -------
Investing Activities:
Purchases of available-for-sale investments (56,325) (23,150)
Proceeds from sale and maturities of available-for-sale investments 57,827 23,311
Advances to affiliate, net (Note 5) (5,329) -
Purchases of property, plant, and equipment (461) (3,721)
Other 673 189
-------- -------
Net cash used in investing activities (3,615) (3,371)
-------- -------
Financing Activities:
Purchases of Company common stock (1,598) -
Purchases of Company common stock from Thermo Electron (2,227) -
Change in due from parent company and affiliated companies (61) 52
-------- -------
Net cash provided by (used in) financing activities (3,886) 52
-------- -------
Decrease in Cash and Cash Equivalents (6,611) (1,710)
Cash and Cash Equivalents at Beginning of Period 6,748 21,752
-------- -------
Cash and Cash Equivalents at End of Period $ 137 $20,042
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
6
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Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Fibergen Inc. (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 July 3, 1999, the results of
operations for the three- and six-month periods ended July 3, 1999, and July 4,
1998, and the cash flows for the six-month periods ended July 3, 1999, and July
4, 1998. Interim results are not necessarily indicative of results for a full
year.
The consolidated balance sheet presented as of January 2, 1999, 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 January 2, 1999,
filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represent unrealized net of tax gains and losses on available-for-sale
investments, reported as a component of shareholders' investment in the
accompanying balance sheet. During the second quarter of 1999 and 1998, the
Company had comprehensive income of $244,000 and a comprehensive loss of $4,000,
respectively. During the first six months of 1999 and 1998, the Company had
comprehensive income of $534,000 and $100,000, respectively.
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
(In thousands except per share amounts) 1999 1998 1999 1998
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Basic
Net Income $ 282 $ 5 $ 561 $ 122
------ ------- ------ -------
Weighted Average Shares 14,377 14,715 14,523 14,715
------ ------- ------ -------
Basic Earnings per Share $ .02 $ - $ .04 $ .01
====== ======= ====== =======
Diluted
Net Income $ 282 $ 5 $ 561 $ 122
------ ------- ------ -------
Weighted Average Shares 14,377 14,715 14,523 14,715
Effect of:
Redemption rights 1,091 1,623 1,581 1,728
Stock options 21 2 11 2
------ ------- ------ -------
Weighted Average Shares, as Adjusted 15,489 16,340 16,115 16,445
------ ------- ------ -------
Diluted Earnings per Share $ .02 $ - $ .03 $ .01
====== ======= ====== =======
7
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3. Earnings per Share (continued)
The computation of diluted earnings per share for each period excludes the
effect of assuming the exercise of certain outstanding stock options because the
effect would be antidilutive. As of July 3, 1999, there were 20,000 of such
options outstanding, with an exercise price of $12.75 per share.
4. Business Segment Information
Three Months Ended Six Months Ended
July 3, July 4, July 3, July 4,
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Revenues:
Cellulose-based Products $ 1,907 $ 1,317 $ 3,636 $ 2,660
Fiber-recovery and Water-clarification Services 346 - 691 -
------- -------- ------- --------
$ 2,253 $ 1,317 $ 4,327 $ 2,660
======= ======== ======= ========
Income Before Provision for Income Taxes:
Cellulose-based Products $ 305 $ 38 $ 520 $ 73
Fiber-recovery and Water-clarification Services (494) (821) (928) (1,513)
------- -------- ------- --------
Total operating loss (189) (783) (408) (1,440)
Interest income 660 792 1,343 1,644
------- -------- ------- --------
$ 471 $ 9 $ 935 $ 204
======= ======== ======= ========
5. Cash Management Arrangement
Effective June 1, 1999, the Company and Thermo Electron Corporation
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.
Amounts invested in this arrangement are included in "advance to affiliate" in
the accompanying balance sheet.
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 has no borrowings under this
arrangement at July 3, 1999.
8
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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 January 2, 1999, filed with the Securities and Exchange
Commission.
Overview
The Company organizes and manages its business by individual functional
operating entity. The Company's two operating entities constitute the Company's
business segments: Fiber-recovery and Water-clarification Services and
Cellulose-based Products. The Fiber-recovery and Water-clarification Services
segment designs, builds, owns, and operates plants to help pulp and paper mills
improve product quality, reduce costs, and close the loop in their water and
solids systems on a long-term contract basis. The plants recover and return to
the mill long cellulose fiber and clarified water to be reused in papermaking.
In July 1998, the Company completed construction of, and began operating, its
first fiber-recovery and water-clarification facility, providing clean water and
long fiber to a mill under a ten-year contract.
The Cellulose-based Products segment, which consists of the Company's
GranTek subsidiary, employs patented technology to produce absorbing granules
from papermaking byproducts that are marketed and sold as Biodac(R) agricultural
carriers, Gransorb(TM) oil and grease absorbents, and PaPurr(TM) (pronounced
"paper") cat box filler. Biodac(R) is used to deliver agricultural chemicals for
professional turf, home lawn and garden, agricultural row-crop, and
mosquito-control applications. Products under development include
natural-fiber-reinforced thermoplastic composites and controlled-release
granules for carrying fertilizers.
Revenues from the Cellulose-based Products segment are principally from
sales in the agricultural-carrier market. The Company's primary customers in
this market, chemical formulators, typically purchase carriers during the winter
and spring for the cultivation and planting season. As a result, the Company
earns a disproportionate share of its revenues from its agricultural-carrier
products during the first two quarters of the year. The Company believes that
its entrance into the oil and grease absorption, cat box filler, and
international agricultural row-crop markets, if successful, may mitigate the
seasonality of the Company's sales.
The Company currently intends to limit the pace and amount of its research
and development so that its research and development expenditures will not
exceed the interest income earned on its cash, cash equivalents,
available-for-sale investments, and advance to affiliate, plus the Company's
operating earnings, if any, before research and development expenses.
Results of Operations
Second Quarter 1999 Compared With Second Quarter 1998
Revenues increased to $2,253,000 in the second quarter of 1999 from
$1,317,000 in the second quarter of 1998, due to an increase in revenues at the
Cellulose-based Products segment and the inclusion of $346,000 of revenues at
the Fiber-recovery and Water-clarification Services segment from its
fiber-recovery and water-clarification facility, which began operations in July
1998. Revenues at the Cellulose-based Products segment increased principally due
to sales of its recently introduced cat box filler product, as well as an
increase in demand for Biodac from its largest customer.
9
<PAGE>
Second Quarter 1999 Compared With Second Quarter 1998 (continued)
The gross profit margin increased to 45% in the second quarter of 1999
from 39% in the second quarter of 1998, primarily due to an increase in revenues
at the Cellulose-based Products segment and the inclusion of higher-margin
revenues from the Fiber-recovery and Water-clarification Services segment. In
addition, the 1998 gross profit margin was reduced by the effect of a decrease
in production volume resulting from necessary shutdowns of the GranTek
manufacturing plant while emptying inventory storage tanks at the
Cellulose-based Products segment.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 38% in the second quarter of 1999 from 68% in the second quarter of
1998, principally due to an increase in revenues at both segments.
Research and development expenses decreased to $354,000 in the second
quarter of 1999 from $408,000 in the second quarter of 1998, primarily due to a
reduction in expenditures related to the development of the fiber-recovery
process at the Fiber-recovery and Water-clarification Services segment.
Interest income decreased to $660,000 in the second quarter of 1999 from
$792,000 in the second quarter of 1998, principally as a result of a decrease in
average invested balances. Average invested balances decreased primarily due to
the use of cash to fund the construction of the Company's fiber-recovery and
water-clarification facility, completed in 1998, and to fund purchases of
Company common stock during 1999.
The effective tax rate was 40% in the second quarter of 1999. The
effective tax rate exceeded the statutory federal income tax rate primarily due
to the impact of state income taxes. The provision for income taxes was $4,000
in the second quarter of 1998 on pretax income of $9,000.
First Six Months 1999 Compared With First Six Months 1998
Revenues increased to $4,327,000 in the first six months of 1999 from
$2,660,000 in the first six months of 1998, due to an increase in revenues at
the Cellulose-based Products segment and the inclusion of $691,000 of revenues
at the Fiber-recovery and Water-clarification Services segment from its
fiber-recovery and water-clarification facility, which began operations in July
1998. Revenues at the Cellulose-based Products segment increased principally due
to an increase in demand for Biodac from its largest customer, as well as sales
of its recently introduced cat box filler product.
The gross profit margin increased to 46% in the first six months of 1999
from 40% in the first six months of 1998, primarily due to an increase in
revenues at the Cellulose-based Products segment and the inclusion of
higher-margin revenues from the Fiber-recovery and Water-clarification Services
segment. In addition, the 1998 gross profit margin was reduced by the effect of
the GranTek manufacturing plant shutdowns at the Cellulose-based Products
segment, as discussed in the results of operations for the second quarter.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 40% in the first six months of 1999 from 63% in the first six
months of 1998, principally due to an increase in revenues at both segments.
Research and development expenses decreased to $659,000 in the first six
months of 1999 from $820,000 in the first six months of 1998 for the reasons
discussed in the results of operations for the second quarter.
Interest income decreased to $1,343,000 in the first six months of 1999
from $1,644,000 in the first six months of 1998 for the reasons discussed in the
results of operations for the second quarter.
The effective tax rate was unchanged at 40% in the first six months of
1999 and 1998. The effective tax rate exceeded the statutory federal income tax
rate primarily due to the impact of state income taxes.
10
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Liquidity and Capital Resources
Consolidated working capital was $53,133,000 at July 3, 1999, compared
with $55,909,000 at January 2, 1999. Included in working capital at July 3,
1999, are cash, cash equivalents, and available-for-sale investments of
$46,124,000, compared with $54,954,000 at January 2, 1999. In addition, the
Company had $5,329,000 invested in an advance to affiliate at July 3, 1999.
Prior to the use of a new domestic cash management arrangement between the
Company and Thermo Electron Corporation (Note 5), which became effective June 1,
1999, amounts invested with Thermo Electron were included in cash and cash
equivalents. During the first six months of 1999, $890,000 of cash was provided
by operating activities. An increase in accounts receivable used $863,000 of
cash, primarily due to higher revenues. In addition, an increase in other
current liabilities provided $501,000 of cash, primarily due to an increase in
accrued income taxes.
During the first six months of 1999, the Company's primary investment
activities involved the purchase and sale of available-for-sale investments and
an advance to affiliate (Note 5).
During the first six months of 1999, the Company's financing activities
used $3,886,000 of cash, principally for the purchase of Company common stock in
open market and negotiated transactions, pursuant to authorizations by its Board
of Directors. Of the total purchased, 250,000 shares of its common stock were
purchased from Thermo Electron for an aggregate market value of $2,227,000.
Thermo Electron had previously acquired these shares through open market
purchases. As of July 3, 1999, the Company had a remaining authorization to
purchase $3,402,000 of Company common stock in open market or negotiated
transactions through March 16, 2000. Any such purchases are funded from working
capital.
The Company's common stock subject to redemption is redeemable by holders
of redemption rights in September 2000 or September 2001 for a total redemption
value of $60,116,000. The redemption rights are guaranteed, on a subordinated
basis, by Thermo Electron. As of July 3, 1999, there were 4,715,000 redemption
rights outstanding and only 3,875,650 shares of Company common stock held by
persons other than Thermo Electron, Thermo Fibertek, or the Company.
During the remainder of 1999, the Company plans to make expenditures for
property, plant, and equipment of approximately $500,000. In addition, the
Company may make capital expenditures for the construction of additional
fiber-recovery and water-clarification facilities. Construction of
fiber-recovery and water-clarification facilities is dependent upon the Company
entering into long-term contracts with paper mills, under which the Company will
charge fees to process the mills' papermaking byproducts. There is no assurance
that the Company will be able to obtain such additional contracts. The Company
anticipates that it will require significant amounts of cash for any
construction of its fiber-recovery and water-clarification facilities. The
Company will seek to finance any construction of such facilities through a
combination of internal funds, additional debt financing, and/or borrowings from
Thermo Fibertek and Thermo Electron, although there is no agreement with Thermo
Fibertek or Thermo Electron under which such parties would be obligated to lend
funds to the Company. The Company believes that its existing resources will be
sufficient to meet the Company's capital requirements until September 2000, when
the Company's redemption rights become exercisable. The Company's liquidity
could be adversely affected by the redemption that may occur in the third
quarter of 2000.
Year 2000
The following information constitutes a "Year 2000 Readiness Disclosure"
under the Year 2000 Information and Readiness Disclosure Act. The Company
continues to assess the potential impact of the year 2000 date recognition issue
on the Company's internal business systems, products, and operations. The
Company's year 2000 initiatives include (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 a
contingency plan.
11
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Year 2000 (continued)
The Company's State of Readiness
The Company has implemented a compliance program to ensure that its
critical information technology systems and facilities will be ready for the
year 2000. The first phase of the program, testing and evaluating the Company's
critical information technology systems and noninformation technology systems
for year 2000 compliance, has largely been completed. During phase one, the
Company tested and evaluated its significant computer systems, software
applications, and related equipment for year 2000 compliance. The Company also
evaluated the potential year 2000 impact on its critical noninformation
technology systems. The Company's efforts included testing the year 2000
readiness of its manufacturing, utility, and telecommunications systems at its
critical facilities. The Company is currently in phase two of its program,
during which any material noncompliant information technology systems or
noninformation technology systems that were identified during phase one are
prioritized and remediated. Based on its evaluations, the Company does not
believe that any material upgrades to its critical noninformation technology
systems are needed. The Company is currently upgrading or replacing its material
noncompliant information technology systems, and the majority of this process
was complete as of July 3, 1999. The Company expects that all of its material
information technology systems and critical noninformation technology systems
will be year 2000 compliant by October 1999.
The Company believes that all of its current material products are not
date sensitive and should not be affected by year 2000 issues.
The Company is in the process of identifying and assessing the year 2000
readiness of key suppliers, vendors, and customers that are believed to be
significant to the Company's business operations. As part of this effort, the
Company has developed and is distributing questionnaires relating to year 2000
compliance to its significant suppliers, vendors, and customers. To date, no
significant supplier, vendor, or customer has indicated that it believes its
business operations will be materially disrupted by the year 2000 issue. The
Company has started to follow-up with significant suppliers, vendors, and
customers that have not responded to the Company's questionnaires. The Company
has completed the majority of its assessment of third party risk, and expects to
be substantially completed by October 1999.
Contingency Plan
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan may include identifying and securing other suppliers, increasing
inventories, and modifying production facilities and schedules. As the Company
continues to evaluate the year 2000 readiness of its business systems,
facilities, and significant suppliers, vendors, and customers, it will modify
and adjust its contingency plan as may be required. The Company expects to
complete its contingency plan by October 1999.
Estimated Costs to Address the Company's Year 2000 Issues
The Company had not incurred any material expenses to third parties
(external costs) related to year 2000 issues as of July 3, 1999, and the total
external costs of year 2000 remediation are not expected to be material. Year
2000 costs are funded from working capital. All internal costs and related
external costs other than capital additions related to year 2000 remediation
have been and will continue to be expensed as incurred. The Company does not
track the internal costs incurred for its year 2000 compliance project. Such
costs are principally the related payroll costs for its information systems
staff.
12
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Year 2000 (continued)
Reasonably Likely Worst Case Scenario
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that certain of the Company's material
suppliers or vendors experience business disruptions due to the year 2000 issue
and are unable to provide materials and services to the Company on time. The
Company's operations could be delayed or temporarily shut down, and it could be
unable to meet its obligations to customers in a timely fashion. The Company's
business, operations, and financial condition could be adversely affected in
amounts that cannot be reasonably estimated at this time. If the Company
believes that any of its key suppliers or vendors may not be year 2000
compliant, it will seek to identify and secure other suppliers or vendors as
part of its contingency plan.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
If any of the Company's material customers, or its material suppliers or vendors
as described above, experience business disruptions due to year 2000 issues, the
Company might also be materially adversely affected. There is expected to be a
significant amount of litigation relating to the year 2000 issue and there can
be no assurance that the Company will not incur material costs in defending or
bringing lawsuits. In addition, if any year 2000 issues are identified, there
can be no assurance that the Company will be able to retain qualified personnel
to remedy such issues. Any unexpected costs or delays arising from the year 2000
issue could have a significant adverse impact on the Company's business,
operations, and financial condition in amounts that cannot be reasonably
estimated at this time.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in equity prices and
interest rates has not changed materially from year-end 1998.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
(d) Use of Proceeds
The Company sold 4,715,000 Units (each Unit consisting of one share of the
Company's common stock and one redemption right which enables the holder to sell
one share of the Company's common stock to the Company during the month of
September 2000 or the month of September 2001 for $12.75 in cash), pursuant to a
Registration Statement on Form S-1 (File No. 333-07585), which was declared
effective by the Securities and Exchange Commission on September 13, 1996. The
managing underwriters of the offering were NatWest Securities Limited, Lehman
Brothers, and Oppenheimer & Co., Inc. The aggregate gross proceeds of the
offering were $60,116,250. The Company's total expenses in connection with the
offering were $4,335,250, of which $3,913,450 was for underwriting discounts and
commissions, $401,800 was for other expenses paid to persons other than
directors or officers of the Company, persons owning more than 10% of any class
of equity securities of the Company, or affiliates of the Company (collectively,
Affiliates), and $20,000 was paid to Thermo Electron for certain corporate
services rendered in connection with the offering. The Company's net proceeds
from the offering were $55,781,000. As of July 3, 1999, the Company had expended
$5,275,000 of such net proceeds for the purchase of property, plant, and
equipment, including $3,573,000 for the construction of a water-clarification
and fiber-recovery facility. The Company has invested, from time to time, the
balance of such net proceeds primarily in investment grade interest- or
dividend-bearing instruments. As of July 3, 1999, remaining net proceeds of
$45,177,000 were invested directly with persons other than Affiliates and
$5,329,000 were invested pursuant to a cash management agreement with Thermo
Electron.
13
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Item 4 - Submission of Matters to a Vote of Security Holders
On May 27, 1999, at the Annual Meeting of Shareholders, the shareholders
reelected six incumbent directors to a one-year term expiring in 2000. The
directors reelected at the meeting were: Ms. Anne T. Barrett, Mr. Francis L.
McKone, Dr. Yiannis A. Monovoukas, Mr. Jonathan W. Painter, Mr. William A.
Rainville, and Mr. Roger D. Wellington. Each director received 14,336,914 shares
voted in favor of his or her election and 3,100 shares voted against. No
abstentions or broker nonvotes were recorded on the election of directors.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
None.
14
<PAGE>
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 August 1999.
THERMO FIBERGEN INC.
/s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Master Cash Management, Guarantee Reimbursement, and Loan Agreement
dated as of June 1, 1999, between the Registrant and Thermo Electron.
10.2 Amended and Restated Directors Stock Option Plan of the Registrant.
10.3 Amended and Restated Deferred Compensation Plan for Directors of
the Registrant.
10.4 Amended and Restated Equity Incentive Plan of the Registrant.
27 Financial Data Schedule.
</TABLE>
MASTER CASH MANAGEMENT, GUARANTEE
REIMBURSEMENT AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 1st day of June, 1999 by and
between Thermo Electron Corporation, a Delaware corporation ("Thermo Electron")
and Thermo Fibergen Inc., a Delaware corporation (the "Subsidiary").
WITNESSETH:
WHEREAS, Thermo Electron and the Subsidiary are party to a Master
Repurchase Agreement, as amended and restated, which contains terms governing a
cash management arrangement between them and a Master Guarantee Reimbursement
and Loan Agreement, as amended and restated, which contains terms relating to
intercompany credit support and a short term borrowing facility;
WHEREAS, Thermo Electron and the Subsidiary desire to establish a new cash
management arrangement and short term borrowing facility between them in lieu of
the arrangements set forth in the Master Repurchase Agreement and the Master
Guarantee Reimbursement and Loan Agreement and also to consolidate the terms
relating to intercompany credit support in one agreement;
WHEREAS, the Subsidiary and other majority owned subsidiaries of Thermo
Electron that join in this Agreement (collectively, the "Majority-Owned
Subsidiaries") and their wholly-owned subsidiaries wish to enter into various
financial transactions, such as convertible or nonconvertible debt, loans,
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 Thermo Electron ("Credit Support
Obligations");
WHEREAS, the Majority Owned Subsidiaries and Thermo Electron 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 Thermo Electron (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority Owned
Subsidiaries;
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, Thermo Electron 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
<PAGE>
WHEREAS, Thermo Electron is willing to consider continuing to issue Parent
Guarantees and providing credit, and the Majority Owned Subsidiaries are willing
to consider continuing to provide Credit Support Obligations, 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. Cash Management Arrangement. The Subsidiary directly, or through its
wholly-owned U.S. subsidiaries, may, from time to time, lend its excess cash to
Thermo Electron (a "Transaction"), on an unsecured basis, bearing interest at a
rate equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal (the "DCP Rate") plus 50 basis points, which rate shall be
adjusted on the second business day of each fiscal month of the Subsidiary and
shall be in effect for the entirety of such fiscal month. The Subsidiary shall
institute a Transaction by depositing its excess cash in the Subsidiary's
concentration account at BankBoston Corporation ("BankBoston") or other bank
designated by Thermo Electron. At the end of each business day, the cash balance
deposited in the Subsidiary's concentration account shall be transferred to
Thermo Electron's intercompany account at BankBoston or other bank designated by
Thermo Electron. Thermo Electron shall indicate on its books the balance of the
Subsidiary's cash held by Thermo Electron under this arrangement. After each
fiscal month end, Thermo Electron shall provide the Subsidiary a report
indicating the Subsidiary's aggregate cash balance ("Excess Cash") held by
Thermo Electron hereunder. The Subsidiary shall have the right to withdraw all
or part of its Excess Cash upon 30 days' prior notice to Thermo Electron. Within
30 days of receipt of such withdrawal notice, Thermo Electron shall transfer the
portion of the Excess Cash requested for withdrawal to an account designated by
the Subsidiary. Thermo Electron shall maintain, at all times, cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of the cash balances of the Subsidiary and of all other participating
subsidiaries of Thermo Electron, other than wholly-owned subsidiaries of Thermo
Electron, held by Thermo Electron under this arrangement. Interest shall be
payable on the Excess Cash by Thermo Electron to the Subsidiary each fiscal
month in arrears. In addition, the Subsidiary's non-U.S. subsidiaries may, from
time to time, lend or advance their excess cash to Thermo Electron, on an
unsecured basis, bearing interest at rates set by Thermo Electron at the
beginning of each month, based to the extent practicable on comparable interest
rates generally available in the local jurisdiction of such participating
non-U.S. subsidiary. Further, Thermo Electron and such non-U.S. subsidiaries
participating in the cash management arrangement with Thermo Electron shall
establish mutually agreeable procedures governing such cash management
arrangement.
2
<PAGE>
2. Loans and Advances. Upon request from the Subsidiary, Thermo Electron
may make loans and advances to the Subsidiary on a short-term, revolving credit
basis, from time to time, in such amounts as mutually determined by Thermo
Electron and the Subsidiary. The aggregate principal amount of such loans and
advances shall be reflected on the books and records of the Subsidiary and
Thermo Electron. All such loans and advances shall be on an unsecured basis
unless specifically provided otherwise in separate loan documents executed at
that time. The Subsidiary shall pay interest on the aggregate unpaid principal
amount of such loans from time to time outstanding at a rate equal to the DCP
Rate plus one hundred fifty (150) basis points, which rate shall be adjusted on
the second business day of each fiscal month of the Subsidiary and shall be in
effect for the entirety of such fiscal month. If, however, one or more of the
Subsidiary's majority-owned U.S. subsidiaries (i.e., not wholly-owned) is also
participating in the cash management arrangement with Thermo Electron, then the
rate payable on the Subsidiary's outstanding principal balance shall be
calculated as follows: If the aggregate amount of the Subsidiary's
majority-owned U.S. subsidiaries' cash balances under the cash management
arrangement ("Majority-Owned Excess Cash") equals or exceeds the Subsidiary's
outstanding principal balance, then the Subsidiary shall pay interest on the
aggregate unpaid principal amount of such loans at a rate per annum equal to the
DCP Rate plus fifty (50) basis points. If the aggregate amount of the
Majority-Owned Excess Cash is less than the Subsidiary's outstanding principal
balance, then (A) the Subsidiary shall pay interest at a rate per annum equal to
the DCP Rate plus fifty (50) basis points on that portion of the unpaid
principal amount equal to the Majority-Owned Excess Cash, and (B) the Subsidiary
shall pay interest at a rate per annum equal to the DCP Rate plus one hundred
fifty (150) basis points on that portion of the unpaid principal amount equal to
(i) the Subsidiary's outstanding principal balance, minus (ii) the
Majority-Owned Excess Cash. The interest rates set forth in the prior two
sentences shall be adjusted on the second business day of each fiscal month of
the Subsidiary and shall be in effect for the entirety of such fiscal month.
Interest shall be computed on a 360-day basis. Interest is payable each fiscal
month in arrears. The aggregate principal amount outstanding shall be payable
within 30 days of demand by Thermo Electron. Overdue principal and interest
shall bear interest at a rate per annum equal to the rate of interest published
from time to time in the Wall Street Journal as the "prime rate" plus one
percent (1%). The principal and accrued interest may be paid by the Subsidiary
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. At the end of each business day, Thermo Electron shall apply the
balance of the Subsidiary's Excess Cash held by Thermo Electron under the cash
management arrangement toward the payment of any loans or advances to the
Subsidiary. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of Thermo Electron or at such other place as Thermo Electron may
designate from time to time in writing to the Subsidiary. The unpaid principal
amount of any such borrowings, and accrued interest thereon, shall become
immediately due and payable, without demand, upon occurrence of any of the
following events:
(a) the failure of the Subsidiary to pay any amount due hereunder within
fifteen (15) days of the date when due;
(b) the failure of the Subsidiary to pay its debts as they become due, the
filing by or against the Subsidiary 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 Subsidiary 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 material property of
the Subsidiary;
3
<PAGE>
(c) the sale by the Subsidiary of all or substantially all of its
assets;
(d) the merger or consolidation of the Subsidiary with or into any other
corporation in a transaction in which the Subsidiary is not the surviving
entity;
(e) the issuance of any writ of attachment, by trustee process or
otherwise, or any restraining order or injunction against or affecting the
person or property of the Subsidiary that is not removed, repealed or
dismissed within thirty (30) days of issuance and as a result has a
material adverse effect on the business, operations, assets or condition,
financial or otherwise, of the Subsidiary or its ability to discharge any
of its liabilities or obligations to Thermo Electron; and
(f) the suspension of the transaction of the usual business of the
Subsidiary.
3. Guarantee Arrangements.
(a) If Thermo Electron provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the
Parent Guarantee, or Thermo Electron 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 Thermo Electron from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by Thermo Electron 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 Thermo Electron (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 Thermo Electron from any remaining liability, cost, expense or
damage (including reasonable attorneys' fees) suffered by Thermo Electron
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 Thermo Electron, 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 Thermo Electron 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. Nothwithstanding the
foregoing, in order to obtain the benefits of the indemnification
obligations of the First Tier Majority Owned Subsidiary set forth above in
this Section 3(a), Thermo Electron must have notified the First Tier
4
<PAGE>
Majority Owned Subsidiary prior to guaranteeing the obligations of the
Second Tier Majority Owned Subsidiary. If after five (5) business days,
Thermo Electron has not received from the First Tier Majority Owned
Subsidiary a notice of objection stating that the First Tier Majority
Owned Subsidiary objects to Thermo Electron guaranteeing the obligations
of the Second Tier Majority Owned Subsidiary, then Thermo Electron may
proceed to issue its guarantee of the Underlying Obligation and such
guarantee shall be subject to the benefits of the indemnification
obligations of the First Tier Majority Owned Subsidiary set forth above in
this Section 3(a). If Thermo Electron does receive such notice of
objection, then Thermo Electron's guarantee shall not be subject to the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a).
(b) For purposes of this Agreement, the term "guarantee" shall include not
only a formal guarantee of an obligation, but also any other arrangement
where Thermo Electron 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 Thermo Electron, 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 Thermo Electron 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.
(c) Promptly after Thermo Electron receives notice that a beneficiary of a
Parent Guarantee is seeking to enforce such Parent Guarantee, Thermo
Electron 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, Thermo Electron will not perform
under the relevant Parent Guarantee unless and until, in Thermo Electron's
reasonable judgment, Thermo Electron 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 Thermo
Electron 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
Thermo Electron. Thermo Electron shall have the right, at its own expense,
5
<PAGE>
to contest the claim of such beneficiary. If Thermo Electron or the
subsidiary of Thermo Electron 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 Thermo Electron
or the subsidiary of Thermo Electron 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 Thermo Electron's
obligation to promptly indemnify the Majority Owned Subsidiary or its
wholly-owned subsidiary, as applicable, hereunder.
(d) If Thermo Electron 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 Thermo Electron thereunder.
Such guaranty shall be enforced only after Thermo Electron, in its
reasonable judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its obligations under the Credit
Extension. If Thermo Electron 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 Thermo Electron 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 Thermo Electron hereunder. Such guaranty by
the First Tier Majority Owned Subsidiary shall be enforced only after
Thermo Electron, in its reasonable judgment, determines that the Second
Tier Majority Owned Subsidiary is unable to fully perform its guaranty
obligation hereunder. Notwithstanding the foregoing, in order for a Credit
Extension to be deemed guaranteed by the First Tier Majority Owned
Subsidiary as set forth above in this Section 3(d), Thermo Electron must
have notified the First Tier Majority Owned Subsidiary prior to providing
the Credit Extension to the Second Tier Majority Owned Subsidiary. If
after five (5) business days, Thermo Electron has not received from the
First Tier Majority Owned Subsidiary a notice of objection stating that
the First Tier Majority Owned Subsidiary objects to Thermo Electron
providing a Credit Extension to the Second Tier Majority Owned Subsidiary,
then Thermo Electron may proceed to issue the Credit Extension to the
Second Tier Majority Owned Subsidiary and the First Tier Majority Owned
Subsidiary shall be deemed to have guaranteed such Credit Extension as set
forth above in this Section 3(d). If Thermo Electron does receive such
notice of objection, then Thermo Electron's Credit Extension shall not be
deemed guaranteed by the First Tier Majority Owned Subsidiary as set forth
in this Section 3(d).
6
<PAGE>
(e) All payments required to be made under this Section 3 by a Majority
Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall be
made within two days after receipt of notice from Thermo Electron. All
payments required to be made under this Section 3 by Thermo Electron shall
be made within two days after receipt of notice from the Majority Owned
Subsidiary.
4. Waivers. No delay or omission on the part of either party in exercising
any right hereunder shall operate as a waiver of such right or of any other
right of the party, nor shall any delay, omission or waiver on any one occasion
be deemed a bar to or waiver of the same or any other right on any future
occasion. The Subsidiary hereby waives demand, notice of prepayment, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of the Subsidiary's obligations hereunder.
The Subsidiary hereby assents to any indulgence and any extension of time for
payment of any indebtedness hereunder granted or permitted by the party.
5. Governing Law. 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 without giving effect to any choice of law
provision or rule that would cause the application of laws of any jurisdiction
other than the Commonwealth of Massachusetts.
6. Severability. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein and shall
be enforceable notwithstanding the unenforceability of any such other provision
or agreement.
7. Non-assignability. The rights and obligations of the parties under this
Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
8. Other Agreements. The parties agree that, effective as of the date
hereof, each of the Master Repurchase Agreement, as amended and restated,
between the Subsidiary and Thermo Electron and the Master Guarantee
Reimbursement and Loan Agreement, as amended and restated, between the
Subsidiary and Thermo Electron, is hereby terminated and is of no further force
and effect.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: /s/ Theo Melas-Kyriazi
------------------------------------
Theo Melas-Kyriazi
Title: Vice President & Chief Financial
Officer
THERMO FIBERGEN INC.
By: /s/ Yiannis A. Monovoukas
------------------------------------
Yiannis A. Monovoukas
Title: President and Chief Executive
Officer
THERMO FIBERGEN INC.
DIRECTORS STOCK OPTION PLAN
As amended and restated effective as of June 7, 1999
1. Purpose
The purpose of this Directors Stock Option Plan (the "Plan") of Thermo
Fibergen 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
200,000 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.
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 2000
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
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.
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
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
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
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.
THERMO FIBERGEN INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
As amended and restated as of June 7, 1999
Section 1. Participation. Any director of Thermo Fibergen 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
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).
(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.
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
(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.
THERMO FIBERGEN INC.
EQUITY INCENTIVE PLAN
As amended and restated effective as of June 7, 1999
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
Thermo Fibergen Inc. (the "Company") and its Stockholders the benefits arising
from capital stock ownership by employees and Directors of, and consultants to,
the Company and its subsidiaries or other persons who are expected to make
significant contributions to the future growth and success of the Company and
its subsidiaries. The Plan is intended to accomplish these goals by enabling the
Company to offer such persons equity-based interests, equity-based incentives or
performance-based stock incentives in the Company, or any combination thereof
("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of two or more members of the Board, each
of whom shall be deemed a "disinterested person" within the meaning of Rule
16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the
"Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board
of Directors, subject to the approval of the Plan by the Corporation's
Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of
grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of
shares of Common Stock reserved and available for distribution under the Plan
shall be 600,000 shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its
subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided however that the maximum number of
shares permitted to be granted under any Award or combination of Awards to any
Participant during any one calendar year may not exceed 500,000 shares of Common
Stock.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 Option Grants. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a
payment in cash, shares of Common Stock, deferred stock or restricted stock, an
option previously granted, based on such terms and conditions as the Board shall
establish and communicate to the option holder at the time that such offer is
made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the
Plan and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422 of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent Stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined by the Board. An incentive stock
option may not be granted after the tenth anniversary of the date on which the
Plan was adopted by the Board and the latest date on which an incentive stock
option may be exercised shall be the tenth anniversary (fifth anniversary, in
the case of any incentive stock option granted to a more than ten percent
Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which the restrictions
on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide
that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to
any Participant shares of Common Stock free of restrictions under the Plan for a
price determined by the Board, but which may not be less than the par value per
share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the
recipient to receive shares of deferred stock, which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which delivery of all or any part of the
Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to
receive, without payment, an amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 of the
Plan) that performance goals be met prior to the Participant's realization of
any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the
grant to the Participant of any Award, in connection with the purchase of Common
Stock under the Award or with the payment of any obligation incurred or
recognized as a result of the Award. The Board will have full authority to
decide whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is
made or at a later date, provide for and make a cash payment to the participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the participant's
income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides (by specific explicit reference to Section 9.2 below). If a
Change in Control occurs while any Awards are outstanding, then, effective upon
the Change in Control, (i) each outstanding stock option or other stock-based
Award awarded under the Plan that was not previously exercisable and vested
shall become immediately exercisable in full and will no longer be subject to a
right of repurchase by the Company, (ii) each outstanding restricted stock award
or other stock-based Award subject to restrictions and to the extent not fully
vested, shall be deemed to be fully vested, free of restrictions and no longer
subject to a right of repurchase by the Company, and (iii) deferral limitations
and conditions that relate solely to the passage of time, continued employment
or affiliation will be waived and removed as to deferred stock Awards and
performance Awards; performance of other conditions (other than conditions
relating solely to the passage of time, continued employment or affiliation)
will continue to apply unless otherwise provided in the agreement evidencing the
Award or in any other agreement between the Participant and the Company or
unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing
the Award, the receipt of an Award will not give a Participant rights as a
Stockholder with respect to any shares covered by an Award until the date of
issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered,
the Board will have the right to require that the participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the Board
with regard to such requirements, prior to the delivery of any Common Stock. If
and to the extent that such withholding is required, the Board may permit the
participant or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no
Award (other than an Award in the form of an outright transfer of cash or Common
Stock not subject to any restrictions) may be transferred other than by will or
the laws of descent and distribution, and during a Participant's lifetime an
Award requiring exercise may be exercised only by him or her (or in the event of
incapacity, the person or persons properly appointed to act on his or her
behalf). The Board may, in its discretion, determine the extent to which Awards
granted to a Participant shall be transferable, and such provisions permitting
or acknowledging transfer shall be set forth in the written agreement evidencing
the Award executed and delivered by or on behalf of the Company and the
Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, or other distribution with respect to holders of Common Stock other than
normal cash dividends, the Board will make (i) appropriate adjustments to the
maximum number of shares that may be delivered under the Plan under Section 4
above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Awards then outstanding or subsequently granted,
any exercise prices relating to Awards and any other provisions of Awards
affected by such change.
(b) In the event of any recapitalization, merger or consolidation
involving the Company, any transaction in which the Company becomes a subsidiary
of another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company or any similar transaction, as determined by the
Board, the Board in its discretion may make appropriate adjustments to
outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued employment with the Company or any
subsidiary or interfere in any way with the right of the Company or subsidiary
to terminate any employment relationship at any time or to increase or decrease
the compensation of such person. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment of the Plan or any agreement evidencing
Awards under the Plan may adversely affect the rights of any participant under
any Award previously granted without such participant's consent.
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
FIBERGEN INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 3, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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