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
June 29, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-9549
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 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 26, 1996
---------------------------- ----------------------------
Common Stock, $.10 par value 18,227,306
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO TERRATECH INC.
Consolidated Balance Sheet
(Unaudited)
Assets
June 29, March 30,
(In thousands) 1996 1996
-------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 71,213 $ 31,182
Short-term available-for-sale investments,
at quoted market value (amortized cost
of $28,249 and $7,007) 28,254 7,004
Accounts receivable, less allowances of
$2,883 and $2,837 45,347 44,053
Unbilled contract costs and fees 24,394 21,113
Inventories:
Raw materials and supplies 3,399 3,822
Work in process and finished goods 42 61
Prepaid and refundable income taxes 7,846 9,500
Prepaid expenses 4,579 4,345
-------- --------
185,074 121,080
-------- --------
Property, Plant and Equipment, at Cost 125,168 121,847
Less: Accumulated depreciation and amortization 41,634 40,002
-------- --------
83,534 81,845
-------- --------
Long-term Available-for-sale Investments,
at Quoted Market Value (amortized cost
of $2,094 and $2,108) 2,073 2,098
-------- --------
Long-term Held-to-maturity Investments,
at Amortized Cost (quoted market value
of $25,212 and $24,963) 24,690 24,251
-------- --------
Other Assets 18,961 12,931
-------- --------
Cost in Excess of Net Assets of Acquired Companies 86,670 89,804
-------- --------
$401,002 $332,009
======== ========
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THERMO TERRATECH INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 29, March 30,
(In thousands except share amounts) 1996 1996
-------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 12,567 $ 10,841
Notes payable and current maturities of
long-term obligations (includes $38,000 and
$15,000 due to parent company) 42,691 19,711
Billings in excess of revenues earned 2,130 2,076
Accrued payroll and employee benefits 9,596 9,801
Accrued income taxes 1,410 -
Other accrued expenses 8,189 7,744
Due to parent company and Thermo Electron 2,167 3,459
-------- --------
78,750 53,632
-------- --------
Deferred Income Taxes 3,332 3,377
-------- --------
Other Deferred Items 977 980
-------- --------
Long-term Obligations:
4 5/8% Subordinated convertible debentures (Note 2) 115,000 -
6 1/2% Subordinated convertible debentures 13,382 18,182
4 7/8% Subordinated convertible debentures 37,950 37,950
Other (includes $73,000 due to parent company
in fiscal 1996) (Note 2) 26,651 99,252
-------- --------
192,983 155,384
-------- --------
Minority Interest 33,073 32,295
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 30,000,000
shares authorized; 18,073,769 and 17,598,013
shares issued 1,807 1,760
Capital in excess of par value 63,742 59,419
Retained earnings 26,383 24,945
Treasury stock at cost, 25,415 and 34,531
shares (306) (410)
Cumulative translation adjustment 271 635
Net unrealized loss on available-for-sale
investments (10) (8)
-------- --------
91,887 86,341
-------- --------
$401,002 $332,009
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO TERRATECH INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
---------------------
June 29, July 1,
(In thousands except per share amounts) 1996 1995
-------------------------------------------------------------------------
Revenues:
Service revenues $ 61,136 $ 46,294
Product revenues 5,752 3,562
-------- --------
66,888 49,856
-------- --------
Costs and Operating Expenses:
Cost of service revenues 49,221 34,581
Cost of product revenues 4,718 3,313
Selling, general and administrative expenses 8,437 8,244
Product and new business development expenses 299 276
-------- --------
62,675 46,414
-------- --------
Operating Income 4,213 3,442
Interest Income 1,630 1,360
Interest Expense (includes $829 and $1,208
to parent company) (3,108) (2,273)
Equity in Earnings of Unconsolidated Subsidiary 279 -
Gain on Issuance of Stock by Subsidiary - 2,742
Gain on Sale of Investments 147 80
-------- --------
Income Before Provision for Income Taxes
and Minority Interest 3,161 5,351
Provision for Income Taxes 1,501 1,024
Minority Interest Expense 222 378
-------- --------
Net Income $ 1,438 $ 3,949
======== ========
Earnings per Share $ .08 $ .22
======== ========
Weighted Average Shares 18,831 18,022
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO TERRATECH INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
-----------------------
June 29, July 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Operating Activities:
Net income $ 1,438 $ 3,949
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,182 2,817
Equity in earnings of unconsolidated
subsidiary (279) -
Minority interest expense 222 378
Provision for losses on accounts receivable 122 28
Other noncash expenses 97 101
Increase (decrease) in deferred income taxes (10) 376
Gain on issuance of stock by subsidiary - (2,742)
Gain on sale of investments (147) (80)
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable (1,165) (2,123)
Inventories and unbilled contract
costs and fees (2,958) (304)
Other current assets (613) 72
Current liabilities 3,333 (541)
-------- --------
Net cash provided by operating
activities 3,222 1,931
-------- --------
Investing Activities:
Acquisition, net of cash acquired - (24,763)
Purchase of minority interest in Thermo Terra
Tech joint venture - (34,267)
Purchases of available-for-sale investments (33,977) (23,243)
Proceeds from sale and maturities of
available-for-sale investments 12,897 5,580
Purchases of property, plant and equipment (4,448) (4,034)
Proceeds from sale of property, plant and
equipment 134 229
Purchase of other assets (489) (25)
-------- --------
Net cash used in investing
activities $(25,883) $(80,523)
-------- --------
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THERMO TERRATECH INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
-----------------------
June 29, July 1,
(In thousands) 1996 1995
--------------------------------------------------------------------------
Financing Activities:
Net proceeds from issuance of subordinated
convertible debentures (Note 2) $112,500 $ 36,889
Issuance of note payable to parent company - 35,000
Repayment of notes payable to parent
company (Note 2) (50,000) (4,000)
Proceeds from issuance of Company and
subsidiary common stock 242 6,677
Other (42) -
-------- --------
Net cash provided by financing
activities 62,700 74,566
-------- --------
Exchange Rate Effect on Cash (8) (366)
-------- --------
Increase (Decrease) in Cash and Cash Equivalents 40,031 (4,392)
Cash and Cash Equivalents at Beginning of Period 31,182 35,808
-------- --------
Cash and Cash Equivalents at End of Period $ 71,213 $ 31,416
======== ========
Noncash Activities:
Fair value of assets of acquired companies $ - $ 27,560
Cash paid for acquired companies - (25,195)
-------- --------
Liabilities assumed of acquired companies $ - $ 2,365
======== ========
Conversions of subordinated convertible
debentures $ 4,800 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
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THERMO TERRATECH INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Thermo TerraTech 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 June 29, 1996,
the results of operations for the three-month periods ended June 29, 1996
and July 1, 1995, and the cash flows for the three-month periods ended June
29, 1996 and July 1, 1995. Interim results are not necessarily indicative
of results for a full year.
The consolidated balance sheet presented as of March 30, 1996, 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 March 30, 1996, filed with the Securities and
Exchange Commission.
Certain amounts in fiscal 1996 have been reclassified to conform to
the fiscal 1997 financial statement presentation. Certain of these
reclassifications are required to present consistent classification of
expenses within the Company's consulting and design services business.
2. Subordinated Convertible Debentures
In May 1996, the Company issued and sold $115.0 million principal
amount of 4 5/8% subordinated convertible debentures due 2003 for net
proceeds of $112.5 million. The debentures are convertible into shares of
the Company's common stock at a price of $15.90 per share and are
guaranteed on a subordinated basis by Thermo Electron Corporation (Thermo
Electron). The Company has agreed to reimburse Thermo Electron in the event
Thermo Electron is required to make a payment under the guarantee. In May
1996, the Company repaid its $15.0 million and $35.0 million promissory
notes to Thermo Electron with proceeds from the offering.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company is a provider of environmental services and infrastructure
planning and design, encompassing a range of specializations within the
remediation and recycling, consulting and design, and laboratory-testing
industries. The Company also provides metal-treating services and
thermal-processing systems used to treat primary metals and metal parts.
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THERMO TERRATECH INC.
Overview (continued)
The Company's environmental services businesses are affected by several
factors, particularly, extreme weather variations, government spending, and
regulation of remediation activities.
Remediation and Recycling - The Company's majority-owned Thermo
Remediation Inc. (Thermo Remediation) subsidiary operates a network of
soil-remediation centers, serving customers in more than a dozen states on
the East and West coasts by providing thermal treatment of soil to remove
and destroy petroleum contamination caused by leaking underground and
aboveground storage tanks, spills, and other sources. In December 1995,
Thermo Remediation acquired Remediation Technologies, Inc. (ReTec), which
provides integrated environmental services such as remediation of
industrial sites contaminated with organic wastes and residues. Through its
Thermo Nutech subsidiary, Thermo Remediation provides services to remove
radioactive contaminants from sand, gravel, and soil, as well as health
physics, radiochemistry laboratory, and radiation dosimetry services. In
addition, Thermo Remediation's Thermo Fluids subsidiary offers
fluids-recycling services including waste motor oil and wastewater
treatment throughout Arizona, Nevada, and in neighboring states. The
Company's majority-owned Thermo EuroTech N.V. (Thermo EuroTech) subsidiary,
located in the Netherlands, provides wastewater treatment services as well
as services to test, remove, and install underground storage tanks. Through
its North Refinery subsidiary, Thermo Eurotech specializes in converting
"off-spec" and contaminated petroleum fluids into usable oil products.
Consulting and Design - The Company's wholly owned Killam Associates
subsidiary provides environmental consulting and engineering services and
specializes in wastewater treatment and water resources management. The
Company's wholly owned Bettigole Andrews & Clark and Normandeau Associates
subsidiaries provide both private and public sector clients with a range of
consulting services that address transportation planning and design, and
natural resource management issues, respectively.
Laboratory Testing - The Company's wholly owned Thermo Analytical
subsidiary operates a network of analytical laboratories that provide
environmental testing services to commercial and government clients
throughout the U.S. The May 1995 acquisition of Lancaster Laboratories,
Inc. (Lancaster Laboratories) expanded the Company's range of contract
services beyond environmental testing to the pharmaceutical- and
food-testing industries.
Metal Treating - The Company performs metallurgical processing
services using thermal-treatment equipment at locations in California and
Minnesota. The Company also designs, manufactures, and installs advanced
custom-engineered, thermal-processing systems through its equipment
division located in Michigan.
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THERMO TERRATECH INC.
Results of Operations
First Quarter Fiscal 1997 Compared With First Quarter Fiscal 1996
Total revenues in the first quarter of fiscal 1997 increased 34% to
$66.9 million from $49.9 million in the first quarter of fiscal 1996.
Revenues from remediation and recycling services were $27.5 million in
fiscal 1997, compared with $15.4 million in fiscal 1996, primarily due to
the inclusion of $10.5 million in revenues from ReTec, which was acquired
in December 1995, an increase in revenues at Thermo EuroTech and, to a
lesser extent, higher revenues from a long-term environmental restoration
contract for the U.S. Department of Energy's (DOE's) Hanford site (Hanford)
and related health physics services. These increases were largely offset by
a decrease in radiochemistry laboratory work, reflecting a reduction in
spending at the DOE and delays in federal government budget appropriations.
Revenues from soil-remediation services decreased 8% resulting from
declines in the volume and price of soil processed due to competitive
pricing pressures and ongoing regulatory uncertainties in several states.
Revenues from consulting and design services increased to $21.5 million in
fiscal 1997 from $19.8 million in fiscal 1996, primarily due to increased
revenues from two major contracts, offset in part by lower revenues from
federal government contracts, reflecting a reduction in spending and delays
in budget appropriations. Revenues from laboratory-testing services,
excluding the radiochemistry laboratory services included in remediation
and recycling services, increased to $8.8 million in fiscal 1997 from $7.5
million in fiscal 1996, largely due to the inclusion of an additional $2.8
million of revenues from Lancaster Laboratories, acquired in May 1995,
offset in part by a decline in revenues due to reduced federal spending.
Metal-treating revenues increased to $9.1 million in fiscal 1997 from $7.2
million in fiscal 1996, primarily due to an increase in demand for
thermal-processing equipment.
The gross profit margin decreased to 19% in the first quarter of
fiscal 1997 from 24% in the first quarter of fiscal 1996, primarily due to
the inclusion of lower-margin revenues from ReTec and a decrease in gross
profit margins for remediation and recycling services due to competitive
pricing pressures. These decreases were offset in part by higher gross
profit margins from metal-treating services resulting from an increase in
revenues.
Selling, general and administrative expenses as a percentage of
revenues decreased to 13% in the first quarter of fiscal 1997 from 17% in
the first quarter of fiscal 1996, primarily due to efficiencies associated
with an increase in revenues and a decline in expenses related to the
consolidation of administrative functions within the consulting and design
services business.
Interest income increased to $1.6 million in the first quarter of
fiscal 1997 from $1.4 million in the first quarter of fiscal 1996,
primarily due to an increase in invested amounts as a result of the
Company's May 1996 issuance of 4 5/8% subordinated convertible debentures
(Note 2). Interest expense increased to $3.1 million in fiscal 1997 from
$2.3 million in fiscal 1996, primarily due to the Company's May 1996
issuance of subordinated convertible debentures and Thermo Remediation's
9PAGE
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THERMO TERRATECH INC.
First Quarter Fiscal 1997 Compared With First Quarter Fiscal 1996
(continued)
May 1995 issuance of 4 7/8% subordinated convertible debentures, offset in
part by a decrease in interest expense due to the repayment of promissory
notes to Thermo Electron Corporation (Thermo Electron) with proceeds from
the Company's May 1996 issuance of subordinated convertible debentures
(Note 2).
Equity in earnings of unconsolidated subsidiary in the first quarter
of fiscal 1997 represents ReTec's proportionate share of income from a
joint venture.
During the first quarter of fiscal 1996, the Company recorded gains of
$2.7 million from the sale of stock by subsidiary.
The effective tax rates were 47% and 19% in the first quarter of
fiscal 1997 and 1996, respectively. The effective tax rate in fiscal 1997
was higher than the statutory federal income tax rate primarily due to
nondeductible amortization of cost in excess of net assets of acquired
companies and the impact of state income taxes. The effective tax rate in
fiscal 1996 was lower than the statutory federal income tax rate primarily
due to the nontaxable gain on issuance of stock by subsidiary.
Minority interest expense decreased to $0.2 million in the first
quarter of fiscal 1997 from $0.4 million in the first quarter of fiscal
1996, due to a reduction in earnings from the Company's majority-owned
subsidiaries.
Liquidity and Capital Resources
Consolidated working capital, including cash, cash equivalents, and
short-term available-for-sale investments, increased to $106.3 million at
June 29, 1996 from $67.4 million at March 30, 1996. Cash, cash equivalents,
and short- and long-term available-for-sale investments were $101.5 million
at June 29, 1996, compared with $40.3 million at March 30, 1996. Of the
$101.5 million balance at March 30, 1996, $33.7 million was held by Thermo
Remediation and the remainder by the Company and its wholly owned
subsidiaries. In addition, at June 29, 1996 the Company had $24.7 million
of long-term held-to-maturity investments, compared with $24.3 million at
March 30, 1996. During the first quarter of fiscal 1997, $3.2 million of
cash was provided by operating activities. In the first quarter of fiscal
1997, the Company used cash of $3.0 million primarily to fund an increase
in unbilled contract costs and fees due to an increase in thermal-
processing equipment contracts, an increase in remediation contracts at
ReTec, as well as an increase in consulting and design services contracts.
In May 1996, the Company issued and sold $115.0 million principal
amount of 4 5/8% subordinated convertible debentures due 2003 for net
proceeds of $112.5 million (Note 2). The debentures are guaranteed on a
subordinated basis by Thermo Electron. The Company has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a payment
under the guarantee. In May 1996, the Company repaid its $15.0 million and
$35.0 million promissory notes to Thermo Electron with proceeds from the
offering.
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THERMO TERRATECH INC.
Liquidity and Capital Resources (continued)
In the first quarter of fiscal 1997, the Company expended $4.4 million
on purchases of property, plant and equipment. During the remainder of
fiscal 1997, the Company expects to expend $5.6 million for purchases of
property, plant and equipment. The Company has no material commitments for
the acquisition of businesses or for capital expenditures. Such
expenditures will largely be affected by the number and size of the
complementary businesses that can be acquired or developed during the year.
The Company believes that it has adequate resources to meet the financial
needs of its current operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
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THERMO TERRATECH INC.
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 6th day of August 1996.
THERMO TERRATECH INC.
Paul F. Kelleher
------------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
------------------------
John N. Hatsopoulos
Vice President and
Chief Financial Officer
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THERMO TERRATECH INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit Page
---------------------------------------------------------------------------
10.1 Elson T. Killam Associated, Inc. 1987 Incentive Stock
Option Plan.
10.2 Elson T. Killam Associates, Inc. 1987 Incentive Stock
Option Plan, Incentive Stock Option Agreement.
10.3 Elson T. Killam Associates, Inc. Shareholders' Agreement
dated January 29, 1995.
10.4 Amendment No. 1 to Shareholders' Agreement, dated
February 6, 1995.
10.5 Option Exchange Agreement between the Company and
Emil C. Herkert, dated February 6, 1995.
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
EXHIBIT 10.1
ELSON T. KILLAM ASSOCIATES, INC.
1987 INCENTIVE STOCK OPTION PLAN
As Adopted by the Board of Directors
on December 15, 1987
As Ratified by the Shareholders
on July 26, 1988
(December 15, 1987)
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ELSON T. KILLAM ASSOCIATES, INC.
1987 INCENTIVE STOCK OPTION PLAN
1. Purpose
The Elson T. Killam Associates, Inc. 1987 Incentive Stock
Option Plan (the "Plan") is intended to enable Elson T. Killam,
Associates, Inc. (the "Company") and any parent or subsidiary
corporation of the Company to attract and retain capable officers
and key senior management employees and to provide them with
incentives to promote the best interests of the Company and its
parent and subsidiaries by enabling and encouraging them, through
the grant of incentive stock options (the "Options") to acquire
Company stock.
As used in the Plan, the term "incentive stock options"
means options which are intended to qualify as incentive stock
options within the meaning of section 422A of the Internal
Revenue Code of 1986, as amended from time to time (the "Code"),
and which are designated as incentive stock options in the Option
Agreement. The term "subsidiary" means any corporation (whether
or not in existence at the time the Plan is adopted) which, at
the time an Option is granted is a subsidiary of the Company
under the definition of "subsidiary corporation" contained in
section 425(f) of the Code, or any similar provision hereafter
enacted. The term "parent" means any corporation (whether or not
in existence at the time the Plan is adopted) which, at the time
an Option is granted, is a parent of the Company under the
definition of "parent corporation" contained in section 425(e) of
the Code or any similar provision hereafter enacted. The term
"related corporation" means any corporation which is a subsidiary
or parent of the Company.
2. Administration.
Except as otherwise provided below, the Plan shall be
administered by a Management Committee (the "Committee") which
shall be composed of the President of Les Chantiers Modernes and
the President of the Company or their representatives designated
in writing. Subject to the terms of the Plan, the Committee
shall have the authority to determine the persons to whom
incentive stock options shall be granted under the Plan and to
recommend the date of grant and the other terms and conditions
thereof. The Committee shall have full authority to administer
the Plan and all references hereinafter shall be made to the
actions of the Committee except as otherwise provided. The
Committee shall have the authority to establish, from time to
time, such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the
Plan, and to make such determinations and interpretations under
or in connection with the Plan and the Options granted hereunder,
as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and
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conclusive upon the Company, its stockholders, employees
(including former employees), and any related corporation, and
upon their respective legal representatives, beneficiaries,
successors and assigns and upon all other persons claiming under
or through any of them. No member of the of the Committee shall
be liable for any action or determination made in good faith with
respect to the Plan or any Option granted hereunder.
3. Eligibility.
The persons eligible to participate in the Plan shall be the
officers and key senior management employees of the Company and
related corporations who may be designated by the Committee. The
persons eligible to receive Options under the Plan are
hereinafter referred to as "Eligible Individuals".
4. Stock Subject to the Plan.
Subject to the provisions of Section 7 hereof, 2,130 shares
(the "Shares") of ten dollars ($10.00) par value common stock of
the Company (the "Common Stock"), shall be available for the
grant of Options under the Plan. Shares issuable under the Plan
shall be authorized but unissued Shares or reacquired Shares of
the Company as determined by the Committee.
If any Option granted under the Plan expires or otherwise
terminates, in whole or in part, without having been exercised,
the Shares subject to the unexercised portion of such Option
shall be available for the granting of Options under the Plan as
fully as if such Shares had never been subject to an Option.
5. Grants, Terms and Conditions of Options.
From time to time until the expiration or earlier
termination of the Plan, the Committee may grant Options to
Eligible Individuals (such grantees are hereinafter referred to
as "Optionees"), under the Plan. Options granted pursuant to the
Plan to such Eligible Individuals shall be in such form as the
Committee shall from time to time approve, and shall be subject
to the following terms and conditions to the extent such terms
and conditions are applicable to such Option:
(a) Price. The option price per Share under each Option
granted under the Plan as an incentive stock option
shall be determined and fixed by the Committee, in its
discretion, but shall not be less than the fair market
value of the Shares on the date of grant of such
Option. The fair market value of a Share on any day
shall mean (i) the value assigned to each Share in
accordance with the valuation method attached hereto as
Exhibit A; or (ii) such other method of determining
fair market value as may be required by the Code or the
regulations and rulings thereunder, and adopted by the
Committee from time to time.
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(b) Term. Subject to earlier termination as provided in
Subsections (c) through (g) below and in Section 7
hereof, and except as otherwise provided in Subsection
(j) below, the duration of each Option shall not be
more than ten (10) years from the date of grant.
(c) Exercise and Payment. Options shall be exercisable in
such installments and on such dates as the Committee
may specify provided; however, that no Options may be
exercised until July 1, 1991, except as otherwise
provided in accordance with Section 7 or in the event
of death, disability, involuntary termination without
cause or retirement of an Optionee as provided herein.
Options shall be exercisable in accordance with the
following schedule:
Option
Grant Period Exercisable
------------ -----------
January 1 to 4 years after
December 31,1987 Date of Grant
January 1, 1988 25% exercis-
and thereafter able as of the
anniversary date
of each Date of
Grant beginning in
or after 1991
Except as otherwise provided in Subsections (d) through
(g) below, Options shall only be exercisable by an
Optionee while he remains in the employ of the Company
or a related corporation. Any Option Shares, the right
to the purchase of which has accrued, may be purchased
at any time up to the expiration or termination of the
Option. As a condition to the exercise of any of the
Options, each Optionee shall enter into a Shareholders'
Agreement in substantially the same form as attached
hereto as Exhibit D. Options may be exercised, in whole
or in part, from time to time, by giving written notice
of exercise to the Company at its principal office,
specifying the number of Shares to be purchased, and
accompanied by payment in full of the aggregate
purchase price for such Shares or by a promissory note
executed in the form attached hereto as Exhibit C. Only
full Shares shall be delivered, and any fractional
Share which might otherwise be deliverable upon
exercise of an Option granted hereunder shall be
forfeited.
The purchase price shall be payable in cash or its
equivalent, as determined by the Committee, in its
discretion unless an Optionee requests the Company to
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permit the exercise of any or all Options by delivery
of a promissory note in accordance with Section 8
hereof.
(d) Termination of Optionee's Employment. If an Optionee's
employment with the Company and all related
corporations is terminated for any reason, voluntarily
or with cause, other than by reason of death,
disability, or retirement (as described in Subsections
(e), (f) and (g) below) prior to the expiration of the
original term of his Option ("Expiration Date") such
Option shall terminate immediately upon such
termination of employment and all rights with respect
to any unvested or unexercised Options shall be
forfeited. For purposes of this Subsection, an
Optionee's employment relationship shall not be deemed
terminated while the Optionee is on military leave,
sick leave, or other bona fide leave of absence (such
as temporary employment by the government) if the
period of such leave does not exceed ninety (90) days,
or, if longer, so long as the Optionee's right to
reemployment with the Company or a related corporation
is guaranteed either by statute or contract.
(e) Death of Optionee. If an Optionee's employment is
terminated by reason of his death prior to the
Expiration Date of his Option, or if an Optionee whose
employment is terminated as a result of retirement or
disability (as described in Subsections (f) and (g)
below) shall die following his termination of
employment but prior to the Expiration Date of his
Option or expiration of the period determined under
Subsections (f) or (g) below, if earlier, such Option
may be exercised by the Optionee's estate, personal
representative or beneficiary who acquired the right to
exercise such Option by bequest or inheritance or by
reason of the death of the Optionee, whether or not the
Options were completely exercisable under Section 5 (c)
at the time of death, at any time prior to the earlier
of (i) three (3) months following the date of the
Optionee's death, or (ii) the Expiration Date of such
Option (which, in the case of death following a
termination of employment pursuant to Subsections (f)
or (g) below, shall be deemed to mean the expiration of
the exercise period determined thereunder).
(f) Disability of Optionee. If an Optionee shall become
disabled (within the meaning of section 22(e)(3) of the
Code) during his employment with the Company or a
related corporation, and his employment with the
Company and all related corporations is terminated as a
consequence of such disability prior to the Expiration
Date of his Option, such Option may be exercised in
full by the Optionee, whether or not the Options were
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completely exercisable under Section 5(c) at the time
of such disability, at any time prior to the earlier of
(i) three (3) months following the date of the
Optionee's termination of employment, or (ii) the
Expiration Date of such Option. In the event of the
Optionee's legal disability such Option may be so
exercised by the Optionee's legal representative.
(g) Retirement or Involuntary Termination of Optionee. If
an Optionee retires in accordance with the retirement
policy of the Company or any related corporation, or
otherwise involuntarily has his employment terminated
by the Company without cause prior to the Expiration
Date of his Option, all Options may be exercised in
full by the Optionee, whether or not the Options were
completely exercisable under Section 5(c) at the time
of such retirement or involuntary termination any time
prior to the earlier of (i) three (3) months after the
date of retirement or (ii) the Expiration Date of such
Option.
(h) Transferability. No Option shall be assignable or
transferable by an Optionee otherwise than by will or
by the laws of descent and distribution, and during the
lifetime of the Optionee, the Option shall be
exercisable only by him, or in the event of his legal
disability, by his legal representative.
(i) Rights as a Stockholder. An Optionee shall have no
rights as a stockholder with respect to any Shares
covered by his Option until the issuance of a stock
certificate to him representing such Shares.
(j) Ten Percent Shareholder. Any other provision of the
Plan notwithstanding, if an Eligible Individual owns
more than ten percent (10%) of the total combined
voting power of all shares of stock of the Company or
of a related corporation at the time an incentive stock
Option is granted to such Eligible Individual, the
incentive stock option price shall not be less than one
hundred ten percent (110%) of the fair market value of
the optioned Shares on the date the incentive stock
option is granted, and such incentive stock option by
its terms shall not be exercisable after the expiration
of five (5) years from the date the incentive stock
option is granted. For purposes of this Subsection, an
Eligible Individual shall be considered to own any
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shares of the Company or a related corporation which
are attributable to such Eligible Individual under
section 425(d) of the Code.
(k) Annual Limit on Grant of Incentive Stock Options. The
aggregate fair market value (determined as of the time
an incentive stock option is granted) of the Shares
with respect to which incentive stock options are
exercisable for the first time by an Optionee during
any calendar year (under the Plan and any other
incentive stock option plan of the Company or a related
corporation) shall not exceed one hundred thousand
dollars ($100,000.00).
(l) Option Agreement and Further Conditions. As a
condition to the grant of an Option, each Optionee
shall enter into, and be bound by the terms of, a stock
option agreement (the "Option Agreement") which shall
state the number of Shares to which the Option
pertains. The Option Agreement shall set forth such
terms, conditions and restrictions regarding the Option
not inconsistent with the Plan and the provisions of
section 422A(b) of the Code as the Committee shall
determine. Without limiting the generality of the
foregoing, the Committee, in its discretion, may impose
further conditions upon the exercisability of Options
and restrictions on transferability with respect to
Shares issued upon exercise of Options.
(m) Withholding. The obligation of the Company to deliver
Shares upon the exercise of any Option shall be subject
to any applicable federal, state and local tax
withholding requirements.
6. Listing and Registration of Shares.
Each Option under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine in
its discretion that the listing, registration or qualification of
the Shares covered thereby upon any securities exchange or under
the laws of any jurisdiction, or the consent or approval of any
regulatory body, is necessary or desirable as a condition of, or
in connection with, the granting of such Option, or the
acquisition of Shares thereunder, or that action by the Company
or the Optionee should be taken in order to obtain an exemption
from any such requirement, then no such Option may be exercised
in whole or in part and no certificate representing Shares shall
be issued unless and until such listing, registration,
qualification, consent, approval, or action shall have been
effected, obtained, or taken on conditions acceptable to the
Committee. Each Optionee or his legal representative or
beneficiaries, also may be required to give satisfactory
assurance that Shares acquired upon exercise of an Option are
being acquired for investment and not with a view to
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distribution, and certificates representing such Shares may be
legended accordingly. Such Shares shall be transferable
thereafter only if the proposed transfer is permissible under the
Plan and the Option Agreement and if, in the opinion of counsel
(who shall be satisfactory to the Company), such transfer shall
at such time be in compliance with securities laws. Nothing
contained in this Section 6 shall obligate the Company to list,
register or qualify any of the Shares.
7. Adjustments.
The number of Shares which may be issued under the Plan, as
stated in Section 4 hereof, and the number of Shares issuable
upon exercise of outstanding Options under the Plan (as well as
the exercise price per share under such outstanding Options)
shall be equitably adjusted by the Committee to reflect any stock
dividend, stock split, share combination, or similar change in
the capitalization of the Company.
In the event the Company is liquidated, its shares become
publicly traded, or a corporate transaction described in section
425(a) of the Code and the Treasury Regulations issued thereunder
occurs (as, for example, a merger, consolidation, acquisition of
property or stock, separation, or reorganization), each
outstanding Option shall be immediately exercisable in full
regardless of any exercise schedule otherwise applicable. The
Committee shall give each Optionee to whom an outstanding Option
has been granted, sixty (60) days written notice prior to such
transaction (i.e., by reason of such liquidation, sale, or other
corporate transaction described above), so that any outstanding
Option or portion thereof may be exercised up to, and including
the earlier of: (i) the date immediately preceding such
transaction, or (ii) the Expiration Date of such Option. In such
event, the Committee may, in its sole discretion, allow each such
Optionee to exercise his Option in full or in part (if it has not
otherwise terminated) regardless of the provisions of Section
5(c) hereof or of the terms of any Option Agreement even if under
the Plan or the Incentive Stock Option Agreement the vesting
period has not expired with respect to such Shares. The
Committee, in its discretion, may change the number of Shares
issuable upon exercise of outstanding Options (as well as the
exercise price per share under such outstanding Options) to
equitably reflect any such corporate transaction, provided that
any such change is made in accordance with section 425(a) of the
Code.
8. Loans to Eligible Employees.
Prior to delivery of a written notice of exercise (under
Section 5 (c)), the Optionee may obtain a loan or loans from the
Company for the purchase of Shares by delivering a written
request to the Committee stating the desired amount of the loan.
Loan requests may not be submitted for amounts in excess of
ninety percent (90%) of the exercise price. If such request
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comports with the requirements of this Plan, the Committee shall
notify the Optionee within seven (7) days of receipt of the loan
request that the loan is approved, subject to the conditions set
forth in Section 8 hereof and the other applicable provisions of
this Plan.
(a) The loan will be extended only if, within thirty (30)
days after receipt from the Committee of notice that
the loan request is approved, the Optionee exercises an
Option granted pursuant to this Plan for the purchase
from the Company of a number of Shares which in the
aggregate have an exercise price at least equal to the
amount of the loan requested and approved.
(b) Loans will be extended under this Plan only to persons
who are employees an the date the Option referred to in
Section 8(a) is exercised, and no loans will be
extended in connection with Options exercised in
connection with death, disability or retirement.
(c) The loan shall be evidenced by a promissory note
bearing interest at the minimum rate to avoid the
imputation of interest under the Code in substantially
the same form as attached hereto as Exhibit C.
(d) If an Optionee terminates his employment with the
Company or any subsidiary corporation due to death,
disability, retirement, voluntary or involuntary
termination or otherwise, any loan indebtedness, and
interest thereon, outstanding an the date of such
termination shall be repaid to the Company, in full,
within ninety (90) days of such termination.
(e) As security for the repayment of the loan extended
under this Plan, the Optionee shall pledge to the
Company shares of Stock of the Company having a total
fair market value equal to one hundred percent (100%)
of the loan amount; provided, however, that to the
extend such Shares are subject to the provisions of
Section 12, alternative security may be required within
the discretion of the Committee.
(f) The Company shall be entitled to all the rights and
remedies with respect to the pledged Shares of a
secured creditor under the Uniform Commercial Code as
in effect from time to time in the State of New Jersey.
If an Optionee, or his personal representative or
legatee, as the case may be, fails to pay any
indebtedness when due or within twenty (20) days
thereafter, without making other arrangements
satisfactory to the Committee for discharging his
indebtedness, the Company may sell any pledged stock or
property at public or private sale and apply the
proceeds to the unpaid indebtedness without demand or
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notice to the Optionee.
(g) If the Optionee is entitled to receive any Special
Performance Bonus in accordance with Exhibit B hereto,
such amounts must be applied to repay any loan which
remains outstanding at the time such bonus is paid or
is to be paid.
9. Amendment or Discontinuance of the Plan.
The Board at any time, and from time to time, may suspend or
discontinue the Plan or amend it in any respect whatsoever,
provided, however, that, without the approval of the holders of
at least two-thirds (2/3) of the outstanding Shares, the Plan may
not be amended so as to materially (a) increase the benefits
accruing to participants under the Plan, (b) increase the number
of Shares which may be issued under the Plan (except for
adjustments permitted or required under Section 7 hereof), (c)
modify the requirements as to eligibility for participation in
the Plan, or (d) increase the cost of the Plan to the Company;
and provided further, that no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an
outstanding Option without the consent of such holder.
10. Absence of Rights.
The recommendation or selection of an Eligible Individual as
a recipient of an Option under the Plan shall not entitle such
person to any Option unless and until the grant actually has been
made by appropriate action of the Committee; and any such grant
is subject to the provisions of the Plan. Further, the granting
of an Option to a person shall not entitle that person to
continued employment by the Company or a related corporation or
affect the terms and conditions of such employment, and the
Company shall have the absolute right, in its discretion, to
retire such person in accordance with its retirement policies or
otherwise to terminate his employment, whether or not such
termination may result in a partial or total termination of his
Option.
11. Application of Funds.
The funds received by the Company upon the exercise of
Options and otherwise under the Plan shall be used for general
corporate purposes as permitted by law.
12. Pledge of Shares.
To the extent required under Section 12 (u) of the Revolving
Credit and Term Loan Agreement dated as of September 16, 1986, to
which the Company is a party, the Company shall not issue Shares
pursuant to the exercise of any Options unless the Optionee shall
have entered into a Pledge Agreement, substantially in the Form
of Exhibit E as attached hereto (except that the rights of the
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Banks and the Agents, as such persons are defined in such Pledge
Agreement, shall have recourse only to the being pledged),
pledging the Shares the Optionee is purchasing to the Agent.
13. Shareholder Approval.
This Plan is subject to the approval of the holders of at
least two-thirds (2/3) of the outstanding Shares, which approval
shall be obtained on or before December 15, 1988, which date is
within twelve (12) months of the date the Plan is adopted by the
Board of Directors of the Company. If the shareholders shall not
approve the Plan as aforesaid, the Plan shall not be effective,
and any and all actions taken prior thereto shall be null and
void or shall, if necessary, be deemed to have been fully
rescinded.
14. No Obligation to Exercise Option.
The granting of an Option shall impose no obligation upon an
Optionee to exercise such Option.
15. Termination of Plan.
No Options or Stock Grants may be granted after December 15,
1997, provided, however, that the Plan and all outstanding
Options shall remain in effect until such Options have expired or
vested, as the case may be, or are terminated in accordance with
the Plan.
EXHIBIT 10.2
ELSON T. KILLAM ASSOCIATES, INC.
1987 INCENTIVE STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT, dated as of the ____ day
of _________ 198_ (the "Grant Date") between Elson T. Killam
Associates, Inc., a New Jersey Corporation (the "Company") and
__________ (the "Optionee"), a key senior management employee or
officer of the Company.
WHEREAS, the Company desires to afford the optionee an
opportunity to purchase shares of dollar ($ ) par
value Common Stock, of the Company ("Shares") as hereinafter
provided, in accordance with the provisions of Elson T. Killam
Associates, Inc. 1987 Incentive Stock Option Plan (the "Plan"), a
copy of which is attached hereto.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable
consideration the legal sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound
hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the
Optionee the right and option to purchase all or any part of an
aggregate of __________ Shares (the "Option"), which Option is
intended to qualify as an incentive stock option under Section
422A of the Internal Revenue Code of 1986 (the "Code"). The
Option is in all respects limited and conditioned as hereinafter
provided, and is subject in all respects to the Plan's terms and
conditions as they may be amended from time to time in accordance
with the Plan (which terms and conditions are and automatically
shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other
terms of this Agreement).
The Option is granted subject to the approval of the Plan
on or before December 15, 1988 by the holders of at least
two-thirds (2/3) of the outstanding Shares. If said shareholder
approval is not obtained as aforesaid, the Plan, this Agreement,
and any and all actions (including without limitation the
granting and exercise of the Option) taken pursuant to or in
connection with either, shall be null and void or shall, if
necessary, be deemed to have been fully rescinded.
2. Purchase Price. The purchase price per share (the
"Option Price") of the Shares covered by the Option (the "Option
Shares") shall be $_____. It is the determination of the
Committee that the Option Price is not less than one hundred
percent (100%) of the fair market value of the Option Shares on
the Grant Date.
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3. Term. Unless earlier terminated pursuant to any
provision hereof or of the Plan, the Option shall expire on
__________ (the "Expiration Date").
4. Exercise of Option. The Option shall become
exercisable on _____________, which date is four (4) years after
the Grant Date if granted prior to 1988 or is exercisable in four
(4) installments beginning on the anniversary of the Grant Date
occurring in or after 1991 and each anniversary date thereafter.
The right of the Optionee to purchase the Option Shares which are
the subject of any installment of the Option which has become
exercisable may be exercised in whole or in part at any time or
times prior to the expiration or other termination of the Option.
The foregoing provisions of this Paragraph 4
notwithstanding, the exercisability of the Option is subject to
the terms and conditions of the Plan, including those set forth
in subsections (c) through (g) of Section 5 thereof.
5. Method of Exercising Option. Subject to the terms and
conditions of this Agreement and the Plan, the Option may be
exercised by written notice to the Company at its principal
office, which is presently located at 27 Bleeker Street, Post
Office Box 1008, Millburn, New Jersey 08873. Such notice (a
suggested form of which is attached hereto) shall state the
election to exercise the Option and the number of Option Shares
with respect to which it is being exercised; shall be signed by
the person or persons so exercising the Option; shall, if the
Company so requests, be accompanied by the investment certificate
referred to in Section 6 of the Plan; and shall be accompanied by
payment of the full Option Price of such Option Shares unless a
loan is permitted within the discretion of the Committee and in
accordance with the Plan. The Option Price shall be paid in
cash, check, bank draft or postal or express money order, except
to the extent a loan is otherwise permitted. Upon receipt of
such notice and payment, the Company, as promptly as practicable
shall deliver or cause to be delivered a certificate or
certificates representing the Shares with respect to which the
Option is so exercised. The certificate or certificates for such
Shares shall be registered in the name of the person or persons
so exercising the Option (or, if the Option is exercised by the
Optionee and if the Optionee shall so request in the notice
exercising the Option, shall be registered in the name of the
Optionee and his or her spouse, jointly, with right of
survivorship) and shall be delivered as provided above to or upon
the written order of the person or persons exercising the Option.
In the event the Option shall be exercised by any person or
persons after the death or legal disability of the Optionee, such
notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise the Option. All Shares that
shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and nonassessable by the Company.
6. Non-Transferability of Option. The Option is not
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assignable or transferable, in whole or in part, by the Optionee,
otherwise than by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option
shall be exercisable only by the Optionee or, in the event of
legal disability, by the Optionee's legal representative.
7. Disqualifying Disposition of Option Shares. The
Optionee agrees to give written notice to the Company, at its
principal office, if a "disposition"' of the Shares acquired
through exercise of the Option granted hereunder occurs at any
time within two (2) years after the Grant Date or within one (1)
year after the transfer to the Optionee of such Shares. For
purposes of this Paragraph, the term "disposition" shall have the
meaning assigned to such term by section 425(c) of the Code.
8. Withholding of Taxes. The obligation of the Company
to deliver Shares upon the exercise of the Option shall be
subject to applicable Federal, state and local tax withholding
requirements.
9. Governing Law. This Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the
Code provisions concerning incentive stock options, and its
interpretation shall otherwise be governed by the laws of the
State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be executed by a duly authorized
officer, and the Optionee has hereunto set his hand and seal, all
as of the day and year first above written.
ATTEST
[Corporate Seal] ELSON T. KILLAM ASSOCIATES, INC.
By:_________________________ By:_______________________________
Assistant Secretary
_____________________________ __________________________________
Witness Grantee
EXHIBIT 10.3
SHAREHOLDERS' AGREEMENT
ELSON T. KILLAM ASSOCIATES, INC.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . 1
1.1 "Closing" . . . . . . . . . . . . . . . . . 2
1.2 "Disability". . . . . . . . . . . . . . . . 2
1.3 "Management Group". . . . . . . . . . . . . 2
1.4 "Prime Rate". . . . . . . . . . . . . . . . 2
1.5 "Purchase Price" . . . . . . . . . . . . . 2
1.6 "Related Corporation" . . . . . . . . . . . 2
1.7 "Retirement". . . . . . . . . . . . . . . . 3
1.8 "Shares" shall mean Killam Common Stock . . 3
1.9 "Selling Shareholder" . . . . . . . . . . . 3
1.10 "Transfer". . . . . . . . . . . . . . . . . 3
ARTICLE 2
ISSUED AND OUTSTANDING SHARES . . . . . . . . . . . 3
2.1 Ownership Of Shares . . . . . . . . . . . . 3
2.2 Future Shares . . . . . . . . . . . . . . . 3
ARTICLE 3
USE OF SHARES PURCHASED BY KILLAM . . . . . . . . . 3
ARTICLE 4
VOLUNTARY TRANSFER OF SHARES. . . . . . . . . . . . 4
4.1 Restriction on Transfer . . . . . . . . . . 4
4.2 Notice of Intent to Transfer Shares . . . . 4
4.3 Option of Killam to Purchase Shares . . . . 4
4.4 Option of ETK to Purchase Shares. . . . . . 4
4.5 Option of Management Group to Purchase
Shares. . . . . . . . . . . . . . . . . . 4
ARTICLE 5
INVOLUNTARY TRANSFER OF SHARES. . . . . . . . . . . 5
5.1 Death . . . . . . . . . . . . . . . . . . . 5
5.2 Disability Of Shareholder . . . . . . . . . 5
5.3 Involuntary Termination of Employment . . . 5
5.4 Voluntary Termination of Employment . . . . 5
5.5 Retirement. . . . . . . . . . . . . . . . . 7
ARTICLE 6
REQUIRED REPURCHASE OF SHARES BY KILLAM . . . . . . 7
6.1 Repurchase. . . . . . . . . . . . . . . . . 7
ARTICLE 7
PURCHASE PRICE AND PAYMENT. . . . . . . . . . . . . 7
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7.1 Purchase Price of Shares. . . . . . . . . . 7
7.2 Payment . . . . . . . . . . . . . . . . . . 7
ARTICLE 8
LOAN REPAYMENT. . . . . . . . . . . . . . . . . . . 8
8.1 Loans Due Killam. . . . . . . . . . . . . . 8
8.2 Loans Due the Shareholder . . . . . . . . . 8
ARTICLE 9
TERMINATION . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 10
LEGEND. . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 11
SECURITY. . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 12
CORPORATE EARNED SURPLUS. . . . . . . . . . . . . . 10
12.1 Creation of Surplus. . . . . . . . . . . . 10
12.2 Inadequate Surplus . . . . . . . . . . . . 10
ARTICLE 13
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 11
13.1 Warranties . . . . . . . . . . . . . . . . 11
13.2 Waiver, Modification, Cancellation . . . . 11
13.3 Heirs and Successors . . . . . . . . . . . 11
13.4 Entire Agreement . . . . . . . . . . . . . 12
13.5 Further Assurances . . . . . . . . . . . . 12
13.6 Waiver . . . . . . . . . . . . . . . . . . 12
13.7 Choice of Law. . . . . . . . . . . . . . . 12
13.8 Captions . . . . . . . . . . . . . . . . . 12
13.9 Counterparts . . . . . . . . . . . . . . . 12
13.10 Notices . . . . . . . . . . . . . . . . . 12
SCHEDULE 1. . . . . . . . . . . . . . . . . . . . . . S-1
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . E-1
PAGE
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SHAREHOLDERS' AGREEMENT
THIS AGREEMENT, dated as of this 6th day of February, 1995,
among Elson T. Killam Associates, Inc., a New Jersey corporation
doing business as Killam Associates and having its principle
place of business at 27 Bleeker Street, Millburn, NJ 07041-1008,
New Jersey, ("Killam") Environmental, Technology and Knowledge
Corporation, a Delaware corporation having its principal place of
business at 1209 Orange Street, Wilmington, Delaware 19801
("ETK") and each of the persons listed on Schedule I attached
hereto (individually, a "Shareholder" and collectively, the
"Shareholders").
WITNESSETH
WHEREAS, on December 15, 1987, Killam established the Elson
T. Killam Associates, Inc. 1987 Incentive Stock Option Plan (the
"ISO Plan") for the benefit of the key management employees of
Killam and its wholly-owned subsidiary, Duncan, Lagnese and
Associates, Inc., a Pennsylvania corporation (hereinafter
referred to as "Duncan"); and
WHEREAS, a pool of Killam shares, equal in amount to twenty
percent (20%) of the issued and outstanding shares of Common
Stock in Killam on the date of adoption of the ISO Plan have been
set aside for issuance under the ISO Plan; and
WHEREAS, the Shareholders will have the right to purchase an
equity interest in Killam under the terms of the ISO Plan, and
WHEREAS, Killam, ETK and the Shareholders believe it is in
their mutual interests to preserve harmony and continuity with
respect to the management of Killam and Duncan, which can be best
attained by providing for the manner in which the Shareholders
may sell or transfer their Shares.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained in this Agreement, and for other good and
valuable consideration, the receipt of which is acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following terms
shall have the meanings ascribed to them in this Article, except
as otherwise expressly indicated or limited by the context in
which they appear in this Agreement:
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1.1 "Closing" shall mean the closing of a transaction of
purchase and sale pursuant to this Agreement which shall take
place at the principle office of Killam or at such location that
is mutually convenient to the parties, on the date thirty (30)
days after the date on which the obligation to purchase or
repurchase shares is imposed under this Agreement or such other
date that is acceptable to the parties, provided, however, that
in the event of a purchase and sale of a deceased Shareholder's
Shares, the "Closing" shall take place as soon as is reasonably
possible after the date of death of the deceased Shareholder.
1.2 "Disability" shall mean either a permanent or total
disability as such term is defined in Killam's or Duncan's
disability insurance policy having the largest face amount
covering any Shareholder as an employee, or, if Killam or Duncan
do not have disability insurance, any physical or mental
condition which materially interferes with the performance of a
Shareholder's customary duties to Killam or Duncan, as the case
may be, where such disability has continued for a period of three
(3) consecutive months, and where, on the basis of independent
medical advice secured by Killam or Duncan, the disability is
reasonably expected to continue for an indeterminate duration
exceeding one (1) year. The term "Disability" shall not include
a Shareholder's involuntary service (or voluntary service in the
time of declared war or national emergency) in the armed forces
of the United States. In making the independent medical
determination as to the duration of the disability of a
Shareholder, the determining physician shall include the period
of time, if any, commencing with the date of the event giving
rise to the Shareholder's disabling physical or mental condition
and ending with the date of the physician's determination.
1.3 "Management Group" shall mean the group of key
management employees of Killam who received options to purchase
Shares under the ISO Plan or any subsequent stock option plan.
1.4 "Prime Rate" shall mean the prime rate of interest of
Midlantic National Bank, its successors or assigns, as announced
at its principal offices from time to time.
1.5 "Purchase Price" shall mean the dollar amount equal to
the number of Shares being purchased pursuant to this Agreement
times the value per share determined pursuant to Article 7.
1.6 "Related Corporation" shall mean any corporation which
is a "subsidiary corporation" of Killam as defined in Section
425(f) of the Internal Revenue Code or 1986, as amended from time
to time (the "Code") and any corporation which is a "parent
corporation" as defined in Section 425(c) of the Code.
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1.7 "Retirement" shall mean a Shareholder's termination of
employment with Killam or Duncan, as the case may be, (other than
for reason of the death, disability or involuntary termination of
employment of the Shareholder) provided that such Shareholder's
termination of services occurs on or after his fifty-fifth (55th)
birthday.
1.8 "Shares" shall mean Killam Common Stock.
1.9 "Selling Shareholder" shall mean the Shareholder or the
estate or legal representative of a Shareholder required to sell
his Shares pursuant to the terms of this Agreement.
1.10 "Transfer" shall mean any gift, sale, assignment,
transfer, encumbrance, devise, bequeath or other disposition of
or encumbrance during life or death.
ARTICLE 2
ISSUED AND OUTSTANDING SHARES
2.1 Ownership Of Shares. As of the date of this Agreement,
the Shareholders are the owners of the number of Shares, or
options to purchase Shares, listed on Schedule 1.
2.2 Future Shares. The Shareholders agree to be bound by
this Agreement with respect to the Shares now owned by them and
any Shares acquired by them on or after the date of this
Agreement (including but not limited to acquisition by purchase,
gift, stock dividend, stock split or division, exercise of an
option or options under the ISO Plan, or any other issuance to
them of additional Shares).
ARTICLE 3
USE OF SHARES PURCHASED BY KILLAM
It is the intent of the parties that any Shares purchased by
Killam or ETK under the terms of this Agreement shall be applied
to grant options to purchase such Shares either to the Management
Group or other key employees of either Killam or Duncan, as
designated from time to time by ETK, in amounts aggregating up to
twenty percent (20%) of the ownership interest in Killam. The
time and individual amounts of such options shall be granted
within the discretion of ETK. To the extent any Shares are
purchased by ETK, ETK may make such Shares available for
redemption by Killam in order to facilitate the issuance of
additional options in accordance with this Article.
Alternatively, Killam and ETK may provide that a comparable
amount of authorized but unissued Shares shall be made available
for the issuance of options in accordance with this Article.
ARTICLE 4
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VOLUNTARY TRANSFER OF SHARES
4.1 Restriction on Transfer. Except as otherwise provided
herein, the Shareholders may not transfer any part of, or all of
their Shares, whether now owned or hereafter acquired, in any
manner whatsoever, to any third party.
4.2 Notice of Intent to Transfer Shares. In the event that
a Shareholder (the "Selling Shareholder") desires to dispose of
any or all of his Shares during his employment, and he obtains a
bona fide written offer from any member or members of the
Management Group to purchase the Shares (a "Bona Fide Offer"), he
shall first give at least forty-five (45) days written notice
(the "Exercise Period") to Killam of his desire to sell such
shares. Such notice shall state the number of Shares offered for
sale (the "Offered Shares") and the offered purchase price (the
"Offered Price").
4.3 Option of Killam to Purchase Shares. Within said
Exercise Period, Killam shall have the option to purchase any or
all of the Offered Shares as it determines, within its
discretion. If Killam elects to exercise its option to purchase
any portion of the Offered Shares, written notice of such
election to exercise its option shall be sent to the Selling
Shareholder prior to the expiration of the Exercise Period. The
purchase price for any Shares sold hereunder shall be equal to
the purchase price determined in accordance with Article 7
regardless of whether the purchase price determined under Article
7 is greater or less than the Offered Price. The Closing for
such Offered Shares shall occur within thirty (30) days after the
notice, if any, accepting the purchase is received by the Selling
Shareholder.
4.4 Option of ETK to Purchase Shares. If Killam does not
elect to purchase any of the Offered Shares or elects to purchase
less than all of the Offered Shares, it shall give written notice
thereof to ETK during the Exercise Period, specifying the number
of remaining Offered Shares. ETK shall have the right to
purchase all or part of the remaining Offered Shares by giving
written notice to the Selling Shareholder within ten (10) days
after receipt of the notice from Killam. The purchase price for
any Shares sold hereunder shall be equal to the purchase price
determined in accordance with Article 7 regardless of whether the
purchase price determined under Article 7 is greater or less than
the Offered Price.
4.5 Option of Management Group to Purchase Shares. If ETK
does not elect to purchase any of the remaining Offered Shares or
elects to purchase some but not all of the remaining Offered
Shares, ETK shall give written notice thereof to the Management
Group, specifying the number of remaining Offered Shares. Each
member of the Management Group shall have the option to purchase
any remaining Offered Shares in proportion with the number of
Shares owned by such member in relation to the total number of
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Shares then owned by all members of the Management Group who
desire to purchase any remaining Shares. Each member shall
exercise his option to purchase such Shares by giving notice to
the Selling Shareholder within ten (10) days after receipt of the
notice from ETK. Such purchases shall be made by the Management
Group at the price and on the terms of the Bona Fide Offer. Any
Offered Shares not purchased by Killam, ETK or the members of the
Management Group may be sold to the member or members of the
Management Group that made the Bona Fide Offer.
ARTICLE 5
INVOLUNTARY TRANSFER OF SHARES
5.1 Death. Upon the death of a Shareholder, Killam or ETK,
as determined by the companies, shall purchase and the estate or
personal representative of the deceased Shareholder shall sell
all of the Shares of Killam owned by the deceased Shareholder or
any Shares thereafter acquired under the ISO Plan. The Closing
for such purchases, shall take place as soon as reasonably
possible after the date of death of the deceased Shareholder in
accordance with Section 1.1.
5.2 Disability Of Shareholder. In the event that a
Shareholder shall become Disabled, Killam or ETK, as determined
by the companies, shall purchase and the Shareholder, or legal
guardian of the Disabled Shareholder, shall sell all of the
Shares of Killam owned by the Disabled Shareholder or any Shares
thereafter acquired under the ISO Plan. The Closing for such
purchase shall take place in accordance with Section 1.1.
5.3 Involuntary Termination of Employment. If any
Shareholder ceases to be employed by Killam, or any Related
Corporation, on account of an involuntary termination, Killam or
ETK, as determined by the companies, shall purchase and the
Shareholder shall sell, at the Closing, those Shares of Killam
held by him at the time of his termination of employment or any
Shares thereafter acquired under the ISO Plan.
5.4 Voluntary Termination of Employment.
(a) If any Shareholder ceases to be employed by
Killam, or any Related Corporation, on account of a voluntary
termination, Killam may, within its discretion, purchase those
Shares held by the Shareholder at the time of his termination or
any Shares thereafter acquired under the ISO Plan. If Killam
elects to purchase any or all of such Shares, the Shareholder
shall sell all Shares for which an election is made. If Killam
does not elect to purchase any or all of such Shares, it shall
give written notice thereof to ETK. ETK shall then have the
right to purchase any or all of such Shares. If Killam and ETK
do not elect to purchase such Shares, ETK shall give written
notice thereof to the Management Group. The members of the
Management Group shall have the option to purchase such Shares in
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accordance with the provisions of Section 5.4(b) below. The
Closing for such purchases shall take place in accordance with
Section 1.1.
(b) If Killam or ETK do not elect to purchase all of a
Shareholder's Shares in accordance with Section 5.4(a), they
shall give written notice thereof to the Management Group. Each
member of the Management Group shall have the option to purchase
any remaining Shares owned by such member in proportion with the
total number of Shares then owned by all members of the
Management Group who desire to purchase any Shares. Each member
shall have the right to purchase such Shares at the price and on
the terms as shall be agreed upon between the member or members
and the Selling Shareholder; provided, however, that if the
purchase price is less than the purchase price at which Killam
and ETK could otherwise purchase such Shares under Section
5.4(a), Killam and ETK shall have an additional twenty (20) days
from the date of any Bona Fide Offer, in writing, to elect to
purchase such Shares at the reduced price. If any member elects
to exercise his option to purchase his portion of the Shares,
such member shall give written notice of such election to the
Selling Shareholder within ten (10) days after receipt of the
notice from Killam or ETK, or within ten (10) days after the
expiration of the additional twenty (20) day period provided for
in the preceding sentence, whichever is later. If any member of
the Management Group does not elect to purchase any Shares in
accordance with this Section, the Selling Shareholder shall give
all members of the Management Group who have elected to purchase
the Shares notice of the remaining number of Shares which may be
proportionately purchased at the option of such members upon
written notice to the Selling Shareholder within ten (10) days of
such notice.
(c) For purposes of this Agreement, the term
"voluntary termination" shall include any voluntary actions on
the part of an employee which results in a termination of
employment, other than Retirement. In the event any employee
voluntarily terminates his employment during a period in which an
employment agreement is in effect, such action shall be deemed to
be a voluntary termination regardless of whether Killam
subsequently characterizes such termination as an involuntary
termination for breach of the employment agreement.
5.5 Retirement. If any Shareholder ceases to be employed by
Killam, or any Related Corporation, on account of Retirement,
Killam or ETK, as determined by the companies, shall purchase and
the Shareholder shall sell those Shares held by him at the time
of his termination or any Shares thereafter acquired under the
ISO Plan. The Closing for such purchase shall take place in
accordance with Section 1.1.
ARTICLE 6
REQUIRED REPURCHASE OF SHARES BY KILLAM
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6.1 Repurchase. Notwithstanding any of the provisions
contained in Article 4 or Article 5, Killam shall repurchase from
the Shareholders and the Shareholders shall sell to Killam on
January 1, 1997 and on January 1, 2000 (the "Repurchase Dates"),
or as soon thereafter as reasonably possible, up to twenty-five
percent (25%) of the Shares held by the Shareholders, or their
estates or personal representatives, on each Repurchase Date,
provided, however, that Killam may purchase no more than
forty-three and three-quarters percent (43.75%) of the number of
Shares held by any Shareholder, and the other members of the
Management Group, immediately prior to the repurchase on January
1, 1997. Purchases required hereunder shall be made from any
Shareholder, and the other members of the Management Group,
either by lot, or on a pro rata basis, until all Shares required
to be repurchased hereunder are so purchased. The total number
of Shares which Killam may repurchase hereunder shall be added to
treasury stock and shall be available for issuance under the ISO
Plan or any subsequent stock option plan to members of the
Management Group or other key employees of Killam or Duncan in
accordance with Article 3.
ARTICLE 7
PURCHASE PRICE AND PAYMENT
7.1 Purchase Price of Shares. The Purchase Price for any
Share eligible for purchase or repurchase by Killam or ETK under
this Agreement shall be determined in accordance with the
Computation of Fair Market Value of Shares, as set forth in
Exhibit A, unless a higher Purchase Price is required under
Exhibit E hereof.
7.2 Payment. The Purchase Price for any Shares purchased
by Killam pursuant to this Agreement shall be subject to offset
in accordance with the provisions of Article 8 and shall be paid
at Closing as follows:
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(a) The Purchase Price for any Shares purchased
pursuant to Section 5.2, upon Disability; Section 5.3 upon
an involuntary termination and Article 6, upon a required
repurchase, shall be paid at Closing by the delivery to the
Selling Shareholder of a promissory note providing for the
payment of the Purchase Price over a three (3) year period
with interest accruing at a rate equal to the Prime Rate on
the date preceding the Closing and substantially in the form
attached to this Agreement as Exhibit B;
(b) The Purchase Price for any Shares purchased
pursuant to Sections 5.4, upon voluntary termination and
5.5, Retirement, shall be paid at Closing by the delivery to
the Selling Shareholder of a promissory note providing for
the payment of the Purchase Price over a five (5) year
period with interest accruing at a rate equal to the Prime
Rate on the date preceding the Closing and substantially in
the form attached to this Agreement as Exhibit C;
(c) The Purchase Price for any Shares purchased
pursuant to Section 5.1 shall be paid in cash, to the
Selling Shareholder at Closing; and
(d) The Purchase Price for any Shares to be purchased
by Killam or ETK pursuant to Article 4, during the term of a
Shareholder's employment, shall be paid upon such terms and
conditions as established by Killam or ETK, respectively,
and approved to by the Shareholder at the Closing.
ARTICLE 8
LOAN REPAYMENT
8.1 Loans Due Killam. Killam shall offset against any
portion of the Purchase Price to be paid by it to a Shareholder,
the amount of any loans or other indebtedness due from the
Shareholder to Killam unless otherwise forgiven under the terms
of the ISO Plan, and, to the extent so credited against the
Purchase Price, such loan or other indebtedness shall be deemed
to be and shall be canceled and discharged. In the event that
any Purchase Price is paid by ETK to a Shareholder, the
Shareholder shall be required to use such proceeds to repay any
indebtedness to Killam in accordance with the preceding sentence.
8.2 Loans Due the Shareholder. Any loan or other
indebtedness due from Killam to a Shareholder shall be satisfied
in accordance with the terms of such loan or indebtedness.
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ARTICLE 9
TERMINATION
This Agreement shall terminate, with respect to any
Shareholder, upon the first to occur of any of the following: (i)
execution of a written agreement by Killam, ETK and any
Shareholder terminating the Agreement; (ii) voluntary transfer of
all Shares held by a Shareholder to Killam, ETK or member(s) of
the Management Group; and (iii) the termination of a
Shareholder's employment, for any reason, and the final payment
of any Purchase Price due hereunder.
ARTICLE 10
LEGEND
The following legend shall be conspicuously endorsed on each
certificate representing any shares issued to Shareholder:
"The shares of stock represented by this certificate
are subject to restrictions on transfer, as contained
in the Shareholders Agreement dated __________, 19__,
as the same may be amended from time to time, a copy of
which is on file at the offices of Killam and will be
furnished upon request. The shares of stock evidenced
by this certificate have not been registered under the
Securities Act of 1933 or under any applicable state
securities law, and may not be transferred except upon
delivery to the Corporation of an opinion of counsel
satisfactory in form and substance to it that such
transfer will not violate the Securities Act of 1933,
as amended, or any applicable state securities laws".
ARTICLE 11
SECURITY
Upon the delivery of a promissory note pursuant to any of
the provisions of this Agreement, a Shareholder shall deliver all
of the Shares to be sold to an escrow agent mutually agreeable to
the parties to this Agreement. The escrow agent shall hold such
Shares in accordance with the terms substantially similar to the
Escrow Agreement attached hereto as Exhibit D. The Shareholder
shall execute such additional documents as may be required by the
escrow agent to transfer properly the Shares on the books of
Killam.
The Shares may be subject to a Pledge Agreement as further
described in Section 12 of the ISO Plan.
ARTICLE 12
CORPORATE EARNED SURPLUS
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12.1 Creation of Surplus. If Killam becomes obligated to
purchase a Shareholder's Shares, and if Killam, pursuant to New
Jersey law, does not have sufficient surplus to make payment as
required under this Agreement or to effectuate or to enter into a
valid redemption at such time, Killam shall promptly take all
legal action to enable it to make payment out of surplus or to
effectuate a valid redemption under New Jersey law, including,
but not limited to the following:
(a) A recapitalization of Killam so as to reduce its
stated capital and increase its surplus in accordance with
N.J.S.A. 14A:7-19; and
(b) A reappraisal of the assets of Killam (including
goodwill, if any) to reflect the market value of such assets
on the books of Killam, in the event such value exceeds the
book value thereof, so as to increase such surplus, if
allowed by law.
12.2 Inadequate Surplus. If Killam does not have
sufficient surplus under New Jersey law to effectuate or to enter
into a lawful redemption of a Shareholder's unpurchased Shares,
and if Killam is unable to take such action pursuant to this
Article 12 so as to enable it to effectuate or to enter into a
lawful redemption for all such Shares, then, notwithstanding any
Provision in this Agreement to the contrary, Killam shall be
obligated to purchase only those unpurchased Shares of the
Shareholder as may be lawfully redeemed or purchased by it.
ARTICLE 13
MISCELLANEOUS
13.1 Warranties. At the time of purchase by Killam or ETK
of any Shares held by a Shareholder, the Shareholder represents
and warrants that he owns the Shares registered in his name on
the books of Killam free and clear of any liens and encumbrances
other than as set forth in this Agreement.
13.2 Waiver, Modification, Cancellation. Any waiver,
alteration or modification of any of the provisions of this
Agreement or cancellation or replacement of this Agreement shall
not be valid unless in writing and signed by all of the parties
hereto.
13.3 Heirs and Successors. This Agreement shall be binding
upon Killam, ETK, the Shareholders, and their respective
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successors, heirs, assigns and personal representatives, as the
case may be.
13.4 Entire Agreement. This Agreement contains the entire
agreement of the parties regarding the subject matter hereof and,
together with the schedules attached hereto, supersedes all prior
agreements, understandings and negotiations regarding the same.
13.5 Further Assurances. Each party hereto agrees to
execute, acknowledge and deliver such further instruments, and to
do all such other acts, as may be necessary or appropriate in
order to carry out the purposes and intent of this Agreement.
13.6 Waiver. The waiver by either party of a breach of any
provisions contained herein shall be in writing and shall in no
way be construed as a waiver of any succeeding breach of such
provision or the waiver of the provision itself.
13.7 Choice of Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New
Jersey as if the Agreement was performed wholly within such State
and without regard to its conflict of law principles.
13.8 Captions. Paragraph captions are inserted for
convenience only and in no way are to be construed to define,
limit or affect the construction or interpretation hereof.
13.9 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument. If this Agreement is executed in counterparts, no
signatory hereto shall be bound until each of the parties named
below shall have duly executed or caused to be duly executed a
counterpart of this Agreement.
13.10 Notices. Whenever under this provisions of this
Agreement notice is required to be given, it shall be in writing
and shall be deemed given when mailed, postage prepaid, by
registered or certified mail, return receipt requested, addressed
to the Shareholder, Killam or ETK at their respective addresses
set forth in this Agreement, or to such other address as may
appear on the record books of Killam. Any party hereto may
change its address for the provision of notice to it hereunder by
notification to the other parties hereto in accordance with this
Section 13.10.
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IN WITNESS WHEREOF, the undersigned parties have executed
this Agreement as of the day and year first above written.
ELSON T. KILLAM ASSOCIATES, INC.
By:/s/ Emil C. Herkert
----------------------------
Emil C. Herkert
ENVIRONMENTAL TECHNOLOGY AND
KNOWLEDGE CORPORATION
By:/s/ John P. Appleton
----------------------------
/s/ Emil C. Herkert
-------------------------------
Emil C. Herkert
/s/ Kenneth L. Zippler
-------------------------------
Kenneth L. Zippler
/s/ Fletcher N. Platt, Jr.
-------------------------------
Fletcher N. Platt, Jr.
/s/ Franklin O. Williamson, Jr.
-------------------------------
Franklin O. Williamson, Jr.
/s/ Eugene J. DeStefano
-------------------------------
Eugene J. DeStefano
/s/ Meint Olthoff
-------------------------------
Meint Olthoff
/s/ Stanley P. Kaltnecker, Jr.
-------------------------------
Stanley P. Kaltnecker, Jr.
EXHIBIT 10.4
AMENDMENT NO. 1 TO SHAREHOLDERS' AGREEMENT
WHEREAS, Elson T. Killam Associates, Inc., a New Jersey
corporation ("Killam"), Engineering, Technology and Knowledge
Corporation, a Delaware corporation (formerly known as
Environmental, Technology and Knowledge Corporation ("ETKC"), and
certain persons (individually, a "Shareholder" and collectively,
the "Shareholders") are parties to that certain Shareholders'
Agreement dated as of the 29th day of January, 1995 (the
"Shareholders' Agreement");
WHEREAS, ETKC owns 100% of the outstanding capital stock of
Killam (the "Killam Stock") and the Shareholders collectively own
vested options (the "Killam Options") to purchase, in the
aggregate, 1,590 additional shares of Killam Stock;
WHEREAS, in the absence of any public trading market for
Killam Stock, the Shareholders' Agreement contains certain
provisions intended under certain identified circumstances to
provide the Shareholders with liquidity with respect to their
shares of Killam Stock;
WHEREAS, pursuant to a Stock Purchase and Sale Agreement of
even date herewith, Thermo Process Systems Inc., a Delaware
corporation ("Thermo"), has acquired 100% of the outstanding
capital stock of ETKC;
WHEREAS, as of the date hereof, the Killam Options (after
taking into account the cancellation of certain of the Killam
Options) have been assumed by Thermo and have been converted into
options to purchase shares of the common stock of Thermo, which
shares are listed for trading on the American Stock Exchange and
are freely tradable under U.S. securities laws in the public
securities markets; and
WHEREAS, the parties wish to clarify the Shareholders'
Agreement to establish such public markets as the means to
provide the Shareholders with the liquidity guaranteed by the
Shareholders' Agreement;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises set forth herein, and intending to be legally
bound, the parties hereto hereby agree as follows:
1. The Shareholders' Agreement is amended by deleting
Section 1.8 thereof in its entirety and substituting therefor the
following:
"1.8 "SHARES" shall mean shares of the common stock of
Thermo Process Systems Inc. acquired upon the exercise of
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options received by the Shareholders as of February 6, 1995
(the "Thermo Options") upon the conversion of
then-outstanding options to purchase shares of the capital
stock of Killam."
2. The Shareholders' Agreement is amended by deleting
Section 2.2 thereof in its entirety and substituting therefor the
following:
"2.2 FUTURE SHARES. The Shareholders agree to be bound
by this Agreement only with respect to the Shares. This
Agreement shall not apply to any other shares of stock of
Thermo Process Systems Inc. acquired by the Shareholders."
3. The Shareholders' Agreement is amended by deleting
Article 3, Sections 4.2, 4.3, 4.4 and 4.5 and Article 7 thereof
in their entirety.
4. The Shareholders' Agreement is amended by deleting
Section 5.1 thereof in its entirety and substituting therefor the
following:
"5.1 DEATH. Upon the death of a Shareholder, the
estate or personal representative of such deceased
Shareholder may sell, transfer or otherwise dispose of any
Shares owned by such deceased Shareholder to any third party
on such terms as such estate or personal representative and
such third party may agree. Any such third party shall take
such Shares free and clear of any restriction imposed on the
Shareholder by this Agreement."
5. The Shareholders' Agreement is amended by deleting
Section 5.2 thereof in its entirety and substituting therefor the
following:
"5.2 DISABILITY. In the event that a Shareholder
becomes Disabled, such Disabled Shareholder or the legal
guardian of such Disabled Shareholder may sell, transfer or
otherwise dispose of any Shares owned by such Disabled
Shareholder to any third party on such terms as such
Disabled Shareholder or such legal guardian and such third
party may agree. Any such third party shall take such
Shares free and clear of any restriction imposed on the
Shareholder by this Agreement."
6. The Shareholders' Agreement is amended by deleting
Section 5.3 thereof in its entirety and substituting therefor the
following:
"5.3 INVOLUNTARY TERMINATION OF EMPLOYMENT. If any
Shareholder ceases to be employed by Killam, or any Related
Corporation, on account of an involuntary termination, such
Shareholder may sell, transfer or otherwise dispose of any
Shares owned by such Shareholder to any third party on such
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terms as such Shareholder and such third party may agree.
Any such third party shall take such Shares free and clear
of any restriction imposed on the Shareholder by this
Agreement."
7. The Shareholders' Agreement is amended by deleting
Section 5.4 thereof in its entirety and substituting therefor the
following:
"5.4 VOLUNTARY TERMINATION OF EMPLOYMENT. If any
Shareholder ceases to be employed by Killam, or any Related
Corporation, on account of a voluntary termination, such
Shareholder may sell, transfer or otherwise dispose of any
Shares owned by such Shareholder to any third party on such
terms as such Shareholder and such third party may agree.
Any such third party shall take such Shares free and clear
of any restriction imposed on the Shareholder by this
Agreement."
8. The Shareholders' Agreement is amended by deleting
Section 5.5 thereof in its entirety and substituting therefor the
following:
"5.5 RETIREMENT. If any Shareholder ceases to be
employed by Killam, or any Related Corporation, on account
of Retirement, such Shareholder may sell, transfer or
otherwise dispose of any Shares owned by such Shareholder to
any third party on such terms as such Shareholder and such
third party may agree. Any such third party shall take such
Shares free and clear of any restriction imposed on the
Shareholder by this Agreement."
9. The Shareholders' Agreement is amended by deleting
Section 6.1 thereof in its entirety and substituting therefor the
following:
"6.1 SALE OF SHARES. Notwithstanding the provisions
contained in Article 4, (a) on and after January 1, 1997,
each Shareholder may sell up to 25% of his Shares to any
third party on such terms as such Shareholder and such third
party may agree; (b) on and after January 1, 1998, each
Shareholder may sell up to 25% of his Shares to any third
party on such terms as such Shareholder and such third party
may agree; (c) on and after January 1, 1999 each Shareholder
may sell up to 25% of his Shares to any third party on such
terms as such Shareholder and such third party may agree;
and (d) on and after January 1, 2000 each Shareholder may
sell up to 25% of his Shares to any third party on such
terms as such Shareholder and such third party may agree;
such that beginning on January 1, 1997, each Shareholder
will have been entitled to sell one-fourth of his total
Shares on and after each such date. Any such third party
shall take such Shares free and clear of any restriction
imposed on the Shareholder by this Agreement. This Section
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6.1 shall not limit the ability of each Shareholder to sell
Shares as set forth in Article 5."
10. The Shareholders' Agreement is amended by adding the
following Section 13.11 immediately after Section 13.10:
"13.11 FLOOR PRICE ON SHARES. In the event that a
Shareholder desires to sell in the open market any or all of
his Shares at any time prior to January 29, 2002 (subject to
the resale restrictions set forth in this Agreement), but
cannot do so at prices equal to at least $8.00 per Share, as
adjusted for stock dividends, stock splits,
reclassifications and similar events (the "Floor Price"),
Killam's parent company, Thermo Process Systems Inc.
("Thermo") will either, in its discretion, buy any such
Shares that cannot be sold for at least the Floor Price for
an amount equal to the Floor Price or (ii) permit the
Shareholder to sell such Shares in the open market at such
price or prices as may be obtainable and pay to the
Shareholder an amount which is equal to the difference
between the Floor Price and the amount which such
Shareholder received (before taking into account
commissions, taxes and other transaction costs) upon such
sales. The Shareholders agree, as a condition to such
agreements by Thermo, to give Thermo reasonable prior
written notice of any such intention to sell such Shares and
to consult with Thermo as to the timing of such sales."
11. The Shareholders' Agreement is amended by adding the
following Section 13.12 immediately after Section 13.11:
"13.12 PLEDGES. Notwithstanding any other provision
of this Agreement, each Shareholder may pledge any or all of
his Shares as collateral for any loans that may be needed to
enable such Shareholder to pay any alternative minimum tax
or other income tax due as a result of the exercise of the
Thermo Options, provided, however, that any lender accepting
such Shares as collateral shall continue to be prohibited
from disposing of such Shares except in accordance with the
provisions of Section 6.1 of this Agreement."
12. Except as expressly amended hereby, the Shareholders'
Agreement shall remain in full force and effect in accordance
with the terms thereof.
4PAGE
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 as of the day and year first written above.
ELSON T. KILLAM ASSOCIATES, INC. ENGINEERING, TECHNOLOGY
AND KNOWLEDGE CORPORATION
By: /s/ Emil C. Herkert By: /s/ John P. Appleton
Printed Name: Emil C. Herkert Printed Name: John P.
Title: President Appleton
Title: President
/s/ Emil C. Herkert /s/ Kenneth L. Zippler
Emil C. Herkert Kenneth L. Zippler
/s/ Franklin O. Williamson, Jr. /s/ Fletcher N. Platt, Jr.
Franklin O. Williamson, Jr. Fletcher N. Platt,
Jr.
/s/ Eugene J. Destefano /s/ Meint Olthof
Eugene J. Destefano Meint Olthof
/s/ Stanley P. Kaltnecker, Jr.
Stanley P. Kaltnecker, Jr.
5PAGE
<PAGE>
for purposes of SectionS 10 and 11 hereof only:
THERMO PROCESS SYSTEMS INC.
By: /s/ John P. Appleton
Printed Name: John P. Appleton
Title: President
EXHIBIT 10.5
OPTION EXCHANGE AGREEMENT
THIS AGREEMENT is made as of the 6th day of February, 1995,
among Thermo Process Systems Inc., a Delaware Corporation
("Thermo"), and Emil C. Herkert, an individual whose primary
residence is in the State of New Jersey ("Optionee").
WHEREAS, pursuant to a Stock Purchase and Sale Agreement of
even date herewith (the "Purchase and Sale Agreement"), Thermo
has acquired 100% of the outstanding capital stock of Engineering
Technology and Knowledge Corporation, a Delaware corporation
("ETKC");
WHEREAS, ETKC owns 100% of the capital stock of Elson T.
Killam Associates, Inc., a New Jersey corporation ("Killam");
WHEREAS, Killam adopted an Incentive Stock Option Plan
effective as of December 15, 1987 (the "Stock Option Plan");
WHEREAS, the pursuant to a stock option agreement dated as
of December 15, 1987, a copy of which is attached as Exhibit A
hereto (the "Option Agreement"), Optionee owns a vested option
(the "Killam Option") to purchase, in the aggregate, 365.52
shares of the capital stock of Killam (after taking into account
the cancellation of the Killam Option with respect to certain
shares of the capital stock of Killam (the "Killam Stock"); and
WHEREAS, Thermo wishes to acquire such Killam Option and to
substitute therefor an economically equivalent option to purchase
shares of Thermo's common stock, $.10 par value per share (the
"Thermo Stock");
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises set forth herein and of the mutual promises set
forth in the Purchase and Sale Agreement, and intending to be
legally bound, the parties hereto hereby agree as follows:
SECTION 1. ASSUMPTION OF THE STOCK OPTION PLAN AND THE
KILLAM OPTION. Except as set forth below, Thermo hereby assumes
and agrees to perform and discharge all liabilities, obligations
and commitments of Killam which are set forth in the Stock Option
Plan and the Option Agreement. Thermo and Optionee hereby agree
that the Killam Option is hereby converted, without any further
action on the part of either party, into an option (the "Thermo
Option") to purchase an aggregate of 250,000 shares of Thermo
Stock. Thermo and Optionee hereby agree that the exercise price
of the Thermo Option shall be $.0824 per share of Thermo Stock.
The assumption of the Stock Option Plan and the Killam Option and
the conversion thereof of into the Thermo Option as provided
herein shall not give Optionee additional benefits which he did
not have immediately prior to the date hereof, result in any
-1-PAGE
<PAGE>
acceleration of any vesting schedule for any Killam Option, or
relieve Optionee of any obligation or restriction applicable to
the Killam Option or the Killam Stock obtainable upon exercise of
the Killam Option, including without limitation obligations and
restrictions imposed by that certain Shareholders' Agreement
dated January 29, 1995, as amended from time to time. Thermo and
Optionee agree that the foregoing assumption and conversion of
the Killam Option is intended to comply with Internal Revenue
Code Regulations governing incentive stock option roll-overs.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
OPTIONEE. Optionee represents and warrants to, and covenants
with, Thermo that:
2.1. OPTION AGREEMENT. Attached hereto as Exhibit 1 is a
true, correct and complete copy of Optionee's Option Agreement.
The Option Agreement has not been amended, and is the sole
instrument to which Optionee is a party that purports to grant
Optionee any right to acquire shares of Killam Stock. Optionee
is the sole true, legal and beneficial owner of the Killam
Option. Optionee has not previously sold or transferred any
interest in the Killam Option to any third party, has not
pledged, mortgaged, hypothecated or otherwise encumbered the
Killam Option or any or all of the Killam Stock. No third party
has been granted or has otherwise obtained, whether by operation
of law or otherwise, any lien, security interest or other
interest, contingent or otherwise, in or with respect to the
Killam Option or in or with respect to any or all of the Killam
Stock.
2.2. AUTHORITY. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
action on the part of Optionee. This Agreement constitutes the
valid and binding obligation of Optionee enforceable against him
in accordance with the terms hereof, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the rights of creditors or by general principles of equity.
Neither the execution, delivery and performance of this Agreement
by Optionee, nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a
violation, breach, termination or acceleration of, or default
under (or would result in such a violation, breach, termination,
acceleration or default with the giving of notice or passage of
time, or both) any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, agreement or other instrument or
obligation to which Optionee is a party or by which Optionee or
any of his properties or assets may be bound or affected; or (ii)
result in the violation of any order, writ, injunction, decree,
statute, rule or regulation applicable to Optionee or his
properties or assets.
2.3. INVESTMENT REPRESENTATIONS.
-2-PAGE
<PAGE>
(a) Optionee has, in connection with his decision to
acquire the Thermo Option, relied solely upon Thermo's
Confidential Placement Memorandum dated January 29, 1995 and
the documents incorporated therein by reference; and
(b) Taking into account the personnel and resources
Optionee can practically bring to bear on the acquisition of
the Thermo Options and the Thermo Stock contemplated hereby,
Optionee is knowledgeable, sophisticated and experienced in
making, and is able to make, decisions with respect to
investments in securities presenting an investment decision
like that involved in the acquisition of the Thermo Option
and the Thermo Stock, including investments in securities
issued by Thermo, and to assess the risks and merits
presented by the acquisition of the Thermo Stock and the
Thermo Options, and has requested, received, reviewed and
considered all information he deems relevant in making an
informed decision to acquire the Thermo Stock and the Thermo
Options.
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THERMO. Thermo hereby represents and warrants to, and covenants
with, Optionee as follows:
3.1. ORGANIZATION AND QUALIFICATION. Thermo is a
corporation validly existing and in good standing under the laws
of the State of Delaware, and has all requisite corporate power
and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted.
3.2. AUTHORITY. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of Thermo. This Agreement
constitutes the valid and binding obligation of Thermo
enforceable against Thermo in accordance with the terms hereof,
except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights of creditors or by general principles of
equity. Neither the execution, delivery and performance of this
Agreement by Thermo, nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in a
violation, breach, termination or acceleration of, or default
under (or would result in such a violation, breach, termination,
acceleration or default with the giving of notice or passage of
time, or both) any of the terms, conditions or provisions of the
certificate of incorporation or bylaws of Thermo, each as
amended, or of any note, bond, mortgage, indenture, agreement or
other instrument or obligation to which Thermo is a party or by
which Thermo or any of its properties or assets may be bound or
affected; or (ii) result in the violation of any order, writ,
injunction, decree, statute, rule or regulation applicable to
Thermo or its properties or assets.
-3-PAGE
<PAGE>
3.3. ASSUMPTION OF THE STOCK OPTION PLAN AND THE KILLAM
OPTION; ISSUANCE, SALE AND DELIVERY OF THE THERMO STOCK. The
assumption of the Stock Option Plan and the Killam Option in
accordance with the terms of this Agreement, and the conversion
of the Killam Option into the Thermo Option, have been duly
authorized under applicable law by all requisite corporate
action. The Thermo Stock (as set forth in Section 1) will be
delivered to Optionee upon exercise of the Thermo Option, and
upon payment by Optionee of the exercise price therefor, and as
and when delivered, will be validly issued and outstanding, fully
paid and nonassessable.
3.4. ACCURACY OF INFORMATION. The information contained
in the Memorandum is true and correct in all material respects as
of the date thereof.
SECTION 4. NOTICES. All notices, requests, demands,
consents and other communications which are required or permitted
hereunder shall be in writing, and shall be deemed given when
actually received or if earlier, two days after deposit with the
U.S. postal authorities, certified or registered mail, return
receipt requested, postage prepaid or two days after deposit with
an internationally recognized air courier or express mail,
charges prepaid, addressed as follows:
If to Thermo:
Thermo Process Systems Inc.
c/o Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254-9046
Attention: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
If to Optionee:
Emil C. Herkert
c/o Killam Associates Inc.
27 Bleeker Street
P. O. Box 32
Millburn, New Jersey 07041-0032
With a copy to:
Norris, McLaughlin & Marcus
721 Route 202-206
P. O. Box 1018
-4-PAGE
<PAGE>
Somerville, New Jersey 08876-1018
Attention: John J. Eagan, Esq.
or to such other address as any party hereto may designate in
writing to the other parties, specifying a change of address for
the purpose of this Agreement.
SECTION 5. CHANGES. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by
Thermo and Optionee.
SECTION 6. HEADINGS. The headings of the various sections
of this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
SECTION 7. SEVERABILITY. In case any provision contained
in this Agreement should be invalid, illegal or unenforceable in
any respect, the validity, legality, and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
SECTION 8. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws governing the Option
Agreement.
SECTION 9. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall constitute an original, but all
of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered
to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives
as of the day and year first above written.
THERMO PROCESS SYSTEMS INC. OPTIONEE
By: /s/ John P. Appleton /s/ Emil C. Herkert
Printed Name: John P. Appleton Printed Name: Emil C. Herkert
Title: President
Exhibit 11
THERMO TERRATECH INC.
Computation of Earnings per Share
Three Months Ended
--------------------------
June 29, July 1,
1996 1995
--------------------------------------------------------------------------
Computation of Primary Earnings per Share:
Net Income (a) $ 1,438,000 $ 3,949,000
----------- -----------
Shares:
Weighted average shares outstanding 17,892,427 17,350,773
Add: Shares issuable from assumed exercise
of options and warrants (as determined
by the application of the treasury
stock method) 938,650 671,379
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 18,831,077 18,022,152
----------- -----------
Primary Earnings per Share (a) / (b) $ .08 $ .22
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
TERRATECH INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 29,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> JUN-29-1996
<CASH> 71,213
<SECURITIES> 28,254
<RECEIVABLES> 48,230
<ALLOWANCES> 2,883
<INVENTORY> 3,441
<CURRENT-ASSETS> 185,074
<PP&E> 125,168
<DEPRECIATION> 41,634
<TOTAL-ASSETS> 401,002
<CURRENT-LIABILITIES> 78,750
<BONDS> 192,983
0
0
<COMMON> 1,807
<OTHER-SE> 90,080
<TOTAL-LIABILITY-AND-EQUITY> 401,002
<SALES> 5,752
<TOTAL-REVENUES> 66,888
<CGS> 4,718
<TOTAL-COSTS> 53,939
<OTHER-EXPENSES> 299
<LOSS-PROVISION> 122
<INTEREST-EXPENSE> 3,108
<INCOME-PRETAX> 3,161
<INCOME-TAX> 1,501
<INCOME-CONTINUING> 1,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,438
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
