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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
The Randers Killam Group Inc.
(Name of Issuer)
The Randers Killam Group Inc.
RK Acquisition Corporation
Thermo TerraTech Inc.
Thermo Electron Corporation
(Name of Person(s) Filing Statement)
Common Stock, par value $.0001 per share
(Title of Class of Securities)
752333 20 3
(CUSIP Number of Class of Securities)
Sandra L. Lambert, Secretary
The Randers Killam Group Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
(781) 622-1000
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)
with a copy to:
Seth H. Hoogasian, General Counsel
The Randers Killam Group Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, Massachusetts 02454-9046
(781) 622-1000
This statement is filed in connection with (check the appropriate box):
a. /X/ The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. The filing of a registration statement under the Securities Act of 1933.
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c. A tender offer.
d. None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies. /X/
Calculation of Filing Fee
- -------------------------------------------------------------------------------
Transaction Value* Amount of Filing Fee
- -------------------------------------------------------------------------------
$4,838,197.50 $968
- -------------------------------------------------------------------------------
* Solely for purposes of calculating the filing fee. Assumes purchase of
1,075,155 shares of Common Stock, par value $.01 per share, of The Randers
Killam Group Inc. at $4.50 per share.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: $968
Form or registration no.: Preliminary Proxy Statement on Schedule 14A
Filing party: The Randers Killam Group Inc.
Date filed: November 9, 1999
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This Rule 13e-3 Transaction Statement (the "Statement") is being filed in
connection with the filing by The Randers Killam Group Inc. ("Randers/Killam" or
the "Company") with the Securities and Exchange Commission (the "Commission") on
November 9, 1999 of a Proxy Statement on Schedule 14A (as amended, the "Proxy
Statement") in connection with a special meeting of the stockholders of
Randers/Killam. At such meeting, the stockholders of Randers/Killam will vote
upon the approval of an Agreement and Plan of Merger dated as of October 19,
1999 (the "Merger Agreement") by and among Thermo Electron Corporation ("Thermo
Electron"), RK Acquisition Corporation (the "Merger Sub") and Randers/Killam,
pursuant to which the Merger Sub, a subsidiary of Thermo Electron, will be
merged with and into Randers/Killam.
The following cross reference sheet is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Proxy Statement of
the information required to be included in response to the items of this
Statement. The information in the Proxy Statement that is attached hereto as
Exhibit (d)(3), including all appendices thereto, is hereby expressly
incorporated herein by reference and the responses to each item are qualified in
their entirety by the provisions of the Proxy Statement.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM IN SCHEDULE 13E-3 CAPTION OR LOCATION IN THE PROXY STATEMENT
- ---------------------- -------------------------------------------
<S> <C>
Item 1(a)............................................"Introduction;" "Summary - Purpose of the Special Meeting;"
"- Parties to the Merger"
Item 1(b)............................................"Introduction;" "Summary - Purpose of the Special Meeting;"
"- Record Date and Quorum;" "- Market Prices of Common Stock
and Dividends;" "The Special Meeting - Record Date and
Quorum Requirement"
Item 1(c) ....................................... "Summary - Market Prices of Common Stock and Dividends"
Item 1(d) ....................................... "Summary - Market Prices of Common Stock and Dividends;"
"The Merger - Covenants"
Item 1(e)............................................Not applicable
Item 1(f)............................................"Appendix D - Information Concerning Transactions in the
Common Stock of the Company"
Item 2(a) - (c)......................................"Introduction;" "Summary - Parties to the Merger;" "Business
of the Company;" "Management;"
</TABLE>
3
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<TABLE>
<S> <C>
"Certain Information
Concerning the Merger Sub, Thermo TerraTech and Thermo
Electron"
Item 2(d)............................................"Management;" "Certain Information Concerning the Merger
Sub, Thermo TerraTech and Thermo Electron"
Item 2(e)............................................Not Applicable
Item 2(f)............................................Not Applicable
Item 2(g)............................................"Certain Information Concerning the Merger Sub, Thermo
TerraTech and Thermo Electron"
Item 3(a)(1)........................................."Certain Transactions"
Item 3(a)(2) - 3 (b) ............................ "Summary - The Merger;" "- The Special Committee's and the
Board's Recommendation;" "- Purpose and Reasons of Thermo
Electron for the Merger;" "Special Factors - Background of
the Merger;" "- The Special Committee's and the Board's
Recommendation;" "- Purpose and Reasons of Thermo Electron
for the Merger;" "Certain Transactions;" "Appendix D -
Information Concerning Transactions in the Common Stock of
the Company"
Item 4(a)............................................"Introduction;" "Summary - The Merger;" "Effective Time of the Merger
and Payment for Shares;" "Assumption of Randers/Killam Stock Options by Thermo
Electron;" "- Conflicts of Interest;" "- Certain Effects of the
Merger;" "- Conditions to the Merger, Termination and Expenses;"
"Special Factors - Conflicts of Interest;" "Certain Effects of the
Merger;" "The Merger;" "Appendix A Agreement and Plan of Merger"
Item 4(b)............................................"Introduction;" "Summary - Purpose of the Special Meeting;" "-The
Merger;" "The Merger - Conversion of Securities;" "Deferred
Compensation Plan for Directors;" "Federal Income Tax Consequences;"
"Appendix A - Agreement and Plan of Merger"
</TABLE>
4
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<TABLE>
<S> <C>
Item 5(a)............................................"Special Factors - Conduct of Randers/Killam's Business
After the Merger"
Item 5(b)............................................"Special Factors - Conduct of Randers/Killam's Business
After the Merger"
Item 5(c)............................................"Introduction;" "Special Factors - Conflicts of Interest;"
"- Conduct of Randers/Killam's Business After the Merger"
Item 5(d) ....................................... .. "Summary - Certain Effects of the Merger;" "Special
Factors - Certain Effects of the Merger;" "The Merger
- Conversion of Securities"
Item 5(e)............................................"Summary - Certain Effects of the Merger;" "Special Factors
- Certain Effects of the Merger;" "- Conduct of
Randers/Killam's Business After the Merger"
Item 5(f) ....................................... .. "Summary - Certain Effects of the Merger;" "Special Factors
- Certain Effects of the Merger"
Item 5(g) ....................................... .. "Summary - Certain Effects of the Merger;" "Special Factors
- Certain Effects of the Merger"
Item 6(a) ....................................... ..."Summary - The Merger;" "The Merger - Source of Funds"
Item 6(b)............................................"Summary - Opinion of Adams, Harkness & Hill;"
"- Conflicts of Interest;" "Special Factors - Opinion of Adams,
Harkness & Hill;" "- Conflicts of Interest;" "The Merger -
Expenses"
Item 6(c)............................................Not applicable
Item 6(d)............................................Not applicable
Item 7(a) -(c)...................................... "Summary - The Merger;" "--The Special Committee's and the
Board's Recommendation;" "- Opinion of Adams, Harkness &
Hill;" "- Purpose and Reasons of Thermo Electron for the
Merger;" "Special Factors - Background of the Merger;" "The
Special Committee's and the Board's Recommendation;" "Opinion
of Adams, Harkness & Hill;" "- Purpose and Reasons of Thermo
Electron for the Merger"
</TABLE>
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<TABLE>
<S> <C>
Item 7(d) ....................................... "Summary - The Merger;" "- Assumption of Randers/Killam
Stock Options by Thermo Electron;" "- Purpose and Reasons of
Thermo Electron for the Merger;" "- Conflicts of Interest;"
"- Certain Effects of the Merger;" "- Federal Income Tax
Consequences;" "Special Factors - Conflicts of Interest;"
"- Certain Effects of the Merger;" "- Purpose and Reasons of
Thermo Electron for the Merger;" "- Conduct of
Randers/Killam's Business After the Merger;" "The Merger -
Conversion of Securities;" "- Assumption of Randers/Killam
Stock Options by the Thermo Electron;" "- Deferred
Compensation Plan for Directors;" "Federal Income Tax
Consequences"
Item 8(a) ....................................... "Summary - The Special Committee's and the Board's
Recommendation;" " - Position of Thermo
Electron as to Fairness of the Merger;" "Special Factors -
The Special Committee's and the Board's Recommendation;"
"- Position of Thermo Electron as to
Fairness of the Merger"
Item 8(b) ......................................... "Summary - The Special Committee's and the Board's
Recommendation;" "- Opinion of Adams, Harkness & Hill;"
" - Position of Thermo Electron as to
Fairness of the Merger;" "Special Factors - Background of
the Merger;" "- The Special Committee's and the Board's
Recommendation;" "- Opinion of Adams, Harkness & Hill;"
"- Position of Thermo Electron as to
Fairness of the Merger;" "Appendix B - Opinion of Adams,
Harkness & Hill"
Item 8(c) ......................................... "Introduction;" "Summary - Vote Required and
Revocation of Proxies;" "The Special Meeting - Voting
Procedures"
Item 8(d)............................................"Summary - The Special Committee's and the Board's
Recommendation;" "- Opinion of Adams, Harkness &
Hill;" "Special Factors - Background of the Merger;"
"- The Special Committee's and the Board's
Recommendation;" "- Opinion of Adams,
</TABLE>
6
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<TABLE>
<S> <C>
Item 8(e)............................................Harkness & Hill;" "Appendix B - Opinion of Adams, Harkness &
Hill" "Summary - The Special Committee's and the Board's
Recommendation;" "Special Factors - The Special Committee's
and the Board's Recommendation"
Item 8(f)............................................Not applicable
Item 9(a) - (c)......................................"Summary - Opinion of Adams, Harkness & Hill;" "Special
Factors - Background of the Merger;" "- Opinion of
Adams, Harkness & Hill;" "Appendix B - Opinion of Adams,
Harkness & Hill"
Item 10(a) ......................................... "Introduction;" "Summary - Vote Required and Revocation of
Proxies;" "- The Special Committee's and the Board's
Recommendation;" "- Conflicts of Interest;" "Special
Factors - Purpose and Reasons of Thermo Electron for the
Merger;" "- Conflicts of Interest;" "The Special Meeting -
Voting Procedures;" "Security Ownership of Certain
Beneficial Owners and Management;" "Appendix D - Information
Concerning Transactions in the Common Stock of the Company"
Item 10(b)..........................................."Appendix D - Information Concerning Transactions in the
Common Stock of the Company"
Item 11 ............................................ "Introduction;" "Summary - Vote Required and
Revocation of Proxies;" "- The Merger;" "The Special
Meeting - Voting Procedures;" "The Merger;" "Appendix
A Agreement and Plan of Merger"
Item 12(a)..........................................."Introduction;" "Summary - Vote Required and Revocation of
Proxies;" "The Special Meeting - Voting Procedures;"
"Certain Information Concerning the Merger Sub, Thermo
TerraTech and Thermo Electron"
Item 12(b) ......................................... "Summary - The Special Committee's and the Board's
Recommendation;" "- Position of Thermo
Electron as to Fairness of
</TABLE>
7
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<TABLE>
<S> <C>
the Merger;" "Special Factors -The Special
Committee's and the Board's Recommendation;" "-
Position of Thermo Electron as
to Fairness of the Merger"
Item 13(a)..........................................."Summary - Rights of Dissenting Stockholders;" "The Special
Meeting - Voting Procedures;" "Rights of Dissenting
Stockholders;" "Appendix C - Text of Section 262 of the
General Corporation Law of the State of Delaware"
Item 13(b)...........................................Not applicable
Item 13(c)...........................................Not applicable
Item 14(a)..........................................."Selected Financial Information and Ratio of Earnings
(Loss) to Fixed Charges;" "Appendix E - Annual Report
on Form 10-K of Randers/Killam for the Fiscal Year
Ended April 3, 1999;" "Appendix F - Amendment No. 1
on Form 10-K/A to Annual Report on Form 10-K of
Randers/Killam for the Fiscal Year Ended April 3,
1999;" "Appendix G - Quarterly Report on
Form 10-Q of Randers/Killam for the Quarter Ended
July 3, 1999"
Item 14(b)...........................................Not applicable
Item 15(a)..........................................."The Special Meeting - Proxy Solicitation"
Item 15(b)...........................................Not applicable
Item 16 ............................................ Entirety of Proxy Statement
Item 17(a)...........................................Not applicable
Item 17(b)...........................................Opinion of Adams, Harkness & Hill dated October 18, 1999
(included as Appendix B to the Proxy Statement)
Item 17(c) ..........................................Agreement and Plan of Merger dated as of October 19, 1999 by
and among Thermo Electron Corporation, RK Acquisition
Corporation and The Randers Killam Group Inc. (included as
Appendix A to the Proxy Statement)
Item 17(d)(1)........................................Letter to Stockholders
</TABLE>
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<TABLE>
<S> <C>
Item 17(d)(2) ...................................... Notice of Special Meeting of Stockholders
Item 17(d)(3) ...................................... Proxy Statement
Item 17(d)(4) ...................................... Form of Proxy
Item 17(e) ......................................... Text of Section 262 of the General Corporation Law of the
State of Delaware (included as Appendix C to the Proxy
Statement)
Item 17(f) .........................................Proxy Statement
</TABLE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Purpose of the Special Meeting" and "- Parties to the Merger" of the
Proxy Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Introduction,"
"Summary - Purpose of the Special Meeting," "- Record Date and Quorum,"
"- Market Prices of Common Stock and Dividends" and "The Special Meeting -
Record Date and Quorum Requirement" of the Proxy Statement is incorporated
herein by reference.
(c) The information set forth in the section entitled "Summary -
Market Prices of Common Stock and Dividends" of the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in the sections entitled "Summary -
Market Prices of Common Stock and Dividends" and "The Merger - Covenants" of the
Proxy Statement is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in Appendix D of the Proxy Statement is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is being filed jointly by the Company (which is the issuer
of the class of equity securities that is the subject of the Rule 13e-3
transaction), the Merger Sub, Thermo TerraTech Inc. ("Thermo TerraTech") and
Thermo Electron.
(a) - (c) The information set forth in the sections entitled
"Introduction," "Summary - Parties to the Merger," "Business of the Company,"
"Management" and "Certain Information Concerning the Merger Sub, Thermo
TerraTech and Thermo Electron" is incorporated herein by reference.
9
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(d) The information set forth in the sections entitled "Management" and
"Certain Information Concerning the Merger Sub, Thermo TerraTech and Thermo
Electron" is incorporated herein by reference.
(e) During the last five years, none of the Company, the Merger Sub, Thermo
TerraTech or Thermo Electron, nor (to the knowledge of each of the Company, the
Merger Sub, Thermo TerraTech or Thermo Electron, respectively) any executive
officer or director of the Company, the Merger Sub, Thermo TerraTech or Thermo
Electron, respectively, has been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors).
(f) During the last five years, none of the Company, the Merger Sub, Thermo
TerraTech or Thermo Electron, nor (to the knowledge of each of the Company, the
Merger Sub, Thermo TerraTech or Thermo Electron, respectively) any executive
officer or director of the Company, the Merger Sub, Thermo TerraTech or Thermo
Electron, respectively, has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction which resulted in a judgment,
decree or final order (i) enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
(ii) finding a violation with respect to such laws.
(g) The information set forth in the section entitled "Certain Information
Concerning the Merger Sub, Thermo TerraTech and Thermo Electron" of the Proxy
Statement is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a) (1) The information set forth in the section entitled "Certain
Transactions" of the Proxy Statement is incorporated herein by reference.
(a) (2) - (b) The information set forth in the sections entitled "Summary -
The Merger," "- The Special Committee's and the Board's Recommendation,"
"- Purpose and Reasons of Thermo Electron for the Merger," "Special Factors -
Background of the Merger," "- The Special Committee's and the Board's
Recommendation," "- Purpose and Reasons of Thermo Electron for the Merger" and
"Certain Transactions," and in Appendix D of the Proxy Statement is incorporated
herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - The Merger," "Effective Time of the Merger and Payment for Shares,"
"- Assumption of Randers/Killam Stock Options by Thermo Electron," "- Conflicts
of Interest," "- Certain Effects of the Merger," "- Conditions to the Merger,
Termination and Expenses," "Special Factors - Conflicts of Interest," "- Certain
Effects of the Merger" and "The Merger," and in Appendix A of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in the sections entitled "Introduction,"
"Summary - Purpose of the Special Meeting," "- The Merger," "The Merger -
Conversion of Securities," "- Deferred
10
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Compensation Plan for Directors" and "Federal Income Tax Consequences," and
Appendix A of the Proxy Statement is incorporated herein by reference.
11
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ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a) The information set forth in the section entitled "Special Factors -
Conduct of Randers/Killam's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in the section entitled "Special Factors -
Conduct of Randers/Killam's Business After the Merger" of the Proxy Statement is
incorporated herein by reference.
(c) The information set forth in the sections entitled "Introduction,"
"Special Factors - Conflicts of Interest" and " - Conduct of Randers/Killam's
Business After the Merger" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger," "Special Factors - Certain Effects of the Merger," and
"The Merger - Conversion of Securities" of the Proxy Statement is incorporated
herein by reference.
(e) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger," "Special Factors - Certain Effects of the Merger" and
"- Conduct of Randers/Killam's Business After the Merger" of the Proxy
Statement is incorporated herein by reference.
(f) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger" and "Special Factors - Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
(g) The information set forth in the sections entitled "Summary - Certain
Effects of the Merger" and "Special Factors - Certain Effects of the Merger" of
the Proxy Statement is incorporated herein by reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in the sections entitled "Summary - The
Merger" and "The Merger - Source of Funds" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in the sections entitled "Summary - Opinion
of Adams, Harkness & Hill," "- Conflicts of Interest," "Special Factors -
Opinion of Adams, Harkness & Hill," "- Conflicts of Interest" and "The Merger -
Expenses" of the Proxy Statement is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
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ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) - (c) The information set forth in the sections entitled "Summary -
The Merger," "-- The Special Committee's and the Board's Recommendation;"
"- Opinion of Adams, Harkness & Hill," "- Purpose and Reasons of Thermo Electron
for the Merger," "Special Factors - Background of the Merger," "- The Special
Committee's and the Board's Recommendation," "- Opinion of Adams, Harkness &
Hill" and "- Purpose and Reasons of Thermo Electron for the Merger" of the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled "Summary - The
Merger," "Assumption of Randers/Killam Stock Options by Thermo Electron,"
"- Purpose and Reasons of Thermo Electron for the Merger," "- Conflicts of
Interest," "- Certain Effects of the Merger," "- Federal Income Tax
Consequences," "Special Factors - Conflicts of Interest," "- Certain Effects
of the Merger," "- Purpose and Reasons of Thermo Electron for the Merger,"
"- Conduct of Randers/Killam's Business After the Merger," "The Merger -
Conversion of Securities," "- Assumption of Randers/Killam Stock Options by
Thermo Electron," "- Deferred Compensation Plan for Directors" and "Federal
Income Tax Consequences" of the Proxy Statement is incorporated herein by
reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Position of Thermo
Electron as to Fairness of the Merger," "Special Factors -The Special
Committee's and the Board's Recommendation" and "- Position of Thermo
Electron as to Fairness of the Merger" of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Opinion of Adams,
Harkness & Hill," "- Position of Thermo Electron as to
Fairness of the Merger," "Special Factors - Background of the Merger," " -
The Special Committee's and the Board's Recommendation," "- Opinion of Adams,
Harkness & Hill" and "- Position of Thermo Electron as
to Fairness of the Merger" of the Proxy Statement, and in Appendix B of the
Proxy Statement is incorporated herein by reference.
(c) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies" and "The Special Meeting -
Voting Procedures" of the Proxy Statement is incorporated herein by reference.
(d) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Opinion of Adams,
Harkness & Hill," "Special Factors - Background of the Merger," "-The Special
Committee's and the Board's Recommendation" and "- Opinion of Adams, Harkness &
Hill," and in Appendix B of the Proxy Statement is incorporated herein by
reference.
13
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(e) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation" and "Special Factors - The
Special Committee's and the Board's Recommendation" of the Proxy Statement is
incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a) - (c) The information set forth in the sections entitled "Summary -
Opinion of Adams, Harkness & Hill," "Special Factors - Background of the Merger"
and "- Opinion of Adams, Harkness & Hill," and in Appendix B of the Proxy
Statement is incorporated herein by reference.
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies," "- The Special Committee's
and the Board's Recommendation," "- Conflicts of Interest," "Special Factors -
Purpose and Reasons of Thermo Electron for the Merger," "- Conflicts of
Interest," "The Special Meeting - Voting Procedures" and "Security Ownership of
Certain Beneficial Owners and Management," and in Appendix D of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in Appendix D of the Proxy Statement is
incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in the sections entitled "Introduction," "Summary
- - Vote Required and Revocation of Proxies," "- The Merger," "The Special Meeting
- - Voting Procedures" and "The Merger," and in Appendix A of the Proxy Statement
is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in the sections entitled "Introduction,"
"Summary - Vote Required and Revocation of Proxies" and "The Special Meeting -
Voting Procedures," and in Appendix D of the Proxy Statement is incorporated
herein by reference.
(b) The information set forth in the sections entitled "Summary - The
Special Committee's and the Board's Recommendation," "- Position of Thermo
Electron as to Fairness of the Merger," "Special Factors -The Special
Committee's and the Board's Recommendation" and "- Position of Thermo
Electron as to Fairness of the Merger" of the Proxy Statement is incorporated
herein by reference.
14
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ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in the sections entitled "Summary -Rights of
Dissenting Stockholders," "The Special Meeting - Voting Procedures" and "Rights
of Dissenting Stockholders," and in Appendix C of the Proxy Statement is
incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in the sections entitled "Selected Financial
Information and Ratio of Earnings (Loss) to Fixed Charges", and in Appendices
E, F and G of the Proxy Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in the section entitled "The Special Meeting
- - Proxy Solicitation" of the Proxy Statement is incorporated herein by
reference.
(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
The entirety of the Proxy Statement is incorporated herein by reference.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
(b) Opinion of Adams, Harkness & Hill dated October 18, 1999 (included as
Appendix B to the preliminary Proxy Statement, which is filed herewith as
Exhibit 99.17(d)(3)).
(c) Agreement and Plan of Merger dated as of October 19, 1999 by and among
Thermo Electron Corporation, RK Acquisition Corporation and The Randers Killam
Group Inc., (included as Appendix A to the Proxy Statement, which is filed
herewith as Exhibit 99.17(d)(3)).
(d)(1) Letter to Stockholders, which is filed herewith as Exhibit
99.17(d)(1).
(d)(2) Notice of Special Meeting of Stockholders, which is filed herewith
as Exhibit 99.17(d)(2).
15
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(d)(3) Proxy Statement, which is filed herewith as Exhibit 99.17(d)(3).
(d)(4) Form of Proxy, which is filed herewith as Exhibit 99.17(d)(4).
(e) Text of Section 262 of the General Corporation Law of the State of
Delaware (included as Appendix C to the Proxy Statement, which is filed herewith
as Exhibit 99.17(d)(3)).
(f) Proxy Statement (see Exhibit 99.17(d)(3)).
16
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SIGNATURES
After due inquiry and to the best of his knowledge and belief, each of the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
THE RANDERS KILLAM GROUP INC.
Dated: November 9, 1999 By:/s/ Emil C. Herkert
-----------------------------------------
Name: Emil C. Herkert
Title: President and Chief Executive Officer
RK ACQUISITION CORPORATION
Dated: November 9, 1999 By:/s/ Theo Melas-Kyriazi
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: President
THERMO TERRATECH INC.
Dated: November 9, 1999 By:/s/ Theo Melas-Kyriazi
------------------------------------------
Name: Theo Melas-Kyriazi
Title: Chief Financial Officer
THERMO ELECTRON CORPORATION
Dated: November 9, 1999 By:/s/ Kenneth J. Apicerno
-----------------------------------------
Name: Kenneth J. Apicerno
Title: Treasurer
17
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- ------------
99.17 (b) Opinion of Adams, Harkness & Hill dated
October 18, 1999 (included as Appendix B to the Proxy
Statement, which is filed herewith as Exhibit
99.17(d)(3)).
99.17 (c) Agreement and Plan of Merger dated as of
Octobe 19, 1999 by and among Thermo Electron
Corporation, RK Acquisition Corporation and The
Randers Killam Group Inc., (included as Appendix A
to the Proxy Statement, which is filed herewith as
Exhibit 99.17(d)(3)).
99.17 (d)(1) Letter to Stockholders.
99.17 (d)(2) Notice of Special Meeting of Stockholders.
99.17(d)(3) Proxy Statement.
99.17(d)(4) Form of Proxy.
99.17(e) Text of Section 262 of the General Corporation Law of
the State of Delaware (included as Appendix C to the
Proxy Statement, which is filed herewith as Exhibit
99.17(d)(3)).
99.17(f) Proxy Statement (see Exhibit 99.17(d)(3)).
RGI 13716
18
<PAGE>
THE RANDERS KILLAM GROUP INC.
, 1999
27 Bleeker Street
Millburn, New Jersey 07041
Dear Stockholder:
I am pleased to invite you to a Special Meeting of the stockholders of The
Randers Killam Group Inc. ("Randers/Killam") at which you will be asked to adopt
an Agreement and Plan of Merger dated as of October 19, 1999 (the "Merger
Agreement") by and among Randers/Killam, Thermo Electron Corporation, the
ultimate parent company of Randers/Killam ("Thermo Electron"), and RK
Acquisition Corporation, a newly formed subsidiary of Thermo Electron (the
"Merger Sub"). The Special Meeting will take place at 10:00 a.m., local time, on
, 2000 at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454.
Under the terms of the Merger Agreement, the Merger Sub would merge with and
into Randers/ Killam, with Randers/Killam being the surviving corporation (the
"Merger"). Each issued and outstanding share of Randers/Killam common stock
(other than shares held by Thermo TerraTech Inc. ("Thermo TerraTech"), Thermo
Electron and stockholders who are entitled to and who have perfected their
dissenters' rights under Delaware law) would be converted into the right to
receive $4.50 in cash, without interest. Randers/Killam would become a private
company. The Merger is more fully described in the Merger Agreement, which is
attached as Appendix A to the enclosed Proxy Statement.
A special committee of the Randers/Killam Board of Directors (the "Special
Committee"), acting in the interests of the stockholders of Randers/Killam other
than Thermo TerraTech, Thermo Electron and the directors and officers of
Randers/Killam, Thermo TerraTech and Thermo Electron or their respective
affiliates (the "Public Stockholders"), evaluated the merits of, and negotiated
the terms of, the Merger. The Special Committee received an opinion from Adams,
Harkness & Hill, Inc. as to the fairness of the Merger from a financial point of
view, as of the date of such opinion, to the Public Stockholders. Please read
carefully the written opinion of Adams, Harkness & Hill, dated October 18, 1999,
which is attached as Appendix B to the enclosed Proxy Statement. The Special
Committee recommended that Randers/ Killam's Board of Directors approve the
Merger Agreement.
Randers/Killam's Board of Directors and the Special Committee of the Board
of Directors believe that the proposed Merger is both substantively and
procedurally fair to the Public Stockholders of Randers/Killam, and recommend
that stockholders vote "FOR" adoption of the Merger Agreement. In considering
the recommendation of the Board of Directors with respect to the Merger
Agreement, stockholders should be aware that four of the five members of the
Randers/Killam Board of Directors are either directors of Thermo TerraTech or
Thermo Electron, or employees of Thermo Electron or its affiliates, and thus
have interests that are in addition to, or different from, your interests as
stockholders of Randers/Killam.
Delaware law requires that a majority of the outstanding shares of
Randers/Killam common stock entitled to vote at the Special Meeting vote in
favor of the Merger Agreement for the Merger Agreement to be adopted. Thermo
TerraTech, which owns approximately 95% of Randers/Killam's outstanding common
stock, and Thermo Electron, which owns approximately 1% of Randers/Killam's
outstanding common stock, have agreed to vote their shares in favor of the
Merger Agreement, thus assuring that the Merger Agreement will be adopted. Only
stockholders of record at the close of business on , 1999 will receive
notice of and be able to vote at the Special Meeting or any adjournment or
adjournments thereof.
The accompanying Proxy Statement provides you with a summary of the proposed
Merger and additional information about the parties involved and their
interests. Please give all this information your careful attention. You can also
obtain other information about Randers/Killam, Thermo TerraTech and Thermo
Electron from documents filed with the Securities and Exchange Commission.
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE TAKE THE TIME
TO VOTE BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD TO US TODAY. IF YOU
DATE, SIGN AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU WISH TO VOTE,
YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT. YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN.
Your Board of Directors believes that the transaction with Thermo Electron
is in the best interests of Randers/Killam and its stockholders, including its
Public Stockholders. Your Board of Directors recommends that stockholders vote
for the adoption of the Merger Agreement. On behalf of the Board of Directors, I
urge you to sign, date and return the enclosed Proxy Card today.
Please do not send any stock certificates to us now. Assuming the Merger
Agreement is adopted, we will send you instructions concerning the surrender of
your shares.
Thank you for your interest and participation.
Yours very truly,
/s/ EMIL C. HERKERT
--------------------------------------
Emil C. Herkert
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
THE RANDERS KILLAM
GROUP INC.
NOTICE OF SPECIAL MEETING
, 1999
TO THE HOLDERS OF THE COMMON STOCK OF
THE RANDERS KILLAM GROUP INC.
I am pleased to give you notice of and cordially invite you to attend in
person or by proxy the Special Meeting of the stockholders of The Randers Killam
Group Inc., a Delaware corporation (the "Company" or "Randers/Killam"), which
will be held on , , 2000, at 10:00 a.m., local time, at the offices
of Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454,
and at any adjournment or adjournments thereof (the "Special Meeting"). At the
Special Meeting, stockholders will:
1. Consider and vote on a proposal to adopt an Agreement and Plan of Merger
dated as of October 19, 1999 (the "Merger Agreement") pursuant to which
RK Acquisition Corporation, a newly-formed company (the "Merger Sub"),
will be merged with and into Randers/Killam (the "Merger"). Upon the
Merger, each stockholder of the Company (other than stockholders who
perfect their dissenters' rights, Thermo TerraTech Inc. and Thermo
Electron Corporation) will become entitled to receive $4.50 in cash,
without interest, for each outstanding share of common stock, $.0001 par
value, of the Company (the "Common Stock") owned by such stockholder
immediately prior to the effective time of the Merger. A copy of the
Merger Agreement is attached as Appendix A to and is described in the
accompanying Proxy Statement.
2. Transact such other business as may properly come before the Special
Meeting.
Only stockholders of record at the close of business on , 1999
will receive notice of and be able to vote at the Special Meeting.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. The
Company's Bylaws require that the holders of a majority of the outstanding
shares of Common Stock entitled to vote be present or represented by proxy at
the Special Meeting in order to constitute a quorum for the transaction of
business. It is important that your shares be represented at the Special Meeting
regardless of the number of shares you hold. Whether or not you are able to be
present in person, please sign and return promptly the enclosed Proxy Card in
the accompanying envelope, which requires no postage if mailed in the United
States. You may revoke your proxy in the manner described in the accompanying
Proxy Statement at any time before it is voted at the Special Meeting.
Stockholders who properly demand appraisal prior to the stockholder vote at
the Special Meeting, who do not vote in favor of adoption of the Merger
Agreement and who otherwise comply with the provisions of Section 262 of the
General Corporation Law of the State of Delaware (the "DGCL") will be entitled,
if the Merger is completed, to statutory appraisal of the fair value of their
shares of Common Stock. See "RIGHTS OF DISSENTING STOCKHOLDERS" in the
accompanying Proxy Statement and the full text of Section 262 of the DGCL, which
is attached as Appendix C to and is described in the accompanying Proxy
Statement, for a description of the procedures that you must follow in order to
exercise your appraisal rights.
This Notice, the Proxy Card and Proxy Statement enclosed herewith are sent
to you by order of the Board of Directors.
Sandra L. Lambert
SECRETARY
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND, IT IS IMPORTANT THAT YOUR SHARES ARE
REPRESENTED AT THE SPECIAL MEETING. TO ADOPT THE MERGER AGREEMENT, THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK
ENTITLED TO VOTE THEREON IS REQUIRED. YOU ARE REQUESTED TO PROMPTLY COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED.
YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER
DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY STOCKHOLDER PRESENT AT THE
SPECIAL MEETING MAY REVOKE SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE MERGER
AGREEMENT AT THE SPECIAL MEETING.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE MERGER AGREEMENT. IN CONSIDERING THE RECOMMENDATION OF THE BOARD OF
DIRECTORS WITH RESPECT TO THE MERGER, STOCKHOLDERS OTHER THAN THERMO
TERRATECH INC., THERMO ELECTRON CORPORATION AND THE DIRECTORS AND OFFICERS OF
THE COMPANY, THERMO TERRATECH INC. AND THERMO ELECTRON CORPORATION (THE "PUBLIC
STOCKHOLDERS") SHOULD BE AWARE THAT CERTAIN OFFICERS AND DIRECTORS OF THE
COMPANY HAVE CERTAIN INTERESTS THAT ARE IN ADDITION TO, OR DIFFERENT FROM, THE
INTERESTS OF THE PUBLIC STOCKHOLDERS. SEE "SPECIAL FACTORS--CONFLICTS OF
INTEREST."
IF A PROPERLY EXECUTED PROXY CARD IS SUBMITTED AND NO INSTRUCTIONS ARE
GIVEN, THE SHARES OF COMMON STOCK REPRESENTED BY THAT PROXY WILL BE VOTED "FOR"
ADOPTION OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES TO THE COMPANY AT THIS TIME.
<PAGE>
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of The Randers
Killam Group Inc., a Delaware corporation (the "Company" or "Randers/Killam"),
in connection with the solicitation by its Board of Directors (the "Board" or
the "Board of Directors") of proxies to be used at a Special Meeting of
stockholders to be held on , 2000, at 10:00 a.m., local time, at the
offices of Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts
02454, and at any adjournment or adjournments thereof (the "Special Meeting").
The Board of Directors has fixed the close of business on , 1999 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of, and to vote at, the Special Meeting.
The Special Meeting has been called to consider and vote on a proposal to
adopt an Agreement and Plan of Merger dated as of October 19, 1999 (the "Merger
Agreement"), which is attached to this Proxy Statement as Appendix A. Pursuant
to the Merger Agreement, RK Acquisition Corporation (the "Merger Sub"), a
newly-formed Delaware corporation, will be merged with and into Randers/Killam
(the "Merger"), with Randers/Killam being the surviving corporation (the
"Surviving Corporation"). Randers/ Killam is an indirect majority-owned
subsidiary and the Merger Sub is a wholly owned subsidiary of Thermo Electron
Corporation, a Delaware corporation ("Thermo Electron"). The Merger Sub was
organized by Thermo Electron solely to facilitate the Merger.
In the Merger, each outstanding share of common stock, $.0001 par value, of
Randers/Killam (the "Common Stock") (other than shares held by stockholders who
are entitled to and who have perfected their Dissenters' Rights (as defined
below), shares held by Randers/Killam in treasury and shares held by Thermo
TerraTech Inc. ("Thermo TerraTech") and Thermo Electron) will be canceled and
converted automatically into the right to receive $4.50 in cash, payable to the
holder thereof, without interest. See "THE MERGER." On August 6, 1998, the last
trading day on which the Common Stock traded prior to the date Thermo Electron
first publicly announced a proposal to take Randers/Killam private (with no
price having been determined and, accordingly, no financial terms announced as
of that date), the closing price per share of Common Stock reported in the
consolidated transaction reporting system was $2.1875. On October 12, 1999, the
last day on which trading in the Common Stock occurred prior to the public
announcement of the terms of the proposed Merger, the closing price per share of
Common Stock reported in the consolidated transaction reporting system was
$3.625. On , 1999, the last trading day prior to the printing of this
Proxy Statement, the closing price per share of Common Stock was $ .
The directors and officers of Randers/Killam immediately prior to the Merger
shall be the initial directors and officers of the Surviving Corporation;
however, Thermo Electron intends to appoint a board of directors comprised
solely of members of the Surviving Corporation's and Thermo Electron's
management after the Merger. All options to purchase Common Stock immediately
prior to the Merger shall be assumed by Thermo Electron and converted into
options to purchase the common stock, $1.00 par value, of Thermo Electron. See
"THE MERGER--Assumption of Randers/Killam Stock Options by Thermo Electron."
Under Delaware law, adoption of the Merger Agreement at the Special Meeting
will require the affirmative vote of holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Special Meeting. Thermo
TerraTech, which owns approximately 95% of the outstanding Common Stock, and
Thermo Electron, which owns approximately 1% of the outstanding Common Stock,
have agreed to vote their shares in favor of the Merger Agreement, thus assuring
that the Merger will be adopted. In addition, the Company's executive officers
and directors have expressed their intention to vote to adopt the Merger
Agreement.
The Board of Directors recommends that stockholders vote "FOR" adoption of
the Merger Agreement. In considering the recommendation of the Board of
Directors with respect to the Merger, stockholders other than Thermo TerraTech,
Thermo Electron and the directors and officers of the Company, Thermo TerraTech
and Thermo Electron (the "Public Stockholders"), should be aware that
<PAGE>
certain officers and directors of the Company have certain interests that are in
addition to, or different from, the interests of the Public Stockholders. See
"SPECIAL FACTORS--Conflicts of Interest."
Stockholders should read and consider carefully the information contained in
this Proxy Statement. The consummation of the Merger is subject to certain
conditions. Accordingly, even if the stockholders adopt the Merger, there can be
no assurance that the Merger will be consummated. This Proxy Statement, the
Notice of Special Meeting and the enclosed Proxy Card are first being mailed to
stockholders of the Company on or about , 1999.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 6
SUMMARY..................................................... 9
Date, Time and Place of the Special Meeting............... 9
Purpose of the Special Meeting............................ 9
Record Date and Quorum.................................... 9
Vote Required and Revocation of Proxies................... 9
Parties to the Merger..................................... 10
The Merger................................................ 11
Effective Time of the Merger and Payment for Shares....... 11
Assumption of Randers/Killam Stock Options by Thermo
Electron................................................ 11
The Special Committee's and the Board's Recommendation.... 12
Opinion of Adams, Harkness & Hill......................... 13
Purpose and Reasons of Thermo Electron for the Merger..... 13
Position of Thermo Electron as to Fairness of the
Merger.................................................. 14
Conflicts of Interest..................................... 15
Certain Effects of the Merger............................. 16
Conditions to the Merger, Termination and Expenses........ 16
Federal Income Tax Consequences........................... 18
Rights of Dissenting Stockholders......................... 18
Accounting Treatment...................................... 18
Market Prices of Common Stock and Dividends............... 18
SPECIAL FACTORS............................................. 20
Background of the Merger.................................. 20
The Special Committee's and the Board's Recommendation.... 27
Opinion of Adams, Harkness & Hill......................... 29
Purpose and Reasons of Thermo Electron for the Merger..... 36
Position of Thermo Electron as to Fairness of the
Merger.................................................. 37
Conflicts of Interest..................................... 38
Certain Effects of the Merger............................. 40
Conduct of Randers/Killam's Business After the Merger..... 40
Conduct of the Business of the Company if the Merger is
Not Consummated......................................... 41
THE SPECIAL MEETING......................................... 42
Proxy Solicitation........................................ 42
Record Date and Quorum Requirement........................ 42
Voting Procedures......................................... 42
Voting and Revocation of Proxies.......................... 43
Effective Time............................................ 43
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
THE MERGER.................................................. 44
Conversion of Securities.................................. 44
Assumption of Randers/Killam Stock Options by Thermo
Electron................................................ 45
Deferred Compensation Plan for Directors.................. 45
Transfer of Shares........................................ 45
Conditions................................................ 45
Representations and Warranties............................ 46
Covenants................................................. 47
Indemnification and Insurance............................. 47
Termination, Amendment and Waiver......................... 48
Source of Funds........................................... 49
Expenses.................................................. 49
Accounting Treatment...................................... 49
Regulatory Approvals...................................... 50
RIGHTS OF DISSENTING STOCKHOLDERS........................... 51
FEDERAL INCOME TAX CONSEQUENCES............................. 54
BUSINESS OF THE COMPANY..................................... 55
SELECTED FINANCIAL INFORMATION AND RATIO OF EARNINGS (LOSS)
TO FIXED CHARGES.......................................... 58
CERTAIN PROJECTED FINANCIAL DATA............................ 59
Projections............................................... 60
MANAGEMENT.................................................. 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 63
Principal Stockholder..................................... 63
Management................................................ 63
CERTAIN TRANSACTIONS........................................ 64
RECENT DEVELOPMENTS......................................... 67
CERTAIN INFORMATION CONCERNING THE MERGER SUB, THERMO
TERRATECH AND THERMO ELECTRON............................. 68
Thermo TerraTech.......................................... 68
Thermo Electron........................................... 70
The Merger Sub............................................ 75
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 76
STOCKHOLDER PROPOSALS....................................... 76
ADDITIONAL INFORMATION...................................... 76
AVAILABLE INFORMATION....................................... 77
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 77
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
APPENDICES
APPENDIX A--Agreement and Plan of Merger.................... A-1
APPENDIX B--Opinion of Adams, Harkness & Hill, Inc.......... B-1
APPENDIX C--Text of Section 262 of the General Corporation
Law of the State of Delaware.............................. C-1
APPENDIX D--Information Concerning Transactions in the
Common Stock of the Company............................... D-1
APPENDIX E--Annual Report on Form 10-K of Randers/Killam for
the Fiscal Year Ended April 3, 1999....................... E-1
APPENDIX F--Amendment No. 1 on Form 10-K/A to Annual Report
on Form 10-K of Randers/Killam for the Fiscal Year Ended
April 3, 1999............................................. F-1
APPENDIX G--Quarterly Report on Form 10-Q of Randers/Killam
for the Quarter Ended July 3, 1999........................ G-1
</TABLE>
5
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
1. WHEN AND WHERE IS THE RANDERS/KILLAM SPECIAL MEETING?
The Randers/Killam Special Meeting will take place on , , 2000,
at 10:00 a.m., local time, at the offices of Thermo Electron Corporation, 81
Wyman Street, Waltham, Massachusetts 02454.
2. WHAT PROPOSALS ARE RANDERS/KILLAM STOCKHOLDERS VOTING ON?
Randers/Killam stockholders are being asked to adopt the Merger Agreement.
The Merger Agreement provides that a wholly owned subsidiary of Thermo Electron
will merge with and into Randers/ Killam and, as a result, Thermo Electron will
own all of the outstanding Common Stock of Randers/ Killam.
3. WHAT WILL RANDERS/KILLAM STOCKHOLDERS RECEIVE IN THE MERGER?
In the Merger, Randers/Killam stockholders will receive $4.50 in cash per
share of Common Stock. The amount of cash consideration to be paid to
Randers/Killam stockholders will equal approximately $4.8 million in the
aggregate.
On August 6, 1998, the last trading day on which the Common Stock traded
prior to the date Thermo Electron first publicly announced the proposal to take
Randers/Killam private (no price having been determined as of that date, and,
accordingly, no financial terms announced as of that date), the closing price
per share of Common Stock reported in the consolidated transaction reporting
system was $2.1875. On October 12, 1999, the last day prior to the public
announcement of the terms of the proposed Merger on which trading in the Common
Stock occurred, the closing price per share of Common Stock reported in the
consolidated transaction reporting system was $3.625. On , 1999, the
last trading day prior to the printing of this Proxy Statement, the closing
price per share of Common Stock reported in the consolidated transaction
reporting system was $ .
4. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
For federal income tax purposes, each stockholder's receipt of $4.50 per
share in the Merger will be treated as a taxable sale of the holder's Common
Stock. Each stockholder's gain or loss per share will equal the difference
between $4.50 and the stockholder's basis in the share of Common Stock.
Randers/Killam stockholders should consult their tax advisors for a full
understanding of the tax consequences of the Merger. No gain or loss for federal
income tax purposes will be recognized by Randers/Killam, Thermo TerraTech,
Thermo Electron or the Merger Sub by reason of the Merger.
5. WHY IS RANDERS/KILLAM'S BOARD OF DIRECTORS RECOMMENDING ADOPTION OF THE
MERGER AGREEMENT?
Randers/Killam's Board of Directors believes, based on the recommendation of
its Special Committee, that the proposed transaction is fair to and in the best
interests of Randers/Killam and its stockholders other than Thermo TerraTech,
Thermo Electron and the directors and officers of the Company, Thermo TerraTech
and Thermo Electron.
6. WHAT RIGHTS DO STOCKHOLDERS HAVE IF THEY OPPOSE THE MERGER?
Stockholders who wish to dissent from the Merger may seek appraisal of the
fair value of their shares, but only if they strictly comply with all of the
procedures under Delaware law that are summarized on pages [ ] of this Proxy
Statement.
6
<PAGE>
7. WHAT STOCKHOLDER VOTE IS REQUIRED TO ADOPT THE MERGER AGREEMENT?
Under Delaware law, a majority of the outstanding shares of Common Stock
entitled to vote must adopt the Merger Agreement. Thermo TerraTech and Thermo
Electron, which collectively own approximately 96% of the outstanding Common
Stock, have agreed to vote in favor of adoption of the Merger Agreement.
Accordingly, the stockholder vote adopting the Merger Agreement is assured.
8. WHAT HAPPENS IF I DO NOT INSTRUCT A BROKER HOLDING MY SHARES AS TO HOW TO
VOTE THEM OR I ABSTAIN FROM VOTING?
If your shares are held by a broker as nominee, your broker will not be able
to vote your shares without instructions from you. If your broker is unable to
vote your shares or if you abstain, it will have the effect of voting against
adoption of the Merger Agreement under Delaware law; however, as indicated
above, Thermo TerraTech and Thermo Electron own sufficient shares to satisfy the
Delaware law voting requirement.
9. WHO IS ENTITLED TO VOTE?
Holders of record of Common Stock at the close of business on ,
1999, the record date for the Special Meeting, are entitled to vote at the
Special Meeting.
10. WHEN IS THE MERGER EXPECTED TO BE COMPLETED?
We are working to complete all aspects of the Merger as quickly as possible.
If adopted by the stockholders, we currently expect the Merger to be completed
by , 2000.
11. WHAT DO I NEED TO DO NOW?
After you have carefully read this Proxy Statement, please complete, sign
and mail your Proxy Card in the enclosed return envelope as soon as possible.
That way, your shares can be represented at the Special Meeting. If your shares
are held by a broker as nominee, you should receive a Proxy Card from your
broker.
Randers/Killam stockholders must return their Proxy Cards before the Special
Meeting or attend the Special Meeting in person in order for their votes to be
counted at the Special Meeting.
12. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY CARD?
You may change your vote at any time before the vote takes place at the
Special Meeting. To do so, you can attend the Special Meeting and vote in
person, complete and send a new Proxy Card with a later date or send a written
notice stating you would like to revoke your proxy. The notice should be sent
to: The Randers Killam Group Inc., c/o Thermo Electron Corporation, 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, Attention: Corporate
Secretary.
13. SHOULD I SEND IN MY RANDERS/KILLAM STOCK CERTIFICATES NOW?
No. You should continue to hold your certificates for Common Stock. If the
Merger is completed, you will receive a package containing instructions on how
to exchange your shares of Common Stock for cash.
14. WHAT WILL HAPPEN TO THE RANDERS/KILLAM STOCK OPTIONS?
Options to purchase Common Stock outstanding on the effective date of the
Merger, whether or not the options are then exercisable, will be assumed by
Thermo Electron and converted into options to purchase the common stock of
Thermo Electron. See "THE MERGER--Assumption of Randers/Killam Stock Options by
Thermo Electron."
7
<PAGE>
15. WHO SHOULD I CALL IF I HAVE ANY ADDITIONAL QUESTIONS?
You should call Randers/Killam Investor Relations at (781) 622-1111.
16. WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
We are not aware of any other matters to be voted on at the Special Meeting.
If you are voting by proxy, however, we ask that you give the proxies listed in
the Proxy Card the power to act in their discretion upon any other matters that
may come before the Special Meeting.
8
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to, and this Summary is qualified in its
entirety by, the more detailed information contained elsewhere or incorporated
by reference in this Proxy Statement. Stockholders should read this Proxy
Statement and its appendices in their entirety before voting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The Special Meeting of stockholders of The Randers Killam Group Inc., a
Delaware corporation (the "Company" or "Randers/Killam"), will be held on
, , 2000, at 10:00 a.m., local time, at the offices of Thermo
Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders of the Company will consider and
vote on a proposal to adopt an Agreement and Plan of Merger dated as of
October 19, 1999 (the "Merger Agreement"), which is attached to this Proxy
Statement as Appendix A. The Merger Agreement provides that RK Acquisition
Corporation (the "Merger Sub"), a newly-formed Delaware corporation that is a
wholly owned subsidiary of Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"), would merge with and into Randers/Killam (the "Merger").
Randers/Killam would be the surviving corporation (the "Surviving Corporation")
in the Merger, and each outstanding share of common stock, $.0001 par value, of
Randers/Killam (the "Common Stock"), other than shares held by stockholders who
are entitled to and who have perfected their Dissenters' Rights (as defined
below), shares held by Randers/Killam in treasury and shares held by Thermo
TerraTech Inc., a Delaware corporation ("Thermo TerraTech") and Thermo Electron,
will be converted automatically into the right to receive $4.50 in cash, payable
to the holders thereof, without interest (the "Cash Merger Consideration"). See
"THE MERGER."
RECORD DATE AND QUORUM
The close of business on , 1999 is the record date (the "Record
Date") for the determination of stockholders entitled to notice of, and to vote
at, the Special Meeting. Each holder of record of Common Stock at the close of
business on the Record Date is entitled to one vote for each share then held on
each matter submitted to a vote of stockholders. At the close of business on the
Record Date, there were shares of Common Stock outstanding. The holders of
a majority of the outstanding shares of Common Stock entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions will be counted as shares
present and entitled to vote for purposes of determining whether a quorum
exists. If you hold your shares of Common Stock through a broker, bank or other
nominee, generally the nominee may only vote the Common Stock that it holds for
you in accordance with your instructions. However, if it has not timely received
your instructions, the nominee may vote on certain matters for which it has
discretionary voting authority. Brokers generally will not have discretionary
voting authority with respect to the proposal to adopt the Merger Agreement. If
a nominee cannot vote on a particular matter because it does not have
discretionary voting authority, this is a "broker non-vote" on that matter.
Broker non-votes are also counted as present or represented at the Special
Meeting for purposes of determining whether a quorum exists. See "THE SPECIAL
MEETING--Record Date and Quorum Requirement."
VOTE REQUIRED AND REVOCATION OF PROXIES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must adopt the Merger. For
the purposes of this vote, a failure to vote, a vote to abstain and a broker
non-vote will have the same legal effect as a vote cast against adoption of the
Merger Agreement. Thermo TerraTech, which owns approximately 95% of the
outstanding Common
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Stock, and Thermo Electron, which owns approximately 1% of the outstanding
Common Stock, own enough shares of Common Stock to adopt the Merger under
Delaware law without the vote of any other holders of Common Stock and have
agreed to vote their shares in favor of the Merger Agreement. See "THE SPECIAL
MEETING--Voting Procedures."
A stockholder who returns a proxy may revoke it at any time before the
stockholder's shares are voted at the Special Meeting. The proxy may be revoked
by written notice to the Secretary of the Company received prior to the Special
Meeting, by executing and returning a later-dated proxy or by voting by ballot
at the Special Meeting. See "THE SPECIAL MEETING--Voting and Revocation of
Proxies."
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that proxy will be voted "FOR"
the adoption of the proposed Merger Agreement.
The Board of Directors of the Company (the "Board" or the "Board of
Directors") is not aware of any other matters to be voted on at the Special
Meeting. If any other matters properly come before the Special Meeting,
including a motion to adjourn the Special Meeting for the purpose of soliciting
additional proxies, the persons named on the accompanying Proxy Card will vote
the shares represented by all properly executed proxies on such matters in their
discretion, except that shares represented by proxies that have been voted
"AGAINST" approval of the Merger Agreement will not be used to vote "FOR"
adjournment of the Special Meeting for the purpose of allowing additional time
for soliciting additional votes "FOR" the Merger Agreement. See "THE SPECIAL
MEETING--Voting Procedures."
PARTIES TO THE MERGER
THE COMPANY
Randers/Killam provides comprehensive engineering and outsourcing services
and operates in four segments: Water and Wastewater Treatment, Process
Engineering and Construction, Highway and Bridge Engineering, and Infrastructure
Engineering. The Company's strategy is to market its technical expertise and
low-cost solutions to a broad base of clients including municipalities,
government agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's Killam subsidiaries comprise the
Water and Wastewater Treatment segment and provide environmental consulting and
engineering services and specialize in wastewater treatment and water resources
management. The Company's Randers subsidiaries, which constitute the Process
Engineering and Construction segment, provide design engineering, project
management, and construction services for industrial clients. The Company's BAC
Killam Inc. subsidiary represents the Company's Highway and Bridge Engineering
segment and provides transportation planning and design services. The
Infrastructure Engineering segment, comprised of CarlanKillam Consulting
Group, Inc., provides transportation and environmental consulting, professional
engineering, and architectural services.
The principal executive offices of the Company are located at 27 Bleeker
Street, Millburn, New Jersey 07041, and its telephone number is (973) 912-2505.
See "BUSINESS OF THE COMPANY."
THE MERGER SUB
The Merger Sub is a newly-formed Delaware corporation organized at the
direction of Thermo Electron for the sole purpose of effecting the Merger and
has not conducted any prior business.
The principal executive offices of the Merger Sub are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000. See "CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMO TERRATECH AND THERMO ELECTRON."
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THERMO ELECTRON
Thermo Electron and its subsidiaries develop, manufacture and market
monitoring, analytical, and biomedical instrumentation; biomedical products
including heart-assist devices, respiratory-care equipment, and mammography
systems; and paper recycling and papermaking equipment. Thermo Electron also
develops alternative-energy systems and clean fuels, industrial process
equipment; and other specialized products. Thermo Electron also provides a range
of services including industrial outsourcing, particularly in
environmental-liability management, laboratory analysis and metallurgical
processing, and conducts advanced-technology research and development. Thermo
Electron performs its business through wholly owned subsidiaries and divisions,
as well as majority-owned subsidiaries that are partially owned by the public or
private investors.
The principal executive offices of Thermo Electron are located at 81 Wyman
Street, Waltham, Massachusetts 02454-9046, and its telephone number is
(781) 622-1000. See "CERTAIN INFORMATION CONCERNING THE MERGER SUB, THERMO
TERRATECH AND THERMO ELECTRON."
THE MERGER
The Merger Agreement provides that, subject to satisfaction of certain
conditions, the Merger Sub will be merged with and into Randers/Killam, and that
following the Merger, the separate existence of the Merger Sub will cease and
Randers/Killam will continue as the Surviving Corporation. At the effective time
of the Merger, which shall be the date and time of filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (the "Effective
Time") (and the date on which the Effective Time occurs being the "Effective
Date"), and subject to the terms and conditions set forth in the Merger
Agreement, each share of issued and outstanding Common Stock (other than shares
as to which Dissenters' Rights (as defined below) are properly perfected and not
withdrawn, shares held by Randers/Killam in treasury and shares held by Thermo
TerraTech and Thermo Electron) will, by virtue of the Merger, be canceled and
converted into the right to receive the Cash Merger Consideration. As a result
of the Merger, Randers/Killam's Common Stock will no longer be publicly traded
and will be 100% owned by Thermo Electron. The aggregate consideration payable
in the Merger, assuming no Dissenters' Rights (as defined below) are exercised,
is approximately $4.8 million. See "THE MERGER."
EFFECTIVE TIME OF THE MERGER AND PAYMENT FOR SHARES
The Effective Time is currently expected to occur as soon as practicable
after the Special Meeting, subject to adoption of the Merger Agreement at the
Special Meeting and satisfaction or waiver of the terms and conditions of the
Merger Agreement. See "--Conditions to the Merger, Termination and Expenses" and
"THE MERGER--Conditions." Detailed instructions with regard to the surrender of
stock certificates, together with a letter of transmittal, will be forwarded to
stockholders by the Company's transfer agent, First Union National Bank of North
Carolina (the "Payment Agent"), promptly following the Effective Time.
Stockholders should not submit their stock certificates to the Payment Agent
until they have received such materials. The Payment Agent will send payment of
the Cash Merger Consideration to stockholders as promptly as practicable
following receipt by the Payment Agent of their stock certificates and other
required documents. No interest will be paid or accrued on the cash payable upon
the surrender of stock certificates. See "THE MERGER--Conversion of Securities."
Stockholders should not send any stock certificates to the Company or the
Payment Agent at this time.
ASSUMPTION OF RANDERS/KILLAM STOCK OPTIONS BY THERMO ELECTRON
At the Effective Time, each outstanding option to purchase shares of Common
Stock (each, a "Randers/Killam Stock Option") under the Randers/Killam Stock
Option Plans (as defined below), whether or not exercisable, will be assumed by
Thermo Electron. Each Randers/Killam Stock Option so assumed by Thermo Electron
will continue to have, and be subject to, the same terms and conditions set
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forth in the applicable Randers/Killam Stock Option Plan immediately prior to
the Effective Time, except that (i) each Randers/Killam Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of common stock, $1.00 par value per share, of Thermo
Electron ("Thermo Electron Common Stock") equal to the product of the number of
shares of Common Stock that were issuable upon exercise of such Randers/Killam
Stock Option immediately prior to the Effective Time multiplied by a fraction
(the "Exchange Ratio"), the numerator of which is the Cash Merger Consideration
and the denominator of which is the closing price (the "Closing Price") of the
Thermo Electron Common Stock on the day immediately preceding the Effective Date
as reported in the consolidated transaction reporting system, rounded down to
the nearest whole number of shares of Thermo Electron Common Stock, and
(ii) the per share exercise price for the shares of Thermo Electron Common Stock
issuable upon exercise of each such assumed Randers/Killam Stock Option will be
equal to the quotient determined by dividing the exercise price per share of
Common Stock at which such Randers/Killam Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent.
See "THE MERGER--Assumption of Randers/Killam Stock Options by Thermo
Electron."
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
In November 1998, the Board appointed a committee (the "Special Committee")
of one director, Dr. Susan F. Tierney (who is not an officer or employee of the
Company, Thermo TerraTech, the Merger Sub or Thermo Electron and who is not a
director of Thermo Electron, Thermo TerraTech or the Merger Sub), to act on
behalf of, and in the interests of, the stockholders of the Company other than
Thermo TerraTech, Thermo Electron and the directors and officers of the Company,
Thermo TerraTech and Thermo Electron (the "Public Stockholders") in her review
of and evaluation of the proposed Merger. See "SPECIAL FACTORS--The Special
Committee's and the Board's Recommendation." Dr. Tierney, the sole member of the
Special Committee, holds options to acquire an aggregate of 48,300 shares of
Common Stock at exercise prices ranging from $1.90 per share to $3.25 per share,
which will be assumed by Thermo Electron and converted into options to acquire
shares of Thermo Electron Common Stock on the same terms as all the other
holders of Randers/Killam Stock Options. See "THE MERGER--Assumption of
Randers/Killam Stock Options by Thermo Electron." Further, deferred units equal
to 3,352 shares of Common Stock have accumulated under the Company's deferred
compensation plan for outside directors for the benefit of Dr. Tierney, which
units will be converted into the right to receive the Cash Merger Consideration
per unit for an aggregate cash payment of $15,084. See "THE MERGER--Deferred
Compensation Plan for Directors."
At the conclusion of its review and evaluation of the proposed Merger, on
October 18, 1999, the Special Committee recommended to the Company's Board that
the Merger Agreement be approved and that it be recommended to the stockholders
of the Company for adoption. In connection with its recommendation, the Special
Committee considered the opinion of Adams, Harkness & Hill, Inc. ("Adams,
Harkness & Hill"), that the consideration of $4.50 per share in cash payable
under the Merger Agreement was fair, from a financial point of view, as of the
date of such opinion, to the Public Stockholders. See "SPECIAL FACTORS--Opinion
of Adams, Harkness & Hill." As part of its deliberations, the Special Committee
determined that the Merger is substantively and procedurally fair to the Public
Stockholders.
Following the recommendation of the Special Committee, the Board of
Directors approved the Merger Agreement, declared its advisability and
recommended that the stockholders of the Company adopt the Merger Agreement. In
connection with its recommendation, the Board also adopted the findings and
recommendation of the Special Committee with regard to both the substantive and
procedural fairness of the Merger. In reaching their respective decisions to
recommend approval of the Merger Agreement, the Special Committee and the Board
also considered the factors set forth elsewhere in this Proxy Statement. See
"SPECIAL FACTORS--The Special Committee's and the Board's Recommendation."
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In considering the recommendation of the Board of Directors with respect to
the Merger, the Public Stockholders should be aware that certain officers and
directors of the Company have certain interests that are in addition to, or
different from, the interests of the Public Stockholders. See "SPECIAL
FACTORS--Conflicts of Interest."
The Special Committee and the Board recommend that the Randers/Killam
stockholders vote "FOR" adoption of the Merger Agreement.
OPINION OF ADAMS, HARKNESS & HILL
Adams, Harkness & Hill provided its opinion to the Special Committee on
October 18, 1999, that, as of the date of such opinion, the consideration of
$4.50 per share in cash payable under the Merger Agreement was fair, from a
financial point of view, to the Public Stockholders of the Company. The full
text of the written opinion of Adams, Harkness & Hill dated October 18, 1999,
which sets forth assumptions made, matters considered and limitations on the
review undertaken in connection with the opinion, is attached hereto as
Appendix B and is incorporated herein by reference. The opinion of Adams,
Harkness & Hill referred to herein does not constitute a recommendation as to
how any stockholder should vote with respect to the Merger. Holders of shares of
Common Stock are urged to, and should, read the opinion in its entirety. See
"SPECIAL FACTORS--Opinion of Adams, Harkness & Hill."
The Special Committee retained Adams, Harkness & Hill to assist it in its
evaluation of the proposed Merger. Pursuant to the terms of Adams, Harkness &
Hill's engagement letter with the Special Committee, the Company paid Adams,
Harkness & Hill a retainer fee of $50,000 and a fee of $87,500 upon the delivery
of its written fairness opinion dated October 18, 1999 (which fee was payable
regardless of the conclusions expressed therein). In addition, the Company has
agreed to pay Adams, Harkness & Hill an additional $50,000 if the Special
Committee requests an additional fairness opinion in connection with a new or
materially revised transaction. The Company has also agreed to reimburse Adams,
Harkness & Hill for all reasonable fees and disbursements of its counsel and all
of its reasonable travel and other out-of-pocket expenses arising in connection
with its engagement, and to indemnify Adams, Harkness & Hill and its affiliates
to the full extent permitted by law against liabilities relating to or arising
out of its engagement, except for liabilities found to have resulted from the
bad faith, willful misconduct or gross negligence of Adams, Harkness & Hill.
The Merger Agreement provides that it is a condition to the obligations of
Randers/Killam to effect the Merger that Adams, Harkness & Hill shall reaffirm
orally its written opinion as of the date of mailing of this Proxy Statement and
at the Effective Time.
PURPOSE AND REASONS OF THERMO ELECTRON FOR THE MERGER
The purpose of Thermo Electron for engaging in the transactions contemplated
by the Merger Agreement is for Thermo Electron to acquire all of the outstanding
shares of Common Stock, other than the shares already held by Thermo Electron
and Thermo TerraTech. In determining to acquire such shares of Common Stock at
this time, Thermo Electron considered the following factors: (i) recent public
capital market trends affecting micro-cap companies, (ii) the latest market
trends in the markets in which the Company competes, primarily the
environmental-liability and resource-management services industry, (iii) the
reduction in the amount of public information available to competitors about
Randers/Killam's business that would result from the termination of the
Company's separate Securities and Exchange Commission (the "Commission")
reporting requirements, (iv) the elimination of additional burdens on management
associated with public reporting and other tasks resulting from the Company's
public company status, including, for example, the dedication of time and
resources of management and of the Board to stockholder and analyst inquiries,
and investor and public relations, (v) the decrease in costs, particularly those
associated with being a public company (for example, as a privately-held entity,
the Company would no longer be required to file quarterly, annual or other
periodic reports with the
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Commission or publish and distribute to its stockholders annual reports and
proxy statements), that Thermo Electron anticipates could result in savings of
approximately $450,000 per year, including the approximate cost of associated
legal and accounting fees; and (vi) the Company's management would have greater
flexibility to focus on long-term business goals, as opposed to quarterly
earnings, as a non-reporting company.
Thermo Electron also considered the advantages and disadvantages of certain
alternatives to taking Randers/Killam private, including leaving Randers/Killam
as a public majority-owned subsidiary of Thermo TerraTech. Thermo Electron
considered the number of Randers/Killam shares held by Public Stockholders,
recent trends in the price of the Common Stock and the relative lack of
liquidity for the Common Stock. Thermo Electron reviewed the net overall cost of
the transaction and its benefits, including its contribution to Thermo
TerraTech's earnings. Thermo Electron also explored alternative uses for the
cash proposed to be used for this transaction. In addition, Thermo Electron
considered that, by acquiring the minority stockholder interest in
Randers/Killam, it would advance the goal of its proposed corporate
reorganization, first announced in August 1998, to reduce the number of Thermo
Electron's majority-owned, public subsidiaries. After consideration of these
various factors, Thermo Electron decided to make a proposal to Randers/Killam to
acquire all of the outstanding shares of Common Stock that it and Thermo
TerraTech did not own. After extensive negotiations with the Special Committee,
Thermo Electron proposed a price of $4.50 per share, which represented a premium
of (i) approximately 105.7% over the closing price of the Common Stock reported
in the consolidated transaction reporting system on August 6, 1998, the last day
prior to Thermo Electron's first public announcement of the proposal to take
Randers/Killam private on which the Common Stock traded (with no price having
been announced), and (ii) approximately 24.1% over the closing price of the
Common Stock reported in the consolidated transaction reporting system on
October 12, 1999, the latest day prior to the public announcement of the terms
of Thermo Electron's proposal on which the Common Stock traded. Thermo Electron
proposed to structure the transaction as a cash merger as a result of the
decline in the price of Thermo Electron Common Stock in September and October
1999 and to avoid dilution of Thermo Electron's existing stockholders. See
"SPECIAL FACTORS--Purpose and Reasons of Thermo Electron for the Merger."
Thermo Electron beneficially owns, in the aggregate, directly and indirectly
through Thermo TerraTech, approximately 96% of the outstanding Common Stock. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Principal
Stockholder."
POSITION OF THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermo Electron considered the findings and recommendation of the Special
Committee and the Board with respect to the fairness of the Merger to the Public
Stockholders (see "SPECIAL FACTORS--The Special Committee's and the Board's
Recommendation"). As of the date of the Merger Agreement, Thermo Electron
adopted the findings and recommendation of the Special Committee and the Board
with respect to the fairness of the Merger. Based solely on the findings and
recommendation of the Special Committee and its own internal review of the terms
of the Merger, Thermo Electron believes that the Merger is both procedurally and
substantively fair to the Public Stockholders and that the Cash Merger
Consideration is fair to the Public Stockholders from a financial point of view.
Thermo Electron did not attach specific weights to any factors in reaching its
belief as to fairness. Thermo Electron is not making any recommendation as to
how the Public Stockholders should vote on the Merger Agreement. See "SPECIAL
FACTORS--Position of Thermo Electron as to Fairness of the Merger."
The Public Stockholders should be aware that certain officers and directors
of Thermo Electron are also officers and directors of the Company and have
certain interests that are in addition to, or different from, the interests of
the Public Stockholders. See "SPECIAL FACTORS--Conflicts of Interest." Thermo
Electron considered these potential conflicts of interest and based in part
thereon, Thermo Electron's proposed offer was conditioned on, among other
things, the approval of the Merger by the Special
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Committee and the receipt by the Special Committee of a fairness opinion from an
investment banking firm.
CONFLICTS OF INTEREST
In considering the recommendation of the Special Committee and the Board
with respect to the Merger, the Public Stockholders should be aware that certain
officers and directors of Randers/Killam have interests in connection with the
Merger that present them with actual or potential conflicts of interest, which
are described in more detail under "SPECIAL FACTORS--Conflicts of Interest."
THE SPECIAL COMMITTEE
Dr. Tierney holds options to acquire an aggregate of 48,300 shares of Common
Stock, at exercise prices ranging from $1.90 to $3.25, which will be assumed by
Thermo Electron and converted into options to acquire shares of Thermo Electron
Common Stock on the same terms as all the other holders of Randers/Killam Stock
Options. See "THE MERGER--Assumption of Randers/Killam Stock Options by Thermo
Electron." Further, deferred units equal to 3,352 shares of Common Stock have
accumulated under the Company's deferred compensation plan for outside directors
for the benefit of Dr. Tierney, which units will be converted into the right to
receive the Cash Merger Consideration per unit for an aggregate cash payment of
$15,084. See "THE MERGER--Deferred Compensation Plan for Directors." Such
options and deferred units were issued to Dr. Tierney pursuant to terms approved
by the Company's stockholders. The Special Committee formally met 23 times,
either in person or telephonically, with one or more of its advisors, from
November 1998 through the date of this Proxy Statement and, in addition, had
numerous informal discussions and consultations telephonically. As compensation
for serving on the Special Committee, the Board has authorized that Dr. Tierney
receive a special retainer fee of $20,000 and additional fees of $1,000 for each
meeting attended in person and $500 for each meeting attended telephonically.
See "SPECIAL FACTORS--Conflicts of Interest" and "MANAGEMENT." For additional
information on Dr. Tierney's share ownership, see "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT--Management."
THE RANDERS/KILLAM DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors, other than the member of the Special
Committee, and executive officers of Randers/Killam own in the aggregate 151,501
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $681,754.50 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 557,100 shares of Common Stock, with exercise prices ranging from
$1.90 to $4.00, which will be assumed by Thermo Electron and converted into
options to acquire shares of Thermo Electron Common Stock on the same terms as
all the other holders of Randers/Killam Stock Options. See "THE
MERGER--Assumption of Randers/Killam Stock Options by Thermo Electron." Such
Board members and executive officers also beneficially own shares of common
stock of Thermo TerraTech and Thermo Electron as set forth in more detail under
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Management."
Further, certain members of the Board and certain executive officers hold
directorship or officer positions with Thermo TerraTech and/or Thermo Electron.
See "MANAGEMENT."
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Surviving Corporation shall, and
Thermo Electron will cause the Surviving Corporation to, fulfill and honor in
all respects the indemnification obligations of Randers/Killam, pursuant to
Randers/Killam's Certificate of Incorporation and Bylaws, as in effect on the
date of the Merger Agreement. In addition, the directors and officers of the
Company will be provided with continuing directors' and officers' liability
insurance coverage for a period of six years following the
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Effective Time, subject to certain limitations. See "SPECIAL FACTORS--Conflicts
of Interest" and "THE MERGER--Indemnification and Insurance."
The Merger Agreement also provides that Randers/Killam will, regardless of
whether the Merger becomes effective, indemnify Dr. Tierney against any costs
and expenses paid in connection with any claim or action arising out of or
pertaining to any action or omission in Dr. Tierney's capacity as a director or
fiduciary of Randers/Killam (including as a member of the Special Committee or
in connection with the transactions contemplated by the Merger Agreement) that
occurs on, before or after the Effective Time, until the expiration of the
statute of limitations relating to any such action or omission. Randers/Killam
shall pay Dr. Tierney's expenses in advance of the final disposition of the
action upon receipt of an undertaking by Dr. Tierney to repay those expenses if
it is later decided that she is not entitled to such payment. If the Merger
becomes effective, Thermo Electron will be jointly and severally responsible for
the indemnification and expense advancement obligations as described above. If
the Merger does not become effective, Thermo Electron shall only be responsible
for indemnifying or advancing expenses for matters that arise out of or pertain
to the work of the Special Committee, the Merger Agreement or the transactions
contemplated by the Merger Agreement.
In addition, Thermo Electron has entered into separate indemnification
agreements with each of the members of the Board of Directors, including the
member of the Special Committee, providing for indemnification of and
advancement of expenses to such directors directly by Thermo Electron in certain
circumstances. See "THE MERGER--Indemnification and Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will be
beneficially owned by Thermo Electron. Thermo Electron will have complete
control over the conduct of the Company's business and will have 100% interest
in the net book value and net earnings of the Company and any future increases
in the value of the Company. Thermo TerraTech's and Thermo Electron's combined
ownership of the Company prior to the transaction contemplated herein aggregated
approximately 96%. Upon completion of this transaction, Thermo Electron's
interest in the Company's net book value of $83.0 million on July 3, 1999, net
income of $2,968,000 for the year ended April 3, 1999 and net loss of
$13,405,000 for the three months ended July 3, 1999, would increase from
approximately 96% of such amounts to 100% of such amounts. The Public
Stockholders will no longer have any interest in, and will not be stockholders
of, Randers/Killam and therefore will not participate in Randers/Killam's future
earnings and potential growth and will no longer bear the risk of any decreases
in the value of the Company. Instead, the stockholders of the Company other than
Thermo TerraTech, Thermo Electron and holders who perfect their Dissenters'
Rights (as defined below) will have the right solely to receive the Cash Merger
Consideration for each share held.
In addition, the Common Stock will no longer be traded on the American Stock
Exchange (the "AMEX") and price quotations with respect to sales of shares in
the public market will no longer be available. The registration of the Common
Stock under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), will be terminated, and this termination will eliminate the Company's
obligation to file periodic financial and other information with the Commission
and will make most other provisions of the Exchange Act inapplicable. See
"SPECIAL FACTORS--Certain Effects of the Merger."
CONDITIONS TO THE MERGER, TERMINATION AND EXPENSES
Each party's obligation to effect the Merger is subject to satisfaction of a
number of conditions, including with respect to one or both parties: (i) the
Merger Agreement shall have been approved and adopted by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote thereon in accordance with the provisions of Section 251 of the General
Corporation Law of the State of Delaware (the "DGCL"); (ii) no court,
administrative agency or commission or other
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governmental or regulatory body or authority or instrumentality shall have
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order that is in effect and that
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger; (iii) the representations and warranties of the
other party shall be true and correct in all material respects on and as of the
Effective Time, except as permitted by the Merger Agreement; and (iv) each of
the parties shall have performed or complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed by
them on or prior to the Effective Time. It is also a condition to Thermo
Electron's obligation to effect the Merger that the Special Committee not have
withdrawn its recommendation to the Board of Directors of Randers/Killam that
the Merger Agreement, including the Cash Merger Consideration, is fair to, and
in the best interests of, the stockholders of Randers/Killam (other than Thermo
TerraTech and Thermo Electron). In addition, it is a condition to
Randers/Killam's obligation to effect the Merger that, at the time of mailing
this Proxy Statement to the stockholders of Randers/Killam and at the Effective
Time, Adams, Harkness & Hill shall have reaffirmed orally its fairness opinion
and shall not have withdrawn such opinion. Certain conditions that have not been
satisfied by one party may be waived by the other party; however, prior approval
of the Special Committee is required for Randers/Killam to waive or amend any
provision of the Merger Agreement. See "THE MERGER--Conditions." Even if the
stockholders approve the Merger Agreement, there can be no assurance that the
Merger will be consummated.
At any time prior to the Effective Time, whether before or after adoption of
the Merger Agreement by the stockholders of Randers/Killam, the Merger Agreement
may be terminated by the mutual written consent of the board of directors of the
Merger Sub and the Board of Directors of Randers/Killam (upon approval of the
Special Committee). In addition, either the Merger Sub or Randers/Killam (upon
approval of the Special Committee), in accordance with the provisions of the
Merger Agreement, may terminate the Merger Agreement prior to the Effective
Time, whether before or after adoption of the Merger Agreement by the
stockholders of Randers/Killam, if (i) the Merger has not been consummated by
March 31, 2000 (in which case the right of Randers/Killam to terminate shall be
exercised as directed by the Special Committee), subject to certain exceptions,
(ii) a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission issues an order, decree or ruling or takes
any other action enjoining, restraining or otherwise prohibiting the Merger and
such order, decree or ruling is final and nonappealable or (iii) the approval of
the stockholders of Randers/Killam necessary to consummate the Merger has not
been obtained, subject to certain exceptions. Thermo Electron has agreed to
vote, or cause to be voted, all of the Common Stock owned by it and any of its
subsidiaries in favor of the Merger. See "THE MERGER--Termination, Amendment and
Waiver."
In addition, the Merger Sub may terminate the Merger Agreement prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
stockholders of Randers/Killam, if Randers/Killam breaches any representation,
warranty, covenant or agreement in any material respect and fails to cure such
breach within 10 business days after written notice of such breach from the
Merger Sub. Randers/Killam may terminate the Merger Agreement prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
stockholders of Randers/Killam, if (i) the Special Committee determines after
consultation with outside legal counsel that failure to do so would be
inconsistent with the Board's or the Special Committee's fiduciary duties under
applicable law (which determination would result in the withdrawal or
modification of the Special Committee's recommendation and, at the Special
Committee's election, the termination of the Merger Agreement) or (ii) Thermo
Electron or Merger Sub breaches any representation, warranty, covenant or
agreement in any material respect and fails to cure such breach within
10 business days after written notice of such breach from Randers/Killam. There
is no termination fee payable by either party in the event that the Merger
Agreement is terminated. See "THE MERGER--Termination, Amendment and Waiver."
Each of the parties has agreed to pay its own costs and expenses in
connection with the Merger Agreement, whether or not the Merger is consummated.
See "THE MERGER--Expenses."
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FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the receipt of the Cash Merger
Consideration by holders of Common Stock pursuant to the Merger will be a
taxable sale of the holder's Common Stock. All holders of Common Stock should
consult their tax advisors to determine the effect of the Merger under federal,
state, local and foreign tax laws. See "FEDERAL INCOME TAX CONSEQUENCES."
RIGHTS OF DISSENTING STOCKHOLDERS
Any stockholder of Randers/Killam who does not vote in favor of the proposal
to approve the Merger Agreement and who complies strictly with the applicable
provisions of Section 262 of the DGCL has the right to dissent and be paid cash
for the fair value of such holder's shares of Common Stock ("Dissenters'
Rights"). The applicable provisions of Section 262 of the DGCL are attached to
this Proxy Statement as Appendix C. To perfect Dissenters' Rights with respect
to the Merger, a Randers/Killam stockholder must follow the procedures set forth
therein precisely. Those procedures are summarized in this Proxy Statement under
"RIGHTS OF DISSENTING STOCKHOLDERS."
Shares of Common Stock held by persons properly exercising Dissenters'
Rights will not be converted into the Cash Merger Consideration in the Merger
and after the Effective Time will represent only the right to receive such
consideration as is determined to be due such dissenting stockholder pursuant to
Section 262 of the DGCL. If after the Effective Time any dissenting stockholder
(i) fails to perfect or loses such right to payment or appraisal pursuant to
Section 262 of the DGCL or (ii) withdraws such demand for appraisal within
60 days after the Effective Date pursuant to Section 262 of the DGCL, each share
of Common Stock of such stockholder shall be treated as a share that had been
converted as of the Effective Time into the right to receive the Cash Merger
Consideration.
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermo Electron, using the purchase method of accounting.
MARKET PRICES OF COMMON STOCK AND DIVIDENDS
The Common Stock is traded on the AMEX (symbol: RGI). The following table
sets forth, for the periods indicated, the high and low sales prices of the
Company's Common Stock as reported in the consolidated transaction reporting
system.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL 1998
First Quarter............................................. $ 5.625 $ 2.50
Second Quarter............................................ 5.00 4.0625
Third Quarter............................................. 5.00 2.50
Fourth Quarter............................................ 4.375 3.125
FISCAL 1999
First Quarter............................................. 3.75 3.125
Second Quarter............................................ 3.125 1.875
Third Quarter............................................. 2.1875 1.5625
Fourth Quarter............................................ 3.625 1.875
FISCAL 2000
First Quarter............................................. 3.625 2.50
Second Quarter............................................ 3.75 3.25
Third Quarter (through November 8, 1999).................. 4.375 3.50
</TABLE>
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<PAGE>
On August 6, 1998, the last day on which the Common Stock traded prior to
the date Thermo Electron first publicly announced the proposal to take
Randers/Killam private (with no price having been announced), the high, low and
closing sales price per share of Common Stock reported in the consolidated
transaction reporting system was $2.1875, $2.1875 and $2.1875, respectively. On
October 12, 1999, the last trading day prior to the public announcement of the
terms of the proposed Merger, the high, low and closing sales price per share of
Common Stock reported in the consolidated transaction reporting system was
$3.625, $3.625 and $3.625, respectively. On , 1999, the last trading day
prior to the printing of this Proxy Statement, the high, low and closing sales
price per share of Common Stock reported in the consolidated transaction
reporting system was $ , $ and $ , respectively. During the third
quarter of fiscal 2000, the highest closing sales price per share prior to the
public announcement of the terms of the Merger was $3.6875.
As of , 1999, there were holders of record of Common Stock
and approximately persons or entities holding in nominee name.
The Company has never paid any cash dividends on its Common Stock.
19
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
In August 1998, Thermo TerraTech and Thermo Electron's senior management
initially considered the possibility of an acquisition by Thermo TerraTech of
all of the shares of common stock of each of Randers/Killam and ThermoRetec
Corporation ("ThermoRetec"; also a publicly traded, majority owned subsidiary of
Thermo TerraTech) held by their respective minority stockholders, in connection
with a proposed corporate reorganization of Thermo Electron and certain of its
subsidiaries. Each of the acquisitions of Randers/Killam and ThermoRetec would
be accomplished by means of a stock-for-stock merger. The goals of Thermo
Electron's proposed corporate reorganization include (i) reducing the complexity
of Thermo Electron's corporate structure, (ii) consolidating and strategically
realigning certain businesses to enhance their competitive market positions and
improve management coordination, and (iii) increasing liquidity in the public
markets by providing larger market floats for Thermo Electron's publicly traded
subsidiaries. If Thermo Electron's reorganization plan is completed as currently
proposed, it will reduce the number of Thermo Electron's majority-owned
subsidiaries from 22 to 12.
In the context of the review of Thermo Electron's entire corporate structure
which was taking place at the time, Thermo Electron's management examined
several factors, including the financial performance and profitability of
Randers/Killam, uncertainty regarding Randers/Killam's future growth prospects,
and the potential benefits to Randers/Killam's business if it were to become
part of a larger business unit. Thermo Electron also considered the following
factors: (i) recent public capital market trends affecting micro-cap companies;
(ii) the latest trends in the markets in which the Company competes; (iii) the
reduction in the amount of public information available to competitors about
Randers/Killam's business that would result from the termination of the
Company's obligations under the Commission's reporting requirements; (iv) the
elimination of additional burdens on management associated with public reporting
and other tasks resulting from the Company's public company status, including,
for example, the dedication of time and resources of management and of the Board
to stockholder and analyst inquiries, and investor and public relations;
(v) the decrease in costs, particularly those associated with being a public
company (for example, as a privately-held entity, the Company would no longer be
required to file quarterly, annual or other periodic reports with the Commission
or publish and distribute to its stockholders annual reports and proxy
statements), that Thermo Electron anticipates could result in savings of
approximately $450,000 per year, including fees for an audit by an independent
accounting firm and legal fees; and (vi) the greater flexibility that the
Company's management would have to focus on long-term business goals, as opposed
to quarterly earnings, as a non-reporting company.
Thermo Electron also considered the relatively low volume of trading in the
Common Stock and considered that the Merger would result in the Public
Stockholders receiving a somewhat more liquid, more readily tradeable security
(at the time the Merger was initially being considered, the Thermo TerraTech
common stock). Management of Thermo Electron and Thermo TerraTech also
considered that acquiring the minority stockholder interest in Randers/Killam
would advance the goal of Thermo Electron's proposed corporate reorganization to
reduce the number of majority-owned, public subsidiaries of Thermo Electron.
Management of Thermo Electron and Thermo TerraTech also considered recent trends
in the price of the Common Stock, although Randers/Killam's current stock price
was not a significant factor in the timing of Thermo Electron's or Thermo
TerraTech's decision to propose acquiring the minority stockholder interest in
Randers/Killam.
On August 10 and 11, 1998, the board of directors of Thermo Electron held a
special meeting at which Thermo Electron's management presented the proposal for
Thermo TerraTech to acquire all of the shares of Common Stock that Thermo
TerraTech and Thermo Electron did not already own, as a part of the proposed
corporate reorganization of Thermo Electron and certain of its subsidiaries. The
Thermo Electron board of directors discussed several factors presented by
management regarding this proposal, including each of the factors discussed in
the second paragraph of this section.
20
<PAGE>
The Thermo Electron board of directors also considered the relatively low
volume of trading in the Common Stock and that the Merger would result in the
Public Stockholders receiving a somewhat more liquid, more readily tradeable
security (as noted above, at this point in time, the proposed form of
consideration in the Merger was still the common stock of Thermo TerraTech. The
Thermo Electron board of directors also acknowledged that as a result of the
Merger, the entire equity interest in Randers/Killam would be beneficially owned
by Thermo Electron, directly and indirectly through Thermo TerraTech. The Public
Stockholders would no longer have any interest in, and would not be stockholders
of, Randers/ Killam, and therefore would not participate in Randers/Killam's
future earnings and potential growth. Additionally, upon consummation of the
Merger, the Common Stock would no longer be traded on the AMEX, price quotations
with respect to sales of shares in the public market would no longer be
available and the registration of the Common Stock under the Exchange Act would
be terminated.
In addition, the Thermo Electron board of directors considered the
advantages and disadvantages of certain alternatives to acquiring the Public
Stockholder interest in Randers/Killam, including (i) selling its and Thermo
TerraTech's equity interest in the Company and (ii) leaving Randers/Killam as a
majority-owned, public subsidiary of Thermo TerraTech. The first alternative,
that of selling its and Thermo TerraTech's equity interest in the Company, was
briefly considered by Thermo Electron management, but it was not an alternative
that was pursued as reasonable, given that Thermo Electron did not want to sell
its equity interest, and did not want Thermo TerraTech to sell its equity
interest, in the Company. The advantages to leaving Randers/Killam as a
majority-owned, public subsidiary that Thermo Electron considered at that time
included (i) the avoidance of dilution to the Thermo TerraTech stockholders by
the issuance of more of its shares of common stock as consideration for shares
of Common Stock (as stated above, at that time the proposed form of
consideration in the Merger was still the common stock of Thermo TerraTech) and
(ii) maintaining the potential access Randers/Killam has to capital in the
public markets as a public company. The disadvantages to leaving Randers/Killam
as a majority-owned, public subsidiary that Thermo Electron considered included
(i) the costs associated with being a public company and (ii) the public
information available to competitors about Randers/Killam's business as result
of its filing obligations with the Commission.
The Thermo Electron board of directors also discussed that, by acquiring the
Public Stockholder interest in Randers/Killam, it would advance the goal of
Thermo Electron's proposed corporate reorganization to reduce the number of
Thermo Electron's majority-owned, public subsidiaries. After consideration of
these various factors, Thermo Electron's board authorized a proposed corporate
reorganization, which included Thermo TerraTech acquiring all of the shares of
Common Stock that Thermo TerraTech and Thermo Electron did not already own for
Thermo TerraTech common stock. On August 12, 1998, Thermo Electron issued a
press release announcing its proposed corporate reorganization.
On November 19, 1998, the board of directors of Thermo TerraTech held a
meeting at which the proposed plan to acquire the Public Stockholder interest in
Randers/Killam was discussed. Thermo TerraTech's management reviewed the
considerations set forth above.
On November 19, 1998, Randers/Killam's Board held a meeting at which all
members were present in person or by telephone. At that meeting, the Board
determined that because Thermo TerraTech and its parent, Thermo Electron,
controlled approximately 96% of the outstanding common stock of Randers/ Killam,
it was desirable to appoint a special committee to act on behalf of and in the
interests of the Public Stockholders for the purpose of evaluating the merits of
and negotiating the proposed transaction, as well as making a recommendation to
the full Board of Directors of Randers/Killam on whether or not to approve such
transaction. The Board authorized the Special Committee to retain a legal
advisor, an investment bank to provide a fairness opinion and any other
professional advisors that the Special Committee deemed necessary or appropriate
to assist it in carrying out its duties. Further, the Board granted the Special
Committee and its advisors access to all of the officers and management of
Randers/ Killam and its subsidiaries, its books, records, projections and
financial statements that were deemed necessary by the Special Committee and its
advisors for their review. The Randers/Killam Board of Directors decided to
appoint Dr. Susan F. Tierney to the Special Committee, and in doing so noted
that
21
<PAGE>
Dr. Tierney was then also a director of Thermo Ecotek Corporation, a
majority-owned subsidiary of Thermo Electron. The Board determined that this
directorship did not prevent Dr. Tierney from fulfilling her duties as a member
of the Special Committee.
In late November and December of 1998, the Special Committee considered
several law firms to act as its legal advisor and conducted telephonic
interviews with a number of these firms. After determining that certain of those
law firms had relationships with Thermo Electron that would preclude them from
representing the Special Committee in the proposed transaction, the Special
Committee conducted more extensive interviews with three law firms, including
Choate Hall & Stewart ("Choate Hall"). Following such investigation, on
December 18, 1998, the Special Committee selected Choate Hall as counsel to the
Special Committee. In making its determination, the Special Committee considered
Choate Hall's reputation and experience, including its merger and acquisition
experience. Choate Hall and the Special Committee discussed the scope of the
duties of the sole member of the Special Committee, the scope of the Special
Committee's authority and the requirement that the sole member of the Special
Committee be independent. The member of the Special Committee affirmed her
independence and her understanding of her obligations to the Public
Stockholders. The Special Committee also determined that it would not recommend
a transaction unless it believed that the proposed transaction was at a fair
price. The Special Committee discussed a proposed schedule for hiring an
investment banker and for conducting due diligence in connection with the
proposed transaction, including discussions with management of the Company,
Thermo TerraTech and Thermo Electron about the business, financial condition and
prospects of Thermo TerraTech and Randers/Killam.
During January and February of 1999, the Special Committee, with the
assistance of its counsel, developed a list of potential investment banks and
conducted preliminary telephonic interviews with eight investment banks. After
discussion with counsel, the Special Committee selected four potential
investment banks, including Adams, Harkness & Hill, with which to have further
discussions. On February 23, 1999, representatives of those investment banks
made presentations to the Special Committee and Choate Hall. On February 25,
1999, the Special Committee, after consultation with counsel, requested draft
engagement letters from two of the presenting banks, including Adams, Harkness &
Hill.
After due deliberation and review of the materials provided by the
investment banking firms, the Special Committee decided to retain Adams,
Harkness & Hill. The Special Committee selected Adams, Harkness & Hill because
of its reputation and experience in investment banking and financial advisory
services generally, and its experience in providing fairness opinions in public
transactions. The Special Committee considered that Adams, Harkness & Hill had
not previously acted as a financial advisor to or provided investment banking
services for Thermo Electron or any of its subsidiaries. The Special Committee
also considered that Adams, Harkness & Hill was located in Boston and could
therefore meet more easily with the Special Committee and conduct its due
diligence review of Thermo TerraTech and Randers/Killam.
On May 5, 1999, Thermo Electron issued a press release announcing that
Thermo TerraTech would be included in the larger reorganization of Thermo
Electron and its subsidiaries. Specifically, it was proposed that the minority
interest in Thermo TerraTech would also be acquired by Thermo Electron. In
connection with this change, the proposed transaction with Randers/Killam was
revised so that the outstanding shares of Common Stock held by the Public
Stockholders would be exchanged for shares of Thermo Electron Common Stock in
lieu of Thermo TerraTech common stock.
On May 13, 1999, the Special Committee formally engaged Adams, Harkness &
Hill. In making its decision to formally engage Adams, Harkness & Hill, the
Special Committee noted and considered that Adams, Harkness & Hill had been
contacted by the special committees of the Board of Directors of each of Thermo
TerraTech and ThermoRetec in connection with a possible engagement to render a
fairness opinion on the proposed acquisition by Thermo Electron of the minority
interests of Thermo TerraTech and ThermoRetec, respectively, in stock-for-stock
mergers. In May 1999, Choate Hall was contacted by the special committee of the
Board of Directors of Thermo TerraTech in connection with the proposed
22
<PAGE>
transaction to determine if Choate Hall would also represent that special
committee. The Special Committee determined that, in each case, the interests of
the special committees of Randers/Killam and Thermo TerraTech, respectively,
were adverse to Thermo Electron and not adverse to each other in these proposed
transactions. The Special Committee decided that, given the corporate structure
of Thermo Electron, Thermo TerraTech (a first tier subsidiary of Thermo
Electron), and Randers/Killam and ThermoRetec (each majority-owned subsidiaries
of Thermo TerraTech), Adams, Harkness & Hill's and Choate Hall's engagement in
the parallel mergers and the more detailed knowledge of Thermo Electron and its
subsidiaries resulting therefrom would be advantageous to the Special Committee.
Adams, Harkness & Hill agreed to assist the Special Committee in, among other
things:
- conducting due diligence on Randers/Killam and Thermo Electron, including,
without limitation, visiting the facilities of and interviewing the
management of Randers/Killam and Thermo Electron;
- reviewing Randers/Killam's and Thermo Electron's historical, current and
projected operating results and financial position, within the context of
the business condition in the industry segments in which Randers/Killam
and Thermo Electron compete and reviewing similar information for the peer
group of companies deemed to be comparable to Randers/Killam and Thermo
Electron;
- evaluating the historical stock price trading records of Randers/Killam,
Thermo Electron and the peer group;
- identifying business combinations deemed to be comparable and assessing
the terms of these precedent business combinations;
- preparing an analysis of Randers/Killam to determine valuation parameters
for Randers/Killam;
- assisting in evaluating the terms and conditions of any proposed offer
from Thermo Electron; and
- providing a written opinion, and any oral opinions, if requested, as to
the fairness, from a financial point of view, of the consideration to be
received by the Public Stockholders in connection with any proposed offer
from Thermo Electron.
Following its formal engagement in May, Adams, Harkness & Hill continued its
due diligence review and analysis of Randers/Killam and Thermo Electron,
including preparation of a financial model that incorporated financial
projections provided by Randers/Killam's management, review of the valuations of
comparable public companies and the financial terms of comparable merger
transactions, and preparation of discounted cash flow valuations. See "--Opinion
of Adams, Harkness & Hill".
On May 24, 1999, Randers/Killam announced its plan to sell certain operating
units of Randers/ Killam, including the Randers division, BAC Killam and
E3-Killam. This announcement was part of a larger plan approved by Thermo
Electron to sell certain operating units of Thermo Electron subsidiaries,
including planned sales by Thermo TerraTech, the majority stockholder of
Randers/Killam, of used-oil processing operations of its Thermo EuroTech, N.V.
subsidiary and of certain soil-recycling facilities by its majority-owned
subsidiary, ThermoRetec. As of the date of mailing this proxy statement to
stockholders, Randers/Killam has not entered into a definitive agreement to sell
any of these operating units, although preliminary discussions are underway with
respect to one of the Company's divisions. See "CERTAIN TRANSACTIONS". Pursuant
to the terms of the Merger Agreement, Randers/Killam is obligated to notify the
Special Committee of any such written offers it receives which sets forth
proposed purchase price of greater than $3 million or in which the total book
value of the assets being sold is greater than $3 million.
In June 1999, Adams, Harkness & Hill met with management of Killam
Associates and Randers Group, the primary operating units of Randers/Killam. On
June 11, 1999, the Special Committee met with Choate Hall and Adams, Harkness &
Hill to review the status of the legal and financial due diligence and discuss
the proposed schedule for the transaction, including the timing of Thermo
Electron's proposed offer. Adams, Harkness & Hill reported on the results of its
visits to and interviews with the management of Randers/Killam and its plans to
continue its financial diligence through June and July.
23
<PAGE>
Throughout June and July, Adams, Harkness & Hill provided the Special
Committee with regular, periodic telephonic updates on its progress on due
diligence and preliminary valuation methods. On July 22, 1999, the Special
Committee met with Adams, Harkness & Hill and Choate Hall to review the
preliminary valuation of Randers/Killam and Thermo Electron established by
Adams, Harkness & Hill and to prepare for Thermo Electron's presentation and
offer. The Special Committee decided in advance that it would defer responding
to any offer until it had fully considered the offer, reviewed its underlying
assumptions and analyses, and assessed the merits of the offer. Adams, Harkness
& Hill discussed the valuation methodologies it employed, including, without
limitation, those discussed in "--Opinion of Adams, Harkness & Hill", in
determining its preliminary valuations. Full discussion ensued on the
appropriateness of certain assumptions and analyses contained in the preliminary
projections. There was also a detailed discussion of the valuation methodologies
used by Adams, Harkness & Hill and any material assumptions used by Adams,
Harkness & Hill in preparing its analysis. After discussion, the Special
Committee authorized Adams, Harkness & Hill to engage Environmental Business
International, Inc., an environmental consultant, for the limited purpose of
reviewing certain assumptions about the environmental industry contained in
Adams, Harkness & Hill's preliminary valuation. See "--Opinion of Adams,
Harkness & Hill." Choate Hall again discussed with the Special Committee its
duties and responsibilities as an independent special committee of the Board of
Directors in evaluating and negotiating the terms of the offer. Although the
Board did not believe that her service on both the board of directors of Thermo
Ecotek and the Board of Directors created an actual conflict of interest, in
order to avoid any appearance of a potential conflict, Dr. Tierney resigned as a
director of Thermo Ecotek, effective August 4, 1999.
On July 23, 1999, Thermo Electron provided the Special Committee and Choate
Hall with a draft Merger Agreement containing all of the proposed terms other
than the proposed exchange ratio. The Special Committee instructed Choate Hall
to review the proposed Merger Agreement and negotiate the agreement along the
terms discussed with the Special Committee.
On August 16, 1999, Thermo Electron provided the Special Committee with a
proposal to acquire the outstanding shares of Randers/Killam. Under this
proposal, each outstanding share of Common Stock held by the Public Shareholders
would be exchanged for 0.15 of a share of Thermo Electron Common Stock. Thermo
Electron's proposal was based on its analysis of the closing stock prices for
Randers/Killam and Thermo Electron of $3.44 and $17.63, respectively, on
July 29, 1999 and included a proposed exchange ratio that valued the Common
Stock at $3.75 and the Thermo Electron Common Stock at $25.00. On August 16,
1999, the date of the proposal, the closing stock prices for Randers/Killam and
Thermo Electron were $2 7/8 and $16 7/8, respectively. While the terms of the
proposal included a premium on the market value of the Common Stock, a
substantial premium also had been added to the Thermo Electron Common Stock,
reflecting Thermo Electron's belief that its common stock was currently
undervalued by the financial markets. The Special Committee instructed Adams,
Harkness & Hill to review the terms of and assumptions underlying the proposed
exchange ratio.
On August 20, 1999, the Special Committee held a telephonic meeting with
Adams, Harkness & Hill and Choate Hall to review the proposed exchange ratio.
Adams, Harkness & Hill indicated that it did not believe the proposed exchange
ratio was appropriate. After a detailed discussion, the Special Committee
determined that it was incumbent on Thermo Electron to propose a more acceptable
alternative. The Special Committee decided that no proposed exchange ratio would
be considered that had the effect of valuing the Common Stock at less than its
current market value or that valued the Thermo Electron Common Stock at a
premium to its then market value. Furthermore, the Special Committee discussed
possible ways to protect the Public Shareholders from fluctuations in the price
of the Randers/Killam and Thermo Electron Common Stocks, including providing the
Public Stockholders with a cash alternative, providing for a collar on the
proposed valuation and an oral confirmation by Adams, Harkness & Hill of its
fairness opinion at the date of distribution of the proxy statement to
Randers/Killam stockholders and/or immediately prior to closing the transaction,
to ensure that the transaction remains fair. The Special Committee discussed
including a collar on the proposed value of the deal, including a minimum dollar
24
<PAGE>
value (a "floor") for each share of the Randers/Killam common stock held by the
public stockholders. If the market value of Thermo Electron Common Stock to be
issued in the proposed transaction went below the proposed floor, the exchange
ratio would be adjusted such that each outstanding share of Common Stock would
be worth the number of shares of Thermo Electron Common Stock equal to the fixed
dollar amount with the Thermo Electron Common Stock valued based on its average
closing price over a specified period prior to the Merger. Similarly, a maximum
dollar value (a "ceiling") could be placed on each share of the Randers/Killam
common stock held by the Public Stockholders if the Thermo Electron Common Stock
were above a specified price. The Special Committee instructed Choate Hall and
Adams, Harkness & Hill to propose a transaction structure that included a
two-way collar on the price of Thermo Electron Common Stock or a cash
alternative if the value of Thermo Electron Common Stock dropped below a certain
price. The Special Committee considered requesting that the Public Stockholders
be permitted to elect, at their discretion, to receive either Thermo Electron
Common Stock or cash in the proposed transaction. The Special Committee decided
not to pursue this with Thermo Electron, since a cash election feature could
create adverse tax consequences for all Public Stockholders. The Special
Committee also asked Choate Hall to continue negotiations on the Merger
Agreement along the lines discussed at the meeting.
On August 24, 1999, Adams, Harkness & Hill communicated to Mr. Theo
Melas-Kyriazi, Chief Financial Officer of Thermo Electron, that the proposed
exchange ratio was unacceptable and presented the proposed collar structure. On
August 26, 1999, Thermo Electron responded with a new proposal that contained no
premium on the trading price of Thermo Electron Common Stock and a proposed
implied exchange ratio of 0.24 shares of Thermo Electron Common Stock for each
outstanding share of Common Stock held by the Public Stockholders. The exchange
ratio would be subject to adjustment based on the average closing price of the
Thermo Electron Common Stock during a specified period prior to the effective
time of the Merger, but would provide a minimum value, or floor, of $3.60 and a
maximum value, or ceiling, of $4.80 for each outstanding share of Common Stock.
On August 26, 1999, the Special Committee held a telephonic meeting with
Choate Hall and Adams, Harkness & Hill to discuss Thermo Electron's revised
proposal. After an extensive discussion, the Special Committee determined that
the overall value of Randers/Killam was still greater than that reflected in
Thermo Electron's revised proposal. The Special Committee and Adams, Harkness &
Hill believed that the prevailing trading price of Randers/Killam did not
reflect the underlying value of the Company since, among other considerations,
the stock was very thinly-traded with an approximate 4% public float. Moreover,
in certain areas Thermo Electron used different assumptions in its valuation of
Randers/Killam than those used in Adams, Harkness & Hill's preliminary analysis.
The Special Committee instructed Choate Hall and Adams, Harkness & Hill to
request an increase in the both the proposed minimum value and maximum value per
share.
Several days later, Thermo Electron submitted a revised proposal. On
August 31, 1999, the Special Committee held a telephonic meeting with Choate
Hall and Adams, Harkness & Hill to discuss Thermo Electron's most recent
proposal, which contained an implied exchange ratio of 0.24 shares of Thermo
Electron Common Stock for each share of outstanding Common Stock held by the
Public Stockholders, subject to adjustment, but having a minimum value of $4.15
and a maximum value of $5.25 for each outstanding share. After discussion with
Adams, Harkness & Hill, the Special Committee determined that the maximum value
or ceiling was acceptable, but that the proposed floor of $4.15 per share still
did not reflect a sufficient overall value for Randers/Killam. After discussion,
the Special Committee determined that it would continue its efforts to obtain a
minimum value greater than $4.15 per share. Later that day, the Special
Committee and Choate Hall had a telephonic meeting with Mr. Melas-Kyriazi in
which the Special Committee requested an increase in the minimum value of
outstanding shares of Common Stock to $4.30 per share.
In response to the Special Committee's request, on September 1, 1999, Thermo
Electron proposed that the implied exchange ratio remain at 0.24, subject to a
minimum value of $4.30 and a maximum value
25
<PAGE>
of $5.25 for each outstanding share of Common Stock. That offer was accepted by
the Special Committee as fair to the Public Stockholders subject to negotiation
of the other terms of the Merger Agreement.
Beginning in August 1999, the Special Committee and Choate Hall, also
negotiated the terms and conditions of the proposed merger agreement. See "THE
MERGER".
The Special Committee subsequently was advised that the Special Committees
of ThermoRetec and Thermo TerraTech had not completed negotiations of the terms
of their respective mergers. Because at that time the Randers/Killam merger was
cross-conditioned on the concurrent completion of the Thermo TerraTech and
ThermoRetec transactions, on September 7, 1999, the Special Committee decided to
postpone meeting with the full Board of Directors of Randers/Killam until the
Special Committees of the other companies had completed their respective
negotiations with Thermo Electron.
On October 5, 1999, representatives of Thermo Electron contacted Adams,
Harkness & Hill and advised Adams, Harkness & Hill that it was possible that
Thermo Electron would elect not to proceed with the Merger on a stock-for-stock
basis given the prevailing price of the Thermo Electron Common Stock.
On October 13, 1999, the Special Committee was advised that Thermo Electron
was withdrawing its offer to pay the merger consideration in Thermo Electron
Common Stock. Thermo Electron informed the Special Committee and its advisors
that the market price of Thermo Electron Common Stock had continued to decline
throughout September and October to a closing price on October 12, 1999 of
$13 11/16 and that it would not proceed with a stock transaction. Thermo
Electron initially proposed a price of $4.30 in cash per share of Randers/Killam
Common Stock. The Special Committee responded that, in part because the Merger
was now taxable to the stockholders of Randers/Killam (as a result of it being
proposed as a cash transaction), the financial terms of the transaction were now
less advantageous to some of the Public Stockholders.
Later on October 13, 1999, the Special Committee met telephonically with
Choate Hall and Adams, Harkness & Hill to discuss the new proposal and requested
certain additional information from Thermo Electron, including more specific
information on the recent financial performance of Randers/Killam.
On October 14, 1999, the Special Committee again met with Choate Hall and
Adams, Harkness & Hill to consider the new offer. After full discussion, the
Special Committee determined that $4.30 was an inadequate cash price. This was
communicated to representatives of Thermo Electron that same day. Thermo
Electron representatives informed the Special Committee and its advisors that
the existing $4.30 per share price was, in their view, fair when taking into
account both the preliminary financial results of Randers/Killam for the quarter
ended October 2, 1999, which were lower than management had expected, balanced
against the taxable nature of the cash offer. The Special Committee then argued
that the change in the structure of the transaction should be given more weight
in the analysis and justified a higher cash premium. Thermo Electron responded
that day with an offer of $4.40 per share. The Special Committee indicated that
it believed the revised offer price was still inadequate and indicated that
$4.50 was appropriate. On October 15, 1999, Thermo Electron increased its offer
to $4.50 for each outstanding share of Common Stock held by the Public
Stockholders, and the Special Committee agreed to this price as fair to the
Public Stockholders, subject to completion of the Merger Agreement.
On October 18, 1999, Adams, Harkness & Hill met with the Special Committee
to give its final report on the terms of the proposed Merger and rendered its
opinion to the Special Committee that the proposal by Thermo Electron of a cash
payment of $4.50 for each outstanding share of Randers/Killam was fair, from a
financial point of view, to the Public Stockholders. On October 12, 1999, the
last day prior to the Special Committee's decision and the announcement of the
financial terms of the Merger on which trading in the Common Stock occurred, the
closing price of the Common Stock was $3.625. Adams, Harkness & Hill reviewed
the various factors it considered in rendering its opinion, which are described
below under "Opinion of Adams, Harkness & Hill." The full Board of Directors of
Randers/Killam then met to hear the report of the Special Committee and Adams,
Harkness & Hill, to review the final terms of the Merger
26
<PAGE>
Agreement and to review the recommendation of the Special Committee. After
discussion, the Special Committee recommended to the full Board of Directors
that it accept Thermo Electron's offer (subject to final approval by the Thermo
Electron Board of Directors) and approve the Merger Agreement in the form
presented at the meeting. The Board of Directors approved the Merger Agreement
(with one director, Thomas R. Eurich, voting against approval of the Merger
Agreement), declared its advisability and recommended that the stockholders vote
in favor of the proposed Merger.
On October 19, 1999, the Merger Agreement was presented to the Board of
Directors of Thermo Electron at a special meeting of the Board of Directors.
Thermo Electron's Board of Directors unanimously approved the Merger Agreement.
The Merger Agreement was then duly executed by the parties. On October 20, 1999,
Randers/Killam issued a press release announcing that, based on the
recommendation of the Special Committee, its Board of Directors had approved the
Merger Agreement with Thermo Electron.
THE SPECIAL COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The Special Committee and the Board believe that the terms of the Merger are
fair to, and in the best interests of, the Public Stockholders. In reaching this
conclusion, the Special Committee has determined that the Merger is both
substantively and procedurally fair, and is therefore entirely fair, to the
Public Stockholders. The Board has adopted the findings and recommendation of
the Special Committee with regard to both the substantive and procedural
fairness of the Merger. Accordingly, the Board has approved the Merger Agreement
and recommends its adoption by the stockholders.
In reaching their decisions to approve the Merger Agreement, the Special
Committee and the Board considered, without limitation, the following factors,
each of which the Special Committee and the Board deemed favorable:
- -- THE PREMIUM REFLECTED IN THE CASH MERGER CONSIDERATION OF $4.50 PER SHARE.
Thermo Electron's willingness to pay $4.50 per share, viewed in light of the
course of negotiations with Thermo Electron and the historical market price
of the Common Stock, was considered by the Special Committee and the Board
in making their respective decisions to approve the Merger Agreement.
-- COURSE OF NEGOTIATIONS. The Special Committee and the Board considered
the history of negotiations with respect to the Merger Agreement, which
led to an increase in Thermo Electron's initial proposal of an exchange
ratio of 0.15 share of Thermo Electron Common Stock per share of Common
Stock (the equivalent of $3.75 per share) on August 16, 1999, finally to
$4.50 offered on October 15, 1999.
-- THE RELATIONSHIP OF THE CASH MERGER CONSIDERATION OF $4.50 PER SHARE TO
THE HISTORICAL MARKET PRICES FOR THE COMMON STOCK. The Special Committee
and the Board considered the prevailing trading price of the Common Stock
and the possibility that the price would decline in the future. They also
considered that, due to the very small public float, prevailing trading
prices might not be available to all Public Stockholders who wished to
sell their shares. The Special Committee and the Board concluded that the
$4.50 per share price proposed by Thermo Electron, which represented
premiums of (i) approximately 24.1% over the per share price on the last
trading date prior to the date on which the Merger was recommended by the
Special Committee and approved by the Board and (ii) approximately 105.7%
over the per share price on the last trading date prior to Thermo
Electron's first public announcement of the proposal to take Randers/
Killam private on August 12, 1998 (with no price having been announced),
would enable the Public Stockholders to obtain a higher price for their
stock than would otherwise be available in the market at that time. The
Special Committee also believed that the prevailing trading price in
October 1999 reflected, in part, Thermo Electron's previously announced
intent to merge with Randers/Killam. The purchase by Thermo Electron
would also eliminate the exposure of the Public Stockholders to any
future or continued declines in the price of the Common Stock.
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<PAGE>
- -- INFORMATION CONCERNING THE FINANCIAL PERFORMANCE, CONDITION, BUSINESS
OPERATIONS AND PROSPECTS OF RANDERS/KILLAM. The Special Committee and the
Board considered the historical, current and potential future performance of
Randers/Killam and determined that the premium reflected in the price per
share offered by Thermo Electron was attractive in light of the current
performance, declining sales and profitability, and the uncertainty of the
Company's future performance and growth prospects. In addition, the Special
Committee and the Board determined that the Merger would shift the risk of
the future financial performance of Randers/Killam from the Public
Stockholders, who do not have the power to control Randers/Killam, entirely
to Thermo Electron, which does have the power to control Randers/Killam and
has the resources to manage and bear that risk over the long term.
- -- TERMS OF THE MERGER AGREEMENT. The Special Committee and the Board
considered the terms of the Merger Agreement, including (i) the amount and
form of the consideration, (ii) the limited number of conditions to the
obligations of Thermo Electron, including the lack of a financing condition,
(iii) the right of the Special Committee to terminate the Merger Agreement
if the Special Committee determines after consultation with outside legal
counsel that failure to do so would be inconsistent with the Board's or the
Special Committee's fiduciary duties under applicable law, (iv) the
condition that Adams, Harkness & Hill update its opinion prior to the
mailing of this Proxy Statement and the Effective Time, (v) the requirement
that Thermo Electron provide notice of certain offers involving the Company
so that the Special Committee and Adams, Harkness & Hill will be advised if
any assets proposed to be sold by the Company might be sold at higher than
anticipated value, and (vi) the absence of a termination fee in the event
Randers/Killam terminates the Merger Agreement. The Special Committee and
the Board believed that the foregoing made the consummation of the
transaction more likely than it would if more significant conditions were
placed on the completion of the transaction or if Thermo Electron did not
have the independent financial resources to complete the transaction.
Further, the Special Committee and the Board believed that the ability of
the Special Committee to terminate the Merger Agreement without payment of a
termination fee in the event its fiduciary duties to the Randers/Killam
stockholders required it to do so provided the Board the freedom to protect
the interests of the Public Stockholders.
- -- THE LIQUIDITY THAT WOULD BE REALIZED BY THE PUBLIC STOCKHOLDERS FROM THE
ALL-CASH OFFER. The Special Committee and the Board believed that the
liquidity to be realized by the Public Stockholders would be beneficial to
such stockholders since Thermo Electron's significant ownership of the
Common Stock (i) resulted in a relatively small public float that
necessarily limited the amount of trading in the Common Stock and
(ii) decreased the likelihood that a proposal to acquire the Common Stock
would be made by an independent entity without the consent of Thermo
Electron. Moreover, Thermo Electron had stated its current intention to
retain its majority holding in the Company, which foreclosed the opportunity
to consider an alternative transaction with a third party purchaser of the
Company or otherwise provide liquidity to the Public Stockholders.
- -- THE OPINION OF ADAMS, HARKNESS & HILL THAT THE CONSIDERATION OF $4.50 PER
SHARE IN CASH IS FAIR, FROM A FINANCIAL POINT OF VIEW, AS OF THE DATE OF ITS
OPINION, TO THE PUBLIC STOCKHOLDERS. The Special Committee reviewed the
independent financial analyses performed by Adams, Harkness & Hill,
including analyses of relative value and discounted cash flows that assume
Randers/Killam will continue as a going concern, and found them to be
reasonable. The Special Committee believed that Adams, Harkness & Hill's
conclusion that the price offered by Thermo Electron was fair, from a
financial point of view, to the Public Stockholders was reasonable based on
the analyses performed. See "--Opinion of Adams, Harkness & Hill."
- -- IN THE COURSE OF THEIR DELIBERATIONS THE SPECIAL COMMITTEE AND THE BOARD
ALSO CONSIDERED THE POSSIBILITY THAT THE COMPANY COULD IMPROVE ITS
PERFORMANCE AND MARKET VALUE. The Special Committee and the Board recognized
that, following the Merger, the Public Stockholders will cease to
participate in the future earnings or growth, if any, of the Company or
benefit from increases, if any, in the value of the Company. This
consideration was evaluated in light of the recent financial performance of
Randers/
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<PAGE>
Killam, the current industry outlook and risks and uncertainties associated
with Randers/Killam's future performance.
- -- POTENTIAL OR ACTUAL CONFLICTS OF INTEREST OF OFFICERS AND DIRECTORS OF
RANDERS/KILLAM IN CONNECTION WITH THE MERGER. See "--Conflicts of Interest."
The Special Committee and the Board also considered evaluating the Company
on a going concern basis, but accorded this method of analysis little, if any,
weight, because Thermo Electron indicated to the Special Committee and the Board
that it had no desire or intention to sell the Company, but rather wanted to
continue to operate the Company substantially as it was being operated. The
Special Committee and the Board also considered evaluating the proposed
transaction based on the Company's implied liquidation value, but accorded this
method of analysis little, if any, weight since the divisions for which a sale
had previously been announced were not expected to be sold at a premium.
In determining that the Merger is fair to the Public Stockholders, the
Special Committee and the Board considered the above factors as a whole and did
not assign specific or relative weights to them. The factors described above
constitute all of the material factors considered by the Special Committee and
the Board. In the view of the Special Committee and the Board, each of the
factors listed above, in the aggregate, reinforced their belief that the
transaction was in the best interests of the Public Stockholders and outweighed
the negative factors listed above.
The Special Committee's and the Board's belief as to the procedural fairness
of the Merger was based, among other things, on their recognition that (i) the
Special Committee consisted of an independent director appointed by a majority
of the Board of Directors to represent solely the interests of the Public
Stockholders and to provide independent consideration of the transaction;
(ii) the Special Committee retained and was advised by independent legal
counsel; (iii) the Special Committee retained Adams, Harkness & Hill to assist
in evaluating the proposed transaction and received advice from Adams,
Harkness & Hill; and (iv) the Cash Merger Consideration and the other terms and
conditions of the Merger Agreement resulted from active arms-length bargaining
between representatives of the Special Committee and representatives of
management of Thermo Electron. No other unaffiliated representative was retained
to act solely on behalf of the Public Stockholders for the purposes of
negotiating the terms of the Merger or the Merger Agreement.
THE SPECIAL COMMITTEE AND THE BOARD HAVE APPROVED THE MERGER AGREEMENT,
BELIEVE THAT THE TERMS OF THE MERGER ARE FAIR TO THE PUBLIC STOCKHOLDERS AND THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE TO ADOPT THE MERGER AGREEMENT.
In considering the recommendation of the Special Committee and the Board
with respect to the Merger Agreement, stockholders should be aware that certain
members of the Special Committee and the Board have certain interests in the
Merger that are different from, or in addition to, the interests of stockholders
generally and that represent actual or potential conflicts of interest. The
Special Committee and the Board were aware of these interests and considered
them, among other matters, in approving the Merger Agreement. See "--Conflicts
of Interest."
In order to aid the evaluation of the Company by the Special Committee and
Adams, Harkness & Hill and Adams, Harkness & Hill's assessment of the fairness,
from a financial point of view, of the consideration to be received by the
Public Stockholders pursuant to the Merger Agreement, the Company furnished the
Special Committee and Adams, Harkness & Hill with certain projected financial
data prepared by the Company's management. See "CERTAIN PROJECTED FINANCIAL
DATA."
OPINION OF ADAMS, HARKNESS & HILL
Pursuant to a letter agreement dated as of May 13, 1999 (the "Adams,
Harkness & Hill Engagement Letter"), Adams, Harkness & Hill was retained by the
Special Committee to render an opinion (the "Opinion") as to the fairness, from
a financial point of view, to the Public Stockholders, of the consideration to
be received by such Public Stockholders in connection with the Merger. The
Special
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<PAGE>
Committee selected Adams, Harkness & Hill for a number of reasons, including its
qualifications, expertise and reputation in the area of valuation and financial
advisory work. Adams, Harkness & Hill is a nationally recognized investment
banking firm and is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. After being retained by the Special Committee, Adams, Harkness & Hill
also was engaged by the special committees of the Board of Directors of each of
ThermoRetec and Thermo TerraTech, respectively, to render opinions as to the
fairness to the holders of common stock of ThermoRetec and Thermo TerraTech
other than Thermo Electron and its affiliates, of the consideration to be
received by such holders in separate transactions involving Thermo Electron, and
received customary fees therefor upon rendering such opinions. At the meeting of
the Randers/Killam Board on October 18, 1999, Adams, Harkness & Hill rendered
its oral Opinion, subsequently confirmed in writing on the same date, that, as
of October 18, 1999, based upon and subject to the various considerations set
forth in the Opinion, the consideration to be received by the Public
Stockholders pursuant to the Merger Agreement was fair, from a financial point
of view, to such stockholders. It is a condition to the obligation of
Randers/Killam to effect the Merger that Adams, Harkness & Hill shall reaffirm
orally its written opinion as of the date of mailing of this Proxy Statement and
at the Effective Time.
THE FULL TEXT OF THE WRITTEN OPINION OF ADAMS, HARKNESS & HILL DATED OCTOBER
18, 1999, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY ADAMS, HARKNESS & HILL IN RENDERING ITS OPINION, IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.
RANDERS/KILLAM SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE OPINION CAREFULLY
AND IN ITS ENTIRETY. ADAMS, HARKNESS & HILL'S OPINION IS DIRECTED TO THE SPECIAL
COMMITTEE AND ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY
THE PUBLIC STOCKHOLDERS PURSUANT TO THE MERGER AGREEMENT, FROM A FINANCIAL POINT
OF VIEW AS OF THE DATE OF SUCH OPINION, AND DOES NOT ADDRESS ANY OTHER ASPECT OF
THE MERGER OR CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF RANDERS/KILLAM COMMON
STOCK AS TO HOW TO VOTE AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION OF
ADAMS, HARKNESS & HILL SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
The following is a summary of the various sources of information and
valuation methodologies used by Adams, Harkness & Hill in arriving at its
Opinion regarding the proposed transaction with Thermo Electron. To determine
the fairness of the transaction, Adams, Harkness & Hill employed analyses based
on the following:
- Public company peers' financial performance and relative valuations;
- Transaction premiums paid in selected precedent acquisitions;
- Stock price performance; and
- Discounted cash flow analysis.
In conducting its investigation and analysis and in arriving at its Opinion,
Adams, Harkness & Hill reviewed the information and took into account the
financial and economic factors it deemed relevant and material under the
circumstances. The material actions undertaken by Adams, Harkness & Hill in its
analysis were as follows:
- Reviewed internal financial information concerning the business and
operations of Randers/Killam that was furnished to Adams, Harkness & Hill
by Randers/Killam's management for purposes of its analysis, as well as
publicly available information, including but not limited to
Randers/Killam's recent filings with the Commission;
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<PAGE>
- Reviewed the Merger Agreement in the form presented to the Special
Committee;
- Compared the historical market prices and trading activity of the Common
Stock with those of other publicly traded companies that Adams,
Harkness & Hill deemed relevant;
- Compared the financial position and operating results of Randers/Killam
with those of other publicly traded companies that Adams, Harkness & Hill
deemed relevant;
- Compared the proposed financial terms of the Merger with the terms of
other merger and acquisition transactions that Adams, Harkness & Hill
deemed relevant; and
- Held discussions with members of Randers/Killam's senior management
concerning Randers/ Killam's historical and current financial condition
and operating results, as well as its future prospects.
Adams, Harkness & Hill also reviewed relevant industry market research
studies, company research reports and key economic and market indicators,
including interest rates, and general stock market performance. Other than as
set forth above, Adams, Harkness & Hill did not review any additional
information in preparing its opinion that, independently, was material to its
analysis. As a part of its engagement, Adams, Harkness & Hill was not requested
to, and did not, solicit any third party indications of interest in acquiring
Randers/Killam. The Special Committee did not place any limitation upon Adams,
Harkness & Hill with respect to the procedures followed or factors considered by
Adams, Harkness & Hill in rendering its Opinion.
In rendering its Opinion, Adams, Harkness & Hill assumed and relied upon the
accuracy and completeness of all of the financial and other information that was
publicly available or provided to Adams, Harkness & Hill by, or on behalf of,
Randers/Killam, and did not independently verify such information. Adams,
Harkness & Hill assumed, with the Special Committee's consent, that:
- All material assets and liabilities (contingent or otherwise, known or
unknown) of Randers/Killam are as set forth in its financial statements;
- Obtaining any regulatory and other approvals and third party consents
required for consummation of the proposed Merger would not have a material
effect on the anticipated benefits of the Merger; and
- The Merger would be consummated in accordance with the terms set forth in
the Merger Agreement, without any amendment thereto and without waiver by
Randers/Killam or Thermo Electron of any of the conditions to their
respective obligations thereunder.
Adams, Harkness & Hill assumed that the projections examined by it were
reasonably prepared based upon the best available estimates and good faith
judgments of the Company's senior management as to the future performance of
Randers/Killam. In conducting its review, Adams, Harkness & Hill did not obtain
an independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Randers/Killam. After consultation with the Special
Committee and with its consent, however, Adams, Harkness & Hill engaged
Environmental Business International, Inc., a leading independent strategic
consulting firm serving the environmental services industry, to support its
assessments of environmental industry conditions. Adams, Harkness & Hill's
Opinion did not predict or take into account any possible economic, monetary or
other changes which may occur, or information which may come available, after
the date of its written Opinion.
PUBLIC COMPANY PEER ANALYSIS--RANDERS/KILLAM
Randers/Killam provides comprehensive engineering and outsourcing services
and operates in four segments: Water and Wastewater Treatment, Process
Engineering and Construction, Highway and Bridge Engineering, and Infrastructure
Engineering. The Company's strategy is to market its technical expertise and
low-cost solutions to a broad base of clients including municipalities,
government agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's
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Killam subsidiaries comprise the Water and Wastewater Treatment segment and
provide environmental consulting and engineering services and specialize in
wastewater treatment and water resources management. The Company's Randers
subsidiaries, which constitute the Process Engineering and Construction segment,
provide design engineering, project management, and construction services for
industrial clients. The Company's BAC Killam Inc. subsidiary represents the
Company's Highway and Bridge Engineering segment and provides transportation
planning and design services. The Infrastructure Engineering segment, comprised
of CarlanKillam Consulting Group, Inc., provides transportation and
environmental consulting, professional engineering, and architectural services.
Accordingly, Adams, Harkness & Hill established three groups of publicly
traded companies that it deemed comparable to Randers/Killam based on markets
served, product offerings, business model and/or financial performance ("Peer
Group Companies"). The three groups consist of:
- Diversified Civil Engineering/Construction/Environmental/Consulting
Companies
1) Baker (Michael) Corp.;
2) Jacobs Engineering Group, Inc.; and
3) URS Corp.
- Environmental Services and Consulting Companies
1) EA Engineering Science & Technology;
2) Ecology and Environment;
3) GZA GeoEnvironmental Technologies;
4) Harding Lawson Associates Group; and
5) Tetra Tech Inc.
- Environmental Engineering and Remediation Services
1) IT Group Inc.;
2) National Environmental Services Co.;
3) Sevenson Environmental Services Inc.;
4) TRC Companies Inc.;
5) Versar, Inc.; and
6) Weston (Roy F.) Inc.
Adams, Harkness & Hill compared certain financial measures and metrics of
Randers/Killam with those of the Peer Group Companies. Such information
included: Market Capitalization ("MC"); Enterprise Value ("EV"); Price/Projected
Calendar 1999 & 2000 Earnings Ratios ("Forward 1999 & 2000 P/ Es"); Enterprise
Value/last twelve months' ("LTM") Revenue; LTM Revenue; LTM Operating Margin;
Market Capitalization/Book Value; and Year/Year Quarterly Revenue Growth.
Enterprise Value/LTM Revenue ("EV/LTM Revenue") and Price/Earnings ("P/E")
multiples imply the range of value public markets place on companies in a
particular market segment. Adams, Harkness & Hill employed an EV valuation in
this analysis because this methodology implies value based on a company's
operations, regardless of how the company finances those operations. To
determine EV, MC is calculated as the product of a company's common stock price
per share (Adams, Harkness & Hill used the closing price on October 8, 1999, for
all public company comparable analyses) multiplied by the number of diluted
shares outstanding. The MC is then adjusted for a company's debt and cash
positions by adding the debt balance and subtracting the cash balance to arrive
at an EV. Unlike EV-based valuation methodologies, P/E-based valuation
methodologies imply a value based on net after-tax earnings inclusive of the
earnings impact of how the company finances its operations. The following
equation illustrates the manner in which EV has been calculated:
((market value of equity) + (debt)) - (cash, cash equivalents and short-term
investments)
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In order of descending EV/LTM Revenue, the Peer Group Companies (for which
sufficient data was available) ranked as follows:
1) Tetra Tech Inc.;
2) National Environmental Services Co.;
3) URS Corp.;
4) IT Group Inc.;
5) TRC Companies Inc.;
6) Versar, Inc.;
7) Sevenson Environmental Services Inc.;
8) Jacobs Engineering Group, Inc.;
9) Ecology and Environment;
10) Weston (Roy F.) Inc.;
11) GZA GeoEnvironmental Technologies;
12) Baker (Michael) Corp.;
13) EA Engineering Science & Technology; and
14) Harding Lawson Associates Group
In order of descending Price/Projected Calendar 1999 Earnings (where
earnings per share estimates were available), the Peer Group Companies ranked as
follows:
1) Tetra Tech Inc.;
2) EA Engineering Science & Technology;
3) Jacobs Engineering Group, Inc.;
4) TRC Companies Inc.;
5) Harding Lawson Associates Group;
6) URS Corp.; and
7) IT Group Inc.
In order of descending Price/Projected Calendar 2000 Earnings (where
earnings per share estimates were available), the Peer Group Companies ranked as
follows:
1) Tetra Tech Inc.;
2) Jacobs Engineering Group, Inc.;
3) URS Corp.;
4) IT Group Inc.; and
5) EA Engineering Science & Technology
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<PAGE>
The low, high and average financial ratios for the Peer Group Companies are
listed in the table below:
<TABLE>
<CAPTION>
MULTIPLE LOW HIGH AVERAGE
- -------- -------- -------- --------
<S> <C> <C> <C>
Enterprise Value/LTM Revenue............................. 0.1 1.2 0.6
Calendar Year 1999 Price/Earnings........................ 8.5 21.2 14.1
Calendar Year 2000 Price/Earnings........................ 4.2 17.6 9.5
</TABLE>
To arrive at Randers/Killam's P/E multiples for Calendar Year 1999 and
Calendar Year 2000, Adams, Harkness & Hill used Randers/Killam's internal
management projections, as external research analysts' projections have not been
published.
Adams, Harkness & Hill compared these ranges of multiples to the multiple
implied by the proposed consideration of approximately:
<TABLE>
<S> <C>
- Enterprise Value/LTM Revenue:......................... 1.3
- Calendar Year 1999 Price/Earnings:.................... 30.0
- Calendar Year 2000 Price/Earnings:.................... 18.8
</TABLE>
TRANSACTION PREMIUMS PAID ANALYSIS
Premiums paid in precedent public company change of control transactions
typically imply the range of consideration acquirers are willing to pay above a
seller's stock price prior to the announcement of the relevant transaction.
Adams, Harkness & Hill reviewed 44 precedent transactions involving selected
engineering and environmental services companies from January 1, 1998 to
October 19, 1999, of which seven transactions involved the acquisition of the
equity shares of publicly-traded companies for which share price data was
available.
In order of descending premium paid based on the seller's stock price one
trading day prior to announcement, the selected environmental transactions used
were as follows:
1) Carmeuse Lime's acquisition of Dravo Corp.;
2) IT Group Inc.'s acquisition of Fluor Daniel GTI;
3) URS Corp.'s acquisition of Dames & Morre Group;
4) IT Group Inc.'s acquisition of OHM Corp.;
5) IT Group Inc.'s acquisition of Emcon;
6) USA Waste Services' acquisition of Trans American Waste Industries; and
7) Special purposes acquisition vehicle of Weiss, Peck & Greer's
acquisition of ATC Group Services
Based upon Adams, Harkness & Hill's analysis of premia paid in selected
precedent environmental services industry transactions, the low, high and
average premia (discounts) paid to sellers' share prices (using the buyer's
share price on the day prior to the announcement date of the transaction to
calculate consideration in stock transactions) for the month, week, and day
prior are listed below:
<TABLE>
<CAPTION>
LOW HIGH AVERAGE
-------- -------- --------
<S> <C> <C> <C>
Premium Paid--1 Month prior.............................. 3% 74% 42%
Premium Paid--1 Week prior............................... (8%) 84% 33%
Premium Paid--1 Day prior................................ 0% 87% 31%
</TABLE>
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<PAGE>
Adams, Harkness & Hill compared these ranges of historic premia to the
implied premium offered by the Cash Merger Consideration to the Company's share
price for the month, week and day prior to the announcement of the finalization
of the Merger Agreement:
<TABLE>
<S> <C>
- Premium Paid--1 Month prior:.......................... 33%
- Premium Paid--1 Week prior:........................... 24%
- Premium Paid--1 Day prior:............................ 24%
</TABLE>
Adams, Harkness & Hill also compared these ranges of precedent premia to the
implied premium offered by the Cash Merger Consideration to the Company's share
price for the month, week and day prior to the date on which the original
restructuring proposal was announced and the date on which the revisions to that
proposal were announced:
Prior to original TMO reorganization announcement (8/12/98):
<TABLE>
<S> <C>
- Premium Paid--1 Month prior:.......................... 80%
- Premium Paid--1 Week prior:........................... 80%
- Premium Paid--1 Day prior:............................ 140%
</TABLE>
Prior to TMO restructuring announcement (5/24/99):
<TABLE>
<S> <C>
- Premium Paid--1 Month prior:.......................... 71%
- Premium Paid--1 Week prior:........................... 64%
- Premium Paid--1 Day prior:............................ 44%
</TABLE>
STOCK PRICE PERFORMANCE ANALYSIS
Adams, Harkness & Hill examined the following for Randers/Killam:
1) 200-Day stock price performance;
2) Stock price performance since IPO;
3) Stock price performance from January 1, 1998 to present compared to the
NASDAQ Composite, S&P 500 and Russell 2000 stock indices; and
4) Stock price performance from January 1, 1998 to present compared to an
index of the Peer Group Companies.
DISCOUNTED CASH FLOW ANALYSIS
Adams, Harkness & Hill performed a discounted cash flow analysis to estimate
the present value of the stand-alone unlevered (i.e., before interest expense)
after-tax cash flows of Randers/Killam. To perform the discounted cash flow
analysis, Adams, Harkness & Hill used the following data sources and
assumptions:
- Randers/Killam's management projections for the year ended December 31,
1999 through the year ended December 31, 2003. Randers/Killam's unlevered
after-tax cash flows were calculated as the after-tax (40% effective rate)
operating earnings of Randers/Killam adjusted for the addition of non-cash
expenses and the deduction of uses of cash not reflected in the income
statement.
- Weighted average cost of capital that ranged from 9.0% to 16.5%.
- Terminal value based on Randers/Killam's earnings before interest and
taxes ("EBIT") for the year ended December 31, 2003 multiplied by EBIT
multiples ranging from 7.0 to 12.0.
Adams, Harkness & Hill calculated the weighted average cost of capital for
each of the Peer Group Companies, using a risk free rate of return of 6.0% and a
market risk premium of 7.4%, and arrived at a
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range of 7.1% to 11.1%, with an average of 9.3%. In order to calculate an
appropriate range of terminal values, Adams, Harkness & Hill also calculated an
EV/EBIT multiple for each of the Peer Group Companies and arrived at a range of
less than 0.0x to 25.9x, with an average of 10.6x.
Adams, Harkness & Hill combined (i) the calculated present value of
Randers/Killam's cash flows for the years ended December 31, 1999 through
December 31, 2003, with (ii) Randers/Killam's EBIT terminal values to arrive at
a range of EVs based on the above assumptions. These EVs were then adjusted by
adding Randers/Killam's cash balance and subtracting its debt balance to arrive
at implied MCs (i.e., equity values). Adams, Harkness & Hill divided the
computed equity values by the number of shares of Randers/ Killam Common Stock
outstanding and arrived at a range of implied per share values of $3.97 to
$7.04, with a median implied value of $5.30.
SUMMARY OF VALUATION ANALYSES
The foregoing summary does not purport to be a complete description of the
analyses performed by Adams, Harkness & Hill. The preparation of a fairness
opinion is a complex process and is not susceptible to partial analysis or
summary description. Adams, Harkness & Hill believes that its analyses must be
considered as a whole, and that selecting portions of such analysis without
considering all analyses and factors would create an incomplete view of the
processes underlying its Opinion. Adams, Harkness & Hill did not attempt to
assign specific weights to particular analyses. However, there were no specific
factors reviewed by Adams, Harkness & Hill that did not support its Opinion. Any
estimates contained in Adams, Harkness & Hill's analyses are not necessarily
indicative of actual values, which may be significantly more or less favorable
than as set forth therein. Estimates of values of companies do not purport to be
appraisals or necessarily to reflect the prices at which companies may actually
be sold. Because such estimates are inherently subject to uncertainty, Adams,
Harkness & Hill does not assume responsibility for their accuracy.
Taken together, the information and analyses employed by Adams, Harkness &
Hill lead to Adams, Harkness & Hill's overall Opinion that the consideration to
be received in the Merger is fair, from a financial point of view, to the Public
Stockholders.
PURPOSE AND REASONS OF THERMO ELECTRON FOR THE MERGER
The purpose of Thermo Electron for engaging in the transactions contemplated
by the Merger Agreement is for Thermo Electron to acquire all of the outstanding
shares of Common Stock, other than the shares already owned by Thermo TerraTech
and Thermo Electron. In determining to acquire such shares of Common Stock at
this time, Thermo Electron considered the following factors: (i) recent public
capital market trends affecting micro-cap companies, (ii) the latest market
trends in the markets in which the Company competes, primarily the
environmental-liability and resource-management services industry, (iii) the
reduction in the amount of public information available to competitors about
Randers/Killam's business that would result from the termination of the
Company's separate Commission reporting requirements, (iv) the elimination of
additional burdens on management associated with public reporting and other
tasks resulting from the Company's public company status, including, for
example, the dedication of time and resources of management and of the Board to
stockholder and analyst inquiries, and investor and public relations, (v) the
decrease in costs, particularly those associated with being a public company
(for example, as a privately-held entity, the Company would no longer be
required to file quarterly, annual or other periodic reports with the Commission
or publish and distribute to its stockholders annual reports and proxy
statements), that Thermo Electron anticipates could result in savings of
approximately $450,000 per year, including the approximate cost of associated
legal and accounting fees; and (vi) the Company's management would have greater
flexibility to focus on long-term business goals, as opposed to quarterly
earnings, as a private company.
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In addition, the Thermo Electron board of directors considered the
advantages and disadvantages of certain alternatives to acquiring the Public
Stockholder interest in Randers/Killam, including (i) selling its and Thermo
TerraTech's equity interest in the Company and (ii) leaving Randers/Killam as a
majority-owned, public subsidiary of Thermo TerraTech. The first alternative,
that of selling its and Thermo TerraTech's equity interest in the Company, was
briefly considered by Thermo Electron management, but it was not an alternative
that was pursued as reasonable, given that Thermo Electron did not want to sell
its equity interest, and did not want Thermo TerraTech to sell its equity
interest, in the Company. The advantages to leaving Randers/Killam as a
majority-owned, public subsidiary that Thermo Electron considered included
(i) (while the proposed form of consideration in the Merger was still the common
stock of Thermo TerraTech) the avoidance of dilution to the Thermo TerraTech
stockholders by the issuance of more of its shares of common stock as
consideration for shares of Common Stock and (ii) maintaining the potential
access Randers/Killam has to capital in the public markets as a public company.
The disadvantages to leaving Randers/Killam as a majority-owned, public
subsidiary that Thermo Electron considered included (i) the costs associated
with being a public company and (ii) the public information available to
competitors about Randers/Killam's business as result of its filing obligations
with the Commission.
Thermo Electron also considered the number of Randers/Killam shares held by
the Public Stockholders, recent trends in the price of the Common Stock and the
relative lack of liquidity for the Common Stock. Thermo Electron reviewed the
net overall cost of the transaction and its benefits, including the
transaction's contribution to Thermo Electron's earnings. Thermo Electron also
explored alternative uses for the cash proposed to be used for this transaction.
In addition, Thermo Electron considered that, by acquiring the minority
stockholder interest in Randers/Killam, it would advance the goal of its
proposed corporate reorganization, first announced in August 1998, to reduce the
number of Thermo Electron's majority-owned, public subsidiaries. After
consideration of these various factors, Thermo Electron decided to make a
proposal to Randers/Killam to acquire all of the outstanding shares of Common
Stock that it and Thermo TerraTech did not own. After extensive negotiations
with the Special Committee, Thermo Electron proposed a price of $4.50 per share,
which represented a premium of (i) approximately 105.7% over the closing price
of the Common Stock reported in the consolidated transaction reporting system on
August 6, 1998, the latest day immediately prior to Thermo Electron's first
public announcement of the proposal to take Randers/Killam private on which the
Common Stock traded (with no price having been announced) and
(ii) approximately 24.1% over the closing price of the Common Stock reported in
the consolidated transaction reporting system on October 12, 1999, the latest
day prior to the public announcement of the terms of Thermo Electron's proposal
on which the Common Stock traded. Thermo Electron proposed to structure the
transaction as a cash merger in order to transfer ownership of the equity
interest in the Company in a single transaction and provide the stockholders
other than Thermo TerraTech and Thermo Electron with prompt payment in cash in
exchange for their shares.
Thermo Electron beneficially owns, in the aggregate, directly and indirectly
through Thermo TerraTech, approximately 96% of the outstanding Common Stock. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Principal
Stockholder."
POSITION OF THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermo Electron considered the findings and recommendation of the Special
Committee and the Board with respect to the fairness of the Merger to the Public
Stockholders (see "--The Special Committee's and the Board's Recommendation").
As of the date of the Merger Agreement, Thermo Electron adopted the findings and
recommendation of the Special Committee and the Board with respect to the
fairness of the Merger. Based solely on the findings and recommendation of the
Special Committee and its own internal review of the terms of the Merger, Thermo
Electron believes that the Merger is both procedurally and substantively fair to
the Public Stockholders and that the Cash Merger Consideration is fair to the
Public Stockholders from a financial point of view. Thermo Electron did not
attach specific
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weights to any factors in reaching its belief as to fairness. Thermo Electron is
not making any recommendation as to how the Public Stockholders should vote on
the Merger Agreement.
Certain officers and directors of Thermo Electron are also officers and
directors of the Company and have certain interests that are in addition to, or
different from, the interests of the Public Stockholders. See "--Conflicts of
Interest." Thermo Electron considered these potential conflicts of interest and
based in part thereon, Thermo Electron's proposed offer was conditioned on,
among other things, the approval of the Merger by the Special Committee and the
receipt by the Special Committee of a fairness opinion from an investment
banking firm.
CONFLICTS OF INTEREST
In considering the recommendation of the Board with respect to the Merger,
the Public Stockholders should be aware that certain officers and directors of
Randers/Killam have interests in connection with the Merger that present them
with actual or potential conflicts of interest, as summarized below. In making
their respective decisions to recommend the Merger, the Special Committee and
the Board were aware of these interests and considered them among the other
matters described above under "--The Special Committee's and the Board's
Recommendation."
Following consummation of the Merger, the current officers and directors of
Randers/Killam will continue as the initial officers and directors of the
Surviving Corporation; however, Thermo Electron intends to appoint a board of
directors comprised solely of members of the Surviving Corporation's and Thermo
Electron's management after the Merger. Officers and directors who own Common
Stock will receive the Cash Merger Consideration on the same terms as all the
other stockholders.
SPECIAL COMMITTEE
As compensation for serving on the Special Committee, which formally met
with one or more of its advisors on 23 occasions, either in person or
telephonically, from November 1998 through the date of this Proxy Statement, the
Board has authorized that the member of the Special Committee receive a special
retainer fee of $20,000 and additional fees of $1,000 for each meeting attended
in person and $500 for each meeting attended telephonically.
Dr. Tierney holds options to acquire an aggregate of 48,300 shares of Common
Stock, at exercise prices ranging from $1.90 to $3.25, which will be assumed by
Thermo Electron and converted into options to acquire shares of Thermo Electron
Common Stock on the same terms as all the other holders of Randers/Killam Stock
Options. See "THE MERGER--Assumption of Randers/Killam Stock Options by Thermo
Electron." Further, deferred units equal to 3,352 shares of Common Stock have
accumulated under the Company's deferred compensation plan for outside directors
for the benefit of Dr. Tierney, which units will be converted into the right to
receive the Cash Merger Consideration per unit for an aggregate cash payment of
$15,084. See "THE MERGER--Deferred Compensation Plan for Directors." The options
and deferred units were issued to Dr. Tierney pursuant to benefit plans approved
by the Company's stockholders. Until her resignation on August 4, 1999,
Dr. Tierney was also a director of Thermo Ecotek.
THE RANDERS/KILLAM DIRECTORS AND EXECUTIVE OFFICERS
The members of the Board of Directors, other than the member of the Special
Committee, and executive officers of Randers/Killam own in the aggregate 151,501
shares of Common Stock and will receive a payment for their shares of Common
Stock in the aggregate amount of $681,754.50 upon consummation of the Merger. In
addition, such Board members and executive officers hold options to acquire an
aggregate of 557,100 shares of Common Stock, with exercise prices ranging from
$1.90 to $4.00 which will be assumed by Thermo Electron and converted into
options to acquire shares of Thermo Electron Common Stock on the same terms as
all the other holders of Randers/Killam Stock Options. See
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"THE MERGER--Assumption of Randers/Killam Stock Options by Thermo Electron." See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT--Management,"
for information regarding beneficial ownership by the Board and executive
officers of Common Stock and common stock of Thermo TerraTech and Thermo
Electron.
Further, certain members of the Board and certain executive officers hold
directorship or officer positions with Thermo TerraTech and/or Thermo Electron.
Mr. Melas-Kyriazi, the chief financial officer of the Company, is also a vice
president and the chief financial officer of Thermo Electron, and is the chief
financial officer of Thermo TerraTech. Mr. Kelleher, the chief accounting
officer of the Company, is also senior vice president, finance and
administration, and the chief accounting officer of Thermo Electron, and is the
chief accounting officer of Thermo TerraTech. Dr. Appleton, the chairman of the
Company's board of directors, is also the president, chief executive officer and
a director of Thermo TerraTech, and is a vice president of Thermo Electron.
Mr. Holt, a director of the Company, is also the chief operating officer, energy
and environment, of Thermo Electron, and is a director of Thermo TerraTech.
Mr. Herkert, the president, chief executive officer and a director of the
Company, is also a vice president of Thermo TerraTech.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Surviving Corporation shall, and
Thermo Electron will cause the Surviving Corporation to, fulfill and honor in
all respects the indemnification obligations of Randers/Killam, pursuant to
Randers/Killam's Certificate of Incorporation and Bylaws, as in effect on the
date of the Merger Agreement. The Surviving Corporation's Certificate of
Incorporation and Bylaws will contain the provisions with respect to
indemnification and elimination of liability for monetary damages currently set
forth in Randers/Killam's Certificate of Incorporation and Bylaws, and such
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights of those individuals who, as of the date of the Merger Agreement and at
any time from the date of the Merger Agreement until the Effective Time, were
directors or officers of Randers/Killam, unless such modification is required by
law. See "THE MERGER--Indemnification and Insurance."
In addition, Thermo Electron will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six years after the Effective Time, a
directors' and officers' liability insurance policy covering the Randers/Killam
directors and officers who, on the date of the Merger Agreement, were then
covered by Thermo Electron's liability insurance policy, with coverage no less
favorable in amount and scope than such director's and officer's existing
coverage. However, in no event will the Surviving Corporation be required to pay
premiums for such insurance in excess of 175% of the current annual premiums, as
adjusted for inflation each year, allocable to and paid by Randers/Killam. See
"THE MERGER--Indemnification and Insurance."
The Merger Agreement also provides that Randers/Killam will, regardless of
whether the Merger becomes effective, indemnify Susan Tierney against any costs
and expenses paid in connection with any claim or action arising out of or
pertaining to any action or omission in Dr. Tierney's capacity as a director or
fiduciary of Randers/Killam (including as a member of the Special Committee or
in connection with the transactions contemplated by the Merger Agreement) that
occurs on, before or after the Effective Time, until the expiration of the
statute of limitations relating to such action or omission. Randers/Killam shall
pay Dr. Tierney's expenses in advance of the final disposition of the action
upon receipt of an undertaking by Dr. Tierney to repay those expenses if it is
later decided that she is not entitled to such payment. If the Merger becomes
effective, Thermo Electron will be jointly and severally responsible for the
indemnification and expenses advancement obligations as described above. If the
Merger does not become effective, Thermo Electron shall only be responsible for
indemnifying or advancing expenses for matters that arise out of or pertain to
the work of the Special Committee, the Merger Agreement or the
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transactions contemplated by the Merger Agreement. See "THE
MERGER--Indemnification and Insurance."
In addition, Thermo Electron has entered into separate indemnification
agreements with each of the members of the Board of Directors, including the
member of the Special Committee, providing for indemnification of and
advancement of expenses to such directors directly by Thermo Electron in the
event that a director, by reason of his or her status as a director or officer
of Randers/Killam (or service as a director, officer or fiduciary of another
enterprise at the request of Thermo Electron), is made or threatened to be made
a party to any threatened, pending or completed action, suit or other
proceeding, whether civil, criminal, administrative or investigative, if the
director acted in good faith and in a manner the director reasonably believed to
be in or not opposed to the best interests of Thermo Electron, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. In the case of any threatened, pending or completed
action, suit or proceeding by or in the right of Thermo Electron,
indemnification shall be made to the maximum extent permitted under Delaware
law. See "THE MERGER--Indemnification and Insurance."
CERTAIN EFFECTS OF THE MERGER
As a result of the Merger, the entire equity interest in the Company will be
beneficially owned by Thermo Electron. Thermo Electron will have complete
control over the conduct of the Company's business and will have 100% interest
in the net book value and net earnings of the Company and any future increases
in the value of the Company. Thermo TerraTech's and Thermo Electron's combined
ownership of the Company prior to the transaction contemplated herein aggregated
approximately 96%. Upon completion of this transaction, Thermo Electron's
interest in the Company's net book value of $83.0 million on July 3, 1999, net
income of $2,968,000 for the year ended April 3, 1999 and net loss of
$13,405,000 for the three months ended July 3, 1999, would increase from
approximately 96% of such amounts to 100% of such amounts. The Public
Stockholders will no longer have any interest in, and will not be stockholders
of, Randers/Killam and therefore will not participate in Randers/Killam's future
earnings and potential growth and will no longer bear the risk of any decreases
in the value of the Company. Instead, the stockholders of the Company other than
Thermo TerraTech, Thermo Electron and holders who perfect their Dissenters'
Rights will have the right to receive the Cash Merger Consideration for each
share held.
In addition, upon consummation of the Merger, the Common Stock will no
longer be traded on the AMEX, price quotations with respect to sales of shares
in the public market will no longer be available and the registration of the
Common Stock under the Exchange Act will be terminated. The termination of
registration of the Common Stock under the Exchange Act will eliminate the
Company's obligation to file periodic financial and other information with the
Commission and will make most of the provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b) and the requirement of
furnishing a proxy or information statement in connection with stockholders'
meetings, no longer applicable.
For federal income tax purposes, the receipt of the Cash Merger
Consideration by holders of Common Stock pursuant to the Merger will be a
taxable sale of the holder's Common Stock. See "FEDERAL INCOME TAX
CONSEQUENCES."
CONDUCT OF RANDERS/KILLAM'S BUSINESS AFTER THE MERGER
Thermo Electron is continuing to evaluate Randers/Killam's business, assets,
practices, operations, properties, corporate structure, capitalization,
management and personnel and discuss what changes, if any, will be desirable.
Subject to the foregoing and the balance of this paragraph, for the foreseeable
future, Thermo Electron expects that the day-to-day business and operations of
Randers/Killam will be conducted substantially as they are currently being
conducted by Randers/Killam. On May 24, 1999,
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Randers/Killam announced its decision to sell three of its operating units: BAC
Killam, the Randers division, and E3-Killam, and to record pretax charges
totaling approximately $15 million relating to such sales. The Company has had
preliminary discussions with potential buyers for these units, but except as
described in the next paragraph, the Company has not received any offers for
these units. Thermo Electron intends to carry out Randers/Killam's intention
with respect to these matters to the extent that they are not completed prior to
the consummation of the Merger. Thermo Electron does not currently intend to
cause the disposition of any other material assets of Randers/Killam, but it
may, in the future, reconsider its position as it continues to evaluate the
Company. Additionally, Thermo Electron does not currently contemplate any
material change in the composition of Randers/Killam's current management except
that Thermo Electron intends to appoint a board of directors comprised solely of
members of the Surviving Corporation's and Thermo Electron's management after
the Merger.
Randers/Killam is currently negotiating with one of its directors,
Mr. Thomas R. Eurich, who is also a Vice President of Randers/Killam, the sale
of its Randers division to a corporation to be formed by Mr. Eurich and other
members of the Randers division management. The terms of a completed transaction
will be considered by Adams, Harkness & Hill in providing its oral opinion prior
to the date of mailing of this Proxy Statement and the Effective Time, that the
Merger is fair, from a financial point of view, to the Public Stockholders. See
"CERTAIN TRANSACTIONS."
CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED
If the Merger is not consummated, the Board of Directors expects that the
Company's current management will continue to operate the Company's business
substantially as currently operated, except with respect to the units that may
be sold. See "--Conduct of Randers/Killam's Business After the Merger." No other
alternatives are currently being considered.
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THE SPECIAL MEETING
PROXY SOLICITATION
This Proxy Statement is being delivered to Randers/Killam's stockholders in
connection with the solicitation by the Board of proxies to be voted at the
Special Meeting to be held on , , 2000 at 10:00 a.m., local time, at
the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454. All expenses incurred in connection with solicitation of
the enclosed proxy will be paid by the Company. Officers, directors and regular
employees of the Company, who will receive no additional compensation for their
services, may solicit proxies by telephone or personal call. The Company has
requested brokers and nominees who hold stock in their names to furnish this
proxy material to their customers and the Company will reimburse such brokers
and nominees for their related out-of-pocket expenses. This Proxy Statement and
the accompanying Proxy Card are first being mailed to stockholders of the
Company on or about , 1999.
RECORD DATE AND QUORUM REQUIREMENT
The close of business on , 1999 is the Record Date for the
determination of stockholders entitled to notice of, and to vote at, the Special
Meeting. Each holder of record of Common Stock at the close of business on the
Record Date is entitled to one vote for each share then held on each matter
submitted to a vote of stockholders. At the close of business on the Record
Date, there were shares of Common Stock issued and outstanding held by
holders of record and by approximately persons or entities holding
in nominee name.
The holders of a majority of the outstanding shares entitled to vote at the
Special Meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted for purposes
of determining whether a quorum exists for the transaction of business. If you
hold your shares of Common Stock through a broker, bank or other nominee,
generally the nominee may only vote the Common Stock that it holds for you in
accordance with your instructions. However, if it has not timely received your
instructions, the nominee may vote on certain matters for which it has
discretionary voting authority. Brokers generally will not have discretionary
voting authority with respect to the proposal to adopt the Merger Agreement. If
a nominee cannot vote on a particular matter because it does not have
discretionary voting authority, this is a "broker non-vote" on that matter.
Broker non-votes are also counted as shares present or represented at the
Special Meeting for purposes of determining whether a quorum exists.
VOTING PROCEDURES
Under Delaware law, holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Special Meeting must adopt the Merger
Agreement. The Merger Agreement is attached to this Proxy Statement as
Appendix A. For the purposes of the vote required under Delaware law, a failure
to vote, a vote to abstain and a broker non-vote will have the same legal effect
as a vote cast against adoption of the Merger Agreement. Thermo TerraTech, which
owns approximately 95% of the outstanding Common Stock, and Thermo Electron,
which owns approximately 1% of the outstanding Common Stock, own enough shares
of Common Stock to adopt the Merger under Delaware law without the vote of the
Public Stockholders and have agreed to vote their shares in favor of the Merger
Agreement. In addition, the Company's directors and executive officers have
expressed their intention to vote to adopt the Merger Agreement.
If a properly executed Proxy Card is submitted and no instructions are
given, the shares of Common Stock represented by that proxy will be voted "FOR"
adoption of the proposed Merger Agreement.
The Board is not aware of any other matters to be voted on at the Special
Meeting. If any other matters properly come before the Special Meeting,
including a motion to adjourn the Special Meeting for
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the purpose of soliciting additional proxies, the persons named on the
accompanying Proxy Card will vote the shares represented by all properly
executed proxies on such matters in their discretion, except that shares
represented by proxies that have been voted "AGAINST" adoption of the Merger
Agreement will not be used to vote "FOR" adjournment of the Special Meeting for
the purpose of allowing additional time for soliciting additional votes "FOR"
the Merger Agreement.
Under Delaware law, holders of Common Stock who do not vote in favor of the
Merger Agreement and who comply with certain notice requirements and other
procedures will have the right to dissent and to be paid cash for the fair value
of their shares as finally determined in accordance with the procedures under
Delaware law. The fair value, as finally determined, may be more or less than
the consideration to be received by other stockholders of Randers/Killam under
the terms of the Merger Agreement. Failure to follow such procedures under
Delaware law precisely will result in the loss of Dissenters' Rights. See
"RIGHTS OF DISSENTING STOCKHOLDERS."
VOTING AND REVOCATION OF PROXIES
A stockholder giving a proxy has the power to revoke it at any time before
it is exercised by (i) filing with the Secretary of Randers/Killam an instrument
revoking it, (ii) submitting a duly executed proxy bearing a later date or
(iii) voting in person at the Special Meeting. Subject to such revocation, all
shares represented by each properly executed proxy received by the Secretary of
Randers/Killam will be voted in accordance with the instructions indicated
thereon, and if no instructions are indicated, will be voted to adopt the Merger
Agreement. The shares represented by the accompanying Proxy Card and entitled to
vote will be voted if the Proxy Card is properly signed and received by the
Secretary of the Company prior to the Special Meeting.
EFFECTIVE TIME
The Merger will be effective as soon as practicable following stockholder
approval of the Merger Agreement at the Special Meeting and satisfaction or
waiver of the terms and conditions set forth in the Merger Agreement, and upon
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware. See "THE MERGER--Conditions."
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THE MERGER
The Merger Agreement provides that the Merger Sub, a newly-formed Delaware
corporation that is a wholly owned subsidiary of Thermo Electron, will be merged
with and into Randers/Killam, and that following the Merger, the separate
existence of the Merger Sub will cease and Randers/Killam will continue as the
Surviving Corporation.
The terms of and conditions to the Merger are contained in the Merger
Agreement, which is included in full as Appendix A to this Proxy Statement and
is incorporated herein by reference. The discussion in this Proxy Statement of
the Merger, and the summary description of all material terms of the Merger
Agreement that is contained in this section, are subject to and qualified in
their entirety by reference to the more complete information set forth in the
Merger Agreement.
CONVERSION OF SECURITIES
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares held by stockholders
exercising Dissenters' Rights, shares held in treasury by Randers/ Killam and
shares held by Thermo TerraTech and Thermo Electron) will, by virtue of the
Merger, be converted into the right to receive the Cash Merger Consideration.
Except for the right to receive the Cash Merger Consideration, from and after
the Effective Time, all shares of Common Stock (other than shares held by
stockholders exercising Dissenters' Rights), by virtue of the Merger and without
any action on the part of the holders, will no longer be outstanding and will be
canceled and retired and will cease to exist. Each holder of a stock certificate
formerly representing any shares (other than shares held by stockholders
exercising Dissenters' Rights) will after the Effective Time cease to have any
rights with respect to such shares other than the right to receive the Cash
Merger Consideration for such shares upon surrender of the stock certificate.
No interest will be paid or accrued on the amount payable upon the surrender
of any stock certificate. Payment to be made to a person other than the
registered holder of the stock certificate surrendered is conditioned upon the
stock certificate so surrendered being properly endorsed and otherwise in proper
form for transfer, as determined by the Payment Agent. Further, the person
requesting such payment will be required to pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the stock certificate surrendered or establish to the satisfaction of the
Payment Agent that such tax has been paid or is not payable. Six months
following the Effective Date, Thermo Electron may require the Payment Agent to
deliver to it any funds made available to the Payment Agent that have not been
disbursed to holders of stock certificates formerly representing shares
outstanding prior to the Effective Time. Neither the Payment Agent nor any party
to the Merger Agreement will be liable to any holder of stock certificates
formerly representing shares for any amount paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
At the Effective Time, subject to the terms, conditions and procedures set
forth in the Merger Agreement, each share of the Merger Sub's common stock that
is issued and outstanding immediately prior to the Effective Time will, by
virtue of the Merger, be converted at the Effective Time into one share of
common stock of the Surviving Corporation. All shares held in treasury by
Randers/Killam immediately prior to the Effective Time will, at the Effective
Time, cease to be outstanding, be canceled and retired without payment of any
consideration therefor and cease to exist. Shares of Common Stock held by
persons properly exercising Dissenters' Rights will not be converted into the
Cash Merger Consideration in the Merger and after the Effective Time will
represent only the right to receive such consideration as is determined to be
due such dissenting stockholder pursuant to Section 262 of the DGCL. See "RIGHTS
OF DISSENTING STOCKHOLDERS."
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ASSUMPTION OF RANDERS/KILLAM STOCK OPTIONS BY THERMO ELECTRON
Randers/Killam has, from time to time, issued options to acquire Common
Stock pursuant to The Randers Group Incorporated 1988 Stock Option Plan and The
Randers Group Incorporated Equity Incentive Plan, each as amended (together, the
"Randers/Killam Stock Option Plans"). At the Effective Time, each outstanding
Randers/Killam Stock Option under the Randers/Killam Stock Option Plans, whether
or not exercisable, will be assumed by Thermo Electron. Each Randers/Killam
Stock Option so assumed by Thermo Electron will continue to have, and be subject
to, the same terms and conditions set forth in the applicable Randers/Killam
Stock Option Plan immediately prior to the Effective Time, except that (i) each
Randers/Killam Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Thermo Electron
Common Stock equal to the product of the number of shares of Common Stock that
were issuable upon exercise of such Randers/Killam Stock Option immediately
prior to the Effective Time multiplied by the Exchange Ratio (as defined below),
rounded down to the nearest whole number of shares of Thermo Electron Common
Stock, and (ii) the per share exercise price for the shares of Thermo Electron
Common Stock issuable upon exercise of such assumed Randers/Killam Stock Option
will be equal to the quotient determined by dividing the exercise price per
share of Common Stock at which such Randers/Killam Stock Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio (as defined
below), rounded up to the nearest whole cent. The Exchange Ratio is a fraction,
the numerator of which is the Cash Merger Consideration and the denominator of
which is the closing price of the Thermo Electron Common Stock on the day
immediately preceding the Effective Date as reported in the consolidated
transaction reporting system.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
At the Effective Time, the Randers/Killam deferred compensation plan for
directors (the "Deferred Compensation Plan") will terminate, and Randers/Killam
will distribute to each participant the sum in cash equal to the balance of
stock units credited to his or her deferred compensation account under the
Deferred Compensation Plan as of the Effective Time multiplied by the Exchange
Price.
TRANSFER OF SHARES
Shares of Common Stock will not be transferred on the stock transfer books
at or after the Effective Time. If certificates representing such shares are
presented to Randers/Killam after the Effective Time, together with an executed
letter of transmittal, such shares will be canceled and exchanged for the Cash
Merger Consideration.
CONDITIONS
Each party's obligation to effect the Merger is subject to the satisfaction
of each of the following conditions at or prior to the Effective Time:
(i) the Merger Agreement and the transactions contemplated therein shall
have been approved and adopted by the affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote
thereon in accordance with the DGCL;
(ii) no court, administrative agency or commission or other governmental or
regulatory body or authority or instrumentality shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order that is in effect
and that has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger; and
(iii) the Thermo Electron Common Stock subject to issuance pursuant to the
Randers/Killam Stock Option Plans, each as assumed by Thermo Electron
pursuant to the Merger Agreement, shall have been authorized for
listing on the New York Stock Exchange.
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<PAGE>
The obligations of Randers/Killam to effect the Merger are subject to the
satisfaction of each of the following conditions at or prior to the Effective
Time, unless waived in writing by Randers/Killam (upon the written consent of
the Special Committee):
(i) the representations and warranties of the Merger Sub and Thermo Electron
in the Merger Agreement shall be true and correct in all material
respects on and as of the Effective Time, except as otherwise permitted
by the Merger Agreement;
(ii) the Merger Sub and Thermo Electron shall have performed or complied in
all material respects with all agreements and covenants required by the
Merger Agreement to be performed or complied with by them at or prior
to the Effective Time;
(iii) Randers/Killam shall have received a certificate of the President,
Chief Executive Officer or Vice President of Thermo Electron certifying
to the effect of above clauses (i) and (ii); and
(iv) at the time of mailing of this Proxy Statement to the stockholders of
Randers/Killam and at the Effective Time, Adams, Harkness & Hill shall
have reaffirmed orally its fairness opinion and shall not have
withdrawn such opinion.
The obligations of the Merger Sub and Thermo Electron to effect the Merger
are subject to the satisfaction of each of the following conditions at or prior
to the Effective Time, unless waived in writing by Thermo Electron:
(i) the representations and warranties of Randers/Killam in the Merger
Agreement shall be true and correct in all material respects on and as
of the Effective Time, except as otherwise permitted by the Merger
Agreement;
(ii) Randers/Killam shall have performed or complied in all material
respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by it on or prior to the
Effective Time;
(iii) Thermo Electron shall have received a certificate of the President,
Chief Executive Officer or Vice President of Randers/Killam certifying
to the effect of above clauses (i) and (ii); and
(iv) the Special Committee shall not have withdrawn its recommendation to
the Board of Directors that the Merger Agreement, including the Cash
Merger Consideration, is fair to, and in the best interests of, the
stockholders of Randers/Killam (other than Thermo Electron and
TerraTech).
REPRESENTATIONS AND WARRANTIES
Randers/Killam has made representations and warranties in the Merger
Agreement regarding, among other things, its organization and good standing,
authority to enter into the Merger Agreement and consummate the transactions
contemplated thereby, its capitalization, requisite governmental and other
consents and approvals, the accuracy of information supplied for inclusion in
this Proxy Statement and the Rule 13e-3 Transaction Statement on Schedule 13E-3
to be filed in connection with the Merger, and its receipt of a fairness opinion
from Adams, Harkness & Hill.
Thermo Electron and the Merger Sub have made representations and warranties
in the Merger Agreement regarding, among other things, their organization and
good standing, authority to enter the Merger Agreement and consummate the
transactions contemplated thereby, adequacy of Thermo Electron's financial
resources to pay the Cash Merger Consideration, accuracy of information supplied
by Thermo Electron for submission on forms and reports required to be filed by
Randers/Killam with the Commission and supplied to Adams, Harkness & Hill, and
requisite governmental and other consents and approvals.
The representations and warranties of the parties in the Merger Agreement
will expire upon consummation of the Merger. After such expiration, none of the
parties to the Merger Agreement or their respective officers, directors or
principals will have any liability for any such representations or warranties.
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COVENANTS
In the Merger Agreement, Randers/Killam has agreed that during the period
from the date of the Merger Agreement and continuing until the earlier of
termination of the Merger Agreement or the Effective Time, Randers/Killam will
carry on its business in the usual, regular and ordinary course, substantially
consistent with past practice, will pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings.
In the Merger Agreement, Thermo Electron has agreed that during the period
from the date of the Merger Agreement and continuing until the earlier of the
termination of the Merger Agreement or the Effective Time, Thermo Electron will,
except for such actions which are contemplated by the Merger Agreement or
certain other actions, carry on its business materially in the usual, regular
and ordinary course, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due, and use its commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others with which it has business dealings. In addition, Thermo Electron
agreed that it will not, and will not permit any of its material subsidiaries
to, take any action which would make any of the representations and warranties
of Thermo Electron contained in the Merger Agreement untrue or cause Thermo
Electron not to be in compliance with any covenant in the Merger Agreement.
Thermo Electron has also agreed to give prompt notice to Randers/Killam of
any written offers or indications of interest that it receives from a
prospective purchaser of any material properties or assets of Randers/Killam or
its subsidiaries, which set forth a proposed purchase price greater than
$3 million, or in which the book value of the assets being sold is greater than
$3 million, other than sales of assets in the ordinary course of business.
INDEMNIFICATION AND INSURANCE
The Merger Agreement provides that the Surviving Corporation shall, and
Thermo Electron will cause the Surviving Corporation to, fulfill and honor in
all respects the indemnification obligations of Randers/Killam, pursuant to
Randers/Killam's Certificate of Incorporation and Bylaws, as in effect on the
date of the Merger Agreement. The Surviving Corporation's Certificate of
Incorporation and Bylaws will contain the provisions with respect to
indemnification and elimination of liability for monetary damages currently set
forth in Randers/Killam's Certificate of Incorporation and Bylaws, and such
provisions will not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights of those individuals who, as of the date of the Merger Agreement and at
any time from the date of the Merger Agreement until the Effective Time, were
directors or officers of Randers/Killam, unless such modification is required by
law.
In addition, Thermo Electron will cause the Surviving Corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for a period of six years after the Effective Time, a
directors' and officers' liability insurance policy covering the Randers/Killam
directors and officers who, on the date of the Merger Agreement, were then
covered by Thermo Electron's liability insurance policy, with coverage no less
favorable in amount and scope than such director's and officer's existing
coverage. However, in no event will the Surviving Corporation be required to pay
premiums for such insurance in excess of 175% of the current annual premiums, as
adjusted for inflation each year, allocable to and paid by Randers/Killam.
The Merger Agreement also provides that Randers/Killam will, regardless of
whether the Merger becomes effective, indemnify Susan Tierney against any costs
and expenses paid in connection with any
47
<PAGE>
claim or action arising out of or pertaining to any action or omission in
Dr. Tierney's capacity as a director or fiduciary of Randers/Killam (including
as a member of the Special Committee or in connection with the transactions
contemplated by the Merger Agreement) that occurs on, before or after the
Effective Time, until the expiration of the statute of limitations relating to
such action or omission. Randers/Killam shall pay Dr. Tierney's expenses in
advance of the final disposition of the action upon receipt of an undertaking by
Dr. Tierney to repay those expenses if it is later decided that she is not
entitled to such payment. If the Merger becomes effective, Thermo Electron will
be jointly and severally responsible for the indemnification and expenses
advancement obligations as described above. If the Merger does not become
effective, Thermo Electron shall only be responsible for indemnifying or
advancing expenses for matters that arise out of or pertain to the work of the
Special Committee, the Merger Agreement or the transactions contemplated by the
Merger Agreement.
In addition, Thermo Electron has entered into separate indemnification
agreements with each of the members of the Board of Directors, including the
member of the Special Committee, providing for indemnification of and
advancement of expenses to such directors directly by Thermo Electron in the
event that a director, by reason of his or her status as a director or officer
of Randers/Killam (or service as a director, officer or fiduciary of another
enterprise at the request of Thermo Electron), is made or threatened to be made
a party to any threatened, pending, or completed action, suit or other
proceeding, whether civil, criminal, administrative or investigative, if the
director acted in good faith and in a manner the director reasonably believed to
be in or not opposed to the best interests of Thermo Electron, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. In the case of any threatened, pending or completed
action, suit or proceeding by or in the right of Thermo Electron,
indemnification shall be made to the maximum extent permitted under Delaware
law.
TERMINATION, AMENDMENT AND WAIVER
At any time prior to the Effective Time, whether before or after approval of
the Merger Agreement by the stockholders of Randers/Killam, the Merger Agreement
may be terminated by the mutual written consent of the board of directors of the
Merger Sub and the Board of Directors of Randers/Killam (upon approval of the
Special Committee).
In addition, either the Merger Sub or Randers/Killam (upon approval of the
Special Committee), in accordance with the provisions of the Merger Agreement,
may terminate the Merger Agreement prior to the Effective Time, whether before
or after approval of the Merger Agreement by the stockholders of Randers/Killam,
if (i) the Merger has not been consummated by March 31, 2000 (in which case the
right of Randers/Killam to terminate shall be exercised as directed by the
Special Committee), unless such party's action or inaction constitutes a breach
of the Merger Agreement and has been a principal cause of or resulted in the
failure of the Merger to be consummated, (ii) a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission issues an
order, decree or ruling or takes any other action enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or action is
final and nonappealable or (iii) the approval of the stockholders of
Randers/Killam necessary to consummate the Merger has not been obtained, unless
such party's action or inaction constitutes a breach of the Merger Agreement and
has been the principal cause of or resulted in the failure to obtain the
requisite stockholder approval to consummate the Merger. Thermo Electron has
agreed to vote, or cause to be voted, all of the Common Stock owned by it and
any of its subsidiaries in favor of the Merger.
In addition, the Merger Sub may terminate the Merger Agreement prior to the
Effective Time, whether before or after adoption of the Merger Agreement by the
stockholders of Randers/Killam, if Randers/Killam breaches any representation,
warranty, covenant or agreement in any material respect and fails to cure such
breach within 10 business days after written notice of such breach from the
Merger Sub.
Randers/Killam may terminate the Merger Agreement prior to the Effective
Time, whether before or after approval of the Merger Agreement by the
stockholders of Randers/Killam, if (i) the Special Committee determines after
consultation with outside legal counsel that failure to do so would be
48
<PAGE>
inconsistent with the Board's or the Special Committee's fiduciary duties under
applicable law (which determination would result in the withdrawal or
modification of the Special Committee's recommendation) or (ii) Thermo Electron
or Merger Sub breaches any representation, warranty, covenant or agreement in
any material respect and fails to cure such breach within 10 business days after
written notice of such breach from Randers/Killam.
Subject to the provisions of applicable law, the Merger Agreement may be
amended by the parties thereto at any time by written agreement of the parties;
provided, however, that Randers/Killam may not amend the Merger Agreement or
waive any term thereunder without the approval of the Special Committee.
There is no termination fee payable by either party in the event that the
Merger Agreement is terminated.
SOURCE OF FUNDS
The aggregate consideration payable in the Merger is approximately
$4.8 million. Thermo Electron intends to finance the Merger entirely from cash
on hand.
EXPENSES
The parties have agreed to pay their own costs and expenses in connection
with the Merger Agreement and the transactions contemplated thereby. Assuming
the Merger is consummated, the estimated costs and fees in connection with the
Merger and the related transactions that will be paid by Randers/Killam are as
follows:
<TABLE>
<CAPTION>
COST OR FEE ESTIMATED AMOUNT
- ----------- ----------------
<S> <C>
Financial advisory fees..................................... $137,500
Legal fees.................................................. 100,000
Accounting fees............................................. 15,000
Special Committee fees...................................... 43,000
Printing and mailing fees................................... 100,000
Commission filing fees...................................... 968
Other regulatory filing fees................................ 5,000
Miscellaneous............................................... 23,532
--------
$425,000
</TABLE>
See "SPECIAL FACTORS--Opinion of Adams, Harkness & Hill" for a description
of the fees to be paid to Adams, Harkness & Hill in connection with its
engagement. For a description of certain fees payable to the member of the
Special Committee, see "SPECIAL FACTORS--Conflicts of Interest."
ACCOUNTING TREATMENT
The Merger will be accounted for as the acquisition of a minority interest
by Thermo Electron, using the purchase method of accounting.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained that
have not already been obtained, nor any regulatory requirements complied with,
in connection with the consummation of the Merger by any party to the Merger
Agreement, except for (i) the requirements of the DGCL in connection with
stockholder approvals and consummation of the Merger and (ii) the requirements
of the federal securities laws.
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RIGHTS OF DISSENTING STOCKHOLDERS
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock appraised
by the Court of Chancery of the State of Delaware and to receive payment of the
fair value of such shares together with a fair rate of interest, if any, as
determined by such court. The fair value as determined by the Delaware court is
exclusive of any element of value arising from the accomplishment or expectation
of the Merger. The following is a summary of certain of the provisions of
Section 262 of the DGCL and is qualified in its entirety by reference to the
full text of Section 262, a copy of which is attached hereto as Appendix C.
Under Section 262, where a merger agreement is to be submitted for approval
and adoption at a meeting of stockholders, as in the case of the Special
Meeting, not less than 20 calendar days prior to the meeting, the Company must
notify each of the holders of Common Stock at the close of business on the
Record Date that such appraisal rights are available and include in each such
notice a copy of Section 262. This Proxy Statement constitutes such notice. Any
stockholder wishing to exercise appraisal rights should review the following
discussion and Appendix C carefully because failure to timely and properly
comply with the procedures specified in Section 262 will result in the loss of
appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights must
deliver to the Company, before the vote on the approval and adoption of the
Merger Agreement at the Special Meeting, a written demand for appraisal of such
holder's shares of Common Stock. Such demand will be sufficient if it reasonably
informs the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote against
the Merger Agreement will not constitute such a demand. In addition, a holder of
shares of Common Stock wishing to exercise appraisal rights must hold of record
such shares on the date the written demand for appraisal is made and must
continue to hold such shares through the Effective Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder of
record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and wish to exercise appraisal rights should
consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to Sandra L. Lambert,
Secretary, The Randers Killam Group Inc., c/o Thermo Electron Corporation, 81
Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, so as to be
received before the vote on the approval and adoption of the Merger Agreement at
the Special Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on behalf
of a holder of record; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is agent for such owner or owners. A record holder such as a broker holding
Common Stock as nominee for several beneficial owners may exercise appraisal
rights with respect to the Common Stock held for one or more beneficial owners
while not exercising such rights with respect to the Common Stock held for other
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought and where no number of shares is
expressly mentioned the demand will be presumed to cover all Common Stock held
in the name of the record owner.
Within 10 calendar days after the Effective Time, the Company, as the
Surviving Corporation in the Merger, must send a notice as to the effectiveness
of the Merger to each person who has satisfied the appropriate provisions of
Section 262 and who has not voted in favor of the Merger Agreement. Within 120
calendar days after the Effective Time, the Company, or any stockholder entitled
to appraisal rights
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<PAGE>
under Section 262 and who has complied with the foregoing procedures, may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the shares of all such stockholders. The Company is not under
any obligation, and has no present intention, to file a petition with respect to
the appraisal of the fair value of the shares of Common Stock. Accordingly, it
is the obligation of the stockholders to initiate all necessary action to
perfect their appraisal rights within the time prescribed in Section 262.
Within 120 calendar days after the Effective Time, any stockholder of record
who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Company a statement setting
forth the aggregate number of shares of Common Stock with respect to which
demands for appraisal have been received and the aggregate number of holders of
such shares. Such statement must be mailed within 10 calendar days after a
written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the fair value of the shares of
Common Stock, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. Holders considering
seeking appraisal should be aware that the fair value of their shares of Common
Stock as determined under Section 262 could be more than, the same as or less
than the amount per share that they would otherwise receive if they did not seek
appraisal of their shares of Common Stock. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods that are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. In addition, Delaware courts have
decided that the statutory appraisal remedy, depending on factual circumstances,
may or may not be a dissenter's exclusive remedy. The Court will also determine
the amount of interest, if any, to be paid upon the amounts to be received by
persons whose shares of Common Stock have been appraised. The costs of the
action may be determined by the Court and taxed upon the parties as the Court
deems equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts used in the appraisal proceeding, be charged pro
rata against the value of all the shares of Common Stock entitled to appraisal.
The Court may require stockholders who have demanded an appraisal and who
hold Common Stock represented by certificates to submit their certificates of
Common Stock to the Court for notation thereon of the pendency of the appraisal
proceedings. If any stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such stockholder.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Common Stock subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to holders of record of shares of Common Stock as of
a date prior to the Effective Time).
If any stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive the Cash Merger Consideration in accordance
with the Merger Agreement, without interest. A stockholder will fail to perfect,
or effectively lose, the right to appraisal if no petition for appraisal is
filed within 120 calendar days after the Effective Time. A stockholder may
withdraw a demand for appraisal by delivering to the Company a written
withdrawal of the demand for appraisal and acceptance of the Merger, except that
any such attempt to withdraw made more than 60 calendar days after the Effective
Time will require the written approval of the Company. Once a petition for
appraisal has been filed, such appraisal proceeding may not be dismissed as to
any stockholder without the approval of the Court.
For federal income tax purposes, stockholders who receive cash for their
shares of Common Stock upon exercise of Dissenters' Rights will realize taxable
gain or loss. See "FEDERAL INCOME TAX CONSEQUENCES."
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations relevant to the Merger. This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to the holders of Common Stock as described herein. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, broker-dealers, persons who are not
citizens or residents of the United States or who are foreign corporations,
foreign partnerships or foreign estates or trusts as to the United States and
holders who acquired their stock through the exercise of an employee stock
option or otherwise as compensation. In addition, the following discussion does
not include any discussion of any state, local or foreign tax consequences that
may result from the Merger.
THIS TAX DISCUSSION IS BASED UPON PRESENT UNITED STATES FEDERAL INCOME TAX
LAW. EACH HOLDER OF COMMON STOCK SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER, INCLUDING THE
APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND THE
POSSIBLE EFFECT OF CHANGES IN SUCH TAX LAWS.
For federal income tax purposes, the receipt of the Cash Merger
Consideration in the Merger by holders of Common Stock will be treated as a
taxable sale of the holder's Common Stock. Each holder's gain or loss per share
will equal the difference between $4.50 and the holder's basis in the share of
Common Stock. Such gain or loss generally will be a capital gain or loss
provided that the holder has held the Common Stock as a capital asset. Capital
gain or loss will be treated as long-term capital gain or loss if the holder has
held the Common Stock for more than one year, and will be treated as short-term
capital gain or loss if the holder has held the Common Stock for one year or
less.
A holder of Common Stock may be subject to backup withholding at the rate of
31% with respect to Cash Merger Consideration received pursuant to the Merger,
unless the holder (a) is a corporation or comes within certain other exempt
categories and, when required, adequately demonstrates this fact, or
(b) provides a correct taxpayer identification number ("TIN"), certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. To prevent the
possibility of backup withholding, each holder must provide the Payment Agent
with his or her correct TIN by completing a Form W-9 or Substitute Form W-9 or,
in the case of exempt foreign persons, with certain other information by
completing the appropriate Form W-8 or Substitute Form W-8. A holder of Common
Stock who does not provide the above information may be subject to penalties
imposed by the Internal Revenue Service (the "IRS"), as well as backup
withholding. Any amount withheld under these rules will be creditable against
the holder's federal income tax liability. Thermo Electron (or its agent) will
report to the holders of Common Stock and the IRS the amount of any "reportable
payments," as defined in Section 3406 of the Code, and the amount of tax, if
any, withheld with respect thereto.
Neither the Company, Merger Sub, Thermo TerraTech nor Thermo Electron will
recognize gain or loss for federal income tax purposes as a result of the
Merger.
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BUSINESS OF THE COMPANY
OVERVIEW
Randers/Killam provides comprehensive engineering and outsourcing services
and operates in four segments: Water and Wastewater Treatment, Process
Engineering and Construction, Highway and Bridge Engineering, and Infrastructure
Engineering. The Company's strategy is to market its technical expertise and
low-cost solutions to a broad base of clients including municipalities,
government agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's Killam subsidiaries comprise the
Water and Wastewater Treatment segment and provide environmental consulting and
engineering services and specialize in wastewater treatment and water resources
management. The Company's Randers subsidiaries, which constitute the Process
Engineering and Construction segment, provide design engineering, project
management, and construction services for industrial clients. The Company's BAC
Killam Inc. subsidiary represents the Company's Highway and Bridge Engineering
segment and provides transportation planning and design services. The
Infrastructure Engineering segment, comprised of CarlanKillam Consulting
Group, Inc., provides transportation and environmental consulting, professional
engineering, and architectural services.
The Company was originally organized as a partnership in January 1974, and
was incorporated in January 1976. In May 1997, Thermo TerraTech Inc. purchased a
controlling interest in The Randers Group Incorporated ("Randers").
Subsequently, Thermo TerraTech entered into a definitive agreement to transfer
its wholly owned subsidiary, The Killam Group, to Randers in exchange for newly
issued shares of Randers' common stock.
In May 1999, the Company announced plans to sell three businesses including
the Randers division, which constitutes the Company's Process Engineering and
Construction segment, and BAC Killam Inc., which represents the Company's
Highway and Bridge Engineering segment. The third business that will be sold,
E3-Killam, Inc., represents a small component of the Water and Wastewater
Treatment segment.
WATER AND WASTEWATER TREATMENT
Through the Company's Killam Associates, Inc., Duncan, Lagnese and
Associates, Incorporated, Killam Management and Operational Services, Inc., and
E3-Killam, Inc. subsidiaries, the Company specializes in the design, planning,
and construction observation of municipal and privately owned water treatment
plants, wastewater treatment plants, and hazardous wastewater facilities. The
Company provides full-service contract operations to plant owners in the private
and public sectors. These services facilitate regulatory compliance, optimize
day-to-day plant operations, reduce costs, provide competent and experienced
personnel, and promote good community relations.
Revenues from the Water and Wastewater Treatment segment represented
approximately 54%, 57% and 69% of the Company's total revenues in fiscal 1999,
1998 and 1997, respectively. See Note 9 to the Company's Consolidated Financial
Statements included elsewhere within this Proxy Statement for financial
information relating to business segments and geographical information.
PROCESS ENGINEERING AND CONSTRUCTION
The Company's Randers division, comprised of Randers Engineering, Inc.,
Redeco Incorporated, and Viridian Technology Incorporated, provides design
engineering, project management, and construction services for industrial
clients in the manufacturing, pharmaceutical, and chemical-processing
industries. The principal geographic region served is the Michigan, Ohio, and
Illinois area of the Midwest, as well as Massachusetts and West Virginia.
The Company offers complete outsourcing services, from the design stage
through construction, for manufacturing equipment, systems, and plants, as well
as office buildings, warehouses, laboratories, and other structures for its
manufacturing clients.
53
<PAGE>
Revenues from the Process Engineering and Construction segment represented
approximately 23% and 16% of the Company's total revenues in fiscal 1999 and
1998, respectively. See Note 9 to the Company's Consolidated Financial
Statements included elsewhere within this Proxy Statement for financial
information relating to business segments and geographical information.
HIGHWAY AND BRIDGE ENGINEERING
The Company's BAC Killam Inc. subsidiary provides both private and public
sector clients with a broad range of consulting services that address
transportation planning and design. Projects include bridge inspection, rating,
and rehabilitation; new bridge design; highway corridor planning studies for new
route alignment of major state highways; design of the reconstruction and
widening of existing major roads; construction inspection on highway and bridge
projects; infrastructure engineering, survey, and land-use planning; natural
resource management; and environmental-impact studies.
Revenues from the Highway and Bridge Engineering segment represented
approximately 15%, 19% and 27% of the Company's total revenues in fiscal 1999,
1998 and 1997, respectively. See Note 9 to the Company's Consolidated Financial
Statements included elsewhere within this Proxy Statement for financial
information relating to business segments and geographical information.
INFRASTRUCTURE ENGINEERING
The Company's CarlanKillam Consulting Group, Inc. subsidiary provides
transportation and environmental consulting, professional engineering, and
architectural services. CarlanKillam is also a leader in the design of
innovative solutions to traffic problems and transportation needs.
Revenues from the Infrastructure Engineering segment represented
approximately 9%, 9% and 4% of the Company's total revenues in fiscal 1999, 1998
and 1997, respectively. See Note 9 to the Company's Consolidated Financial
Statements included elsewhere within this Proxy Statement for financial
information relating to business segments and geographical information.
PROPERTIES
The location and general character of the Company's properties by business
segment as of April 3, 1999, are:
WATER AND WASTEWATER TREATMENT
The Company owns approximately 50,000 square feet of office, laboratory, and
engineering space in New Jersey. The Company leases approximately 53,000 square
feet of office and engineering space in Pennsylvania, New Jersey, New York,
Massachusetts, and West Virginia, under leases expiring through 2003.
PROCESS ENGINEERING AND CONSTRUCTION
The Company owns approximately 11,000 square feet of office and engineering
space in Michigan. The Company leases approximately 17,000 square feet of office
and engineering space in Michigan, West Virginia, Ohio, and Massachusetts, under
leases expiring through 2003.
HIGHWAY AND BRIDGE ENGINEERING
The Company leases approximately 34,000 square feet of office and
engineering space in New York and New Jersey, under leases expiring through
2005.
INFRASTRUCTURE ENGINEERING
The Company leases approximately 24,000 square feet of office and
engineering space in Florida and Alabama, under leases expiring through 2000.
The Company believes that these facilities are adequate for its present
operations and that other suitable space is readily available if any of such
leases are not extended.
54
<PAGE>
SELECTED FINANCIAL INFORMATION AND
RATIO OF EARNINGS (LOSS) TO FIXED CHARGES
The selected financial information presented below as of and for the fiscal
years ended April 3, 1999, and April 4, 1998, and for the fiscal year ended
March 29, 1997, has been derived from Randers/Killam's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report incorporated by reference into this
Proxy Statement. The selected financial information presented below as of
March 29, 1997, and as of and for the fiscal years ended March 30, 1996, and
April 1, 1995, has been derived from Randers/Killam's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, but have not been
included or incorporated by reference herein. This information should be read in
conjunction with Randers/Killam's Consolidated Financial Statements and related
notes incorporated by reference into this Proxy Statement. The selected
financial information for the three months ended July 3, 1999, and July 4, 1998,
has not been audited but, in the opinion of Randers/Killam, includes all
adjustments (consisting only of normal, recurring adjustments) necessary to
present fairly such information in accordance with generally accepted accounting
principles applied on a consistent basis. The results of operations for the
three months ended July 3, 1999, are not necessarily indicative of results for
the entire year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
------------------- FISCAL YEAR(1)
JULY 3, JULY 4, ----------------------------------------------------
1999(2) 1998 1999 1998(3) 1997(4) 1996 1995
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues....................................... $ 18,603 $20,083 $80,773 $71,583 $64,374 $58,515 $27,735
Net Income (Loss).............................. (13,405) 788 2,968 3,153 3,580 2,379 693
Basic and Diluted Earnings (Loss) per Share.... (.53) .03 .12 .13 .16 .11 .03
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital................................ $ 28,085 $26,957 $28,424 $25,822 $16,038 $13,084 $14,348
Total Assets................................... 87,422 94,919 98,145 93,193 75,434 71,893 71,886
Long-term Obligations.......................... 743 1,901 774 1,948 1,260 1,883 2,551
Shareholders' Investment....................... 69,609 80,786 83,014 79,998 64,731 58,725 60,278
OTHER DATA (UNAUDITED):
Book Value per Share........................... $ 2.74 $ 3.18 $ 3.26 $ 3.15 $ 2.86 $ 2.60 $ 2.67
Cash Dividends Declared per Share.............. -- -- -- -- -- -- --
RATIO OF EARNINGS (LOSS) TO FIXED CHARGES
(UNAUDITED)(5):
Ratio.......................................... N/A 7.72x 6.75x 6.79x
Fixed Charges Coverage Deficiency.............. $(13,932) $ -- $ -- $ --
</TABLE>
- ------------------------------
(1) Randers/Killam's 1999, 1998, 1997, 1996, and 1995 fiscal years ended
April 3, 1999, April 4, 1998, March 29, 1997, March 30, 1996, and April 1,
1995, respectively.
(2) Reflects a $15.7 million pretax charge for restructuring costs.
(3) Reflects the May 1997 acquisition of The Randers Group Incorporated by
Thermo TerraTech Inc., subsequently transferred to The Randers Killam
Group Inc.
(4) Reflects the November 1996 acquisition of CarlanKillam Consulting
Group, Inc. by Thermo TerraTech Inc., subsequently transferred to The
Randers Killam Group Inc.
(5) For purposes of computing the ratios of earnings to fixed charges,
"earnings" represents income before income taxes, plus fixed charges, and
"loss" represents loss before income taxes, plus fixed charges. "Fixed
charges" consist of interest on indebtedness and one-third of rental
expense, which is deemed to be the interest component of such rental
expense.
55
<PAGE>
CERTAIN PROJECTED FINANCIAL DATA
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data, cash
flows or balance sheet and financial position information. However, in order to
aid the evaluation of the Company by the Special Committee and Adams,
Harkness & Hill and Adams, Harkness & Hill's assessment of the fairness, from a
financial point of view, of the consideration of $4.50 per share in cash payable
to the Public Stockholders pursuant to the Merger Agreement, the Company, in
July 1999, furnished the Special Committee and Adams, Harkness & Hill with
certain projections (the "Projections") prepared by the Company's management.
The following summary of the Projections is included in this Proxy Statement
solely because the Projections were made available to such parties. The
Projections do not reflect any of the effects of the Merger or other changes
that may in the future be deemed appropriate concerning the Company and its
assets, business, operations, properties, policies, corporate structure,
capitalization and management in light of the circumstances then existing. The
Company has not updated the Projections to reflect changes that have occurred
since their preparation.
The Projections were not prepared with a view toward public disclosure or
compliance with published guidelines of the Commission or the American Institute
of Certified Public Accountants regarding forward-looking information or
generally accepted accounting principles. Neither the Company's independent
auditors, nor any other independent accountants, have compiled, examined or
performed any procedures with respect to the prospective financial information
contained in the Projections, nor have they expressed any opinion or given any
form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, such prospective
financial information. Furthermore, the Projections necessarily make numerous
assumptions, some (but not all) of which are set forth below and many of which
are beyond the control of the Company and may prove not to have been, or may no
longer be, accurate. Additionally, this information, except as otherwise
indicated, does not reflect revised prospects for the Company's businesses,
changes in general business and economic conditions, or any other transaction or
event that has occurred or that may occur and that was not anticipated at the
time such information was prepared. Accordingly, such information is not
necessarily indicative of current values or future performance, which may be
significantly more favorable or less favorable than as set forth below, and
should not be regarded as a representation that they will be achieved.
THE PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUE OF THE
COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THE PROJECTIONS. MANY OF
THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES ARE BEYOND THE
COMPANY'S ABILITY TO CONTROL OR PREDICT. STOCKHOLDERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THE PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED OR THAT THE COMPANY'S FUTURE FINANCIAL RESULTS WILL
NOT MATERIALLY VARY FROM THE PROJECTIONS. THE COMPANY DOES NOT INTEND TO UPDATE
OR REVISE THE PROJECTIONS.
The Projections included herein have been prepared by the Company based upon
management's estimates of the total market for its services and the Company's
own performance through 2003, as well as the impact on the Company's financial
results of the completion of the announced sales of various business units. The
projected results for calendar 1999 set forth in the Projections were based upon
actual results through April 3, 1999 and management forecasts for the remainder
of the year.
56
<PAGE>
PROJECTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
CALENDAR YEAR
----------------------------------------------------
1999 (P) 2000 (P) 2001 (P) 2002 (P) 2003 (P)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues...................................... $ 77,779 $51,890 $55,880 $59,840 $64,100
Costs and Operating Expenses:
Cost of revenues............................ 58,031 35,485 38,260 41,045 44,030
Selling, general, and administrative
expenses.................................. 13,366 7,625 8,032 8,440 8,858
Restructuring costs......................... 15,731 -- -- -- --
-------- ------- ------- ------- -------
87,128 43,110 46,292 49,485 52,888
-------- ------- ------- ------- -------
Operating Income (Loss)....................... (9,349) 8,780 9,588 10,355 11,212
Interest Income............................... 811 1,200 1,600 2,000 2,500
Interest Expense.............................. (155) (75) (70) (65) (60)
-------- ------- ------- ------- -------
Income (Loss) Before Provision for Income
Taxes....................................... (8,693) 9,905 11,118 12,290 13,652
Provision for Income Taxes.................... 1,720 4,485 4,985 5,531 6,090
-------- ------- ------- ------- -------
Net Income (Loss)............................. $(10,413) $ 5,420 $ 6,133 $ 6,759 $ 7,562
======== ======= ======= ======= =======
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net...................... $ 12,105 $ 7,630 $ 7,850 $ 8,510 $ 8,980
Unbilled Contract Costs and Fees.............. 8,660 4,390 4,850 5,320 5,800
Prepaid Income Taxes and Other Current
Assets...................................... 1,888 1,648 1,663 1,678 1,693
-------- ------- ------- ------- -------
Total Current Assets Excluding Cash and
Investments................................. 22,653 13,668 14,363 15,508 16,473
Property, Plant, and Equipment:
Balance, beginning of year.................. 11,305 11,215 11,050 10,910 10,795
Additions................................... 1,449 845 910 975 1,040
Depreciation expense........................ (1,497) (1,010) (1,050) (1,090) (1,130)
Sales and retirements....................... (42) -- -- -- --
-------- ------- ------- ------- -------
Balance, end of year........................ 11,215 11,050 10,910 10,795 10,705
Cost in Excess of Net Assets of Acquired
Companies................................... 31,198 30,692 29,792 28,892 27,992
</TABLE>
57
<PAGE>
MANAGEMENT
The current directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ------------------------------------------
<S> <C> <C>
President, Chief Executive Officer and
Emil C. Herkert........................... 61 Director
Theo Melas-Kyriazi........................ 40 Chief Financial Officer
Paul F. Kelleher.......................... 57 Chief Accounting Officer
Nicholas M. DeNichilo..................... 47 Vice President
Thomas R. Eurich.......................... 53 Vice President and Director
John P. Appleton.......................... 64 Chairman of the Board and Director
Brian D. Holt............................. 50 Director
Susan F. Tierney.......................... 48 Director
</TABLE>
All of the Company's directors are elected annually by the stockholders and
hold office until their respective successors are duly elected and qualified.
Executive officers are elected annually by the Board of Directors and serve at
its discretion.
Emil C. Herkert has been president and a director of the Company since
November 1997, and has been chief executive officer of the Company since
May 1997. In addition, he has served as a vice president of Thermo TerraTech
since May 1996, as president of The Killam Group of Companies from its
acquisition by Thermo TerraTech in February 1995 until its merger into the
Company in May 1997, and as president of Killam Associates from 1997 through
May 1998.
Theo Melas-Kyriazi was appointed chief financial officer of the Company,
Thermo TerraTech and Thermo Electron on January 1, 1999. Mr. Melas-Kyriazi
joined Thermo Electron in 1986 as assistant treasurer, and became treasurer in
May 1988. He was named president and chief executive officer of ThermoSpectra
Corporation, a majority-owned subsidiary and affiliate of Thermo Electron, in
August 1994, a position he held until becoming vice president of corporate
strategy for Thermo Electron in March 1998. Mr. Melas-Kyriazi remains a vice
president of Thermo Electron. He is also the chairman of the board of directors
of ThermoSpectra Corporation and is a director of ThermoRetec.
Paul F. Kelleher has been the chief accounting officer of the Company since
November 1997. He has been senior vice president, finance and administration, of
Thermo Electron since June 1997, and served as its vice president, finance from
1987 until 1997. Mr. Kelleher served as Thermo Electron's controller from 1982
until January 1996. He is a director of ThermoLase Corporation, an affiliate of
Thermo Electron. Mr. Kelleher also serves as the chief accounting officer of
Thermo TerraTech.
Nicholas M. DeNichilo has been Vice President since 1997. Prior to that
time, he had served as a Vice President of Killam Associates since 1985.
Thomas R. Eurich has been a vice president of the Company since
November 1997 and a director of the Company since its inception in 1976. Prior
to the acquisition of a majority interest in the Company by Thermo TerraTech,
Mr. Eurich served as its president and chief executive officer from its
inception in 1976 until November 1997 and May 1997, respectively.
John P. Appleton has been the chairman of the board and a director of the
Company since November 1997. Dr. Appleton has been president, chief executive
officer and a director of Thermo TerraTech since September 1993, and has served
as a vice president of Thermo Electron since 1975 in various managerial
capacities. He was the chief executive officer of ThermoRetec from
September 1993 to May 1997. He also serves as a director of ThermoRetec.
Brian D. Holt has been a director of the Company since November 1998.
Mr. Holt has been chief operating officer, environment and energy, of Thermo
Electron since September 1998. He has also been the president and chief
executive officer of Thermo Ecotek Corporation, a majority-owned subsidiary and
58
<PAGE>
affiliate of Thermo Electron, since February 1994, and has been a director of
Thermo Ecotek Corporation since January 1995. For more than five years prior to
his appointment as an officer of Thermo Ecotek Corporation, he was the president
and chief executive officer of Pacific Generation Company, a financier, builder,
owner and operator of independent power facilities. Mr. Holt is also a director
of the following affiliates of Thermo Electron: ThermoRetec and Thermo
TerraTech.
Susan F. Tierney has been a director of the Company since November 1997.
Dr. Tierney is a partner with the Economics Resource Group. From March 1993 to
May 1993, Dr. Tierney was a consultant for the U.S. Department of Energy, and
from May 1993 to July 1995, she served as Assistant Secretary for Policy for the
U.S. Department of Energy. Prior to that appointment, Dr. Tierney served as
Secretary of Environmental Affairs for the Commonwealth of Massachusetts from
January 1991 to March 1993 and as Commissioner of the Department of Public
Utilities for the Commonwealth of Massachusetts from 1988 to January 1991. From
March 1996 until her resignation on August 4, 1999, Dr. Tierney also served as a
director of Thermo Ecotek Corporation, an affiliate of Thermo Electron.
59
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of October 2, 1999 with respect to the only person
that was known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
- ------------------- ------------------ -------------------------
<S> <C> <C>
Thermo Electron Corporation(1) ........ 24,359,564 95.8%
81 Wyman Street
Waltham, MA 02454-9046
</TABLE>
- ------------------------
(1) Thermo Electron beneficially owned 95.8% of the Common Stock outstanding as
of October 2, 1999, of which approximately 94.8% is owned through Thermo
TerraTech and approximately 1% is owned directly. Thermo Electron, through
Thermo TerraTech, has the power to elect all of the members of the Company's
Board of Directors. After the Merger, Thermo Electron will beneficially own
100% of the outstanding Common Stock.
MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo TerraTech and Thermo Electron, as of
October 2, 1999, with respect to (i) each director of the Company, (ii) the
chief executive officer of the Company and other executive officers of the
Company and (iii) all directors and current executive officers as a group.
While certain directors and executive officers of the Company are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo TerraTech or by Thermo Electron, as the case may
be.
<TABLE>
<CAPTION>
THE RANDERS KILLAM THERMO THERMO ELECTRON
GROUP INC.(2) TERRATECH INC.(3) CORPORATION(4)
---------------------- ---------------------- ----------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
- ------- --------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John P. Appleton....................... 120,000 * 305,939 1.6 154,433 *
Nicholas M. DeNichilo.................. 68,800 * 38,000 * 10,175 *
Thomas R. Eurich....................... 207,501 * 0 * 0 *
Emil C. Herkert........................ 252,000 * 89,900 * 46,900 *
Brian D. Holt.......................... 4,000 * 250,000 1.3 287,243 *
Paul F. Kelleher....................... 8,000 * 11,197 * 203,505 *
Theo Melas-Kyriazi..................... 0 * 618 * 309,245 *
Susan F. Tierney....................... 51,652 * 1,000 * 0 *
All directors and current executive
officers as a group (8 persons)...... 711,953 2.8% 696,654 3.7% 1,011,501 *
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding common stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
60
<PAGE>
(2) The shares of Common Stock beneficially owned by Dr. Appleton,
Mr. DeNichilo, Mr. Eurich, Mr. Herkert, Mr. Holt, Mr. Kelleher, Dr. Tierney
and all directors and current executive officers as a group include 120,000,
68,800, 58,000, 250,000, 4,000, 8,000, 48,300 and 557,100 shares,
respectively, that such person or group had the right to acquire within
60 days of October 2, 1999, through the exercise of stock options. Shares
beneficially owned by Dr. Tierney and all directors and current executive
officers as a group include 3,352 shares allocated through October 2, 1999,
to Dr. Tierney's account maintained under the Company's Deferred
Compensation Plan. No director or current executive officer beneficially
owned more than 1.0% of the Common Stock outstanding as of October 2, 1999;
all directors and current executive officers as a group beneficially owned
2.8% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermo TerraTech beneficially owned by
Dr. Appleton, Mr. DeNichilo, Mr. Herkert, Mr. Holt, Mr. Kelleher,
Dr. Tierney and all directors and current executive officers as a group
include 275,000, 38,000, 8,000, 250,000, 5,000, 1,000 and 577,000 shares,
respectively, that such person or group had the right to acquire within
60 days of October 2, 1999, through the exercise of stock options. Shares of
the common stock of Thermo TerraTech beneficially owned by Dr. Appleton,
Mr. Kelleher, Mr. Melas-Kyriazi and all directors and executive officers as
a group include 305, 303, 299 and 907 shares, respectively, allocated
through October 2, 1999, to their respective accounts maintained pursuant to
Thermo Electron's employee stock ownership plan (the "ESOP"), of which the
trustees, who have investment power over its assets, are executive officers
of Thermo Electron. Other than Dr. Appleton, who beneficially owned 1.6% of
the common stock of Thermo TerraTech outstanding as of October 2, 1999, and
Mr. Holt, who beneficially owned 1.3% of the common stock of Thermo
TerraTech outstanding as of October 2, 1999, no director or current
executive officer beneficially owned more than 1.0% of the common stock of
Thermo TerraTech outstanding as of October 2, 1999; all directors and
current executive officers as a group beneficially owned approximately 3.7%
of the common stock of Thermo TerraTech outstanding as of such date.
(4) The shares of the common stock of Thermo Electron beneficially owned by
Dr. Appleton, Mr. DeNichilo, Mr. Herkert, Mr. Holt, Mr. Kelleher,
Mr. Melas-Kyriazi and all directors and current executive officers as a
group include 116,972, 9,750, 44,400, 284,250, 170,587, 270,074 and 896,033
shares, respectively, that such person or group had the right to acquire
within 60 days of October 2, 1999, through the exercise of stock options.
Shares of the common stock of Thermo Electron beneficially owned by
Dr. Appleton, Mr. Kelleher, Mr. Melas-Kyriazi and all directors and current
executive officers as a group include 1,615, 1,426, 1,071 and 4,112 shares,
respectively, allocated through October 2, 1999, to accounts maintained
pursuant to the ESOP. No director or named executive officer beneficially
owned more than 1.0% of the common stock of Thermo Electron outstanding as
of October 2, 1999; all directors and current executive officers as a group
did not beneficially own more than 1.0% of the common stock of Thermo
Electron outstanding as of such date.
CERTAIN TRANSACTIONS
Thermo Electron has, from time to time, caused certain subsidiaries to sell
minority interests to investors, resulting in several majority-owned private and
publicly held subsidiaries. In addition, Thermo Electron and certain of its
subsidiaries, including Thermo TerraTech, have acquired the majority interest in
certain publicly held companies. Thermo TerraTech acquired the majority interest
in the Company in 1997. The Company and such other majority-owned Thermo
Electron subsidiaries are hereinafter referred to as the "Thermo Subsidiaries."
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Company, have adopted the Thermo Electron
61
<PAGE>
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined,
(3) each company has access to the combined resources and financial, managerial
and technological strengths of the others, and (4) Thermo Electron and the
Thermo Subsidiaries, in the aggregate, are able to obtain the most favorable
terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
the Thermo Subsidiaries.
The Charter currently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Company and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including general legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns, centralized cash
management and certain financial and other services to the Company. The Company
was assessed an annual fee equal to 0.8% of the Company's revenues for these
services in fiscal 1998 and 1999. The annual fee will remain at 0.8% of the
Company's total revenues for fiscal 2000. The fee is reviewed annually and may
be changed by mutual agreement of the Company and Thermo Electron. During fiscal
1998, 1999 and the three months ended July 3, 1999, Thermo Electron assessed the
Company $679,000, $646,000 and $149,000, respectively, in fees under the
Services Agreement. Management believes that the charges under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. In fiscal 1998, 1999 and
62
<PAGE>
the three months ended July 3, 1999, the Company was billed an additional
$15,000, $95,000 and $7,000, respectively, by Thermo Electron for certain
administrative services required by the Company that were not covered by the
Services Agreement. The Services Agreement automatically renews for successive
one-year terms, unless canceled by the Company upon 30 days' prior notice. In
addition, the Services Agreement terminates automatically in the event the
Company ceases to be a member of the Thermo Group or ceases to be a participant
in the Charter. In the event of a termination of the Services Agreement, the
Company will be required to pay a termination fee equal to the fee that was paid
by the Company for services under the Services Agreement for the nine-month
period prior to termination. Following termination, Thermo Electron may provide
certain administrative services on an as-requested basis by the Company or as
required in order to meet the Company's obligations under Thermo Electron's
policies and procedures. Thermo Electron will charge the Company a fee equal to
the market rate for comparable services if such services are provided to the
Company following termination.
The Company and Thermo TerraTech are parties to a Tax Allocation Agreement
under which both the Company and Thermo TerraTech are included in Thermo
Electron's consolidated federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo TerraTech and
Thermo Electron together own at least 80% of the Company's outstanding Common
Stock. The agreement provides that in years in which the Company has taxable
income, it will pay to Thermo Electron amounts comparable to the taxes the
Company would have paid if it had filed its own separate company tax returns. If
Thermo TerraTech's and Thermo Electron's combined equity ownership of the
Company were to drop below 80%, the Company would file its own tax returns. In
fiscal 1998 and 1999, the Company paid Thermo Electron $374,000 and $700,000,
respectively, under the Tax Allocation Agreement. No amounts were paid by the
Company under the Tax Allocation Agreement during the three months ended
July 3, 1999.
As of July 3, 1999, $15,510,000 of the Company's cash equivalents were
invested in a cash management arrangement with Thermo Electron. Under this
arrangement, the Company lends excess cash to Thermo Electron and has the
contractual right to withdraw its invested funds upon 30 days' prior notice.
Thermo Electron is contractually required to maintain cash, cash equivalents
and/or immediately available bank lines of credit equal to at least 50% of all
funds invested under the arrangement by all Thermo Electron subsidiaries other
than wholly owned subsidiaries. The Company's funds invested in the cash
management arrangement earn a rate equal to the 30-day Dealer Commercial Paper
Rate as reported in THE WALL STREET JOURNAL plus 50 basis points, set at the
beginning of each month.
As of July 3, 1999, the Company owed Thermo Electron and its other
subsidiaries an aggregate of $361,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services
and for miscellaneous items, net of amounts owed to the Company by Thermo
Electron and its other subsidiaries for products, services and for miscellaneous
items. The largest amount of net indebtedness owed by the Company to Thermo
Electron and its other subsidiaries since April 4, 1998, was $1,190,000. These
amounts do not bear interest and are expected to be paid in the normal course of
business.
From time to time, the Company may transact business with other companies in
the Thermo Group. The Company purchases products and services in the ordinary
course of business with other companies affiliated with Thermo TerraTech.
Purchases of products and services from such affiliated companies totaled
$382,000, $425,000 and $80,000 in fiscal 1998, 1999 and the three months ended
July 3, 1999, respectively.
Randers/Killam is currently negotiating with one of its directors, Mr.
Thomas R. Eurich, who is also a Vice President of Randers/Killam, the sale of
its Randers division for approximately $2.7 million to a corporation to be
formed by Mr. Eurich and other members of the Randers division management. The
purchase price proposed by Mr. Eurich approximates the book value of the Randers
division as of October 2, 1999. Emil Herkert and John Appleton, the President
and Chairman, respectively, of Randers/
63
<PAGE>
Killam, are negotiating the terms of the sale on behalf of Randers/Killam. In
the fiscal year ended April 3, 1999 and the three months ended July 3, 1999, the
revenues of the Randers division were $18,342,000 and $2,788,000, respectively.
RECENT DEVELOPMENTS
On November 8, 1999, Randers/Killam issued a press release containing
information as to its earnings for the fiscal quarter ended October 2, 1999.
Randers/Killam reported net income of $922,000 on revenues of $18,019,000 for
the quarter, compared with net income of $819,000 on revenues of $20,988,000 for
the same period in fiscal 1999. Diluted earnings per share for the second
quarter of fiscal 2000 were $.04, compared with $.03 for the same period in
fiscal 1999.
64
<PAGE>
CERTAIN INFORMATION CONCERNING THE MERGER SUB,
THERMO TERRATECH AND THERMO ELECTRON
THERMO TERRATECH
Thermo TerraTech provides industrial outsourcing services and manufacturing
support encompassing a broad range of specializations. Thermo TerraTech provides
environmental-liability and resource-management services, as well as consulting
services for engineering, nuclear remediation, soil remediation, and fluids
recycling. In addition, Thermo TerraTech provides comprehensive engineering and
outsourcing services in water and wastewater treatment, process engineering and
construction, highway and bridge engineering, and infrastructure engineering;
consulting services that address natural resource management issues; and
metallurgical processing services. Thermo TerraTech also operates analytical
laboratories that provide environmental- and pharmaceutical-testing services,
primarily to commercial clients throughout the U.S.
The principal executive offices of Thermo TerraTech are located at 85 First
Avenue, Waltham, Massachusetts 02451, and its telephone number is
(781) 370-1640. Unless otherwise noted, the business address of each of the
following directors and executive officers of Thermo TerraTech is 85 First
Avenue, Waltham, Massachusetts 02451, and each of such persons is a citizen of
the United States.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMO TERRATECH
JOHN P. APPLETON: President, Chief Executive Officer and Director
John P. Appleton has been president, chief executive officer and a director
of Thermo TerraTech since September 1993. Dr. Appleton has been chairman of the
board of ThermoRetec since September 1993 and was its chief executive officer
from September 1993 to May 1997. He has been chairman of the board of
Randers/Killam since November 1997. Dr. Appleton has served as a vice president
of Thermo Electron since 1975 in various managerial capacities.
JOHN N. HATSOPOULOS: Director
John N. Hatsopoulos has been a director of Thermo TerraTech since 1986. He
served as a vice president of Thermo TerraTech and its chief financial officer
from 1988 until December 1997 and December 1998, respectively. Mr. Hatsopoulos
was the senior vice president of Thermo TerraTech from December 1997 until his
retirement in December 1998. He was the president of Thermo Electron from 1997
to 1998 and its chief financial officer from 1988 to 1998. Prior to his
appointment as president of Thermo Electron, he served as an executive vice
president from 1986 until 1998. Mr. Hatsopoulos has been the vice chairman of
the board of directors of Thermo Electron since 1998. He is also a director of
US Liquids Inc. and the following affiliates of Thermo Electron:
Thermedics Inc., Thermo Fibertek Inc. and Thermo Instrument Systems Inc. His
business address is 45 First Street, Waltham, Massachusetts 02454.
EMIL C. HERKERT: Vice President
Emil C. Herkert has been a vice president of Thermo TerraTech since 1996.
For further information, please see description under "MANAGEMENT."
BRIAN D. HOLT: Director
Brian D. Holt became a director of Thermo TerraTech in February 1997.
Mr. Holt has been chief operating officer, environment and energy, of Thermo
Electron since September 1998. He has been the president and chief executive
officer of Thermo Ecotek Corporation, a majority-owned subsidiary of Thermo
Electron since February 1994 and a director of that company since January 1995.
For more than five years prior to his appointment as an officer of Thermo Ecotek
Corporation, he was the president and chief executive officer of Pacific
Generation Company, a financier, builder, owner and operator of independent
power facilities. Mr. Holt is also a director of the following affiliates of
Thermo Electron: the
65
<PAGE>
Company and ThermoRetec. His business address is 245 Winter Street, Suite 300,
Waltham, Massachusetts 02451.
PAUL F. KELLEHER: Chief Accounting Officer
Paul F. Kelleher has been the chief accounting officer of Thermo TerraTech
since 1986. He has been senior vice president, finance and administration, of
Thermo Electron since June 1997, and served as its vice president, finance from
1987 until 1997. Mr. Kelleher served as Thermo Electron's controller from 1982
until January 1996. Mr. Kelleher also serves as the chief accounting officer of
the Company. He is a director of ThermoLase Corporation, an affiliate of Thermo
Electron.
THEO MELAS-KYRIAZI: Chief Financial Officer
Theo Melas-Kyriazi has been chief financial officer of Thermo TerraTech, the
Company and Thermo Electron since January 1999. Mr. Melas-Kyriazi joined Thermo
Electron in 1986 as assistant treasurer, and became treasurer in 1988. He was
named president and chief executive officer of ThermoSpectra Corporation, a
majority-owned subsidiary of Thermo Electron in 1994, a position he held until
becoming vice president of corporate strategy for Thermo Electron in 1998.
Mr. Melas-Kyriazi remains a vice president of Thermo Electron. He also is a
director and chief financial officer of ThermoSpectra Corporation, and is a
director of ThermoRetec, both affiliates of Thermo Electron. Mr. Melas-Kyriazi
is a citizen of Greece. Mr. Melas-Kyriazi's business address is 81 Wyman Street,
P.O. Box 9046, Waltham, Massachusetts 02454-9046.
DONALD E. NOBLE: Director
Donald E. Noble has been a director of Thermo TerraTech since 1986 and
served as chairman of the board from 1992 to November 1994. For more than
20 years, from 1959 to 1980, Mr. Noble served as the chief executive officer of
Rubbermaid Incorporated, first with the title of president and then as chairman
of the board. Mr. Noble is also a director of Thermo Fibertek Inc. and Thermo
Sentron Inc., affiliates of Thermo Electron. Mr. Noble's business address is 345
North Market Street, Suite G-05, Wooster, Ohio 44691.
JEFFREY L. POWELL: Vice President
Jeffrey L. Powell has been a vice president of Thermo TerraTech since 1994.
Mr. Powell served as president of ThermoRetec Corporation since its inception in
1993, and as its chief executive officer from May 1997 until April 1998, when he
was named senior vice president.
WILLIAM A. RAINVILLE: Director
William A. Rainville has been a director of Thermo TerraTech since
February 1993 and was chairman of the board from November 1994 through
February 1997. Mr. Rainville has been president and chief executive officer of
Thermo Fibertek Inc., a majority owned subsidiary of Thermo Electron that
develops and manufactures equipment and products for the paper making and paper
recycling industries, since its inception in 1991, a senior vice president of
Thermo Electron since March 1993 and a vice president of Thermo Electron from
1986 to 1993. Mr. Rainville is also chief operating officer, recycling and
resource recovery, of Thermo Electron. From 1984 until January 1993,
Mr. Rainville was the president and chief executive officer of Thermo Electron
Web Systems Inc., a subsidiary of Thermo Fibertek Inc. Mr. Rainville is also a
director of Thermo Ecotek Corporation, Thermo Fibergen Inc., Thermo
Fibertek Inc. and ThermoRetec. Mr. Rainville's business address is
245 Winter Street, Waltham, Massachusetts 02451.
POLYVIOS C. VINTIADIS: Chairman of the Board and Director
Polyvios C. Vintiadis has been a director of Thermo TerraTech since
September 1992 and chairman of the board since February 1997. Mr. Vintiadis has
been the chairman and chief executive officer of Towermarc Corporation, a real
estate development company, since 1984. Prior to joining Towermarc
66
<PAGE>
Corporation, Mr. Vintiadis was a principal of Morgens, Waterfall &
Vintiadis, Inc., a financial services firm, with whom he remains associated. For
more than 20 years prior to that time, Mr. Vintiadis was employed by Arthur D.
Little & Company, Inc. Mr. Vintiadis is also a director of Thermo Instrument
Systems Inc. and Spectra-Physics Lasers Inc., affiliates of Thermo Electron.
Mr. Vintiadis' business address is Towermarc Corporation, Two Sound View Drive,
Greenwich, CT 06830.
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMO
TERRATECH
The following table sets forth the beneficial ownership of Common Stock, as
of October 2, 1999, with respect to (i) each director and current executive
officer of Thermo TerraTech and (iii) all directors and current executive
officers of Thermo TerraTech as a group.
While certain directors and executive officers of Thermo TerraTech are also
directors and executive officers of Thermo Electron or its subsidiaries other
than Thermo TerraTech, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron or Thermo TerraTech, as the case
may be.
<TABLE>
<CAPTION>
THE RANDERS KILLAM
GROUP INC.(2)
------------------------
NUMBER OF PERCENTAGE
NAME (1) SHARES OF CLASS (%)
- -------- --------- ------------
<S> <C> <C>
John P. Appleton....................................... 120,000 *
John N. Hatsopoulos.................................... 48,000 *
Emil C. Herkert........................................ 252,000 *
Brian D. Holt.......................................... 4,000 *
Paul F. Kelleher....................................... 8,000 *
Theo Melas-Kyriazi..................................... 0 *
Donald E. Noble........................................ 300 *
Jeffrey L. Powell...................................... 24,000 *
William A. Rainville................................... 24,000 *
Polyvios C. Vintiadis.................................. 53,688 *
All directors and current executive officers as a group
(10 persons)......................................... 533,988 2.1
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding Common Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Dr. Appleton,
Mr. Hatsopoulos, Mr. Herkert, Mr. Holt, Mr. Kelleher, Mr. Noble,
Mr. Powell, Mr. Rainville, Mr. Vintiadis and all directors and current
executive officers as a group include 120,000, 48,000, 250,000, 4,000,
8,000, 300, 24,000, 24,000, 48,300 and 526,600 shares, respectively, that
such person or group had the right to acquire within 60 days of October 2,
1999, through the exercise of stock options. No director or current
executive officer beneficially owned more than 1.0% of the Common Stock
outstanding as of October 2, 1999; all directors and current executive
officers as a group beneficially owned 2.1% of the Common Stock outstanding
as of such date.
THERMO ELECTRON
Thermo Electron and its subsidiaries develop, manufacture and market
monitoring, analytical, and biomedical instrumentation; biomedical products
including heart-assist devices, respiratory-care equipment, and mammography
systems; and paper recycling and papermaking equipment. Thermo Electron
67
<PAGE>
also develops alternative-energy systems and clean fuels, industrial process
equipment; and other specialized products. Thermo Electron also provides a range
of services including industrial outsourcing, particularly in
environmental-liability management, laboratory analysis and metallurgical
processing, and conducts advanced-technology research and development. Thermo
Electron performs its business through wholly owned subsidiaries and divisions,
as well as majority-owned subsidiaries that are partially owned by the public or
private investors.
The principal executive offices of Thermo Electron are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000. Unless otherwise noted, the business address of each
of the following directors and executive officers of Thermo Electron is
81 Wyman Street, Waltham, Massachusetts 02454, and each of such persons is a
citizen of the United States.
DIRECTORS AND EXECUTIVE OFFICERS OF THERMO ELECTRON
JOHN M. ALBERTINE: Director
John M. Albertine has been a director of Thermo Electron since 1986.
Dr. Albertine serves as the chairman of the board and chief executive officer of
Albertine Enterprises, Inc., an economic and public policy consulting and
full-service mergers and acquisitions firm he founded in 1990. Dr. Albertine is
also a director of American Precision Industries, Inc., Intermagnetics General
Corp. and U.S. Cast Products Inc. His business address is Albertine
Enterprises, Inc., 1156 15(th) Street N.W., Suite 505, Washington, DC 20005.
SAMUEL W. BODMAN: Director
Samuel W. Bodman has been a director of Thermo Electron since May 1999.
Since 1988, Mr. Bodman has served as the chairman and chief executive officer of
Cabot Corporation, a manufacturer of specialty chemicals and materials.
Mr. Bodman is a director of Cabot Oil & Gas Corporation, John Hancock Mutual
Life Insurance Company, Security Capital Group Incorporated and Westvaco
Corporation. His business address is Cabot Corporation, 75 State Street, Boston,
Massachusetts 02109.
PETER O. CRISP: Director
Peter O. Crisp has been a director of Thermo Electron since 1974. Mr. Crisp
was a general partner of Venrock Associates, a venture capital investment firm,
for more than five years until his retirement in September 1997. He has been
vice chairman of Rockefeller Financial Services, Inc. since December 1997.
Mr. Crisp is also a director of American Superconductor Corporation, Evans &
Sutherland Computer Corporation and United States Trust Corporation, as well as
the following affiliates of Thermo Electron: Thermedics Inc. and ThermoTrex
Corporation.
ELIAS P. GYFTOPOULOS: Director
Elias P. Gyftopoulos has been a director of Thermo Electron since 1976.
Dr. Gyftopoulos is Professor Emeritus of the Massachusetts Institute of
Technology, where he was the Ford Professor of Mechanical Engineering and of
Nuclear Engineering for more than 20 years until his retirement in 1996.
Dr. Gyftopoulos is also a director of the following affiliates of Thermo
Electron: Thermo BioAnalysis Corporation, Thermo Cardiosystems Inc., ThermoLase
Corporation, ThermoSpectra Corporation, ThermoRetec, Thermo Vision Corporation
and Trex Medical Corporation. His business address is Massachusetts Institute of
Technology, Room 24-109, 77 Massachusetts Avenue, Cambridge, Massachusetts
02139.
GEORGE N. HATSOPOULOS: Chairman of the Board and Director
George N. Hatsopoulos has been a director and the chairman of the board of
directors of Thermo Electron since he founded Thermo Electron in 1956. He was
also the chief executive officer and president
68
<PAGE>
of Thermo Electron from 1956 until June1999 and January 1997, respectively.
Dr. Hatsopoulos is also a director of Photoelectron Corporation and the
following affiliates of Thermo Electron: Thermedics Inc., Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo Instrument Systems Inc. and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of Mr. John N. Hatsopoulos, a
director of Thermo TerraTech and a director and vice chairman of the board of
directors of Thermo Electron.
JOHN N. HATSOPOULOS: Vice Chairman of the Board and Director
John N. Hatsopoulos has been a director of Thermo Electron since
September 1997 and the vice chairman of the board of directors since
September 1998. He was the president of Thermo Electron from January 1997 until
September 1998, its chief financial officer from 1988 until his retirement in
December 1998, and an executive vice president from 1986 until 1997.
Mr. Hatsopoulos is also a director of US Liquids Inc. and the following
affiliates of Thermo Electron: Thermedics Inc., Thermo Fibertek Inc., Thermo
Instrument Systems Inc. and Thermo TerraTech. Mr. Hatsopoulos is the brother of
Dr. George N. Hatsopoulos, a director and chairman of the board of directors of
Thermo Electron. Mr. Hatsopoulos' business address is 45 First Street, Waltham,
Massachusetts 02454.
BRIAN D. HOLT: Chief Operating Officer, Environment and Energy
Brian D. Holt became the chief operating officer, environment and energy, of
Thermo Electron in September 1998. Mr. Holt has been the president and chief
executive officer of Thermo Ecotek Corporation, a majority-owned subsidiary of
Thermo Electron, since February 1994, and has been a director of Thermo Ecotek
Corporation since January 1995. For more than five years prior to his
appointment as an officer of Thermo Ecotek Corporation, he was the president and
chief executive officer of Pacific Generation Company, a financier, builder,
owner and operator of independent power facilities. Mr. Holt is also a director
of the following affiliates of Thermo Electron: the Company, ThermoRetec and
Thermo TerraTech. Mr. Holt's business address is 245 Winter Street, Suite 300,
Waltham, Massachusetts 02451.
FRANK JUNGERS: Director
Frank Jungers has been a director of Thermo Electron since 1978.
Mr. Jungers has been a consultant on business and energy matters since 1977.
From 1974 through 1977, Mr. Jungers was employed by the Arabian American Oil
Company as the chairman and chief executive officer. Mr. Jungers is also a
director of The AES Corporation, Donaldson, Lufkin & Jenrette, Inc., Georgia-
Pacific Corporation, Statia Terminals Group N.V. and the following affiliates of
Thermo Electron: ONIX Systems Inc., Thermo Ecotek Corporation and ThermoQuest
Corporation. His business address is 822 N.W. Murray, Suite 242, Portland,
Oregon 97229.
JOHN T. KEISER: Chief Operating Officer, Biomedical
John T. Keiser became the chief operating officer, biomedical, of Thermo
Electron in September 1998. Mr. Keiser has been president of Thermedics Inc., a
majority-owned subsidiary of Thermo Electron, since March 1994, its chief
executive officer since December 1998 and its senior vice president from 1994
until March 1998. Mr. Keiser was the president of the Eberline Instrument
division of Thermo Instrument from 1985 to July 1994. Mr. Keiser is also a
director of the following affiliates of Thermo Electron: Metrika Systems
Corporation, Thermedics Detection Inc., ThermoTrex Corporation, ThermoLase
Corporation, Trex Medical Corporation, Thermo Sentron Inc. and Thermo
Cardiosystems Inc. He has also been the president of Thermo Biomedical Inc., a
wholly owned subsidiary of Thermo Electron, since 1994.
PAUL F. KELLEHER: Senior Vice President, Finance and Administration
Paul F. Kelleher has been the senior vice president, finance and
administration, of Thermo Electron since June 1997, and served as its vice
president, finance from 1987 until 1997. Mr. Kelleher served as Thermo
Electron's controller from 1982 until January 1996. Mr. Kelleher is also the
chief accounting
69
<PAGE>
officer of the Company and Thermo TerraTech, and is a director of ThermoLase
Corporation, an affilate of Thermo Electron.
EARL R. LEWIS: Chief Operating Officer, Measurement and Detection
Earl R. Lewis became the chief operating officer, measurement and detection
of Thermo Electron in September 1998, and had been a vice president of Thermo
Electron since September 1996. Mr. Lewis has been a director and chief executive
officer of Thermo Instrument Systems Inc. ("Thermo Instrument") since
January 1998, and has been president of Thermo Instrument since March 1997. He
was the chief operating officer of Thermo Instrument from January 1996 to
January 1998. Prior to that time, he was an executive vice president of Thermo
Instrument from January 1996 to March 1997, a senior vice president from
January 1994 to January 1996 and a vice president from March 1992 to
January 1994. Prior to his appointment as Thermo Instrument's chief executive
officer, Mr. Lewis was also the chief executive officer of Thermo Optek
Corporation, a majority-owned subsidiary of Thermo Instrument, from its
inception in August 1995 to January 1998 and was the president of its
predecessor, Thermo Jarrell Ash Corporation for more than five years prior to
1995. Mr. Lewis is also a director of SpectRx Inc. and the following affiliates
of Thermo Electron: FLIR Systems, Inc., Metrika Systems Corporation, ONIX
Systems Inc., Spectra-Physics Lasers, Inc., Thermo BioAnalysis Corporation,
Thermo Optek Corporation, ThermoQuest Corporation and Thermo Vision Corporation.
ROBERT A. MCCABE: Director
Robert A. McCabe has been a director of Thermo Electron since 1962. He has
been the chairman of Pilot Capital Corporation, which is engaged in private
investments, since 1998. Mr. McCabe was president of Pilot Capital Corporation
from 1987 to 1998. Prior to that time, Mr. McCabe was a managing director of
Lehman Brothers Inc., an investment banking firm. Mr. McCabe is also a director
of Atlantic Bank & Trust Company, Borg-Warner Security Corporation, Church &
Dwight Company and Thermo Optek Corporation, an affiliate of Thermo Electron.
His business address is Pilot Capital Corporation, 444 Madison Avenue, Suite
2103, New York, New York 10022.
THEO MELAS-KYRIAZI: Chief Financial Officer and Vice President
Theo Melas-Kyriazi has been the chief financial officer of Thermo Electron
since January 1999 and a vice president since March 1998. In addition,
Mr. Melas-Kyriazi was the treasurer of Thermo Electron from May 1988 to
August 1994. Mr. Melas-Kyriazi is the chief financial officer of the Company and
Thermo TerraTech. Mr. Melas-Kyriazi is also a director of the following
affiliates of Thermo Electron: ThermoSpectra Corporation and ThermoRetec.
HUTHAM S. OLAYAN: Director
Hutham S. Olayan has been a director of Thermo Electron since 1987. She has
served since 1995 as the president and a director of Olayan America Corporation,
a member of the Olayan Group, and as the president and a director of Competrol
Real Estate Limited, another member of the Olayan Group, from 1986 until its
merger into Olayan America Corporation in 1997. The surviving company is engaged
in private investments, including real estate, and advisory services. In
addition, from 1985 to 1994, Ms. Olayan served as the president and a director
of Crescent Diversified Limited, another member of the Olayan Group engaged in
private investments. Ms. Olayan is also a director of Trex Medical Corporation,
an affiliate of Thermo Electron. Ms. Olayan is a citizen of Saudi Arabia. Her
business address is Suite 1100, 505 Park Avenue, New York, New York 10022.
ROBERT W. O'LEARY: Director
Robert W. O'Leary has been a director of Thermo Electron since June 1998. He
has been the president and the chairman of Premier Inc., a strategic alliance of
not-for-profit health care and hospital
70
<PAGE>
systems, since 1995. From 1990 to 1995, Mr. O'Leary was the chairman of American
Medical International, Inc., one of the three predecessor entities of
Premier Inc. His business address is Premier, Inc., 12225 El Camino Real, San
Diego, California 92130.
WILLIAM A. RAINVILLE: Chief Operating Officer, Recycling and Resource
Recovery
William A. Rainville became the chief operating officer, recycling and
resource recovery, of Thermo Electron in September 1998. Prior to that time,
Mr. Rainville had been a senior vice president of Thermo Electron since
March 1993 and was a vice president of Thermo Electron from 1986 to 1993.
Mr. Rainville has been the president and chief executive officer of Thermo
Fibertek Inc., a majority-owned subsidiary of Thermo Electron, since its
inception in 1991 and a director since January 1992. From 1984 until
January 1993, Mr. Rainville was the president and chief executive officer of
Thermo Web Systems Inc., a subsidiary of Thermo Fibertek Inc. Mr. Rainville is
also a director of the following affiliates of Thermo Electron: Thermo Ecotek
Corporation, Thermo Fibergen Inc., ThermoRetec, and Thermo TerraTech. His
business address is 245 Winter Street, Waltham, Massachusetts 02451.
RICHARD F. SYRON: President, Chief Executive Officer and Director
Richard F. Syron has been the president and chief executive officer of
Thermo Electron since June 1999 and a director of Thermo Electron since
September 1997. From April 1994 to May 1999, Dr. Syron was the chairman and
chief executive officer of the American Stock Exchange, Inc., which has offices
located at 86 Trinity Place, New York, New York 10006. From January 1989 through
April 1994, he was the president and chief executive officer of the Federal
Reserve Bank of Boston. Prior to that time, he held a variety of senior
positions with the Federal Home Loan Bank of Boston, the Federal Reserve Bank of
Boston, the Board of Governors of the Federal Reserve System and the U.S.
Department of Treasury. Dr. Syron is also a director of Dreyfus Corporation, The
John Hancock Corporation, and the following affiliates of Thermo Electron:
Thermo Instrument Systems Inc., Thermedics Inc. and Thermo Fibertek Inc.
ROGER D. WELLINGTON: Director
Roger D. Wellington has been a director of Thermo Electron since 1986.
Mr. Wellington serves as the president and chief executive officer of Wellington
Consultants, Inc. and of Wellington Associates Inc., international business
consulting firms he founded in 1994 and 1989, respectively. Prior to 1989,
Mr. Wellington served as the chairman of the board of Augat Inc., a manufacturer
of electromechanical components and systems, for more than five years. Prior to
1988, Mr. Wellington also served as the chief executive officer and president of
Augat Inc. for more than ten years. Mr. Wellington is also a director of
Photoelectron Corporation and Thermo Fibergen Inc., an affiliate of Thermo
Electron.
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS AND DIRECTORS OF THERMO ELECTRON
The following table sets forth the beneficial ownership of Common Stock, as
of October 2, 1999, with respect to (i) each director and current executive
officer of Thermo Electron and (ii) all directors and current executive officers
as a group.
While certain directors and executive officers of Thermo Electron are also
directors and executive officers of majority-owned subsidiaries of Thermo
Electron, all such persons disclaim beneficial ownership
71
<PAGE>
of the shares of Common Stock owned by Thermo Electron or by such majority-owned
subsidiaries, as the case may be.
<TABLE>
<CAPTION>
THE RANDERS KILLAM
GROUP INC.(2)
------------------------
NUMBER OF PERCENTAGE
NAME(1) SHARES OF CLASS (%)
- ------- --------- ------------
<S> <C> <C>
John M. Albertine...................................... 0 *
Samuel W. Bodman....................................... 0 *
Peter O. Crisp......................................... 0 *
Elias P. Gyftopoulos................................... 0 *
George N. Hatsopoulos.................................. 48,000 *
John N. Hatsopoulos.................................... 48,000 *
Brian D. Holt.......................................... 4,000 *
Frank Jungers.......................................... 0 *
John T. Keiser......................................... 4,000 *
Paul F. Kelleher....................................... 8,000 *
Earl R. Lewis.......................................... 4,000 *
Robert A. McCabe....................................... 0 *
Theo Melas-Kyriazi..................................... 0 *
Hutham S. Olayan....................................... 0 *
Robert W. O'Leary...................................... 0 *
William A. Rainville................................... 24,000 *
Richard F. Syron....................................... 0 *
Roger D. Wellington.................................... 0 *
All directors and current executive officers as a group
(18 persons)......................................... 140,000 *
</TABLE>
- ------------------------
* Reflects ownership of less than 1.0% of the outstanding Common Stock.
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) The shares of Common Stock beneficially owned by Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Holt, Mr. Keiser, Mr. Kelleher, Mr. Lewis, Mr. Rainville
and all directors and current executive officers as a group include 48,000,
48,000, 4,000, 4,000, 8,000, 4,000, 24,000 and 140,000 shares, respectively,
that such person or members of the group had the right to acquire within
60 days of October 2, 1999, through the exercise of stock options. No
director or current executive officer beneficially owned more than 1.0% of
the Common Stock outstanding as of October 2, 1999; all directors and
current executive officers as a group beneficially owned less than 1.0% of
the Common Stock outstanding as of such date.
THE MERGER SUB
The Merger Sub is a newly formed Delaware corporation organized at the
direction of Thermo Electron for the sole purpose of facilitating the Merger and
has not conducted any prior business.
The principal executive offices of the Merger Sub are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
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DIRECTOR AND EXECUTIVE OFFICER OF THE MERGER SUB
THEO MELAS-KYRIAZI: President and Director
Theo Melas-Kyriazi has been the Merger Sub's president and sole director
since the Merger Sub's formation in May 1999. For further information, please
see descriptions under "Directors and Executive Officers of Thermo TerraTech,"
and "Directors and Executive Officers of Thermo Electron," above.
OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICER AND DIRECTOR OF THE MERGER SUB
Please see "Ownership of Common Stock by Executive Officers and Directors of
Thermo TerraTech" and "Ownership of Common Stock by Executive Officers and
Directors of Thermo Electron," above, for information regarding the ownership of
Common Stock by Theo Melas-Kyriazi, the sole director and executive officer of
the Merger Sub.
To the knowledge of the Company, all of the above-listed officers and
directors of Thermo TerraTech, Thermo Electron, and the Merger Sub, as well as
the officers and directors of the Company, intend to vote their shares of Common
Stock to approve the Merger Agreement.
INDEPENDENT PUBLIC ACCOUNTANTS
The Consolidated Balance Sheets as of April 3, 1999 and April 4, 1998, and
the related Consolidated Statements of Operations, Shareholders' Investment, and
Cash Flows for each of the three years in the period ended April 3, 1999,
included in or incorporated by reference in this Proxy Statement have been
audited by Arthur Andersen LLP, independent public accountants, as stated in
their report. Representatives of Arthur Andersen LLP are not expected to be at
the Special Meeting.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of
Randers/Killam and to be presented at such meeting must have been received by
the Company for inclusion in the proxy statement and form of proxy no later than
December 14, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 under the Exchange Act (relating to proposals to be
presented at the meeting but not included in the Company's proxy statement and
form of proxy), will be considered untimely, and thus the Company's proxy may
confer discretionary voting authority on the persons named in the proxy with
regard to such proposals, if received after March 1, 2000.
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Exchange Act, and
Rule 13e-3 promulgated thereunder, the Company, as issuer of the class of equity
securities that is the subject of the Rule 13e-3 transaction, together with the
Merger Sub, Thermo TerraTech and Thermo Electron, have filed a Schedule 13E-3
with the Commission with respect to the transactions contemplated by the Merger
Agreement. As permitted by the rules and regulations of the Commission, this
Proxy Statement omits certain information, exhibits and undertakings contained
in the Schedule 13E-3. Such additional information can be inspected at and
obtained from the Commission in the manner set forth below under "AVAILABLE
INFORMATION."
Statements contained in this Proxy Statement or in any document incorporated
herein by reference as to the contents of any contract or other document
referred to herein or therein are not necessarily complete and in each instance
reference is made to such contract or other document filed as an exhibit to the
Schedule 13E-3 or such other document, and each such statement shall be deemed
qualified in its entirety by such reference.
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<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements, and other
information with the Commission. The reports, proxy statements, and other
information filed with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington D.C. 20549 and at the following Regional Offices of
the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. The Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company. The same information is also available on the
Internet at http://www.FreeEDGAR.com. The Common Stock is listed on the AMEX,
and such material that relates to the Company may also be inspected at the
offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New
York 10006-1881. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT,
IN CONNECTION WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY,
THERMO TERRATECH, THERMO ELECTRON OR THE MERGER SUB. THE DELIVERY OF THIS PROXY
STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY, THE MERGER SUB, THERMO TERRATECH AND THERMO ELECTRON SINCE THE DATE
HEREOF OR THAT THE INFORMATION IN THIS PROXY STATEMENT OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN IS CURRENT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
(File No. 0-18095) are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended April 3,
1999, as amended;
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
July 3, 1999;
3. The Company's Current Report on Form 8-K, filed with the Commission on
May 12, 1999, regarding modifications to the previously announced
reorganization plan involving the Company;
4. The Company's Current Report on Form 8-K, filed with the Commission on
May 25, 1999, regarding certain pretax charges to be taken by the Company;
5. The Company's Current Report on Form 8-K, filed with the Commission on
October 21, 1999, regarding the execution of the Merger Agreement; and
6. The description of the Common Stock that is contained in the Company's
Registration Statement on Form 8-A filed under the Exchange Act, as amended.
Copies of the documents listed above (other than exhibits thereto that are
not specifically incorporated by reference herein) are available, without
charge, to any person, including any beneficial owner of Common Stock, to whom
this Proxy Statement is delivered, upon oral or written request to Sandra L.
Lambert, Secretary, The Randers Killam Group Inc., c/o Thermo Electron
Corporation, 81 Wyman Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046
(telephone (781) 622-1000).
In addition, the Company's Annual Report on Form 10-K for the fiscal year
ended April 3, 1999, the Amendment No. 1 on Form 10-K/A to its Annual Report on
Form 10-K for the fiscal year ended April 3, 1999 and its Quarterly Report on
Form 10-Q for the quarter ended July 3, 1999 are attached as Appendix E, F and
G, respectively, to this Proxy Statement.
Any statements contained in a document incorporated or deemed to be
incorporated herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded. All information
appearing in this Proxy Statement is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THERMO ELECTRON CORPORATION,
RK ACQUISITION CORPORATION
AND
THE RANDERS KILLAM GROUP INC.
DATED AS OF OCTOBER 19, 1999
<PAGE>
<TABLE>
<C> <S> <C>
ARTICLE I THE MERGER................................................................ A-3
1.1. The Merger.................................................. A-3
1.2. Effective Time; Closing..................................... A-3
1.3. Effect of the Merger........................................ A-3
1.4. Certificate of Incorporation; Bylaws........................ A-4
1.5. Directors and Officers...................................... A-4
1.6. Effect on Capital Stock..................................... A-4
1.7. Surrender of Certificates................................... A-5
No Further Ownership Rights in Randers/Killam Common
1.8. Stock..................................................... A-6
1.9. Lost, Stolen or Destroyed Certificates...................... A-6
1.10. Closing of Transfer Books................................... A-6
1.11. Dissenting Shares........................................... A-6
1.12. Taking of Necessary Action; Further Action.................. A-7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF RANDERS/KILLAM......................... A-7
2.1. Organization of Randers/Killam.............................. A-7
2.2. Randers/Killam Capital Structure............................ A-7
2.3. Authority................................................... A-8
2.4. Board Approval.............................................. A-8
2.5. Fairness Opinion............................................ A-8
2.6. Schedule 13E-3; Proxy Statement............................. A-8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND MERGER SUB........
A-9
3.1. Organization................................................ A-9
3.2. Authority................................................... A-10
3.3. Merger Sub.................................................. A-10
3.4. Information Provided to Investment Bankers.................. A-10
3.5. Compliance with Agreements.................................. A-10
3.6. Schedule 13E-3; Proxy Statement............................. A-10
3.7. Financial Resources......................................... A-10
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...................................... A-11
4.1. Conduct of Business by Randers/Killam....................... A-11
4.2. Conduct of Business by Thermo Electron...................... A-11
ARTICLE V ADDITIONAL AGREEMENTS..................................................... A-11
5.1. Schedule 13E-3; Proxy Statement; Other Filings.............. A-11
5.2. Meeting of Randers/Killam Stockholders...................... A-12
5.3. Access to Information....................................... A-12
5.4. Public Disclosure........................................... A-13
5.5. Legal Requirements.......................................... A-13
5.6. Notification of Certain Matters............................. A-13
5.7. Best Efforts and Further Assurances......................... A-13
5.8. Stock Option Plans; Reservation of Shares................... A-14
5.9. Thermo Electron Form S-8.................................... A-14
5.10. Indemnification; Insurance.................................. A-14
5.11. Deferred Compensation Plan.................................. A-16
5.12. Compliance by Merger Sub.................................... A-16
5.13. NYSE Listing................................................ A-16
ARTICLE VI CONDITIONS TO THE MERGER................................................. A-16
Conditions to Obligations of Each Party to Effect the
6.1. Merger.................................................... A-16
</TABLE>
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<TABLE>
<C> <S> <C>
Additional Conditions to the Obligations of
6.2. Randers/Killam............................................ A-16
Additional Conditions to the Obligations of Thermo Electron
6.3. and Merger Sub............................................ A-17
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER....................................... A-18
7.1. Termination................................................. A-18
7.2. Notice of Termination; Effect of Termination................ A-18
7.3. Fees and Expenses........................................... A-19
7.4. Amendment................................................... A-19
7.5. Extension; Waiver........................................... A-19
ARTICLE VIII GENERAL PROVISIONS..................................................... A-19
8.1. Non-Survival of Representations and Warranties.............. A-19
8.2. Notices..................................................... A-19
8.3. Counterparts................................................ A-20
8.4. Entire Agreement............................................ A-20
8.5. Severability................................................ A-20
8.6. Other Remedies; Specific Performance........................ A-20
8.7. Governing Law............................................... A-21
8.8. Assignment.................................................. A-21
8.9. Headings.................................................... A-21
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of October 19,
1999 is by and among Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"), RK Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of TT Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of Thermo Electron ("Merger Sub"), and The Randers
Killam Group Inc., a Delaware corporation ("Randers/Killam").
RECITALS
A. Thermo Electron and its majority-owned subsidiary, Thermo TerraTech Inc.
("TerraTech"), own approximately 1% and 95%, respectively, of the outstanding
shares of common stock, par value $.0001 per share, of Randers/Killam (the
"Randers/Killam Common Stock"), and Thermo Electron desires to acquire all of
the outstanding shares of Randers/Killam Common Stock not owned by Thermo
Electron or TerraTech.
B. Thermo Electron has formed the Merger Sub as a subsidiary with the
intent of causing it to merge with Randers/Killam, as described in this
Agreement.
C. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Thermo
Electron and Randers/Killam will enter into a business combination transaction
pursuant to which Merger Sub will merge with and into Randers/ Killam (the
"Merger").
D. The Board of Directors of Thermo Electron (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of Thermo Electron, and (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement.
E. The Board of Directors of Randers/Killam, on the recommendation of a
special committee of the Board of Directors (the "Special Committee"),
consisting of a director of Randers/Killam who is not an officer or director of
Thermo Electron or TerraTech or an officer of Randers/Killam, (i) has determined
that this Agreement, including the Cash Merger Consideration (as defined below),
and the transactions contemplated by this Agreement, are fair to, and in the
best interests of, the stockholders of Randers/ Killam (other than Thermo
Electron and TerraTech), (ii) has approved and declared the advisability of this
Agreement, the Merger and the other transactions contemplated by this Agreement
and (iii) has resolved to recommend the approval and adoption of this Agreement
by the stockholders of Randers/Killam.
F. Adams, Harkness & Hill ("AH&H") has delivered to the Special Committee,
for its consideration, and for delivery to the stockholders of Randers/Killam,
its written opinion that, subject to the various assumptions and limitations set
forth therein, as of the date of such opinion the consideration to be received
by the stockholders of Randers/Killam (other than TerraTech and Thermo Electron)
is fair to such stockholders from a financial point of view.
G. Thermo Electron, Randers/Killam and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into
Randers/Killam, the separate corporate existence of Merger Sub shall cease and
Randers/
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Killam shall continue as the surviving corporation. Randers/Killam as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the Surviving Corporation shall cause the Merger to be consummated by filing a
Certificate of Merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of the DGCL
(the time of such filing, or such later time as may be agreed in writing by the
parties and specified in the Certificate of Merger, being the "Effective Time"
and the date on which the Effective Time occurs being the "Effective Date") as
soon as practicable on the Closing Date (as herein defined). Unless the context
otherwise requires, the term "Agreement" as used herein refers collectively to
this Agreement and the Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the executive offices of Thermo Electron at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date"). At the Closing, (i) Randers/Killam shall
deliver to Thermo Electron the various certificates and instruments required
under Article VI, (ii) Thermo Electron and Merger Sub shall deliver to
Randers/Killam the various certificates and instruments required under
Article VI and (iii) Randers/Killam shall execute and file the Certificate of
Merger with the Secretary of State of the State of Delaware, in accordance with
the applicable provisions of the DGCL.
1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Randers/Killam and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Randers/Killam and Merger Sub shall become
the debts, liabilities and duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Subject to the requirements of Section 5.10 hereof, at the Effective
Time, the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation.
(b) Subject to the requirements of Section 5.10 hereof, the Bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be,
at the Effective Time, the Bylaws of the Surviving Corporation until
thereafter amended.
1.5. DIRECTORS AND OFFICERS. The directors of Randers/Killam immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, to serve until their respective successors are duly elected or
appointed and qualified. The officers of Randers/Killam immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, to serve
until their successors are duly elected or appointed or qualified.
1.6. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Randers/Killam or the
holders of any of the following securities:
(a) CONVERSION OF RANDERS/KILLAM COMMON STOCK. Subject to the balance of
this Section 1.6, each share of Randers/Killam Common Stock issued and
outstanding immediately prior to the Effective Time will be automatically
converted into the right to receive Four Dollars and Fifty Cents in cash
($4.50) (subject to adjustment pursuant to Section 1.6(g) hereof, the "Cash
Merger Consideration") upon surrender of the certificate representing such
share of Randers/Killam Common Stock in the manner provided in Section 1.7
(or in the case of a lost, stolen or destroyed certificate, upon delivery of
an affidavit (and bond, if required) in the manner provided in
Section 1.9). As of the Effective Time, all such shares of Randers/Killam
Common Stock shall no longer be outstanding and shall be
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<PAGE>
automatically canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Randers/Killam Common Stock
shall cease to have any rights with respect thereto, except the right to
receive the Cash Merger Consideration as described in this subsection
1.6(a).
(b) STOCK OPTION PLANS. All options to purchase Randers/Killam Common
Stock outstanding immediately prior to the Effective Time under The Randers
Group Incorporated 1988 Stock Option Plan and The Randers Group Incorporated
Equity Incentive Plan, each as amended (together, the "Randers/Killam Stock
Option Plans"), shall be converted into options to purchase shares of the
common stock, $1.00 par value per share, of Thermo Electron (the "Thermo
Common Stock") in accordance with Section 5.8 hereof.
(c) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one validly issued,
fully paid and non-assessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(d) TREASURY STOCK; AFFILIATE STOCK. Notwithstanding any other provision
of this Agreement, each share of Randers/Killam Common Stock issued and
outstanding and owned by Thermo Electron or any wholly owned subsidiary of
Thermo Electron, together with all treasury shares held by Randers/ Killam
immediately prior to the Effective Time shall cease to be outstanding, and
shall automatically be cancelled and retired without payment of any
consideration therefor, cash or otherwise, and cease to exist.
(e) ADJUSTMENTS TO CASH MERGER CONSIDERATION. The Cash Merger
Consideration shall be adjusted to reflect fully the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into, or exercisable or exchangeable
for, Randers/Killam Common Stock), recapitalization or other like change
without receipt of consideration with respect to Randers/Killam Common Stock
occurring on or after the date hereof and prior to the Effective Time.
1.7. SURRENDER OF CERTIFICATES.
(a) PAYMENT AGENT. Prior to the Effective Time, Thermo Electron shall
authorize American Stock Transfer & Trust Company to act as the payment
agent (the "Payment Agent") in the Merger. Immediately following the
Effective Time, Thermo Electron shall deposit with the Payment Agent, in
trust for the benefit of the holders of certificates (the "Certificates")
representing shares of Randers/ Killam Common Stock converted pursuant to
Section 1.6(a) for payment in accordance with the provisions of this
Article I, cash in an amount equal to the product of the Cash Merger
Consideration multiplied by the number of shares of Randers/Killam Common
Stock entitled to conversion for payment pursuant to Section 1.6(a).
(b) EXCHANGE PROCEDURES. As soon as practicable after, and in no event
more than three business days after, the Effective Time, Thermo Electron
shall cause the Payment Agent to mail to each holder of record (as of the
Effective Time) of a Certificate (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Payment Agent and shall otherwise be in such form and have such other
provisions as Thermo Electron may reasonably specify and as are reasonably
acceptable to Randers/ Killam, with the approval of the Special Committee)
and (ii) instructions for effecting the exchange of the Certificates for the
Cash Merger Consideration. Upon surrender of a Certificate for cancellation
to the Payment Agent, together with such letter of transmittal duly
completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange
therefor payment of the Cash Merger Consideration multiplied by the number
of shares of Randers/Killam Common Stock represented by such Certificate,
without interest, and the Certificate so surrendered shall forthwith be
cancelled. In the event of a transfer of ownership of shares of
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<PAGE>
Randers/Killam Common Stock which is not registered in the transfer records
of Randers/Killam as of the Effective Time, the Cash Merger Consideration
may be paid in accordance with this Article I to a transferee if the
Certificate evidencing such shares is presented to the Payment Agent,
accompanied by all documents required by law to evidence and effect such
transfer pursuant to this Section. Until so surrendered, each outstanding
Certificate will be deemed from and after the Effective Time, for all
corporate purposes, to evidence only the right to receive payment of the
Cash Merger Consideration for each share of Randers/Killam Common Stock
represented on such Certificate.
(c) TRANSFERS OF OWNERSHIP. If payment of the Cash Merger Consideration
is to be made to any person other than the person in whose name the
Certificate surrendered in exchange therefor is registered, it will be a
condition of such payment that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
person requesting such payment will have paid to Thermo Electron or any
agent designated by it any transfer or other taxes required by reason of
payment to a person other than the registered holder of the Certificate
surrendered, or established to the satisfaction of Thermo Electron or any
agent designated by it that such tax has been paid or is not payable.
(d) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Payment Agent, Thermo Electron, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of
Randers/Killam Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(e) RESPONSIBILITY; TERM. During the term of its engagement, the Payment
Agent shall make the payments referred to in Section 1.6(a) out of the funds
supplied by Thermo Electron. Promptly following the date that is six months
after the Effective Date, the Payment Agent shall, upon request by Thermo
Electron, deliver to Thermo Electron all cash, Certificates and other
documents in its possession relating to the transactions described in this
Agreement, and the Payment Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing shares of Randers/ Killam
Common Stock may surrender such Certificate to Thermo Electron and (subject
to applicable abandoned property, escheat and similar laws) receive in
exchange therefor the Cash Merger Consideration multiplied by the number of
shares of Randers/Killam Common Stock represented by such Certificate,
without any interest thereon.
1.8. NO FURTHER OWNERSHIP RIGHTS IN RANDERS/KILLAM COMMON STOCK. All
amounts paid upon the surrender of shares of Randers/Killam Common Stock in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to such shares of Randers/Killam Common
Stock.
1.9. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Payment Agent shall pay the
aggregate Cash Merger Consideration in respect of such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof; provided, however, that, as a condition precedent to the payment
thereof, the owner of such lost, stolen or destroyed Certificates shall deliver
a bond in such sum as Thermo Electron or the Payment Agent may reasonably direct
as indemnity against any claim that may be made against Thermo Electron or the
Payment Agent with respect to the Certificates alleged to have been lost, stolen
or destroyed, unless Thermo Electron waives such requirement in writing.
1.10. CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Randers/Killam shall be closed and no transfer of Randers/Killam Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to Thermo Electron, they shall be canceled and exchanged for rights to
receive the applicable Cash Merger Consideration as provided in this Article I.
1.11. DISSENTING SHARES. Notwithstanding any other provision of this
Agreement, shares of Randers/ Killam Common Stock that are outstanding
immediately prior to the Effective Time and which are held by
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stockholders (i) who have not voted in favor of or consented to the Merger,
(ii) who shall have demanded properly in writing appraisal of such shares in
accordance with DGCL Section 262 and (iii) who shall not have withdrawn such
demand or otherwise forfeited appraisal rights (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the Cash
Merger Consideration. Such stockholders shall, as of the Effective Time, cease
to retain any rights with respect to the Randers/Killam Common Stock, except as
provided in the DGCL, including the right to receive payment of the appraised
value of the shares held by them in accordance with the provisions of
Section 262, provided that all Dissenting Shares held by stockholders (i) who
shall have failed to perfect or lost their rights to appraisal of such shares
under Section 262, or (ii) who have withdrawn their demand for appraisal within
60 days after the Effective Date and accept the terms offered upon the Merger in
accordance with Section 262(e), shall thereupon be, or be deemed to have been,
converted into and to have become exchangeable, as of the Effective Time, for
the right to receive, without any interest thereon, the Cash Merger
Consideration, upon surrender, in the manner provided in Section 1.7, of the
Certificates that formerly evidenced such shares without the prior consent of
Thermo Electron.
1.12. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Randers/Killam and Merger Sub, the officers and directors of
the Surviving Corporation are fully authorized in the name of Randers/Killam and
Merger Sub or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF RANDERS/KILLAM
Randers/Killam represents and warrants to Thermo Electron and Merger Sub as
follows:
2.1. ORGANIZATION OF RANDERS/KILLAM. Randers/Killam and each of its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, has the corporate or similar power to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed by Randers/Killam to be conducted, and is duly qualified to do
business and in good standing as a foreign corporation or other legal entity in
each jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Randers/Killam. In this Agreement, the term "Material Adverse
Effect" used in reference to Randers/ Killam means any event, change or effect,
that is or is reasonably likely to be, individually or in the aggregate with
other events, changes or effects, materially adverse to the financial condition,
assets, liabilities, results of operations or business of Randers/Killam and its
subsidiaries, taken as a whole.
2.2. RANDERS/KILLAM CAPITAL STRUCTURE. The authorized capital stock of
Randers/Killam consists of 30,000,000 shares of Common Stock, par value $.0001
per share, of which there were 25,434,719 shares issued and outstanding as of
October 2, 1999, and no shares in treasury as of October 2, 1999. All
outstanding shares of Randers/Killam Common Stock are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of Randers/Killam
or any agreement or document to which Randers/Killam is a party or by which it
is bound. As of October 2, 1999, an aggregate of 2,097,175 shares of
Randers/Killam Common Stock, net of exercises, were reserved for issuance to
employees, consultants and non-employee directors pursuant to the Randers/Killam
Stock Option Plans, under which options were outstanding for an aggregate of
1,272,175 shares as of such date. All shares of Randers/Killam Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and non-assessable.
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2.3. AUTHORITY.
(a) Randers/Killam has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Randers/Killam, subject only to
the adoption of this Agreement by Randers/Killam's stockholders and the
filing and recording of the Certificate of Merger pursuant to the DGCL.
Under the DGCL, Randers/Killam's stockholders may adopt this Agreement by
vote of the holders of a majority of the outstanding shares of
Randers/Killam Common Stock. This Agreement has been duly executed and
delivered by Randers/Killam, and assuming the due authorization, execution
and delivery by Thermo Electron and Merger Sub, constitutes the valid and
binding obligation of Randers/Killam, enforceable in accordance with its
terms. The execution and delivery of this Agreement by Randers/Killam do
not, and the performance of this Agreement by Randers/Killam will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of
Randers/Killam or (ii) subject to obtaining the adoption by Randers/Killam's
stockholders of this Agreement as contemplated in Section 5.2 and compliance
with the requirements set forth in Section 2.3(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Randers/Killam or any of its material subsidiaries or by which its or their
respective properties is bound, except, with respect to clause (ii), for any
such conflicts, violations, defaults or other occurrences that would not
have a Material Adverse Effect on Randers/Killam or the Surviving
Corporation.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to Randers/Killam in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of the Certificate of Merger with the Secretary of State of Delaware,
(ii) the filing of the Proxy Statement and the Schedule 13E-3 (as defined in
Section 2.6) with the U.S. Securities and Exchange Commission ("SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws.
2.4. BOARD APPROVAL. The Board of Directors of Randers/Killam, upon
recommendation of the Special Committee that this Agreement, including the Cash
Merger Consideration, is fair to, and in the best interests of, the stockholders
of Randers/Killam (other than Thermo Electron and TerraTech), has, as of the
date of this Agreement, unanimously (i) adopted a resolution approving this
Agreement and declaring its advisability, (ii) determined that the Merger is
fair to, and in the best interests of, Randers/ Killam and its stockholders, and
(iii) determined to recommend that the stockholders of Randers/Killam approve
this Agreement.
2.5. FAIRNESS OPINION. The Special Committee has received an opinion from
AH&H dated October 18, 1999 that, as of such date, the consideration to be
received by Randers/Killam's stockholders in the Merger is fair, from a
financial point of view, to Randers/Killam's stockholders other than Thermo
Electron and TerraTech.
2.6 SCHEDULE 13E-3; PROXY STATEMENT. The information supplied by
Randers/Killam for inclusion in the Rule 13e-3 Transaction Statement on
Schedule 13E-3 (such Schedule, as amended or supplemented, is referred to herein
as the "Schedule 13E-3") (including any information incorporated by reference in
the Schedule 13E-3 from other filings made by Randers/Killam with the SEC) or
(other than with respect to the information supplied by Thermo Electron and/or
Merger Sub) the proxy statement to be sent to the stockholders of Randers/Killam
in connection with the meeting of Randers/Killam's stockholders to consider the
adoption of this Agreement and approval of the Merger (the "Randers/Killam
Stockholders'
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Meeting") (such proxy statement, as amended or supplemented, is referred to
herein as the "Proxy Statement") shall not, on the date the Proxy Statement is
first mailed to stockholders, at the time of the Randers/Killam Stockholders'
Meeting or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading. The Proxy Statement will
comply (other than with respect to information relating to Thermo Electron
and/or Merger Sub) as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND MERGER SUB
Thermo Electron and Merger Sub, jointly and severally, represent and warrant
to Randers/Killam as follows:
3.1. ORGANIZATION. Thermo Electron is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, each has the corporate power
to own, lease and operate its property and to carry on its business as now being
conducted and as proposed to be conducted, and is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have a Material Adverse Effect on Thermo
Electron. In this Agreement, the term "Material Adverse Effect" used in
reference to Thermo Electron means any event, change or effect, that is or is
reasonably likely to be, individually or in the aggregate with other events,
changes or effects, materially adverse to the financial condition, assets,
liabilities, results of operations or business of Thermo Electron and its
subsidiaries, taken as a whole.
3.2. AUTHORITY.
(a) Each of Thermo Electron and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Thermo
Electron and Merger Sub, subject only to the filing and recording of the
Certificate of Merger pursuant to the DGCL. This Agreement has been duly
executed and delivered by each of Thermo Electron and Merger Sub and,
assuming the due authorization, execution and delivery of this Agreement by
Randers/Killam, this Agreement constitutes the valid and binding obligation
of each of Thermo Electron and Merger Sub, enforceable in accordance with
its terms. The execution and delivery of this Agreement by each of Thermo
Electron and Merger Sub do not, and the performance of this Agreement by
each of Thermo Electron and Merger Sub will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of Thermo Electron or the
Certificate of Incorporation or Bylaws of Merger Sub or of any material
subsidiary, direct or indirect, of Thermo Electron (each, a "Material Thermo
Subsidiary"), (ii) subject to compliance with the requirements set forth in
Section 3.2(b) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Thermo Electron or any Material
Thermo Subsidiaries (including Merger Sub, but excluding Randers/Killam and
its wholly owned subsidiaries) or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair Thermo Electron's rights or alter
the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the properties or assets
of Thermo Electron or any Material Thermo Subsidiaries (including Merger
Sub, but excluding Randers/ Killam and its wholly owned subsidiaries)
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Thermo Electron or any Material Thermo Subsidiaries (including Merger Sub,
but excluding Randers/Killam
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and its wholly owned subsidiaries) is a party or by which Thermo Electron or
any Material Thermo Subsidiaries (including Merger Sub, but excluding
Randers/Killam and its wholly owned subsidiaries) or its or any of their
respective properties are bound or affected, except, with respect to clauses
(ii) and (iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Material Adverse Effect on Thermo
Electron.
(b) All shares of Thermo Common Stock which will be subject to issuance
pursuant to the Randers/Killam Stock Option Plans, each as assumed by Thermo
Electron pursuant to this Agreement will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of
Thermo Electron or any other agreement or document to which Thermo Electron
is a party or by which it is bound.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Thermo Electron or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger
with the Secretary of State of Delaware, (ii) the filing of the
Schedule 13E-3 with the SEC in accordance with the Exchange Act, and
(iii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
state securities laws.
3.3 MERGER SUB. Since the date of its incorporation, Merger Sub has not
engaged in any activities other than in connection with or as contemplated by
this Agreement.
3.4 INFORMATION PROVIDED TO INVESTMENT BANKERS. To the knowledge of Thermo
Electron, the information provided by Thermo Electron and Randers/Killam to AH&H
in connection with the Merger does not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. For purposes of the foregoing sentence, any
projections or forward-looking statements shall not be deemed to be statements
of material facts; however, the projections were prepared in good faith and
based on assumptions that were reasonable at the time such projections were
prepared, given the information known by management at such time. Furthermore,
it is recognized that such projections and forward-looking statements do not
constitute any warranty as to the future performance of Thermo Electron or
Randers/Killam and that actual results may vary from projected results.
3.5 COMPLIANCE WITH AGREEMENTS. The treatment provided for herein with
respect to outstanding options under the Randers/Killam Stock Option Plans is in
compliance with the applicable agreements and instruments governing such
securities. No consent or approval of the holders of such instruments is
required in connection with the transactions contemplated by this Agreement.
3.6 SCHEDULE 13E-3; PROXY STATEMENT. The information supplied by Thermo
Electron for inclusion in the Schedule 13E-3 (including any information
incorporated by reference in the Schedule 13E-3 from other filings made by
Thermo Electron with the SEC) or (other than with respect to the information
supplied by Randers/Killam) the Proxy Statement shall not, on the date the Proxy
Statement is first mailed to stockholders, at the time of the Randers/Killam
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading. The Proxy
Statement will comply (with respect to information relating to Thermo Electron)
as to form in all material respects with the provisions of the Exchange Act and
the rules and regulations thereunder.
3.7. FINANCIAL RESOURCES. Thermo Electron has the financial resources to
consummate the transactions contemplated by this Agreement and to pay the
consideration in the Merger provided for in Section 1.6(a).
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. CONDUCT OF BUSINESS BY RANDERS/KILLAM. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Randers/Killam
shall, except for such actions which are contemplated by this Agreement or
reasonably appropriate in connection with the transactions contemplated by this
Agreement, and except as consented to by Thermo Electron, carry on its business
in the usual, regular and ordinary course, in substantially the same manner as
heretofore conducted, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due, and use its commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others with which it has business dealings.
4.2 CONDUCT OF BUSINESS BY THERMO ELECTRON. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Thermo Electron
(i) shall, except for such actions which are contemplated by this Agreement or
reasonably appropriate in connection with the transactions contemplated by this
Agreement, or which are undertaken in connection with the Merger or with the
reorganization of Thermo Electron and its subsidiaries as publicly announced or
as disclosed to AH&H prior to the date of this Agreement, carry on its business
materially in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted, pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings; and
(ii) shall not, and shall not permit any Material Thermo Subsidiary to, take any
action which would make any of the representations and warranties of Thermo
Electron contained herein untrue or cause Thermo Electron not to be in
compliance with any covenant set forth herein.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1. SCHEDULE 13E-3; PROXY STATEMENT; OTHER FILINGS.
(a) As promptly as practicable after the execution of this Agreement,
Thermo Electron, TerraTech and Randers/Killam will jointly prepare and file
with the SEC the Schedule 13E-3 and the Proxy Statement. Thermo Electron,
TerraTech and Randers/Killam will cause the Proxy Statement to be mailed to
stockholders of Randers/Killam at the earliest practicable time. Each party
will notify the other promptly upon the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Schedule 13E-3 or
the Proxy Statement or any other filing or for additional information and
will supply the other party with copies of all correspondence between such
party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to
the Proxy Statement, the Schedule 13E-3 or the Merger. Whenever any event
occurs that is required to be set forth in an amendment or supplement to the
Schedule 13E-3 or the Proxy Statement, the relevant party will promptly
inform the other party of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
stockholders of Randers/Killam, such amendment or supplement.
(b) The information supplied by Randers/Killam for inclusion in the
Schedule 13E-3 or the Proxy Statement (including any information
incorporated by reference in the Schedule 13E-3 or the
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Proxy Statement from other filings made by Randers/Killam with the SEC) will
not, on the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to Randers/Killam stockholders, at the time of the
Randers/Killam Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact,
or shall omit to state any material fact necessary in order to make the
statements made therein not false or misleading in light of the
circumstances under which they were made, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Randers/ Killam Stockholders' Meeting
which has become false or misleading.
(c) The information supplied by Thermo Electron and Merger Sub for
inclusion in the Schedule 13E-3 or the Proxy Statement (including any
information incorporated by reference in the Schedule 13E-3 or the Proxy
Statement from other filings made by Thermo Electron with the SEC) will not,
on the date the Proxy Statement (or any amendment thereof or supplement
thereto) is first mailed to Randers/Killam stockholders, at the time of the
Randers/Killam Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which
it shall be made, is false or misleading with respect to any material fact,
or shall omit to state any material fact necessary in order to make the
statements made therein not false or misleading in light of the
circumstances under which they were made, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Randers/Killam Stockholders' Meeting
which has become false or misleading.
(d) The Proxy Statement will include the recommendation of the Special
Committee in favor of approval of this Agreement (except that the Special
Committee may withdraw, modify or refrain from making such recommendation to
the extent that the Special Committee determines after consultation with
outside legal counsel that failure to do so would be inconsistent with the
Special Committee's fiduciary duties under applicable law).
(e) The Proxy Statement will include the recommendation of the Board of
Directors of Randers/ Killam in favor of approval of this Agreement (except
that the Board of Directors of Randers/Killam may withdraw, modify or
refrain from making such recommendation to the extent that the Board
determines after consultation with outside legal counsel that failure to do
so would be inconsistent with the Board's fiduciary duties under applicable
law).
(f) To the extent that the Special Committee or the Board withdraws,
modifies or refrains from making their respective recommendations pursuant
to Sections 5.1(d) or (e) hereof, the Proxy Statement will reflect such
action.
5.2. MEETING OF RANDERS/KILLAM STOCKHOLDERS. Promptly after the date
hereof, Randers/Killam will take all action necessary in accordance with the
DGCL and its Certificate of Incorporation and Bylaws to convene the
Randers/Killam Stockholders' Meeting to be held as promptly as practicable for
the purpose of voting upon this Agreement. Unless the Special Committee
determines after consultation with outside legal counsel that to do so would be
inconsistent with the Board's or the Special Committee's fiduciary duties under
applicable law, Randers/Killam will use its reasonable best efforts to solicit
from its stockholders proxies in favor of the approval of this Agreement and the
Merger, and will take all other action necessary or advisable to secure the vote
or consent of its stockholders required by the DGCL to obtain such approvals.
Thermo Electron shall vote, or cause to be voted, all of the Randers/Killam
Common Stock then owned by it and any of its subsidiaries in favor of the
approval of this Agreement and the Merger.
5.3. ACCESS TO INFORMATION. Subject to applicable legal restrictions, each
of the parties hereto will afford the other (including, in the case of
Randers/Killam, the Special Committee) and each of their respective accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of each of them during the
period prior to the Effective
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Time to obtain all information concerning their respective businesses, including
the status of their respective product development efforts, properties, results
of operations and personnel, as each of them may reasonably request. Each of the
parties hereto agrees that it will, and will cause its representatives and
agents to, keep all such information confidential and will not, and will cause
its representatives or agents not to, use any information obtained pursuant to
this Section 5.3 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Notwithstanding the foregoing, none
of the parties hereto shall be required to keep confidential any information
(i) which is or becomes generally available to the public, other than by
wrongful disclosure by the disclosing party in violation of this Agreement, or
(ii) which becomes available to the disclosing party on a nonconfidential basis
from a source other than the nondisclosing party or any officer or director of
such party.
5.4. PUBLIC DISCLOSURE. Thermo Electron and Randers/Killam will consult
with each other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and will not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a national
securities exchange. Promptly upon the execution hereof, the parties shall
jointly make a press release with respect to the transactions contemplated by
this Agreement, in form reasonably satisfactory to the Special Committee, and
Randers/Killam shall, within five days after the execution hereof, file with the
SEC a Current Report on Form 8-K, which shall attach as an exhibit this
Agreement.
5.5. LEGAL REQUIREMENTS. Subject to the terms of this Agreement, each of
Thermo Electron, Merger Sub and Randers/Killam will take all reasonable actions
necessary or desirable to comply promptly with all legal requirements that may
be imposed on them with respect to the consummation of the transactions
contemplated by this Agreement (including furnishing all information required in
connection with approvals of or filings with any Governmental Entity, and
including using its reasonable best efforts to defend any litigation prompted
hereby) and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon any of
them or their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
5.6. NOTIFICATION OF CERTAIN MATTERS. Subject to the terms of this
Agreement, Thermo Electron and Merger Sub will give prompt notice to
Randers/Killam, and Randers/Killam will give prompt notice to Thermo Electron,
of the occurrence, or failure to occur, of any event, which occurrence or
failure to occur would be reasonably likely to cause (a) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date of this Agreement to the Effective Time, or
(b) any material failure of Thermo Electron and Merger Sub or Randers/Killam, as
the case may be, or of any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement. From the date of this Agreement until
the Effective Time, Thermo Electron will give prompt notice to Randers/Killam
(including, without limitation, the Special Committee) of any written offers or
indications of interest it receives from a prospective purchaser of any material
properties or assets of Randers/Killam or its subsidiaries, which set forth a
proposed purchase price greater than $3 million or in which the book value of
the assets being sold is greater than $3 million, other than sales of assets and
services in the ordinary course of business. Notwithstanding the above, the
delivery of any notice pursuant to this section will not limit or otherwise
affect the remedies available hereunder to the party receiving such notice or
the conditions to such party's obligation to consummate the Merger.
5.7. BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of Thermo Electron and Randers/Killam under this Agreement, each
of the parties to this Agreement will use its reasonable best efforts to
effectuate the Merger and the other transactions contemplated hereby and to
fulfill and cause to be fulfilled the conditions to closing under this
Agreement, it being understood that such efforts shall not include any
obligation to settle any litigation prompted hereby. Subject to the terms
hereof, each party hereto, at the reasonable request of another party hereto,
will execute and deliver such
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other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
5.8. STOCK OPTION PLANS; RESERVATION OF SHARES.
(a) At the Effective Time, each outstanding option to purchase shares of
Randers/Killam Common Stock (each a "Randers/Killam Stock Option") under the
Randers/Killam Stock Option Plans, whether or not exercisable, will be
assumed by Thermo Electron. Each Randers/Killam Stock Option so assumed by
Thermo Electron under this Agreement will continue to have, and be subject
to, the same terms and conditions set forth in the applicable Randers/Killam
Stock Option Plan immediately prior to the Effective Time (including,
without limitation, any repurchase rights), except that (i) each
Randers/Killam Stock Option will be exercisable (or will become exercisable
in accordance with its terms) for that number of whole shares of Thermo
Common Stock equal to the product of the number of shares of Randers/Killam
Common Stock that were issuable upon exercise of such Randers/Killam Stock
Option immediately prior to the Effective Time multiplied by a fraction (the
"Exchange Ratio"), the numerator of which is the Cash Merger Consideration
and the denominator of which is the closing price of the Thermo Common Stock
on the day immediately preceding the Effective Date as reported in the
consolidated transaction reporting system, rounded down to the nearest whole
number of shares of Thermo Common Stock, and (ii) the per share exercise
price for the shares of Thermo Common Stock issuable upon exercise of such
assumed Randers/Killam Stock Option will be equal to the quotient determined
by dividing the exercise price per share of Randers/ Killam Common Stock at
which such Randers/Killam Stock Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole
cent. After the Effective Time, Thermo Electron will issue to each holder of
an outstanding Randers/Killam Stock Option a notice describing the foregoing
assumption of such Randers/Killam Stock Option by Thermo Electron.
(b) Thermo Electron will reserve sufficient shares of Thermo Common
Stock for issuance under this Section 5.8.
5.9. THERMO ELECTRON FORM S-8. Thermo Electron agrees to file a
registration statement on Form S-8 or, if possible, an amendment to Thermo
Electron's then effective registration statement on Form S-8, for the shares of
Thermo Common Stock issuable with respect to the assumed Randers/Killam Stock
Options within five (5) business days of the Effective Time, and shall keep such
registration statement effective for so long as any such options remain
outstanding.
5.10. INDEMNIFICATION; INSURANCE.
(a) The Certificate of Incorporation and Bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification and
elimination of liability for monetary damages set forth in the Certificate
of Incorporation and Bylaws of Randers/Killam, which provisions will not be
amended, repealed or otherwise modified for a period of six (6) years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who, as of the date hereof and at any time from
the date hereof to the Effective Time, were directors or officers of
Randers/Killam, unless such modification is required by law. The Surviving
Corporation shall, and Thermo Electron will cause the Surviving Corporation
to, fulfill and honor in all respects the indemnification obligations of
Randers/Killam pursuant to the provisions of the Certificate of
Incorporation and the Bylaws of Randers/Killam as in effect on the date of
this Agreement.
(b) For a period of six (6) years after the Effective Time, Thermo
Electron shall cause the Surviving Corporation to, either directly or
through participation in Thermo Electron's umbrella policy, maintain in
effect a directors' and officers' liability insurance policy covering those
Randers/ Killam directors and officers currently covered by Thermo
Electron's liability insurance policy with coverage no less favorable in
amount and scope than existing coverage for such Randers/Killam
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directors and officers (which coverage may be an endorsement extending the
period in which claims may be made under such existing policy); provided,
however, that in no event shall the Surviving Corporation be required to
expend to maintain or procure insurance coverage pursuant to this
Section 5.10, directly or through participation in Thermo Electron's policy,
an amount per annum in excess of 175% of the current annual premiums, as
adjusted for inflation each year, allocable and payable by Randers/Killam
(the "Maximum Premium") with respect to such insurance, or, if the cost of
such insurance exceeds the Maximum Premium, the maximum amount of coverage
that can be purchased or maintained for the Maximum Premium.
(c) Randers/Killam shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective,
indemnify and hold harmless Susan Tierney ("Tierney") against all costs and
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action
or omission in Tierney's capacity as a director (including, without
limitation, as a member of the Special Committee) or fiduciary of
Randers/Killam (including, without limitation, in connection with the
transactions contemplated by this Agreement) occurring on, before or after
the Effective Time (or, if this Agreement is terminated without the Merger
becoming effective, occurring on, before or after the date of such
termination), until the expiration of the statute of limitations relating
thereto (and shall pay any expenses in advance of the final disposition of
such action or proceeding to Tierney to the fullest extent permitted under
applicable law, upon receipt from Tierney of an undertaking (which need not
be secured or subject to a bond or other requirement) to repay any advanced
expenses if it shall ultimately be determined that Tierney is not entitled
to be indemnified against such expenses). If the Merger becomes effective,
Thermo Electron shall be jointly and severally responsible, to the fullest
extent permitted by applicable law (it being understood that applicable law
may permit Thermo Electron to indemnify or advance expenses to Tierney under
circumstances in which Randers/Killam could not do so), for the
indemnification and advancement of expenses obligations provided for in the
first sentence of this Section 5.10(c). If the Merger does not become
effective, Thermo Electron shall have the same responsibilities set forth in
the immediately preceding sentence, except that Thermo Electron shall have
no responsibility for indemnifying or advancing expenses to Tierney with
respect to matters that do not arise out of or pertain to the work of the
Special Committee, this Agreement or the transactions contemplated hereby.
In the event of any claim, action, suit, proceeding or investigation covered
by this Section 5.10(c), (i) Randers/Killam, Thermo Electron and the
Surviving Corporation, as the case may be, shall pay the reasonable fees and
expenses of counsel selected by Tierney, promptly after statements therefor
are received, and (ii) Randers/Killam, Thermo Electron and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither Randers/Killam nor Thermo Electron nor the Surviving
Corporation shall be liable for any settlement effected without Thermo
Electron's prior written consent (such consent not to be unreasonably
withheld or delayed); and provided, further, that, in the event any claim
for indemnification is asserted or made within the period prior to the
expiration of the applicable statute of limitations, all rights to
indemnification in respect of such claim shall continue until the
disposition of such claim. In connection with Thermo Electron or the
Surviving Corporation making any payment or advancing any funds pursuant to
this Section 5.10(c), Thermo Electron or the Surviving Corporation, as the
case may be, shall be entitled to require Tierney to use commercially
reasonable efforts, at the cost and expense of Thermo Electron and the
Surviving Corporation, to cause Thermo Electron or the Surviving
Corporation, as the case may be, to be subrogated to Tierney's rights under
any insurance coverage maintained by the Surviving Corporation, Thermo
Electron or any of their respective affiliates with respect to the
underlying subject matter of, and to the extent of, such payment or advance.
(d) In the event Randers/Killam, Thermo Electron or the Surviving
Corporation or any of their respective successors or assigns
(i) consolidates with or merges into any other person and shall not be
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the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties or
assets to any person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Randers/Killam, Thermo Electron
and the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 5.10.
(e) Heirs, representatives and estates of the officers and directors of
Randers/Killam (including, without limitation, Tierney) shall have the right
to enforce the obligations arising under this Section 5.10.
(f) The rights of the officers and directors of Randers/Killam
(including, without limitation, Tierney) under this Section 5.10 are in
addition to any rights of such persons under separate indemnification
agreements any such persons may have with Randers/Killam and/or Thermo
Electron, under the Certificate of Incorporation or Bylaws of Randers/Killam
or Thermo Electron or otherwise.
5.11. DEFERRED COMPENSATION PLAN. Subject to obtaining the consents of the
affected participants, at the Effective Time, the Randers/Killam Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan") will
terminate, and Randers/Killam will distribute to each participant the sum in
cash equal to the balance of stock units credited to his or her deferred
compensation account under the Deferred Compensation Plan as of the Effective
Time multiplied by the Cash Merger Consideration.
5.12 COMPLIANCE BY MERGER SUB. Thermo Electron shall cause Merger Sub to
timely perform and comply with all of its obligations under or related to this
Agreement. Thermo Electron will ensure that Merger Sub has the financial
resources to consummate the transactions contemplated by this Agreement and to
pay the consideration in the Merger provided for in Section 1.6(a).
5.13 NYSE LISTING. Thermo Electron shall use its best efforts to cause all
shares of Thermo Common Stock which will be subject to issuance pursuant to the
Randers/Killam Stock Option Plans, each as assumed by Thermo Electron pursuant
to this Agreement, to be authorized for listing on the New York Stock Exchange.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(b) NYSE LISTING. The Thermo Common Stock which will be subject to
issuance pursuant to the Randers/Killam Stock Option Plans, each as assumed
by Thermo Electron pursuant to this Agreement, shall have been authorized
for listing on the New York Stock Exchange.
(c) STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the requisite vote under the DGCL by the stockholders of
Randers/Killam.
6.2. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF RANDERS/KILLAM. The
obligations of Randers/ Killam to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Effective
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Time of each of the following conditions, any of which may be waived, in
writing, exclusively by Randers/ Killam (provided that the Special Committee
shall have consented in writing to any such waiver):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Thermo Electron and Merger Sub contained in this Agreement shall be true
and correct in all material respects (other than those already qualified by
a materiality standard, which shall be true and correct in all respects) on
and as of the Effective Time, except for changes expressly contemplated by
this Agreement and except for those representations and warranties that
address matters only as of a particular date (which shall remain true and
correct as of such particular date), with the same force and effect as if
made on and as of the Effective Time; and Randers/Killam shall have received
a certificate to such effect signed on behalf of Thermo Electron by the
President, Chief Executive Officer or Vice President of Thermo Electron; and
(b) AGREEMENTS AND COVENANTS. Thermo Electron and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Randers/Killam shall have
received a certificate to such effect signed on behalf of Thermo Electron by
the President, Chief Executive Officer or Vice President of Thermo Electron.
(c) FAIRNESS OPINION. At the time of mailing of the Proxy Statement to
the stockholders of Randers/Killam and at the Effective Time, AHH shall have
reaffirmed orally the fairness opinion previously prepared and delivered by
it to the Special Committee and AHH shall not have withdrawn such opinion.
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THERMO ELECTRON AND MERGER
SUB. The obligations of Thermo Electron and Merger Sub to consummate and effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by Thermo Electron:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Randers/Killam contained in this Agreement shall be true and correct in
all material respects (other than those already qualified by a materiality
standard, which shall be true and correct in all respects) on and as of the
Effective Time, except for changes contemplated by this Agreement and except
for those representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except, in all such cases, where the failure to be so true and correct
would not have a Material Adverse Effect on Randers/Killam; and Thermo
Electron and Merger Sub shall have received a certificate to such effect
signed on behalf of Randers/Killam by the President, Chief Executive Officer
or Vice President of Randers/Killam; and
(b) AGREEMENTS AND COVENANTS. Randers/Killam shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Thermo Electron shall have received a certificate to
such effect signed on behalf of Randers/Killam by the President, Chief
Executive Officer or Vice President of Randers/Killam.
(c) NO WITHDRAWAL OF SPECIAL COMMITTEE RECOMMENDATION. The Special
Committee shall not have withdrawn its recommendation to the Board of
Directors of Randers/Killam as set forth in Section 2.4 hereof.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of this Agreement
by the stockholders of Randers/Killam:
(a) by mutual written consent duly authorized by the Boards of Directors
of Merger Sub and Randers/Killam (upon approval of the Special Committee);
(b) by either Randers/Killam (at the direction of the Special Committee)
or Merger Sub if the Merger shall not have been consummated by March 31,
2000; provided, however, that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose action or
failure to act has been a principal cause of or resulted in the failure of
the Merger to occur on or before such date if such action or failure to act
constitutes a breach of this Agreement;
(c) by either Randers/Killam (upon approval of the Special Committee) or
Merger Sub if a court of competent jurisdiction or governmental, regulatory
or administrative agency or commission shall have issued an order, decree or
ruling or taken any other action (an "Order"), in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger,
which order, decree or ruling is final and nonappealable;
(d) by either Randers/Killam (upon approval of the Special Committee) or
Merger Sub if the required approval of the stockholders of Randers/Killam
contemplated by this Agreement shall not have been obtained by reason of the
failure to obtain the required vote upon a vote taken at a meeting of
stockholders duly convened therefor or at any adjournment thereof (provided
that the right to terminate this Agreement under this Section 7.1(d) shall
not be available to Randers/Killam where the failure to obtain stockholder
approval of Randers/Killam shall have been caused by the action or failure
to act of Randers/Killam in breach of this Agreement and the right to
terminate this Agreement under this Section 7.1(d) shall not be available to
Merger Sub where the failure to obtain the requisite vote by the
stockholders of Randers/Killam shall have been caused by the failure of
Thermo Electron or any direct or indirect subsidiary of Thermo Electron
(whether or not wholly-owned) to vote its shares of Randers/Killam Common
Stock in favor of the Merger and this Agreement);
(e) by Randers/Killam if the Special Committee determines after
consultation with outside legal counsel that failure to do so would be
inconsistent with the Board's or the Special Committee's fiduciary duties
under applicable law;
(f) by Randers/Killam (upon approval of the Special Committee), upon a
breach of any representation, warranty, covenant or agreement on the part of
Thermo Electron or Merger Sub set forth in this Agreement, if (i) as a
result of such breach the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach and
(ii) such breach shall not have been cured by Thermo Electron or Merger Sub
within ten (10) business days following receipt by Thermo Electron of
written notice of such breach from Randers/Killam; or
(g) by Merger Sub, upon a breach of any representation, warranty,
covenant or agreement on the part of Randers/Killam set forth in this
Agreement, if (i) as a result of such breach the conditions set forth in
Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time of
such breach and (ii) such breach shall not have been cured by Randers/Killam
within ten (10) business days following receipt by Randers/Killam of written
notice of such breach from Merger Sub.
7.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice by the terminating party to the other parties hereto
(or, in the case of a termination pursuant to Section 7.1(f) or 7.1(g), the
expiration of the ten business day period referred to therein). In the event of
the termination of this Agreement as
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provided in Section 7.1, this Agreement shall be of no further force or effect,
except that (i) the confidentiality obligations of each party hereto contained
in Section 5.3, the obligations contained in Section 5.10, and the provisions of
Sections 7.2, 7.3 and 8.1 shall survive any such termination and (ii) nothing
herein shall relieve any party from liability for any willful and material
breach of this Agreement.
7.3. FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
7.4. AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto; provided, however, that
Randers/Killam may not amend this Agreement without the approval of the Special
Committee.
7.5. EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein; provided, however, that Randers/ Killam may not
take any such actions without the approval of the Special Committee. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE VIII
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Randers/Killam, Thermo Electron and Merger Sub contained in
this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms, or as the context requires, survive the Effective Time
shall survive the Effective Time.
8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Thermo Electron or Merger Sub, to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: President
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
with a copy (which shall not constitute notice to Thermo Electron or Merger Sub)
to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: General Counsel
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
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(b) if to Randers/Killam, to:
The Randers Killam Group Inc.
27 Bleeker Street
Millburn, NJ 07041
Attention: President
Telephone: (973) 912-2505
Facsimile: (973) 912-2595
with a copy (which shall not constitute notice to Randers/Killam) to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attention: William P. Gelnaw, Jr., Esq.
Telephone: (617) 248-5000
Facsimile: (617) 248-4000
8.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein (a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, with the exception of the agreements relating to the Randers/Killam
Stock Option Plans, the Deferred Compensation Plan, and any agreements relating
to indemnification of members of the Board; and (b) are not intended to confer
upon any other person any rights or remedies hereunder, except as set forth or
otherwise contemplated herein. Notwithstanding the foregoing, Section 5.10
hereof is intended to be for the benefit of, and may be enforced by, those
individuals who, as of the date hereof and at any time from the date hereof to
the Effective Time, were directors or officers of Randers/Killam.
8.5. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6. OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
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8.7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof, except to the extent that the DGCL applies.
8.8. ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
8.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, Thermo Electron, Merger Sub and Randers/Killam have
caused this Agreement to be signed by themselves or their duly authorized
respective officers, all as of the date first written above.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
RK ACQUISITION CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: PRESIDENT
THE RANDERS KILLAM GROUP INC.
By: /s/ KENNETH J. APICERNO
-----------------------------------------
Name: Kenneth J. Apicerno
Title: TREASURER
</TABLE>
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APPENDIX B
ADAMS, HARKNESS & HILL LETTERHEAD
October 18, 1999
Special Committee of the Board of Directors
Randers Killam Group, Inc.
27 Bleeker Street
Milburn, NJ 07041
Dear Sirs:
The Special Committee of the Board of Directors (the "Special Committee") of
Randers Killam Group, Inc. ("Randers" or the "Company") has requested our
opinion (the "Opinion"), as investment bankers, as to the fairness, from a
financial point of view, to the shareholders of Randers other than Thermo
Electron Corporation ("Thermo Electron") or Thermo TerraTech Inc. ("TTT"), of
the cash consideration to be received by such shareholders in connection with
the proposed acquisition (the "Transaction") of the Company by Thermo Electron,
pursuant to an Agreement and Plan of Merger to be dated as of October 19, 1999
(the "Merger Agreement"), by and among Thermo Electron, RK Acquisition
Corporation, a wholly-owned subsidiary of TTT Acquisition corporation, a
wholly-owned subsidiary of Thermo Electron ("Merger Sub"), and the Company.
Adams, Harkness & Hill, Inc. ("AH&H"), as part of its investment banking
activities, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
In the Transaction and pursuant to the Merger Agreement, subject to Company
shareholder approval, each share of the Company's common stock, par value $.0001
per share (the "Common Shares"), issued and outstanding immediately prior to the
effective date of the Transaction, will be converted into the right to receive
$4.50 in cash, at or subsequent to the effective date of the Transaction.
In developing our Opinion, we have, among other activities: (i) reviewed the
Company's Annual Reports, Reports on Form 10-K and related financial information
for the three fiscal years ended April 3, 1999, and the Company's Report on
Form 10-Q and the related unaudited financial information for the three month
period ending July 3, 1999 (the "Public Historical Financial Information");
(ii) reviewed Thermo Electron's Annual Reports, Reports on Form 10-K and related
financial information for the three fiscal years ended January 2, 1999, and
Thermo Electron's Reports on Form 10-Q and the related unaudited financial
information for the three month periods ending April 3, 1999 and July 3, 1999;
(iii) analyzed certain internal financial statements and other internal
financial and operating data and business plans prepared by the management of
the Company, including five-year financial budgets (the "Budgets");
(iv) conducted due diligence discussions with members of senior management of
the Company and Thermo Electron, and discussed with members of senior management
of the Company and Thermo Electron their views regarding future business and
financial and operating benefits arising from the Transaction; (v) reviewed the
historical market prices and trading activity for the Common Shares and compared
them with that of certain publicly traded companies we deemed to be relevant and
comparable to the Company; (vi) compared the results of operations of the
Company with those of certain companies we deemed to be relevant and comparable
to the Company; (vii) compared the financial terms of the Transaction with the
financial terms of certain other mergers and acquisitions we deemed to be
relevant and comparable to the Transaction; (viii) reviewed the Merger
Agreement; and (ix) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
we deemed necessary, including our assessment of general economic, monetary,
market and industry conditions. In support of our assessment of environmental
industry conditions, we engaged and consulted Environmental Business
International, Inc. ("EBI"), a leading strategic consulting firm serving the
environmental services industry. EBI reviewed the Public Historical Financial
Information, the
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Budgets, and certain financial and industry analyses prepared by AH&H, and
provided to us its professional opinion that the Budgets had been prepared on a
reasonable basis, the analysis, procedures and industry assessments performed by
AH&H were sufficiently comprehensive, and the major industry-related factors
affecting RGI had been duly considered by AH&H.
Our Opinion as expressed herein is limited to the fairness, from a financial
point of view, of the proposed consideration and does not address the Company's
underlying business decision to engage in the Transaction. Our Opinion does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote on the Transaction. We are expressing no opinion as to
the value of Common Shares at the time of our analysis or at any time prior to
and including the effective date of the Transaction. In connection with our
review and in arriving at our Opinion, we have not independently verified any
information received from the Company, have relied on such information, and have
assumed that all such information is complete and accurate in all material
respects. With respect to any internal forecasts or budgets reviewed relating to
the prospects of the Company, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance and
cash requirements of the Company. Our Opinion is rendered on the basis of
securities market conditions prevailing as of the date hereof and on the
conditions and prospects, financial and otherwise, of the Company as known to us
on the date hereof. We have not conducted, nor have we received copies of, any
independent valuation or appraisal of any of the assets of the Company. In
addition, we have assumed, with your consent, that the terms set forth in the
executed Merger Agreement will not differ materially from the proposed terms
provided to us in the October 18, 1999, draft Merger Agreement.
AH&H also has been engaged by Special Committees of the Boards of Directors
of each of TTT and ThermoRetec Corporation ("Retec") to develop opinions as to
the fairness to the holders of common stock of TTT other than Thermo Electron
and to the holders of common stock of Retec other than Thermo Electron and TTT,
respectively, of the consideration to be received by such holders in separate
transactions involving Thermo Electron.
It is understood that this letter is for the information of the Special
Committee and the Board of Directors of the Company and may not be used for any
other purpose without our prior written consent, except that this opinion may be
included in its entirety in any filing made by the Company with the Securities
and Exchange Commission with respect to the transactions contemplated by the
Merger Agreement.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the consideration to be received in the Transaction by the holders
of Common Shares other than Thermo Electron and TTT is fair, from a financial
point of view, to such shareholders.
Sincerely,
ADAMS, HARKNESS & HILL, INC.
By: /s/ JAMES A. SIMMS
--------------------------------------
James A. Simms
GROUP HEAD, MERGERS & ACQUISITIONS
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APPENDIX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
SECTION 262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to SectionSection251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under 253 of this title is not owned by the parent
corporation immediately prior to the merger, appraisal rights shall be available
for the shares of the subsidiary Delaware corporation.
C-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to Section228 or
Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second notice
is sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall
C-2
<PAGE>
be such effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
C-3
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
<PAGE>
APPENDIX D
INFORMATION CONCERNING TRANSACTIONS IN
THE COMMON STOCK OF THE COMPANY
The following sets forth information with respect to purchases of Common
Stock by Randers/Killam, Thermo TerraTech and Thermo Electron since the
commencement of Randers/Killam's second full fiscal year preceding the date of
this Proxy Statement.
<TABLE>
<CAPTION>
AVERAGE PURCHASE
NUMBER OF RANGE OF PRICES PRICE PER SHARE
SHARES PURCHASED PAID PER SHARE DURING
QUARTER/FISCAL YEAR PURCHASER DURING QUARTER DURING QUARTER ($)(1) QUARTER ($)(1)
- ------------------- ---------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C>
1(st) Quarter 1998....... Thermo TerraTech 1,504,000(2)(3) $3.125(2) $3.125(2)
2(nd) Quarter 1998....... Thermo TerraTech 20,713,920(2)(4) $3.125(2) $3.125(2)
</TABLE>
- ------------------------
(1) Prices per share of Common Stock are net of commissions paid by the
respective purchasers.
(2) The number of shares and the purchase prices per share for purchases of
Common Stock by Thermo TerraTech in the 1(st) and 2(nd) quarters of fiscal
1998 have been restated to reflect a one-for-five reverse stock split in
January 1999.
(3) These shares were purchased from Randers/Killam's management so that Thermo
TerraTech could obtain a greater than 50% interest in Randers/Killam.
(4) These shares were issued by Randers/Killam pursuant to the terms of a Stock
Purchase Agreement dated as of September 19, 1997, under which Thermo
TerraTech sold its wholly owned engineering and consulting businesses, known
as The Killam Group, to Randers/Killam in exchange for 20,713,920 shares of
Common Stock.
D-1
<PAGE>
The following chart sets forth information with respect to options granted
by Randers/Killam since the commencement of Randers/Killam's second full fiscal
year preceding the date of this Proxy Statement to directors and executive
officers of Randers/Killam, Thermo TerraTech, the Merger Sub and Thermo
Electron.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
DATE OF COVERED EXERCISE
NAME RELATIONSHIP GRANT BY OPTIONS PRICE
- ---- ------------------------------- -------- ---------- --------
<S> <C> <C> <C> <C>
John P. Appleton............... Chairman of the Board of 12/12/97 120,000 $3.25
Directors, Randers/Killam;
President, Chief Executive
Officer and Director, Thermo
TerraTech; Vice President,
Thermo Electron
Nicholas P. DeNichilo.......... Vice President, Randers/Killam 2/24/99 8,800 $2.50
Nicholas P. DeNichilo.......... Vice President, Randers/Killam 12/12/97 60,000 $3.25
Thomas R. Eurich............... Vice President and Director, 2/24/99 4,000 $2.50
Randers/Killam
Thomas R. Eurich............... Vice President and Director, 12/12/97 54,000 $3.25
Randers/Killam
Emil C. Herkert................ President, Chief Executive 2/24/99 10,000 $2.50
Officer and Director,
Randers/Killam
Emil C. Herkert................ President, Chief Executive 12/12/97 240,000 $3.25
Officer and Director,
Randers/Killam
Paul F. Kelleher............... Chief Accounting Officer, 12/12/97 8,000 $3.25
Randers/Killam; Chief
Accounting Officer, Thermo
TerraTech; Senior Vice
President, Finance and
Administration, Thermo
Electron
Susan F. Tierney............... Director, Randers/Killam 12/12/97 48,000 $3.25
Polyvios C. Vintiadis.......... Director, Thermo TerraTech 12/12/97 48,000 $3.25
</TABLE>
No options to purchase Common Stock have been exercised by directors and
executive officers of Randers/Killam, Thermo TerraTech, the Merger Sub and
Thermo Electron since the commencement of Randers/Killam's second full fiscal
year preceding the date of this Proxy Statement.
TRANSACTIONS IN THE COMMON STOCK
There were no transactions in the Common Stock effected during the 60 days
preceding the date of this Proxy Statement by Randers/Killam, Thermo TerraTech,
the Merger Sub, Thermo Electron or, to the best knowledge of the Company, the
directors and executive officers of any of Randers/Killam, Thermo TerraTech, the
Merger Sub or Thermo Electron.
D-2
<PAGE>
APPENDIX E
ANNUAL REPORT ON FORM 10-K OF RANDERS/KILLAM
FOR THE FISCAL YEAR ENDED APRIL 3, 1999
E-1
<PAGE>
APPENDIX E
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended April 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-18095
THE RANDERS KILLAM GROUP INC.
(Exact name of Registrant as specified in its charter)
Delaware 38-2788025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Bleeker Street
Millburn, New Jersey 07041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
- ------------------------------ -----------------------------------------
Common Stock, $.0001 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of April 30, 1999, was approximately $2,411,412.
As of April 30, 1999, the Registrant had 25,429,344 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Fiscal 1999 Annual Report to Shareholders for the
year ended April 3, 1999, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on September 16, 1999, are incorporated by reference
into Part III.
<PAGE>
PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
The Randers Killam Group Inc. (the Company or the Registrant, formerly
the Randers Group Incorporated) provides comprehensive engineering and
outsourcing services and operates in four segments: Water and Wastewater
Treatment, Process Engineering and Construction, Highway and Bridge Engineering,
and Infrastructure Engineering.
In January 1999, the Company's name was changed from The Randers Group
Incorporated to The Randers Killam Group Inc.
The Company's strategy is to market its technical expertise and low-cost
solutions to a broad base of clients including municipalities, government
agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's Killam subsidiaries comprise the
Water and Wastewater Treatment segment and provide environmental consulting and
engineering services and specialize in wastewater treatment and water resources
management. The Company's Randers subsidiaries, which constitute the Process
Engineering and Construction segment, provide design engineering, project
management, and construction services for industrial clients. The Company's BAC
Killam Inc. subsidiary represents the Company's Highway and Bridge Engineering
segment and provides transportation planning and design services. The
Infrastructure Engineering segment, comprised of CarlanKillam Consulting Group,
Inc., provides transportation and environmental consulting, professional
engineering, and architectural services.
The Company was originally organized as a partnership in January 1974,
and was incorporated in January 1976. In May 1997, Thermo TerraTech Inc.
purchased a controlling interest in The Randers Group Incorporated (Randers).
Subsequently, Thermo TerraTech entered into a definitive agreement to transfer
its wholly owned subsidiary, The Killam Group, to Randers in exchange for newly
issued shares of Randers' common stock. As a result of these transactions, The
Killam Group was deemed to be the "accounting acquiror," and historical results
for Randers have been restated to solely reflect the financial information of
The Killam Group for periods prior to May 12, 1997, and to reflect the combined
results of The Killam Group and Randers (collectively, the Company or the
Registrant) from May 12, 1997, the date on which Thermo TerraTech became the
majority-owner of Randers. See Note 2 to Consolidated Financial Statements in
the Registrant's Fiscal 1999* Annual Report to Shareholders, which information
is incorporated herein by reference.
In May 1999, the Company announced plans to sell three businesses
including the Randers division, which constitutes the Company's Process
Engineering and Construction segment, and BAC Killam Inc., which represents the
Company's Highway and Bridge Engineering segment. The third business that will
be sold, E3-Killam, Inc., represents a small component of the Water and
Wastewater Treatment segment. In connection with the planned sale of these
businesses, the Company expects to record pretax charges of approximately $15
million, primarily in the first quarter of fiscal 2000. These charges primarily
represent the excess of book value of the businesses over the estimated proceeds
from sale. Revenues and operating losses of these business units in fiscal 1999
aggregated $31.7 million and $0.5 million, respectively.
As of April 3, 1999, Thermo TerraTech owned 24,110,210 shares of the
Company's common stock, representing 95% of the Company's stock outstanding. An
87%-owned public subsidiary of Thermo Electron Corporation, Thermo TerraTech
provides industrial outsourcing services and manufacturing support encompassing
a broad range of specializations, including infrastructure engineering, design
and construction, environmental compliance, laboratory-testing and metal
treating.
- --------------------
* References to fiscal 1999, 1998, and 1997 herein are for the fiscal years
ended April 3, 1999, April 4, 1998, and March 29, 1997, respectively.
2
<PAGE>
As of April 3, 1999, Thermo Electron owned 251,000 shares of the
Company's common stock, representing 1% of the Company's stock outstanding.
Thermo Electron is a world leader in monitoring, analytical, and biomedical
instrumentation; biomedical products including heart-assist devices,
respiratory-care equipment, and mammography systems; and paper recycling and
papermaking equipment. Thermo Electron also develops alternative-energy systems
and clean fuels, provides a range of services including industrial outsourcing
and environmental-liability management, and conducts research and development in
advanced imaging, laser, and electronic information-management technologies.
Thermo Electron has announced a proposed reorganization involving certain
of Thermo Electron's subsidiaries, including the Company. Under this plan, the
Company and its sister subsidiary, ThermoRetec Corporation, as well as their
parent company, Thermo TerraTech, would be merged into Thermo Electron. The
public shareholders of the Company, ThermoRetec, and Thermo TerraTech would
receive common stock in Thermo Electron in exchange for their shares. The
completion of these transactions is subject to numerous conditions, as outlined
in Note 11 to Consolidated Financial Statements in the Registrant's Fiscal 1999
Annual Report to Shareholders, which information is incorporated herein by
reference.
FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report on Form
10-K. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
"seeks," "estimates," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements, including those detailed under the heading
"Forward-looking Statements" in the Registrant's Fiscal 1999 Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) FINANCIAL INFORMATION ABOUT SEGMENTS
Financial information concerning the Company's segments is summarized in
Note 9 to Consolidated Financial Statements in the Registrant's Fiscal 1999
Annual Report to Shareholders, which information is incorporated herein by
reference.
(c) DESCRIPTION OF BUSINESS
(i) PRINCIPAL SERVICES AND PRODUCTS
A substantial portion of the Company's sales are made to existing
customers on a repeat basis. The Company's services are often performed as
multi-year studies. In addition to federal, state, and local governments,
customers include public utilities, waste management companies, oil refineries,
mining companies, chemical manufacturers, architectural and engineering firms,
and a variety of service companies involved with real estate transactions.
WATER AND WASTEWATER TREATMENT
Through the Company's Killam Associates, Inc., Duncan, Lagnese and
Associates, Incorporated, Killam Management and Operational Services, Inc., and
E3-Killam, Inc. subsidiaries, the Company specializes in the design, planning,
and construction observation of municipal and privately owned water treatment
plants, wastewater treatment plants, and hazardous wastewater facilities. The
Company provides full-service contract operations to plant owners in the private
and public sectors. These services facilitate regulatory compliance, optimize
day-to-day plant operations, reduce costs, provide competent and experienced
personnel, and promote good community relations.
3
<PAGE>
PROCESS ENGINEERING AND CONSTRUCTION
The Company's Randers division, comprised of Randers Engineering, Inc.,
Redeco Incorporated, and Viridian Technology Incorporated, provides design
engineering, project management, and construction services for industrial
clients in the manufacturing, pharmaceutical, and chemical-processing
industries. The principal geographic region served is the Michigan, Ohio, and
Illinois area of the Mid-West, as well as Massachusetts and West Virginia.
The Company offers complete outsourcing services, from the design stage
through construction, for manufacturing equipment, systems, and plants, as well
as office buildings, warehouses, laboratories, and other structures for its
manufacturing clients.
HIGHWAY AND BRIDGE ENGINEERING
The Company's BAC Killam Inc. subsidiary provides both private and public
sector clients with a broad range of consulting services that address
transportation planning and design. Projects include bridge inspection, rating,
and rehabilitation; new bridge design; highway corridor planning studies for new
route alignment of major state highways; design of the reconstruction and
widening of existing major roads; construction inspection on highway and bridge
projects; infrastructure engineering, survey, and land-use planning; natural
resource management; and environmental-impact studies.
INFRASTRUCTURE ENGINEERING
The Company's CarlanKillam Consulting Group, Inc. subsidiary provides
transportation and environmental consulting, professional engineering, and
architectural services. CarlanKillam is also a leader in the design of
innovative solutions to traffic problems and transportation needs.
(ii) NEW PRODUCTS
The Company has made no commitments to new products that would require
the investment of a material amount of the Company's assets.
(iii) RAW MATERIALS
Since the Company's business is service oriented, it does not involve the
processing of raw materials and is not dependent on fluctuations in the supply
or price of raw materials. To date, the Company has not experienced any
difficulty in obtaining any of the materials or components used in its
operations and does not foresee any such difficulty in the future. The Company
has multiple sources for all of its significant raw material needs.
(iv) PATENTS, LICENSES AND TRADEMARKS
The Company does not own or license any patents, trademarks, licenses,
franchises, or concessions which are material to the Company's business. The
Company believes that its business depends primarily upon the technical and
marketing expertise of its personnel.
(v) SEASONAL INFLUENCES
A majority of the Company's businesses experience seasonal fluctuations.
Site investigation work and certain environmental testing services may decline
in winter months as a result of severe weather conditions.
4
<PAGE>
(vi) WORKING CAPITAL REQUIREMENTS
In general, there are no special inventory requirements or credit terms
extended to customers that would have a material adverse effect on the Company's
working capital.
(vii) DEPENDENCY ON A SINGLE CUSTOMER
No single customer accounted for more than 10% of the Company's total
revenues in any of the past three years.
(viii) BACKLOG
The Company's backlog of firm orders at fiscal year-end 1999 and 1998
was:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Water and Wastewater Treatment $26,911 $30,825
Process Engineering and Construction 5,753 9,775
Highway and Bridge Engineering 16,103 9,448
Infrastructure Engineering 6,765 3,621
------- -------
$55,532 $53,669
------- -------
------- -------
</TABLE>
Included in the Company's backlog at fiscal year-end 1999 and 1998 is the
incomplete portion of contracts that are accounted for using the
percentage-of-completion method. Certain of these contracts are subject to
cancellation by the customer upon payment of a cancellation charge. Of the
fiscal 1999 backlog amount, substantially all orders are expected to be filled
within fiscal 2000.
(ix) GOVERNMENT CONTRACTS
Not applicable.
(x) COMPETITION
The Company's businesses are engaged in highly competitive markets in all
of its service areas and in all four of its segments. These markets tend to be
regional. In its geographic service area, competition consists of small, one-to
three-person firms offering a limited scope of services, as well as much larger
firms that may be regional, national, or international in the scope of services
they offer. The principal competitive factors for the Company are: reputation;
experience; breadth and quality of services offered; and technical, managerial,
and business proficiency.
The Company's Water and Wastewater Treatment segment competes primarily
with Camp Dresser and McKee Inc., CH2M Hill Companies, Ltd., Montgomery Watson
Inc., and URS Greiner Woodward Clyde.
Competitors in the Process Engineering and Construction segment include
Jacobs Engineering Group, Inc., Flour-Daniels, Kraevernor, and Earth Tech.
The Company's Highway and Bridge Engineering segment competes primarily
with STV Group Inc., Parsons Brinckerhoff Inc., Edwards Kelcey Inc., and URS
Greiner Woodward Clyde.
Competitors in the Infrastructure Engineering segment include STV Group
Inc., Parsons Brinckerhoff Inc., Edwards Kelcey Inc., URS Greiner Woodward
Clyde, and Post Buckley Schuh & Jernigan Inc.
5
<PAGE>
(xi) ENVIRONMENTAL PROTECTION REGULATIONS
The Company believes that compliance by the Company with federal, state,
and local environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
(xii) NUMBER OF EMPLOYEES
As of April 3, 1999, the Company employed approximately 650 people. None
of the Company's employees are represented by a union. The Company believes that
relations with its employees are good.
(d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
Not applicable.
(e) EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Present Title (Fiscal Year First Became Executive Officer)
------------------------------------- ------- -----------------------------------------------------------------
<S> <C> <C>
Emil C. Herkert 61 President and Chief Executive Officer (1998)
Nicholas M. DeNichilo 47 Vice President (1997)
Thomas R. Eurich 53 Vice President (1976)
Theo Melas-Kyriazi 39 Chief Financial Officer (1999)
Paul F. Kelleher 56 Chief Accounting Officer (1997)
</TABLE>
Each executive officer serves until his successor is chosen or appointed
by the Board of Directors and qualified or until earlier resignation, death, or
removal. Mr. Herkert was appointed Chief Executive Officer of the Company in May
1997 and President in November 1997. Prior thereto, Mr. Herkert had served as
President of Killam Associates since 1977. Mr. Herkert has also served as a Vice
President of Thermo TerraTech since 1996. Mr. DeNichilo was appointed Vice
President in 1997. Prior to that time he served as a Vice President of Killam
Associates since 1985. Mr. Eurich served as President of Randers from 1976 until
the date of its agreement to acquire The Killam Group in 1997, at which time Mr.
Eurich was appointed Vice President of the Company. Mr. Melas-Kyriazi was
appointed Chief Financial Officer of the Company and Thermo Electron on January
1, 1999. He joined Thermo Electron in 1986 as Assistant Treasurer, and became
Treasurer in 1988. He was named President and Chief Executive Officer of
ThermoSpectra Corporation, a public subsidiary of Thermo Instrument Systems Inc.
in 1994, a position he held until becoming Vice President of Corporate Strategy
for Thermo Electron in 1998. Mr. Melas-Kyriazi remains a Vice President of
Thermo Electron. Mr. Kelleher has held comparable positions for at least five
years with Thermo TerraTech and Thermo Electron. Messrs. Melas-Kyriazi and
Kelleher are full-time employees of Thermo Electron, but devote such time to the
affairs of the Company as the Company's needs reasonably require.
Item 2. PROPERTIES
The location and general character of the Company's properties by
business segment as of April 3, 1999, are:
WATER AND WASTEWATER TREATMENT
The Company owns approximately 50,000 square feet of office, laboratory,
and engineering space in New Jersey. The Company leases approximately 53,000
square feet of office and engineering space in Pennsylvania, New Jersey, New
York, Massachusetts, and West Virginia, under leases expiring through 2003.
6
<PAGE>
PROCESS ENGINEERING AND CONSTRUCTION
The Company owns approximately 11,000 square feet of office and
engineering space in Michigan. The Company leases approximately 17,000 square
feet of office and engineering space in Michigan, West Virginia, Ohio, and
Massachusetts, under leases expiring through 2003.
HIGHWAY AND BRIDGE ENGINEERING
The Company leases approximately 34,000 square feet of office and
engineering space in New York and New Jersey, under leases expiring through
2005.
INFRASTRUCTURE ENGINEERING
The Company leases approximately 24,000 square feet of office and
engineering space in Florida and Alabama, under leases expiring through 2000.
The Company believes that these facilities are adequate for its present
operations and that other suitable space is readily available if any of such
leases are not extended.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
On January 28, 1999, at a Special Meeting in Lieu of the 1998 Annual
Meeting of the Stockholders (the "Special Meeting"), the stockholders elected
five incumbent directors to a one-year term expiring in 1999. The Directors
elected at the meeting were: Dr. John P. Appleton, Mr. Thomas R. Eurich,
Mr. Emil C. Herkert, Dr. Susan F. Tierney, and Mr. Polyvios C. Vintiadis. Dr.
Appleton and Mr. Herkert each received 12,887,447 shares voted in favor of his
election and 48,595 shares voted against. Mr. Eurich received 12,892,847 shares
voted in favor of his election and 43,195 shares voted against. Dr. Tierney
received 12,903,847 shares voted in favor of her election and 32,195 shares
voted against. Mr. Vintiadis received 12,872,847 shares voted in favor of his
election and 63,195 shares voted against. No abstentions or broker "non-votes"
were recorded on the election of directors.
At the Special Meeting, five other proposals were approved by the
stockholders. The stockholders approved a proposal to effect a reverse stock
split of one share for every five shares outstanding of the Company's Common
Stock as follows: 12,838,062 shares were voted in favor of the proposal, 67,800
shares were voted against, 30,180 shares abstained, and no broker "non-votes"
were recorded on the proposal. The stockholders approved a proposal to approve
the listing on the American Stock Exchange's Emerging Company Marketplace of
22,606,210 shares of Common Stock to be issued in connection with the
acquisition by the Company of all of the outstanding shares of The Killam Group
Inc. as follows: 11,480,557 shares were voted in favor of the proposal, 54,800
shares were voted against, 37,380 shares abstained, and no broker "non-votes"
were recorded on the proposal. The stockholders approved a proposal to amend the
Company's Certificate of Incorporation to change the name of the Company to "The
Randers Killam Group Inc." as follows: 12,878,787 shares were voted in favor of
the proposal, 29,000 shares were voted against, 28,255 shares abstained, and no
broker "non-votes" were recorded on the proposal. The stockholders approved a
proposal to adopt an equity incentive plan and to reserve 2,000,000 shares of
Common Stock for issuance thereunder as follows: 9,673,435 shares were voted in
favor of the proposal, 117,400 shares were voted against, 1,781,902 shares
abstained, and no broker "non-votes" were recorded on the proposal. The
stockholders approved a proposal to adopt a deferred compensation plan for
directors and to reserve 25,000 shares of Common Stock for issuance thereunder
as follows: 11,352,907 shares were voted in favor of the proposal, 179,300
shares were voted against, 40,530 shares abstained, and no broker "non-votes"
were recorded on the proposal.
7
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information concerning the market and market price for the Registrant's
common stock, $.0001 par value, and dividend policy is included under the
sections labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's Fiscal 1999 Annual Report to Shareholders and is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information required under this item is included under the sections
labeled "Selected Financial Information" and "Dividend Policy" in the
Registrant's Fiscal 1999 Annual Report to Shareholders and is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's Fiscal 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's Fiscal 1999 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Registrant's Consolidated Financial Statements as of April 3, 1999,
and Supplementary Data are included in the Registrant's Fiscal 1999 Annual
Report to Shareholders and are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
8
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning directors required under this item is
incorporated herein by reference from the material contained under the caption
"Election of Directors" in the Registrant's definitive proxy statement to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year. The information
concerning delinquent filers pursuant to Item 405 of Regulation S-K is
incorporated herein by reference from the material contained under the heading
"Section 16(a) Beneficial Ownership Reporting Compliance" under the caption
"Stock Ownership" in the Registrant's definitive proxy statement to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A, not
later than 120 days after the close of the fiscal year.
Item 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by
reference from the material contained under the caption "Executive Compensation"
in the Registrant's definitive proxy statement to be filed with the Securities
and Exchange Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated herein by
reference from the material contained under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated herein by
reference from the material contained under the caption "Relationship with
Affiliates" in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the close of the fiscal year.
9
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a,d) FINANCIAL STATEMENTS AND SCHEDULES
(1) The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2) The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
LIST OF FINANCIAL STATEMENTS AND SCHEDULES REFERENCED IN THIS ITEM 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedules filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or in the notes thereto.
(b) REPORTS ON FORM 8-K
On February 8, 1999, the Company filed a Current Report on Form 8-K, with
respect to the approval by the Company's shareholders, of: (i) an
amendment to the Company's Certificate of Incorporation changing the
Company's name, and (ii) a one-for-five reverse stock split of the
Company's common stock.
(c) EXHIBITS
See Exhibit Index on the page immediately preceding exhibits.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized.
Date: June 9, 1999 THE RANDERS KILLAM GROUP INC.
By: /s/ Emil C. Herkert
------------------------------------
Emil C. Herkert
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of June 9, 1999.
Signature Title
- --------- -----
By: /s/ Emil C. Herkert President, Chief Executive Officer, and
------------------------- Director
Emil C. Herkert
By: /s/ Theo Melas-Kyriazi Chief Financial Officer
-------------------------
Theo Melas-Kyriazi
By: /s/ Paul F. Kelleher Chief Accounting Officer
-------------------------
Paul F. Kelleher
By: /s/ John P. Appleton Chairman of the Board and Director
-------------------------
John P. Appleton
By: /s/ Thomas R. Eurich Director
-------------------------
Thomas R. Eurich
By: /s/ Brian D. Holt Director
-------------------------
Brian D. Holt
By: /s/ Susan F. Tierney Director
-------------------------
Susan F. Tierney
By: /s/ Polyvios C. Vintiadis Director
-------------------------
Polyvios C. Vintiadis
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of The Randers Killam Group Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in The Randers Killam
Group Inc.'s Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated May 11, 1999 (except with
respect to the matters discussed in Note 13 as to which the date is June 1,
1999). Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14 on page 10 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the consolidated financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
May 11, 1999
12
<PAGE>
SCHEDULE II
THE RANDERS KILLAM GROUP INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
Description of Year Expense Recovered Off Other (a) of Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended April 3, 1999 $ 760 $ 1,059 $ 4 $ (532) $ - $ 1,291
Year Ended April 4, 1998 $ 706 $ 293 $ 4 $ (352) $ 109 $ 760
Year Ended March 29, 1997 $ 576 $ 149 $ 30 $ (84) $ 35 $ 706
</TABLE>
(a) Includes allowances of businesses transferred from parent company as
described in Note 2 to Consolidated Financial Statements in the
Registrant's Fiscal 1999 Annual Report to Shareholders.
13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
2.1 Stock Purchase Agreement between the Thermo Electron Corporation
and the Registrant dated March 13, 1991 (filed as an Exhibit to
Schedule 13D filed by Thermo Electron Corporation on March 22,
1991, and incorporated herein by reference).
2.2 Option granted by Richard A. McEnhill to the Registrant dated
March 8, 1991 (filed as an Exhibit to Amendment No. 1 to Schedule
13D filed by Thermo Electron Corporation on January 27, 1994, and
incorporated herein by reference).
2.3 Option Assignment Agreement between the Registrant and Thermo Power
Corporation dated as of January 19, 1994 (filed as an Exhibit to
Amendment No. 1 to Schedule 13D filed by Thermo Electron
Corporation on January 27, 1994, and incorporated herein by
reference).
2.4 Stock Purchase and Sale Agreement dated May 12, 1997, by and
between Thermo TerraTech Inc. and Thomas R. Eurich, Michael J.
Krivitzky, Thomas J. McEnhill, and Bruce M. Bourdon (filed as
Exhibit (iv) to Amendment No. 3 to Schedule 13D filed by
Thermo Electron Corporation, Thermo Power Corporation, and
Thermo TerraTech Inc. on May 13, 1997, and incorporated herein
by reference).
2.5 Amendment No. 1 dated September 19, 1997, to Stock Purchase
and Sale Agreement dated May 12, 1997, by and between Thermo
TerraTech Inc. and Thomas R. Eurich, Michael J. Krivitzky,
Thomas J. McEnhill, and Bruce M. Bourdon (filed as Exhibit 2.5
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended April 4, 1998, and incorporated herein by
reference).
2.6 Letter of Intent dated May 12, 1997, by and between Thermo
TerraTech Inc. and the Registrant (filed as Exhibit (v) to
Amendment No. 3 to Schedule 13D filed by Thermo Electron
Corporation, Thermo Power Corporation, and Thermo TerraTech
Inc. on May 13, 1997, and incorporated herein by reference).
2.7 Stock Purchase Agreement entered on September 19, 1997, by and
between Thermo TerraTech Inc. and the Registrant (filed as
Exhibit (vii) to Amendment No. 4 to Schedule 13D filed by
Thermo Electron Corporation and Thermo TerraTech Inc. on
October 3, 1997, and incorporated herein by reference).
2.8 Amendment No. 1 dated as of April 4, 1998, to Stock Purchase
Agreement entered on September 19, 1997, by and between Thermo
TerraTech Inc. and the Registrant (filed as Exhibit 2.8 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
April 4, 1998, and incorporated herein by reference).
2.9 Agreement by and among Thermo TerraTech Inc., the Registrant,
Thomas R. Eurich, Michael J. Krivitzky, Thomas J. McEnhill, Bruce
M. Bourdon, and David A. Wiegerink (filed as Exhibit 10 to the
Registrant's Current Report on Form 8-K dated September 19, 1997,
and filed with the Commission on October 3, 1997, and
incorporated herein by reference).
3.1 Certificate of Amendment to Certificate of Incorporation, dated
November 2, 1987 (filed as Exhibit 3(b) to the Registrant's
Registration Statement on Form 10 and incorporated herein by
reference).
3.2 Certificate of Amendment to the Company's Certificate of
Incorporation (filed as Exhibit 3 to Amendment No. 1 to the
Company's Registration Statement on Form 8-A and incorporated
herein by reference).
14
<PAGE>
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
3.3 Amended and Restated By-Laws (filed as Exhibit 3(a) to the
Registrant's Registration Statement on Form 10 and incorporated
herein by reference).
3.4 Amendment to Amended and Restated By-Laws, effective October 28,
1997 (filed as Exhibit 3.4 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 4, 1998, and
incorporated herein by reference).
4.1 SpecCommon Stock Certificate (filed as Exhibit 6 to Amendment No. 1
to the Company's Registration Statement on Form 8-A, and
incorporated herein by reference).
10.1 Development Agreement dated December 1, 1988, between First Venture
Associates Limited Partnership and Redeco Incorporated (filed as
Exhibit 10(a) to the Registrant's Registration Statement on Form 10
and incorporated herein by reference).
10.2 Addendum to Development Agreement between First Venture
Associates Limited Partnership and Redeco Incorporated (filed
as Exhibit 10(b) to the Registrant's Annual Report on Form
10-KSB for the year ended December 31, 1993, and incorporated
herein by reference).
10.3 The Randers Group Incorporated 1988 Stock Option Plan (filed
as Exhibit 10(m) to the Registrant's Registration Statement on
Form 10 and incorporated herein by reference).
10.4 Indemnification Agreement, dated November 2, 1987, between The
Registrant and Thomas R. Eurich (filed as Exhibit 10(n) to the
Registrant's Registration Statement on Form 10 and incorporated
herein by reference).
10.5 The Randers Group Incorporated Flexible Compensation Plan (filed as
Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991, and incorporated herein by
reference).
10.6 Thermo Electron Corporate Charter as amended and restated
effective January 3, 1993 (filed as Exhibit 10.1 to Thermo
Electron Corporation's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-8002] and
incorporated herein by reference).
10.7 Corporate Services Agreement dated November 19, 1997, between
Thermo Electron Corporation and the Registrant (filed as
Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 3, 1998, and incorporated herein by
reference).
10.8 Tax Allocation Agreement dated as of November 19, 1997, between the
Registrant and Thermo TerraTech Inc. (filed as Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended January 3, 1998, and incorporated herein by reference).
10.9 Master Repurchase Agreement dated as of November 19, 1997,
between the Registrant and Thermo Electron Corporation (filed
as Exhibit 10.6 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended January 3, 1998, and incorporated
herein by reference).
10.10 Master Guarantee Reimbursement and Loan Agreement dated as of
February 26, 1998, between the Registrant and Thermo TerraTech
Inc. (filed as Exhibit 10.10 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended April 4, 1998, and
incorporated herein by reference).
15
<PAGE>
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
10.11 Equity Incentive Plan (filed as Exhibit 10.7 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended January 3, 1998, and incorporated herein by reference).
10.12 Deferred Compensation Plan for Directors (filed as Exhibit 10.8 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended January 3, 1998, and incorporated herein by reference).
10.13 Form of Indemnification Agreement for Directors and Officers Form
of Indemnification Agreement with Directors and Officers (filed
as Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended January 3, 1998, and incorporated herein by
reference).
10.14 Stock Holding Assistance Plan and Form of Loan thereunder (filed as
Exhibit 10.15 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended April 4, 1998, and incorporated herein by
reference).
10.15 Deferred Compensation Agreement dated September 16, 1986, between
Elson T. Killam Associates Inc. and Emil C. Herkert (filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended July 4, 1998, and incorporated herein by
reference).
10.16 Addendum dated 1990, to Deferred Compensation Agreement dated
September 16, 1986, between Elson T. Killam Associates Inc. and
Emil C. Herkert (filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 1998,
and incorporated herein by reference).
10.17 Amendment No. 1, dated April 27, 1990, a Deferred Compensation
Agreement dated September 16, 1986, between Elson T. Killam
Associates Inc. and Emil C. Herkert (filed as Exhibit 10.3 to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended July 4, 1998, and incorporated herein by reference).
10.18 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between the Registrant and
Thermo Electron Corporation.
13 Annual Report to Shareholders for the year ended April 3, 1999
(only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
16
<PAGE>
EXHIBIT 13
The Randers Killam Group Inc.
Consolidated Financial Statements
Fiscal 1999
<PAGE>
<TABLE>
<CAPTION>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
Year Ended
-------------------------------------
April 3, April 4, March 29,
(In thousands except per share amounts) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES (Note 9) $ 80,773 $ 71,583 $ 64,374
--------- -------- --------
Costs and Operating Expenses:
Cost of revenues 61,754 52,838 48,048
Selling, general, and administrative expenses (Note 7) 13,816 12,788 9,555
--------- -------- --------
75,570 65,626 57,603
--------- -------- --------
Operating Income 5,203 5,957 6,771
Interest Income 652 195 110
Interest Expense (155) (196) (184)
--------- -------- --------
Income Before Provision for Income Taxes 5,700 5,956 6,697
Provision for Income Taxes (Note 4) 2,732 2,803 3,117
--------- -------- --------
NET INCOME $ 2,968 $ 3,153 $ 3,580
--------- -------- --------
--------- -------- --------
BASIC AND DILUTED EARNINGS PER SHARE (Note 10) $ .12 $ .13 $ .16
--------- -------- --------
--------- -------- --------
WEIGHTED AVERAGE SHARES (Note 10)
Basic 25,429 25,111 22,606
--------- -------- --------
--------- -------- --------
Diluted 25,452 25,202 22,606
--------- -------- --------
--------- -------- --------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
April 3, April 4,
(In thousands except share amounts) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (includes $15,015 and $8,713 under repurchase agreement with
affiliated company; Note 13) $ 15,921 $ 9,763
Accounts receivable, less allowances of $1,291 and $760 12,677 14,304
Unbilled contract costs and fees 9,942 9,333
Prepaid and refundable income taxes (Note 4) 1,735 1,359
Prepaid expenses 433 373
--------- ---------
40,708 35,132
--------- ---------
Property, Plant, and Equipment, at Cost, Net 11,365 11,664
--------- ---------
Other Assets (Note 3) 1,966 1,177
--------- ---------
Cost in Excess of Net Assets of Acquired Companies (Note 2) 44,106 45,220
--------- ---------
$ 98,145 $ 93,193
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of long-term obligations (Note 5) $ 1,145 $ 187
Accounts payable 4,784 3,809
Accrued payroll and employee benefits 3,228 3,254
Accrued income taxes 2,364 1,016
Other accrued expenses 669 725
Due to parent company and affiliated companies 94 319
--------- ---------
12,284 9,310
--------- ---------
Deferred Income Taxes (Note 4) 997 888
--------- ---------
Other Deferred Items 1,076 1,049
--------- ---------
Long-term Obligations (Note 5) 774 1,948
--------- ---------
Commitments and Contingencies (Note 6)
Shareholders' Investment (Notes 2, 3, and 8):
Common stock, $.0001 par value, 30,000,000 shares authorized; 25,429,344 shares and
127,146,733 pro forma shares issued and outstanding 3 13
Capital in excess of par value 79,379 79,321
Retained earnings 3,632 664
--------- ---------
83,014 79,998
--------- ---------
$ 98,145 $ 93,193
--------- ---------
--------- ---------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
----------------------------------------
April 3, April 4, March 29,
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,968 $ 3,153 $ 3,580
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,787 2,675 2,137
Provision for losses on accounts receivable 1,059 293 149
Other noncash items (423) (200) (193)
Change in deferred income taxes 109 (208) (109)
Changes in current accounts, excluding the effect of transfer of
businesses from parent company:
Accounts receivable 49 (874) 590
Unbilled contract costs and fees (614) (1,338) (764)
Other current assets (469) 369 523
Accounts payable 975 1,246 (896)
Other current liabilities 1,312 (636) (1,487)
-------- -------- ---------
Net cash provided by operating activities 7,753 4,480 3,530
-------- -------- ---------
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (1,355) (1,531) (1,003)
Proceeds from sale of property, plant, and equipment 157 18 106
Other (181) (27) -
-------- -------- ---------
Net cash used in investing activities (1,379) (1,540) (897)
-------- -------- ---------
FINANCING ACTIVITIES
Repayment of notes payable (216) (170) (671)
Net transfers from (to) parent company - 3,424 (1,304)
Cash acquired from transfer of businesses from parent company - 1,442 285
Repayment of note receivable - 390 -
-------- -------- ---------
Net cash provided by (used in) financing activities (216) 5,086 (1,690)
-------- -------- ---------
Increase in Cash and Cash Equivalents 6,158 8,026 943
Cash and Cash Equivalents at Beginning of Year 9,763 1,737 794
-------- -------- ---------
Cash and Cash Equivalents at End of Year $ 15,921 $ 9,763 $ 1,737
-------- -------- ---------
-------- -------- ---------
CASH PAID FOR
Interest $ 155 $ 224 $ 205
Income taxes $ 1,632 $ 642 $ -
NONCASH ACTIVITIES
Transfer of acquired businesses from parent company (Note 2) $ - $ 4,700 $ 3,460
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
Year Ended
----------------------------------------
April 3, April 4, March 29,
(In thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK, $.0001 PAR VALUE
Balance at beginning of year $ 13 $ - $ -
Effect of one-for-five reverse stock split (10) - -
Shares issuable to parent company (Note 2) - 12 -
Transfer of Randers from parent company (Note 2) - 1 -
--------- --------- ---------
Balance at end of year 3 13 -
--------- --------- ---------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year 79,321 - -
Effect of one-for-five reverse stock split 10 - -
Shares issuable to parent company (Note 2) - 70,632 -
Transfer of Randers from parent company (Note 2) - 8,597 -
Tax benefit related to employees' and directors' stock plans 48 92 -
--------- --------- ---------
Balance at end of year 79,379 79,321 -
--------- --------- ---------
RETAINED EARNINGS
Balance at beginning of year 664 - -
Net income after May 12, 1997 2,968 2,752 -
Shares issuable to parent company (Note 2) - (2,088) -
--------- --------- ---------
Balance at end of year 3,632 664 -
--------- --------- ---------
PARENT COMPANY INVESTMENT
Balance at beginning of year - 64,731 58,725
Net income prior to May 12, 1997 - 401 3,580
Transfer of CarlanKillam from parent company (Note 2) - - 3,730
Net transfers from (to) parent company - 3,424 (1,304)
Shares issuable to parent company (Note 2) - (68,556) -
--------- --------- ---------
Balance at end of year - - 64,731
--------- --------- ---------
$ 83,014 $ 79,998 $ 64,731
--------- --------- ---------
--------- --------- ---------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Randers Killam Group Inc. (the Company) provides comprehensive
engineering and outsourcing services and operates in four business segments:
Water and Wastewater Treatment, Process Engineering and Construction, Highway
and Bridge Engineering, and Infrastructure Engineering. In January 1999, the
Company's name was changed from The Randers Group Incorporated to The Randers
Killam Group Inc.
RELATIONSHIP WITH THERMO TERRATECH INC. AND THERMO ELECTRON CORPORATION
As of April 3, 1999, Thermo TerraTech Inc. owned 24,110,210 shares of the
Company's common stock, representing 95% of such shares outstanding. Thermo
TerraTech is an 87%-owned subsidiary of Thermo Electron Corporation. As of
April 3, 1999, Thermo Electron owned 251,000 shares of the Company's common
stock, representing 1% of such shares outstanding.
Thermo Electron has announced a proposed reorganization involving certain
of Thermo Electron's subsidiaries, including the Company. Under this plan, the
Company would be merged into Thermo Electron (Note 11).
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated.
FISCAL YEAR
The Company has adopted a fiscal year ending the Saturday nearest
March 31. References to fiscal 1999, 1998, and 1997 are for the fiscal years
ended April 3, 1999, April 4, 1998, and March 29, 1997, respectively. Fiscal
years 1999 and 1997 each included 52 weeks; fiscal 1998 included 53 weeks.
REVENUE RECOGNITION
Substantially all revenues are earned under contracts. Revenues and
profits on contracts are recognized using the percentage-of-completion method.
The percentage of completion is determined by relating the actual costs incurred
to date to management's estimate of total costs to be incurred on each contract.
If a loss is indicated on any contract in process, a provision is made currently
for the entire loss. Revenues earned on contracts in process in excess of
billings are classified as unbilled contract costs and fees in the accompanying
balance sheet. There are no significant amounts included in the accompanying
balance sheet that are not expected to be recovered from existing contracts at
current contract values, or that are not expected to be collected within one
year, including amounts that are billed but not paid under retainage provisions.
STOCK-BASED COMPENSATION PLANS
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to shareholders' investment.
INCOME TAXES
The Company and Thermo TerraTech have a tax allocation agreement under
which both the Company and Thermo TerraTech are included in Thermo Electron's
consolidated federal and certain state income tax returns. The agreement
provides that in years in which the Company has taxable income, it will pay to
Thermo Electron amounts comparable to the taxes the Company would have paid had
it filed separate tax returns. If Thermo TerraTech's and Thermo Electron's
combined equity ownership of the Company were to drop below 80%, the Company
would be required to file its own income tax returns. Prior to the February 1999
issuance of its shares of common stock to
6
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Thermo TerraTech in connection with the acquisition of The Killam Group to the
Company (Note 2), Thermo TerraTech's ownership of actual outstanding shares of
common stock of the Company was less than 80% and the Company filed its own
income tax returns.
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes," the Company recognizes deferred income
taxes based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
EARNINGS PER SHARE
Basic earnings per share have been computed by dividing net income by the
weighted average number of shares or pro forma shares outstanding during the
year (Note 2). Diluted earnings per share have been computed assuming the
exercise of stock options, as well as their related income tax effects. Shares
issued in connection with the transactions described in Note 2 have been shown
as outstanding for all periods presented for purposes of computing earnings per
share.
REVERSE STOCK SPLIT
All share and per share information has been restated to reflect a
one-for-five reverse stock split, which was effective in February 1999. Share
information in the accompanying 1998 balance sheet has not been restated for the
reverse stock split.
CASH AND CASH EQUIVALENTS
At fiscal year-end 1999 and 1998, $15,015,000 and $8,713,000,
respectively, of the Company's cash equivalents were invested in a repurchase
agreement with Thermo Electron. Under this agreement, the Company in effect
lends excess cash to Thermo Electron, which Thermo Electron collateralizes with
investments principally consisting of corporate notes, U.S. government-agency
securities, commercial paper, money market funds, and other marketable
securities, in the amount of at least 103% of such obligation. The Company's
funds subject to the repurchase agreement are readily convertible into cash by
the Company and have an original maturity of three months or less. The Company's
repurchase agreement earns a rate based on the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter (Note 13). At
fiscal year-end 1999 and 1998, the Company's cash equivalents also included
investments in commercial paper which have an original maturity of three months
or less. Cash equivalents are carried at cost, which approximates market value.
PROPERTY, PLANT, AND EQUIPMENT
The costs of additions and improvements are capitalized, while
maintenance and repairs are charged to expense as incurred. The Company provides
for depreciation and amortization using the straight-line method over the
estimated useful lives of the property as follows: buildings, 25 to 40 years;
machinery and equipment, 2 to 12 years; and leasehold improvements, the shorter
of the term of the lease or the life of the asset.
Property, plant, and equipment consists of:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,044 $ 1,044
Buildings 7,334 7,157
Machinery, Equipment, and Leasehold Improvements 8,360 7,515
--------- ---------
16,738 15,716
Less: Accumulated Depreciation and Amortization 5,373 4,052
--------- ---------
$ 11,365 $ 11,664
--------- ---------
--------- ---------
</TABLE>
7
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
The excess of cost over the fair value of net assets of acquired
businesses is amortized using the straight-line method over 40 years.
Accumulated amortization was $7,848,000 and $6,574,000 at fiscal year-end 1999
and 1998, respectively. The Company assesses the future useful life of this
asset whenever events or changes in circumstances indicate that the current
useful life has diminished. The Company considers the future undiscounted cash
flows of the acquired businesses in assessing the recoverability of this asset.
If impairment has occurred, any excess of carrying value over fair value is
recorded as a loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, current maturities of long-term obligations,
accounts payable, due to parent company and affiliated companies, and long-term
obligations. Their respective carrying amounts in the accompanying balance
sheet, excluding long-term obligations, approximated fair value due to their
short-term nature. The fair value of the Company's long-term obligations at
fiscal year-end 1999 and 1998 approximated carrying value based on borrowing
rates available to the Company at the respective year ends.
COMPREHENSIVE INCOME
During the first quarter of fiscal 1999, the Company adopted SFAS
No. 130, "Reporting Comprehensive Income." This pronouncement sets forth
requirements for disclosure of the Company's comprehensive income and
accumulated other comprehensive items. In general, comprehensive income combines
net income and "other comprehensive items," which represents certain items
reported as components of shareholders' investment. The Company has no such
items and, accordingly, its comprehensive income is equal to its net income for
all periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRESENTATION
Certain amounts in fiscal 1998 and 1997 have been reclassified to conform
to the presentation in the fiscal 1999 financial statements.
2. ACQUISITIONS AND BASIS OF ACCOUNTING
On May 12, 1997, Thermo TerraTech purchased a controlling interest in The
Randers Group Incorporated (Randers). Thermo TerraTech purchased 1,420,000
shares of Randers common stock from certain members of Randers' management, and
84,000 shares from Thermo Power Corporation, an affiliate of Thermo TerraTech,
at a price of $3.125 per share, for an aggregate cost of $4,700,000. Following
these transactions, Thermo TerraTech owned 53.3% of Randers' outstanding common
stock. In addition, Thermo Electron owned approximately 8.9% of Randers'
outstanding common stock.
Subsequently, in September 1997, Thermo TerraTech and Randers entered
into a definitive agreement to transfer Thermo TerraTech's wholly owned
engineering and consulting businesses (known as The Killam Group) to Randers, in
exchange for newly issued shares of Randers' common stock. Effective April 4,
1998, the agreement was amended to provide that the price for these businesses
would be equal to $70,644,407, the book value of the transferred businesses as
of April 4, 1998. The number of new shares of Randers' common stock issued to
Thermo TerraTech
8
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND BASIS OF ACCOUNTING (CONTINUED)
equaled such book value on April 4, 1998, divided by $3.125, or 22,606,210
shares. The shares issued to Thermo TerraTech included 668,360 shares related to
the increase in value resulting from the earnings of The Killam Group from
May 12, 1997, through April 4, 1998, which totaled approximately $2,088,000. In
January 1999, the Randers' shareholders approved the listing of the shares on
the American Stock Exchange and an amendment to Randers' Certificate of
Incorporation changing the Company's name to The Randers Killam Group Inc. Upon
issuance of the shares in February 1999, Thermo TerraTech and Thermo Electron
owned approximately 94.8% and 1.0%, respectively, of Randers' outstanding common
stock. For purposes of computing weighted average shares, the 22,606,210 shares
of Randers' common stock issued in connection with the acquisition of The Killam
Group have been considered to be outstanding for all periods presented, and the
2,823,136 shares of Randers' common stock that were outstanding as of May 12,
1997, the date on which Thermo TerraTech acquired a majority interest in
Randers, are considered outstanding as of that date.
This transaction has been accounted for in accordance with Securities
and Exchange Commission Staff Accounting Bulletin Topic 2-A2, pursuant to
which The Killam Group has been treated as the "accounting acquiror" because
Thermo TerraTech owns the larger portion of the voting rights of Randers as a
result of the above mentioned transactions. Accordingly, the historical
financial information of Randers has been restated to solely reflect the
financial information of The Killam Group for periods prior to May 12, 1997,
the date on which Thermo TerraTech acquired a majority interest in Randers.
Results from May 12, 1997, reflect the combined results of The Killam Group
and Randers. Consequently, references to the Company prior to May 12, 1997,
refer solely to The Killam Group.
Based on unaudited data, the following table presents selected
financial information for The Killam Group and Randers on a pro forma basis,
assuming the companies had been combined since the beginning of fiscal 1997.
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 72,720 $ 76,775
Net Income 3,150 4,213
Earnings per Share:
Basic .13 .19
Diluted .12 .19
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the businesses been combined
from the beginning of fiscal 1997.
In November 1996, Thermo TerraTech acquired CarlanKillam Consulting
Group, Inc., a provider of transportation and environmental consulting and
professional engineering and architectural services for $3,460,000. Immediately
subsequent to Thermo TerraTech's acquisition of CarlanKillam, Thermo TerraTech
contributed this business to the Company. Pro forma results have not been
presented as the results of CarlanKillam were not material to the Company's
results of operations.
These transactions have been accounted for using the purchase method of
accounting, and their results of operations have been included in the
accompanying financial statements from the respective dates of acquisition by
Thermo TerraTech. The aggregate cost of Randers and CarlanKillam exceeded the
estimated fair value of the acquired net assets by $7,920,000, which is being
amortized over 40 years.
9
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
STOCK OPTION PLANS
The Company has a stock-based compensation plan for its key employees,
directors, and others, which permits the grant of stock and stock-based awards
as determined by the human resources committee of the Company's Board of
Directors (the Board Committee), including restricted stock, stock options,
stock bonus shares, or performance-based shares. The option recipients and the
terms of options granted under this plan are determined by the Board Committee.
Generally, options granted to date are exercisable immediately, but are subject
to certain transfer restrictions and the right of the Company to repurchase
shares issued upon exercise of the options at the exercise price, upon certain
events. The restrictions and repurchase rights generally lapse ratably over a
one- to ten-year period, depending on the term of the option, which generally
ranges from five to twelve years. Nonqualified stock options may be granted at
any price determined by the Board Committee, although incentive stock options
must be granted at not less than the fair market value of the Company's stock on
the date of grant. To date, all options have been granted at fair market value.
In connection with the transfer of Randers in fiscal 1998, the Company
assumed certain outstanding options granted under Randers' incentive stock
option plan. The Randers' options become exercisable over the vesting period.
Options vest 50% in the first year after the date of grant and 25% in each of
the second and third years after the date of grant. These options expire 10
years from the date of grant.
In addition to the Company's stock-based compensation plans, certain
officers and key employees may also participate in the stock-based compensation
plans of Thermo Electron and Thermo TerraTech.
In November 1998, the Company's employees, excluding its officers and
directors, were offered the opportunity to exchange previously granted options
to purchase shares of Company common stock for an amount of options equal to
half of the number of options previously held, exercisable at a price equal to
the fair market value at the time of the exchange offer. Holders of options to
acquire 482,000 shares at a weighted average exercise price of $3.30 per share
elected to participate in this exchange and, as a result, received options to
purchase 241,000 shares of Company common stock at $1.90 per share, which are
included in the fiscal 1999 grants in the table below. The other terms of the
new options are the same as the exchanged options except that the holders may
not sell shares purchased pursuant to such new options for six months from the
exchange date. The options exchanged were canceled by the Company.
A summary of the Company's stock option activity is:
<TABLE>
<CAPTION>
1999 1998
------------------- ------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
(Shares in thousands) Shares Price Shares Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options Outstanding, Beginning of Year 1,487 $ 3.28 - $ -
Granted 351 2.09 1,372 3.25
Forfeited (8) 4.92 (24) 3.25
Canceled due to exchange (482) 3.30 - -
Randers' options outstanding at time of transfer - - 139 3.60
------- -------- ------ ------
Options Outstanding, End of Year 1,348 $ 2.95 1,487 $ 3.30
------- -------- ------ ------
------- -------- ------ ------
Options Exercisable 1,335 $ 2.94 1,457 $ 3.25
------- -------- ------ ------
------- -------- ------ ------
Options Available for Grant 790 652
------- ------
------- ------
</TABLE>
10
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
A summary of the status of the Company's stock options at April 3, 1999,
is:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------------------------------------
Number Weighted Weighted
of Average Average
Shares Remaining Exercise
Range of Exercise Prices (In thousands) Contractual Life Price
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1.90 - $2.52 351 6.3 years $ 2.09
2.53 - 3.14 65 3.5 years 3.13
3.15 - 3.76 921 5.7 years 3.25
3.77 - 4.38 11 5.2 years 4.38
------
$1.90 - $4.38 1,348 5.8 years $ 2.95
------
------
</TABLE>
The information disclosed above for options outstanding at April 3, 1999,
does not differ materially for options exercisable.
EMPLOYEE STOCK PURCHASE PROGRAM
Substantially all of the Company's full-time employees are eligible to
participate in an employee stock purchase program sponsored by Thermo TerraTech
and Thermo Electron. Prior to November 1, 1998, the applicable shares of common
stock could be purchased at the end of a 12-month period at 95% of the fair
market value at the beginning of the period and the shares purchased were
subject to a six-month resale restriction. Effective November 1, 1998, the
applicable shares of common stock may be purchased at 85% of the lower of the
fair market value at the beginning or end of the plan year, and the shares
purchased are subject to a one-year resale restriction. Shares are purchased
through payroll deductions of up to 10% of each participating employee's gross
wages.
PRO FORMA STOCK-BASED COMPENSATION PLANS EXPENSE
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-based Compensation," which sets forth a
fair-value based method of recognizing stock-based compensation expense. As
permitted by SFAS No. 123, the Company has elected to continue to apply APB 25
in accounting for its stock-based compensation plans. Had compensation cost for
awards granted after fiscal 1997 under the Company's stock-based compensation
plans been determined based on the fair value at the grant dates consistent with
the method set forth under SFAS No. 123, the effect on the Company's net income
and earnings per share would have been:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income: $ 2,968 $ 3,153
As reported 2,460 2,786
Pro forma
Basic and Diluted Earnings per Share:
As reported .12 .13
Pro forma .10 .11
</TABLE>
Pro forma compensation expense for options granted is reflected over the
vesting period, therefore future pro forma compensation expense may be greater
as additional options are granted.
11
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
The weighted average fair value per share of options granted was $3.15
and $3.25 in fiscal 1999 and 1998, respectively. The fair value of each option
grant is estimated on the grant date using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Volatility 28% 27%
Risk-free Interest Rate 4.9% 5.7%
Expected Life of Options 4.0 years 5.0 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option-pricing models require the input
of highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
401(K) SAVINGS PLANS
The majority of the Company's full-time employees are eligible to
participate in 401(k) savings plans sponsored by certain subsidiaries and Thermo
Electron. Contributions to the 401(k) savings plans are made by both the
employee and the Company. Company contributions are based upon the level of
employee contributions and for certain plans, are based on subsidiary profits.
For these plans, the Company contributed and charged to expense $1,155,000,
$1,272,000, and $1,130,000 in fiscal 1999, 1998, and 1997, respectively.
DEFINED BENEFIT PENSION PLAN
One of the Company's divisions has a noncontributory defined benefit
retirement plan for salaried employees. This plan has been frozen and all
participants who had not been credited with the maximum years of service
continue to receive such credit up to the allowable maximum based on continued
service. Benefits under the plan are based on years of service and employees'
compensation during the last years of employment. Funds are contributed to a
trustee as necessary to provide for current service and for any unfunded
projected benefit obligation over a reasonable period.
Net periodic benefit income includes:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Cost on Benefit Obligation $ 728 $ 711 $ 677
Expected Return on Plan Assets (1,134) (928) (868)
Amortization of Unrecognized Gain (51) - -
--------- --------- ---------
$ (457) $ (217) $ (191)
--------- --------- ---------
--------- --------- ---------
</TABLE>
12
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company's defined benefit pension plan activity is:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in Benefit Obligation:
Benefit obligation, beginning of year $ 10,028 $ 9,563
Interest cost 728 711
Benefits paid (342) (309)
Actuarial (gain) loss (173) 63
--------- ----------
Benefit obligation, end of year 10,241 10,028
---------- ----------
Change in Plan Assets:
Fair value of plan assets, beginning of year 12,756 10,457
Actual return on plan assets (224) 2,608
Benefits paid (342) (309)
--------- ----------
Fair value of plan assets, end of year 12,190 12,756
--------- ----------
Funded Status 1,949 2,728
Unrecognized Net Gain (403) (1,639)
---------- ----------
Prepaid Benefit Costs $ 1,546 $ 1,089
---------- ----------
---------- ----------
</TABLE>
Prepaid benefit costs are included in other assets in the accompanying
balance sheet. The weighted average actuarial assumptions used to determine the
net periodic benefit costs in fiscal 1999, 1998, and 1997 were: discount rate -
7.5%, expected long-term rate of return on assets - 9.0%, and rate of increase
in salary levels - 0%.
OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, one of the Company's divisions
provided other postretirement benefits for employees who met certain age and
length-of-service requirements. Under SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," the expected cost of these
postretirement benefits must be charged to expense during the years that the
employees render service. This postretirement benefit plan has been frozen and
the Company recorded the accumulated postretirement obligation calculated as of
that date.
Net postretirement healthcare cost includes:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Cost on Benefit Obligation $ 50 $ 49 $ 91
Amortization of Unrecognized Gain (17) (16) (11)
--------- --------- ---------
$ 33 $ 33 $ 80
--------- --------- ---------
--------- --------- ---------
</TABLE>
13
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
The Company's post retirement healthcare plan activity is:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in Benefit Obligation:
Benefit obligation, beginning of year $ 686 $ 677
Interest cost 50 49
Benefits paid (18) (18)
Other - (22)
---------- ----------
Benefit obligation, end of year 718 686
---------- ----------
Plan Assets - -
Funded Status (718) (686)
Unrecognized Net Gain (307) (324)
---------- ----------
Accrued Post Retirement Healthcare Cost $ (1,025) $ (1,010)
---------- ----------
---------- ----------
</TABLE>
For measurement purposes, the following table illustrates the annual rate
of increase in the per capita cost of covered healthcare claims:
<TABLE>
<CAPTION>
Annual Rate
--------------------
Pre-65 Post-65
------ -------
<S> <C> <C>
1999 7% 6%
1998 8% 6%
1997 8% 6%
</TABLE>
The pre-65 rate decreases gradually to 6% for fiscal 2000 and remains at
that level thereafter. The healthcare cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed healthcare cost trend rates by one percentage point in each year would
increase the accumulated postretirement benefit obligation as of April 3, 1999,
by $71,000 and the aggregate of the service and interest cost components of the
net postretirement healthcare cost for the year then ended by $5,000. A decrease
in the assumed healthcare cost trend rates by one percentage point in each year
would decrease the accumulated postretirement benefit obligation as of April 3,
1999, by $61,000 and the aggregate of the service and interest cost components
of the net postretirement healthcare cost for the year then ended by $5,000. The
discount rates used in determining the accumulated postretirement benefit
obligation was 7.5% in fiscal 1999 and 1998, and 8% in fiscal 1997.
14
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES
The components of the provision for income taxes are:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently Payable:
Federal $ 2,410 $ 2,398 $ 2,306
State 564 617 654
------- ------- -------
2,974 3,015 2,960
------- ------- -------
Net Deferred (Prepaid):
Federal (212) (180) 121
State (30) (32) 36
------- ------- -------
(242) (212) 157
------- ------- -------
$ 2,732 $ 2,803 $ 3,117
------- ------- -------
------- ------- -------
</TABLE>
The Company receives a tax deduction upon exercise of nonqualified stock
options by employees for the difference between the exercise price and the
market price of the Company's stock on the date of exercise. The provision for
income taxes that is currently payable does not reflect $48,000 and $92,000 of
such benefits of the Company that have been allocated to capital in excess of
par value in fiscal 1999 and 1998, respectively.
Provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income before provision for income taxes due to:
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision for Income Taxes at Statutory Rate $ 1,938 $ 2,025 $ 2,277
Differences Resulting From:
State income taxes, net of federal tax 352 386 455
Amortization of cost in excess of net assets of acquired companies 433 412 363
Other, net 9 (20) 22
------- ------- -------
$ 2,732 $ 2,803 $ 3,117
------- ------- -------
------- ------- -------
</TABLE>
15
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES (CONTINUED)
Prepaid and deferred income taxes in the accompanying balance sheet
consist of:
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prepaid (Deferred) Income Taxes:
Reserves and other accruals $ 858 $ 706
Accrued compensation 615 759
State net operating loss carryforward 235 108
Intangible assets 76 82
Depreciation (1,073) (1,078)
Other 27 (106)
------- -------
$ 738 $ 471
------- -------
------- -------
</TABLE>
As of April 3, 1999, the Company had state net operating loss
carryforwards of approximately $2,960,000, which expire from 2004 through 2018.
5. LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
(In thousands) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
6.25% Mortgage Loan (payable in monthly installments of $9, with balloon
payment in May 1999) $ 1,063 $ 1,173
Mortgage Loan (payable in monthly installments of $12, with final payment
in 2003 (a)) 856 949
Other - 13
------- -------
1,919 2,135
Less: Current Maturities 1,145 187
------- -------
$ 774 $ 1,948
------- -------
------- -------
</TABLE>
(a) Bears interest at Prime Rate, which was 7.75% at April 3, 1999.
The annual requirements for long-term obligations as of April 3, 1999,
are $1,145,000 in fiscal 2000; $88,000 in fiscal 2001; $96,000 in fiscal 2002;
and $590,000 in fiscal 2003. Total requirements of long-term obligations are
$1,919,000.
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $2,508,000, $2,498,000, and
$2,068,000 in fiscal 1999, 1998, and 1997, respectively. Future minimum payments
due under noncancelable operating leases at April 3, 1999, are $2,085,000 in
fiscal 2000; $1,611,000 in fiscal 2001; $1,183,000 in fiscal 2002; $561,000 in
fiscal 2003; $74,000 in fiscal 2004; and $24,000 in fiscal 2005 and thereafter.
Total future minimum lease payments are $5,538,000.
16
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONTINGENCIES
The Company is contingently liable with respect to lawsuits and other
matters that arose in the ordinary course of business. In the opinion of
management, these contingencies will not have a material adverse effect upon the
financial position of the Company or its results of operations.
7. RELATED-PARTY TRANSACTIONS
CORPORATE SERVICES AGREEMENT
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company currently pays Thermo Electron annually an amount equal to 0.8% of
the Company's revenues. In calendar 1997 and 1996 the Company paid an amount
equal to 1.0% of the Company's revenues. For these services, the Company was
charged $646,000, $679,000, and $644,000 in fiscal 1999, 1998, and 1997,
respectively. The fee is reviewed and adjusted annually by mutual agreement of
the parties. The corporate services agreement is renewed annually but can be
terminated upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron
Corporate Charter defines the relationship among Thermo Electron and its
majority-owned subsidiaries). Management believes that the service fee charged
by Thermo Electron is reasonable and that such fees are representative of the
expenses the Company would have incurred on a stand-alone basis. For additional
items such as employee benefit plans, insurance coverage, and other identifiable
costs, Thermo Electron charges the Company based upon costs attributable to the
Company. In fiscal 1999, Thermo Electron billed the Company an additional
$61,000 for certain administrative services required by the Company that were
not covered by the corporate services agreement.
OTHER RELATED-PARTY TRANSACTIONS
The Company purchases products and services in the ordinary course of
business with other companies affiliated with Thermo TerraTech. Purchases of
products and services from such affiliated companies total $425,000, $382,000,
and $2,238,000 in fiscal 1999, 1998, and 1997, respectively.
REPURCHASE AGREEMENT
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Notes 1 and 13.
8. COMMON STOCK
At April 3, 1999, the Company had reserved 2,129,550 unissued shares of
its common stock for possible issuance under stock-based compensation plans.
9. BUSINESS SEGMENT INFORMATION
The Company organizes and manages its businesses by individual functional
operating entity. The Company's businesses operate in four segments: Water and
Wastewater Treatment, Process Engineering and Construction, Highway and Bridge
Engineering, and Infrastructure Engineering. In classifying operational entities
into a particular segment, the Company aggregates businesses with similar
economic characteristics, services, and customers.
The Company's Water and Wastewater Treatment segment provides
engineering, consulting, and outsourcing services to industrial and government
clients for the design, construction oversight, and operation of water and
wastewater treatment facilities.
The Process Engineering and Construction segment plans, designs, and
builds equipment, systems, and plants used for manufacturing.
17
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. BUSINESS SEGMENT INFORMATION (CONTINUED)
The Company's Highway and Bridge Engineering segment provides consulting
and outsourcing services for transportation projects.
The Infrastructure Engineering segment provides a wide array of
consulting and outsourcing services for infrastructure development.
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Water and Wastewater Treatment (a) $ 43,957 $ 40,790 $ 44,452
Process Engineering and Construction (b) 18,342 11,154 -
Highway and Bridge Engineering (c) 12,158 13,345 17,595
Infrastructure Engineering 6,977 6,346 2,608
Intersegment sales elimination (d) (661) (52) (281)
----------- ---------- -----------
$ 80,773 $ 71,583 $ 64,374
----------- ---------- -----------
----------- ---------- -----------
Income Before Provision for Income Taxes:
Water and Wastewater Treatment $ 6,037 $ 6,305 $ 7,112
Process Engineering and Construction 729 1,109 -
Highway and Bridge Engineering (1,148) (1,193) (70)
Infrastructure Engineering 760 495 373
Corporate (e) (1,175) (759) (644)
----------- ---------- -----------
Total operating income 5,203 5,957 6,771
Interest income (expense), net 497 (1) (74)
----------- ---------- -----------
$ 5,700 $ 5,956 $ 6,697
----------- ---------- -----------
----------- ---------- -----------
Total Assets:
Water and Wastewater Treatment $ 50,156 $ 55,474 $ 55,499
Process Engineering and Construction 11,649 10,695 -
Highway and Bridge Engineering 14,119 14,728 16,247
Infrastructure Engineering 5,587 4,857 4,749
Corporate (f) 16,634 7,439 (1,061)
----------- ---------- -----------
$ 98,145 $ 93,193 $ 75,434
----------- ---------- -----------
----------- ---------- -----------
Depreciation and Amortization:
Water and Wastewater Treatment $ 1,735 $ 1,718 $ 1,606
Process Engineering and Construction 407 312 -
Highway and Bridge Engineering 415 430 444
Infrastructure Engineering 230 215 87
----------- ---------- -----------
$ 2,787 $ 2,675 $ 2,137
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
18
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(In thousands) 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Expenditures:
Water and Wastewater Treatment $ 775 $ 935 $ 780
Process Engineering and Construction 300 387 -
Highway and Bridge Engineering 157 166 216
Infrastructure Engineering 123 43 7
----------- ---------- -----------
$ 1,355 $ 1,531 $ 1,003
----------- ---------- -----------
----------- ---------- -----------
</TABLE>
(a) Includes intersegment sales of $180,000, $11,000, and $165,000 in fiscal
1999, 1998, and 1997, respectively.
(b) Includes intersegment sales of $69,000 and $6,000 in fiscal 1999 and 1998,
respectively.
(c) Includes intersegment sales of $412,000, $35,000, and $116,000 in fiscal
1999, 1998, and 1997, respectively.
(d) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(e) Primarily general and administrative expenses.
(f) Primarily cash and cash equivalents.
10. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BASIC
Net Income $ 2,968 $ 3,153 $ 3,580
--------- -------- --------
Shares Issued in Connection With the Acquisition of The Killam Group (Note 2) 22,606 22,606 22,606
Randers' Weighted Average Shares Outstanding From May 12, 1997, Date of Acquisition
by Thermo TerraTech (Note 2) 2,823 2,505 -
--------- -------- --------
Weighted Average Shares 25,429 25,111 22,606
--------- -------- --------
Basic Earnings per Share $ .12 $ .13 $ .16
--------- -------- --------
--------- -------- --------
DILUTED
Net Income $ 2,968 $ 3,153 $ 3,580
--------- -------- --------
Basic Weighted Average Shares 25,429 25,111 22,606
Effect of Stock Options 23 91 -
--------- -------- --------
Weighted Average Shares, as Adjusted 25,452 25,202 22,606
--------- -------- --------
Diluted Earnings per Share $ .12 $ .13 $ .16
--------- -------- --------
--------- -------- --------
</TABLE>
The computation of diluted earnings per share excludes the effect of
assuming the exercise of certain outstanding stock options because the effect
would be antidilutive. As of April 3, 1999, there were 1,309,000 shares of such
options outstanding, with exercise prices ranging from $3.13 to $4.38 per share.
19
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. PROPOSED REORGANIZATION
Thermo Electron has announced a proposed reorganization involving certain
of Thermo Electron's subsidiaries, including the Company. Under this plan, the
Company and its sister subsidiary, ThermoRetec Corporation, as well as their
parent company, Thermo TerraTech, would be merged into Thermo Electron. As a
result, all three companies would become wholly owned subsidiaries of Thermo
Electron. The public shareholders of the Company, ThermoRetec, and Thermo
TerraTech would receive common stock in Thermo Electron in exchange for their
shares. The completion of these transactions is subject to numerous conditions,
including the establishment of prices and exchange ratios; confirmation of
anticipated tax consequences; the approval of the Board of Directors of
ThermoRetec and Thermo TerraTech; the negotiation and execution of a definitive
merger agreement; the receipt of a fairness opinion from an investment banking
firm that the transaction is fair to the Company's shareholders (other than
Thermo TerraTech and Thermo Electron) from a financial point of view; the
approval of the Company's Board of Directors, including its independent
directors; and completion of review by the Securities and Exchange Commission of
any necessary documents regarding the proposed transactions.
12. UNAUDITED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
(In thousands except per share amounts)
1999 First Second Third Fourth
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 20,083 $ 20,988 $ 20,816 $ 18,886
Gross Profit 5,029 4,699 4,676 4,615
Net Income 788 819 773 588
Basic and Diluted Earnings per Share .03 .03 .03 .02
</TABLE>
<TABLE>
<CAPTION>
1998 First (a) Second Third Fourth
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 16,844 $18,231 $18,269 $18,239
Gross Profit 4,492 4,745 5,024 4,484
Net Income 841 984 906 422
Basic and Diluted Earnings per Share .03 .04 .04 .02
</TABLE>
(a) Reflects the May 1997 acquisition of Randers by Thermo TerraTech (Note 2),
subsequently transferred to the Company.
20
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. SUBSEQUENT EVENTS
RESTRUCTURING ACTIONS
In May 1999, the Company announced plans to sell three businesses, two of
which comprise the Company's Process Engineering and Construction segment and
Highway and Bridge Engineering segment. The third business that will be sold
represents a small component of the Water and Wastewater Treatment segment. In
connection with the planned sale of these businesses, the Company expects to
record pretax charges of approximately $15 million, primarily in the first
quarter of fiscal 2000. These charges primarily represent the excess of book
value of the businesses over the estimated proceeds from sale. Revenues and
operating losses of these business units in fiscal 1999 aggregated $31.7 million
and $0.5 million, respectively.
CASH MANAGEMENT ARRANGEMENT
Effective June 1, 1999, the Company and Thermo Electron commenced use of
a new domestic cash management arrangement (Note 1). Under the new arrangement,
amounts advanced to Thermo Electron by the Company for domestic cash management
purposes bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis
points, set at the beginning of each month. Thermo Electron is contractually
required to maintain cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 50% of all funds invested under this cash
management arrangement by all Thermo Electron subsidiaries other than wholly
owned subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. The
Company will report amounts invested in this arrangement as "advance to
affiliate" in its balance sheet, beginning in the first quarter of fiscal 2000.
21
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of The Randers Killam Group Inc.:
We have audited the accompanying consolidated balance sheet of The
Randers Killam Group Inc. (formerly The Randers Group Incorporated; a Delaware
Corporation and a 95%-owned subsidiary of Thermo TerraTech Inc.) as of April 3,
1999, and April 4, 1998, and the related consolidated statements of income, cash
flows, and shareholders' investment for each of the three years in the period
ended April 3, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Randers
Killam Group Inc. as of April 3, 1999, and April 4, 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended April 3, 1999, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
May 11, 1999 (except with respect
to the matters discussed in Note 13,
as to which the date is June 1, 1999)
22
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed immediately after this Management's
Discussion on Analysis of Financial Condition and Results of Operation under the
heading "Forward-looking Statements."
OVERVIEW
The Company's businesses provide comprehensive engineering and
outsourcing services and operate in four segments: Water and Wastewater
Treatment, Process Engineering and Construction, Highway and Bridge Engineering,
and Infrastructure Engineering. The Company's clients include municipalities,
government agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's strategy is to market its
technical expertise and low-cost solutions to a broad base of clients.
In May 1997, Thermo TerraTech Inc. purchased a controlling interest in
The Randers Group Incorporated (Randers), a provider of design engineering,
project management, and construction services for industrial clients in the
manufacturing, pharmaceutical, and chemical-processing industries. Subsequently,
Thermo TerraTech entered into a definitive agreement to transfer its wholly
owned engineering and consulting businesses (known as The Killam Group) to
Randers in exchange for additional shares of Randers' common stock. As a result
of these transactions, as approved at the January 1999 Special Meeting of the
Company's Shareholders (Note 2), the Killam Group was deemed to be the
"accounting acquiror," and historical results for Randers have been restated to
solely reflect the financial information of The Killam Group for periods prior
to May 12, 1997, and to reflect the combined results of The Killam Group and
Randers (collectively, the Company) from May 12, 1997, the date on which Thermo
TerraTech became the majority-owner of Randers.
The Randers division, comprised of Randers Engineering, Inc., Redco
Incorporated, and Viridian Technology Incorporated, represents the Company's
Process Engineering and Construction segment. The Company's Killam Associates,
Inc., Duncan, Lagnese and Associates, Incorporated, Killam Management and
Operational Services, Inc., and E3-Killam, Inc. subsidiaries, represent the
Water and Wastewater Treatment segment and provide environmental consulting and
engineering services and specialize in wastewater treatment and water resources
management. The Company's BAC Killam Inc. subsidiary represents the Company's
Highway and Bridge Engineering segment and provides both private and public
sector clients with a broad range of consulting services that address
transportation planning and design. In addition, in November 1996, Thermo
TerraTech acquired CarlanKillam Consulting Group, Inc., a provider of
transportation and environmental consulting, professional engineering, and
architectural services, and subsequently transferred it to the Company.
CarlanKillam represents the Company's Infrastructure Engineering segment.
In May 1999, the Company announced the planned sale of three businesses,
BAC Killam, the Randers division, and E3-Killam. The Company expects to record
pretax charges totaling approximately $15 million, primarily in the first
quarter of fiscal 2000, ending July 3, 1999, as a result of the planned sale
(Note 13).
RESULTS OF OPERATIONS
FISCAL 1999 COMPARED WITH FISCAL 1998
Revenues increased 13% to $80.8 million in fiscal 1999 from $71.6 million
in fiscal 1998, primarily due to construction and labor management contracts at
the Process Engineering and Construction segment and the Water and Wastewater
Treatment segment, which commenced during the first quarter of fiscal 1999 and
are expected to be completed by the end of the first quarter of fiscal 2000. To
a lesser extent, revenues increased $3.5 million due to the inclusion of a full
period of revenues in fiscal 1999 from Randers, which was acquired in May 1997
and represents the Process Engineering and Construction segment.
23
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1999 COMPARED WITH FISCAL 1998 (CONTINUED)
The gross profit margin decreased to 24% in fiscal 1999 from 26% in
fiscal 1998, primarily due to a change in sales mix to lower-margin
construction-management contracts from higher-margin design contracts at the
Process Engineering and Construction segment and Water and Wastewater Treatment
segment.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 17% in fiscal 1999 from 18% in fiscal 1998, due to an increase in
revenues. Selling, general, and administrative expenses increased in fiscal
1999, primarily due to higher provisions for uncollectible accounts and the
inclusion of expenses from Randers for the full period of fiscal 1999.
Interest income increased to $0.7 million in fiscal 1999 from $0.2
million in fiscal 1998, primarily due to higher average invested cash balances.
Interest expense remained relatively unchanged at $0.2 million in fiscal 1999
and 1998.
The effective tax rates were 48% and 47% in fiscal 1999 and 1998,
respectively. The effective tax rates exceeded 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 tax rate
increased in fiscal 1999 primarily due to an increase in the relative effect of
nondeductible amortization expense.
FISCAL 1998 COMPARED WITH FISCAL 1997
Revenues increased 11% to $71.6 million in fiscal 1998 from $64.4 million
in fiscal 1997, primarily due to the inclusion of $11.2 million of revenues from
Randers, which was acquired in May 1997 and represents the Process Engineering
and Construction segment and $3.8 million resulting from the inclusion of a full
period of revenues in fiscal 1998 from CarlanKillam, which was acquired in
November 1996 and represents the Infrastructure Engineering segment. These
increases were offset in part by a decrease in revenues due to the completion of
two major contracts in fiscal 1997 at the Water and Wastewater Treatment and the
Highway and Bridge Engineering segments.
The gross profit margin increased to 26% in fiscal 1998 from 25% in
fiscal 1997, primarily due to a change in sales mix to higher-margin contracts
at the Water and Wastewater Treatment segment, and the inclusion of
higher-margin revenues at the Process Engineering and Construction segment.
Selling, general, and administrative expenses as a percentage of revenues
increased to 18% in fiscal 1998 from 15% in fiscal 1997, primarily due to the
May 1997 acquisition of Randers, which has higher expenses as a percentage of
revenues and, to a lesser extent, increased marketing costs at the Water and
Wastewater Treatment segment.
Interest income increased to $0.2 million in fiscal 1998 from $0.1
million in fiscal 1997, primarily due to higher average invested cash balances.
Interest expense remained relatively unchanged at $0.2 million in fiscal 1998
and 1997.
The effective tax rates were 47% in fiscal 1998 and 1997. The effective
tax rates exceeded 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.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $28.4 million at April 3, 1999, compared
with $25.8 million at April 4, 1998. Included in working capital are cash and
cash equivalents of $15.9 million at April 3, 1999, compared with $9.8 million
at April 4, 1998. During fiscal 1999, $7.8 million of cash was provided by
operating activities. During this period, $2.3 million of cash was provided by
an increase in accounts payable and other current liabilities, primarily due to
increased subcontract work, as well as the timing of payments. These sources of
cash were offset in part by an increase of $0.6 million in unbilled contract
costs and fees due to the timing of billings on certain contracts. The days
sales outstanding in unbilled contract costs and fees and accounts receivable at
April 3, 1999, were 48 and 59 days, respectively, compared with 47 and 68 days,
respectively at April 4, 1998. Management does not believe that the change in
the number of days sales outstanding is indicative of any trend that would
materially affect the Company's future results of operations or liquidity.
24
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company's investing activities in fiscal 1999 primarily consisted of
capital additions of $1.4 million. The Company expects to expend approximately
$1.0 million for capital additions during fiscal 2000.
In fiscal 1999, the Company's financing activities used $0.2 million of
cash for the repayment of notes payable.
The Company generally expects to have positive cash flow from its
existing operations. Although the Company does not presently intend to actively
seek to acquire additional businesses in the near future, it may acquire one or
more complimentary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds and/or short-term borrowings from Thermo
TerraTech or Thermo Electron Corporation, although it has no agreement with
these companies to ensure that funds will be available on acceptable terms, or
at all. The Company believes that its existing resources are sufficient to meet
the capital requirements of its existing businesses for the foreseeable future.
MARKET RISK
The Company is exposed to market risk from changes in interest rates,
which could affect its future results of operations and financial condition. The
Company's cash and cash equivalents and long-term obligations are sensitive to
changes in interest rates. Interest rate changes would result in a change in the
fair value of fixed rate financial instruments and a change in earnings from
variable rate instruments. A 10% change in interest rates would not have a
material effect on the fair value of, or earnings from, these financial
instruments.
YEAR 2000
The following constitutes a "Year 2000 Readiness Disclosure" under the
Year 2000 Information and Readiness Disclosure Act. The Company continues to
assess the potential impact of the year 2000 date recognition issue on the
Company's internal business systems, products, and operations. The Company's
year 2000 initiatives include (i) testing and upgrading significant information
technology systems and facilities; (ii) assessing the year 2000 readiness of its
key suppliers and vendors; and (iii) developing a contingency plan.
THE COMPANY'S STATE OF READINESS
The Company has implemented a compliance program to ensure that its
critical information technology systems and facilities will be ready for the
year 2000. The first phase of the program, testing and evaluating the Company's
critical information technology systems and facilities for year 2000 compliance,
has largely been completed. During phase one, the Company tested and evaluated
its significant computer systems, software applications, and related equipment
for year 2000 compliance. The Company also evaluated the potential year 2000
impact on its critical facilities. The Company's efforts included testing the
year 2000 readiness of its utility and telecommunications systems at its
critical facilities. The Company is currently in phase two of its program,
during which any noncompliant systems or facilities that were identified during
phase one are prioritized and remediated. Based on its evaluations of its
critical facilities, the Company does not believe that any material upgrades or
modifications are required. The Company is currently upgrading or replacing its
material noncompliant information technology systems, and this process was
approximately 90% complete as of April 3, 1999. In many cases, such upgrades or
replacements are being made in the ordinary course of business, without
accelerating previously scheduled upgrades or replacements. The Company expects
that all of its material information technology systems and critical facilities
will be year 2000 compliant by June 1999.
25
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR 2000 (CONTINUED)
The Company is in the process of identifying and assessing the year 2000
readiness of key suppliers and vendors that are believed to be significant to
the Company's business operations. As part of this effort, the Company has
developed and is distributing questionnaires relating to year 2000 compliance to
its significant suppliers and vendors. To date, no significant supplier or
vendor has indicated that its business operations will be materially disrupted
by the year 2000 issue. The Company has started to follow-up with its
significant suppliers and vendors that have not responded to the Company's
questionnaires. The Company has not completed the majority of its assessment of
third-party risk, but expects to be substantially completed by June 1999.
CONTINGENCY PLAN
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan may include identifying manual or backup systems in the event of a
failure of the Company's material information technology systems. As the Company
continues to evaluate the year 2000 readiness of its business systems and
facilities and significant suppliers and vendors, it will modify and adjust its
contingency plan as may be required.
ESTIMATED COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
The Company had not incurred material expenses to third parties (external
costs) related to year 2000 issues as of April 3, 1999, and the total external
costs of year 2000 remediation are not expected to be material.
The Company does not track the internal costs incurred for its year 2000
compliance project. Such costs are principally the related payroll costs for its
information systems group.
REASONABLY LIKELY WORST CASE SCENARIO
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that the Company experiences year 2000
problems in its material information technology systems that cause the Company
to be unable to access data, to process transactions, and to maintain accurate
books and records. In such an event, the Company's operations could be delayed
or temporarily shut down, and it could be unable to meet its obligations to
customers in a timely fashion. The Company's business, operations, and financial
condition could be adversely affected in amounts that cannot be reasonably
estimated at this time.
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Some services provided by the Company may involve the delivery to clients of
third-party software and hardware. Accordingly, the Company may see an increase
in warranty and other claims related to Company services that incorporate such
software or hardware. In addition, certain older third-party products, which the
Company no longer uses in providing its services to clients, may not be year
2000 compliant, which may expose the Company to claims. As discussed above, if
any of the Company's key suppliers or vendors experience business disruptions
due to year 2000 issues, the Company might also be materially adversely
affected. There is expected to be a significant amount of litigation relating to
the year 2000 issue and there can be no assurance that the Company will not
incur material costs in defending or bringing lawsuits. In addition, if any year
2000 issues are identified, there can be no assurance that the Company will be
able to retain qualified personnel to remedy such issues. Any unexpected costs
or delays arising from the year 2000 issue could have a material adverse impact
on the Company's business, operations, and financial condition in amounts that
cannot be reasonably estimated at this time.
26
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in fiscal 2000 and beyond to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company.
DEPENDENCE ON SALES TO GOVERNMENT ENTITIES. A significant portion of the
Company's revenues is derived from municipalities, state governments, and
government utility authorities. Any decreases in purchases by these entities,
including, without limitation, decreases resulting from shifts in priorities or
overall budgeting limitations, could have a material adverse effect on the
Company's business, financial condition, and results of operations. In addition,
most of the Company's contracts require the Company to perform specific services
for a fixed fee. Contracts with governmental entities often permit the purchaser
to cancel the agreement at any time. A significant overrun in the Company's
expenses or cancellation of a significant contract could also result in a
material adverse effect on the Company's business, financial condition, and
results of operations. The Company's contracts with governmental entities are
also subject to other risks, including contract suspensions; protests by
disappointed bidders of contract awards, which can result in the re-opening of
the bidding process; and changes in government policies or regulations.
COMPETITION. The markets for many of the Company's services are regional
and are characterized by intense competition from numerous local competitors.
Some of the Company's competitors have greater technical and financial resources
than those of the Company. As a result, they may be able to adapt more quickly
to changes in customer requirements and new or emerging technologies, or to
devote greater resources to the promotion and sale of their services than the
Company. Competition could increase if new companies enter the market or its
existing competitors expand their service lines. There can be no assurance that
the Company's current technology, technology under development, or ability to
develop new technologies will be sufficient to enable it to compete effectively
with its competitors.
DEPENDENCE ON ENVIRONMENTAL REGULATION. Federal, state, and local
environmental laws govern most of the markets in which the Company conducts
business, as well as many of the Company's operations. The markets for many of
the Company's services, including water supply design and inspection services,
wastewater treatment facility design and inspection services, solid and
hazardous waste management services, environmental testing services, natural
resource management, and air pollution testing and management services, were
directly or indirectly created by, and are dependent on, the existence and
enforcement of those laws. There can be no assurance that these laws and
regulations will not change in the future, requiring new technologies or
stricter standards with which the Company must comply. In addition, there can be
no assurance that these laws and regulations will not be made more lenient in
the future, thereby reducing the size of the markets addressed by the Company.
Any such change in such federal, state, and local environmental laws and
regulations may have a material adverse effect on the Company's business.
POTENTIAL ENVIRONMENTAL AND REGULATORY LIABILITY. The Company's
operations are subject to comprehensive laws and regulations related to the
protection of the environment. Among other things, these laws and regulations
impose requirements to control air, soil, and water pollution, and regulate
health, safety, zoning, land use, and the handling and transportation of
hazardous and nonhazardous materials. Such laws and regulations also impose
liability for remediation and cleanup of environmental contamination, both
on-site and off-site, resulting from past and present operations. These
requirements may also be imposed as conditions of operating permits or licenses
that are subject to renewal, modification, or revocation. Existing laws and
regulations, and new laws and regulations, may require the Company to modify,
supplement, replace, or curtail its operating methods, facilities, or equipment
at costs which may be substantial without any corresponding increase in revenue.
The Company's water, wastewater, and hazardous waste-treatment management
services operations may expose the Company to liabilities to clients and third
parties. In addition, the Company is also potentially subject to monetary fines,
penalties, remediation, cleanup or stop orders, injunctions, or orders to cease
or suspend certain of its practices. The outcome of any proceedings and
associated costs and expenses could have a material adverse impact on the
Company's business. In addition, the Company is subject to numerous laws and
regulations related to the protection of human health and safety. Such laws and
regulations may pose liability on the Company for exposure of its employees to
radiation or other hazardous contamination.
27
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
The Company endeavors to operate its business to minimize its exposure to
environmental and other regulatory liabilities. Although no claims giving rise
to such liabilities have been asserted by the Company's customers or employees
to date, there can be no assurance that such claims cannot or will not be
asserted against the Company.
POTENTIAL PROFESSIONAL LIABILITY. The Company's business exposes it to
potential liability for the negligent performance of its services and, as such,
the Company may face substantial liability to clients and third parties for
damages resulting from faulty designs or other professional services. The
Company currently maintains professional errors and omissions insurance, but
there can be no assurance that this insurance will provide sufficient coverage
in the event of a claim, that the Company will be able to maintain such coverage
on acceptable terms, if at all, or that a professional liability claim would not
result in a material adverse effect on the Company's business, financial
condition, and results of operations.
SEASONAL INFLUENCES. A majority of the Company's businesses experience
seasonal fluctuations. Site investigation work and certain environmental testing
services may decline in winter months as a result of severe weather conditions.
RISKS ASSOCIATES WITH ACQUISITION STRATEGY. The Company's strategy has
included the acquisition of businesses that complement or augment the Company's
existing services. The Company does not presently intend to actively seek to
make additional acquisitions in the near future, and expects instead to
concentrate its resources on strengthening its core businesses. The Company may,
however, acquire one or more additional businesses if they are presented to the
Company on terms the Company believes to be attractive. Promising acquisitions
are difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory approvals. Any
acquisitions completed by the Company may be made at substantial premiums over
the fair value of the net assets of the acquired companies. There can be no
assurance that the Company will be able to complete future acquisitions or that
the Company will be able to successfully integrate any acquired businesses. In
order to finance such acquisitions, it may be necessary for the Company to raise
additional funds through public or private financings. Any equity or debt
financing, if available at all, may be on terms that are not favorable to the
Company and, in the case of equity financing, may result in dilution to the
Company's shareholders.
RISKS ASSOCIATED WITH CASH MANAGEMENT ARRANGEMENT WITH THE PARENT
COMPANY. The Company participates in a cash management arrangement with its
parent company, Thermo Electron. Under this cash management arrangement, the
Company lends its excess cash to Thermo Electron on an unsecured basis. The
Company has the contractual right to withdraw its funds invested in the cash
management arrangement upon 30 days' prior notice. Thermo Electron is
contractually required to maintain cash, cash equivalents, and/or immediately
available bank lines of credit equal to at least 50% of all funds invested under
the cash management arrangement by all Thermo Electron subsidiaries other than
wholly owned subsidiaries. The funds are held on an unsecured basis and
therefore are subject to the credit risk of Thermo Electron. The Company's
ability to receive its cash upon notice of withdrawal could be adversely
affected if participants in the cash management arrangement demand withdrawal of
their funds in an aggregate amount in excess of the 50% reserve required to be
maintained by Thermo Electron. In the event of a bankruptcy of Thermo Electron,
the Company would be treated as an unsecured creditor and its right to receive
funds from the bankruptcy estate would be subordinated to secure creditors and
would be treated on a pari passu basis with all other unsecured creditors.
Further, all cash withdrawn by the Company from the cash management arrangement
within one year before the bankruptcy would be subject to rescission. The
inability of Thermo Electron to return the Company's cash on a timely basis or
at all could have a material adverse effect on the Company's results of
operations and financial position.
28
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
POTENTIAL IMPACT OF YEAR 2000 ON PROCESSING OF DATE-SENSITIVE
INFORMATION. While the Company is attempting to minimize any negative
consequences arising from the year 2000 issue, there can be no assurance that
year 2000 problems will not have a material adverse impact on the Company's
business, operations, or financial condition. While the Company expects that
upgrades to its internal business systems will be completed in a timely fashion,
there can be no assurance that the Company will not encounter unexpected costs
or delays. Some services provided by the Company may involve the delivery to
clients of third-party software and hardware. Accordingly, the Company may see
an increase in warranty and other claims related to Company services that
incorporate such software or hardware. In addition, certain older third-party
products, which the Company no longer uses in providing its services to clients,
may not be year 2000 compliant, which may expose the Company to claims. If any
of the Company's significant suppliers, vendors, or customers experience
business disruptions due to year 2000 issues, the Company might also be
materially adversely affected. There is expected to be a significant amount of
litigation relating to the year 2000 issue and there can be no assurance that
the Company will not incur material costs in defending or bringing lawsuits. In
addition, if any year 2000 issues are identified, there can be no assurance that
the Company will be able to retain qualified personnel to remedy such issues.
Any unexpected costs or delays arising from the year 2000 issue could have a
significant adverse impact on the Company's business, operations, and financial
condition in amounts that cannot be reasonably estimated at this time.
29
<PAGE>
THE RANDERS KILLAM GROUP INC. 1999 FINANCIAL STATEMENTS
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1999 1998 (a) 1997 (b) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenues $ 80,773 $ 71,583 $ 64,374 $ 58,515 $ 27,735
Gross Profit 19,019 18,745 16,326 13,503 5,640
Net Income 2,968 3,153 3,580 2,379 693
Basic and Diluted Earnings per Share .12 .13 .16 .11 .03
BALANCE SHEET DATA
Working Capital $ 28,424 $ 25,822 $ 16,038 $ 13,084 $ 14,348
Total Assets 98,145 93,193 75,434 71,893 71,886
Long-term Obligations 774 1,948 1,260 1,883 2,551
Shareholders' Investment 83,014 79,998 64,731 58,725 60,278
</TABLE>
(a) Reflects the May 1997 acquisition of Randers by Thermo TerraTech (Note 2),
subsequently transferred to the Company.
(b) Reflects the November 1996 acquisition of CarlanKillam Consulting Group by
Thermo TerraTech (Note 2), subsequently transferred to the Company.
COMMON STOCK MARKET INFORMATION
The Company's common stock is traded on the American Stock Exchange under
the symbol RGI. The following table sets forth the high and low sales prices of
the Company's common stock for fiscal 1999 and 1998, as reported in the
consolidated transaction reporting system. Prices have been restated to reflect
a one-for-five reverse stock split, effective in February 1999.
<TABLE>
<CAPTION>
Fiscal 1999 Fiscal 1998
--------------------- ---------------------
Quarter High Low High Low
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $3 3/4 $3 1/8 $5 5/8 $2 1/2
Second 3 1/8 1 7/8 5 4 1/16
Third 2 3/16 1 9/16 5 2 1/2
Fourth 3 5/8 1 7/8 4 3/8 3 1/8
</TABLE>
As of April 30, 1999, the Company had 65 holders of record of its common
stock. This does not include holdings in street or nominee names. The closing
market price on the American Stock Exchange for the Company's common stock on
April 30, 1999, was $2 5/8 per share.
DIVIDEND POLICY
The Company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use earnings
to finance expansion and growth. Payment of dividends will rest within the
discretion of the Company's Board of Directors and will depend upon, among other
factors, the Company's earnings, capital requirements, and financial condition.
30
<PAGE>
APPENDIX F
AMENDMENT NO. 1 ON FORM 10-K/A TO ANNUAL REPORT ON FORM 10-K
OF RANDERS/KILLAM FOR THE FISCAL YEAR ENDED APRIL 3, 1999
F-1
<PAGE>
APPENDIX F
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------------------------
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
- ---------
- --------- Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 0-18095
THE RANDERS KILLAM GROUP INC.
(Exact name of Registrant as specified in its character)
Delaware 38-2788025
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Bleeker Street
Millburn, New Jersey 07041
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Stock, $.0001 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. X No _____.
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 30, 1999, was approximately $2,411,412.
As of April 30, 1999, the Registrant had 25,429,344 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended April 3, 1999, are incorporated by reference into Parts I and II.
<PAGE>
Items 10, 11, 12 & 13 of Part III of the Registrant's Annual Report on Form 10-K
for the fiscal year ended April 3, 1999 are hereby amended and restated in their
entirety as follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Set forth below are the names of the directors, their ages, their
offices in The Randers Killam Group Inc. ("Randers" or the "Company"), if any,
their principal occupation or employment for the past five years, the length of
their tenure as directors and the names of other public companies in which such
persons hold directorships. Information regarding their beneficial ownership of
the Company's Common Stock and of the common stock of its parent company, Thermo
TerraTech Inc. ("Thermo TerraTech"), a provider of industrial outsourcing
services and manufacturing support encompassing a broad range of specialization
including environmental-liability management, engineering and design, laboratory
testing and metal treating, and Thermo TerraTech's parent company, Thermo
Electron Corporation ("Thermo Electron"), a provider of products and services in
measurement instrumentation, biomedical devices, energy, resource recovery, and
emerging technologies, is reported in Item 12 - Security Ownership of Certain
Beneficial Owners and Management.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
JOHN P. APPLETON Dr. Appleton, 64, has been the chairman of the board and a director of the Company
since November 1997. Dr. Appleton has been president and chief executive officer
of Thermo TerraTech since September 1993, and has served as a vice president of
Thermo Electron since 1975 in various managerial capacities. He was the chief
executive officer of ThermoRetec Corporation ("ThermoRetec"), a majority-owned
subsidiary of Thermo TerraTech, from September 1993 to May 1997. Dr. Appleton
also serves as a director of ThermoRetec and Thermo TerraTech.
- -------------------------------------------------------------------------------------------------------------------
THOMAS R. EURICH Mr. Eurich, 53, has been a director of the Company since its inception in 1976. He
has also been a vice president of the Company since November 1997. Prior to the
acquisition of a majority interest in the Company by Thermo TerraTech, Mr. Eurich
served as its president and chief executive officer from its inception in 1976 until
November 1997 and May 1997, respectively.
- -------------------------------------------------------------------------------------------------------------------
EMIL C. HERKERT Mr. Herkert, 61, has been a director of the Company since November 1997. He has
also served as president and chief executive officer of the Company since November
1997 and May 1997, respectively. In addition, he has served as a vice president
of Thermo TerraTech since May 1996, as president of the Randers group of companies
from its acquisition by Thermo TerraTech in February 1995 until its merger into
the Company in May 1997, and as president of Killam Associates, a wholly owned
subsidiary of Thermo TerraTech from 1997 through May 1998.
- -------------------------------------------------------------------------------------------------------------------
BRIAN D. HOLT Mr. Holt, 50, has been a director of the Company since November 1998. Mr. Holt
has been the president and chief executive officer of Thermo Ecotek Corporation, a
majority-owned subsidiary of Thermo Electron that is involved in clean-power
resources, clean fuels, and naturally derived products for protecting crops since
February 1994. He has been the chief operating officer, environmental and energy,
of Thermo Electron since September 1998. From March 1996 to September 1998, he
was a vice president of Thermo Electron. For more than five years prior to his
appointment as an officer of Thermo Ecotek Corporation, he was president and chief
executive officer of Pacific Generation Company, a financier, builder, owner and
operator of independent power facilities. Mr. Holt is also a director of KFx,
Inc., Thermo Ecotek Corporation, Thermo Power Corporation, Thermo TerraTech and
ThermoRetec.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
SUSAN F. TIERNEY Dr. Tierney, 48, has been a director of the Company since November 1997. Dr.
Tierney is a partner with the Economics Resource Group, an economics/policy
consulting firm. From March 1993 to May 1993, Dr. Tierney was a consultant for
the U.S. Department of Energy, and from May 1993 to July 1995, she served as
Assistant Secretary for Policy for the U.S. Department of Energy. Prior to that
appointment, Dr. Tierney served as Secretary of Environmental Affairs for the
Commonwealth of Massachusetts from January 1991 to March 1993 and as Commissioner
of the Department of Public Utilities for the Commonwealth of Massachusetts from
1988 to January 1991. Dr. Tierney is also a director of Thermo Ecotek Corporation.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The board of directors has established an audit committee and a human
resources committee, each consisting solely of directors who are not employees
of the Company, of Thermo Electron or of any other companies affiliated with
Thermo Electron (also referred to as "outside directors"). The sole member of
the audit committee is Dr. Tierney. The audit committee reviews the scope of the
audit with the Company's independent public accountants and meets with them for
the purpose of reviewing the results of the audit subsequent to its completion.
The sole member of the human resources committee is Dr. Tierney. The human
resources committee reviews the performance of senior members of management,
recommends executive compensation and administers the Company's stock option and
other stock-based compensation plans. The Company does not have a nominating
committee of the board of directors. The board of directors met four times, the
audit committee met twice and the human resources committee met three times
during fiscal 1999. Each director attended at least 75% of all meetings of the
board of directors and committees on which he served held during fiscal 1999.
The board of directors has also established a special committee (the
"Special Committee") consisting solely of one outside director for the purpose
of evaluating the merits and negotiating the terms of the proposed transaction
with Thermo Electron pursuant to which the Company would be taken private,
considering such alternatives as the Special Committee deems appropriate and
making a recommendation to the full board of directors on whether or not to
approve any such proposed transaction. See Item 13 - Certain Relationships and
Related Transactions. The sole member of the Special Committee is Dr. Tierney.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Outside directors receive an annual retainer of $2,000 and a fee of
$1,000 per day for attending regular meetings of the board of directors and $500
per day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees of
the board of directors. Payment of directors' fees is made quarterly. Dr.
Appleton, Mr. Eurich, Mr. Herkert and Mr. Holt are all employees of Thermo
Electron or its subsidiaries and do not receive any cash compensation from the
Company for their services as directors. Directors are also reimbursed for
out-of-pocket expenses incurred in attending such meetings.
In addition, members of the Special Committee receive a one-time
retainer of $20,000 and a fee of $1,000 per day for attending regular meetings
of the Special Committee and $500 per day for participating in meetings of the
Special Committee held by means of conference telephone.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Under the Company's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of his
cash fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change in control or proposed change in
control of the Company that is not approved by the board of directors, deferred
amounts become payable immediately.
<PAGE>
Either of the following is deemed to be a change of control: (a) the
acquisition, without the prior approval of the board of directors, directly or
indirectly, by any person of 50% or more of the outstanding Common Stock or the
outstanding common stock of Thermo TerraTech or 25% or more of the outstanding
common stock of Thermo Electron; or (b) the failure of the persons serving on
the board of directors immediately prior to any contested election of directors
or any exchange offer or tender offer for the Common Stock or the common stock
of Thermo TerraTech or Thermo Electron to constitute a majority of the board of
directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of the Company's Common Stock. When payable, amounts
deferred may be disbursed solely in shares of Common Stock accumulated under the
Deferred Compensation Plan. A total of 25,000 shares of Common Stock have been
reserved for issuance under the Deferred Compensation Plan. As of April 3, 1999,
deferred units equal to approximately 7,862 shares of Common Stock were
accumulated under the Deferred Compensation Plan.
STOCK-BASED COMPENSATION
Directors of the Company are also eligible for the grant of stock
options under the Company's equity incentive plan. The equity incentive plan is
administered by the human resources committee of the board of directors, which
determines the form and terms of stock-based awards to be granted. To date, only
nonqualified stock options have been granted under this plan. These options may
be exercised at any time prior to the expiration of the option on the seventh
anniversary of the grant date. Shares acquired upon exercise of the options are
subject to restrictions on transfer and right of the Company to repurchase such
shares at the exercise price if the director ceases to serve as a director of
the Company or any other Thermo Electron company. The restrictions and
repurchase rights lapse or are deemed to have lapsed 20% per year, starting with
the first anniversary of the grant date, provided the director has continuously
served as a director of the Company or any other Thermo Electron company since
the grant date. No options to purchase shares of the Common Stock were granted
to the outside directors of the Company under this plan in fiscal 1999.
STOCK OWNERSHIP POLICIES FOR DIRECTORS
The human resources committee of the board of directors (the
"Committee") has established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership within a three
year period. The chief executive officer of the Company is required to comply
with a separate stock holding policy established by the Committee, which is
described in Item 11 - Executive Compensation - Stock Ownership Policies.
In addition, the Committee has adopted a policy requiring directors to
hold shares of the Company's Common Stock equal to one-half of their net option
exercises over a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to exercise the
option and the number of shares that could have been surrendered to satisfy tax
withholding obligations attributable to the exercise of the option. This policy
is also applicable to executive officers, and is described in Item 11 -
Executive Compensation - Stock Ownership Policies.
EXECUTIVE OFFICERS
Reference is made to Item 1(e) of this Report for information regarding
the Executive Officers of the Registrant.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
NOTE: All share data for the Company's Common Stock has been adjusted to
reflect a one-for-five reverse stock split effected in February 1999.
The following table summarizes compensation for services to the Company
in all capacities awarded to, earned by or paid to the Company's chief executive
officer and its two other most highly compensated executive officers (i) for the
fiscal year from April 5, 1998 through April 3, 1999 ("fiscal 1999") (ii) for
the fiscal year from March 30, 1997 through April 4, 1998 ("fiscal 1998"), (iii)
for the three-month period from January 1, 1997 through March 29, 1997 ("fiscal
1997"), reflecting a change in the Company's fiscal year-end to the 52- or
53-week period ending on the Saturday nearest March 30, and (iv) for the fiscal
year from January 1, 1996 to December 31, 1996 ("fiscal "1996"). The listed
executive officers are collectively referred to herein as the "named executive
officers." No other executive officer of the Company met the definition of
"highly compensated" within the meaning of the Securities and Exchange
Commission's executive compensation disclosure rules.
The Company is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Company, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Company's affairs is
provided to the Company under the Corporate Services Agreement between the
Company and Thermo Electron. See Item 13 - Certain Relationships and Related
Transactions. Accordingly, the compensation for these individuals is not
reported in the following table.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION (1) LONG TERM COMPENSATION
----------------------- ----------------------
RESTRICTED SECURITIES
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD (2) OPTIONS (3) COMPENSATION (4)
------------------ ---- ------ ----- ------------ --------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Emil C. Herkert (5) 1999 $214,000 $65,000 $37,391 (6) $109,125 10,000 (RGI) $26,202 (8)
President & Chief 6,100 (TMO)
Executive Officer 8,000 (TTT)
1998 $207,000 $0 (7) $48,188 (6) -- 240,000 (RGI) $18,325 (8)
300 (TMO)
2,000 (MKA)
2,000 (ONX)
2,000 (TDX)
1,000 (TISI)
2,000 (TRIL)
1,500 (VIZ)
2,000 (TRCC)
------------------------------------------------------------------------------------------------------------------------
Thomas R. Eurich (9) 1999 $145,000 $10,000 -- -- 4,000 (RGI) $500
Vice President 1998 $145,000 $0 (7) -- -- 54,000 (RGI) $500
1997 $33,000 (1) -- (1) -- -- -- --
1996 -- -- -- -- --
$132,000
------------------------------------------------------------------------------------------------------------------------
Nicholas M. DeNichilo 1999 $144,851 $22,500 -- -- 8,800 (RGI) $11,514 (8)
Vice President (10) 5,000 (TTT)
1998 $142,000 $45,000 -- -- 60,000 (RGI) $11,152 (8)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company changed its fiscal year-end to March from December in 1997,
and as a consequence, the salary data for fiscal 1997 reflects salary
paid during the three-month period from January 1, 1997 to March 29,
1997. Salary data for the subsequent fiscal year reflects salary paid
during the Company's full fiscal year.
<PAGE>
(2) In fiscal 1999, Mr. Herkert was awarded 19,400 shares of restricted
stock of Thermo TerraTech with a value of $109,125 on the grant date.
The restricted stock awards vest in their entirety on January 2, 2002.
Dividends are payable on restricted stock. At the end of fiscal 1999,
Mr. Herkert held 19,400 shares of restricted stock of Thermo TerraTech
with an aggregate value of $97,000.
(3) Options to purchase Common Stock granted by the Company are designated
in the table as "RGI". In addition, the named executive officers have
also been granted options to purchase the common stock of the following
Thermo Electron companies during the last three fiscal years as part of
Thermo Electron's stock option program: Thermo Electron (designated in
the table as TMO), Metrika Systems Corporation (designated in the table
as MKA), ONIX Systems Inc. (designated in the table as ONX), Thermedics
Detection Inc. (designated in the table as TDX), Thermo Information
Solutions Inc. (designated in the Table as TISI), Thermo TerraTech
(designated in the Table as TTT), Thermo Trilogy Corporation
(designated in the table as TRIL), Thermo Vision Corporation
(designated in the table as VIZ) and Trex Communications Corporation
(designated in the table as TRCC).
(4) Represents the amount of matching contributions made by the
individual's employer on behalf of named executive officers
participating in the Elson T. Killam Savings and Investment Plan, in
the case of Messrs. Herkert and DeNichilo, and in The Randers Killam
Group Inc. 401(k) Profit Sharing Plan, in the case of Mr. Eurich.
(5) The Company became a majority-owned subsidiary of Thermo TerraTech on
May 12, 1997. Mr. Herkert was appointed chief executive officer of the
Company on May 12, 1997 and was appointed to the additional position of
president of the Company on November 19, 1997. The annual cash
compensation (salary and bonus) reported in the table for Mr. Herkert
represents the amount paid by the Company and Thermo TerraTech for his
services to such entities during fiscal 1998 and 1999.
(6) This amount includes payments of $20,000 plus an additional gross-up
amount of $17,186 to compensate for the federal and state income tax
liability attributable to such payments made to Mr. Herkert in fiscal
1999 and 1998 pursuant to the terms of a certain Deferred Compensation
Agreement with Elson T. Killam Associates.
(7) Mr. Herkert and Mr. Eurich elected to forego their bonuses for fiscal
1998 in light of the Company's operating and stock price performance in
fiscal 1998.
(8) For Messrs. Herkert and DeNichilo, these figures also include $16,178
and $6,493, respectively for fiscal 1998 and $24,000 and $6,400,
respectively for fiscal 1999, of contributions to the Elson T. Killam
Savings and Investment Plan in lieu of contributions to the Killam
Associates Defined Benefit Retirement Plan, benefits under which were
frozen as of March 31, 1995.
(9) Mr. Eurich was appointed vice president of the Company on November 19,
1997. Prior to that time, Mr. Eurich served as chief executive officer
of the Company until May 12, 1997, and as president of the Company
until November 19, 1997.
(10) Mr. DeNichilo was appointed vice president of the Company on November
19, 1997. The annual compensation (salary and bonus) reported in the
table for Mr. DeNichilo represents the amount paid by the Company and
Thermo TerraTech for his services to such entities during fiscal 1998
and 1999.
STOCK OPTIONS GRANTED DURING FISCAL 1999
The following table sets forth information concerning individual
grants of stock options made during fiscal 1999 to the named executive officers.
It has not been the Company's policy in the past to grant stock appreciation
rights, and no such rights were granted during fiscal 1999.
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1999
- -------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
NUMBER OF SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION TERM (2)
GRANTED AND EMPLOYEES IN PRICE PER EXPIRATION ---------------
NAME COMPANY (1) FISCAL YEAR SHARE DATE 5% 10%
---- ------------ ------------ ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Emil C. Herkert 10,000 (RGI) 2.85% $2.50 2/24/04 $6,900 $15,300
300 (TMO) 0.01% (3) $34.50 6/2/03 $2,859 $6,318
5,800 (TMO) 0.14% (3) $16.20 9/23/03 $25,984 $57,362
8,000 (TTT) 0.67% (3) $5.03 2/24/04 $11,120 $24,560
- -------------------------------------------------------------------------------------------------------------
Thomas R. Eurich 4,000 (RGI) 1.14% (3) $2.50 2/24/04 $2,760 $6,120
- -------------------------------------------------------------------------------------------------------------
Nicholas M. DeNichilo 8,800 (RGI) 2.51% $2.50 2/24/04 $6,072 $13,464
5,000 (TTT) 0.42% (3) $5.03 2/24/04 $6,950 $15,350
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant. In all cases, the shares acquired
upon exercise are subject to repurchase by the granting company at the
exercise price if the optionee ceases to be employed by such company or
any other Thermo Electron company. The granting company may exercise
its repurchase rights within six months after the termination of the
optionee's employment. The repurchase rights generally lapse ratably
over a one- to five-year period, depending on the option term, which
may vary from five to ten years, provided the optionee continues to be
employed by the granting company or any other Thermo Electron company.
The granting corporation may permit the holders of options to exercise
options and to satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation. Please see footnote (2) under Summary Compensation Table
above for the company abbreviations used in this table.
(2) The amounts shown on this table represent hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. These gains are based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The gains
shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.
Actual gains, if any, on stock option exercises will depend on the
future performance of the common stock of the applicable corporation,
the optionee's continued employment through the option period and the
date on which the options are exercised.
(3) These options were granted under stock option plans maintained by
Thermo Electron or its subsidiaries other than the Company as part of
Thermo Electron's compensation program and accordingly are reported as
a percentage of total options granted to employees of Thermo Electron
and its subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1999 and outstanding stock options held at the end of
fiscal 1999 by the Company's named executive officers. No stock appreciation
rights were exercised or were outstanding during fiscal 1999.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL 1999 YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY
SHARES YEAR-END OPTIONS AT FISCAL
ACQUIRED ON VALUE (EXERCISABLE/ YEAR-END (EXERCISABLE/
NAME COMPANY (1) EXERCISE REALIZED (2) UNEXERCISABLE) (1) UNEXERCISABLE)
- ---- ----------- -------- ------------ ------------------ --------------
<S> <C> <C> <C> <C> <C>
Emil C. Herkert (3) RGI -- -- 250,000 /0 $3,310 /--
TMO -- -- 43,900 /0 $0 /--
MKA -- -- 2,000 /0 $0 /--
ONX -- -- 2,000 /0 $0 /--
TDX -- -- 2,000 /0 $0 /--
TISI -- -- 0 /1,000 -- /$0 (4)
TTT -- -- 8,000 /0 $0 /--
TRIL -- -- 0 /2,000 -- /$0 (4)
VIZ -- -- 1,500 /0 $0 /--
TRCC -- -- 0 /2,000 -- /$0 (4)
- ---------------------------------------------------------------------------------------------------------------
Thomas R. Eurich RGI -- -- 58,000 /0 $1,324 /--
- ---------------------------------------------------------------------------------------------------------------
Nicholas M. DeNichilo RGI -- -- 68,800 /0 $2,913 /--
TMO 1,500 $28,295 9,750 /0 $0 /--
TTT -- -- 38,000 /0 $0 /--
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options reported outstanding at the end of the fiscal year
are immediately exercisable as of fiscal year-end, except options to
purchase the common stock of Thermo Information Solutions Inc., Thermo
Trilogy Corporation and Trex Communications Corporation, which are not
exercisable until the earlier of (i) 90 days after the effective date
of the registration of that company's common stock under Section 12 of
the Exchange Act and (ii) nine years from the grant date. In all cases,
the shares acquired upon exercise of the options reported in the table
are subject to repurchase by the granting company at the exercise price
if the optionee ceases to be employed by such company or any other
Thermo Electron company. The granting company may exercise its
repurchase rights within six months after the termination of the
optionee's employment. For publicly traded companies, the repurchase
rights generally lapse ratably over a five- to ten-year period,
depending on the option term, which may vary from seven to twelve
years, provided that the optionee continues to be employed by the
Company or any other Thermo Electron company. For companies whose
shares are not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. The granting
company may permit the holder of options to exercise options and to
satisfy tax withholding obligations by surrendering shares equal in
fair market value to the exercise price or withholding obligation.
Certain options have three-year terms and the repurchase rights lapse
in their entirety on the second anniversary of the grant date. Please
see footnote (2) under Summary Compensation Table above for the company
abbreviations used in this table.
(2) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the
option because in many cases the shares are not sold on exercise but
continue to be held by the executive officer exercising the option. The
amounts shown represent the difference between the option exercise
price and the market price on the date of exercise, which is the amount
that would have been realized if the shares had been sold immediately
upon exercise.
(3) Mr. Herkert has served as a vice president of Thermo TerraTech since
1996 and has been granted options to purchase shares of the common
stock of Thermo Electron and certain of its subsidiaries other than the
Company from time to time by Thermo Electron or such other
subsidiaries. These options are
<PAGE>
not reported here as they were granted as compensation for service to
Thermo Electron companies in capacities other than in his capacity as
the chief executive officer of the Company.
(4) No public market existed for the shares underlying these options as of
April 3, 1999. Accordingly, no value in excess of exercise price has
been attributed to these options.
DEFINED BENEFIT RETIREMENT PLAN
The Company's Killam Associates subsidiary maintains a Defined Benefit
Retirement Plan (the "Plan") for eligible U.S. employees. Accrued benefits under
the Plan were frozen as of March 31, 1995. Mr. Herkert and Mr. DeNichilo are
both participants in the Plan. The following table sets forth the estimated
annual benefits payable under the Plan upon retirement in specified compensation
and years-of-service classifications. The estimated benefits reflect the
statutory limits on compensation that can be recognized for Plan purposes. The
limit at March 31, 1995 was $150,000 per year.
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL ----------------
COMPENSATION 15 20 25 30 35
------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 $20,064 $26,752 $33,440 $40,128 $46,817
125,000 25,427 33,902 42,378 50,853 59,329
150,000 20,789 41,052 51,315 61,578 71,842
</TABLE>
Each eligible employee receives a monthly retirement benefit, beginning
at normal retirement age (65, although benefits are not reduced if the employee
retires after reaching 62). Before the benefit was frozen, it provided 1.05% of
an employee's Average Final Compensation (as defined below) in excess of the
average of the Social Security wage bases, multiplied by his years of service
(up to a maximum of 35 years). Benefits are reduced for retirement before age
62. Average Final Compensation is the average total compensation for the 5
consecutive years out of the last 15 years prior to 1995 which produce the
highest average. The frozen annual accrued benefit for Mr. Herkert is $93,332
(based on the compensation limit of $235,840 that was in effect in 1993) and for
Mr. DeNichilo is $32,638. The Plan benefits shown are payable during the
employee's lifetime unless the employee elects another form of benefit that
provides death protection.
EXECUTIVE RETENTION AGREEMENTS
Thermo Electron has entered into agreements with certain executive
officers and key employees of Thermo Electron and its subsidiaries that provide
severance benefits if there is a change in control of Thermo Electron and their
employment is terminated by Thermo Electron "without cause" or by the individual
for "good reason", as those terms are defined therein, within 18 months
thereafter. For purposes of these agreements, a change in control exists upon
(i) the acquisition by any person of 40% or more of the outstanding common stock
or voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to include a majority of directors who are "continuing
directors", which term is defined to include directors who were members of
Thermo Electron's board on the date of the agreement or who subsequent to the
date of the agreement were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement
with Mr. Herkert. This agreement provides that in the event Mr. Herkert's
employment is terminated under the circumstances described above, he would be
entitled to a lump sum payment equal to the sum of (a) one times his highest
annual base salary in any 12 month period during the prior five-year period,
plus (b) one times his highest
<PAGE>
annual bonus in any 12 month period during the prior five-year period. In
addition, he would be provided benefits for a period of one year after such
termination substantially equivalent to the benefits package he would have been
otherwise entitled to receive if he was not terminated. Further, all repurchase
rights of Thermo Electron and its subsidiaries shall lapse in their entirety
with respect to all options that he holds in Thermo Electron and its
subsidiaries, including the Company, as of the date of the change in control.
Finally, Mr. Herkert would be entitled to a cash payment equal to $15,000, to be
used toward outplacement services.
Assuming that the severance benefits would have been payable as of
April 5, 1999, the lump sum salary and bonus payment under such agreement to Mr.
Herkert would have been approximately $343,000. In the event that payments under
these agreements are deemed to be so called "excess parachute payments" under
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), Mr. Herkert would be entitled to receive a gross-up
payment equal to the amount of any excise tax payable by him with respect to
such payment, plus the amount of all other additional taxes imposed on him
attributable to the receipt of such gross-up payment.
STOCK OWNERSHIP POLICIES
The human resources committee of the board of directors (the
"Committee") established a stock holding policy for executive officers of the
Company that required executive officers to own a multiple of their compensation
in shares of Common Stock. For the chief executive officer, the multiple is one
times his base salary and reference incentive compensation for the fiscal year.
For all other officers, the multiple was one times the officer's base salary.
The Committee deemed it appropriate to permit officers to achieve these
ownership levels over a three-year period. The policy has been amended to apply
only to the chief executive officer.
In order to assist executive officers in complying with the policy, the
Committee also adopted a stock holding assistance plan under which the Company
is authorized to make interest-free loans to executive officers to enable them
to purchase shares of Common Stock in the open market. This plan was also
amended to apply only to the chief executive officer. The loans are required to
be repaid upon the earlier of demand or the tenth anniversary of the date of the
loan, unless otherwise determined by the Committee.
The Committee also has a policy requiring its executive officers to
hold shares of Common Stock equal to one-half of their net option exercises over
a period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of Thermo TerraTech, the Company's parent
company, and of Thermo Electron, Thermo TerraTech's parent company, as of May
31, 1999, with respect to (i) each director, (ii) each executive officer named
in the summary compensation table set forth in Item 11 - Executive Compensation,
(the "named executive officers") and (iii) all directors and current executive
officers as a group. In addition, the following table sets forth the beneficial
ownership of Common Stock, as of May 31, 1999, with respect to each person who
was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
While certain directors or executive officers of the Company are also
directors or executive officers of Thermo Electron or Thermo TerraTech, all such
persons disclaim beneficial ownership of the shares of Common Stock owned by
Thermo TerraTech or Thermo Electron.
<PAGE>
<TABLE>
<CAPTION>
THE RANDERS KILLAM THERMO TERRATECH THERMO ELECTRON
NAME (1) GROUP INC. (2) INC. (3) CORPORATION (4
- -------- -------------- --------- --------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 24,361,210 N/A N/A
John P. Appleton 120,000 305,939 154,363
Nicholas M. DeNichilo 68,800 38,000 10,175
Thomas R. Eurich 207,501 0 0
Emil C. Herkert 252,000 89,900 46,400
Brian D. Holt 4,000 250,000 286,943
Susan F. Tierney 51,653 1,000 0
All directors and current executive
officers as a group (8 persons) 715,954 749,654 1,010,829
</TABLE>
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children and all share ownership includes sole voting
and investment power.
(2) Shares of Common Stock beneficially owned by Dr. Appleton, Mr. DeNichilo,
Mr. Eurich, Mr. Herkert, Mr. Holt, Dr. Tierney and all directors and
current executive officers as a group include 120,000, 68,800, 58,000,
250,000, 4,000, 48,300, and 561,100 shares, respectively, that such person
or group has the right to acquire within 60 days of May 31, 1999, through
the exercise of stock options. Shares beneficially owned by Dr. Tierney and
all directors and current executive officers as a group each include 3,353
shares that had been allocated through April 3, 1999, to Dr. Tierney's
account maintained under the Deferred Compensation Plan. No director or
named executive officer beneficially owned more than 1% of the Common Stock
outstanding as of May 31, 1999; all directors and current executive
officers as a group beneficially owned 2.8% of the Common Stock outstanding
as of such date.
(3) Shares of the common stock of Thermo TerraTech beneficially owned by Dr.
Appleton, Mr. DeNichilo, Mr. Herkert, Mr. Holt, Dr. Tierney and all
directors and current executive officers as a group include 275,000,
38,000, 8,000, 250,000, 1,000 and 630,000 shares, respectively, that such
person or group has the right to acquire within 60 days of May 31, 1999,
through the exercise of stock options. Shares beneficially owned by Dr.
Appleton and all directors and current executive officers as a group
include 305 and 907 shares, respectively, allocated through May 31, 1999,
to accounts maintained pursuant to the ESOP, as defined below. Except for
Dr. Appleton, who beneficially owned 1.58% and Mr. Holt who beneficially
owned 1.3% of the common stock outstanding as of May 31, 1999, no director
or named executive officer beneficially owned more than 1% of the common
stock of Thermo TerraTech outstanding as of such date; all directors and
current executive officers as a group beneficially owned 3.89% of the
common stock of Thermo TerraTech as of May 31, 1999.
(4) Shares of the common stock of Thermo Electron beneficially owned by Dr.
Appleton, Mr. DeNichilo, Mr. Herkert, Mr. Holt and all directors and
current executive officers as a group include 116,902, 9,750, 43,900,
283,950, and 898,300 shares, respectively, that such person or group has
the right to acquire within 60 days of May 31, 1999, through the exercise
of stock options. Shares beneficially owned by Dr. Appleton and all
directors and current executive officers as a group include 1,615 and 4,112
shares, respectively, allocated through May 31, 1999, to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan ("ESOP"), of which the trustees, who have investment power over its
assets, are officers of Thermo Electron. No director or named executive
officer beneficially owned more than 1% of the common stock of Thermo
Electron outstanding as of May 31, 1999; all directors and current
executive officers as a group did not beneficially own more than 1% of the
common stock of Thermo Electron outstanding as of such date.
(5) As of May 31, 1999, Thermo Electron beneficially owned approximately 95.8%
of the outstanding Common Stock, primarily through its majority-owned
subsidiary Thermo TerraTech. Thermo Electron's address is 81 Wyman Street,
Waltham, Massachusetts 02454-9046. As of May 31, 1999,
<PAGE>
Thermo Electron had the power to elect all of the members of the Company's
board of directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as Thermo Electron
and Thermo TerraTech, to file with the Securities and Exchange Commission
initial reports of ownership and periodic reports of changes in ownership of the
Company's securities. Based upon a review of such filings, all Section 16(a)
filing requirements applicable to such persons were complied with during fiscal
1999, except in the following instances. Thermo Electron filed one Form 4 late
reporting a total of two transactions associated with the grant of options to
purchase Common Stock granted to employees under its stock option program. Also,
Thermo Electron filed a Form 5 containing a total of nine transactions which
should have previously been reported on a Form 4, consisting of nine
transactions associated with the grant and lapse of options to purchase Common
Stock granted to employees under its stock option program.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thermo Electron has, from time to time, caused its subsidiaries to sell
minority interests to investors, resulting in several majority-owned, private
and publicly-held subsidiaries. The Company and such other majority-owned Thermo
Electron subsidiaries are hereinafter referred to as the "Thermo Subsidiaries."
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Company, have adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
To achieve these ends, the Charter identifies the general principles to
be followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
the Thermo Subsidiaries.
The Charter currently provides that it shall continue in effect so long
as Thermo Electron and at least one Thermo Subsidiary participate. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Company, can withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate a
subsidiary's participation in the Charter in
<PAGE>
the event the subsidiary ceases to be controlled by Thermo Electron or ceases to
comply with the Charter or the policies and procedures applicable to the Thermo
Group. A withdrawal from the Charter automatically terminates the corporate
services agreement and tax allocation agreement (if any) in effect between the
withdrawing company and Thermo Electron. The withdrawal from participation does
not terminate outstanding commitments to third parties made by the withdrawing
company, or by Thermo Electron or other members of the Thermo Group, prior to
the withdrawal. In addition, a withdrawing company is required to continue to
comply with all policies and procedures applicable to the Thermo Group and to
provide certain administrative functions mandated by Thermo Electron so long as
the withdrawing company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Company and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and financial and other services to the Company. The Company was
assessed an annual fee equal to 0.8% of the Company's revenues for these
services in fiscal 1999. The annual fee will remain at 0.8% of the Company's
revenues for fiscal 2000. The fee is reviewed annually and may be changed by
mutual agreement of the Company and Thermo Electron. During fiscal 1999, Thermo
Electron assessed the Company $646,000 in fees under the Services Agreement.
Management believes that the charges under the Services Agreement are reasonable
and that the terms of the Services Agreement are fair to the Company. In fiscal
1999, the Company was billed an additional $61,000 by Thermo Electron for
certain administrative services required by the Company that were not covered by
the Services Agreement. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Company upon 30 days' prior
notice. In addition, the Services Agreement terminates automatically in the
event the Company ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Company or as required in order to meet the Company's obligations under
Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided to the Company following termination.
The Company and Thermo TerraTech are parties to a Tax Allocation
Agreement under which both the Company and Thermo TerraTech are included in
Thermo Electron's consolidated Federal and state income tax returns. Under
current law, the Company will be included in such tax returns so long as Thermo
TerraTech and Thermo Electron together own at least 80% of the Company's
outstanding Common Stock. The agreement provides that in years in which the
Company has taxable income, it will pay to Thermo Electron amounts comparable to
the taxes the Company would have paid if it had filed its own separate company
tax returns. If Thermo TerraTech's and Thermo Electron's combined equity
ownership of the Company were to drop below 80%, the Company would file its own
tax returns. In fiscal 1999, the Company paid Thermo Electron $700,000 under the
Tax Allocation Agreement.
Thermo Electron has announced a proposed reorganization involving
certain of Thermo Electron's subsidiaries, including the Company. Under this
plan, the Company, and its sister subsidiary, ThermoRetec Corporation, as well
as their parent company, Thermo TerraTech Inc., would be merged into Thermo
Electron. As a result, all three companies would become wholly owned
subsidiaries of Thermo Electron. The public shareholders of all three companies
would receive common stock in Thermo Electron in exchange for their shares. The
completion of these transactions is subject to numerous conditions, including
the establishment of prices and exchange ratios; confirmation of anticipated tax
consequences; the approval of the Board of Directors of Thermo TerraTech and
ThermoRetec; the negotiation and execution of definitive merger agreements; the
receipt of fairness opinions from investment banking firms that the transactions
are fair to the Company's and subsidiaries' shareholders (other than Thermo
TerraTech and Thermo Electron) from a financial point of view; the approval of
the Company's Board of Directors, including its independent directors;
<PAGE>
and completion of review by the Securities and Exchange Commission of any
necessary documents regarding the proposed transactions.
From time to time the Company may transact business with other
companies in the Thermo Group.
The Company purchases products and services in the ordinary course of
business from other companies affiliated with Thermo TerraTech. In fiscal 1999,
the Company purchased a total of $425,000 of products and services from other
companies affiliated with Thermo TerraTech.
At April 3, 1999, the Company owed Thermo Electron and its other
subsidiaries an aggregate of $94,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, net of amounts owed to the Company by Thermo
Electron and its other subsidiaries for products, services and other
miscellaneous items. The largest amount of such net indebtedness owed by the
Company to Thermo Electron and its other subsidiaries since April 4, 1998 was
$1,190,000. These amounts do not bear interest and are expected to be paid in
the normal course of business.
As of April 3, 1999, approximately $15,015,000 of the Company's cash
equivalents was invested in a repurchase agreement with Thermo Electron. Under
this agreement, the Company in effect lends excess cash to Thermo Electron,
which Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. The Company's funds subject to the repurchase agreement are
readily convertible into cash by the Company. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter. This agreement was terminated effective
June 1, 1999 in connection with the adoption of a new domestic cash management
agreement.
Effective June 1, 1999, the Company and Thermo Electron commenced use
of a new domestic cash management arrangement. Under the new arrangement,
amounts advanced to Thermo Electron by the Company for domestic cash management
purposes bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis
points, set at the beginning of each month. Thermo Electron is contractually
required to maintain cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 50% of all funds invested under this cash
management arrangement by all Thermo Electron subsidiaries other than wholly
owned subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice.
STOCK HOLDING ASSISTANCE PLAN
The human resources committee of the board of directors (the
"Committee"), established a stock holding policy that requires the chief
executive officer to acquire and hold a minimum number of shares of Common
Stock. In order to assist the chief executive officer in complying with the
policy, the Committee also adopted a stock holding assistance plan under which
the Company may make interest-free loans to the chief executive officer, to
enable him to purchase the Common Stock in the open market. The stock holding
policy and the stock holding assistance plan were both subsequently amended to
apply only to the chief executive officer. The loans are repayable upon the
earlier of demand or the tenth anniversary of the date of the loan, unless
otherwise determined by the Committee. No such loans are currently outstanding
under the plan.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 on form 10-K/A
to be signed by the undersigned, duly authorized.
THE RANDERS KILLAM GROUP INC.
By: /s/ SANDRA L. LAMBERT
------------------------------------
Sandra L. Lambert
Secretary
<PAGE>
APPENDIX G
QUARTERLY REPORT ON FORM 10-Q OF RANDERS/KILLAM
FOR THE QUARTER ENDED JULY 3, 1999
G-1
<PAGE>
APPENDIX G
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended July 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 0-18095
THE RANDERS KILLAM GROUP INC.
(Exact name of Registrant as specified in its charter)
Delaware 38-2788025
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
27 Bleeker Street
Milburn, New Jersey 07041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Class Outstanding at July 30, 1999
------------------------------ ----------------------------
Common Stock, $.0001 par value 25,429,344
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE RANDERS KILLAM GROUP INC.
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
July 3, April 3,
(In thousands) 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (includes $15,015 under repurchase agreement with related party
in fiscal 1999) $ 1,293 $ 15,921
Advance to affiliate (Note 6) 15,510 -
Accounts receivable, less allowances of $1,076 and $1,291 15,005 12,677
Unbilled contract costs and fees 8,937 9,942
Prepaid and refundable income taxes 1,735 1,735
Prepaid expenses 602 433
--------- ---------
43,082 40,708
--------- ---------
Property, Plant, and Equipment, at Cost 16,490 16,738
Less: Accumulated depreciation and amortization 5,543 5,373
--------- ---------
10,947 11,365
--------- ---------
Other Assets 1,750 1,966
--------- ---------
Cost in Excess of Net Assets of Acquired Companies (Note 4) 31,643 44,106
--------- ---------
$ 87,422 $ 98,145
--------- ---------
--------- ---------
</TABLE>
2
<PAGE>
THE RANDERS KILLAM GROUP INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
<TABLE>
<CAPTION>
July 3, April 3,
(In thousands except share amounts) 1999 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Current maturities of long-term obligations $ 1,129 $ 1,145
Accounts payable 5,281 4,784
Accrued payroll and employee benefits 3,381 3,228
Accrued income taxes 1,702 2,364
Accrued restructuring costs (Note 4) 2,669 -
Other accrued expenses 474 669
Due to parent company and affiliated companies 361 94
--------- ---------
14,997 12,284
--------- ---------
Deferred Income Taxes 997 997
--------- ---------
Other Deferred Items 1,076 1,076
--------- ---------
Long-term Obligations 743 774
--------- ---------
Shareholders' Investment:
Common stock, $.0001 par value, 30,000,000 shares authorized; 25,429,344 shares issued
and outstanding 3 3
Capital in excess of par value 79,379 79,379
Retained earnings (Accumulated deficit) (9,773) 3,632
--------- ---------
69,609 83,014
--------- ---------
$ 87,422 $ 98,145
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THE RANDERS KILLAM GROUP INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $ 18,603 $ 20,083
---------- ----------
Costs and Operating Expenses:
Cost of revenues 13,904 15,054
Selling, general, and administrative expenses 3,129 3,589
Restructuring costs (Note 4) 15,668 -
---------- ----------
32,701 18,643
---------- ----------
Operating Income (Loss) (14,098) 1,440
Interest Income 199 125
Interest Expense (33) (43)
---------- ----------
Income (Loss) Before Income Taxes (13,932) 1,522
Income Tax Benefit (Provision) 527 (734)
---------- ----------
Net Income (Loss) $ (13,405) $ 788
---------- ----------
---------- ----------
Basic and Diluted Earnings (Loss) per Share (Note 2) $ (.53) $ .03
---------- ----------
---------- ----------
Weighted Average Shares (Note 2):
Basic 25,429 25,429
---------- ----------
---------- ----------
Diluted 25,429 25,481
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THE RANDERS KILLAM GROUP INC.
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating Activities:
Net income (loss) $ (13,405) $ 788
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 492 682
Provision for losses on accounts receivable - 257
Noncash restructuring costs (Note 4) 12,999 -
Other noncash items (96) 5
Changes in current accounts:
Accounts receivable (1,999) 417
Unbilled contract costs and fees 1,005 (1,112)
Other current assets (169) (203)
Accounts payable 497 1,176
Other current liabilities 2,234 (196)
---------- ----------
Net cash provided by operating activities 1,558 1,814
---------- ----------
Investing Activities:
Advances to affiliate, net (Note 6) (15,510) -
Purchases of property, plant, and equipment (567) (272)
Proceeds from sale of property, plant, and equipment - 12
Other (46) -
---------- ----------
Net cash used in investing activities (16,123) (260)
---------- ----------
Financing Activities:
Repayment of note payable and long-term obligations (63) (47)
---------- ----------
Net cash used in financing activities (63) (47)
---------- ----------
Increase (Decrease) in Cash and Cash Equivalents (14,628) 1,507
Cash and Cash Equivalents at Beginning of Period 15,921 9,763
---------- ----------
Cash and Cash Equivalents at End of Period $ 1,293 $ 11,270
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THE RANDERS KILLAM GROUP INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by The Randers Killam Group Inc. (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of the financial position at July 3, 1999, and
the results of operations and cash flows for the three-month periods ended July
3, 1999, and July 4, 1998. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of April 3, 1999, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended April 3, 1999,
filed with the Securities and Exchange Commission.
2. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BASIC
Net Income (Loss) $ (13,405) $ 788
---------- ----------
Weighted Average Shares 25,429 25,429
---------- ----------
Basic Earnings (Loss) per Share $ (.53) $ .03
---------- ----------
---------- ----------
DILUTED
Net Income (Loss) $ (13,405) $ 788
---------- ----------
Weighted Average Shares 25,429 25,429
Effect of Stock Options - 52
---------- ----------
Weighted Average Shares, as Adjusted 25,429 25,481
---------- ----------
Diluted Earnings (Loss) per Share $ (.53) $ .03
---------- ----------
---------- ----------
</TABLE>
The computation of diluted earnings (loss) per share excludes the effect
of assuming the exercise of certain outstanding stock options because the effect
would be antidilutive. As of July 3, 1999, there were 1,348,000 of such options
outstanding, with exercise prices ranging from $1.90 to $7.65 per share.
6
<PAGE>
THE RANDERS KILLAM GROUP INC.
3. Business Segment Information
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Water and Wastewater Treatment $ 10,656 $ 11,027
Process Engineering and Construction 2,788 4,789
Highway and Bridge Engineering 3,198 2,916
Infrastructure Engineering 2,001 1,516
Intersegment sales elimination (40) (165)
---------- ----------
$ 18,603 $ 20,083
---------- ----------
---------- ----------
Income (Loss) Before Income Taxes:
Water and Wastewater Treatment (a) $ 1,238 $ 1,440
Process Engineering and Construction (b) (5,927) 364
Highway and Bridge Engineering (c) (9,334) (148)
Infrastructure Engineering 190 156
Corporate (d) (265) (372)
---------- ----------
Total operating income (loss) (14,098) 1,440
Interest and other income, net 166 82
---------- ----------
$ (13,932) $ 1,522
---------- ----------
---------- ----------
</TABLE>
(a) Includes restructuring costs of $380,000 in fiscal 2000.
(b) Includes restructuring costs of $5,720,000 in fiscal 2000.
(c) Includes restructuring costs of $9,568,000 in fiscal 2000.
(d) Primarily general and administrative expenses.
During the first quarter of fiscal 2000, the Company recorded
restructuring costs in connection with the planned sale of three businesses
(Note 4). As a result, total assets decreased by $200,000 at the Water and
Wastewater Treatment segment, $4,778,000 at the Process Engineering and
Construction segment, and $8,021,000 at the Highway and Bridge Engineering
segment.
4. Restructuring Costs
During the first quarter of fiscal 2000, the Company recorded
restructuring costs of $15,668,000 in connection with the planned sale of three
businesses. These businesses consist of the Randers division, which constitutes
the Company's Process Engineering and Construction segment; BAC Killam Inc.,
which represents the Company's Highway and Bridge Engineering segment; and
E3-Killam Inc., which represents a small component of the Water and Wastewater
Treatment segment. These costs primarily include a write-off of $12,239,000 of
cost in excess of net assets of acquired companies and a write-down of $760,000
of property and equipment to reduce the carrying value of the businesses
proposed to be sold to the estimated proceeds from their sale, $2,562,000 of
ongoing lease costs for facilities that will be exited in connection with the
sale of these businesses, and $107,000 of severance costs for 9 employees across
all functions, all of whom were terminated by the end of the first quarter of
fiscal 2000. As of July 3, 1999, the remaining obligation for the restructuring
actions totaled $2,669,000, which represents ongoing lease costs and severance.
The Company expects to incur additional restructuring costs of approximately
$925,000, primarily for employee retention bonuses during the remainder of
fiscal 2000. The bonuses are payable upon the sale of the businesses described
above. Unaudited revenues and operating income before restructuring costs of
these business units aggregated $6,303,000 and $41,000, in the first quarter of
fiscal 2000, respectively. Revenues and operating
7
<PAGE>
THE RANDERS KILLAM GROUP INC.
4. Restructuring Costs (continued)
losses aggregated $31,655,000 and $478,000 in fiscal 1999, respectively. As a
result of the restructuring actions, depreciation has been discontinued on the
facilities to be sold and amortization has been discontinued on the cost in
excess of net assets of acquired companies which was written off. During the
first quarter of fiscal 2000, discontinuing depreciation and amortization
reduced the pretax operating loss of $209,000.
5. Proposed Reorganization
Thermo Electron Corporation has announced a proposed reorganization
involving certain of Thermo Electron's subsidiaries, including the Company.
Under this plan, the Company and its sister subsidiary, ThermoRetec Corporation,
as well as their parent company, Thermo TerraTech Inc., would be merged into
Thermo Electron. As a result, all three companies would become wholly owned
subsidiaries of Thermo Electron. The public shareholders of the Company,
ThermoRetec, and Thermo TerraTech would receive common stock in Thermo Electron
in exchange for their shares. The completion of these transactions is subject to
numerous conditions, including the establishment of prices and exchange ratios;
confirmation of anticipated tax consequences; the approval of the Board of
Directors of ThermoRetec and Thermo TerraTech; the negotiation and execution of
a definitive merger agreement; the receipt of a fairness opinion from an
investment banking firm that the transaction is fair to the Company's
shareholders (other than Thermo TerraTech and Thermo Electron) from a financial
point of view; the approval of the Company's Board of Directors, including its
independent directors; and completion of review by the Securities and Exchange
Commission of any necessary documents regarding the proposed transactions.
6. Cash Management Arrangement
Effective June 1, 1999, the Company and Thermo Electron commenced use of
a new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. Amounts
invested in this arrangement are included in "advance to affiliate" in the
accompanying balance sheet.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended April 3, 1999, filed with the Securities and Exchange
Commission.
OVERVIEW
The Company's businesses provide comprehensive engineering and
outsourcing services and operate in four segments: Water and Wastewater
Treatment, Process Engineering and Construction, Highway and Bridge Engineering,
and Infrastructure Engineering. The Company's clients include municipalities,
government agencies, and companies in the manufacturing, pharmaceutical, and
chemical-processing industries. The Company's strategy is to market its
technical expertise and low-cost solutions to a broad base of clients.
8
<PAGE>
THE RANDERS KILLAM GROUP INC.
OVERVIEW (CONTINUED)
In May 1997, Thermo TerraTech Inc. purchased a controlling interest in
The Randers Group Incorporated (Randers), a provider of design engineering,
project management, and construction services for industrial clients in the
manufacturing, pharmaceutical, and chemical-processing industries. Subsequently,
Thermo TerraTech entered into a definitive agreement to transfer its wholly
owned engineering and consulting businesses (known as The Killam Group) to
Randers in exchange for additional shares of Randers' common stock. As a result
of these transactions, as approved at the January 1999 Special Meeting of the
Company's Shareholders, the Killam Group was deemed to be the "accounting
acquiror," and historical results for Randers have been restated to solely
reflect the financial information of The Killam Group for periods prior to May
12, 1997, and to reflect the combined results of The Killam Group and Randers
(collectively, the Company) from May 12, 1997, the date on which Thermo
TerraTech became the majority-owner of Randers.
The Randers division, comprised of Randers Engineering, Inc.; Redco
Incorporated; and Viridian Technology Incorporated, represents the Company's
Process Engineering and Construction segment. The Company's Killam Associates,
Inc.; Duncan, Lagnese and Associates, Incorporated; Killam Management and
Operational Services, Inc.; and E3-Killam, Inc. subsidiaries, represent the
Water and Wastewater Treatment segment and provide environmental consulting and
engineering services and specialize in wastewater treatment and water resources
management. The Company's BAC Killam Inc. subsidiary represents the Company's
Highway and Bridge Engineering segment and provides both private and public
sector clients with a broad range of consulting services that address
transportation planning and design. The Company's CarlanKillam Consulting Group,
Inc. subsidiary provides transportation and environmental consulting,
professional engineering, and architectural services, and represents the
Company's Infrastructure Engineering segment.
In May 1999, the Company announced the planned sale of three businesses,
the Randers division, which represents the Company's Process Engineering and
Construction segment; BAC Killam, which represents the Company's Highway and
Bridge Engineering segment; and E3-Killam, which represents a small component of
the Company's Water and Wastewater Treatment segment (Note 4).
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2000 COMPARED WITH FIRST QUARTER OF FISCAL 1999
Revenues decreased to $18.6 million in the first quarter of fiscal 2000
from $20.1 million in the first quarter of fiscal 1999, primarily due to a
decrease in contract revenue at the Process Engineering and Construction segment
and the Water and Wastewater Treatment segment, due in part to a recession in
the chemical industry. These decreases in revenues were offset in part by an
increase in revenues at the Infrastructure Engineering segment due to an
increase in demand.
The gross profit margin remained unchanged at 25% in the first quarter of
fiscal 2000 and 1999.
Selling, general, and administrative expenses as a percentage of revenues
decreased to 17% in the first quarter of fiscal 2000 from 18% in the first
quarter of fiscal 1999, due primarily to lower depreciation and amortization
expenses as a result of the restructuring actions discussed in Note 4. The
reduction in depreciation and amortization expenses had a favorable effect on
pretax earnings of $0.2 million for the first quarter of fiscal 2000.
During the first quarter of fiscal 2000, the Company recorded
restructuring costs of $15.7 million in connection with the planned sale of
three businesses (Note 4).
Interest income increased to $0.2 million in the first quarter of fiscal
2000 from $0.1 million in the first quarter of fiscal 1999, primarily due to
higher average invested balances.
9
<PAGE>
THE RANDERS KILLAM GROUP INC.
FIRST QUARTER OF FISCAL 2000 COMPARED WITH FIRST QUARTER OF
FISCAL 1999 (continued)
The Company recorded a tax benefit of $0.5 million in the first quarter
of fiscal 2000 on pretax losses of $13.9 million. The effective tax rate was
lower than the statutory federal income tax rate principally due to
nondeductible charges, including the write-off of cost in excess of net assets
of acquired companies of $12.2 million (Note 4). The Company recorded a tax
provision of $0.7 million in the first quarter of fiscal 1999 on pretax income
of $1.5 million, resulting in an effective tax rate of 48%. The effective tax
rate was higher than the statutory federal income tax rate, principally due to
the effect of nondeductible amortization of cost in excess of net assets of
acquired companies and the impact of the state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $28.1 million at July 3, 1999, compared
with $28.4 million at April 3, 1999. Included in working capital are cash and
cash equivalents of $1.3 million at July 3, 1999, compared with $15.9 million at
April 3, 1999. In addition, as of July 3, 1999, the Company had $15.5 million
invested in an advance to affiliate. Prior to the use of a new domestic cash
management arrangement between the Company and Thermo Electron Corporation (Note
6), which became effective June 1, 1999, amounts invested with Thermo Electron
were included in cash and cash equivalents. During the first quarter of fiscal
2000, $1.6 million of cash was provided by operating activities. During this
period, $2.7 million of cash was provided by an increase in accounts payable and
other current liabilities, primarily due to restructuring costs recorded during
the first quarter of fiscal 2000, which were not paid as of July 3, 1999. An
increase in accounts receivable used $2.0 million in cash, primarily due to the
timing of customer payments. The days sales outstanding in unbilled contract
costs and fees and in accounts receivable at July 3, 1999, were 44 and 71 days,
respectively, compared with 48 and 59 days, respectively, at April 3, 1999.
Management does not believe that the change in the number of days sales
outstanding is indicative of any trend that would materially affect the
Company's future results of operations or liquidity.
Excluding advances to affiliate activity (Note 6), the Company's primary
investing activities in the first quarter of fiscal 2000 consisted of capital
additions of $0.6 million. The Company expects to expend approximately $0.7
million for capital additions during the remainder of fiscal 2000.
In the first quarter of fiscal 2000, the Company's financing activities
used $0.1 million of cash for the repayment of long-term obligations.
The Company generally expects to have positive cash flow from its
existing operations. Although the Company does not presently intend to actively
seek to acquire additional businesses in the near future, it may acquire one or
more complimentary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds and/or short-term borrowings from Thermo
TerraTech Inc. or Thermo Electron, although it has no agreement with these
companies to ensure that funds will be available on acceptable terms, or at all.
The Company believes that its existing resources are sufficient to meet the
capital requirements of its existing businesses for the foreseeable future.
YEAR 2000
The following constitutes a "Year 2000 Readiness Disclosure" under the
Year 2000 Information and Readiness Disclosure Act. The Company continues to
assess the potential impact of the year 2000 date recognition issue on the
Company's internal business systems, products, and operations. The Company's
year 2000 initiatives include (i) testing and upgrading significant information
technology systems and facilities; (ii) assessing the year 2000 readiness of its
key suppliers and vendors; and (iii) developing a contingency plan.
10
<PAGE>
THE RANDERS KILLAM GROUP INC.
YEAR 2000 (CONTINUED)
THE COMPANY'S STATE OF READINESS
The Company has implemented a compliance program to ensure that its
critical information technology systems and non-information technology systems
will be ready for the year 2000. The first phase of the program, testing and
evaluating the Company's critical information technology systems and
non-information technology systems for year 2000 compliance, has been completed.
During phase one, the Company tested and evaluated its significant computer
systems, software applications, and related equipment for year 2000 compliance.
The Company also evaluated the potential year 2000 impact on its critical
non-information technology systems. The Company's efforts included testing the
year 2000 readiness of its utility and telecommunications systems at its
critical facilities. The Company is currently in phase two of its program,
during which any material noncompliant information technology systems or
non-information technology systems that were identified during phase one are
prioritized and remediated. Based on its evaluations, the Company does not
believe that any material upgrades or modifications to its critical
non-information technology systems are required. As of July 3, 1999, the Company
has upgraded or replaced its material noncompliant information technology
systems. In many cases, such upgrades or replacements were made in the ordinary
course of business, without accelerating previously scheduled upgrades or
replacements.
The Company identified and assessed the year 2000 readiness of key
suppliers and vendors that are believed to be significant to the Company's
business operations. As part of this effort, the Company has developed and
distributed questionnaires relating to year 2000 compliance to its significant
suppliers and vendors. To date, no significant supplier or vendor has indicated
that its business operations will be materially disrupted by the year 2000
issue. The Company is following up with significant suppliers and vendors that
have not responded to the Company's questionnaires. As of July 3, 1999, the
Company is substantially complete with the majority of its assessment of
third-party risk.
CONTINGENCY PLAN
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan may include identifying manual or backup systems in the event of a
failure of the Company's material information technology systems. As the Company
continues to evaluate the year 2000 readiness of its business systems and
facilities and significant suppliers and vendors, it will modify and adjust its
contingency plan as may be required. The Company expects to complete its
contingency plan by October 1999.
ESTIMATED COSTS TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES
The Company had not incurred material third-party expenses (external
costs) related to year 2000 issues as of July 3, 1999, and the total external
costs of year 2000 remediation are not expected to be material. The Company does
not track the internal costs incurred for its year 2000 compliance project. Such
costs are principally the related payroll costs for its information systems
group.
REASONABLY LIKELY WORST CASE SCENARIO
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that the Company experiences year 2000
problems in its material information technology systems that cause the Company
to be unable to access data, to process transactions, and to maintain accurate
books and records. In such an event, the Company's operations could be delayed
or temporarily shut down, and it could be unable to meet its obligations to
customers in a timely fashion. The Company's business, operations, and financial
condition could be adversely affected in amounts that cannot be reasonably
estimated at this time.
11
<PAGE>
THE RANDERS KILLAM GROUP INC.
YEAR 2000 (CONTINUED)
RISKS OF THE COMPANY'S YEAR 2000 ISSUES
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Some services provided by the Company may involve the delivery to clients of
third-party software and hardware. Accordingly, the Company may see an increase
in warranty and other claims related to Company services that incorporate such
software or hardware. In addition, certain older third-party products, which the
Company no longer uses in providing its services to clients, may not be year
2000 compliant, which may expose the Company to claims. As discussed above, if
any of the Company's key suppliers or vendors experience business disruptions
due to year 2000 issues, the Company might also be materially adversely
affected. There is expected to be a significant amount of litigation relating to
the year 2000 issue and there can be no assurance that the Company will not
incur material costs in defending or bringing lawsuits. In addition, if any year
2000 issues are identified, there can be no assurance that the Company will be
able to retain qualified personnel to remedy such issues. Any unexpected costs
or delays arising from the year 2000 issue could have a material adverse impact
on the Company's business, operations, and financial condition in amounts that
cannot be reasonably estimated at this time.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company's exposure to market risk from changes in interest rates has
not changed materially from its exposure at fiscal year-end 1999.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On May 12, 1999, the Company filed a Current Report on Form 8-K, dated as
of May 5, 1999, with respect to modifications to the previously announced
reorganization plan of the Company's ultimate parent, Thermo Electron
Corporation, involving certain of Thermo Electron's subsidiaries, including the
Company.
On May 25, 1999, the Company filed a Current Report on Form 8-K, dated as
of May 24, 1999, with respect to certain pretax restructuring and other charges
that will be taken by the Company.
12
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THE RANDERS KILLAM GROUP 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 1999.
THE RANDERS KILLAM GROUP INC.
/s/ Paul F. Kelleher
---------------------------------
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-kyriazi
---------------------------------
Theo Melas-Kyriazi
Chief Financial Officer
13
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THE RANDERS KILLAM GROUP INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------------------------------------------------------------------------
27 Financial Data Schedule.
14
<PAGE>
[ATTACHMENT A TO PROXY STATEMENT]
FORM OF PROXY
THE RANDERS KILLAM GROUP INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD , 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Emil C. Herkert, Theo Melas-Kyriazi and
Kenneth J. Apicerno, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Special
Meeting of the stockholders of The Randers Killam Group Inc., a Delaware
corporation (the "Company"), to be held on ________, _______, 2000, at 10:00
a.m., at the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454-9046, and at any adjournment or adjournments thereof, and to
vote all shares of common stock of the Company standing in the name of the
undersigned on _________, 1999, with all of the powers the undersigned would
possess if personally present at such meeting.
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
THE RANDERS KILLAM GROUP INC.
______________, 2000
1. To consider and vote on a proposal to approve an Agreement and Plan
of Merger dated as of October 19, 1999 (the "Merger Agreement") pursuant to
which RK Acquisition Corporation, a newly-formed subsidiary of Thermo Electron
Corporation, will be merged (the "Merger") with and into the Company and each
stockholder of the Company (other than stockholders who are entitled to and have
perfected their dissenters' rights, shares held by the Company in treasury, and
shares held by Thermo Electron Corporation or Thermo TerraTech Inc.) will become
entitled to receive $4.50 in cash, without interest, for each outstanding share
of common stock, $.0001 par value, of the Company owned by such stockholder
immediately prior to the effective time of the Merger. A copy of the Merger
Agreement is attached as Appendix A to and is described in the accompanying
Proxy Statement.
[ ] For [ ] Against [ ] Abstain
2. To consider and act in their discretion upon such other matters as
may properly come before the Special Meeting or any adjournment or adjournments
thereof.
[ ] For [ ] Against [ ] Abstain
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS
SET FORTH ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO
INSTRUCTION IS GIVEN.
Copies of the Notice of Special Meeting and of the Proxy Statement have
been received by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS
PROXY IN THE ENCLOSED ENVELOPE.
Signature(s)
-----------------------------
Date
------------------------------------
Note: This proxy should be dated, signed by the
stockholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity
should so indicate. If shares are held by joint
tenants or as community property, both should sign.
PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD BACK AS SOON AS POSSIBLE!
