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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
<PAGE>
amounts become payable immediately. 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>
<S> <C> <C> <C> <C> <C> <C> <C>
Summary Compensation Table
- --------------------------------------------------------------------------------------------------------------------------
Annual Compensation (1) Long Term Compensation
---------------------- ----------------------
Name and Restricted Securities
Principal Fiscal Other Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Award (2) Options (3) Compensation (4)
- ---------- ------- ------ ----- ------------ ---------- ---------- ----------------
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>
Option Grants in Fiscal 1999
- -------------------------------------------------------------------------------
Potential
Percent of Realizable
Number of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Exercise Stock Price
Name Options Employees Price Appreciation
Granted and in Fiscal Per Expiration for Option
Company (1) Year Share Date Term (2)
----------- ------- ------- ------- ---------------
5% 10%
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. 8,800 (RGI) 2.51% $2.50 2/24/04 $6,072 $13,464
DeNichilo
5,000 (TTT) 0.42% (3) $5.03 2/24/04 $6,950 $15,350
- -------------------------------------------------------------------------------
(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>
Aggregated Option Exercises In Fiscal 1999 And
Fiscal 1999 Year-End Option Values
- -------------------------------------------------------------------------------
Number of
Unexercised
Shares Options at Value of
Acquired Fiscal Unexercised
on Value Year-End In-the-Money
Name Company(1) Exercise Realized (Exercisable/ Options at
(2) Unexercisable) (1) Fiscal Year-End
(Exercisable/
Unexercisable)
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. RGI -- -- 68,800 /0 $2,913 /--
DeNichilo
TMO 1,500 $28,295 9,750 /0 $0 /--
TTT -- -- 38,000 /0 $0 /--
- --------------------------------------------------------------------------------
(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.
<PAGE>
(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 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.
Annual Years of Service
Compensation
15 20 25 30 35
-- -- -- -- --
$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
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 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
<PAGE>
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>
The Randers Killam Thermo Thermo Electron
Name (1) Group Inc. (2) TerraTech Inc. (3) Corporation (4)
-------- ----------------- ----------------- --------------
Thermo Electron 24,361,210 N/A N/A
Corporation (5)
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 715,954 749,654 1,010,829
group (8 persons)
(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, Thermo Electron had
the power to elect all of the members of the Company's board of directors.
<PAGE>
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 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
<PAGE>
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; 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.
<PAGE>
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
