SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended July 3, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-13572
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3072335
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification No.)
245 Winter Street, Suite 300
Waltham, Massachusetts 02451
(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, $.10 par value 35,948,659
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
July 3, October 3,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 13,483 $41,371
Advance to affiliate (Note 7) 11,932 -
Restricted funds 17,224 24,536
Accounts receivable and unbilled revenues 58,755 45,792
Inventories:
Raw materials and supplies 12,002 13,843
Work in process 3,895 2,802
Finished goods 9,333 6,995
Prepaid income taxes - 11,724
Other current assets 4,495 2,335
-------- --------
131,119 149,398
-------- --------
Property, Plant, and Equipment, at Cost (Note 5) 260,707 389,553
Less: Accumulated depreciation and amortization 64,470 87,623
-------- --------
196,237 301,930
Long-term Available-for-sale Investments, at Quoted Market Value 6,111 8,502
(amortized cost of $6,379 and $8,504; Note 5)
-------- --------
Restricted Funds 31,072 26,177
-------- --------
Other Assets 21,929 19,104
-------- --------
$386,468 $505,111
======== ========
2
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
July 3, October 3,
(In thousands except share amounts) 1999 1998
- ------------------------------------------------------------------------------------- ----------- ----------
Current Liabilities:
Notes payable and current portion of long-term obligations $ 39,305 $28,032
Accounts payable 22,194 10,775
Accrued restructuring costs (Note 5) 7,283 -
Lease obligations payable 5,517 1,648
Accrued income taxes 11,504 5,378
Other accrued expenses 9,881 17,530
Due to parent company 2,800 2,446
-------- --------
98,484 65,809
-------- --------
Long-term Obligations:
Nonrecourse tax-exempt obligations 14,500 33,700
Subordinated convertible debentures (includes $2,826 due to parent 46,770 47,400
company in fiscal 1999)
Capital lease obligations - 12,346
-------- --------
61,270 93,446
-------- --------
Deferred Income Taxes - 56,571
-------- --------
Other Deferred Items (Note 6) 34,660 25,216
-------- --------
Minority Interest 12,564 14,437
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000 shares authorized; 37,869,248 3,787 3,782
and 37,822,789 shares issued
Capital in excess of par value 176,071 175,673
Retained earnings 28,508 98,802
Treasury stock at cost, 1,919,496 and 1,944,179 shares (28,358) (28,735)
Deferred compensation (51) -
Accumulated other comprehensive items (Note 2) (467) 110
-------- --------
179,490 249,632
-------- --------
$386,468 $505,111
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ----------
Revenues $ 52,267 $50,748
-------- -------
Costs and Operating Expenses:
Cost of revenues (includes $897 and $752 to related parties) 36,579 34,420
Selling, general, and administrative expenses (includes $402 and $406 6,548 5,591
to related parties)
Research and development expenses 790 670
Restructuring costs (Note 5) 124,347 -
-------- -------
168,264 40,681
-------- -------
Operating Income (Loss) (115,997) 10,067
Interest Income 530 987
Interest Expense (includes $145 and $270 to parent company) (1,919) (2,669)
Other Expense (Note 5) (2,125) -
Equity in Earnings (Loss) of Joint Venture 35 (61)
-------- -------
Income (Loss) Before Income Taxes and Minority Interest (119,476) 8,324
Income Tax (Provision) Benefit 43,514 (3,173)
Minority Interest Income (Expense) (Note 5) 1,404 (327)
-------- -------
Net Income (Loss) $(74,558) $ 4,824
======== =======
Earnings (Loss) per Share (Note 3):
Basic $ (2.07) $ .15
======== =======
Diluted $ (2.07) $ .14
======== =======
Weighted Average Shares (Note 3):
Basic 35,949 32,405
======== =======
Diluted 35,949 39,049
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Operations
(Unaudited)
Nine Months Ended
July 3, July 4,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ---------
Revenues $ 144,658 $145,764
--------- --------
Costs and Operating Expenses:
Cost of revenues (includes $3,622 and $3,718 to related parties) 106,888 99,460
Selling, general, and administrative expenses (includes $1,141 and 19,409 17,263
$1,262 to related parties)
Research and development expenses 2,036 2,059
Restructuring costs (Note 5) 124,347 -
-------- -------
252,680 118,782
-------- -------
Operating Income (Loss) (108,022) 26,982
Interest Income 2,126 3,357
Interest Expense (includes $152 and $1,640 to parent company) (5,314) (9,437)
Gain on Issuance of Stock by Subsidiary - 6,269
Other Expense (Note 5) (2,125) -
Equity in Earnings of Joint Venture 110 62
--------- --------
Income (Loss) Before Income Taxes and Minority Interest (113,225) 27,233
Income Tax (Provision) Benefit 41,696 (7,782)
Minority Interest Income (Expense) (Note 5) 1,235 (1,171)
--------- --------
Net Income (Loss) $ (70,294) $ 18,280
========= ========
Earnings (Loss) per Share (Note 3):
Basic $ (1.96) $ .67
========= ========
Diluted $ (1.96) $ .52
========= ========
Weighted Average Shares (Note 3):
Basic 35,940 27,109
========= ========
Diluted 35,940 39,190
========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
July 3, July 4,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ---------
Operating Activities:
Net income (loss) $(70,294) $18,280
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Noncash restructuring charges (Note 5) 117,065 -
Depreciation and amortization 18,403 17,821
Increase (decrease) in deferred income taxes (54,340) 7,782
Minority interest (income) expense (1,235) 1,171
Gain on issuance of stock by subsidiary - (6,269)
Changes in current accounts, excluding the effect of acquisitions:
Restricted funds 7,312 10,386
Accounts receivable and unbilled revenues (13,334) (10,957)
Inventories (3,592) (2,384)
Other current assets 9,464 (1,199)
Accounts payable 11,957 6,912
Lease obligations payable 3,572 3,507
Other current liabilities 9,995 (6,158)
-------- -------
Net cash provided by operating activities 34,973 38,892
-------- -------
Investing Activities:
Acquisitions, net of cash acquired (Note 6) (8,420) (19,100)
Purchases of property, plant, and equipment (18,128) (38,343)
Advances to affiliate, net (Note 7) (11,932) -
Funding of long-term restricted funds (4,895) (4,832)
Increase in other deferred items 8,668 8,012
Increase in other assets (6,995) (242)
--------- -------
Net cash used in investing activities (41,702) (54,505)
-------- -------
Financing Activities:
Repayment of long-term obligations (18,100) (26,100)
Payments under capital lease obligations (10,097) (8,912)
Increase in short-term borrowings 7,897 -
Net proceeds from issuance of Company and subsidiary common stock 91 15,602
Purchases of Company common stock - (10,248)
Contribution from minority partner 789 1,130
Distribution to minority partner (1,427) (1,360)
-------- -------
Net cash used in financing activities $(20,847) $(29,888)
-------- --------
6
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
July 3, July 4,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ----------- ---------
Exchange Rate Effect on Cash $ (312) $ 30
-------- -------
Decrease in Cash and Cash Equivalents (27,888) (45,471)
Cash and Cash Equivalents at Beginning of Period 41,371 83,540
-------- -------
Cash and Cash Equivalents at End of Period $ 13,483 $38,069
======== =======
Noncash Activities:
Fair value of assets of acquired companies 9,683 20,025
Cash paid for acquired companies (8,583) (19,100)
-------- -------
Liabilities assumed of acquired companies $ 1,100 $ 925
======== =======
Conversion of subordinated convertible debentures (includes $68,500 $ 630 $83,248
converted by parent company in fiscal 1998)
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
THERMO ECOTEK CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Ecotek Corporation (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of the financial position at July 3, 1999, the results of
operations for the three- and nine-month periods ended July 3, 1999, and July 4,
1998, and the cash flows for the nine-month periods ended July 3, 1999, and July
4, 1998. The Company's results of operations for the nine-month periods ending
July 3, 1999, and July 4, 1998, include 39 weeks and 40 weeks, respectively.
Prior period amounts have been reclassified to conform to the presentation in
the current financial statements. Interim results are not necessarily indicative
of results for a full year.
The consolidated balance sheet presented as of October 3, 1998, 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, as amended, for the fiscal year ended
October 3, 1998, filed with the Securities and Exchange Commission.
2. Comprehensive Income
During the first quarter of fiscal 1999, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
pronouncement sets forth requirements for disclosures of the Company's
comprehensive income and accumulated other comprehensive items. In general,
comprehensive income combines net income (loss) and "other comprehensive items,"
which represents certain amounts that are reported as components of
shareholders' investment in the accompanying balance sheet, including foreign
currency translation adjustments and unrealized net of tax gains and losses on
available-for-sale investments. The Company had a comprehensive loss of $75.1
million in the third quarter of fiscal 1999 and comprehensive income of $3.4
million in the third quarter of fiscal 1998. The Company had a comprehensive
loss of $69.3 million in the first nine months of fiscal 1999 and comprehensive
income of $18.2 million in the first nine months of fiscal 1998.
3. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 3, July 4, July 3, July 4,
(In thousands except per share amounts) 1999 1998 1999 1998
- -------------------------------------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Basic
Net Income (Loss) $(74,558) $ 4,824 $(70,294) $ 18,280
-------- -------- -------- --------
Weighted Average Shares 35,949 32,405 35,940 27,109
-------- -------- -------- --------
Basic Earnings (Loss) per Share $ (2.07) $ .15 $ (1.96) $ .67
======== ======== ======== ========
8
<PAGE>
3. Earnings (Loss) per Share (continued)
Three Months Ended Nine Months Ended
July 3, July 4, July 3, July 4,
(In thousands except per share amounts) 1999 1998 1999 1998
- -------------------------------------------------------------- ---------- ----------- ---------- ----------
Diluted
Net Income (Loss) $(74,558) $ 4,824 $(70,294) $ 18,280
Effect of:
Convertible debentures - 474 - 2,053
Majority-owned subsidiary's dilutive securities - (3) - (6)
-------- -------- -------- --------
Income (Loss) Available to Common Shareholders, $(74,558) $ 5,295 $(70,294) $ 20,327
-------- -------- -------- --------
as Adjusted
Weighted Average Shares 35,949 32,405 35,940 27,109
Effect of:
Convertible debentures - 6,341 - 11,752
Stock options - 303 - 329
------- -------- ------- --------
Weighted Average Shares, as Adjusted 35,949 39,049 35,940 39,190
------- -------- ------- --------
Diluted Earnings (Loss) per Share $ (2.07) $ .14 $ (1.96) $ .52
======= ======== ======= ========
</TABLE>
The computation of diluted earnings (loss) per share for each period
excludes the effect of assuming the exercise of certain outstanding stock
options because the effect would be antidilutive. As of July 3, 1999, there were
1,078,000 of such options outstanding, with exercise prices ranging from $5.50
to $19.25 per share.
In addition, the computation of diluted earnings (loss) per share for the
three- and nine-month periods ended July 3, 1999, excludes the effect of
assuming the conversion of convertible obligations because the effect would be
antidilutive. As of July 3, 1999, the calculation excluded $45.0 million
principal amount of 4.875% subordinated convertible debentures, convertible at
$16.50 per share, and $1.8 million principal amount of noninterest bearing
subordinated convertible debentures, convertible at $13.56 per share.
4. 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 would be merged into Thermo Electron. As a result,
the Company would become a wholly owned subsidiary of Thermo Electron. The
public shareholders of the Company would receive common stock of Thermo Electron
in exchange for their shares. The completion of this transaction is subject to
numerous conditions, including the establishment of a price and exchange ratio,
confirmation of anticipated tax consequences, the approval of the Board of
Directors of the Company (including its independent directors), 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 Electron) from a financial point of
view, and completion of review by the Securities and Exchange Commission of any
necessary documents regarding the proposed transaction.
9
<PAGE>
5. Restructuring and Related Costs
During the third quarter of fiscal 1999, the Company recorded
restructuring costs of $124.3 million and other expense of $2.1 million, as a
result of the actions detailed below.
Following significant investments of resources in attempts to correct
operational problems, in May 1999, the Company made a decision to cease further
efforts and hold for sale or disposal its subbituminous coal-beneficiation
facility near Gillette, Wyoming (the K-Fuel Facility). As a result, the Company
recorded a charge of $68.0 million, including $63.3 million to write down the
plant and related equipment to a nominal salvage value, $4.4 million for
estimated land reclamation costs, and $0.3 million of other exit costs,
primarily abandoned-facility payments. The Company recorded $1.5 million of
minority interest income, representing a minority partner's share of these
charges.
The Company's Delano, California, biomass facilities will reach the end of
the fixed price contract period of their power-sales agreement in September
2000. While the Company forecasts for periods after that time project positive
cash flows, the facilities would operate at a loss due to depreciation expense
that extends beyond fiscal 2000. In May 1999, the Company entered into an
agreement to terminate the power-sales agreement for its Delano facilities,
effective December 31, 1999. The terms of the agreement call for the Company to
receive payments in lieu of operating under its current agreement and is subject
to regulatory approval. The Company recorded a charge of $51.0 million as a
result of entering into the new agreement, including $47.5 million to write down
the plant and related assets to their estimated recoverable value, $2.4 million
related to a loss on the cancellation of the facility's primary fuel contract,
and $1.1 million to write off cost in excess of net assets acquired.
Pacific Gas & Electric (PG&E), the customer under a long-term power-sales
agreement at the Company's Woodland, California, plant, has interpreted the
terms of such agreement to permit PG&E to cease payment of fixed contract rates
effective July 1, 1999, and to thereafter purchase power at avoided cost rates.
Although the Company contests this interpretation and is considering its
alternatives concerning this dispute, during the third quarter of fiscal 1999,
the Company recorded a charge of $3.8 million, representing impairment of the
Company's net investment in the Woodland facility as a result of PG&E's decision
to cease making payments of the fixed contract rates.
In addition, during the third quarter of fiscal 1999 the Company recorded
a charge of $1.5 million to write off a power plant that is held for sale. The
Company believes that the salvage value, if any, is nominal.
In the third quarter of fiscal 1999, the Company also recorded a charge of
$2.1 million representing the write-down of available-for-sale equity securities
of its minority partner in the K-Fuel Facility. The Company deems the impairment
to be permanent based on recent stock prices. This charge is included in other
expense in the accompanying fiscal 1999 statement of operations.
As of July 3, 1999, the Company's remaining liability for restructuring
costs consisted of $4.4 million for estimated land reclamation costs, $2.4
million associated with a cancelled fuel contract, and $0.5 million of other
costs.
6. Acquisition
In May 1999, the Company's Star Natural Gas subsidiary acquired one gas
gathering system and two gas processing plants (the gas facilities) for $8.6
million in cash and future contingent royalty payments based on the performance
of the gas facilities of up to $5.6 million.
This acquisition has been accounted for using the purchase method of
accounting, and the results of operations of the gas facilities have been
included in the accompanying statement of operations from the date of
acquisition. The cost of this acquisition equaled the estimated fair value of
the net assets acquired. Allocation of the purchase price was based on an
estimate of the fair value of the assets acquired and is subject to adjustment
upon finalization of the purchase price allocation. The Company has gathered no
information that indicates the final allocation will differ materially from the
preliminary estimate. Pro forma results have not been presented as the results
of the gas facilities were not material to the Company's results of operations.
10
<PAGE>
7. 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, as
amended, for the fiscal year ended October 3, 1998, filed with the Securities
and Exchange Commission.
Overview
The Company reports its results in two business segments. The Energy
segment operates independent electric power-generation facilities through joint
ventures, limited partnerships, or wholly owned subsidiaries (the Operating
Companies) and a natural gas business (Star Natural Gas). The Biopesticide
segment manufactures and sells biopesticides through the Company's
majority-owned subsidiary, Thermo Trilogy Corporation.
In the Energy segment, each Operating Company in the United States
typically sells power under a long-term power-sales agreement. The profitability
of operating the Company's facilities depends on the price received for power
under the power-sales agreements with power purchasers, on plant performance or
availability, and on the fuel, operating, and maintenance costs for the
facilities. The Energy segment earns a disproportionately high share of its
income in May to October due to the rate structures under the power-sales
agreements for its California plants, which provide strong incentives to operate
during this period of high demand. Conversely, the Energy segment has
historically operated at marginal profitability during the second fiscal quarter
due to the rate structure under these agreements. The Energy segment's
profitability is also dependent on the amount of development expenses that it
incurs.
Through May 1999, the Energy segment also operated in the field of
engineered clean fuels through a limited partnership agreement with KFx, Inc.
The Company is a 95%-partner in a partnership established to develop, construct,
and operate a subbituminous coal-beneficiation facility near Gillette, Wyoming
(the K-Fuel Facility). As discussed in Results of Operations below, in May 1999,
the Company made a decision to hold the K-Fuel Facility for sale or disposal
(Note 5).
The Company has expanded its energy operations into international markets
and has begun business-development efforts in Italy and the Czech Republic. In
January 1998, the Company, through a wholly owned subsidiary's participation in
a joint venture, indirectly acquired a majority interest in the assets of a
12-megawatt energy center near Tabor, Czech Republic, along with the business of
five auxiliary boilers in the town of Pribram, Czech Republic (the Czech
Republic operations). The Company completed the expansion of the 12-megawatt
facility
11
<PAGE>
Overview (continued)
to 50-megawatt capacity in March 1999. The cost of business-development efforts
may increase as the Company expands into these markets due to increased
complexity inherent in foreign development. In addition, the amount of cash
required to fund equity investments is expected to increase, due to the
financing requirements of lenders in foreign markets.
During fiscal 1998, the Company established its Star Natural Gas
subsidiary in Dallas, Texas, to pursue opportunities in the natural gas
gathering, processing, storage, and marketing business. In May 1999, Star
purchased one gas gathering system and two gas processing plants (the gas
facilities) for $8.6 million in cash (Note 6).
Thermo Trilogy's biopesticide products include botanical extracts from the
seed of the tropical neem tree, microbial-based pesticides (fungal-based
insecticides and fungicides, bacterial-based insecticides, baculovirus, and
beneficial nematodes), insect pheromone-based products such as traps and lures,
and disease-free sugar cane planting stock. These biopesticide products are used
as alternatives or complements to conventional chemical-based pest-control
technologies. In November 1997, Thermo Trilogy acquired the sprayable bacillus
thuringiensis (Bt) biopesticide business of Novartis AG and its affiliates (the
Bt business). Whereas Thermo Trilogy currently markets its products
predominantly for use in the northern hemisphere, where the growing season
generally runs from March to October, Thermo Trilogy generally earns a
disproportionately high share of its income in its third and fourth fiscal
quarters.
Since its inception, the Company has derived a substantial majority of its
revenue from the development, construction, and operation of biomass-powered
electric-generation facilities. While the Company's U.S. biomass energy business
is expected to continue to generate revenues for the foreseeable future, the
Company expects the aggregate revenues and profitability associated with this
business to decline significantly beginning in the fourth quarter of fiscal
1999, as discussed in Results of Operations below. In anticipation of this
decline, the Company may explore other options for its biomass facilities,
including disposal or repowering. In addition, within the next few years, the
Company expects a substantial portion of its revenues to be derived from new
business ventures in natural gas gathering and storage and/or biopesticides. A
major portion of the Company's efforts will be focused on developing and
acquiring new power projects, natural gas gathering and storage projects, and
its biopesticide business. The Company has had limited prior experience in the
repowering of power plants and there can be no assurance that the Company will
be able to successfully develop, market, or sell its services in these areas.
The Company's future success will depend significantly on its ability to
develop, introduce, and integrate new products and services in these areas. No
assurance can be given that the Company will be successful in this regard. Any
failure or inability of the Company to implement these strategies would have a
material adverse effect on the Company's business, financial condition, and
results of operations.
Results of Operations
Third Quarter Fiscal 1999 Compared With Third Quarter Fiscal 1998
Total revenues increased to $52.3 million in the third quarter of fiscal
1999 from $50.7 million in the third quarter of fiscal 1998. Revenues from the
Energy segment increased to $45.4 million in fiscal 1999 from $42.9 million in
fiscal 1998. The increase was primarily due to a $1.0 million increase in
revenues from the expanded Czech Republic operations and, to a lesser extent,
$0.7 million in revenues from two power-generation facilities in California that
were placed into service for the summer peak season in the third quarter of
fiscal 1999 (the repowered facilities).
Revenues at Thermo Trilogy decreased to $6.9 million in the third quarter
of fiscal 1999 from $7.8 million in the third quarter of fiscal 1998. The
decrease was primarily due to a decrease in pheromone product sales by Thermo
Trilogy's U.K. subsidiary due to lower demand.
12
<PAGE>
Third Quarter Fiscal 1999 Compared With Third Quarter Fiscal 1998 (continued)
The gross profit margin decreased to 30% in the third quarter of fiscal
1999 from 32% in the third quarter of fiscal 1998. The gross profit margin for
the Energy segment decreased to 28% in fiscal 1999 from 29% in fiscal 1998,
primarily due to the inclusion of $1.0 million of operating losses at the
repowered facilities. The gross profit margin for Thermo Trilogy decreased to
43% in fiscal 1999 from 52% in fiscal 1998, primarily due to decreased revenues.
The power-sales agreements for the Company's Mendota, Woodland, and Delano
plants in California are so-called standard offer #4 (SO#4) contracts, which
require Pacific Gas and Electric (PG&E), in the case of Mendota and Woodland,
and Southern California Edison (SCE), in the case of Delano facilities, to
purchase the power output of the projects at fixed rates for specified periods.
Thereafter, the utilities will pay a rate based upon the costs that would have
otherwise been incurred by the purchasing utilities in generating their own
electricity or in purchasing it from other sources (avoided cost, as determined
from time to time by the California Public Utility Commission). Avoided cost
rates are currently substantially lower than the Company has received under the
fixed-rate portions of their contracts and are expected to remain so for the
foreseeable future. PG&E has interpreted the terms of the power-sales agreements
to permit PG&E to begin paying for power purchased from the Mendota and Woodland
facilities at avoided cost rates in June and July 1999, respectively, although
the Company believes that this change to avoided cost rates occurred six months
earlier than the power-sales agreements provided. The Company is considering its
alternatives concerning this dispute. The Company expects that, at current
avoided cost rates, its Mendota plant will operate at substantially reduced
operating income levels or at a loss beginning in the fourth quarter of fiscal
1999. Further, based on current avoided cost rates, the Woodland plant will
operate at breakeven or nominal losses through fiscal 2010, primarily as a
result of nonrecourse lease obligations that have been partially funded from the
Woodland plant's past cash flows. Absent sufficient reductions in fuel prices
and other operating costs, under such circumstances the Company will draw down
power reserve funds to cover operating cash shortfalls and then, if such funds
are depleted, either renegotiate its nonrecourse lease for the Woodland plant or
forfeit its interest in the plant. The results of the Woodland facility were
approximately breakeven in the first nine months of fiscal 1999 and 1998 as a
result of recording as an expense the funding of reserves required under
Woodland's nonrecourse lease agreement to cover expected shortfalls in lease
payments. The power-sales agreement with SCE for the Delano facilities calls for
fixed contract rates through September 2000. If the agreement reached in May
1999 to terminate the Company's power-sales agreements, effective December 31,
1999, for its Delano facilities receives regulatory approval, the Company
expects that the results from the Delano facilities will be reduced to breakeven
or a loss beginning in the second quarter of fiscal 2000, dependent upon avoided
cost rates and operating expenses at that time. Should the agreement not receive
approval, the Company expects that the Delano facilities will continue to have
positive cash flows, but will operate at substantial operating losses beginning
in the first quarter of fiscal 2001. In fiscal 1998, the Mendota and Delano
plants' operating income was approximately $10.0 million and $33.0 million,
respectively. In anticipation of these expected declines in revenues and
operating income, the Company may explore other options for its biomass
facilities, including disposal or repowering.
Selling, general, and administrative expenses as a percentage of revenues
increased to 13% in the third quarter of fiscal 1999 from 11% in the third
quarter of fiscal 1998. The increase is primarily due to the inclusion of higher
selling, general, and administrative expenses as a percentage of revenues at
Star Natural Gas.
Research and development expenses were $0.8 million in the third quarter
of fiscal 1999 and $0.7 million in the third quarter of fiscal 1998, and
represent Thermo Trilogy's ongoing new-product development.
During the third quarter of fiscal 1999, the Company recorded
restructuring costs of $124.3 million (Note 5). The Company recorded $68.0
million in restructuring costs due to the Company's decision to hold the K-Fuel
Facility for sale or disposal, $51.0 million as a result of entering into an
agreement to terminate the power-sales agreement at its Delano facility, $3.8
million representing impairment of the Company's net investment in the Woodland
facility, and $1.5 million representing the write-off of a power plant that is
held for sale.
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Third Quarter Fiscal 1999 Compared With Third Quarter Fiscal 1998 (continued)
Interest income decreased to $0.5 million in the third quarter of fiscal
1999 from $1.0 million in the third quarter of fiscal 1998, primarily due to a
decrease in invested balances due to cash expended for the expansion of the
Czech Republic operations, the purchase of the gas facilities, and construction
of the K-Fuel Facility.
Interest expense decreased to $1.9 million in the third quarter of fiscal
1999 from $2.7 million in the third quarter of fiscal 1998. The decrease was
primarily due to lower outstanding debt related to the Company's Delano and
Mendota plants and, to a lesser extent, the conversion by Thermo Electron
Corporation of $68.5 million principal amount of the Company's 4% subordinated
convertible debentures in May 1998.
Other expense of $2.1 million in the third quarter of fiscal 1999
represents the write-down of available-for-sale equity securities held by the
Company due to impairment that the Company deems permanent (Note 5).
Equity in earnings (loss) of joint venture represents the Company's
proportionate share of the results of a joint venture.
The effective tax rate was a benefit of 36% in the third quarter of fiscal
1999 and a provision of 38% in the third quarter of fiscal 1998. In fiscal 1999,
the effect of tax credits earned from the production of fuel prior to the
closure of the K-Fuel Facility and the exclusion of income taxed directly to
minority partners was offset in part by the effect of certain nondeductible
restructuring costs. The effective tax rate in fiscal 1998 exceeded the
statutory federal tax rate primarily due to the impact of state income taxes,
offset in part by the exclusion of income taxed directly to minority partners.
The Company recorded minority interest income in fiscal 1999 due to the
allocation of $1.5 million in restructuring costs to the Company's minority
partner in the K-Fuel Facility (Note 5), offset in part by the allocation of
income from plant operations to a minority partner in an Operating Company.
Minority interest expense in fiscal 1998 represents the allocation of income
from plant operations to a minority partner in an Operating Company and the
minority shareholders' proportionate share of Thermo Trilogy's results.
First Nine Months Fiscal 1999 Compared With First Nine Months Fiscal 1998
Total revenues were $144.7 million and $145.8 million in the first nine
months of fiscal 1999 and 1998, respectively. Revenues from the Energy segment
increased to $126.8 million in fiscal 1999 from $123.5 million in fiscal 1998.
Revenues increased $3.5 million due to the inclusion of revenues from the Czech
Republic operations for nine months in fiscal 1999, compared with six months in
fiscal 1998. To a lesser extent, revenues increased due to higher contractual
energy rates at the Company's Delano, Gorbell, and Whitefield facilities.
Effective on various dates in fiscal 1998, contractual energy rate increases
ceased at the Company's four California energy facilities. These increases were
offset in part by lower revenues as a result of unplanned outages at two of the
Company's California facilities due to mechanical problems in the first quarter
of fiscal 1999.
Revenues at Thermo Trilogy decreased to $17.9 million in the first nine
months of fiscal 1999 from $22.3 million in the first nine months of fiscal
1998. The decrease was primarily due to the inclusion in fiscal 1998 of $4.1
million of Bt product revenues under a transition agreement that expired in
February 1998, during which Thermo Trilogy shifted its Bt business distribution
network from Novartis' in-country direct sales force to an indirect network of
distributors.
The gross profit margin decreased to 26% in the first nine months of
fiscal 1999 from 32% in the first nine months of fiscal 1998. The gross profit
margin for the Energy segment decreased to 24% in fiscal 1999 from 29% in fiscal
1998, primarily due to a $7.5 million increase in operating losses at the
Company's K-Fuel Facility, which was placed in service in April 1998 and closed
in May 1999. The gross profit margin for Thermo Trilogy decreased to 40% in
fiscal 1999 from 45% in fiscal 1998, primarily due to decreased revenues.
14
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First Nine Months Fiscal 1999 Compared With First Nine Months Fiscal 1998
(continued)
Selling, general, and administrative expenses as a percentage of revenues
increased to 13% in the first nine months of fiscal 1999 from 12% in the first
nine months of fiscal 1998, primarily due to the inclusion of higher selling,
general, and administrative expenses as a percentage of revenues at Star Natural
Gas and the K-Fuel Facility.
Research and development expenses were $2.0 million in the first nine
months of fiscal 1999 and $2.1 million in the first nine months of 1998, and
represent Thermo Trilogy's ongoing new-product development.
Interest income decreased to $2.1 million in the first nine months of
fiscal 1999 from $3.4 million in the first nine months of fiscal 1998. The
decrease was primarily due to lower average invested balances due to cash
expended for the acquisition and expansion of the Czech Republic operations, the
acquisition of the Bt business, the repurchase of Company common stock in fiscal
1998, construction of the K-Fuel Facility, the purchase of power-generation
facilities and related sites in California, and the purchase of the gas
facilities.
Interest expense decreased to $5.3 million in the first nine months of
fiscal 1999 from $9.4 million in the first nine months of fiscal 1998, primarily
due to the reasons discussed in the results of operations for the third quarter.
During the first nine months of fiscal 1998, the Company recorded a gain
of $6.3 million from the issuance of Thermo Trilogy common stock.
Other expense of $2.1 million in the first nine months of 1999 represents
the write-down of available-for-sale equity securities held by the Company due
to an impairment that the Company deems permanent (Note 5).
Equity in earnings of joint venture represents the Company's proportionate
share of earnings from a joint venture.
The effective tax rate was a benefit of 37% in the first nine months of
fiscal 1999 and a provision of 29% in the first nine months of fiscal 1998. The
effective tax rate in fiscal 1999 varied from the statutory federal income tax
rate primarily due to tax credits earned from the production of fuel prior to
the closure of the K-Fuel Facility and the exclusion of income taxed directly to
a minority partner, offset in part by the effect of certain nondeductible
restructuring costs. The effective tax rate in fiscal 1998 was below the
statutory federal tax rate due to the nontaxable gain on issuance of stock by
subsidiary and the exclusion of income taxed directly to a minority partner,
offset in part by state income taxes.
The Company recorded minority interest income in fiscal 1999 due to the
allocation of $1.5 million in restructuring costs to the Company's minority
partner in the K-Fuel Facility (Note 5), offset in part by the allocation of
income from plant operations to a minority partner in an Operating Company.
Minority interest expense in fiscal 1998 represents the allocation of income
from plant operations to a minority partner in an Operating Company and the
minority shareholders' proportionate share of Thermo Trilogy's results.
Liquidity and Capital Resources
Working capital was $32.6 million at July 3, 1999, compared with $83.6
million at October 3, 1998. The Company had cash, cash equivalents, and current
restricted funds of $30.7 million at July 3, 1999, compared with $65.9 million
at October 3, 1998. In addition, at July 3, 1999, the Company had $11.9 million
invested in an advance to affiliate. Prior to the use of a new domestic cash
management arrangement between the Company and Thermo Electron (Note 7), which
became effective June 1, 1999, amounts invested with Thermo Electron were
included in cash and cash equivalents. Current restricted funds, which consists
of funds held in trust pursuant to certain lease and debt agreements, totaled
$17.2 million and $24.5 million at July 3, 1999, and October 3, 1998,
respectively. In addition, cash and cash equivalents in the accompanying balance
sheet includes $10.0 million and $12.0 million of cash at July 3, 1999, and
October 3, 1998, respectively, which is restricted by the terms of certain lease
and financing
15
<PAGE>
Liquidity and Capital Resources (continued)
agreements. These restrictions limit the ability of the Operating Companies to
transfer funds to the Company in the form of dividends, loans, advances, or
other distributions. Further, until such time, if ever, as projections of
avoided costs change, all cash flows from the Woodland Operating Company, other
than cash required for tax distributions, will be restricted from distribution
to the Company. During the first nine months of fiscal 1999, the Company's
operating activities provided cash and restricted funds of $27.7 million. Cash
provided by the Company's operations and an increase in accounts payable of
$12.0 million was offset in part by $13.3 million of cash used to fund an
increase in accounts receivable. The increase in accounts payable and accounts
receivable are primarily due to increased business activity at Star Natural Gas.
The Company expects to pay accrued restructuring costs of $7.3 million primarily
over the next 12 months.
Excluding advances to affiliate activity (Note 7), the Company's investing
activities used $29.8 million of cash during the first nine months of fiscal
1999. The Company completed construction on a 50-megawatt expansion at the Czech
Republic operations and expended $10.3 million for construction costs in the
first nine months of fiscal 1999. In addition, the Company, through its Limited
Partnership Agreement with KFx Wyoming, Inc., expended $4.7 million for
additions to the K-Fuel Facility. The Company expended $3.1 million on other
capital expenditures during the first nine months of fiscal 1999. The Company
expects to make capital expenditures of approximately $2.0 million during the
remainder of fiscal 1999. The Company also expended $8.4 million, net of cash
acquired, for the purchase of one gas gathering system and two gas processing
facilities (Note 6).
During the first nine months of fiscal 1999, the Company's financing
activities used cash of $20.8 million, primarily for the repayment of long-term
obligations and payments under capital lease obligations related to three of its
California plants.
The Company has completed the expansion project of its Czech Republic
operations. The cost of the acquisition and expansion of this facility was
approximately $32 million. The Company has received preliminary approval for the
issuance of grant funds by the Italian Ministry of Treasury sufficient to cover
approximately 30% of the cost of constructing two biomass-powered,
electric-generating plants in Italy. If the Company proceeds with construction,
it may be obligated to provide up to $30 million for construction of the
facilities during fiscal 2000. While the Company does not currently have any
firm available credit facilities, it does not expect to require funding for
currently existing operations in the foreseeable future. The Company is in the
early stages of developing projects in Southern California, Florida, and
Germany. Equity investments required by the Company for these development
efforts, if successful, are uncertain, but may be significant. Although the
Company's projects are designed to produce positive cash flow over the long
term, the Company will have to obtain significant additional funds from time to
time to meet project development requirements, including the funding of equity
investments, and to complete acquisitions. As the Company acquires, invests in,
or develops future plants, the Company expects to finance them with nonrecourse
debt, internal funds, or through borrowings from third parties or Thermo
Electron. Although Thermo Electron has expressed its willingness to provide
funds to the Company on a short-term basis to help finance acquisitions and
equity investments in future projects, the Company has no agreements with Thermo
Electron or third parties that assure funds will be available on acceptable
terms, or at all.
Year 2000
The following information constitutes a "Year 2000 Readiness Disclosure"
under the Year 2000 Information and Readiness Disclosure Act. The Company
continues to assess the potential impact of the year 2000 date recognition issue
on the Company's internal business systems 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, customers, and vendors to determine their year 2000 compliance
status; and (iii) developing a contingency plan.
16
<PAGE>
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, which efforts included testing the year 2000
readiness of its manufacturing, utility, and telecommunications systems at its
critical facilities. The Company is currently in phase two of its program,
during which any noncompliant information technology systems or non-information
technology systems that were identified during phase one are prioritized and
remediated. The Company is currently upgrading or replacing such noncompliant
information technology systems, and this process was approximately 90% complete
as of July 3, 1999. The Company is also upgrading its hardware and software
relating to plant control operations at each of its facilities and, to date, has
completed such upgrades at six of its eight U.S. facilities. 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
non-information technology systems will be year 2000 compliant by October 31,
1999. For phase three of the program, the Company will continue ongoing testing
of its critical internal business systems and non-information technology systems
in an effort to ensure that no operating disruptions due to year 2000 issues
occur.
The Company is continuing its process of identifying and assessing the
year 2000 readiness of key suppliers, vendors, and customers that are believed
to be significant to the Company's business operations, including its most
significant electric utility customers. As part of this ongoing effort, the
Company has developed and distributed questionnaires requesting year 2000
compliance information from its significant suppliers, vendors, and customers.
To date, no significant supplier, vendor, or customer has indicated that it
believes its business operations will be materially disrupted by the year 2000
issue. The Company is actively contacting and working with its significant
suppliers, vendors, and customers to verify the information that has been
provided. The Company has placed increased focus on any significant supplier,
vendor, or customer that either does not respond to the Company's questionnaire
or, from information provided, is considered to be lacking in its year 2000
compliance effort. The Company has completed its assessment of significant
vendors, suppliers, customers, and all other third-party risks. The Company has
developed and implemented internal systems and procedures to monitor the
response of its significant suppliers, vendors, and customers regarding the
state of their year 2000 compliance readiness.
Contingency Plan
The Company has developed a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan includes identifying and securing other suppliers and modifying
production facilities and schedules. As the Company continues to evaluate the
year 2000 readiness of its business systems and facilities, significant
suppliers, vendors, and customers, it will modify and adjust its contingency
plan as may be required.
Estimated Costs to Address the Company's Year 2000 Issues
To date, costs incurred in connection with the year 2000 issue have not
been material. The Company does not expect total year 2000 remediation costs to
be material, but there can be no assurance that the Company will not encounter
unexpected costs or delays in achieving year 2000 compliance. Year 2000 costs
relating to facilities were funded from working capital. All internal costs and
related external costs other than capital additions related to year 2000
remediation have been and will continue to be expensed as incurred. The Company
does not track the internal costs incurred for its year 2000 compliance project.
Such costs are principally the related payroll costs for its information systems
group.
17
<PAGE>
Year 2000 (continued)
Reasonably Likely Worst Case Scenario
At this point in time, the Company is not able to determine the most
reasonably likely worst case scenario to result from the year 2000 issue. One
possible worst case scenario would be that certain of the Company's material
suppliers, vendors, or customers experience business disruptions due to the year
2000 issue and, with respect to suppliers and vendors, are unable to provide
materials and services to the Company on time and, with respect to customers,
may result in their inability to accept power produced. The Company's operations
could be delayed or temporarily shut down, and it could be unable to meet its
obligations to customers in a timely fashion. The Company's business,
operations, and financial condition could be adversely affected in amounts that
cannot be reasonably estimated at this time. If the Company believes that any of
its key suppliers or vendors may not be year 2000 ready, it will seek to
identify and secure other suppliers or vendors as part of its contingency plan.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
If any of the Company's material suppliers, vendors, or customers experience
business disruptions due to year 2000 issues, the Company might also be
materially adversely affected. If any of the countries in which the Company
operates experience significant year 2000 disruption, the Company could also be
materially adversely affected. There is expected to be a significant amount of
litigation relating to the year 2000 issue and there can be no assurance that
the Company will not incur material costs in defending or bringing lawsuits. In
addition, if any year 2000 issues are identified, there can be no assurance that
the Company will be able to retain qualified personnel to remedy such issues.
Any unexpected costs or delays arising from the year 2000 issue could have a
significant adverse impact on the Company's business, operations, and financial
condition in amounts that cannot be reasonably estimated at this time.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in equity prices,
foreign currency exchange rates, and interest rates has not changed materially
from its exposure at fiscal year-end 1998.
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 25, 1999, the Company filed a Current Report on Form 8-K, dated May
24, 1999, with respect to a proposed reorganization plan, as well as
restructuring and other charges at the Company.
18
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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 11th day of August 1999.
THERMO ECOTEK CORPORATION
/s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Chief Financial Officer
19
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 Master Cash Management, Guarantee Reimbursement and Loan
Agreement dated as of June 1, 1999, between the Registrant and
Thermo Electron Corporation.
10.2 Master Cash Management, Guarantee Reimbursement and Loan
Agreement dated as of June 1, 1999, between Thermo Trilogy
Corporation and Thermo Electron Corporation.
10.3 Amended and Restated Directors Stock Option Plan of the
Registrant.
10.4 Amended and Restated Deferred Compensation Plan for Directors
of the Registrant.
10.5 Amended and Restated Equity Incentive Plan of the Registrant.
10.6 Amended and Restated Nonqualified Stock Option Plan of the
Registrant.
10.7 Amended and Restated Thermo Ecotek Corporation - Thermo Trilogy
Corporation Nonqualified Stock Option Plan.
27 Financial Data Schedule.
MASTER CASH MANAGEMENT, GUARANTEE
REIMBURSEMENT AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 1st day of June, 1999 by and
between Thermo Electron Corporation, a Delaware corporation ("Thermo Electron")
and Thermo Ecotek Corporation, a Delaware corporation (the "Subsidiary").
WITNESSETH:
WHEREAS, Thermo Electron and the Subsidiary are party to a Master
Repurchase Agreement, as amended and restated, which contains terms governing a
cash management arrangement between them and a Master Guarantee Reimbursement
and Loan Agreement, as amended and restated, which contains terms relating to
intercompany credit support and a short term borrowing facility;
WHEREAS, Thermo Electron and the Subsidiary desire to establish a new
cash management arrangement and short term borrowing facility between them in
lieu of the arrangements set forth in the Master Repurchase Agreement and the
Master Guarantee Reimbursement and Loan Agreement and also to consolidate the
terms relating to intercompany credit support in one agreement;
WHEREAS, the Subsidiary and other majority owned subsidiaries of Thermo
Electron that join in this Agreement (collectively, the "Majority-Owned
Subsidiaries") and their wholly-owned subsidiaries wish to enter into various
financial transactions, such as convertible or nonconvertible debt, loans,
equity offerings, and other contractual arrangements with third parties (the
"Underlying Obligations") and may provide credit support to, on behalf of or for
the benefit of, other subsidiaries of Thermo Electron ("Credit Support
Obligations");
WHEREAS, the Majority Owned Subsidiaries and Thermo Electron acknowledge
that the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from Thermo Electron (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority Owned
Subsidiaries;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries") may themselves be majority owned subsidiaries of other
Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations may be demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation;
WHEREAS, Thermo Electron may itself make a loan or provide other credit
to a Second Tier Majority Owned Subsidiary or its wholly-owned subsidiaries
under circumstances where the applicable First Tier Majority Owned Subsidiary
does not provide such credit; and
WHEREAS, Thermo Electron is willing to consider continuing to issue
Parent Guarantees and providing credit, and the Majority Owned Subsidiaries are
willing to consider continuing to provide Credit Support Obligations, on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. Cash Management Arrangement. The Subsidiary directly, or through its
wholly-owned U.S. subsidiaries, may, from time to time, lend its excess cash to
Thermo Electron (a "Transaction"), on an unsecured basis, bearing interest at a
rate equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal (the "DCP Rate") plus 50 basis points, which rate shall be
adjusted on the second business day of each fiscal month of the Subsidiary and
shall be in effect for the entirety of such fiscal month. The Subsidiary shall
institute a Transaction by depositing its excess cash in the Subsidiary's
concentration account at BankBoston Corporation ("BankBoston") or other bank
designated by Thermo Electron. At the end of each business day, the cash balance
deposited in the Subsidiary's concentration account shall be transferred to
Thermo Electron's intercompany account at BankBoston or other bank designated by
Thermo Electron. Thermo Electron shall indicate on its books the balance of the
Subsidiary's cash held by Thermo Electron under this arrangement. After each
fiscal month end, Thermo Electron shall provide the Subsidiary a report
indicating the Subsidiary's aggregate cash balance ("Excess Cash") held by
Thermo Electron hereunder. The Subsidiary shall have the right to withdraw all
or part of its Excess Cash upon 30 days' prior notice to Thermo Electron. Within
30 days of receipt of such withdrawal notice, Thermo Electron shall transfer the
portion of the Excess Cash requested for withdrawal to an account designated by
the Subsidiary. Thermo Electron shall maintain, at all times, cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of the cash balances of the Subsidiary and of all other participating
subsidiaries of Thermo Electron, other than wholly-owned subsidiaries of Thermo
Electron, held by Thermo Electron under this arrangement. Interest shall be
payable on the Excess Cash by Thermo Electron to the Subsidiary each fiscal
month in arrears. In addition, the Subsidiary's non-U.S. subsidiaries may, from
time to time, lend or advance their excess cash to Thermo Electron, on an
unsecured basis, bearing interest at rates set by Thermo Electron at the
beginning of each month, based to the extent practicable on comparable interest
rates generally available in the local jurisdiction of such participating
non-U.S. subsidiary. Further, Thermo Electron and such non-U.S. subsidiaries
participating in the cash management arrangement with Thermo Electron shall
establish mutually agreeable procedures governing such cash management
arrangement.
2. Loans and Advances. Upon request from the Subsidiary, Thermo Electron
may make loans and advances to the Subsidiary on a short-term, revolving credit
basis, from time to time, in such amounts as mutually determined by Thermo
Electron and the Subsidiary. The aggregate principal amount of such loans and
advances shall be reflected on the books and records of the Subsidiary and
Thermo Electron. All such loans and advances shall be on an unsecured basis
unless specifically provided otherwise in separate loan documents executed at
that time. The Subsidiary shall pay interest on the aggregate unpaid principal
amount of such loans from time to time outstanding at a rate equal to the DCP
Rate plus one hundred fifty (150) basis points, which rate shall be adjusted on
the second business day of each fiscal month of the Subsidiary and shall be in
effect for the entirety of such fiscal month. If, however, one or more of the
Subsidiary's majority-owned U.S. subsidiaries (i.e., not wholly-owned) is also
participating in the cash management arrangement with Thermo Electron, then the
rate payable on the Subsidiary's outstanding principal balance shall be
calculated as follows: If the aggregate amount of the Subsidiary's
majority-owned U.S. subsidiaries' cash balances under the cash management
arrangement ("Majority-Owned Excess Cash") equals or exceeds the Subsidiary's
outstanding principal balance, then the Subsidiary shall pay interest on the
aggregate unpaid principal amount of such loans at a rate per annum equal to the
DCP Rate plus fifty (50) basis points. If the aggregate amount of the
Majority-Owned Excess Cash is less than the Subsidiary's outstanding principal
balance, then (A) the Subsidiary shall pay interest at a rate per annum equal to
the DCP Rate plus fifty (50) basis points on that portion of the unpaid
principal amount equal to the Majority-Owned Excess Cash, and (B) the Subsidiary
shall pay interest at a rate per annum equal to the DCP Rate plus one hundred
fifty (150) basis points on that portion of the unpaid principal amount equal to
(i) the Subsidiary's outstanding principal balance, minus (ii) the
Majority-Owned Excess Cash. The interest rates set forth in the prior two
sentences shall be adjusted on the second business day of each fiscal month of
the Subsidiary and shall be in effect for the entirety of such fiscal month.
Interest shall be computed on a 360-day basis. Interest is payable each fiscal
month in arrears. The aggregate principal amount outstanding shall be payable
within 30 days of demand by Thermo Electron. Overdue principal and interest
shall bear interest at a rate per annum equal to the rate of interest published
from time to time in the Wall Street Journal as the "prime rate" plus one
percent (1%). The principal and accrued interest may be paid by the Subsidiary
at any time or from time to time, in whole or in part, without premium or
penalty. All payments shall be applied first to accrued interest and then to
principal. At the end of each business day, Thermo Electron shall apply the
balance of the Subsidiary's Excess Cash held by Thermo Electron under the cash
management arrangement toward the payment of any loans or advances to the
Subsidiary. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of Thermo Electron or at such other place as Thermo Electron may
designate from time to time in writing to the Subsidiary. The unpaid principal
amount of any such borrowings, and accrued interest thereon, shall become
immediately due and payable, without demand, upon occurrence of any of the
following events:
(a) the failure of the Subsidiary to pay any amount due hereunder within
fifteen (15) days of the date when due;
(b) the failure of the Subsidiary to pay its debts as they become due,
the filing by or against the Subsidiary of any petition under the U.S.
Bankruptcy Code (or the filing of any similar petition under the
insolvency law of any jurisdiction), or the making by the Subsidiary of
an assignment or trust mortgage for the benefit of creditors or the
appointment of a receiver, custodian or similar agent with respect to,
or the taking by any such person of possession of, any material property
of the Subsidiary;
(c) the sale by the Subsidiary of all or substantially all of its
assets;
(d) the merger or consolidation of the Subsidiary with or into any other
corporation in a transaction in which the Subsidiary is not the
surviving entity;
(e) the issuance of any writ of attachment, by trustee process or
otherwise, or any restraining order or injunction against or affecting
the person or property of the Subsidiary that is not removed, repealed
or dismissed within thirty (30) days of issuance and as a result has a
material adverse effect on the business, operations, assets or
condition, financial or otherwise, of the Subsidiary or its ability to
discharge any of its liabilities or obligations to Thermo Electron; and
(f) the suspension of the transaction of the usual business of the
Subsidiary.
3. Guarantee Arrangements.
(a) If Thermo Electron provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the
Parent Guarantee, or Thermo Electron performs under the Parent Guarantee
for any other reason, then the Majority Owned Subsidiary that is
obligated, either directly or indirectly through a wholly-owned
subsidiary, under such Underlying Obligation shall indemnify and save
harmless Thermo Electron from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by Thermo Electron as a
result of the Parent Guarantee. If the Underlying Obligation is issued
by a Second Tier Majority Owned Subsidiary or a wholly-owned subsidiary
thereof, and such Second Tier Majority Owned Subsidiary is unable to
fully indemnify Thermo Electron (because of the poor financial condition
of such Second Tier Majority Owned Subsidiary, or for any other reason),
then the First Tier Majority Owned Subsidiary that owns the majority of
the stock of such Second Tier Majority Owned Subsidiary shall indemnify
and save harmless Thermo Electron from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees) suffered by
Thermo Electron as a result of the Parent Guarantee. If a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof provides a Credit
Support Obligation for any subsidiary of Thermo Electron, other than a
subsidiary of such Majority Owned Subsidiary, and the beneficiary(ies)
of the Credit Support Obligation enforce the Credit Support Obligation,
or the Majority Owned Subsidiary or its wholly-owned subsidiary performs
under the Credit Support Obligation for any other reason, then Thermo
Electron shall indemnify and save harmless the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, from any liability, cost,
expense or damage (including reasonable attorneys' fees) suffered by the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
as a result of the Credit Support Obligation. Without limiting the
foregoing, Credit Support Obligations include the deposit of funds by a
Majority Owned Subsidiary or a wholly-owned subsidiary thereof in a
credit arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for overdraft
obligations of other Majority Owned Subsidiaries or their subsidiaries
also participating in the credit arrangement with such banking facility.
Nothwithstanding the foregoing, in order to obtain the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a), Thermo Electron must have notified
the First Tier Majority Owned Subsidiary prior to guaranteeing the
obligations of the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron guaranteeing
the obligations of the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue its guarantee of the Underlying
Obligation and such guarantee shall be subject to the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a). If Thermo Electron does receive
such notice of objection, then Thermo Electron's guarantee shall not be
subject to the indemnification obligations of the First Tier Majority
Owned Subsidiary set forth above in this Section 3(a).
(b) For purposes of this Agreement, the term "guarantee" shall include
not only a formal guarantee of an obligation, but also any other
arrangement where Thermo Electron is liable for the obligations of a
Majority Owned Subsidiary or its wholly-owned subsidiaries. Such other
arrangements include (a) representations, warranties and/or covenants or
other obligations joined in by Thermo Electron, whether on a joint or
joint and several basis, for the benefit of the Majority Owned
Subsidiary or its wholly-owned subsidiaries and (b) responsibility of
Thermo Electron by operation of law for the acts and omissions of the
Majority Owned Subsidiary or its wholly-owned subsidiaries, including
controlling person liability under securities and other laws.
(c) Promptly after Thermo Electron receives notice that a beneficiary of
a Parent Guarantee is seeking to enforce such Parent Guarantee, Thermo
Electron shall notify the Majority Owned Subsidiary(s) obligated, either
directly or indirectly through a wholly-owned subsidiary, under the
relevant Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have the right, at
its own expense, to contest the claim of such beneficiary. If a Majority
Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is
contesting the claim of such beneficiary, Thermo Electron will not
perform under the relevant Parent Guarantee unless and until, in Thermo
Electron's reasonable judgment, Thermo Electron is obligated under the
terms of such Parent Guarantee to perform. Subject to the foregoing, any
dispute between a Majority Owned Subsidiary or wholly-owned subsidiary
thereof, as applicable, and a beneficiary of a Parent Guarantee shall
not affect such Majority Owned Subsidiary's obligation to promptly
indemnify Thermo Electron hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as applicable, receives
notice that a beneficiary of a Credit Support Obligation is seeking to
enforce such Credit Support Obligation, the Majority Owned Subsidiary
shall notify Thermo Electron. Thermo Electron shall have the right, at
its own expense, to contest the claim of such beneficiary. If Thermo
Electron or the subsidiary of Thermo Electron on whose behalf the Credit
Support Obligation is given is contesting the claim of such beneficiary,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, will not perform under the relevant Credit Support
Obligation unless and until, in the Majority Owned Subsidiary's
reasonable judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the terms of such
Credit Support Obligation to perform. Subject to the foregoing, any
dispute between Thermo Electron or the subsidiary of Thermo Electron on
whose behalf the Credit Support Obligation was given, on the one hand,
and a beneficiary of a Credit Support Obligation, on the other, shall
not affect Thermo Electron's obligation to promptly indemnify the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
hereunder.
(d) If Thermo Electron makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the First Tier
Majority Owned Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary hereby guarantees the Second Tier
Majority Owned Subsidiary's obligations to Thermo Electron thereunder.
Such guaranty shall be enforced only after Thermo Electron, in its
reasonable judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its obligations under the Credit
Extension. If Thermo Electron provides Credit Extension to a
wholly-owned subsidiary of a Second Tier Majority Owned Subsidiary, the
Second Tier Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to Thermo Electron thereunder and the First
Tier Majority Owned Subsidiary that owns the majority of the stock of
such Second Tier Majority Owned Subsidiary hereby guarantees the Second
Tier Majority Owned Subsidiary's obligations to Thermo Electron
hereunder. Such guaranty by the First Tier Majority Owned Subsidiary
shall be enforced only after Thermo Electron, in its reasonable
judgment, determines that the Second Tier Majority Owned Subsidiary is
unable to fully perform its guaranty obligation hereunder.
Notwithstanding the foregoing, in order for a Credit Extension to be
deemed guaranteed by the First Tier Majority Owned Subsidiary as set
forth above in this Section 3(d), Thermo Electron must have notified the
First Tier Majority Owned Subsidiary prior to providing the Credit
Extension to the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron providing a
Credit Extension to the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue the Credit Extension to the Second
Tier Majority Owned Subsidiary and the First Tier Majority Owned
Subsidiary shall be deemed to have guaranteed such Credit Extension as
set forth above in this Section 3(d). If Thermo Electron does receive
such notice of objection, then Thermo Electron's Credit Extension shall
not be deemed guaranteed by the First Tier Majority Owned Subsidiary as
set forth in this Section 3(d).
(e) All payments required to be made under this Section 3 by a Majority
Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall
be made within two days after receipt of notice from Thermo Electron.
All payments required to be made under this Section 3 by Thermo Electron
shall be made within two days after receipt of notice from the Majority
Owned Subsidiary.
4. Waivers. No delay or omission on the part of either party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right of the party, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. The Subsidiary hereby waives demand, notice of prepayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of the Subsidiary's obligations
hereunder. The Subsidiary hereby assents to any indulgence and any extension of
time for payment of any indebtedness hereunder granted or permitted by the
party.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and performed therein without giving effect to any choice of law
provision or rule that would cause the application of laws of any jurisdiction
other than the Commonwealth of Massachusetts.
6. Severability. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein and shall
be enforceable notwithstanding the unenforceability of any such other provision
or agreement.
7. Non-assignability. The rights and obligations of the parties under
this Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
8. Other Agreements. The parties agree that, effective as of the date
hereof, each of the Master Repurchase Agreement, as amended and restated,
between the Subsidiary and Thermo Electron and the Master Guarantee
Reimbursement and Loan Agreement, as amended and restated, between the
Subsidiary and Thermo Electron, is hereby terminated and is of no further force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: _____________________________
/s/ Theo Melas-Kyriazi
Title: Vice President
Chief Financial Officer
THERMO ECOTEK CORPORATION
By: _____________________________
/s/ Brian D. Holt
Title: President &
Chief Executive Officer
MASTER CASH MANAGEMENT, GUARANTEE
REIMBURSEMENT AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 1st day of June, 1999 by and
between Thermo Electron Corporation, a Delaware corporation ("Thermo Electron")
and Thermo Trilogy Corporation, a Delaware corporation (the "Subsidiary").
WITNESSETH:
WHEREAS, Thermo Electron and the Subsidiary are party to a Master
Repurchase Agreement, as amended and restated, which contains terms governing a
cash management arrangement between them and a Master Guarantee Reimbursement
and Loan Agreement, as amended and restated, which contains terms relating to
intercompany credit support and a short term borrowing facility;
WHEREAS, Thermo Electron and the Subsidiary desire to establish a new
cash management arrangement and short term borrowing facility between them in
lieu of the arrangements set forth in the Master Repurchase Agreement and the
Master Guarantee Reimbursement and Loan Agreement and also to consolidate the
terms relating to intercompany credit support in one agreement;
WHEREAS, the Subsidiary and other majority owned subsidiaries of Thermo
Electron that join in this Agreement (collectively, the "Majority-Owned
Subsidiaries") and their wholly-owned subsidiaries wish to enter into various
financial transactions, such as convertible or nonconvertible debt, loans,
equity offerings, and other contractual arrangements with third parties (the
"Underlying Obligations") and may provide credit support to, on behalf of or for
the benefit of, other subsidiaries of Thermo Electron ("Credit Support
Obligations");
WHEREAS, the Majority Owned Subsidiaries and Thermo Electron acknowledge
that the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from Thermo Electron (a "Parent Guarantee") or
without obtaining Credit Support Obligations from other Majority Owned
Subsidiaries;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority
Owned Subsidiaries") may themselves be majority owned subsidiaries of other
Majority Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier
Majority Owned Subsidiary's Underlying Obligations may be demanded and given
without the respective First Tier Majority Owned Subsidiary also issuing a
guarantee of such Underlying Obligation;
WHEREAS, Thermo Electron may itself make a loan or provide other credit
to a Second Tier Majority Owned Subsidiary or its wholly-owned subsidiaries
under circumstances where the applicable First Tier Majority Owned Subsidiary
does not provide such credit; and
WHEREAS, Thermo Electron is willing to consider continuing to issue
Parent Guarantees and providing credit, and the Majority Owned Subsidiaries are
willing to consider continuing to provide Credit Support Obligations, on the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. Cash Management Arrangement. The Subsidiary directly, or through its
wholly-owned U.S. subsidiaries, may, from time to time, lend its excess cash to
Thermo Electron (a "Transaction"), on an unsecured basis, bearing interest at a
rate equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal (the "DCP Rate") plus 50 basis points, which rate shall be
adjusted on the second business day of each fiscal month of the Subsidiary and
shall be in effect for the entirety of such fiscal month. The Subsidiary shall
institute a Transaction by depositing its excess cash in the Subsidiary's
concentration account at BankBoston Corporation ("BankBoston") or other bank
designated by Thermo Electron. At the end of each business day, the cash balance
deposited in the Subsidiary's concentration account shall be transferred to
Thermo Electron's intercompany account at BankBoston or other bank designated by
Thermo Electron. Thermo Electron shall indicate on its books the balance of the
Subsidiary's cash held by Thermo Electron under this arrangement. After each
fiscal month end, Thermo Electron shall provide the Subsidiary a report
indicating the Subsidiary's aggregate cash balance ("Excess Cash") held by
Thermo Electron hereunder. The Subsidiary shall have the right to withdraw all
or part of its Excess Cash upon 30 days' prior notice to Thermo Electron. Within
30 days of receipt of such withdrawal notice, Thermo Electron shall transfer the
portion of the Excess Cash requested for withdrawal to an account designated by
the Subsidiary. Thermo Electron shall maintain, at all times, cash, cash
equivalents and/or immediately available bank lines of credit equal to at least
50% of the cash balances of the Subsidiary and of all other participating
subsidiaries of Thermo Electron, other than wholly-owned subsidiaries of Thermo
Electron, held by Thermo Electron under this arrangement. Interest shall be
payable on the Excess Cash by Thermo Electron to the Subsidiary each fiscal
month in arrears. In addition, the Subsidiary's non-U.S. subsidiaries may, from
time to time, lend or advance their excess cash to Thermo Electron, on an
unsecured basis, bearing interest at rates set by Thermo Electron at the
beginning of each month, based to the extent practicable on comparable interest
rates generally available in the local jurisdiction of such participating
non-U.S. subsidiary. Further, Thermo Electron and such non-U.S. subsidiaries
participating in the cash management arrangement with Thermo Electron shall
establish mutually agreeable procedures governing such cash management
arrangement.
2. Loans and Advances. Upon request from the Subsidiary, Thermo Electron
may make loans and advances to the Subsidiary on a short-term, revolving credit
basis, from time to time, in such amounts as mutually determined by Thermo
Electron and the Subsidiary. The aggregate principal amount of such loans and
advances shall be reflected on the books and records of the Subsidiary and
Thermo Electron. All such loans and advances shall be on an unsecured basis
unless specifically provided otherwise in separate loan documents executed at
that time. The Subsidiary shall pay interest on the aggregate unpaid principal
amount of such loans from time to time outstanding at a rate equal to the DCP
Rate plus one hundred fifty (150) basis points, which rate shall be adjusted on
the second business day of each fiscal month of the Subsidiary and shall be in
effect for the entirety of such fiscal month. If, however, one or more of the
Subsidiary's majority-owned U.S. subsidiaries (i.e., not wholly-owned) is also
participating in the cash management arrangement with Thermo Electron, then the
rate payable on the Subsidiary's outstanding principal balance shall be
calculated as follows: If the aggregate amount of the Subsidiary's
majority-owned U.S. subsidiaries' cash balances under the cash management
arrangement ("Majority-Owned Excess Cash") equals or exceeds the Subsidiary's
outstanding principal balance, then the Subsidiary shall pay interest on the
aggregate unpaid principal amount of such loans at a rate per annum equal to the
DCP Rate plus fifty (50) basis points. If the aggregate amount of the
Majority-Owned Excess Cash is less than the Subsidiary's outstanding principal
balance, then (A) the Subsidiary shall pay interest at a rate per annum equal to
the DCP Rate plus fifty (50) basis points on that portion of the unpaid
principal amount equal to the Majority-Owned Excess Cash, and (B) the Subsidiary
shall pay interest at a rate per annum equal to the DCP Rate plus one hundred
fifty (150) basis points on that portion of the unpaid principal amount equal to
(i) the Subsidiary's outstanding principal balance, minus (ii) the
Majority-Owned Excess Cash. The interest rates set forth in the prior two
sentences shall be adjusted on the second business day of each fiscal month of
the Subsidiary and shall be in effect for the entirety of such fiscal month.
Interest shall be computed on a 360-day basis. Interest is payable each fiscal
month in arrears. The aggregate principal amount outstanding shall be payable
within 30 days of demand by Thermo Electron. Overdue principal and interest
shall bear interest at a rate per annum equal to the rate of interest published
from time to time in the Wall Street Journal as the "prime rate" plus one
percent (1%). The principal and accrued interest may be paid by the Subsidiary
at any time or from time to time, in whole or in part, without premium or
penalty. All payments shall be applied first to accrued interest and then to
principal. At the end of each business day, Thermo Electron shall apply the
balance of the Subsidiary's Excess Cash held by Thermo Electron under the cash
management arrangement toward the payment of any loans or advances to the
Subsidiary. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of Thermo Electron or at such other place as Thermo Electron may
designate from time to time in writing to the Subsidiary. The unpaid principal
amount of any such borrowings, and accrued interest thereon, shall become
immediately due and payable, without demand, upon occurrence of any of the
following events:
(a) the failure of the Subsidiary to pay any amount due hereunder within
fifteen (15) days of the date when due;
(b) the failure of the Subsidiary to pay its debts as they become due,
the filing by or against the Subsidiary of any petition under the U.S.
Bankruptcy Code (or the filing of any similar petition under the
insolvency law of any jurisdiction), or the making by the Subsidiary of
an assignment or trust mortgage for the benefit of creditors or the
appointment of a receiver, custodian or similar agent with respect to,
or the taking by any such person of possession of, any material property
of the Subsidiary;
(c) the sale by the Subsidiary of all or substantially all of its
assets;
(d) the merger or consolidation of the Subsidiary with or into any other
corporation in a transaction in which the Subsidiary is not the
surviving entity;
(e) the issuance of any writ of attachment, by trustee process or
otherwise, or any restraining order or injunction against or affecting
the person or property of the Subsidiary that is not removed, repealed
or dismissed within thirty (30) days of issuance and as a result has a
material adverse effect on the business, operations, assets or
condition, financial or otherwise, of the Subsidiary or its ability to
discharge any of its liabilities or obligations to Thermo Electron; and
(f) the suspension of the transaction of the usual business of the
Subsidiary.
3. Guarantee Arrangements.
(a) If Thermo Electron provides a Parent Guarantee of an Underlying
Obligation, and the beneficiary(ies) of the Parent Guarantee enforce the
Parent Guarantee, or Thermo Electron performs under the Parent Guarantee
for any other reason, then the Majority Owned Subsidiary that is
obligated, either directly or indirectly through a wholly-owned
subsidiary, under such Underlying Obligation shall indemnify and save
harmless Thermo Electron from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by Thermo Electron as a
result of the Parent Guarantee. If the Underlying Obligation is issued
by a Second Tier Majority Owned Subsidiary or a wholly-owned subsidiary
thereof, and such Second Tier Majority Owned Subsidiary is unable to
fully indemnify Thermo Electron (because of the poor financial condition
of such Second Tier Majority Owned Subsidiary, or for any other reason),
then the First Tier Majority Owned Subsidiary that owns the majority of
the stock of such Second Tier Majority Owned Subsidiary shall indemnify
and save harmless Thermo Electron from any remaining liability, cost,
expense or damage (including reasonable attorneys' fees) suffered by
Thermo Electron as a result of the Parent Guarantee. If a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof provides a Credit
Support Obligation for any subsidiary of Thermo Electron, other than a
subsidiary of such Majority Owned Subsidiary, and the beneficiary(ies)
of the Credit Support Obligation enforce the Credit Support Obligation,
or the Majority Owned Subsidiary or its wholly-owned subsidiary performs
under the Credit Support Obligation for any other reason, then Thermo
Electron shall indemnify and save harmless the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, from any liability, cost,
expense or damage (including reasonable attorneys' fees) suffered by the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
as a result of the Credit Support Obligation. Without limiting the
foregoing, Credit Support Obligations include the deposit of funds by a
Majority Owned Subsidiary or a wholly-owned subsidiary thereof in a
credit arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for overdraft
obligations of other Majority Owned Subsidiaries or their subsidiaries
also participating in the credit arrangement with such banking facility.
Nothwithstanding the foregoing, in order to obtain the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a), Thermo Electron must have notified
the First Tier Majority Owned Subsidiary prior to guaranteeing the
obligations of the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron guaranteeing
the obligations of the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue its guarantee of the Underlying
Obligation and such guarantee shall be subject to the benefits of the
indemnification obligations of the First Tier Majority Owned Subsidiary
set forth above in this Section 3(a). If Thermo Electron does receive
such notice of objection, then Thermo Electron's guarantee shall not be
subject to the indemnification obligations of the First Tier Majority
Owned Subsidiary set forth above in this Section 3(a).
(b) For purposes of this Agreement, the term "guarantee" shall include
not only a formal guarantee of an obligation, but also any other
arrangement where Thermo Electron is liable for the obligations of a
Majority Owned Subsidiary or its wholly-owned subsidiaries. Such other
arrangements include (a) representations, warranties and/or covenants or
other obligations joined in by Thermo Electron, whether on a joint or
joint and several basis, for the benefit of the Majority Owned
Subsidiary or its wholly-owned subsidiaries and (b) responsibility of
Thermo Electron by operation of law for the acts and omissions of the
Majority Owned Subsidiary or its wholly-owned subsidiaries, including
controlling person liability under securities and other laws.
(c) Promptly after Thermo Electron receives notice that a beneficiary of
a Parent Guarantee is seeking to enforce such Parent Guarantee, Thermo
Electron shall notify the Majority Owned Subsidiary(s) obligated, either
directly or indirectly through a wholly-owned subsidiary, under the
relevant Underlying Obligation. Such Majority Owned Subsidiary(s) or
wholly-owned subsidiary thereof, as applicable, shall have the right, at
its own expense, to contest the claim of such beneficiary. If a Majority
Owned Subsidiary or wholly-owned subsidiary thereof, as applicable, is
contesting the claim of such beneficiary, Thermo Electron will not
perform under the relevant Parent Guarantee unless and until, in Thermo
Electron's reasonable judgment, Thermo Electron is obligated under the
terms of such Parent Guarantee to perform. Subject to the foregoing, any
dispute between a Majority Owned Subsidiary or wholly-owned subsidiary
thereof, as applicable, and a beneficiary of a Parent Guarantee shall
not affect such Majority Owned Subsidiary's obligation to promptly
indemnify Thermo Electron hereunder. Promptly after a Majority Owned
Subsidiary or wholly-owned subsidiary thereof, as applicable, receives
notice that a beneficiary of a Credit Support Obligation is seeking to
enforce such Credit Support Obligation, the Majority Owned Subsidiary
shall notify Thermo Electron. Thermo Electron shall have the right, at
its own expense, to contest the claim of such beneficiary. If Thermo
Electron or the subsidiary of Thermo Electron on whose behalf the Credit
Support Obligation is given is contesting the claim of such beneficiary,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, will not perform under the relevant Credit Support
Obligation unless and until, in the Majority Owned Subsidiary's
reasonable judgment, the Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is obligated under the terms of such
Credit Support Obligation to perform. Subject to the foregoing, any
dispute between Thermo Electron or the subsidiary of Thermo Electron on
whose behalf the Credit Support Obligation was given, on the one hand,
and a beneficiary of a Credit Support Obligation, on the other, shall
not affect Thermo Electron's obligation to promptly indemnify the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
hereunder.
(d) If Thermo Electron makes a loan or provides other credit ("Credit
Extension") to a Second Tier Majority Owned Subsidiary, the First Tier
Majority Owned Subsidiary that owns the majority of the stock of such
Second Tier Majority Owned Subsidiary hereby guarantees the Second Tier
Majority Owned Subsidiary's obligations to Thermo Electron thereunder.
Such guaranty shall be enforced only after Thermo Electron, in its
reasonable judgment, determines that the Second Tier Majority Owned
Subsidiary is unable to fully perform its obligations under the Credit
Extension. If Thermo Electron provides Credit Extension to a
wholly-owned subsidiary of a Second Tier Majority Owned Subsidiary, the
Second Tier Majority Owned Subsidiary hereby guarantees it wholly-owned
subsidiary's obligations to Thermo Electron thereunder and the First
Tier Majority Owned Subsidiary that owns the majority of the stock of
such Second Tier Majority Owned Subsidiary hereby guarantees the Second
Tier Majority Owned Subsidiary's obligations to Thermo Electron
hereunder. Such guaranty by the First Tier Majority Owned Subsidiary
shall be enforced only after Thermo Electron, in its reasonable
judgment, determines that the Second Tier Majority Owned Subsidiary is
unable to fully perform its guaranty obligation hereunder.
Notwithstanding the foregoing, in order for a Credit Extension to be
deemed guaranteed by the First Tier Majority Owned Subsidiary as set
forth above in this Section 3(d), Thermo Electron must have notified the
First Tier Majority Owned Subsidiary prior to providing the Credit
Extension to the Second Tier Majority Owned Subsidiary. If after five
(5) business days, Thermo Electron has not received from the First Tier
Majority Owned Subsidiary a notice of objection stating that the First
Tier Majority Owned Subsidiary objects to Thermo Electron providing a
Credit Extension to the Second Tier Majority Owned Subsidiary, then
Thermo Electron may proceed to issue the Credit Extension to the Second
Tier Majority Owned Subsidiary and the First Tier Majority Owned
Subsidiary shall be deemed to have guaranteed such Credit Extension as
set forth above in this Section 3(d). If Thermo Electron does receive
such notice of objection, then Thermo Electron's Credit Extension shall
not be deemed guaranteed by the First Tier Majority Owned Subsidiary as
set forth in this Section 3(d).
(e) All payments required to be made under this Section 3 by a Majority
Owned Subsidiary or its wholly-owned subsidiaries, as applicable, shall
be made within two days after receipt of notice from Thermo Electron.
All payments required to be made under this Section 3 by Thermo Electron
shall be made within two days after receipt of notice from the Majority
Owned Subsidiary.
4. Waivers. No delay or omission on the part of either party in
exercising any right hereunder shall operate as a waiver of such right or of any
other right of the party, nor shall any delay, omission or waiver on any one
occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. The Subsidiary hereby waives demand, notice of prepayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of the Subsidiary's obligations
hereunder. The Subsidiary hereby assents to any indulgence and any extension of
time for payment of any indebtedness hereunder granted or permitted by the
party.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and performed therein without giving effect to any choice of law
provision or rule that would cause the application of laws of any jurisdiction
other than the Commonwealth of Massachusetts.
6. Severability. Each provision and agreement herein shall be treated as
separate and independent from any other provision or agreement herein and shall
be enforceable notwithstanding the unenforceability of any such other provision
or agreement.
7. Non-assignability. The rights and obligations of the parties under
this Agreement shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
8. Other Agreements. The parties agree that, effective as of the date
hereof, each of the Master Repurchase Agreement, as amended and restated,
between the Subsidiary and Thermo Electron and the Master Guarantee
Reimbursement and Loan Agreement, as amended and restated, between the
Subsidiary and Thermo Electron, is hereby terminated and is of no further force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: _____________________________
/s/ Theo Melas-Kyriazi
Title: Vice President &
Chief Financial Officer
THERMO TRILOGY CORPORATION
By: _____________________________
/s/ Brian D. Holt
Title: Chief Executive Officer
THERMO ECOTEK CORPORATION
DIRECTORS STOCK OPTION PLAN
As amended and restated effective as of June 9, 1999
1. Purpose
The purpose of this Directors Stock Option Plan (the "Plan") of Thermo
Ecotek Corporation (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose services are considered essential to the
Company's growth and progress and to provide them with a further incentive to
become directors and to continue as directors of the Company. The Plan is
intended to be a nonstatutory stock option plan.
2. Administration
The Board of Directors, or a Committee (the "Committee") consisting of
one or more directors of the Company appointed by the Board of Directors, shall
supervise and administer the Plan. Grants of stock options under the Plan and
the amount and nature of the options to be granted shall be automatic in
accordance with Section 5. However, all questions of interpretation of the Plan
or of any stock options granted under it shall be determined by the Board of
Directors or the Committee and such determination shall be final and binding
upon all persons having an interest in the Plan.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
subsidiary or parent of the Company shall be eligible to participate in the
Plan. Directors who receive grants of stock options in accordance with this Plan
are sometimes referred to herein as "Optionees."
4. Stock Subject to the Plan
The maximum number of shares that may be issued under the Plan shall be
225,000 shares of the Company's Common Stock (the "Common Stock"), subject to
adjustment as provided in Section 9. Shares to be issued upon the exercise of
options granted under the Plan may be either authorized but unissued shares or
shares held by the Company in its treasury. If any option expires or terminates
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for options thereafter to be granted.
5. Terms and Conditions
A. Annual Stock Option Grants
Each Director of the Company who meets the requirements of Section 3 and
who is holding office immediately following the Annual Meeting of Stockholders
commencing with the Annual Meeting of Stockholders held in calendar year 1996,
shall be granted an option to purchase 1,000 shares of Common Stock at the close
of business on the date of such Annual Meeting.
B. General Terms and Conditions Applicable to All Grants.
1. Options shall be immediately exercisable at any time from and
after the grant date and prior to the date which is the earliest
of:
(a) three years after the grant date for options granted
under Section 5(A), (b) two years after the Optionee ceases to
serve as a director of the Company, Thermo Electron or any
subsidiary of Thermo Electron (one year in the event the Optionee
ceases to meet the requirements of this Subsection by reason of
his or her death), or (c) the date of dissolution or liquidation
of the Company.
2. The exercise price at which Options are granted hereunder
shall be the average of the closing prices reported by the
national securities exchange on which the Common Stock is
principally traded for the five trading days immediately
preceding and including the date the option is granted or, if
such security is not traded on an exchange, the average last
reported sale price for the five-day period on the NASDAQ
National Market List, or the average of the closing bid prices
for the five-day period last quoted by an established quotation
service for over-the-counter securities, or if none of the above
shall apply, the last price paid for shares of the Common Stock
by independent investors in a private placement.
3. All options shall be evidenced by a written agreement
substantially in such form as shall be approved by the Board of
Directors or Committee, containing terms and conditions
consistent with the provisions of this Plan.
6. Exercise of Options
A. Exercise/Consideration
An option may be exercised in accordance with its terms by written
notice of intent to exercise the option, specifying the number of shares of
stock with respect to which the option is then being exercised. The notice shall
be accompanied by payment in the form of cash or shares of Common Stock of the
Company (the shares so tendered referred to herein as "Tendered Shares") with a
then current market value equal to the exercise price of the shares to be
purchased; provided, however, that such Tendered Shares shall have been acquired
by the Optionee more than six months prior to the date of exercise (unless such
requirement is waived in writing by the Company). Against such payment the
Company shall deliver or cause to be delivered to the Optionee a certificate for
the number of shares then being purchased, registered in the name of the
Optionee or other person exercising the option. If any law or applicable
regulation of the Securities and Exchange Commission or other body having
jurisdiction in the premises shall require the Company or the Director to take
any action in connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or certificates
for such shares shall be postponed until completion of the necessary action,
which shall be taken at the Company's expense.
B. Tax Withholding
The Company shall have the right to deduct from payments of any kind
otherwise due to the Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the Optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the Optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. Notwithstanding the foregoing, no election to use shares for the
payment of withholding taxes shall be effective unless made in compliance with
any applicable requirements of Rule 16b-3.
7. Transferability
Except as may be authorized by the Board, in its sole discretion, no
Option may be transferred other than by will or the laws of descent and
distribution, and during an Optionee's lifetime an Option may be exercised only
by him or her (or in the event of incapacity, the person or persons properly
appointed to act on his or her behalf). The Board may, in its discretion,
determine the extent to which Options granted to an Optionee shall be
transferable, and such provisions permitting or acknowledging transfer shall be
set forth in the written agreement evidencing the Option executed and delivered
by or on behalf of the Company and the Optionee.
8. Limitation of Rights to Continue as a Director
Neither the Plan, nor the quantity of shares subject to options granted
under the Plan, nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied,
that the Company will retain a Director for any period of time, or at any
particular rate of compensation.
9. Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, or other distribution with respect to holders of Common Stock other than
normal cash dividends, the Board will make (i) appropriate adjustments to the
maximum number of shares that may be delivered under the Plan under Section 4
above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Options then outstanding or subsequently granted,
any exercise prices relating to Options and any other provisions of Options
affected by such change.
(b) In the event of any recapitalization, merger or consolidation
involving the Company, any transaction in which the Company becomes a subsidiary
of another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company or any similar transaction, as determined by the
Board, the Board in its discretion may make appropriate adjustments to
outstanding Options to avoid distortion in the operation of the Plan.
10. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in respect of shares
as to which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan or the written
agreement evidencing options granted hereunder.
11. Stock Reserved
The Company shall at all times during the term of the options reserve
and keep available such number of shares of the Common Stock as will be
sufficient to permit the exercise in full of all options granted under this Plan
and shall pay all other fees and expenses necessarily incurred by the Company in
connection therewith.
12. Securities Laws Restrictions
A. Investment Representations.
The Company may require any person to whom an option is granted, as a
condition of exercising such option, to give written assurances in substance and
form satisfactory to the Company to the effect that such person is acquiring the
Common Stock subject to the option for his or her own account for investment and
not with any present intention of selling or otherwise distributing the same,
and to such other effects as the Company deems necessary or appropriate in order
to comply with federal and applicable state securities laws.
B. Compliance with Securities Laws.
Each option shall be subject to the requirement that if, at any time,
counsel to the Company shall determine that the listing, registration or
qualification of the shares subject to such option upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
13. Change in Control
A. Impact of Event
In the event of a "Change in Control" as defined in Section 13(A), the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides (by specific explicit reference to Section 13(B) below). If a
Change in Control occurs while any Options are outstanding, then, effective upon
the Change in Control, each outstanding Option under the Plan that was not
previously exercisable and vested shall become immediately exercisable in full
and will no longer be subject to a right of repurchase by the Company.
B. Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
14. Amendment of the Plan
The provisions of Sections 3 and 5 of the Plan shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, or the rules thereunder.
Subject to the foregoing, the Board of Directors may at any time, and from time
to time, modify or amend the Plan in any respect, except that if at any time the
approval of the Stockholders of the Company is required as to such modification
or amendment under Rule 16b-3, the Board of Directors may not effect such
modification or amendment without such approval.
The termination or any modification or amendment of the Plan shall not,
without the consent of an Optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the Optionees affected,
the Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding option to
the extent necessary to ensure the qualification of the Plan under Rule 16b-3.
15. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of Directors,
but no option granted under the Plan shall become exercisable until six months
after the Plan is approved by the Stockholders of the Company.
16. Notice
Any written notice to the Company required by any of the provisions of
the Plan shall be addressed to the Secretary of the Company and shall become
effective when it is received.
17. Governing Law
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.
THERMO ECOTEK CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
As amended and restated as of June 9, 1999
Section 1. Participation. Any director of Thermo Ecotek Corporation (the
"Company") may elect to have such percentage as he or she may specify of the
fees otherwise payable to him or her deferred and paid to him or her as provided
in this Plan. A director who is also an employee of the Company or any
subsidiary or parent of the Company, shall not be eligible to participate in
this Plan. Each election shall be made by notice in writing delivered to the
Secretary of the Company, in such form as the Secretary shall designate, and
each election shall be applicable only with respect to fees earned subsequent to
the date of the election for the period designated in the form. The term
"participant" as used herein refers to any director who shall have made an
election. No participant may defer the receipt of any fees to be earned after
the later to occur of either (a) the date on which the participant shall retire
from or otherwise cease to engage in his or her principal occupation or
employment or (b) the date on which he or she shall cease to be a director of
the Company, or such earlier date as the Board of Directors of the Company, with
the participant's consent, may designate (the "deferral termination date"). In
the event that the participant's deferral termination date is the date on which
he or she ceases to engage in his or her principal occupation or employment, the
participant or a personal representative shall advise the Company of that date
by written notice delivered to the Secretary of the Company.
Section 2. Establishment of Deferred Compensation Accounts. There shall be
established for each participant an account to be designated as that
participant's deferred compensation account.
Section 3. Allocations to Deferred Compensation Accounts. There shall be
allocated to each participant's deferred compensation account, as of the end of
each quarter, an amount equal to his or her fees for that quarter which that
participant shall have elected to have deferred pursuant to Section 1.
Section 4. Stock Units and Stock Unit Accounts. All amounts allocated to a
participant's deferred compensation account pursuant to Section 3 and Section 5
shall be converted, at the end of each quarter, into stock units by dividing the
accumulated balance in the deferred compensation account as of the end of that
quarter by the average last sale price per share of the Company's common stock
as reported in The Wall Street Journal, for the five business days up to and
including the last business day of that quarter. The number of stock units, so
determined, rounded to the nearest one-hundredth of a share, shall be credited
to a separate stock unit account to be established for the participant, and the
aggregate value thereof as of the last business day of that quarter shall be
charged to the participant's deferred compensation account. No amounts credited
to the participant's deferred compensation account pursuant to Section 5
subsequent to the close of the fiscal year in which occurs the participant's
deferral termination date shall be converted into stock units. Any such amount
shall be distributed in cash as provided in Section 8. A maximum number of
37,500 shares of the Company's common stock may be represented by stock units
credited under this Plan, subject to proportionate adjustment in the event of
any stock dividend, stock split or other capital change affecting the Company's
common stock.
Section 5. Cash Dividend Credits. Additional credits shall be made to a
participant's deferred compensation account, until all distributions shall have
been made from the participant's stock unit account, in amounts equal to the
cash dividends (or the fair market value of dividends paid in property other
than dividends payable in common stock of the Company) which the participant
would have received from time to time had he or she been the owner on the record
dates for the payment of such dividends of the number of shares of the Company's
common stock equal to the number of units in his or her stock unit account on
those dates.
Section 6. Stock Dividend Credits. Additional credits shall be made to a
participant's stock unit account, until all distributions shall have been made
from the participant's stock unit account, of a number of units equal to the
number of shares of the Company's common stock, rounded to the nearest
one-hundredth share, which the participant would have received from time to time
as stock dividends had he or she been the owner on the record dates for the
payments of such stock dividends of the number of units of the Company's common
stock equal to the number of units credited to his or her stock unit account on
those dates.
Section 7. Adjustments in the Event of Certain Transactions. In the event of a
stock dividend, stock split or combination of shares, or other distribution with
respect to holders of Common Stock other than normal cash dividends, the number
of units then credited to a partipant's stock unit account shall be
appropriately adjusted on the same basis. In the event of any recapitalization,
merger or consolidation involving the Company, any transaction in which the
Company becomes a subsidiary of another entity, any sale or other disposition of
all or a substantial portion of the assets of the Company or any similar
transaction, as determined by the Board, the Board in its discretion may
terminate the Plan pursuant to Section 11.
Section 8. Distribution of Stock and Cash After Participant's Deferral
Termination Date. When a participant's deferral termination date shall occur,
the Company shall become obligated to make the distributions prescribed in the
following paragraphs (a) and (b).
(a) The Company shall distribute to the participant the number of shares
of the common stock of the Company which shall equal the total number of units
accumulated in his or her stock unit account as of the close of the fiscal year
in which the participant's deferral termination date occurs. Such distribution
of stock shall be made in ten annual installments, unless, at least six months
prior to his or her deferral termination date, the participant shall have
elected, by notice in writing filed with the Secretary of the Company, to have
such distribution made in five annual installments. In either such case, the
installments shall be of as nearly equal number of shares as practicable,
adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of
units remaining in the participant's stock unit account. The first such
installment shall be distributed within 60 days after the close of the fiscal
year in which the participant's deferral termination date occurs. The remaining
installments shall be distributed at annual intervals thereafter. Anything
herein to the contrary notwithstanding, the Company shall have the option, if
its Board of Directors shall by resolution so determine, in lieu of making
distribution in ten or five annual installments as set forth above, with the
participant's consent, to distribute stock or any remaining installments thereof
in a single distribution at any time following the close of the fiscal year in
which the participant's deferral termination date occurs. Distribution of stock
made hereunder may be made from shares of common stock held in the treasury
and/or from shares of authorized but previously unissued shares of common stock.
(b) The Company shall distribute to the participant sums in cash equal
to the balance credited to his or her deferred compensation account as of the
close of the fiscal year in which his or her deferral termination date occurs
plus such additional amounts as shall be credited thereto from time to time
thereafter pursuant to Section 5. The cash distribution shall be made on the
same dates as the annual distributions made pursuant to paragraph (a) above, and
each cash distribution shall consist of the entire balance credited to the
participant's deferred compensation account at the time of the annual
distribution.
If a participant's deferral termination date shall occur by reason of
his or her death or if he or she shall die after his or her deferral termination
date but prior to receipt of all distributions of stock and cash provided for in
this Section 8, all stock and cash remaining distributable hereunder shall be
distributed to such beneficiary as the participant shall have designated in
writing and filed with the Secretary of the Company or, in the absence of
designation, to the participant's personal representative. Such distributions
shall be made in the same manner and at the same intervals as they would have
been made to the participant had he or she continued to live.
Section 9. Participant's Rights Unsecured. The right of any participant to
receive distributions under Section 8 shall be an unsecured claim against the
general assets of the Company. The Company may but shall not be obligated to
acquire shares of its outstanding common stock from time to time in anticipation
of its obligation to make such distributions, but no participant shall have any
rights in or against any shares of stock so acquired by the Company. All such
stock shall constitute general assets of the Company and may be disposed of by
the Company at such time and for such purposes as it may deem appropriate.
10. Change in Control
10.1 Impact of Event
In the event of a "Change in Control" as defined in Section 10.2, the Plan shall
terminate and full distribution shall be made from all participants' deferred
compensation accounts and stock unit accounts effective upon the Change of
Control.
10.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
Section 11. Amendment and Termination of the Plan. The Board of Directors of the
Company may amend or terminate the Plan at any time and from time to time,
provided, however, that no amendment adversely affecting credits already made to
any participant's deferred compensation account or stock unit account may be
made without the consent of that participant or, if that participant has died,
that participant's beneficiary. Upon termination of the Plan, the Company shall
be obligated to distribute to the participant either of the following as the
Board of Directors of the Company, in its sole discretion, may determine: (i)
the number of shares of the common stock of the Company which shall equal the
total number of units accumulated in the participant's stock unit account as of
the effective date of termination of the Plan or (ii) a sum in cash equal to the
balance credited to the participant's deferred compensation account as of the
effective date of termination of the Plan.
THERMO ECOTEK CORPORATION
EQUITY INCENTIVE PLAN
As amended and restated effective as of June 9, 1999
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
Thermo Ecotek Corporation (the "Company") and its Stockholders the benefits
arising from capital stock ownership by employees and Directors of, and
consultants to, the Company and its subsidiaries or other persons who are
expected to make significant contributions to the future growth and success of
the Company and its subsidiaries. The Plan is intended to accomplish these goals
by enabling the Company to offer such persons equity-based interests,
equity-based incentives or performance-based stock incentives in the Company, or
any combination thereof ("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable for any action or determination made in
good faith. The Board may, to the full extent permitted by law, delegate any or
all of its responsibilities under the Plan to a committee (the "Committee")
appointed by the Board and consisting of two or more members of the Board, each
of whom shall be deemed a "disinterested person" within the meaning of Rule
16b-3 (or any successor rule) of the Securities Exchange Act of 1934 (the
"Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board
of Directors, subject to the approval of the Plan by the Corporation's
Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of
grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of
shares of Common Stock reserved and available for distribution under the Plan
shall be 600,000 shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its
subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of Section 2, shall from time to time select from among such
eligible persons those who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant; provided however that the maximum number of
shares permitted to be granted under any Award or combination of Awards to any
Participant during any one calendar year may not exceed 250,000 shares of Common
Stock.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options that are not intended to meet the requirements of
Section 422 ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 Option Grants. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations) as the Board shall deem
advisable. Option agreements shall expressly state whether an option grant is
intended to qualify as an incentive stock option or non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for a
payment in cash, shares of Common Stock, deferred stock or restricted stock, an
option previously granted, based on such terms and conditions as the Board shall
establish and communicate to the option holder at the time that such offer is
made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the
Plan and each option agreement evidencing an incentive stock option shall be
construed so that each incentive stock option shall be an incentive stock option
as defined in Section 422 of the Code or any statutory provision that may
replace such Section, and any provisions thereof that cannot be so construed
shall be disregarded. Instruments evidencing incentive stock options must
contain such provisions as are required under applicable provisions of the Code.
Incentive stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option shall not be less
than 100% (110% in the case of an incentive stock option granted to a more than
ten percent Stockholder of the Company) of the fair market value of the Common
Stock on the date of grant, as determined by the Board. An incentive stock
option may not be granted after the tenth anniversary of the date on which the
Plan was adopted by the Board and the latest date on which an incentive stock
option may be exercised shall be the tenth anniversary (fifth anniversary, in
the case of any incentive stock option granted to a more than ten percent
Stockholder of the Company) of the date of grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time accelerate the time at which the restrictions
on all or any part of the shares shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide
that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell to
any Participant shares of Common Stock free of restrictions under the Plan for a
price determined by the Board, but which may not be less than the par value per
share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the
recipient to receive shares of deferred stock, which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which delivery of all or any part of the
Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 Performance Awards
6.4.1 Performance Awards. A performance Award entitles the recipient to
receive, without payment, an amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 of the
Plan) that performance goals be met prior to the Participant's realization of
any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the
grant to the Participant of any Award, in connection with the purchase of Common
Stock under the Award or with the payment of any obligation incurred or
recognized as a result of the Award. The Board will have full authority to
decide whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven.
In connection with any Award, the Board may at the time such Award is
made or at a later date, provide for and make a cash payment to the participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the participant's
income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides (by specific explicit reference to Section 9.2 below). If a
Change in Control occurs while any Awards are outstanding, then, effective upon
the Change in Control, (i) each outstanding stock option or other stock-based
Award awarded under the Plan that was not previously exercisable and vested
shall become immediately exercisable in full and will no longer be subject to a
right of repurchase by the Company, (ii) each outstanding restricted stock award
or other stock-based Award subject to restrictions and to the extent not fully
vested, shall be deemed to be fully vested, free of restrictions and no longer
subject to a right of repurchase by the Company, and (iii) deferral limitations
and conditions that relate solely to the passage of time, continued employment
or affiliation will be waived and removed as to deferred stock Awards and
performance Awards; performance of other conditions (other than conditions
relating solely to the passage of time, continued employment or affiliation)
will continue to apply unless otherwise provided in the agreement evidencing the
Award or in any other agreement between the Participant and the Company or
unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument evidencing
the Award, the receipt of an Award will not give a Participant rights as a
Stockholder with respect to any shares covered by an Award until the date of
issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to deliver Common Stock pursuant to such
exercise until the Company is satisfied as to the authority of such
representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be delivered,
the Board will have the right to require that the participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the Board
with regard to such requirements, prior to the delivery of any Common Stock. If
and to the extent that such withholding is required, the Board may permit the
participant or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirement.
10.5 Transferability of Awards
Except as may be authorized by the Board, in its sole discretion, no
Award (other than an Award in the form of an outright transfer of cash or Common
Stock not subject to any restrictions) may be transferred other than by will or
the laws of descent and distribution, and during a Participant's lifetime an
Award requiring exercise may be exercised only by him or her (or in the event of
incapacity, the person or persons properly appointed to act on his or her
behalf). The Board may, in its discretion, determine the extent to which Awards
granted to a Participant shall be transferable, and such provisions permitting
or acknowledging transfer shall be set forth in the written agreement evidencing
the Award executed and delivered by or on behalf of the Company and the
Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, or other distribution with respect to holders of Common Stock other than
normal cash dividends, the Board will make (i) appropriate adjustments to the
maximum number of shares that may be delivered under the Plan under Section 4
above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Awards then outstanding or subsequently granted,
any exercise prices relating to Awards and any other provisions of Awards
affected by such change.
(b) In the event of any recapitalization, merger or consolidation
involving the Company, any transaction in which the Company becomes a subsidiary
of another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company or any similar transaction, as determined by the
Board, the Board in its discretion may make appropriate adjustments to
outstanding Awards to avoid distortion in the operation of the Plan.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued employment with the Company or any
subsidiary or interfere in any way with the right of the Company or subsidiary
to terminate any employment relationship at any time or to increase or decrease
the compensation of such person. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment of the Plan or any agreement evidencing
Awards under the Plan may adversely affect the rights of any participant under
any Award previously granted without such participant's consent.
THERMO ECOTEK CORPORATION
NONQUALIFIED STOCK OPTION PLAN
As amended and restated effective as of June 9, 1999
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended to
encourage ownership of Common Stock (the "Common Stock"), of Thermo Ecotek
Corporation ("Company"), by persons selected by the Board of Directors (or a
committee thereof) in its sole discretion, including directors, executive
officers, key employees and consultants of the Company and its subsidiaries, and
to provide additional incentive for them to promote the success of the business
of the Company. The Plan is intended to be a nonstatutory stock option plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of Directors
of the Company.
3. Stock Subject to Plan
Subject to adjustment as provided in Section 11, the total number of
shares of Common Stock reserved and available for issuance under the Plan and
the Company's Incentive Stock Option Plan in the aggregate shall be 1,350,000
shares. Shares to be issued upon the exercise of options granted under the Plan
may be either authorized but unissued shares or shares held by the Company in
its treasury. If any option expires or terminates for any reason without having
been exercised in full, the unpurchased shares subject thereto shall again be
available for options thereafter to be granted.
4. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). Subject to the provisions of the Plan, the Board shall have
complete authority, in its discretion, to make the following determinations with
respect to each option to be granted by the Company: (a) the person to receive
the option (the "Optionee"); (b) the time of granting the option; (c) the number
of shares subject thereto; (d) the option price; (e) the option period; (f) the
terms and conditions of options granted under the Plan (including terms and
conditions relating to events of merger, consolidation, dissolution and
liquidation, change of control, vesting, forfeiture, restrictions, dividends and
interest, if any, on deferred amounts); (g) waive compliance by an optionee with
any obligation to be performed by him or her under an option; (h) waive any term
or condition of an option; (i) cancel an existing option in whole or in part
with the consent of an Optionee; (j) grant replacement options; (k) accelerate
the vesting or lapse of any restrictions of any option; and (l) adopt the form
of instruments evidencing options under the Plan and change such forms from time
to time. In making such determinations, the Board may take into account the
nature of the services rendered by the Optionees, their present and potential
contributions to the success of the Company and/or one or more of its
subsidiaries, and such other factors as the Board in its discretion shall deem
relevant. Subject to the provisions of the Plan, the Board shall also have
complete authority to interpret the Plan, to prescribe, amend, and rescind rules
and regulations relating to it, to determine the terms and provisions of the
respective option agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
Any interpretation by the Board of the terms and provisions of the Plan or any
Award thereunder and the administration thereof, and all action taken by the
Board, shall be final, binding and conclusive on all parties and any person
claiming under or through any party. No Director shall be liable for any action
or determination made in good faith. The Board may, to the full extent permitted
by law, delegate any or all of its responsibilities under the Plan to a
committee (the "Committee") appointed by the Board and consisting of two or more
members of the Board, each of whom shall be deemed a "disinterested person"
within the meaning of Rule 16b-3 (or any successor rule) of the Securities
Exchange Act of 1934 (the "Exchange Act").
5. Eligibility
An option may be granted to any person selected by the Board in its sole
discretion.
6. Time of Granting Options
The granting of an option shall take place at the time specified by the
Board. Only if expressly so provided by the Board shall the granting of an
option be regarded as taking place at the time when a written option agreement
shall have been duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement shall provide,
among other things, that it does not confer upon an Optionee any right to
continue in the employ of the Company and/or one or more of its subsidiaries or
to continue as a director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such subsidiary to
terminate the employment of the Optionee at any time if the Optionee is an
employee, to remove the Optionee as a director of the Company if the Optionee is
a director, or to terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such installments,
cumulative or noncumulative, as the Board may determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by written
notice of intent to exercise the option, specifying the number of shares of
stock with respect to which the option is then being exercised. The notice shall
be accompanied by payment in the form of cash or shares of Common Stock (the
"Tendered Shares") with a then current market value equal to the option price of
the shares to be purchased; provided, however, that such Tendered Shares shall
have been acquired by the Optionee more than six months prior to the date of
exercise, unless such requirement is waived in writing by the Company. Against
such payment the Company shall deliver or cause to be delivered to the Optionee
a certificate for the number of shares then being purchased, registered in the
name of the Optionee or other person exercising the option. If any law or
applicable regulation of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require the Company or the Optionee to
take any action in connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or certificates
for such shares shall be postponed until completion of the necessary action,
which shall be taken at the Company's expense.
9. Transferability
Except as may be authorized by the Board, in its sole discretion, no
Option may be transferred other than by will or the laws of descent and
distribution, and during a Optionee's lifetime an option requiring exercise may
be exercised only by him or her (or in the event of incapacity, the person or
persons properly appointed to act on his or her behalf). The Board may, in its
discretion, determine the extent to which options granted to an Optionee shall
be transferable, and such provisions permitting or acknowledging transfer shall
be set forth in the written agreement evidencing the option executed and
delivered by or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Board, in its sole discretion, may determine the manner in which
options shall vest, the rights of the Company to repurchase the shares issued
upon the exercise of any option and the manner in which such rights shall lapse,
and the terms upon which any option granted shall terminate. The Board shall
have the right to accelerate the date of exercise of any installment or to
accelerate the lapse of the Company's repurchase rights. All of such terms shall
be specified in a written option agreement executed and delivered by or on
behalf of the Company and the Optionee to whom such option shall be granted.
11. Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, or other distribution with respect to holders of Common Stock other than
normal cash dividends, the Board will make (i) appropriate adjustments to the
maximum number of shares that may be delivered under the Plan under Section 3
above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Options then outstanding or subsequently granted,
any exercise prices relating to Options and any other provisions of Awards
affected by such change.
(b) In the event of any recapitalization, merger or consolidation
involving the Company, any transaction in which the Company becomes a subsidiary
of another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company or any similar transaction, as determined by the
Board, the Board in its discretion may make appropriate adjustments to
outstanding Options to avoid distortion in the operation of the Plan.
12. Change in Control
12.1 Impact of Event
In the event of a "Change in Control" as defined in Section 12.2, the
following provisions shall apply, unless the agreement evidencing the Option
otherwise provides (by specific explicit reference to Section 12.2 below). If a
Change in Control occurs while any Options are outstanding, then, effective upon
the Change in Control, (i) each outstanding stock option granted under the Plan
that was not previously exercisable and vested shall become immediately
exercisable in full and will no longer be subject to a right of repurchase by
the Company, (ii) each outstanding Option subject to restrictions and to the
extent not fully vested, shall be deemed to be fully vested, free of
restrictions and no longer subject to a right of repurchase by the Company, and
(iii) performance of other conditions (other than conditions relating solely to
the passage of time, continued employment or affiliation) will continue to apply
unless otherwise provided in the agreement evidencing the Option or in any other
agreement between the Optionee and the Company or unless otherwise agreed by the
Board.
12.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
13. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in respect of shares
as to which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan.
14. Stock Reserved
The Company shall at all times during the term of the options reserve
and keep available such number of shares of the Common Stock as will be
sufficient to satisfy the requirements of this Plan and shall pay all other fees
and expenses necessarily incurred by the Company in connection therewith.
15. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the Company, will
be required to give a representation in form satisfactory to counsel for the
Company that he will not transfer, sell or otherwise dispose of the shares
received upon exercise of the option at any time purchased by him, upon exercise
of any portion of the option, in a manner which would violate the Securities Act
of 1933, as amended, and the regulations of the Securities and Exchange
Commission thereunder and the Company may, if required or at its discretion,
make a notation on any certificates issued upon exercise of options to the
effect that such certificate may not be transferred except after receipt by the
Company of an opinion of counsel satisfactory to it to the effect that such
transfer will not violate such Act and such regulations.
16. Tax Withholding
The Company shall have the right to deduct from payments of any kind
otherwise due to an Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan (the "withholding requirements"). The Board will have
the right to require that the Optionee or other appropriate person remit to the
Company an amount sufficient to satisfy the withholding requirements, or make
other arrangements satisfactory to the Board with regard to such requirements,
prior to the delivery of any Common Stock pursuant to exercise of an option. If
and to the extent that such withholding is required, the Board may permit the
Optionee or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirements.
17. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 17, the Board may at any
time or times amend the Plan or any outstanding Option for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Options. No amendment of the Plan or any agreement evidencing
Options under the Plan may adversely affect the rights of any participant under
any Option previously granted without such participant's consent.
THERMO ECOTEK CORPORATION
THERMO TRILOGY CORPORATION NONQUALIFIED STOCK OPTION PLAN
As amended and restated effective as of June 9, 1999
1. Purpose
This Nonqualified Stock Option Plan (the "Plan") is intended to
encourage ownership of Common Stock (the "Common Stock"), of Thermo Trilogy
Corporation ("Subsidiary"), a subsidiary of Thermo Ecotek Corporation (the
"Company"), by persons selected by the Board of Directors (or a committee
thereof) in its sole discretion, including directors, executive officers, key
employees and consultants of the Company and its subsidiaries, and to provide
additional incentive for them to promote the success of the business of the
Company and Subsidiary. The Plan is intended to be a nonstatutory stock option
plan.
2. Effective Date of the Plan
The Plan shall become effective when adopted by the Board of Directors
of the Company.
3. Stock Subject to Plan
Subject to adjustment as provided in Section 11, the total number of
shares of Common Stock reserved and available for issuance under the Plan shall
be 75,000 shares. Shares to be issued upon the exercise of options granted under
the Plan shall be shares of Subsidiary beneficially owned by the Company. If any
option expires or terminates for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be available for
options thereafter to be granted.
4. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). Subject to the provisions of the Plan, the Board shall have
complete authority, in its discretion, to make the following determinations with
respect to each option to be granted by the Company: (a) the person to receive
the option (the "Optionee"); (b) the time of granting the option; (c) the number
of shares subject thereto; (d) the option price; (e) the option period; and (f)
the terms and conditions of options granted under the Plan (including terms and
conditions relating to events of merger, consolidation, dissolution and
liquidation, change of control, vesting, forfeiture, restrictions, dividends and
interest, if any, on deferred amounts); (g) waive compliance by an optionee with
any obligation to be performed by him or her under an option; (h) waive any term
or condition of an option; (i) cancel an existing option in whole or in part
with the consent of an Optionee; (j) grant replacement options; (k) accelerate
the vesting or lapse of any restrictions of any option; and (l) adopt the form
of instruments evidencing options under the Plan and change such forms from time
to time.. In making such determinations, the Board may take into account the
nature of the services rendered by the Optionees, their present and potential
contributions to the success of the Company and/or one or more of its
subsidiaries, and such other factors as the Board in its discretion shall deem
relevant. Subject to the provisions of the Plan, the Board shall also have
complete authority to interpret the Plan, to prescribe, amend, and rescind rules
and regulations relating to it, to determine the terms and provisions of the
respective option agreements (which need not be identical), and to make all
other determinations necessary or advisable for the administration of the Plan.
Any interpretation by the Board of the terms and provisions of the Plan or any
Award thereunder and the administration thereof, and all action taken by the
Board, shall be final, binding and conclusive on all parties and any person
claiming under or through any party. No Director shall be liable for any action
or determination made in good faith. The Board may, to the full extent permitted
by law, delegate any or all of its responsibilities under the Plan to a
committee (the "Committee") appointed by the Board and consisting of two or more
members of the Board, each of whom shall be deemed a "disinterested person"
within the meaning of Rule 16b-3 (or any successor rule) of the Securities
Exchange Act of 1934 (the "Exchange Act").
5. Eligibility
An option may be granted to any person selected by the Board in its sole
discretion.
6. Time of Granting Options
The granting of an option shall take place at the time specified by the
Board. Only if expressly so provided by the Board shall the granting of an
option be regarded as taking place at the time when a written option agreement
shall have been duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement shall provide,
among other things, that it does not confer upon an Optionee any right to
continue in the employ of the Company and/or one or more of its subsidiaries or
to continue as a director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such subsidiary to
terminate the employment of the Optionee at any time if the Optionee is an
employee, to remove the Optionee as a director of the Company if the Optionee is
a director, or to terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
An option may become exercisable immediately or in such installments,
cumulative or noncumulative, as the Board may determine.
8. Exercise of Option
An option may be exercised in accordance with its terms by written
notice of intent to exercise the option, specifying the number of shares of
stock with respect to which the option is then being exercised. The notice shall
be accompanied by payment in the form of cash or shares of Subsidiary Common
Stock (the "Tendered Shares") with a then current market value equal to the
option price of the shares to be purchased; provided, however, that such
Tendered Shares shall have been acquired by the Optionee more than six months
prior to the date of exercise, unless such requirement is waived in writing by
the Company. Against such payment the Company shall deliver or cause to be
delivered to the Optionee a certificate for the number of shares then being
purchased, registered in the name of the Optionee or other person exercising the
option. If any law or applicable regulation of the Securities and Exchange
Commission or other body having jurisdiction in the premises shall require the
Company, Subsidiary or the Optionee to take any action in connection with shares
being purchased upon exercise of the option, exercise of the option and delivery
of the certificate or certificates for such shares shall be postponed until
completion of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
Except as may be authorized by the Board, in its sole discretion, no
Option may be transferred other than by will or the laws of descent and
distribution, and during a Optionee's lifetime an option requiring exercise may
be exercised only by him or her (or in the event of incapacity, the person or
persons properly appointed to act on his or her behalf). The Board may, in its
discretion, determine the extent to which options granted to an Optionee shall
be transferable, and such provisions permitting or acknowledging transfer shall
be set forth in the written agreement evidencing the option executed and
delivered by or on behalf of the Company and the Optionee.
10. Vesting, Restrictions and Termination of Options
The Board, in its sole discretion, may determine the manner in which
options shall vest, the rights of the Company to repurchase the shares issued
upon the exercise of any option and the manner in which such rights shall lapse,
and the terms upon which any option granted shall terminate. The Board shall
have the right to accelerate the date of exercise of any installment or to
accelerate the lapse of the Company's repurchase rights. All of such terms shall
be specified in a written option agreement executed and delivered by or on
behalf of the Company and the Optionee to whom such option shall be granted.
11. Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, or other distribution with respect to holders of Common Stock other than
normal cash dividends, the Board will make (i) appropriate adjustments to the
maximum number of shares that may be delivered under the Plan under Section 3
above, and (ii) appropriate adjustments to the number and kind of shares of
stock or securities subject to Options then outstanding or subsequently granted,
any exercise prices relating to Options and any other provisions of Awards
affected by such change.
(b) In the event of any recapitalization, merger or consolidation
involving the Company, any transaction in which the Company becomes a subsidiary
of another entity, any sale or other disposition of all or a substantial portion
of the assets of the Company, any transaction which results in Thermo Electron
Corporation ceasing to be the beneficial owner of a majority of the
then-outstanding shares of Common Stock, or any similar transaction, as
determined by the Board, the Board in its discretion may make appropriate
adjustments to outstanding Options to avoid distortion in the operation of the
Plan.
12. Change in Control
12.1 Impact of Event
In the event of a "Change in Control" as defined in Section 12.2, the
following provisions shall apply, unless the agreement evidencing the Option
otherwise provides (by specific explicit reference to Section 12.2 below). If a
Change in Control occurs while any Options are outstanding, then, effective upon
the Change in Control, (i) each outstanding stock option granted under the Plan
that was not previously exercisable and vested shall become immediately
exercisable in full and will no longer be subject to a right of repurchase by
the Company, (ii) each outstanding Option subject to restrictions and to the
extent not fully vested, shall be deemed to be fully vested, free of
restrictions and no longer subject to a right of repurchase by the Company, and
(iii) performance of other conditions (other than conditions relating solely to
the passage of time, continued employment or affiliation) will continue to apply
unless otherwise provided in the agreement evidencing the Option or in any other
agreement between the Optioneet and the Company or unless otherwise agreed by
the Board.
12.2 Definition of "Change in Control"
"Change in Control" means an event or occurrence set forth in any one or
more of subsections (a) through (d) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but is
specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership of any capital stock of Thermo Electron Corporation
("Thermo Electron") if, after such acquisition, such Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 40% or
more of either (i) the then-outstanding shares of common stock of Thermo
Electron (the "Outstanding TMO Common Stock") or (ii) the combined voting power
of the then-outstanding securities of Thermo Electron entitled to vote generally
in the election of directors (the "Outstanding TMO Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition by
Thermo Electron, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by Thermo Electron or any corporation controlled
by Thermo Electron, or (iii) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i) and (ii) of subsection (c) of this
definition; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board of Directors of Thermo Electron (the "Thermo
Board") (or, if applicable, the Board of Directors of a successor corporation to
Thermo Electron), where the term "Continuing Director" means at any date a
member of the Thermo Board (i) who was a member of the Thermo Board as of July
1, 1999 or (ii) who was nominated or elected subsequent to such date by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Thermo Board was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election; provided, however, that there shall
be excluded from this clause (ii) any individual whose initial assumption of
office occurred as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents, by or on behalf of a person other than the
Thermo Board; or
(c) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or a sale
or other disposition of all or substantially all of the assets of Thermo
Electron in one or a series of transactions (a "Business Combination"), unless,
immediately following such Business Combination, each of the following two
conditions is satisfied: (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding TMO Common Stock and
Outstanding TMO Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns Thermo Electron or substantially all of Thermo
Electron's assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the "Acquiring
Corporation") in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding TMO Common
Stock and Outstanding TMO Voting Securities, respectively; and (ii) no Person
(excluding the Acquiring Corporation or any employee benefit plan (or related
trust) maintained or sponsored by Thermo Electron or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 40% or more of the then
outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors; or
(d) approval by the stockholders of Thermo Electron of a complete
liquidation or dissolution of Thermo Electron.
13. Limitation of Rights in Option Stock
The Optionees shall have no rights as stockholders in respect of shares
as to which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan.
14. Stock Reserved
The Company shall at all times during the term of the options reserve
and keep available such number of shares of the Common Stock as will be
sufficient to satisfy the requirements of this Plan and shall pay all other fees
and expenses necessarily incurred by the Company in connection therewith.
15. Securities Laws Restrictions
Each Optionee exercising an option, at the request of the Company, will
be required to give a representation in form satisfactory to counsel for the
Company that he will not transfer, sell or otherwise dispose of the shares
received upon exercise of the option at any time purchased by him, upon exercise
of any portion of the option, in a manner which would violate the Securities Act
of 1933, as amended, and the regulations of the Securities and Exchange
Commission thereunder and the Company may, if required or at its discretion,
make a notation on any certificates issued upon exercise of options to the
effect that such certificate may not be transferred except after receipt by the
Company of an opinion of counsel satisfactory to it to the effect that such
transfer will not violate such Act and such regulations.
16. Tax Withholding
The Company shall have the right to deduct from payments of any kind
otherwise due to an Optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan (the "withholding requirements"). The Board will have
the right to require that the Optionee or other appropriate person remit to the
Company an amount sufficient to satisfy the withholding requirements, or make
other arrangements satisfactory to the Board with regard to such requirements,
prior to the delivery of any Common Stock pursuant to exercise of an option. If
and to the extent that such withholding is required, the Board may permit the
Optionee or such other person to elect at such time and in such manner as the
Board provides to have the Company hold back from the shares to be delivered, or
to deliver to the Company, Common Stock having a value calculated to satisfy the
withholding requirements.
17. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 17, the Board may at any
time or times amend the Plan or any outstanding Option for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Options. No amendment of the Plan or any agreement evidencing
Options under the Plan may adversely affect the rights of any participant under
any Option previously granted without such participant's consent.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMO
ECOTEK CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 3,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> JUL-03-1999
<CASH> 13,483
<SECURITIES> 0
<RECEIVABLES> 58,755
<ALLOWANCES> 0
<INVENTORY> 25,230
<CURRENT-ASSETS> 131,119
<PP&E> 260,707
<DEPRECIATION> 64,470
<TOTAL-ASSETS> 386,468
<CURRENT-LIABILITIES> 98,484
<BONDS> 58,444
0
0
<COMMON> 3,787
<OTHER-SE> 175,703
<TOTAL-LIABILITY-AND-EQUITY> 386,468
<SALES> 144,658
<TOTAL-REVENUES> 144,658
<CGS> 106,888
<TOTAL-COSTS> 106,888
<OTHER-EXPENSES> 126,383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,314
<INCOME-PRETAX> (113,225)
<INCOME-TAX> (41,696)
<INCOME-CONTINUING> (70,294)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,294)
<EPS-BASIC> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
