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 April 1, 2000
[ ] 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, 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 April 28, 2000
Common Stock, $.10 par value 35,985,668
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
April 1, October 2,
<S> <C> <C>
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Assets:
Cash and cash equivalents $ 8,541 $ 20,002
Advance to affiliate 29,883 17,766
Restricted funds 27,102 28,024
Accounts receivable and unbilled revenues, less allowances of $49 and $12 33,558 57,980
Inventories 5,820 7,292
Deferred tax asset 41,123 37,384
Other current assets (Note 6) 83,604 2,573
Net assets of discontinued operations (Note 4) 26,082 39,280
-------- --------
255,713 210,301
-------- --------
Property, Plant, and Equipment, at Cost (Note 6) 180,748 251,470
Less: Accumulated depreciation and amortization 65,701 63,263
-------- --------
115,047 188,207
-------- --------
Long-term Available-for-sale Investments, at Quoted Market Value 13,816 6,111
(amortized cost of $6,379) -------- --------
Restricted Funds 27,193 30,205
-------- --------
Other Assets 7,499 7,990
-------- --------
$419,268 $442,814
======== ========
2
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 1, October 2,
(In thousands except share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Liabilities:
Short-term obligations and current portion of long-term obligations $ 5,809 $ 37,752
Accounts payable 23,294 30,252
Accrued restructuring costs (Note 5) 7,589 7,473
Lease obligations payable 1,116 1,005
Other accrued expenses 12,485 15,758
Due to parent company 1,775 373
-------- --------
52,068 92,613
-------- --------
Long-term Obligations:
Tax-exempt obligations 31,575 14,500
Subordinated convertible debentures (includes $10,061 and 46,770 46,770
$2,826 due to parent company) -------- --------
78,345 61,270
-------- --------
Deferred Income Taxes 61,922 53,096
-------- --------
Other Deferred Items 37,122 40,419
-------- --------
Minority Interest 4,111 4,435
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000 shares authorized; 3,787 3,787
37,874,355 and 37,869,248 shares issued
Capital in excess of par value 175,828 175,895
Retained earnings 29,789 39,382
Treasury stock at cost, 1,891,401 and 1,901,346 shares (27,928) (28,084)
Deferred compensation (36) (46)
Accumulated other comprehensive items (Note 2) 4,260 47
-------- --------
185,700 190,981
-------- --------
$419,268 $442,814
======== ========
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
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues $25,949 $41,036
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $681 and $1,324 to related parties) 20,311 33,077
Selling, general, and administrative expenses (includes $258 3,616 4,223
and $379 to related parties)
Restructuring costs and other unusual income, net (Note 5) (312) -
------- -------
23,615 37,300
------- -------
Operating Income 2,334 3,736
Interest Income 687 827
Interest Expense (includes $169 and $7 to parent company) (801) (1,504)
------- -------
Income from Continuing Operations Before Income Taxes and 2,220 3,059
Minority Interest
Provision for Income Taxes 818 845
Minority Interest Expense 320 343
------- -------
Income from Continuing Operations 1,082 1,871
Loss from Discontinued Operations (net of income tax benefit and - (117)
minority interest of $135; Note 4) ------- -------
Net Income $ 1,082 $ 1,754
======= =======
Basic and Diluted Earnings per Share from Continuing Operations (Note 3) $ .03 $ .05
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .03 $ .05
======= =======
Weighted Average Shares (Note 3):
Basic 35,976 35,944
======= =======
Diluted 36,167 36,194
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Operations
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues $ 64,559 $81,411
-------- -------
Costs and Operating Expenses:
Cost of revenues (includes $1,514 and $2,725 to related parties) 50,412 63,576
Selling, general, and administrative expenses (includes $603 and 7,433 8,387
$739 to related parties)
Restructuring costs and other unusual income, net (Note 5) (312) -
-------- -------
57,533 71,963
-------- -------
Operating Income 7,026 9,448
Interest Income 1,544 1,590
Interest Expense (includes $286 and $7 to parent company) (2,174) (3,395)
-------- -------
Income from Continuing Operations Before Income Taxes and Minority 6,396 7,643
Interest
Provision for Income Taxes 2,536 2,348
Minority Interest Expense 358 357
-------- -------
Income from Continuing Operations 3,502 4,938
Loss from Discontinued Operations (net of income tax benefit and (495) (674)
minority interest of $605 and $718; Note 4)
Provision for Loss on Disposal of Discontinued Operations (net of (12,600) -
income tax benefit of $2,700; Note 4) -------- -------
Net Income (Loss) $ (9,593) $ 4,264
======== =======
Basic and Diluted Earnings per Share from Continuing Operations (Note 3) $ .10 $ .14
======== =======
Basic and Diluted Earnings (Loss) per Share (Note 3) $ (.27) $ .12
======= =======
Weighted Average Shares (Note 3):
Basic 35,974 35,935
======== =======
Diluted 36,167 36,220
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Operating Activities:
Net income (loss) $ (9,593) $ 4,264
Adjustments to reconcile net income (loss) to income from continuing
operations:
Loss from discontinued operations 495 674
Provision for loss on disposal of discontinued operations 12,600 -
-------- --------
Income from continuing operations 3,502 4,938
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities of continuing operations:
Depreciation and amortization 6,474 11,949
Increase in deferred income taxes 2,459 3,354
Gain on sale of property, plant, and equipment (Note 5) (2,000) -
Noncash restructuring costs (Note 5) 592 -
Minority interest expense 358 357
Provision for losses on accounts receivable 37 -
Other noncash items 10 -
Changes in current accounts, excluding the effect of discontinued
operations:
Restricted funds 922 12,714
Accounts receivable and unbilled revenues 29,345 (144)
Inventories 1,399 (1,534)
Other current assets (2,056) (1,784)
Accounts payable (6,778) 4,239
Other current liabilities (1,216) (3,391)
-------- --------
Net cash provided by continuing operations 33,048 30,698
Net cash used in discontinued operations (2,269) (2,401)
-------- --------
Net cash provided by operating activities 30,779 28,297
-------- --------
Investing Activities:
Advances to affiliate, net (12,117) -
Purchases of property, plant, and equipment (18,535) (13,052)
Proceeds from sale of property, plant, and equipment (Note 5) 2,000 -
Use (funding) of long-term restricted funds 3,012 (4,692)
Increase (decrease) in other deferred items (3,099) 4,867
Increase in other assets 720 (2,685)
-------- --------
Net cash used in continuing operations (28,019) (15,562)
Net cash provided by (used in) discontinued operations 276 (1,545)
-------- --------
Net cash used in investing activities $(27,743) $(17,107)
-------- --------
6
<PAGE>
THERMO ECOTEK CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Financing Activities:
Repayment of long-term obligations $(14,000) $(14,200)
Payments under capital lease obligations (12,181) (6,959)
Net proceeds from issuance of long-term obligations 11,875 -
Increase (decrease) in short-term borrowings (1,399) 5,992
Net proceeds from issuance of Company and subsidiary common stock 88 88
Distribution to minority partner (840) (753)
Contribution from minority partner 124 754
-------- --------
Net cash used in continuing operations (16,333) (15,078)
Net cash used in discontinued operations - -
Net cash used in financing activities (16,333) (15,078)
-------- --------
Exchange Rate Effect on Cash of Continuing Operations (87) (215)
Exchange Rate Effect on Cash of Discontinued Operations 23 49
-------- --------
Decrease in Cash and Cash Equivalents (13,361) (4,054)
Cash and Cash Equivalents at Beginning of Period 21,919 41,371
-------- --------
8,558 37,317
Cash and Cash Equivalents of Discontinued Operations at End of Period (17) (760)
-------- --------
Cash and Cash Equivalents at End of Period $ 8,541 $ 36,557
======== ========
Noncash Activities:
Conversion of subordinated convertible debentures $ - $ 630
======== ========
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 April 1, 2000, the results of
operations for the three- and six-month periods ended April 1, 2000, and April
3, 1999, and the cash flows for the six-month periods ended April 1, 2000, and
April 3, 1999. Interim results are not necessarily indicative of results for a
full year.
Historical financial results have been restated to reflect a decision to
sell the Company's majority-owned Thermo Trilogy Corporation subsidiary, which
has been presented as discontinued operations in the accompanying financial
statements (Note 4). The consolidated financial statements and notes are
presented as permitted by Form 10-Q and do not contain certain information
included in the annual financial statements and notes of the Company. The
consolidated financial statements and notes included herein should be read in
conjunction with the financial statements and notes included in the Company's
Annual Report on Form 10-K for the fiscal year ended October 2, 1999, as
amended, filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income 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 comprehensive income of $4.4
million and $1.7 million in the second quarter of fiscal 2000 and 1999,
respectively. The Company had a comprehensive loss of $5.4 million in the first
six months of fiscal 2000 and comprehensive income of $2.9 million in the first
six months of fiscal 1999.
</TABLE>
3. Earnings (Loss) per Share
Basic and diluted earnings (loss) per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 3, April 1, April 3,
<S> <C> <C> <C> <C>
(In thousands except per share amounts) 2000 1999 2000 1999
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Basic
Income from Continuing Operations $ 1,082 $ 1,871 $ 3,502 $ 4,938
Loss from Discontinued Operations - (117) (495) (674)
Provision for Loss on Disposal of Discontinued Operations - - (12,600) -
-------- --------- -------- ---------
Net Income (Loss) $ 1,082 $ 1,754 $ (9,593) $ 4,264
-------- --------- -------- ---------
Weighted Average Shares 35,976 35,944 35,974 35,935
-------- --------- -------- ---------
Basic Earnings (Loss) per Share:
Continuing operations $ .03 $ .05 $ .10 $ .14
Discontinued operations - - (.36) (.02)
-------- --------- -------- ---------
$ .03 $ .05 $ (.27) $ .12
======== ========= ======== =========
8
<PAGE>
3. Earnings (Loss) per Share (continued)
Three Months Ended Six Months Ended
April 1, April 3, April 1, April 3,
(In thousands except per share amounts) 2000 1999 2000 1999
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Diluted
Income from Continuing Operations $ 1,082 $ 1,871 $ 3,502 $ 4,938
Loss from Discontinued Operations - (117) (495) (674)
Provision for Loss on Disposal of Discontinued Operations - - (12,600) -
-------- --------- -------- ---------
Net Income (Loss) $ 1,082 $ 1,754 $ (9,593) $ 4,264
-------- --------- -------- ---------
Weighted Average Shares 35,976 35,944 35,974 35,935
Effect of:
Convertible obligations 134 134 134 137
Stock options 57 116 59 148
-------- --------- -------- ---------
Weighted Average Shares, as Adjusted 36,167 36,194 36,167 36,220
-------- --------- -------- ---------
Diluted Earnings (Loss) per Share:
Continuing operations $ .03 $ .05 $ .10 $ .14
Discontinued operations - - (.36) (.02)
-------- --------- -------- ---------
$ .03 $ .05 $ (.27) $ .12
======== ========= ======== =========
Options to purchase 354,000 and 447,000 shares of common stock for the
second quarter of fiscal 2000 and 1999, respectively, and 572,000 and 442,000
shares of common stock for the first six months of fiscal 2000 and 1999,
respectively, were not included in the computation of diluted earnings (loss)
per share because the options' exercise prices were greater than the average
market price for the common stock and their effect would have been antidilutive.
In addition, the computation of diluted earnings (loss) per share for all
periods presented excludes the effect of assuming the conversion of the
Company's $45.0 million principal amount of 4.875% subordinated convertible
debentures, convertible at $16.50 per share, because the effect would be
antidilutive.
4. Proposed Reorganization and Discontinued Operations
Proposed Reorganization
In January 2000, Thermo Electron Corporation updated its proposed
reorganization involving certain of Thermo Electron's subsidiaries, including
the Company. Under this plan, Thermo Electron will acquire the minority interest
in the Company by exchanging 0.431 shares of Thermo Electron common stock for
each share of Company common stock. As a result, the Company would become a
wholly owned subsidiary of Thermo Electron. This transaction is expected to be
completed by the end of the fourth quarter of fiscal 2000. The proposed
transaction will require Securities and Exchange Commission clearance of
necessary filings. Thermo Electron has determined that the Company is no longer
a core business and expects to retain it after it acquires the minority interest
while it continues to evaluate how to best exit the business and create maximum
value for its shareholders.
Discontinued Operations
On January 31, 2000, Thermo Electron announced a plan under which the
Company will divest its Thermo Trilogy subsidiary, which represents its
Biopesticides segment. In accordance with the provisions of Accounting
Principles Board Opinion (APB) No. 30 concerning reporting the effect of
disposal of a segment of a business, the Company classified the results of
operations of the Biopesticides segment as discontinued in the accompanying
9
<PAGE>
4. Proposed Reorganization and Discontinued Operations (continued)
statement of operations. In addition, the net assets of the Biopesticides
segment were classified as net assets of discontinued operations in the
accompanying balance sheet, and primarily consisted of inventories, accounts
receivable, and machinery and equipment, net of certain current liabilities,
principally accounts payable.
</TABLE>
Summary operating results of the Biopesticides segment were as follows:
<TABLE>
<CAPTION>
Three Six Months Ended
Months Ended
April 3, April 1, April 3,
<S> <C> <C> <C>
(In thousands except per share amounts) 1999 2000 (a) 1999
- ---------------------------------------------------------- ----------- ----------- ----------- -----------
Revenues $6,294 $4,510 $10,980
Costs and Expenses 6,546 5,610 12,372
------ ------ -------
Loss from Discontinued Operations Before (252) (1,100) (1,392)
Income Tax Benefit and Minority Interest
Income Tax Benefit 95 461 530
Minority Interest Income 40 144 188
------ ------ -------
Loss from Discontinued Operations $ (117) $ (495) $ (674)
====== ====== =======
(a) Includes results for the first quarter of fiscal 2000, the period prior to
the decision to sell Thermo Trilogy.
In the first quarter of fiscal 2000, the Company provided $12.6 million,
net of a tax benefit of $2.7 million, for the estimated loss on disposal of
discontinued operations. During the second quarter of fiscal 2000, Thermo
Trilogy had revenues and a net loss of $6.2 million and $0.6 million,
respectively. The Company expects to complete the sale of its Biopesticides
segment by the end of the first quarter of fiscal 2001.
5. Restructuring and Related Costs
During fiscal 1999, the Company recorded cash restructuring costs,
primarily for land reclamation costs at its subbituminous coal-beneficiation
facility, a loss on the cancellation of a fuel contract at its Delano,
California, facilities, and severance for 3 employees, all of whom were
terminated during the first quarter of fiscal 2000.
During the second quarter of fiscal 2000, the Company recorded a charge of
$1.0 million for the termination of 45 employees in connection with cost
reduction measures, primarily at its corporate office and Delano facilities, 8
of whom were terminated prior to April 1, 2000. The actions are expected to
result in annual cost savings of $1.5 million. In addition, the Company recorded
employee retention costs of $0.1 million during the second quarter of fiscal
2000. These costs are being recorded ratably over the period through which the
employees must work to earn the payment. During the second quarter of fiscal
2000, the Company also recorded noncash charges of $0.3 million for the write
off of capitalized development costs and $0.3 million to write off cost in
excess of net assets of acquired companies associated with its gas marketing
business that was closed.
During the second quarter of fiscal 2000, the Company sold its Gorbell
plant in Athens, Maine for $2.0 million in cash. The Company terminated the
power-sales agreement for this facility in fiscal 1999. The facility had a
nominal book value and the proceeds were recorded as a gain which is included in
restructuring costs and other unusual income, net in the accompanying statement
of operations.
</TABLE>
10
<PAGE>
5. Restructuring and Related Costs (continued)
A summary of the changes in accrued restructuring costs is as follows:
Fiscal 1999 Plan
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Land Fuel Contract Severance Other
Reclamation Cancellation
(In thousands) Costs Total
- -------------------------------- -------------- -------------- -------------- -------------- -------------
Balance at October 2, 1999 $4,394 $2,444 $ 189 $ 446 $7,473
Usage - (612) (189) - (801)
------ ------ ------ ------ ------
Balance at April 1, 2000 $4,394 $1,832 $ - $ 446 $6,672
====== ====== ====== ====== ======
</TABLE>
Fiscal 2000 Plan
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(In thousands) Severance Employee
Retention Total
- -------------------------------- ----------------------------- -------------- -------------- -------------
Reserves Established $ 957 $ 139 $1,096
Usage (179) - (179)
------ ------ ------
Balance at April 1, 2000 $ 778 $ 139 $ 917
====== ====== ======
The Company generally expects accrued restructuring costs to be paid
primarily during the remainder of fiscal 2000, however, in May 2000, the Company
completed the sale of its coal-beneficiation facility and 2.0 million shares of
KFx Inc. common stock in exchange for the buyer's assumption of the reclamation
liability totaling $4.4 million along with other obligations under certain
contracts and permits related to the facility.
6. Termination of Power-sales Agreement
During the first quarter of fiscal 2000, an agreement became effective
under which the Company terminated the power-sales agreement for its Delano
plants. The agreement calls for the Company to receive a series of fixed
payments in lieu of operating under the terms of the power-sales agreement. At
the time the Company entered into the agreement in fiscal 1999, the plants were
written down to the present value of the future cash flows. During fiscal 2000,
the Company reclassified this present value, exclusive of the plant's residual
value, from property, plant, and equipment to other current assets and other
assets. During May 2000, the Company sold a portion of these payments on a
nonrecourse basis to a bank group and received proceeds of approximately $53
million. This amount is included in other current assets in the accompanying
balance sheet at April 1, 2000.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 2, 1999, as amended, filed with the Securities and
Exchange Commission.
11
<PAGE>
Overview
The Company's continuing operations operate independent electric
power-generation facilities through joint ventures, limited partnerships, or
wholly owned subsidiaries (the Operating companies), as well as a natural gas
business (Star Natural Gas).
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 and become a wholly owned
subsidiary of Thermo Electron. In addition, Thermo Electron has announced that
the Company will divest its Thermo Trilogy Corporation subsidiary, which
represents its Biopesticides segment (Note 4).
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 Company 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 Company has historically operated at marginal profitability
during the second fiscal quarter due to the rate structure under these
agreements. The Company's profitability is also dependent on the amount of
development expenses that it incurs.
The Company has expanded its energy operations into international markets
and has begun business- development efforts in the Czech Republic and Germany.
In January 1998, the Company, through a joint venture established by a wholly
owned subsidiary, 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 an expansion of the facility to
50-megawatt capacity in March 1999. In September 1999, the Company purchased,
also through a joint venture, a 58-megawatt electricity-generating facility in
Premnitz, Germany. 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 the equity
component of these investments is expected to increase due to the financing
requirements of lenders in foreign markets.
The Company's Star Natural Gas subsidiary pursues opportunities in the
natural gas gathering, processing, storage, and marketing business. In May 1999,
Star Natural Gas purchased one gas gathering system and two gas processing
plants (the gas facilities). In January 2000, Star Natural Gas decided to close
its gas marketing operation after a determination that it is no longer a core
business (Note 5).
Through May 1999, the Company 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 that was established to develop, construct,
and operate a subbituminous coal-beneficiation facility near Gillette, Wyoming
(the K-Fuel Facility). In May 1999, the Company made a decision to hold the
K-Fuel Facility for sale or disposal. In May 2000, the Company sold its interest
in the K-Fuel Facility and 2.0 million shares of KFx common stock in exchange
for the assumption by the buyer of a land reclamation obligation totaling $4.4
million to the state of Wyoming relating to the K-Fuel Facility along with other
obligations under certain contracts and permits relating to the K-Fuel Facility.
Since its inception, the Company has derived a substantial majority of its
revenue from the development, construction, and operation of biomass-fueled
electricity-generating 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 fiscal 2000 due to the
expiration or termination of power-sales agreements at the biomass facilities.
In anticipation of this decline, the Company is exploring other options for its
biomass facilities, including disposal. The Company intends to focus its efforts
on the repowering and expansion of its Mountainview, California, facility and
the development of the Lakeworth electricity-generating facility in Florida. Any
failure or inability of the Company to develop these projects would have a
material adverse effect on its business, financial condition, and results of
operations.
12
<PAGE>
Results of Operations
Second Quarter Fiscal 2000 Compared With Second Quarter Fiscal 1999
Revenues were $25.9 million in the second quarter of fiscal 2000, compared
with $41.0 million in the second quarter of fiscal 1999. Revenues decreased by
an aggregate $14.1 million due to the termination of the power-sales agreements
at the Company's Gorbell and Delano facilities during the fourth quarter of
fiscal 1999 and the first quarter of fiscal 2000, respectively. Revenues
decreased by an aggregate $8.8 million at the Company's Mendota and Woodland
facilities. The utility that purchases power from the Mendota and Woodland
facilities commenced paying for power at avoided cost rates during the fourth
quarter of fiscal 1999, as discussed below. These decreases were offset by the
inclusion of $4.2 million in revenues from the Company's electricity-generating
facility in Premnitz, Germany, which was acquired in September 1999, and a $2.5
million increase in revenues from the Company's Star Natural Gas subsidiary,
primarily due to the acquisition of the gas facilities in May 1999. Revenues
also increased $1.3 million at the Company's Czech Republic operations due to a
plant expansion that was completed in March 1999.
The gross profit margin increased to 22% in the second quarter of fiscal
2000 from 19% in the second quarter of fiscal 1999. The increase was primarily
due to the exclusion of $4.5 million of operating costs from the K-Fuel
Facility, which was closed during the third quarter of fiscal 1999, offset in
part by the effect of the transition to avoided cost rates at the Mendota and
Woodland facilities.
The power-sales agreements for the Company's Mendota, Woodland, and Delano
facilities in California are so-called standard offer #4 (SO#4) contracts, which
required Pacific Gas & Electric (PG&E), in the case of Mendota and Woodland, and
Southern California Electric (SCE), in the case of the Delano facilities, to
purchase the power output of the projects at fixed rates through specified
periods. Thereafter, the utility 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). Avoided cost
rates are currently substantially lower than the rates the Company has received
under the fixed-rate portions of its contracts and are expected to remain so for
the foreseeable future. PG&E stopped paying for power purchased from the Mendota
and Woodland facilities at fixed cost rates effective in July and August 1999,
respectively. Based on current avoided cost rates, the Company expects that the
Woodland facility will operate at breakeven or nominal operating losses,
primarily as a result of nonrecourse lease obligations that have been partially
funded from the Woodland facility's past cash flows. Absent sufficient
reductions in fuel prices and other operating costs, 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 facility
or forfeit its interest in the facility. Revenues from the Woodland facility
were $28.9 million in fiscal 1999 and its results were approximately breakeven.
The Mendota facility's fiscal 2000 results have been affected by the
transition to avoided cost rates. The Mendota facility's revenues and operating
loss were $5.1 million and $2.3 million, respectively, in the first six months
of fiscal 2000, compared with revenues and operating income of $13.5 million and
$2.8 million, respectively, in the first six months of fiscal 1999. The
power-sales agreement with SCE for the Delano facilities called for fixed
contract rates through September 2000. In anticipation of a decline in rates at
the Delano facilities, the Company reached an agreement in May 1999 to terminate
its power-sales agreement, effective December 31, 1999, for the Delano
facilities. During the second quarter of fiscal 2000, the Company decided it was
uneconomical to operate the Delano facilities following the termination of the
power-sales agreement and suspended operations in March 2000. The Delano
facilities' aggregate revenues and operating income before restructuring charges
were approximately $63.6 million and $33.4 million, respectively, in fiscal
1999. If Thermo Ecotek had been paid avoided cost rates at each of its
California facilities, revenues would have been lower by approximately $67
million in fiscal 1999. In response to these declines in revenues and operating
income, the Company may continue to explore other options for its biomass
facilities, including disposal.
13
<PAGE>
Second Quarter Fiscal 2000 Compared With Second Quarter Fiscal 1999 (continued)
Selling, general, and administrative expenses decreased to $3.6 million in
the second quarter of fiscal 2000 from $4.2 million in the second quarter of
fiscal 1999, primarily due to a reduction in costs following the closure of the
K-Fuel Facility and the Gorbell and Delano plants. Selling, general, and
administrative expenses as a percentage of revenues increased to 14% in fiscal
2000 from 10% in fiscal 1999, primarily due to decreased revenues.
The Company recorded restructuring and related income, net, of $0.3
million in the second quarter of fiscal 2000 (Note 5). Restructuring costs of
$1.7 million include $1.0 million for severance, $0.3 million to write off
capitalized development costs and $0.3 million to write off cost in excess of
net assets of acquired companies associated with the Company's gas marketing
business that was closed, and $0.1 million of accrued retention costs. Unusual
income consists of a $2.0 million gain on the sale of the Company's Gorbell
facility in Athens, Maine.
Interest income decreased to $0.7 million in the second quarter of fiscal
2000 from $0.8 million in the second quarter of fiscal 1999, primarily due to
lower average invested cash balances.
Interest expense decreased to $0.8 million in the second quarter of fiscal
2000 from $1.5 million in the second quarter of fiscal 1999, primarily due to
lower outstanding debt related to the Company's Delano and Mendota facilities.
The effective tax rate was 37% and 28% in the second quarter of fiscal
2000 and 1999, respectively. The effective tax rate in fiscal 2000 exceeded the
statutory federal income tax rate primarily due to the effect of state income
taxes. The effective tax rate in fiscal 1999 was below the statutory federal
income tax rate primarily due to tax credits earned from the production of
K-Fuel prior to the closure of the K-Fuel Facility.
Minority interest expense represents the allocation of income from plant
operations to a minority partner in an Operating company.
In accordance with the provisions of Accounting Principles Board Opinion
No. 30 concerning reporting the effect of disposal of a segment of a business,
the results of the Company's Biopesticides segment have been classified as
discontinued operations in the accompanying statement of operations (Note 4).
The loss from discontinued operations was $0.1 million in the second quarter of
fiscal 1999. The Company is not currently aware of any known trends, events, or
uncertainties involving discontinued operations that it expects will materially
affect its results of operations, financial condition, or liquidity through the
date such operations are disposed.
First Six Months Fiscal 2000 Compared With First Six Months Fiscal 1999
Revenues were $64.6 million in the first six months of fiscal 2000,
compared with $81.4 million in the first six months of fiscal 1999. Revenues
decreased by an aggregate $17.0 million at the Company's Mendota and Woodland
facilities. The utility that purchases power from the Mendota and Woodland
facilities commenced paying for power at avoided cost rates during the fourth
quarter of fiscal 1999, as discussed in the results of operations for the second
quarter. Revenues decreased by an aggregate $15.9 million due to the termination
of the power-sales agreements at the Company's Gorbell and Delano facilities
during the fourth quarter of fiscal 1999 and the first quarter of fiscal 2000,
respectively. These decreases were offset by the inclusion of $9.4 million in
revenues from the Company's electricity-generating facility in Premnitz,
Germany, which was acquired in September 1999, and a $3.9 million increase in
revenues from the Company's Star Natural Gas subsidiary, primarily due to the
acquisition of the gas facilities in May 1999. Revenues also increased $2.4
million at the Company's Czech Republic operations due to a plant expansion that
was completed in March 1999.
14
<PAGE>
First Six Months Fiscal 2000 Compared With First Six Months Fiscal 1999 (continued)
The gross profit margin was 22% in the first six months of fiscal 2000 and
1999. An increase in the gross profit margin due to the exclusion of $7.5
million of operating costs from the K-Fuel Facility, which was closed during the
third quarter of fiscal 1999, was offset by the effect of the transition to
avoided cost rates at the Mendota and Woodland facilities.
Selling, general, and administrative expenses decreased to $7.4 million in
the first six months of fiscal 2000 from $8.4 million in the first six months of
fiscal 1999, primarily due to the reasons discussed in the results of operations
for the second quarter. Selling, general, and administrative expenses as a
percentage of revenues increased to 12% in fiscal 2000 from 10% in fiscal 1999,
primarily due to decreased revenues.
Interest income decreased to $1.5 million in the first six months of
fiscal 2000 from $1.6 million in the first six months of fiscal 1999, primarily
due to lower average invested cash balances.
Interest expense decreased to $2.2 million in the first six months of
fiscal 2000 from $3.4 million in the first six months of fiscal 1999, primarily
due to lower outstanding debt related to the Company's Delano and Mendota
facilities.
The effective tax rate was 40% and 31% in the first six months of fiscal
2000 and 1999, respectively. The effective tax rate in fiscal 2000 exceeded the
statutory federal income tax rate primarily due to the effect of state income
taxes. The effective tax rate in fiscal 1999 was below the statutory federal
income tax rate primarily due to tax credits earned from the production of
K-Fuel prior to the closure of the K-Fuel Facility.
Minority interest expense represents the allocation of income from plant
operations to a minority partner in an Operating company.
The loss from discontinued operations was $0.7 million in the first six
months of fiscal 1999 and $0.5 million in fiscal 2000 prior to the decision to
divest the Biopesticides segment. In the first six months of fiscal 2000, the
Company provided $12.6 million, net of tax, for the estimated loss on disposal
of the Biopesticides segment (Note 4).
Liquidity and Capital Resources
Working capital was $203.6 million at April 1, 2000, compared with $117.7
million at October 2, 1999. The Company had cash, cash equivalents, and current
restricted funds of $35.6 million at April 1, 2000, compared with $48.0 million
at October 2, 1999. In addition, the Company had $29.9 million invested in an
advance to affiliate at April 1, 2000, compared with $17.8 million at October 2,
1999. Current restricted funds, which consists of funds held in trust pursuant
to certain lease and debt agreements, totaled $27.1 million and $28.0 million at
April 1, 2000, and October 2, 1999, respectively. In addition, cash and cash
equivalents in the accompanying balance sheet includes $4.6 million and $12.5
million of cash at April 1, 2000, and October 2, 1999, respectively, which is
restricted by the terms of certain lease and financing 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.
During the first six months of fiscal 2000, the Company's continuing operations
provided cash and restricted funds from operating activities of $32.1 million.
Cash of $29.3 million was provided by a decrease in accounts receivable,
primarily due to a reduction in second quarter fiscal 2000 revenues compared
with the fourth quarter of fiscal 1999 as a result of the termination of the
power-sales agreements of the Gorbell and Delano facilities. This source of cash
was offset in part by $6.8 million of cash used to fund a seasonal decrease in
accounts payable at Star Natural Gas subsidiary. The Company expects to pay
accrued restructuring costs of $3.2 million primarily during the remainder of
fiscal 2000 (Note 5).
15
<PAGE>
Liquidity and Capital Resources (continued)
Excluding advance to affiliate activity, the investing activities of the
Company's continuing operations used $15.9 million of cash during the first six
months of fiscal 2000. The Company expended $18.5 million for capital
expenditures, including $14.7 million related to the repowering of the Company's
Mountainview, California, facility. The Company sold its interest in its Gorbell
electricity-generating facility for $2.0 million. The Company expects to make
capital expenditures of approximately $15 million during the remainder of fiscal
2000, primarily related to the Mountainview facility.
During the first six months of fiscal 2000, the Company's financing
activities used cash of $16.3 million, including $26.2 million for the repayment
of long-term obligations and payments under capital lease obligations related to
three of its California facilities. Subsequent to repaying a portion of the
outstanding balance of the Company's tax-exempt obligations, the Company reached
an agreement to extend the original maturity of these obligations to 2018. As
part of this agreement, the bank group participating in the financing returned
$11.9 million of previously paid obligations to the Company. Accordingly, as of
April 1, 2000, the Company has outstanding $31.6 million of tax-exempt
obligations.
During May 2000, the Company entered into an agreement with a bank group
to factor a portion of the payments to be received from the termination of the
power-sales agreement at the Delano facilities. The Company received
approximately $53 million under this arrangement. The Company has begun
repowering and expansion efforts at an existing project in Southern California
and development efforts for an electricity-generating facility in Florida. The
Company estimates the total cost of the Southern California and Florida projects
to be $600 million and $135 million, respectively. The Company has committed to
spend approximately $140 million for the purchase of certain equipment for the
Southern California facility. The Company expects to obtain project financing to
fund this purchase although it does not currently have any firm available credit
facilities. In addition, together with a 10% joint venture partner, the Company
is developing a gas storage facility in Colorado at an expected cost of $40
million. The Company expects it will require significant financing for these
development and expansion projects, although the Company does not currently have
any firm available credit facilities. 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. The Company has no agreements
with third parties that assure funds will be available on acceptable terms, or
at all.
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 1999.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On February 1, 2000, the Company filed a Current Report on Form 8-K dated
January 31, 2000, with respect to a proposed reorganization plan at Thermo
Electron Corporation, as well as a decision to hold for sale the Company's
Thermo Trilogy Corporation subsidiary.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 12th day of May 2000.
THERMO ECOTEK CORPORATION
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- -----------------------------------------------------------------------------
10.1 Description of severance agreement for Brian D. Holt (filed as Exhibit 10.60 to Thermo
Electron Corporation's Annual Report on Form 10-K for the year ended January 1, 2000
[File No. 1-8002] and incorporated herein by reference).
10.2 Description of transaction bonus arrangement between Brian D.
Holt and Thermo Electron Corporation.
10.3 Retention Agreement dated February 11, 2000, between Parimal S.
Patel and Thermo Electron Corporation.
10.4 Retention Agreement dated February 11, 2000, between John T.
Miller and Thermo Electron Corporation.
10.5 Retention Agreement dated February 11, 2000, between Floyd M.
Gent and Thermo Electron Corporation.
10.6 Retention Agreement dated February 11, 2000, between Randall W.
Miselis and Thermo Electron Corporation.
27.1 Financial Data Schedule for the quarter ended April 1, 2000.
27.2 Restated Financial Data Schedule for the quarter ended April 3,
1999.
</TABLE>
In April 2000, Mr. Brian D. Holt entered into a transaction bonus
agreement with Thermo Electron Corporation providing that he will be entitled to
receive a transaction bonus equal to 0.11% of the aggregate proceeds up to
$410,000,000 from the sale of the energy and environment business units for
which Mr. Holt is responsible, excluding Thermo Ecotek Corporation. If the
aggregate sale prices exceed $410,000,000, Mr. Holt would be entitled to receive
an additional bonus equal to 0.5% of the amount in excess of $410,000,000.
February 11, 2000
Mr. Parimal S. Patel
10 Gould Road
Bedford, MA 01730
Dear Parimal:
As you know, Thermo Electron Corporation recently announced a corporate wide
reorganization. As part of that reorganization, Thermo Electron Corporation
announced that Thermo Ecotek Corporation will not be considered to be a core
business. Therefore, the next twelve to eighteen months will be a period of
challenge and transition for Thermo Ecotek ("TCK"). We recognize and appreciate
your past contributions to TCK and would like you to continue your employment
with us.
Transition Bonus Program
In order to provide an incentive for you to remain with TCK during this critical
period of time we are granting you a Transition Bonus in the amount of $179,500.
Thirty percent (30%) of the Transition Bonus will be paid on February 15, 2001
and seventy percent (70%) of the Transition Bonus will be paid you on February
15, 2002. Payment of the Transition Bonus is also subject to the other terms of
this Agreement.
Terms of this Agreement
If you voluntarily terminate your employment with TCK or you are terminated for
"Cause" (as defined below) before February 15, 2001 or February 15, 2002, as
applicable, you will not receive the Transition Bonus. However, you may keep any
portion of the Transition Bonus that has previously been paid. If your
employment is terminated prior to February 15, 2002 without "Cause" or if there
is a "Change in Control" of TCK (as defined below) you will be paid your full
Transition Bonus. If you voluntarily obtain employment with Thermo Electron
Corporation or one of its subsidiaries, you will be paid your Transition Bonus
prorated on a daily basis to the date of your employment with Thermo Electron or
its subsidiaries.
TCK will continue to employ you as an employee-at-will and you will receive your
regular compensation and benefits. However, TCK retains the right to terminate
your employment at any time with or without Cause, but if termination occurs
without Cause or due to a Change in Control, you will receive payment of the
Transition Bonus, as outlined above. You retain the right to voluntarily
terminate your services with TCK at any time.
<PAGE>
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization,
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK.
Severance Payments
Attached is a separate letter, which outlines the Enhanced Severance Program,
which you are eligible for, in the event that you are terminated without Cause
or if there is Change in Control of TCK on or prior to February 15, 2002. The
Enhanced Severance Program will terminate as of February 15, 2002, and if you
are terminated on or after February 16, 2002 you will receive the standard
severance package in accordance with existing TCK policies.
By signing this agreement you agree to keep the documents and its terms
confidential. After you have had the opportunity to read and understand this
letter, please sign and date the acknowledgement line. Your signature
acknowledges that this communication supersedes any prior agreements or
understandings whether oral or written between you and TCK pertaining to any
transition or incentive payments being offered to you in connection with any
termination of employment with TCK.
On behalf of Thermo Ecotek Corporation, I thank you for your continued
assistance and support. I look forward to working with you as we meet the
challenges presented during this period of change and opportunity.
<PAGE>
If you have any questions, regarding anything contained within this
communication, please do not hesitate to contact either John Krupa, Director of
Human Resources or myself.
Please make a photocopy for yourself and return the original to me no later than
Wednesday, February 16, 2000.
Sincerely,
/s/ John T. Miller
- -------------------------
John T. Miller
President Power Resources
Thermo Ecotek Corporation
Acknowledged and Agreed
/s/ Parimal S. Patel
- ------------------------- -------------------------
Parimal S. Patel Date
<PAGE>
February 11, 2000
Mr. Parimal S. Patel
10 Gould Road
Bedford, MA 01730
Dear Parimal:
This letter confirms our discussion and outlines the Enhanced Severance Program
which shall be offered to you in the event that your employment is terminated
without "Cause" (as defined below) or as a result of "Change in Control" of (as
defined below) Thermo Ecotek Corporation ("TCK"). The availability of the
Enhanced Severance Program, upon an employee's separation, is conditioned upon
and will require the execution of a release of claims (a sample of which is
attached to this letter). This Enhanced Severance Program together with the
release document will be presented and reaffirmed, if necessary, at that time.
If you do not execute the release of claims, you will only receive the standard
severance package in accordance with existing TCK policies. This Enhanced
Severance Program will remain available to eligible employees through February
15, 2002.
If you accept employment with another entity which is a subsidiary or affiliate
of Thermo Electron Corporation or TCK the Enhanced Severance Program shall
become null and void.
In order to maintain eligibility for any of the below outlined elements, the TCK
requires that you remain a regular active employee unless your employment is
terminated without Cause or as a result of a Change in Control.
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK. If as a result of such Change in Control you are terminated or you
are not offered a position with comparable salary, compensation, bonus and
benefits, or your principal work location is moved by more than 50 miles, you
will be eligible for the Enhanced Severance Program. However, if as a result of
a Change of Control you are offered a position with comparable salary,
compensation, bonus and benefits and your principal work location is not moved
by more than 50 miles, you will not be eligible for the Enhanced Severance
Program or the standard TCK severance benefits.
<PAGE>
Notice of Termination
If your employment is terminated without Cause or as a result of a Change in
Control, you will be notified at least 13 weeks prior to termination or receive
13 weeks pay-in-lieu-of notice, at TCK's option.
Salary Continuation
Beginning with the day following your termination date, you shall be placed on
salary continuation through the regular payroll system, at your regular biweekly
salary for a period of 78 weeks. TCK may, for its convenience, choose to provide
this benefit in the form of a lump sum rather than salary continuation.
Vacation
Accrued but unused vacation will be paid to you with the first check covering
the salary continuation period. Vacation payments will be calculated using your
regular biweekly base compensation. You will not accrue additional vacation
credit beyond your termination date.
Medical, Dental, and Life Insurance
Through the end of your salary continuation period, you may continue to
participate in any medical, dental and/or life insurance programs in which you
are currently enrolled, provided that you pay the regular employee portion of
these benefits where applicable. Once medical and dental benefits cease, you
will be notified of your eligibility to continue medical and dental coverage
under the provisions of COBRA.
If TCK chooses to provide the salary continuation benefit through a lump sum
payment, you will not be able to participate in the regular medical, dental
and/or life insurance programs in which you are currently enrolled. However, you
will be immediately eligible under the provisions of COBRA or the conversion
provisions of these programs. Should this occur, TCK will issue to you a lump
sum payment equal to 6 months of applicable premiums.
STD and LTD
Both short term and long term disability coverage will cease as of your last day
of active employment.
<PAGE>
Employee Assistance Program
This program will continue to be available to you and your dependents through
the end of your salary continuation period.
Employee Stock Purchase Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
401K Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
Outplacement Program
The company has arranged, at no cost to you, outplacement consulting services
through Keystone Associates. Keystone will coordinate the delivery of these
services at their offices in Burlington, Massachusetts. You shall be eligible to
begin receiving these services immediately upon termination, or you may schedule
the start of this program anytime within 90 days after the date of your
termination. The major elements of this comprehensive program include:
Counseling
Resume development
Research skills
Self assessment and job targeting
Effective correspondence
Networking and other search techniques
Interview training
<PAGE>
Administrative Support
Office space and private telephone line with voice mail
Research assistance
Reference library
The outplacement services described above will be available for a period of four
months.
Sincerely,
/s/ John T. Miller
- ---------------------------
John T. Miller
Vice President
Thermo Ecotek Corporation
<PAGE>
Sample Release of Claims
In exchange for the additional severance program offered to me by Thermo Ecotek
Corporation in an Agreement dated February 11, 2000. I hereby release Thermo
Ecotek Corporation and Thermo Electron Corporation, their subsidiaries and
affiliates (collectively the "Corporation") and its officers, directors,
employees and legal predecessors and successors from all claims, liabilities and
causes of action, whether known or unknown, which I have, may have, or claim to
have against the Corporation based upon or arising out of my employment with the
Corporation. I hereby agree not to file any lawsuit to assert such claims, which
include, but are not limited to any claims for breach of contract, wrongful
termination, or age, sex, race, disability or other discrimination under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or
any other federal, state, or local laws prohibiting such discrimination. As used
herein, the Corporation includes any and all parents, divisions, or subsidiaries
of the Corporation.
I understand that I have been advised to seek the advice of an attorney, if I so
choose, prior to signing this release and that I am giving up any legal claims I
have against the Corporation by signing this release. I further understand that
I may have 21 days to consider this agreement, that I may revoke it at any time
during the 7 days after I sign it, and that it shall not become effective until
that 7 day revocation period has passed. I fully understand my right to take 21
days to consider signing this release and, after having sufficient time to
consider my options, I hereby waive my right to take the full 21-day period. I
acknowledge that I am signing this release knowingly, willingly and voluntarily
in exchange for the additional severance payment described in this letter.
I acknowledge that I have carefully read and fully understand this Release of
All Claims and I have not relied on any statement, written or oral, which is not
set out in this document.
/s/ John T. Miller /s/ Parimal S. Patel
- ------------------------- ------------------------
John T. Miller Parimal S. Patel
Vice President
Thermo Ecotek Corporation
February 11, 2000
Mr. John T. Miller
15 Oak St.
Wellesley, MA 02480
Dear John:
As you know, Thermo Electron Corporation recently announced a corporate wide
reorganization. As part of that reorganization, Thermo Electron Corporation
announced that Thermo Ecotek Corporation will not be considered to be a core
business. Therefore, the next twelve to eighteen months will be a period of
challenge and transition for Thermo Ecotek ("TCK"). We recognize and appreciate
your past contributions to TCK and would like you to continue your employment
with us.
Transition Bonus Program
In order to provide an incentive for you to remain with TCK during this critical
period of time we are granting you a Transition Bonus in the amount of $171,600.
Thirty percent (30%) of the Transition Bonus will be paid on February 15, 2001
and seventy percent (70%) of the Transition Bonus will be paid you on February
15, 2002. Payment of the Transition Bonus is also subject to the other terms of
this Agreement.
Terms of this Agreement
If you voluntarily terminate your employment with TCK or you are terminated for
"Cause" (as defined below) before February 15, 2001 or February 15, 2002, as
applicable, you will not receive the Transition Bonus. However, you may keep any
portion of the Transition Bonus that has previously been paid. If your
employment is terminated prior to February 15, 2002 without "Cause" or if there
is a "Change in Control" of TCK (as defined below) you will be paid your full
Transition Bonus. If you voluntarily obtain employment with Thermo Electron
Corporation or one of its subsidiaries, you will be paid your Transition Bonus
prorated on a daily basis to the date of your employment with Thermo Electron or
its subsidiaries.
TCK will continue to employ you as an employee-at-will and you will receive your
regular compensation and benefits. However, TCK retains the right to terminate
your employment at any time with or without Cause, but if termination occurs
without Cause or due to a Change in Control, you will receive payment of the
Transition Bonus, as outlined above. You retain the right to voluntarily
terminate your services with TCK at any time.
<PAGE>
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization,
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK.
Severance Payments
Attached is a separate letter, which outlines the Enhanced Severance Program,
which you are eligible for, in the event that you are terminated without Cause
or if there is Change in Control of TCK on or prior to February 15, 2002. The
Enhanced Severance Program will terminate as of February 15, 2002, and if you
are terminated on or after February 16, 2002 you will receive the standard
severance package in accordance with existing TCK policies.
By signing this agreement you agree to keep the documents and its terms
confidential. After you have had the opportunity to read and understand this
letter, please sign and date the acknowledgement line. Your signature
acknowledges that this communication supersedes any prior agreements or
understandings whether oral or written between you and TCK pertaining to any
transition or incentive payments being offered to you in connection with any
termination of employment with TCK.
On behalf of Thermo Ecotek Corporation, I thank you for your continued
assistance and support. I look forward to working with you as we meet the
challenges presented during this period of change and opportunity.
<PAGE>
If you have any questions, regarding anything contained within this
communication, please do not hesitate to contact either John Krupa, Director of
Human Resources or myself.
Please make a photocopy for yourself and return the original to me no later than
Wednesday, February 16, 2000.
Sincerely,
/s/ Brian Holt
- --------------------------
Brian Holt
President and CEO
Thermo Ecotek Corporation
Acknowledged and Agreed
/s/ John T. Miller
- -------------------------- --------------------------
John T. Miller Date
<PAGE>
February 11, 2000
Mr. John T. Miller
15 Oak St.
Wellesley, MA 02480
Dear John:
This letter confirms our discussion and outlines the Enhanced Severance Program
which shall be offered to you in the event that your employment is terminated
without "Cause" (as defined below) or as a result of "Change in Control" of (as
defined below) Thermo Ecotek Corporation ("TCK"). The availability of the
Enhanced Severance Program, upon an employee's separation, is conditioned upon
and will require the execution of a release of claims (a sample of which is
attached to this letter). This Enhanced Severance Program together with the
release document will be presented and reaffirmed, if necessary, at that time.
If you do not execute the release of claims, you will only receive the standard
severance package in accordance with existing TCK policies. This Enhanced
Severance Program will remain available to eligible employees through February
15, 2002.
If you accept employment with another entity which is a subsidiary or affiliate
of Thermo Electron Corporation or TCK the Enhanced Severance Program shall
become null and void.
In order to maintain eligibility for any of the below outlined elements, the TCK
requires that you remain a regular active employee unless your employment is
terminated without Cause or as a result of a Change in Control.
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK. If as a result of such Change in Control you are terminated or you
are not offered a position with comparable salary, compensation, bonus and
benefits, or your principal work location is moved by more than 50 miles, you
will be eligible for the Enhanced Severance Program. However, if as a result of
a Change of Control you are offered a position with comparable salary,
compensation, bonus and benefits and your principal work location is not moved
by more than 50 miles, you will not be eligible for the Enhanced Severance
Program or the standard TCK severance benefits.
<PAGE>
Notice of Termination
If your employment is terminated without Cause or as a result of a Change in
Control, you will be notified at least 13 weeks prior to termination or receive
13 weeks pay-in-lieu-of notice, at TCK's option.
Salary Continuation
Beginning with the day following your termination date, you shall be placed on
salary continuation through the regular payroll system, at your regular biweekly
salary for a period of 52 weeks. TCK may, for its convenience, choose to provide
this benefit in the form of a lump sum rather than salary continuation.
Vacation
Accrued but unused vacation will be paid to you with the first check covering
the salary continuation period. Vacation payments will be calculated using your
regular biweekly base compensation. You will not accrue additional vacation
credit beyond your termination date.
Medical, Dental, and Life Insurance
Through the end of your salary continuation period, you may continue to
participate in any medical, dental and/or life insurance programs in which you
are currently enrolled, provided that you pay the regular employee portion of
these benefits where applicable. Once medical and dental benefits cease, you
will be notified of your eligibility to continue medical and dental coverage
under the provisions of COBRA.
If TCK chooses to provide the salary continuation benefit through a lump sum
payment, you will not be able to participate in the regular medical, dental
and/or life insurance programs in which you are currently enrolled. However, you
will be immediately eligible under the provisions of COBRA or the conversion
provisions of these programs. Should this occur, TCK will issue to you a lump
sum payment equal to 6 months of applicable premiums.
<PAGE>
STD and LTD
Both short term and long term disability coverage will cease as of your last day
of active employment.
Employee Assistance Program
This program will continue to be available to you and your dependents through
the end of your salary continuation period.
Employee Stock Purchase Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
401K Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
Outplacement Program
The company has arranged, at no cost to you, outplacement consulting services
through Keystone Associates. Keystone will coordinate the delivery of these
services at their offices in Burlington, Massachusetts. You shall be eligible to
begin receiving these services immediately upon termination, or you may schedule
the start of this program anytime within 90 days after the date of your
termination. The major elements of this comprehensive program include:
Counseling
Resume development
Research skills
Self assessment and job targeting
Effective correspondence
Networking and other search techniques
Interview training
<PAGE>
Administrative Support
Office space and private telephone line with voice mail
Research assistance
Reference library
The outplacement services described above will be available for a period of four
months.
Sincerely,
/s/ Brian Holt
- -------------------------
Brian Holt
President and CEO
Thermo Ecotek Corporation
<PAGE>
Sample Release of Claims
In exchange for the additional severance program offered to me by Thermo Ecotek
Corporation in an Agreement dated February 11, 2000. I hereby release Thermo
Ecotek Corporation and Thermo Electron Corporation, their subsidiaries and
affiliates (collectively the "Corporation") and its officers, directors,
employees and legal predecessors and successors from all claims, liabilities and
causes of action, whether known or unknown, which I have, may have, or claim to
have against the Corporation based upon or arising out of my employment with the
Corporation. I hereby agree not to file any lawsuit to assert such claims, which
include, but are not limited to any claims for breach of contract, wrongful
termination, or age, sex, race, disability or other discrimination under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or
any other federal, state, or local laws prohibiting such discrimination. As used
herein, the Corporation includes any and all parents, divisions, or subsidiaries
of the Corporation.
I understand that I have been advised to seek the advice of an attorney, if I so
choose, prior to signing this release and that I am giving up any legal claims I
have against the Corporation by signing this release. I further understand that
I may have 21 days to consider this agreement, that I may revoke it at any time
during the 7 days after I sign it, and that it shall not become effective until
that 7 day revocation period has passed. I fully understand my right to take 21
days to consider signing this release and, after having sufficient time to
consider my options, I hereby waive my right to take the full 21-day period. I
acknowledge that I am signing this release knowingly, willingly and voluntarily
in exchange for the additional severance payment described in this letter.
I acknowledge that I have carefully read and fully understand this Release of
All Claims and I have not relied on any statement, written or oral, which is not
set out in this document.
/s/ Brian Holt /s/ John T. Miller
- ------------------------- -------------------------
Brian Holt John T. Miller
President and CEO
Thermo Ecotek Corporation
February 11, 2000
Mr. Floyd M. Gent
90 Dover Rd.
Wellesley, MA 02482
Dear Floyd:
As you know, Thermo Electron Corporation recently announced a corporate wide
reorganization. As part of that reorganization, Thermo Electron Corporation
announced that Thermo Ecotek Corporation will not be considered to be a core
business. Therefore, the next twelve to eighteen months will be a period of
challenge and transition for Thermo Ecotek ("TCK"). We recognize and appreciate
your past contributions to TCK and would like you to continue your employment
with us.
Transition Bonus Program
In order to provide an incentive for you to remain with TCK during this critical
period of time we are granting you a Transition Bonus in the amount of $156,700.
Thirty percent (30%) of the Transition Bonus will be paid on February 15, 2001
and seventy percent (70%) of the Transition Bonus will be paid you on February
15, 2002. Payment of the Transition Bonus is also subject to the other terms of
this Agreement.
Terms of this Agreement
If you voluntarily terminate your employment with TCK or you are terminated for
"Cause" (as defined below) before February 15, 2001 or February 15, 2002, as
applicable, you will not receive the Transition Bonus. However, you may keep any
portion of the Transition Bonus that has previously been paid. If your
employment is terminated prior to February 15, 2002 without "Cause" or if there
is a "Change in Control" of TCK (as defined below) you will be paid your full
Transition Bonus. If you voluntarily obtain employment with Thermo Electron
Corporation or one of its subsidiaries, you will be paid your Transition Bonus
prorated on a daily basis to the date of your employment with Thermo Electron or
its subsidiaries.
TCK will continue to employ you as an employee-at-will and you will receive your
regular compensation and benefits. However, TCK retains the right to terminate
your employment at any time with or without Cause, but if termination occurs
without Cause or due to a Change in Control, you will receive payment of the
Transition Bonus, as outlined above. You retain the right to voluntarily
terminate your services with TCK at any time.
<PAGE>
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization,
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK.
Severance Payments
Attached is a separate letter, which outlines the Enhanced Severance Program,
which you are eligible for, in the event that you are terminated without Cause
or if there is Change in Control of TCK on or prior to February 15, 2002. The
Enhanced Severance Program will terminate as of February 15, 2002, and if you
are terminated on or after February 16, 2002 you will receive the standard
severance package in accordance with existing TCK policies.
By signing this agreement you agree to keep the documents and its terms
confidential. After you have had the opportunity to read and understand this
letter, please sign and date the acknowledgement line. Your signature
acknowledges that this communication supersedes any prior agreements or
understandings whether oral or written between you and TCK pertaining to any
transition or incentive payments being offered to you in connection with any
termination of employment with TCK.
On behalf of Thermo Ecotek Corporation, I thank you for your continued
assistance and support. I look forward to working with you as we meet the
challenges presented during this period of change and opportunity.
<PAGE>
If you have any questions, regarding anything contained within this
communication, please do not hesitate to contact either John Krupa, Director of
Human Resources or myself.
Please make a photocopy for yourself and return the original to me no later than
Wednesday, February 16, 2000.
Sincerely,
/s/ John T. Miller
- -------------------------
John T. Miller
President Power Resources
Thermo Ecotek Corporation
Acknowledged and Agreed
/s/ Floyd M. Gent
- -------------------------- --------------------------------
Floyd M. Gent Date
<PAGE>
February 11, 2000
Mr. Floyd M. Gent
90 Dover Rd.
Wellesley, MA 02482
Dear Floyd:
This letter confirms our discussion and outlines the Enhanced Severance Program
which shall be offered to you in the event that your employment is terminated
without "Cause" (as defined below) or as a result of "Change in Control" of (as
defined below) Thermo Ecotek Corporation ("TCK"). The availability of the
Enhanced Severance Program, upon an employee's separation, is conditioned upon
and will require the execution of a release of claims (a sample of which is
attached to this letter). This Enhanced Severance Program together with the
release document will be presented and reaffirmed, if necessary, at that time.
If you do not execute the release of claims, you will only receive the standard
severance package in accordance with existing TCK policies. This Enhanced
Severance Program will remain available to eligible employees through February
15, 2002.
If you accept employment with another entity which is a subsidiary or affiliate
of Thermo Electron Corporation or TCK the Enhanced Severance Program shall
become null and void.
In order to maintain eligibility for any of the below outlined elements, the TCK
requires that you remain a regular active employee unless your employment is
terminated without Cause or as a result of a Change in Control.
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK. If as a result of such Change in Control you are terminated or you
are not offered a position with comparable salary, compensation, bonus and
benefits, or your principal work location is moved by more than 50 miles, you
will be eligible for the Enhanced Severance Program. However, if as a result of
a Change of Control you are offered a position with comparable salary,
compensation, bonus and benefits and your principal work location is not moved
by more than 50 miles, you will not be eligible for the Enhanced Severance
Program or the standard TCK severance benefits.
<PAGE>
Notice of Termination
If your employment is terminated without Cause or as a result of a Change in
Control, you will be notified at least 13 weeks prior to termination or receive
13 weeks pay-in-lieu-of notice, at TCK's option.
Salary Continuation
Beginning with the day following your termination date, you shall be placed on
salary continuation through the regular payroll system, at your regular biweekly
salary for a period of 52 weeks. TCK may, for its convenience, choose to provide
this benefit in the form of a lump sum rather than salary continuation.
Vacation
Accrued but unused vacation will be paid to you with the first check covering
the salary continuation period. Vacation payments will be calculated using your
regular biweekly base compensation. You will not accrue additional vacation
credit beyond your termination date.
Medical, Dental, and Life Insurance
Through the end of your salary continuation period, you may continue to
participate in any medical, dental and/or life insurance programs in which you
are currently enrolled, provided that you pay the regular employee portion of
these benefits where applicable. Once medical and dental benefits cease, you
will be notified of your eligibility to continue medical and dental coverage
under the provisions of COBRA.
If TCK chooses to provide the salary continuation benefit through a lump sum
payment, you will not be able to participate in the regular medical, dental
and/or life insurance programs in which you are currently enrolled. However, you
will be immediately eligible under the provisions of COBRA or the conversion
provisions of these programs. Should this occur, TCK will issue to you a lump
sum payment equal to 6 months of applicable premiums.
STD and LTD
Both short term and long term disability coverage will cease as of your last day
of active employment.
<PAGE>
Employee Assistance Program
This program will continue to be available to you and your dependents through
the end of your salary continuation period.
Employee Stock Purchase Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
401K Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
Outplacement Program
The company has arranged, at no cost to you, outplacement consulting services
through Keystone Associates. Keystone will coordinate the delivery of these
services at their offices in Burlington, Massachusetts. You shall be eligible to
begin receiving these services immediately upon termination, or you may schedule
the start of this program anytime within 90 days after the date of your
termination. The major elements of this comprehensive program include:
Counseling
Resume development
Research skills
Self assessment and job targeting
Effective correspondence
Networking and other search techniques
Interview training
<PAGE>
Administrative Support
Office space and private telephone line with voice mail
Research assistance
Reference library
The outplacement services described above will be available for a period of four
months.
Sincerely,
/s/ John T. Miller
- -------------------------
John T. Miller
Vice President
Thermo Ecotek Corporation
<PAGE>
Sample Release of Claims
In exchange for the additional severance program offered to me by Thermo Ecotek
Corporation in an Agreement dated February 11, 2000. I hereby release Thermo
Ecotek Corporation and Thermo Electron Corporation, their subsidiaries and
affiliates (collectively the "Corporation") and its officers, directors,
employees and legal predecessors and successors from all claims, liabilities and
causes of action, whether known or unknown, which I have, may have, or claim to
have against the Corporation based upon or arising out of my employment with the
Corporation. I hereby agree not to file any lawsuit to assert such claims, which
include, but are not limited to any claims for breach of contract, wrongful
termination, or age, sex, race, disability or other discrimination under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or
any other federal, state, or local laws prohibiting such discrimination. As used
herein, the Corporation includes any and all parents, divisions, or subsidiaries
of the Corporation.
I understand that I have been advised to seek the advice of an attorney, if I so
choose, prior to signing this release and that I am giving up any legal claims I
have against the Corporation by signing this release. I further understand that
I may have 21 days to consider this agreement, that I may revoke it at any time
during the 7 days after I sign it, and that it shall not become effective until
that 7 day revocation period has passed. I fully understand my right to take 21
days to consider signing this release and, after having sufficient time to
consider my options, I hereby waive my right to take the full 21-day period. I
acknowledge that I am signing this release knowingly, willingly and voluntarily
in exchange for the additional severance payment described in this letter.
I acknowledge that I have carefully read and fully understand this Release of
All Claims and I have not relied on any statement, written or oral, which is not
set out in this document.
/s/ John T. Miller /s/ Floyd M. Gent
- ------------------------- -------------------------
John T. Miller Floyd M. Gent
Vice President
Thermo Ecotek Corporation
February 11, 2000
Mr. Randall W. Miselis
20 Easement Road
Tewksbury, MA 01876
Dear Randall:
As you know, Thermo Electron Corporation recently announced a corporate wide
reorganization. As part of that reorganization, Thermo Electron Corporation
announced that Thermo Ecotek Corporation will not be considered to be a core
business. Therefore, the next twelve to eighteen months will be a period of
challenge and transition for Thermo Ecotek ("TCK"). We recognize and appreciate
your past contributions to TCK and would like you to continue your employment
with us.
Transition Bonus Program
In order to provide an incentive for you to remain with TCK during this critical
period of time we are granting you a Transition Bonus in the amount of $87,150.
Thirty percent (30%) of the Transition Bonus will be paid on February 15, 2001
and seventy percent (70%) of the Transition Bonus will be paid you on February
15, 2002. Payment of the Transition Bonus is also subject to the other terms of
this Agreement.
Terms of this Agreement
If you voluntarily terminate your employment with TCK or you are terminated for
"Cause" (as defined below) before February 15, 2001 or February 15, 2002, as
applicable, you will not receive the Transition Bonus. However, you may keep any
portion of the Transition Bonus that has previously been paid. If your
employment is terminated prior to February 15, 2002 without "Cause" or if there
is a "Change in Control" of TCK (as defined below) you will be paid your full
Transition Bonus. If you voluntarily obtain employment with Thermo Electron
Corporation or one of its subsidiaries, you will be paid your Transition Bonus
prorated on a daily basis to the date of your employment with Thermo Electron or
its subsidiaries.
TCK will continue to employ you as an employee-at-will and you will receive your
regular compensation and benefits. However, TCK retains the right to terminate
your employment at any time with or without Cause, but if termination occurs
without Cause or due to a Change in Control, you will receive payment of the
Transition Bonus, as outlined above. You retain the right to voluntarily
terminate your services with TCK at any time.
<PAGE>
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization,
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK.
Severance Payments
Attached is a separate letter, which outlines the Enhanced Severance Program,
which you are eligible for, in the event that you are terminated without Cause
or if there is Change in Control of TCK on or prior to February 15, 2002. The
Enhanced Severance Program will terminate as of February 15, 2002, and if you
are terminated on or after February 16, 2002 you will receive the standard
severance package in accordance with existing TCK policies.
By signing this agreement you agree to keep the documents and its terms
confidential. After you have had the opportunity to read and understand this
letter, please sign and date the acknowledgement line. Your signature
acknowledges that this communication supersedes any prior agreements or
understandings whether oral or written between you and TCK pertaining to any
transition or incentive payments being offered to you in connection with any
termination of employment with TCK.
On behalf of Thermo Ecotek Corporation, I thank you for your continued
assistance and support. I look forward to working with you as we meet the
challenges presented during this period of change and opportunity.
<PAGE>
If you have any questions, regarding anything contained within this
communication, please do not hesitate to contact either John Krupa, Director of
Human Resources or myself.
Please make a photocopy for yourself and return the original to me no later than
Wednesday, February 16, 2000.
Sincerely,
/s/ John T. Miller
- --------------------------------
John T. Miller
President Power Resources
Thermo Ecotek Corporation
Acknowledged and Agreed
/s/ Randall W. Miselis
- -------------------------------- --------------------------------
Randall W. Miselis Date
<PAGE>
February 11, 2000
Mr. Randall W. Miselis
20 Easement Road
Tewksbury, MA 01876
Dear Randall:
This letter confirms our discussion and outlines the Enhanced Severance Program
which shall be offered to you in the event that your employment is terminated
without "Cause" (as defined below) or as a result of "Change in Control" of (as
defined below) Thermo Ecotek Corporation ("TCK"). The availability of the
Enhanced Severance Program, upon an employee's separation, is conditioned upon
and will require the execution of a release of claims (a sample of which is
attached to this letter). This Enhanced Severance Program together with the
release document will be presented and reaffirmed, if necessary, at that time.
If you do not execute the release of claims, you will only receive the standard
severance package in accordance with existing TCK policies. This Enhanced
Severance Program will remain available to eligible employees through February
15, 2002.
If you accept employment with another entity which is a subsidiary or affiliate
of Thermo Electron Corporation or TCK the Enhanced Severance Program shall
become null and void.
In order to maintain eligibility for any of the below outlined elements, the TCK
requires that you remain a regular active employee unless your employment is
terminated without Cause or as a result of a Change in Control.
For purposes of this Agreement, "Cause" shall be determined by TCK in the
exercise of good faith and reasonable judgement. "Cause" will include but not be
limited to, breach of this Agreement by you, any act by you of gross personal
misconduct, gross insubordination, material misappropriation of funds, fraud,
dishonesty, gross neglect of or failure to perform the duties reasonably
required of you pursuant to your employment, engaging in activities that are
competitive with Thermo Ecotek Corporation's business or any conduct which is in
willful violation of any applicable law or regulation pertaining to TCK's
business.
"Change of Control" shall mean the merger, consolidation, reorganization
liquidation, dissolution or similar transaction entered into by TCK (except into
Thermo Electron Corporation), the sale or disposition of 50% or more of the
existing assets of TCK in one or a series of transactions, change in ownership
of 50% or more of the beneficial ownership of the outstanding shares of common
stock of TCK. If as a result of such Change in Control you are terminated or you
are not offered a position with comparable salary, compensation, bonus and
benefits, or your principal work location is moved by more than 50 miles, you
will be eligible for the Enhanced Severance Program. However, if as a result of
a Change of Control you are offered a position with comparable salary,
compensation, bonus and benefits and your principal work location is not moved
by more than 50 miles, you will not be eligible for the Enhanced Severance
Program or the standard TCK severance benefits.
<PAGE>
Notice of Termination
If your employment is terminated without Cause or as a result of a Change in
Control, you will be notified at least 13 weeks prior to termination or receive
13 weeks pay-in-lieu-of notice, at TCK's option.
Salary Continuation
Beginning with the day following your termination date, you shall be placed on
salary continuation through the regular payroll system, at your regular biweekly
salary for a period of 52 weeks. TCK may, for its convenience, choose to provide
this benefit in the form of a lump sum rather than salary continuation.
Vacation
Accrued but unused vacation will be paid to you with the first check covering
the salary continuation period. Vacation payments will be calculated using your
regular biweekly base compensation. You will not accrue additional vacation
credit beyond your termination date.
Medical, Dental, and Life Insurance
Through the end of your salary continuation period, you may continue to
participate in any medical, dental and/or life insurance programs in which you
are currently enrolled, provided that you pay the regular employee portion of
these benefits where applicable. Once medical and dental benefits cease, you
will be notified of your eligibility to continue medical and dental coverage
under the provisions of COBRA.
If TCK chooses to provide the salary continuation benefit through a lump sum
payment, you will not be able to participate in the regular medical, dental
and/or life insurance programs in which you are currently enrolled. However, you
will be immediately eligible under the provisions of COBRA or the conversion
provisions of these programs. Should this occur, TCK will issue to you a lump
sum payment equal to 6 months of applicable premiums.
STD and LTD
Both short term and long term disability coverage will cease as of your last day
of active employment.
<PAGE>
Employee Assistance Program
This program will continue to be available to you and your dependents through
the end of your salary continuation period.
Employee Stock Purchase Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
401K Plan
You will continue to be eligible for participation under the normal plan rules
through the end of your salary continuation period.
Outplacement Program
The company has arranged, at no cost to you, outplacement consulting services
through Keystone Associates. Keystone will coordinate the delivery of these
services at their offices in Burlington, Massachusetts. You shall be eligible to
begin receiving these services immediately upon termination, or you may schedule
the start of this program anytime within 90 days after the date of your
termination. The major elements of this comprehensive program include:
Counseling
Resume development
Research skills
Self assessment and job targeting
Effective correspondence
Networking and other search techniques
Interview training
<PAGE>
Administrative Support
Office space and private telephone line with voice mail
Research assistance
Reference library
The outplacement services described above will be available for a period of four
months.
Sincerely,
/s/ John T. Miller
- -------------------------
John T. Miller
Vice President
Thermo Ecotek Corporation
<PAGE>
Sample Release of Claims
In exchange for the additional severance program offered to me by Thermo Ecotek
Corporation in an Agreement dated February 11, 2000. I hereby release Thermo
Ecotek Corporation and Thermo Electron Corporation, their subsidiaries and
affiliates (collectively the "Corporation") and its officers, directors,
employees and legal predecessors and successors from all claims, liabilities and
causes of action, whether known or unknown, which I have, may have, or claim to
have against the Corporation based upon or arising out of my employment with the
Corporation. I hereby agree not to file any lawsuit to assert such claims, which
include, but are not limited to any claims for breach of contract, wrongful
termination, or age, sex, race, disability or other discrimination under the
Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or
any other federal, state, or local laws prohibiting such discrimination. As used
herein, the Corporation includes any and all parents, divisions, or subsidiaries
of the Corporation.
I understand that I have been advised to seek the advice of an attorney, if I so
choose, prior to signing this release and that I am giving up any legal claims I
have against the Corporation by signing this release. I further understand that
I may have 21 days to consider this agreement, that I may revoke it at any time
during the 7 days after I sign it, and that it shall not become effective until
that 7 day revocation period has passed. I fully understand my right to take 21
days to consider signing this release and, after having sufficient time to
consider my options, I hereby waive my right to take the full 21-day period. I
acknowledge that I am signing this release knowingly, willingly and voluntarily
in exchange for the additional severance payment described in this letter.
I acknowledge that I have carefully read and fully understand this Release of
All Claims and I have not relied on any statement, written or oral, which is not
set out in this document.
/s/ John T. Miller /s/ Randal W. Miselis
- ------------------------- -------------------------
John T. Miller Randall W. Miselis
Vice President
Thermo Ecotek Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THERMO ECOTEK CORPORATION'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED APRIL 1,2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> APR-01-2000
<CASH> 8,541
<SECURITIES> 0
<RECEIVABLES> 33,607
<ALLOWANCES> 49
<INVENTORY> 5,820
<CURRENT-ASSETS> 255,713
<PP&E> 180,748
<DEPRECIATION> 65,701
<TOTAL-ASSETS> 419,268
<CURRENT-LIABILITIES> 52,068
<BONDS> 68,284
0
0
<COMMON> 3,787
<OTHER-SE> 181,913
<TOTAL-LIABILITY-AND-EQUITY> 419,268
<SALES> 64,559
<TOTAL-REVENUES> 64,559
<CGS> 50,412
<TOTAL-COSTS> 50,412
<OTHER-EXPENSES> (312)
<LOSS-PROVISION> 37
<INTEREST-EXPENSE> 2,174
<INCOME-PRETAX> 6,396
<INCOME-TAX> 2,536
<INCOME-CONTINUING> 3,502
<DISCONTINUED> (13,095)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,593)
<EPS-BASIC> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THERMO ECOTEK CORPORATION'S
ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED APRIL 3,1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> APR-03-1999
<CASH> 36,557
<SECURITIES> 0
<RECEIVABLES> 35,046
<ALLOWANCES> 0
<INVENTORY> 11,176
<CURRENT-ASSETS> 150,618
<PP&E> 385,002
<DEPRECIATION> 96,892
<TOTAL-ASSETS> 486,380
<CURRENT-LIABILITIES> 76,113
<BONDS> 62,270
0
0
<COMMON> 3,787
<OTHER-SE> 249,371
<TOTAL-LIABILITY-AND-EQUITY> 486,380
<SALES> 81,411
<TOTAL-REVENUES> 81,411
<CGS> 63,576
<TOTAL-COSTS> 63,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,395
<INCOME-PRETAX> 7,643
<INCOME-TAX> 2,348
<INCOME-CONTINUING> 4,938
<DISCONTINUED> (674)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,264
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
