SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended January 1, 1994
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-8002
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-2209186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $1.00 par value New York Stock Exchange
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 28, 1994, was approximately $1,967,000,000.
As of January 28, 1994, the Registrant had 47,933,007 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
January 1, 1994, are incorporated by reference into Parts I and II.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 24, 1994, are incorporated by reference into
Part III.<PAGE>
PART I
Item 1. Business
(a) General Development of Business
Thermo Electron Corporation and its subsidiaries develop, manufacture, and
market analytical and environmental-monitoring instruments, alternative-energy
systems, industrial process equipment, biomedical products, and various devices
based on advanced technologies. The Company also provides metallurgical
heat-treating, environmental engineering, and analytical laboratory services.
The Company conducts its business through its divisions and wholly owned
subsidiaries, as well as majority-owned subsidiaries that are partially owned by
the public or by private investors.
The Company has developed leading market positions in many lines of business,
including analytical and environmental-monitoring instruments, biomass-fueled
power plants, paper-recycling equipment, and papermaking accessories. The
Company is currently seeking to establish leading market positions in the fields
of left ventricular-assist devices, explosives-detection systems, thermal
soil-remediation services, and dedicated natural gas engines for vehicles and
stationary applications. The Company is developing new products in its Advanced
Technologies segment, as well as other segments.
A key element in the Company's growth has been its ability to commercialize
innovative products and services emanating from research and development
activities conducted at the Company's various subsidiaries and divisions. The
Company's strategy has been to identify business opportunities arising from
social, economic, and regulatory issues and to seek a leading market share
through the application of proprietary technology. As part of this strategy, the
Company continues to focus on the acquisition of complementary businesses that
can be integrated into existing core businesses to leverage the Company's access
to new markets.
The Company believes that maintaining an entrepreneurial atmosphere is essential
to continuing its growth and development. In order to preserve this environment,
in 1983 the Company adopted the strategy of having certain subsidiaries sell a
minority interest to outside investors. This permits the establishment of more
focused management objectives and performance incentives and provides capital to
support the subsidiaries' growth. The Company's operating philosophy is to
manage both its wholly owned and majority-owned subsidiaries by providing
centralized strategic planning, corporate development, administrative, financial
and other services that would not be available to many independent companies of
similar size. As of year-end 1993, the Company had 12 subsidiaries that have
sold minority equity interests, nine of which are publicly traded.
Thermo Electron, a Delaware corporation, was incorporated in 1956, completed its
initial public offering in 1967, and was listed on the New York Stock Exchange
in 1980. The principal executive office of the Company is 81 Wyman Street,
Waltham, Massachusetts 02254-9046 (telephone: 617-622-1000). Unless the context
otherwise requires, "the Registrant" and "the Company" as used herein refer to
Thermo Electron Corporation and its subsidiaries.
(b) Financial Information About Industry Segments
The Company's products and services are divided into six segments: Instruments,
Alternative-energy Systems, Process Equipment, Biomedical Products, Services,
and Advanced Technologies. In some cases, products or services within a
particular segment are provided by more than one subsidiary, and certain
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subsidiaries' products or services are included in more than one segment. The
principal products and services offered by the Company in the six industry
segments are described in detail below (see "Principal Products and Services").
Financial information concerning the Company's industry segments is summarized
in Note 12 to Consolidated Financial Statements in the Registrant's 1993 Annual
Report to Shareholders and is incorporated herein by reference.
(c) Description of Business
(i) Principal Products and Services
Instruments
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The Company, through its Thermo Instrument Systems Inc. subsidiary, is a
worldwide leader in the development, manufacture, and marketing of analytical
instruments used to detect and measure air pollution, nuclear radioactivity,
complex chemical compounds, toxic metals, and other elements in a wide variety
of materials. In recent years, Thermo Instrument has completed a number of key
acquisitions to expand and complement its existing lines of instruments,
including: Finnigan Corporation, a leading manufacturer of mass spectrometers,
in May 1990; Gas Tech Inc., a leading manufacturer of portable instruments and
fixed-site systems for detecting and monitoring toxic and combustible gases, in
May 1992; Nicolet Instrument Corporation, a leading manufacturer of instruments
for numerous analytical, chemistry, engineering, and other applications, in
August 1992; Gamma-Metrics, a manufacturer of analytical and nuclear reactor
monitoring instruments, in January 1993; Spectra-Physics Analytical, a
manufacturer of high performance liquid chromatography and capillary
electrophoresis analytical instruments, in February 1993; and the radiation
measurement products and radiometry process control divisions of FAG
Kugelfischer Georg Shafer AG, in October 1993. On January 31, 1994, Thermo
Instrument announced its intention to acquire, subject to regulatory approvals
and the satisfaction of certain conditions to closing, several of the businesses
within the EnviroTech Measurements & Controls group of Baker Hughes Incorporated
for a cash purchase price of approximately $93 million. The businesses to be
acquired manufacture products used for process control, process measurement and
laboratory analysis.
The Company's instruments employ a variety of advanced technologies including
spectral, electroanalytical, and separation techniques to determine the
composition, or structure, and physical properties of natural and synthetic
substances. The Company's instruments can be broadly categorized by their use as
analytical or monitoring instruments.
Analytical Instruments
The Company's principal analytical instrument products are atomic emission and
absorption spectrometers, Fourier transform infrared (FT-IR) and FT-Raman
spectrometers, mass spectrometers, and high performance liquid chromatographs.
Atomic emission (AE) and atomic absorption (AA) spectrometers identify and
measure trace quantities of metals, and other elements, in a wide variety of
materials, including environmental samples (such as soil, water, and wastes),
foods, drugs, cosmetics, and metal alloys. The Company sells these products to a
wide range of customers in manufacturing industries, such as producers of
aircraft, automobiles and trucks, computers, chemicals, food, and primary
metals; service industries such as waste management companies and commercial
testing laboratories; and government and university laboratories.
The Company is a leading manufacturer of both sequential AE spectrometers, in
which elements are analyzed one at a time, and simultaneous AE spectrometers, in
3<PAGE>
which many elements can be measured at one time. The Company produces AA
spectrometers in single-, double-, and four-channel models. The Company is the
only major producer of multichannel AA spectrometers, which provide several
operational advantages over single-channel instruments, including speed of
analysis, increased accuracy, reduced sample consumption, and analysis over an
extended range of concentrations.
The Company's FT-IR and FT-Raman spectrometers are designed to nondestructively
determine the chemical composition and physical properties of materials. These
instruments are used in many areas of chemical research, industrial quality
control and process monitoring, and for solving a wide variety of materials
analysis problems. The Company offers a variety of models ranging from recently
introduced models designed for routine applications to highly advanced
research-grade FT-IR spectrometers.
The Company is a leading manufacturer of commercial mass spectrometers and has
pioneered many of the significant developments and applications of mass
spectrometry. The Company's mass spectrometry products identify and measure the
components of a sample for organic chemical compounds or for inorganic elements.
These instruments are used by customers in environmental analysis and pollution
control; in research and the production of pharmaceuticals; in biochemistry; in
analysis of foods, chemicals, and petrochemicals; and in health and forensic
science. The Company provides both stand-alone spectrometers and combined
systems that use chromatographs purchased from other companies. These products
span a range of sensitivity, specificity, separation technologies, data-handling
capabilities, sizes, and prices.
The Company also sells high performance liquid chromatography instruments and
related equipment used principally in the production of pharmaceuticals,
chemicals, and personal-care products, and for environmental monitoring. These
instruments separate the chemical components of substances for purposes of
identification and measurement. Capillary electrophoresis is a relatively new
separation technique that is based on a combination of chromatographic and
electroanalytical technologies and is particularly useful in biochemical,
pharmaceutical, and environmental research. In addition, the Company
manufactures and markets digital oscilloscopes and multichannel transient
recorders, as well as X-ray imaging systems used for quality control in the
electronics industry.
Monitoring Instruments
The Company also manufactures monitoring instruments for two principal markets:
the detection and measurement of nuclear radiation, and the monitoring of air
pollutants and detection of toxic and combustible gases.
The Company's nuclear radiation monitoring instruments detect and measure alpha,
beta, gamma, neutron, or X-ray radiation emitted by natural sources and by
radioactive materials found in nuclear power plants and certain governmental,
industrial, and medical facilities. The Company is a leading manufacturer of a
broad range of stand-alone and portable instruments and computer-integrated
instrument systems used to ensure the protection of personnel from nuclear
radiation. Nuclear power plants and U.S. Department of Energy facilities
purchase approximately 85% of the radiation monitoring instruments sold by the
Company.
The Company's air-monitoring instruments measure pollutants in ambient or "open"
air and from stationary sources such as industrial smokestacks. The principal
pollutants measured are oxides of nitrogen, sulfur dioxide, carbon monoxide,
ozone, and volatile organic compounds. These instruments are used by utility and
industrial customers to ensure compliance with environmental regulations, by
government agencies to monitor air quality, and by research facilities. The
4<PAGE>
Occupational Safety and Health Administration's recently established safety
requirements for protecting workers from toxic or explosive atmospheres in
confined spaces are addressed with detectors, instruments, and systems for
sensing, monitoring, and warning of such dangers. These worker-safety products
are used in a wide range of applications, from large petrochemical plants,
utilities, and industrial manufacturing facilities to commercial buildings.
Also included in the Company's monitoring instruments business is equipment that
provides on-line, real-time analysis of elements in bulk raw materials, such as
coal and cement. These analyzers are used by utilities to determine the sulfur
content of coal to ensure compliance with air quality standards and by the
cement industry to test raw materials to assure product quality and uniformity.
Revenues from instruments products were $516,712,000, $349,261,000, and
$283,612,000 in 1993*, 1992, and 1991, respectively.
Alternative-energy Systems
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The Company's Alternative-energy Systems segment includes the construction,
sale, and operation of alternative-energy power plants, the manufacture, sale,
and servicing of packaged cooling and cogeneration systems, natural gas and
marine engines, industrial refrigeration systems, and steam turbines and
compressors and, beginning in early 1994, the operation of a waste-recycling
facility.
Alternative-energy Power Plants
Through a division and its Thermo Energy Systems Corporation subsidiary, the
Company develops, constructs, and operates alternative-energy power plants. The
power plants, generally designed to burn low-grade fuels and to produce less
than 100 megawatts of electric power, are either owned by the Company or sold to
third parties upon completion and operated by the Company. The Company has
completed and operates three wood-waste power plants and four agricultural-waste
power plants, representing a net electric generating capacity of approximately
140 megawatts.
The Company also has substantial capabilities in developing and operating
fossil-fuel cogeneration systems, which generate electricity and thermal energy
in the form of steam, or hot or chilled water. The Company has built, on a
turnkey basis, three fossil-fuel cogeneration systems that are owned and
operated by others, and one system in Dade County, Florida, that is owned by a
third party and operated by a joint venture of which the Company is a partner.
The facilities that are leased by the Company are owned by institutional
investors and are leased on a long-term basis to the Company or to joint
ventures or partnerships in which the Company has ownership interests. The
Company uses internal funds for preconstruction development expenses and
generally obtains external financing for construction. The Company has equity
ownership interests in three operating plants. The Company may make additional
significant equity investments in its projects in the future.
The Company participates in the operation of the Dade County Downtown Government
Center cogeneration plant in Miami, Florida, through a joint venture of
subsidiaries of the Company and Rolls-Royce, Inc. Because the demand for power
and chilled water at the Downtown Government Center complex has been
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* References to 1993, 1992, and 1991 herein are for the fiscal years ended
January 1, 1994, January 2, 1993, and December 28, 1991, respectively.
5<PAGE>
substantially less than anticipated since the plant's startup in 1987, and
because the Company believes Dade County has breached its contractual
obligations with respect to use of power at Dade County facilities outside the
Government Center (affecting plant efficiencies), the joint venture has
experienced continuing losses. The Company is involved in litigation and
regulatory proceedings with respect to this project (see Item 3., "Legal
Proceedings" below).
Revenues from alternative-energy power plant operations and construction were
$128,558,000, $140,561,000, and $112,527,000 in 1993, 1992, and 1991,
respectively.
Waste-recycling Facility
In early 1994, the Company completed construction and commenced operation of a
2,100-ton-per-day municipal solid waste-recycling facility (the Recycling
Facility) in San Diego County, California (the County). The Recycling Facility
is the first such facility that the Company has built or operated. The
construction of the Recycling Facility was financed by the issuance by the
California Pollution Control Finance Authority of $133.5 million principal
amount of bonds (the CPCFA Bonds), which are effectively guaranteed by the
Company except under certain circumstances. The Company has entered into a
24-year agreement with the County under which the Company will recycle materials
recovered from the County's waste stream and reduce the volume of remaining
waste for a service fee. The service fee is calculated pursuant to a formula
that includes a provision for debt service for the CPCFA Bonds, a passthrough of
certain costs of operating the Recycling Facility, an operation and maintenance
allowance, and an allocation of a portion of the proceeds from the resale of
recovered materials generated by the Recycling Facility. The County has
guaranteed that certain minimum amounts of waste will be brought to the
Recycling Facility and the Company has guaranteed that the Recycling Facility is
capable of processing a minimum amount of waste and of yielding certain
percentages of recovered materials from recoverable waste. Except for risks
associated with the nonperformance by the County of its obligations, the Company
will bear most business and legal risks associated with operating the Recycling
Facility. Although the Company believes that the Recycling Facility will be able
to satisfy all applicable performance requirements, due to the novelty and
complexity of the technology and processes involved, there can be no assurance
that the Company will not encounter unanticipated operational difficulties.
Natural Gas Engines and Refrigeration Systems
The Company, through its Thermo Power Corporation subsidiary, designs, develops,
manufactures, markets, and services environmentally sensitive and economically
efficient power generation, cooling, and related products, many of which are
fueled by natural gas. Thermo Power's 1992 acquisition of FES, Inc., a supplier
of specialized ammonia-based, fluorocarbon-free refrigeration systems primarily
used by the food-processing, pharmaceutical, and petrochemical industries,
combined with its Crusader Engines division, a leading manufacturer of inboard
marine engines, have expanded Thermo Power from an entity with a research and
development focus to an integrated manufacturing operation.
Many of Thermo Power's products are powered by its proprietary low-emission
natural gas-fueled TecoDrive engines, a family of General Motors Corporation
gasoline engines that have been modified by Thermo Power to optimize performance
on natural gas. Thermo Power is developing a number of applications for its
TecoDrive engines, including driving irrigation pumping systems and other
stationary power applications and powering various fleet vehicles. Thermo Power
has established a marketing relationship with Blue Bird Corporation, a leading
school bus manufacturer in the U.S., to provide TecoDrive engines as a
6<PAGE>
production option for school buses built by Blue Bird. Thermo Power has also
supplied TecoDrive engines for use in demonstrations by other fleet operators,
including United Parcel Service, the U.S. Postal Service, and several fleets
abroad. In addition to conducting research on natural gas engines for vehicles,
Thermo Power, through its Tecogen division, has a research and development
relationship with Carrier Corporation and the Gas Research Institute to develop
natural gas engine-driven cooling systems.
The Company's Alternative-energy Systems segment also includes its Peter
Brotherhood Ltd. subsidiary, a manufacturer of steam turbines and compressors
based in the United Kingdom.
Process Equipment
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The Company designs, manufactures, and sells advanced, custom-engineered
processing machinery, including papermaking and paper-recycling equipment,
metallurgical thermal-processing systems, and electroplating systems.
Papermaking and Paper-recycling Equipment
Through its Thermo Fibertek Inc. subsidiary, the Company manufactures and sells
processing machinery and accessories for the papermaking and paper-recycling
industries worldwide. The Company's principal products in this business include
custom-engineered systems and equipment for the preparation of waste paper for
conversion into recycled paper, and accessory equipment and related consumables
that are of critical importance to the efficient operation of papermaking
machines. The Company has developed what it believes is the most technologically
advanced equipment for the preparation of white recycled fiber (e.g. printing
and office paper, newsprint, and tissue). The Company sells in countries outside
the Pacific Rim what it believes is the most technologically advanced equipment
for the preparation of brown recycled fiber (e.g. corrugated boxes and paper
bags) pursuant to a license from Aikawa Iron Works Ltd., a leading Japanese
manufacturer of this equipment.
Thermo Fibertek also manufactures accessories used in the papermaking industry,
and is a leading designer and manufacturer of doctor blades and showers that
perform continuous on-line cleaning of rolls and fabrics used to protect
papermaking machines from costly damage caused by web breaks. The Company seeks
to expand its businesses through the introduction of new products and
technologies and through select acquisitions. Thermo Fibertek expanded its
existing market position in papermaking accessories through the September 1992
acquisition of Vickerys Holdings Limited, a U.K.-based manufacturer of doctoring
systems and environmental process systems, and the June 1993 acquisition of AES,
formerly Albany International Corp.'s Engineered Systems Division, a worldwide
supplier of showering systems, formation systems, and water-filtration systems
for the papermaking process.
Revenues from papermaking and paper-recycling equipment were $137,088,000,
$125,577,000, and $124,731,000 in 1993, 1992, and 1991, respectively.
Metallurgical Thermal-processing Systems
The Company, through the Holcroft division of its Thermo Process Systems Inc.'s
subsidiary, designs, manufactures, and sells computer-controlled,
custom-engineered thermal-processing systems used to treat primary metals and
metal parts. Holcroft's products include controlled-atmosphere systems used to
impart desirable metallurgical properties, such as added tensile strength and
wear resistance, and vacuum heat-treating systems used in forming metals into
desired shapes.
7<PAGE>
The Company also manufactures electroplating systems, heavy metal and
waste-treatment systems, and aqueous cleaning systems that offer an alternative
to the use of ozone-damaging chemicals in a variety of production processes.
Biomedical Products
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The Company's Biomedical Products segment comprises a number of different
businesses, several of which have developed out of the Company's research
related to ventricular-assist devices, which began in 1966. In addition, the
Company has made several acquisitions, including International Technidyne
Corporation (ITC) in 1991, the biomedical division of Nicolet Instrument
Corporation (Nicolet Biomedical) and Lorad Corporation in 1992, and CBI
Laboratories, Inc. in 1993.
ITC is a leading manufacturer of hemostasis management products, including blood
coagulation-monitoring instruments. ITC also manufactures and markets
skin-incision devices that can draw minute but medically significant blood
samples through precisely controlled, pain-free incisions.
Nicolet Biomedical is a leading manufacturer of biomedical instruments for
assessing muscle, nerve, sleep, hearing, and brain blood-flow disorders and for
related work in clinical neurophysiology. These instruments are used in
hospitals, clinics, universities, private practice medical offices, and medical
research facilities by physicians and technologists for routine clinical testing
and intra-operative monitoring. Nicolet Biomedical also produces systems that
record and display spontaneous brain waves in the form of a topographic colored
"map." Such maps of brain activity are used in conjunction with other
measurements to assist in the diagnosis of various neurologic disorders.
Lorad is a leading U.S. manufacturer of low-dose X-ray mammography equipment and
minimally invasive needle-biopsy systems. In 1992, Lorad introduced a digital
imaging mammography system designed to target a specific area of the breast
where a suspicious lesion has been detected, and create a digital image of the
lesion on a video monitor. Digital imaging has advantages over traditional X-ray
mammography because once the X-ray image has been converted into digital
computer code, radiologists can enhance the image quality to scrutinize subtle
differences that may go undetected on a film-based X-ray. Lorad's needle-biopsy
systems provide a less-invasive alternative to conventional surgical biopsies.
Compared with open surgery, these needle techniques are less traumatic to the
patient, result in less scarring, which can affect the accuracy of future
mammograms, and are performed on an outpatient basis at a significantly lower
cost.
In December 1993, the Company's ThermoTrex Corporation subsidiary acquired CBI,
a manufacturer of high-quality skin-care and other personal-care products sold
through salons, spas, and department stores. It is anticipated that CBI will
manufacture the lotion that is an integral part of ThermoTrex's laser-based
system for long-term hair removal, which is being developed by ThermoLase Inc.,
a majority-owned subsidiary of ThermoTrex.
The Company's Thermedics Inc. subsidiary develops, manufactures, and markets
enteral-nutrition delivery systems and solutions and a family of biocompatible
polyurethanes, TecoflexR and TecothaneR, which are medical-grade plastics used
in medical disposables and industrial applications.
Thermedics also manufactures Scent Seal (1) fragrance samplers, which were
developed from the Company's polymer technology. Scent Seal fragrance samplers
are used in magazines to seal fragrance renditions in perfume advertisements,
and offer an alternative to commonly used fragrance strips.
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(1) Scent Seal is a trademark of Scent Seal Inc.
8<PAGE>
The Company, through its Thermo Cardiosystems Inc. subsidiary, is a leader in
the research and development of implantable left ventricular-assist devices
(LVADs). These devices are designed to perform substantially all or part of the
pumping function of the left ventricle of the natural heart for patients
suffering from cardiovascular disease. Unlike total artificial heart systems,
which require removal of the natural heart, LVADs allow the heart to be left in
place, preserving the heart's biological control mechanisms. The Company's
devices are currently being used in clinical trials in patients awaiting heart
transplants. The current version of the Company's air-driven LVAD has been
implanted in more than 190 patients, and its battery-powered LVAD has been
implanted in 12 patients. In December 1993, the FDA's Advisory Panel on
Circulatory System Devices unanimously recommended commercial approval for the
air-driven LVAD, providing that certain labeling conditions are met. The FDA is
free to decide whether or not to accept this recommendation and whether to
impose additional conditions upon the grant of commercial approval. The FDA may
also impose limitations on the indicated uses for the air-driven LVAD and may
require that the Company continue to submit clinical data after the product is
approved. In any event, prior to the FDA's final decision on commercial
approval, the Company must undergo a standard FDA review of product labeling and
manufacturing practices. The Company expects that the FDA will not make a final
approval decision until mid-1994 at the earliest. There can be no assurances,
however, when the FDA's decision will be made or whether the FDA will approve
the air-driven LVAD for commercial sale. The Company does not expect that it
will file a premarket approval application for its electric LVAD before 1995.
Services
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The Company provides analytical and environmental services in the fields of
laboratory testing, engineering, and waste treatment. Through a network of
facilities owned and operated by Thermo Instrument, the Company provides
comprehensive laboratory-based environmental testing, analysis, and related
services for the detection, measurement, and monitoring of hazardous wastes and
radioactive materials. The Company's services also include design and
construction inspection of water supply and wastewater treatment facilities,
surveying and site planning, transportation engineering services, solid waste
management services, and building services.
Thermo Process Systems' Thermo Remediation Inc. subsidiary operates a national
network of facilities for remediating petroleum-contaminated soil. Thermo
Remediation currently operates six soil-recycling centers, one each in Virginia,
Florida, California and Oregon, and two in South Carolina. Thermo Remediation
recently entered the waste fluids-recycling market through the acquisition of a
fluids recovery company based in Arizona. A majority-owned subsidiary of Thermo
Process, J. Amerika N.V., provides environmental services from its
Netherlands-based operation.
In addition, metallurgical heat-treating services are provided for customers in
the aerospace, defense, and other industries. The Company also provides
metallurgical fabrication services, principally on high-temperature materials,
for customers in the aerospace, medical, electronics, and nuclear industries.
Advanced Technologies
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Many of the Company's lines of business resulted from its research and
development activities. In 1988, the operations constituting substantially all
of the Company's research and development segment were combined into a
subsidiary, which is now called ThermoTrex Corporation. ThermoTrex continues to
9<PAGE>
conduct sponsored research and development and is also attempting to
commercialize new products based on advanced technologies it has developed in
its laboratories. Sponsored research and development conducted by this
subsidiary, principally for the United States government, includes basic and
applied research in electro-optical and electro-acoustic systems, advanced laser
systems, thermodynamics, heat transfer, materials technology, and advanced
parallel and signal processing. This work also includes design, development, and
testing of prototype devices and systems.
Research and development currently in progress by ThermoTrex includes the
development of a passive microwave camera that is intended to "see" through
clouds and fog to enhance safety in aerial navigation, the Sonic CTTM (Computed
Tomography) system for the early detection of breast cancer, a blood-flow
measurement system, called the Doppler CT, for the diagnosis and monitoring of
peripheral vascular disease, and a laser-based system, called ThermoLase, for
the painless long-term removal of hair. ThermoTrex is also developing a
full-breast digital mammography system. These products are at various stages of
development and are subject to various levels of regulatory approval. Because
these projects are still under development, no assurance can be given that the
necessary approvals for any of the projects will be obtained on a timely basis,
or at all, or that any of them will eventually result in commercially viable
products.
Based on technology that has been used to develop instruments sold by the
Company for the detection of nitrosamines and other nitrogen-based compounds,
the Company, through a subsidiary of Thermedics, develops, manufactures,
markets, and sells instruments to detect explosives (the EGISR system) and
narcotics (the SentorR system) at airports and other locations. In 1992,
Thermedics introduced a high-speed product quality assurance system based on its
EGIS technology for use in bottling lines (the AlexusR system). The Company
believes that the technology developed from this project may have applications
in a range of environments where the ability to screen products during
high-speed production, without interruption, will enhance product quality and
increase efficiency.
The Company's Thermo Voltek Corporation subsidiary designs, develops, and
manufactures test instruments that simulate different types of pulsed
electromagnetic interference in order to test electronic and electrical systems
and components for electromagnetic compatibility (EMC), provides EMC consulting
and systems-integration services, distributes a range of EMC-related products
and manufactures and markets specialized power supplies for telecommunications
equipment. Thermo Voltek also designs, manufactures, and markets high-voltage
power conversion systems, modulators, fast-repsonse protection systems, and
related high-voltage equipment for industrial, medical, and environmental
processes, and defense and scientific research applications.
Publicly and Privately Held Subsidiaries
In 1983, the Company adopted a strategy of having certain subsidiaries sell a
minority interest in a public or private offering to outside investors. An
important goal of this strategy is to provide the entrepreneurial atmosphere and
focused performance incentives of a separate business. As of January 1, 1994,
the Company had 12 subsidiaries that have sold minority equity interests, nine
of which are publicly traded and three of which are privately held.
Thermedics Inc. develops, manufactures, and markets explosives- and
drug-detection devices, product quality assurance systems, as well as
biomaterials and other biomedical products. Thermedics' products are included in
10<PAGE>
the Company's Biomedical Products and Advanced Technologies segments. On January
31, 1994, Thermedics announced its intention to acquire from Baker Hughes
Incorporated two businesses that manufacture precision measurement and
inspection equipment, for a cash purchase price of approximately $41 million.
Thermo Cardiosystems Inc., a majority-owned subsidiary of Thermedics,
performs research and development of implantable left ventricular-assist
devices designed to perform substantially all or part of the pumping
function of the left ventricle of the natural heart for patients suffering
from cardiovascular disease. Thermo Cardiosystems' products are included in
the Company's Biomedical Products segment.
Thermo Voltek Corp., a majority-owned subsidiary of Thermedics, designs,
develops, and manufactures instruments and systems that simulate the
effects of pulsed electromagnetic interference and power interruptions,
provides electromagnetic compatibility consulting and systems services, and
designs, manufactures, and markets high-voltage power conversion systems
for commercial, medical, defense, and industrial applications. Thermo
Voltek's products are included in the Company's Advanced Technologies
segment.
Thermo Instrument Systems Inc. develops, manufactures, and markets analytical
and monitoring instruments used to detect and measure air pollution, nuclear
radioactivity, toxic substances, chemical compounds, and trace quantities of
metals, and other elements, in a wide variety of materials. Thermo Instrument
also performs analytical laboratory services for the management of hazardous
wastes and radioactive materials, and environmental science and engineering
services. Thermo Instrument's products and services are included in the
Company's Instruments and Services segments.
Thermo Process Systems Inc. designs, manufactures, and installs
custom-engineered thermal-processing systems for treating primary metals and
metal parts. The Company also provides a range of metallurgical processing
services. Thermo Process' products and services are included in the Company's
Process Equipment and Services segments.
Thermo Remediation Inc., a majority-owned subsidiary of Thermo Process,
operates a network of soil-recycling centers in the U.S. and provides waste
fluids-recycling services. Thermo Remediation's services are included in
the Company's Services segment.
J. Amerika N.V., a majority-owned, privately held subsidiary of Thermo
Process, provides environmental services in the Netherlands, including
testing, removal, and installation of underground storage tanks, and
groundwater cleanup. J. Amerika's services are included in the Company's
Services segment.
Thermo Power Corporation manufactures, markets, and services industrial
refrigeration equipment; natural gas engines for vehicles and stationary
applications; natural gas-fueled cooling and cogeneration systems; and marine
engines; and conducts research and development on low-emission engines and
advanced systems for clean-coal combustion. Thermo Power's products are included
in the Company's Alternative-energy Systems segment.
ThermoTrex Corporation manufactures and markets mammography and biopsy systems
for the early detection of breast cancer, and conducts advanced-technology
research and product development, which it is incorporating into commercial
products for the medical imaging and avionics industries. ThermoTrex's products
are included in the Company's Advanced Technologies and Biomedical Products
segments.
11<PAGE>
ThermoLase Inc., a majority-owned, privately held subsidiary of ThermoTrex,
is developing a laser-based system for the long-term removal of hair, and
manufactures high-quality skin-care products sold through salons, spas, and
department stores. ThermoLase's hair-removal system is included in the
Advanced Technologies segment and ThermoLase's skin-care products are
included in the Company's Biomedical Products segment.
Thermo Fibertek Inc. develops, markets, and manufactures a range of equipment
and accessory products for the domestic and international paper industry,
including de-inking and stock-preparation equipment for paper recycling. Thermo
Fibertek's products are included in the Company's Process Equipment segment.
Thermo Energy Systems Corporation, a majority-owned, privately held subsidiary,
develops and operates alternative-energy power plants. Plants currently operated
by the Company are owned by third parties and leased on a long-term basis to the
Company, or are owned by joint ventures or partnerships in which the Company has
ownership interests. Thermo Energy Systems' operations are included in the
Company's Alternative-energy Systems segment.
The Company also has a number of wholly owned subsidiaries and divisions that
develop, manufacture, and market neurophysiology monitoring instruments,
blood-coagulation monitoring products and skin-incision devices, electroplating
and wastewater treatment lines, and steam turbines and gas compressors, and
provide services in metallurgical heat-treating and specialty metals
fabrication. In addition, a division of the Company constructed and now operates
a waste-recycling facility.
(ii) New Products
The Company's business includes the development and introduction of new products
and may include entry into new business segments. The Company has made no
commitments to new products that require the investment of a material amount of
the Company's assets, nor does it have any definitive plans to enter new
business segments that would require such an investment (see Section (xi)
"Research and Development").
(iii) Raw Materials
In the opinion of management, the Company has a readily available supply of raw
materials for all of its significant products from various sources and does not
anticipate any difficulties in obtaining the raw materials essential to its
business, except as described below.
The Company's Thermedics subsidiary relies upon a number of sole-source
suppliers of chemical components used in the manufacture of two polyurethanes.
In addition, Thermedics' Thermo Cardiosystems subsidiary relies upon a number of
custom-designed components and materials supplied by other companies to
manufacture its LVADs. In 1992, several suppliers of such components and
materials notified Thermo Cardiosystems that they intended to exit the
biomedical market. While the Company believes that the existing premarket
approval application for Thermo Cardiosystems air-driven LVADs will not be
affected by the discontinuation of these materials, any new materials used in
the LVAD systems will require approval by the FDA. The Company's goal is to
obtain FDA approval for alternative materials before Thermo Cardiosystems'
existing supplies are depleted. The cost to the Company to evaluate and test
alternative materials and the time necessary to obtain FDA approval for these
materials are inherently difficult to determine because both time and cost are
dependent on at least two factors: the similarity of the alternative material to
the original material, and the amount of third-party testing that may have
already been completed on alternative materials. There can be no assurance,
12<PAGE>
however, that Thermo Cardiosystems' existing supplies will not be depleted prior
to the receipt of FDA approval.
(iv) Patents, Licenses, and Trademarks
The Company considers patents to be important in the present operation of its
business. However, the Company does not consider any patent, or related group of
patents, to be of such importance that its expiration or termination would
materially affect the Company's business taken as a whole. The Company seeks
patent protection for inventions and developments made by its personnel and
incorporated into its products or otherwise falling within its fields of
interest. Patent rights resulting from work sponsored by outside parties do not
always accrue exclusively to the Company and may be limited by agreements or
contracts.
The Company protects some of its technology as trade secrets and, where
appropriate, utilizes trademarks with its products. It also enters into license
agreements with others to grant and/or receive rights to patents and know-how.
(v) Seasonal Influences
There are no significant seasonal influences on the Company's sales of products
and services.
(vi) Working Capital Requirements
There are no special inventory requirements or credit terms extended to
customers that would have a material adverse effect on the Company's working
capital.
(vii) Dependence on a Single Customer
No single customer accounted for more than 10% of the Company's total revenues
in any of the past three years. The Advanced Technologies segment derived
approximately 23% of its revenues in 1993 from contracts with various agencies
of the U.S. government and approximately 45% of its revenues in 1993 from one
customer for a high-speed product quality assurance system. In connection with
the development of alternative-energy power plants, the Company typically enters
into long-term power supply contracts with a single customer for the sale of
power generated by each plant. Although the Alternative-energy Systems segment
is, therefore, dependent upon a small number of customers, the Company believes
that the nature of its customers (typically utilities) and the long-term nature
of these contracts significantly reduce the risk associated with a small
customer base.
(viii) Backlog
The Company's backlog of firm orders at year-end 1993 and 1992 was as follows:
(In thousands) 1993 1992
-----------------------------------------------------------------
Instruments $115,600 $ 93,000
Alternative-energy Systems 370,600 375,800
Process Equipment 36,200 40,900
Biomedical Products 26,800 13,300
Services 39,700 47,400
Advanced Technologies 29,100 25,900
-------- --------
$618,000 $596,300
======== ========
13<PAGE>
Alternative-energy Systems segment backlog includes $281 million at year-end
1993 and 1992 for revenues to be earned over 24 years from the operation of the
San Diego County waste-recycling facility, construction of which was completed
in early 1994 (see "Alternative-energy Systems" under section (c), "Description
of Business"). The Advanced Technologies segment backlog includes government
contract orders that are firm but not yet funded. Such orders were $11.4 million
and $11.7 million at year-end 1993 and 1992, respectively.
Backlog includes the uncompleted portion of research and development contracts
and the uncompleted portion of certain equipment contracts that are accounted
for using the percentage-of-completion method. The Company believes
approximately 95% of the 1993 backlog, excluding backlog relating to the
waste-recycling facility in San Diego County, will be filled during fiscal 1994.
The Company believes that approximately $12 million of the backlog relating to
the waste-recycling facility in San Diego County will be filled in fiscal 1994.
(ix) Government Contracts
Approximately 3% of the Company's total revenues in fiscal 1993 were derived
from contracts or subcontracts with the federal government, which are subject to
renegotiation of profits or termination. The Company does not have any knowledge
of threatened or pending renegotiation or termination of any material contract
or subcontract.
(x) Competition
The Company is engaged in many highly competitive industries. The nature of the
competition in each of the Company's markets is described below:
Instruments
The Company's instruments business generally competes on the basis of technical
advances that result in new products and improved price-performance ratios,
reputation among customers as a quality leader for products and services, and
active research and application-development programs. To a lesser extent, the
Company competes on the basis of price. The Company believes it is among the
principal manufacturers specializing in analytical instrumentation, although it
faces significant competition from other companies and technologies in most of
its product lines and its relative position in certain markets cannot be
determined due to insufficient data. The Company believes it is the leading
supplier of mass spectrometers, FT-IR spectrometers, FT-IR and FT-Raman
microscopes, and optical plasma-emission spectrometers, and a major supplier of
atomic absorption spectrometers. In liquid chromatography, the Company believes
its competitors include several larger companies and numerous specialty
manufacturers. In its remaining analytical instrument product lines, the Company
believes its competitors are mainly smaller, specialized firms.
The Company is a leading manufacturer of ambient air monitoring instruments and
a major manufacturer of source monitoring and worker-safety monitoring
instruments. Some engineering companies compete for large ambient air monitoring
installations, but they do not manufacture the individual instruments that form
a major part of the system, therefore, they will often buy these from the
Company on an OEM basis.
Alternative-energy Systems
Alternative-energy power plants are individually designed to meet customer
specifications. Most customers solicit proposals from several companies and make
a selection based upon engineering design capability, adherence to
14<PAGE>
specifications, and previous experience with the supplier, as well as price and
service.
The Company's sale of packaged cogeneration systems is subject to intense
competition, both direct and indirect. Direct competitors consist of companies
that sell cogeneration products resembling those sold by the Company. In
addition, electric utility pricing programs provide competition for the
Company's cogeneration products. Indirect competitors include manufacturers of
conventional water heaters, air conditioners, and electric generator sets, since
the economic benefits of the Company's cogeneration and cooling systems depend
on the cost of conventional energy. The Company believes it competes in the sale
of its systems on the basis of several factors, including product quality and
reliability, operational savings, ease of installation, service, and price.
The Company anticipates that competition in the developing alternative-fuel
engine market, specifically natural gas engines for vehicles, will be intense,
and potential competitors may include major automotive and natural gas companies
and other companies that have greater financial resources than those of the
Company.
The Company has experienced intense competition in the marine engine business in
recent years, primarily from the vertical integration of boat and engine
manufacturers that has led to the acquisition of some of its former customers by
competing engine manufacturers. Competition is primarily on the basis of
quality, reliability, and service.
The Company's sale of industrial refrigeration systems is subject to intense
competition. The industrial refrigeration market is mature, highly fragmented,
and extremely dependent on close customer contacts. Major industrial
refrigeration companies, of which FES is one, account for approximately one half
of worldwide sales, with the balance generated by many smaller companies. The
Company competes principally on the basis of its advanced control systems and
overall quality, reliability, service, and price.
Process Equipment
The Company faces significant competition in the markets for both
paper-recycling and web process equipment, and competes in these markets
primarily on the basis of quality, service, technical expertise, and product
innovation. The Company is a leading supplier of accessory equipment for
papermaking machines, and competes in this market primarily on the basis of
service, technical expertise, and performance.
Although the market for metallurgical processing systems is subject to intense
competition worldwide, competition for particular projects is typically limited
to only a few companies. The Company competes on the basis of several factors,
including technical performance, product quality and reliability, timely
delivery, and price.
Services
The Company competes in the emerging and highly fragmented market for
soil-remediation services on its ability to offer customers superior protection
from environmental liabilities from a national network of cleanup facilities.
However, the Company faces competition in local markets from landfills and other
remediation technologies as well as from companies competing with similar
technologies, that limits the prices that can be charged by the Company. Pricing
is therefore a major competitive factor to the Company.
The Company's metallurgical services business competes in specialty machining
15<PAGE>
services. Competition is based principally on quality, service, price, and the
ability to respond rapidly to customer requirements.
Hundreds of independent analytical testing laboratories and engineering and
consulting firms compete for environmental services business nationwide. Many of
these firms use equipment and processes similar to those of the Company.
Competition is based not only on price, but also on reputation for accuracy,
quality, and the ability to respond rapidly to customer requirements. In
addition, many industrial companies have their own in-house analytical testing
capabilities.
Biomedical Products
Competition in the markets for most of the Company's biomedical products,
including those manufactured by Thermo Cardiosystems, Lorad, Nicolet Biomedical
and ITC, is based to a large extent upon technical performance.
The Company is aware of one other company that is performing clinical trials in
humans of a long-term LVAD and a portable electric LVAD. The Company is also
aware that a total artificial heart is currently undergoing clinical trials. The
requirement of obtaining FDA approval for commercial sale of LVADs is a
significant barrier to entry into that market. Consequently, the first companies
to receive market approval from the FDA will have a significant competitive
advantage.
Sales of Lorad X-ray mammography equipment are primarily limited to the U.S.
Lorad and General Electric Company each have approximately 30% of the U.S. X-ray
mammography market. The balance of the market is divided among approximately 10
other companies. The Company competes in this market principally on the basis of
technological advances and technical service support and, to a lesser extent,
price.
CBI competes with a number of small manufacturers and divisions of larger
companies primarily on the basis of reputation, product quality, diversity of
products and price.
Advanced Technologies
In its contract research and development business, the Company not only competes
with other companies and institutions that perform similar services, but must
also rely on the ability of government agencies and other clients to obtain
allocations of research and development monies to fund contracts with the
Company. The Company competes for its research and development programs
principally on the basis of technical innovations. As government funding becomes
more scarce, particularly for defense projects, the competition for such funding
will become more intense. In addition, as the Company's programs move from the
development stage to commercialization, competition is expected to intensify.
There are a number of competing technologies for instruments that detect
explosives and narcotics, including makers of other chemical-detection
instruments as well as enhanced X-ray detectors. Competition in this area is
primarily based on performance and, to a lesser extent, price. Since use of the
Company's explosives-detection instruments has not been mandated by the U.S.
Federal Aviation Administration (FAA), most of the Company's sales of
explosives-detection equipment are overseas. The Company believes that the
manufacturers, if any, whose devices are required to be used by the FAA will
have a substantial competitive advantage in the United States. The Company's
product quality assurance systems compete with chemical-detection systems
manufactured by several companies and with other technologies and processes for
quality assurance. Competition in the markets for all of the Company's detection
16<PAGE>
products is based primarily on performance and, to a lesser extent, price.
The Company estimates that there are between 10 and 20 companies that compete in
each of the markets for pulsed electromagnetic interference test equipment,
component reliability test equipment, and high-voltage power conversion systems
of the general type manufactured and marketed by the Company. Competition is
principally on the basis of reputation, technical expertise, and product
performance.
(xi) Research and Development
During 1993, 1992, and 1991, the Company expended $79,378,000, $58,101,000, and
$47,367,000, respectively, on research and development. Of these amounts,
$20,435,000, $19,426,000, and $21,196,000 were sponsored by customers and
$58,943,000, $38,675,000, and $26,171,000 were Company-sponsored. Approximately
640 professional employees were engaged full-time in research and development
activities at January 1, 1994.
(xii) Environmental Protection Regulations
The Company believes that compliance with federal, state, and local
environmental protection regulations will not have a material adverse effect on
its capital expenditures, earnings, or competitive position.
(xiii) Number of Employees
At January 1, 1994, the Company employed approximately 8,800 persons.
(d) Financial Information about Exports by Domestic Operations and about
Foreign Operations
Financial information about exports by domestic operations and about foreign
operations is summarized in Note 12 in the Registrant's 1993 Annual Report to
Shareholders and is incorporated herein by reference.
(e) Executive Officers of the Registrant
Present Title (Year First
Name Age Became Executive Officer)
- ------------------------- --- ----------------------------------
George N. Hatsopoulos (1) 67 Chairman of the Board, President,
Chief Executive Officer, and
Director (1956)
John N. Hatsopoulos (1) 59 Executive Vice President and Chief
Financial Officer (1968)
Robert C. Howard 63 Executive Vice President (1968)
Peter G. Pantazelos 63 Executive Vice President (1968)
Arvin H. Smith 64 Executive Vice President (1983)
William A. Rainville 52 Senior Vice President (1993)
Paul F. Kelleher 51 Vice President, Finance (1982)
(1) George N. Hatsopoulos and John N. Hatsopoulos are brothers.
Each executive officer serves until his successor is chosen or appointed and
qualified or until earlier resignation, death, or removal. All executive
officers have held comparable positions with the Company for at least the last
five years.
17<PAGE>
Item 2. Properties
The location and general character of the Company's principal properties by
industry segment as of January 1, 1994, are as follows:
Instruments
The Company owns approximately 697,000 square feet of office, engineering,
laboratory, and production space, principally in California, Colorado, Florida,
New Mexico, Wisconsin, Germany, and England, and leases approximately 694,000
square feet of office, engineering, laboratory, and production space principally
in California, Connecticut, Massachusetts, Wisconsin, Germany, and Japan, under
leases expiring from 1994 to 2017.
Alternative-energy Systems
The Company owns approximately 413,000 square feet of office, engineering, and
production space in Pennsylvania and England, and leases approximately 208,000
square feet of office, engineering, laboratory, and production space principally
in Massachusetts and Michigan, under leases expiring from 1994 to 2005.
The Company operates four alternative-energy power plants in California, Maine,
and New Hampshire, under leases expiring from 2003 to 2009. The Company owns
three alternative-energy power plants in New Hampshire and California and a
waste-recycling facility in California.
Process Equipment
The Company owns approximately 1,153,000 square feet of office, laboratory, and
production space, principally in Connecticut, Massachusetts, New York, Canada,
England, France, and Mexico, and leases approximately 471,000 square feet of
office, engineering, and production space principally in Georgia, Michigan, and
Wisconsin, under leases expiring from 1994 to 2000.
Biomedical Products
The Company owns approximately 96,000 square feet of office and production space
in Connecticut and New Jersey, and leases approximately 286,000 square feet of
office, engineering, laboratory, and production space in Illinois,
Massachusetts, New Jersey, and Texas, under leases expiring from 1995 to 2003.
Services
The Company owns approximately 1,855,000 square feet of office, laboratory, and
production space, principally in California, Florida, Minnesota, Oregon, South
Carolina, and the Netherlands, and leases approximately 782,000 square feet of
office, engineering, laboratory, and production space principally in Arizona,
California, Massachusetts, New Jersey, New Mexico, and South Carolina, under
leases expiring from 1994 to 2008.
Advanced Technologies and Corporate Headquarters
The Company owns approximately 126,000 square feet of office space in
Massachusetts and New York and leases approximately 231,000 square feet of
office, engineering, and laboratory space principally in California,
Massachusetts, and the Netherlands, under leases expiring from 1994 to 2003.
18<PAGE>
The Company believes that its facilities are in good condition and are suitable
and adequate to meet its current needs, and that suitable replacements are
available on commercially reasonable terms for any leases which expire in 1994
in the event that the Company is unable to renew such leases on reasonable
terms.
Item 3. Legal Proceedings
The Company participates in the operation of the Dade County Downtown Government
Center cogeneration facility in Miami, Florida, through a 50/50 joint venture of
subsidiaries of the Company and Rolls-Royce, Inc. The joint venture sells
electricity to Metropolitan Dade County (the County) pursuant to an energy
purchase contract signed in 1983. Because the demand for power and chilled water
at the Government Center complex has been substantially less than anticipated
since the plant's startup in 1987, and because the Company believes the County
has breached its contractual obligations with respect to the use of power at
County facilities outside the Government Center (affecting plant efficiency),
the joint venture has experienced continuing losses. The joint venture sells
over half of its actual output to the County and the balance to Florida Power
and Light (the local utility). On April 13, 1992, the joint venture re-filed a
lawsuit against the County (originally brought in 1988) in the Circuit Court of
the Eleventh Judicial Circuit, Dade County, Florida, seeking in excess of $60
million in damages and alleging that the County was in breach of the energy
purchase contract and had misrepresented its demand for electrical power. The
County has asserted counterclaims in excess of $28 million against the joint
venture, the Company, and Rolls-Royce, alleging, among other things, failure to
properly maintain and operate the facility and to use its best efforts to
maximize use of the facility's output. The County has also asserted that the
joint venture is responsible for local property taxes on the project, totaling
approximately $10.5 million to date, which the joint venture disputes. On May
18, 1993, the County filed a petition with the Florida Public Service
Commission, asserting that the joint venture was engaged in the retail sale of
electricity without complying with the rules governing public utilities. The
County has filed a similar motion in the state court case alleging that the
contract was illegal. Trial of the state court action has been delayed while the
County and the joint venture attempt to settle the dispute.
On May 28, 1993, the County brought a parallel proceeding before the Federal
Energy Regulatory Commission (FERC) seeking to terminate the project's
qualifying facility status under the Public Utility Regulatory Policies Act of
1978 (PURPA) for failure to meet certain required efficiency standards at
various times from 1987 to the present (PURPA generally obligates utilities,
such as Florida Power and Light, to purchase electricity from qualifying
facilities at the utilities' avoided cost and exempts qualifying facilities from
various Federal and state regulations, such as the Federal Power Act (FPA).) The
Company believes the project currently meets the efficiency standards and
therefore currently has qualifying facility status. However, on October 21,
1993, FERC issued an order finding that, although the project met the efficiency
standards for 1992, the project did not meet such standards from 1987 through
1991. FERC denied the joint venture's request for a waiver of the efficiency
standards for that period and also directed the joint venture to show cause why
FERC should not find that the joint venture was a public utility for FPA
purposes during that period. If the joint venture is retroactively deemed a
public utility under FPA, FERC could impose refund liabilities and other
penalties to the extent FERC does not find either that the joint venture
complied with relevant FERC regulations or that the regulations should be
waived. The joint venture has been granted a rehearing of the FERC decision and
has asserted various grounds for reversal. The joint venture is also entitled to
appeal FERC's final decision, if necessary. In the rehearing, the County and
19<PAGE>
Florida Power and Light argued before FERC that the project did not meet the
efficiency standards for 1992. The County is also using FERC's decision in an
attempt to have the state court declare the energy purchase contract illegal
under Federal law.
The joint venture leases its generating equipment from Florida Energy Partners
Limited Partnership (FEP). If the energy purchase contract were to be held
illegal, FEP could declare a default by the joint venture under the lease with
FEP, and the County could be released from its obligation to buy electricity
from the joint venture. In the lease, the joint venture also covenanted that the
project would maintain PURPA qualifying facility status. If the joint venture is
deemed to have breached this covenant, FEP could declare a default under the
lease. In the event of a default under the lease, among other things, FEP could
seek to sell or re-lease the equipment and the Company generally would be liable
for one-half of any deficiency between (a) in the event of a sale, approximately
$54 million and the amount realized from the sale or (b) in the case of
re-lease, one-half of the difference between the present value of future rental
and prepayment penalty under the lease (approximately $42 million) and the
present value of a fair rental value to be collected from a new tenant.
The joint venture's revenues and net losses for (a) the year ended
January 1, 1994 were $5.0 million and $12.5 million, respectively (exclusive of
a $15.0 million reserve the Company recorded in 1993 in connection with this
project) and (b) the cumulative period 1987 through 1991 were $26.3 million and
$23.0 million, respectively. The Company reports its interest in the joint
venture's results of operations using the equity method of accounting. Under
this method, the Company records 50% of the joint venture's loss, but does not
report as revenues any of the joint venture's revenues.
On or about September 8, 1993, the Connecticut Department of Environmental
Protection (DEP) served pretrial memoranda in the action captioned "Timothy R.E.
Keeney, Commissioner of Environmental Protection vs. Napco, Inc.," in Hartford
County (Connecticut) Superior Court, seeking civil penalties from the Company's
Napco, Inc. subsidiary for alleged violations of state law relating primarily to
labeling and storage of on-site containers allegedly containing hazardous
materials, and related record-keeping matters. The allegations do not involve
damage to the environment. The DEP seeks to have the court impose civil
penalties of up to $25,000 per day per violation, allegedly totaling several
million dollars. Napco, Inc. has denied the DEP's allegations, and is defending
the case vigorously and asserting all available defenses. The Company believes
that any settlement of this matter by its subsidiary will not have a material
adverse effect on the Company.
Certain subsidiaries of the Company, including those recently acquired by the
Company, have been notified that the U.S. Environmental Protection Agency (EPA)
has determined that a release or a substantial threat of a release of a
hazardous substance, as defined in the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (CERCLA or the Superfund law), occurred
at sites to which chemical or other wastes generated by the manufacturing
operations of these companies may have been sent. These notifications generally
also allege that these companies may be potentially responsible parties with
respect to the remedial actions needed to control or clean up any such releases.
Under CERCLA, responsible parties can include current and previous owners of the
site, generators of hazardous substances disposed of at the site, and
transporters of hazardous substances to the site. Each responsible party can be
jointly and severally liable, without regard to fault or negligence, for all
costs associated with site remediation. In each instance the Company believes
that its subsidiary is one of several companies that received such notification
and who may likewise be held liable for any such remedial costs.
20<PAGE>
The Company is also involved in situations under state environmental laws with
respect to certain other sites where remediation may be required. The Company is
conducting investigative or remediation activities at these sites pursuant to
arrangements with state environmental agencies.
The Company evaluates its potential liability as a responsible party for these
environmental matters on an ongoing basis subject to factors such as the
estimated remediation costs, the nature and duration of the Company's
involvement with the site, the financial strength of other potentially
responsible parties, and the availability of indemnification from previous
owners of acquired businesses. Estimated liabilities are accrued in accordance
with Statement of Financial Accounting Standards No. 5, "Accounting for
Contingencies." To date, the Company has not incurred any significant liability
with respect to any of these sites and anticipates that future liabilities
related to sites where the Company is currently a potentially responsible party
or is otherwise conducting investigative or remediation activities, will not
have a material adverse effect on its business, results of operations, or
financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Information concerning the market and market price for the Registrant's Common
Stock, $1.00 par value, and related matters, is included under the sections
labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's 1993 Annual Report to Shareholders and is incorporated herein by
reference.
Item 6. Selected Financial Data
The information required under this item is included under the sections "Ten
Year Financial Summary" and "Dividend Policy" in the Registrant's 1993 Annual
Report to Shareholders and is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's 1993 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The Registrant's Consolidated Financial Statements as of January 1, 1994, are
included in the Registrant's 1993 Annual Report to Shareholders and are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Not Applicable.
21<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information concerning Directors required under this item is incorporated
herein by reference from the material contained under the caption "Election of
Directors" in the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the close of the fiscal year. The information concerning
delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein
by reference from the material contained under the heading "Disclosure of
Certain Late Filings" under the caption "Stock Ownership" in the Registrant's
definitive proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A, not later than 120 days after the close
of the fiscal year.
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference
from the material contained under the caption "Executive Compensation" in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is incorporated herein by reference
from the material contained under the caption "Stock Ownership" in the
Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
Item 13. Certain Relationships and Related Transactions
The information required under this item is incorporated herein by reference
from the material contained under the caption "Relationship with Affiliates" in
the Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A, not later than 120 days after
the close of the fiscal year.
22<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a), (d) Financial Statements and Schedules
(1) The financial statements set forth in the list below are filed as
part of this Report.
(2) The financial statement schedules set forth in the list below are
filed as part of this Report.
(3) Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
List of Financial Statements and Schedules Referenced in this Item 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Certain Financial Schedules included herewith:
Schedule I: Marketable Securities Short- and Long-term
Schedule II: Amounts Receivable From Related Parties and
Underwriters, Promoters, and Employees Other Than
Related Parties
Schedule VIII: Valuation and Qualifying Accounts
Schedule IX: Short-term Borrowings
Schedule X: Supplemental Income Statement Information
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or in the notes thereto.
(b) Reports on Form 8-K
During the Company's fiscal quarter ended January 1, 1994, the Company was not
required to file, and did not file, any Current Report on Form 8-K.
(c) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
23<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 9, 1994
THERMO ELECTRON CORPORATION
By: George N. Hatsopoulos
George N. Hatsopoulos
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, as of March 9, 1994.
Signature Title
--------- -----
By: George N. Hatsopoulos President, Chief Executive Officer,
George N. Hatsopoulos Chairman of the Board and Director
By: John N. Hatsopoulos Executive Vice President and Chief
John N. Hatsopoulos Financial Officer
By: Paul F. Kelleher Vice President, Finance
Paul F. Kelleher (Chief Accounting officer)
By: John M. Albertine Director
John M. Albertine
By: Peter O. Crisp Director
Peter O. Crisp
By: Elias P. Gyftopoulos Director
Elias P. Gyftopoulos
By: Frank Jungers Director
Frank Jungers
By: Robert A. McCabe Director
Robert A. McCabe
By: Frank E. Morris Director
Frank E. Morris
By: Donald E. Noble Director
Donald E. Noble
By: Hutham S. Olayan Director
Hutham S. Olayan
By: Director
Roger D. Wellington
24<PAGE>
Report of Independent Public Accountants
----------------------------------------
To the Shareholders and Board of Directors of
Thermo Electron Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Thermo Electron Corporation's
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 17, 1994. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedules listed in Item 14 on page 23 are the responsibility of the Company's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial statements
taken as a whole.
Arthur Andersen & Co.
Boston, Massachusetts
February 17, 1994
25<PAGE>
SCHEDULE I
Thermo Electron Corporation
Marketable Securities Short- and Long-term
(In thousands)
January 1, 1994
Amount
Market Carried
Cost Value in
Name of Issuer and Title of Principal of Each of Each Balance
Each Issue Amount Issue(a) Issue Sheet(a)
- --------------------------------- --------- -------- -------- --------
Corporate Notes:
ACM Managed Income Fund $ 4,900 $ 4,899 $ 4,900 $ 4,900
Alexander Haagen Properties Inc. 2,000 2,000 2,000 2,000
American Express Corporation 1,000 1,069 1,076 1,000
Anagram Funding Corp. 5,000 5,000 5,000 5,000
Bankers Trust New York Corp. 5,000 5,000 5,000 5,000
Bear Stearns Companies Inc. 6,000 6,039 6,032 6,000
British Petroleum North America 4,500 4,609 4,604 4,500
Broken Hill Properties
Operations Inc. 10,000 10,000 10,000 10,000
Caterpillar Financial Services Inc. 8,000 8,017 8,014 8,000
Chrysler Financial Corp. 9,000 9,062 9,129 9,000
Chubb Capital Corp. 5,100 5,100 5,100 5,100
Coca-Cola Enterprises Inc. 800 800 818 800
Dean Witter Discover & Co. 5,000 5,000 5,000 5,000
Dow Chemical Corp. 10,000 10,000 10,000 10,000
Eastman Kodak Corporation 6,000 2,785 2,753 6,000
First Australia Prime Income Fund 15,000 15,000 15,000 15,000
Ford Motor Credit Company 10,000 10,000 10,013 10,000
Freeport McMoran Inc. 2,000 2,000 1,990 2,000
General Electric Capital
Corporation 7,225 7,446 7,583 7,225
General Motors Acceptance
Corporation 19,590 20,033 20,072 19,590
Halliburton Co. 6,000 2,651 2,925 6,000
IBM Corporation 7,000 7,000 6,983 7,000
Kimberly-Clark Corp. 2,775 3,126 2,970 2,775
MCI Communications Corp. 3,000 3,019 3,012 3,000
Meditrust 4,200 4,577 4,537 4,200
Merrill Lynch & Co. 7,000 7,174 7,158 7,000
National Health Investors Inc. 5,000 5,095 5,000 5,000
Pepsi Corporation 5,000 5,267 5,260 5,000
Pfizer Inc. 1,200 1,200 1,200 1,200
Pioneer International Hong
Kong Ltd. 5,000 5,000 5,000 5,000
Pitney Bowes Inc. 1,350 1,432 1,406 1,350
RJR Nabisco Inc. 4,000 4,482 4,378 4,000
Safeway Stores Inc. 2,000 1,995 2,044 2,000
Seven World Trade Finance Inc. 5,000 5,000 5,000 5,000
Shearson Lehman Hutton Inc. 1,000 1,039 1,150 1,000
Sizeler Property Investors 1,000 1,000 1,000 1,000
Southwestern Bell Capital
Corporation $ 2,000 $ 2,085 $ 2,129 $ 2,000
26<PAGE>
Amount
Market Carried
Cost Value in
Name of Issuer and Title of Principal of Each of Each Balance
Each Issue Amount Issue(a) Issue Sheet(a)
- --------------------------------- --------- -------- -------- --------
Texaco Capital Inc. $ 2,000 $ 2,057 $ 2,073 $ 2,000
The Limited Inc. 7,200 7,200 7,200 7,200
Time Warner Inc. 2,000 2,069 2,095 2,000
Union Bank of Finland 2,000 2,034 2,045 2,000
USX Corporation 4,000 1,420 1,640 4,000
Waste Management Inc. 3,500 3,526 3,679 3,500
Xerox Corporation 1,870 1,906 1,911 1,870
-------- -------- -------- --------
221,210 215,213 215,879 221,210
-------- -------- -------- --------
Commercial Paper:
Allianz of America Finance Corp. 5,000 4,911 5,000 5,000
American International Group
Funding 10,000 9,996 10,000 10,000
Bank of New York 10,000 9,985 10,000 10,000
Baxter International 5,000 4,971 5,000 5,000
Conagra Inc. 5,000 4,984 5,000 5,000
Daimler Benz North America Corp. 10,000 9,991 10,000 10,000
GTE Corporation 5,000 4,978 5,000 5,000
Merrill Lynch & Co. 5,000 4,975 5,000 5,000
R.R. Donnelley & Sons 10,000 9,996 10,000 10,000
Time Warner Inc. 5,000 4,971 5,000 5,000
Xerox Credit Corp. 5,000 4,990 5,000 5,000
-------- -------- -------- --------
75,000 74,748 75,000 75,000
-------- -------- -------- --------
Money Market Preferred Stock:
Bank America Corporation 1,000 1,187 1,100 1,000
Duff & Phelps Selected
Utilities 5,000 5,000 5,000 5,000
Elf Acquitaine Finance USA 7,500 7,500 7,500 7,500
Ford Holdings Inc. 5,900 5,925 5,934 5,900
Lasalle National Corp. 1,000 1,000 1,000 1,000
Lasmo Funding Corp. 5,000 5,000 5,000 5,000
Rhone Poulenc Equity
Development Inc. 5,000 5,000 5,000 5,000
Select Asset Funding 10,400 10,400 10,400 10,400
Texaco Inc. 10,750 10,804 10,763 10,750
-------- -------- -------- --------
51,550 51,816 51,697 51,550
-------- -------- -------- --------
U.S. Government and Agencies:
Federal Home Loan Bank 18,000 18,080 18,181 18,000
Federal Farm Credit 8,000 9,513 9,689 8,000
Federal Home Loan Mortgage Corp. 9,675 9,881 9,769 9,675
Federal National Mortgage
Association $ 44,000 $ 45,159 $ 45,260 $ 44,000
27<PAGE>
Amount
Market Carried
Cost Value in
Name of Issuer and Title of Principal of Each of Each Balance
Each Issue Amount Issue(a) Issue Sheet(a)
- --------------------------------- --------- -------- -------- --------
Student Loan Marketing
Association $ 2,000 $ 2,015 $ 2,015 $ 2,000
Overseas Private Investment Corp. 2,800 2,800 2,800 2,800
U.S. Treasury 7,000 6,919 7,098 7,000
CMO Agency Fund 20,903 20,903 21,162 20,903
-------- -------- -------- --------
112,378 115,270 115,974 112,378
-------- -------- -------- --------
Tax-exempt Securities:
Chicago Illinois School
Finance Authority 2,000 2,195 2,191 2,000
Intercapital Insured Trust 3,050 3,050 3,050 3,050
Intermountain Power Agency, Utah 2,000 2,206 2,196 2,000
La Grange, Georgia 1,330 1,483 1,370 1,330
Metro Atlantic Rapid Trust 1,000 1,098 1,097 1,000
Muniyield Fund Inc. 5,300 5,300 5,300 5,300
Muniyield New Jersey 8,000 7,991 8,002 8,000
Muniyield Quality IIC Inc. 5,000 4,997 5,005 5,000
Nuveen Insured Municipal
Fund Inc. 3,500 3,567 3,553 3,500
Nuveen Premier Income Fund 5,000 5,000 5,000 5,000
Nuveen Performance Plus Fund 3,000 3,000 3,003 3,000
Nuveen Quality Municipal Fund 3,300 3,307 3,332 3,300
Nuveen Municipal Advantage Fund 1,500 1,497 1,509 1,500
Nuveen California Quality Fund 1,700 1,694 1,709 1,700
Van Kempen Municipal Trust 4,500 4,493 4,534 4,500
-------- -------- -------- --------
50,180 50,878 50,851 50,180
-------- -------- -------- --------
Asset-backed Securities:
FHLMC-1232 Class B 5,000 4,939 5,034 5,000
FHLMC-1237 Series D 5,000 4,894 5,003 5,000
First Chicago Trust Series 93F 7,000 7,016 7,009 7,000
-------- -------- -------- --------
17,000 16,849 17,046 17,000
-------- -------- -------- --------
Other:
Common Stock 12,907 12,907 12,730 12,556
Bank Time Deposit 30,875 30,875 30,875 30,875
Whole Loan Repurchase Agreement 25,000 25,000 25,000 25,000
Government Money Market Cash 127,972 127,972 127,972 127,972
Money Market Cash 11,461 11,461 11,461 11,461
Cash in Bank Accounts 39,811 39,811 39,811 39,811
Other $ 3,106 $ 3,106 $ 3,106 $ 3,106
28<PAGE>
Amount
Market Carried
Cost Value in
Name of Issuer and Title of Principal of Each of Each Balance
Each Issue Amount Issue(a) Issue Sheet(a)
- --------------------------------- --------- -------- -------- --------
Accrued Interest $ 3,996 $ 3,996 $ 3,996 $ 3,996
Accrued Discount/Surplus - - - (4,171)
-------- -------- -------- --------
255,128 255,128 254,951 250,606
-------- -------- -------- --------
Total Cash, Cash Equivalents,
Short- and Long-term
Investments, and
Restricted Funds $782,446 $779,902 $781,398 $777,924
======== ======== ======== ========
(a) The cost of certain securities exceeds the amount carried on
the balance sheet due to the purchase of these securities at
a premium. "Accrued discount/surplus" represents the
unamortized discount/premium as of January 1, 1994.
29<PAGE>
SCHEDULE II
Thermo Electron Corporation
Amounts Receivable From Related Parties and
Underwriters, Promoters, and Employees
Other Than Related Parties
(In thousands)
Balance, Balance,
Beginning End of
Year Ended Name of Debtor(a) of Year Additions Deductions Year
- ----------------- ----------------- --------- --------- ---------- -------
January 1, 1994 Kenneth L. Wood $ 775 $ 450 $ - $1,225
Kenneth L. Wood $ 588 $ - $ - $ 588
January 2, 1993 Kenneth L. Wood $ - $ 775 $ - $ 775
Kenneth L. Wood $ 588 $ - $ - $ 588
December 28, 1991 Kenneth L. Wood $ 588 $ - $ - $ 588
(a) The $588,000 represents a noninterest bearing note receivable which is
payable to the Company's Thermo Process Systems Inc. subsidiary on
April 14, 1994. This amount is included in "Accounts receivable" in
the Consolidated Financial Statements included in the Registrant's 1993
Annual Report to Shareholders. The $1,225,000 represents a note
receivable which bears interest at the Broker Call Rate, minus 25 basis
points, and is payable to the Company on September 18, 1995. This note
is included in "Other Assets" in the Consolidated Financial Statements
included in the Registrant's 1993 Annual Report to Shareholders. These
notes were secured by a pledge of Thermo Process common stock and were
repaid in full in January 1994. As of January 1, 1994, Kenneth L. Wood
was an employee of Thermo Process.
30<PAGE>
SCHEDULE VIII
Thermo Electron Corporation
Valuation and Qualifying Accounts
(In thousands)
Year Ended January 1, 1994
Charged
Balance, to Accounts Balance,
Beginning Costs and Accounts Written End
Description of Year Expenses Other(a) Recovered Off of Year
- ------------------------------------------------------------------------------
Allowance for
Doubtful accounts $11,341 2,675 1,532 1,961 (3,380) $14,129
==============================================================================
Year Ended January 2, 1993
Charged
Balance, to Accounts Balance,
Beginning Costs and Accounts Written End
Description of Year Expenses Other(a) Recovered Off of Year
- ------------------------------------------------------------------------------
Allowance for
Doubtful accounts $10,865 2,021 1,760 144 (3,449) $11,341
==============================================================================
Year Ended December 28, 1991
Charged
Balance, to Accounts Balance,
Beginning Costs and Accounts Written End
Description of Year Expenses Other(a) Recovered Off of Year
- ------------------------------------------------------------------------------
Allowance for
Doubtful accounts $10,894 3,020 71 173 (3,293) $10,865
==============================================================================
(a) Allowances of businesses acquired during the year as
described in Note 2 to Consolidated Statements in the
Registrant's 1993 Annual Report to Shareholders.
31<PAGE>
SCHEDULE IX
Thermo Electron Corporation
Short-term Borrowings
(In thousands except percentages)
At Year-end During the Year
---------------- ---------------------------------
Weighted Weighted
Average Highest Average of Average
Category Interest Quarter-end Quarter-end Interest
Year Ended (a) Balance Rate Balance Balances Rate (b)
- ----------------- ------- -------- -------- ----------- ----------- --------
January 1, 1994 Bank $45,851 6.2% $45,851 $30,047 6.5%
January 2, 1993 Bank $22,034 7.6% $22,034 $13,341 9.5%
December 28, 1991 Bank $ 4,904 8.6% $ 6,750 $ 5,477 10.2%
(a) This schedule does not include current maturities of
long-term obligations.
(b) Calculations are based on the average daily interest rates in
effect during the periods the loans were outstanding.
- --------------------------------------------------------------------------------
SCHEDULE X
Thermo Electron Corporation
Supplemental Income Statement Information
(In thousands)
Year Ended
---------------------------------------------------
January 1, 1994 January 2, 1993 December 28, 1991
--------------- --------------- -----------------
Maintenance and Repairs $19,715 $14,604 $10,327
32<PAGE>
Exhibit
Number Description of Exhibit Page
- -----------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of the
Registrant, as amended (filed as Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3
[Reg. No. 33-64324] and incorporated herein by
reference).
3.2 By-laws of the Registrant, as amended.
4.1 Fiscal Agency Agreement dated July 29, 1992 between
the Registrant and Chemical Bank, pertaining to the
Registrant's 4 5/8% Senior Convertible Debentures
due 1997 (filed as Exhibit 19 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 27, 1992 [File No. 1-8002] and incorporated
herein by reference).
The Registrant agrees, pursuant to Item
601(b)(4)(iii)(A) of Regulation S-K, to furnish to
the Commission upon request, a copy of each
instrument with respect to other long-term debt of
the Registrant or its consolidated subsidiaries.
4.2 Rights Agreement dated as of May 4, 1988 between the
Registrant and The First National Bank of Boston,
which includes as Exhibit A the Form of Certificate
of Designations, as Exhibit B the Form of Rights
Certificate, and as Exhibit C the Summary of Rights
to Purchase Preferred Stock (filed as Exhibit 1 to
the Registrant's Registration Statement on Form 8-A,
declared effective by the Commission on June 25,
1988 [File No. 1-8002] and incorporated herein by
reference).
10.1 Thermo Electron Corporate Charter as amended and
restated effective January 3, 1993 (filed as
Exhibit 10.1 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by
reference).
10.2 Form of Severance Benefit Agreement with officers
(filed as Exhibit 10.15 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 29, 1990 [File No. 1-8002] and incorporated
herein by reference).
10.3 Form of Indemnification Agreement with directors and
officers (filed as Exhibit 10.16 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 29, 1990 [File No. 1-8002] and incorporated
herein by reference).
33<PAGE>
10.4 Loan and Reimbursement Agreement dated as of
December 1, 1991 among North County Resource
Recovery Associates; Union Bank of Switzerland;
National Westminster Bank PLC and Banque Paribas,
New York Branch, as lead managers; Credit Local de
France as co-lead manager; and Union Bank of
Switzerland as issuing bank and as agent (filed as
Exhibit 10.39 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by
reference).
10.5 Amended and Restated Reimbursement Agreement dated
as of December 31, 1993 among Chemical Trust Company
of California as Owner Trustee; Delano Energy
Company Inc.; ABN AMRO Bank N.V., Boston Branch, for
itself and as Agent; The First National Bank of
Boston, as Co-agent; Barclays Bank PLC, as Co-agent;
Societe Generale, as Co-agent; and BayBank, as Lead
Manager.
10.6 Amended and Restated Participation Agreement dated
as of December 31, 1991 among Delano Energy Company
Inc.; Thermo Energy Systems Corporation; Chemical
Trust Company of California, as Owner Trustee; ABN
AMRO Bank N.V., Boston Branch, as Co-agent; Bank of
Montreal, as Co-agent; Barclays Bank PLC, as
Co-agent; Society Generale, as Co-agent; BayBank, as
Lead Manager; and ABN AMRO Bank N.V., Cayman Island
Branch, and joined in by the Registrant.
10.7 Asset and Stock Purchase Agreement dated January 14,
1993 among Thermo Instrument Systems Inc.,
Spectra-Physics Analytical, Inc. and
Spectra-Physics, Inc. (filed as Exhibit 10(j) to the
Annual Report on Form 10-K of Thermo Instrument
Systems Inc. for the year ended January 2, 1993
[File No. 1-9786] and incorporated herein by
reference).
10.8-
10.20 Reserved
10.21 Incentive Stock Option Plan of the Registrant (filed
as Exhibit 4(d) to the Registrant's Registration
Statement on Form S-8 [Reg. No. 33-8993] and
incorporated herein by reference). (Maximum number
of shares issuable is 6,023,437 shares, after
adjustment to reflect share increases approved in
1984 and 1986, and share decrease approved in 1989,
and 3-for-2 stock splits effected in October 1986
and October 1993).
34<PAGE>
10.22 Nonqualified Stock Option Plan of the Registrant
(filed as Exhibit 4(e) to the Registrant's
Registration Statement on Form S-8 [Reg. No.
33-8993] and incorporated herein by reference).
(Plan amended in 1984 to extend expiration date to
December 14, 1994; maximum number of shares issuable
is 6,023,437 shares, after adjustment to reflect
share increases approved in 1984 and 1986, and share
decrease approved in 1989, and 3-for-2 stock splits
effected in October 1986 and October 1993).
10.23 Deferred Compensation for Directors of the
Registrant (filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1987 [File No. 1-8002]
and incorporated herein by reference). (Maximum
number of shares issuable is 301,875 shares, after
adjustment to reflect share increases approved in
1986 and 1992 and 3-for-2 stock splits effected in
October 1986 and October 1993).
10.24 Equity Incentive Plan of the Registrant (filed as
Exhibit A to the Registrant's Proxy Statement dated
April 12, 1989 [File No. 1-8002] and incorporated
herein by reference). (Plan amended in 1989 to
restrict exercise price for SEC reporting persons to
not less than 50% of fair market value or par value;
maximum number of shares issuable is 2,700,000
shares, after adjustment to reflect 3-for-2 stock
split effected in October 1993).
10.25 Directors' Stock Option Plan of the Registrant
(filed as Appendix A to the Registrant's Proxy
Statement dated April 14, 1993 [File No. 1-8002] and
incorporated herein by reference). (Adjustments to
reserved shares and formula grant to reflect stock
split as follows: 300,000 shares of Thermo Electron
Corporation reserved and option grant size is 1,500
shares as a result of 3-for-2 stock split effected
in October 1993).
10.26 Thermo Electron Corporation - Thermedics Inc.
Nonqualified Stock Option Plan (filed as Exhibit 4
to a Registration Statement on Form S-8 of
Thermedics Inc. [Reg. No. 2-93747] and incorporated
herein by reference). (Maximum number of shares
issuable is 450,000 shares, after adjustment to
reflect share increase approved in 1988, 5-for-4
stock split effected in January 1985, 4-for-3 stock
split effected in September 1985, and 3-for-2 stock
splits effected in October 1986 and November 1993).
35<PAGE>
10.27 Thermo Electron Corporation - Thermo Instrument
Systems Inc. (formerly Thermo Environmental
Corporation) Nonqualified Stock Option Plan (filed
as Exhibit 4(c) to a Registration Statement on Form
S-8 of Thermo Instrument Systems Inc. [Reg. No.
33-8034] and incorporated herein by reference).
(Maximum number of shares issuable is 225,000
shares, after adjustment to reflect 3-for-2 stock
split effected in July 1993).
10.28 Thermo Electron Corporation - Thermo Instrument
Systems Inc. Nonqualified Stock Option Plan (filed
as Exhibit 10.12 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended January 3,
1987 [File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is
320,152 shares, after giving effect to share
increase approved in 1988 and adjustment for 3-for-2
stock splits effected in January 1988 and July
1993).
10.29 Thermo Electron Corporation - Thermo Process Systems
Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.13 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 3, 1987
[File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is
108,000 shares, after adjustment to reflect 6-for-5
stock splits effected in July 1988 and March 1989,
and 3-for-2 stock split effected in September 1989).
10.30 Thermo Electron Corporation - Thermo Power
Corporation (formerly Tecogen Inc.) Nonqualified
Stock Option Plan (filed as Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 3, 1987 [File No. 1-8002]
and incorporated herein by reference).
10.31 Thermo Electron Corporation - Thermo Cardiosystems
Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.11 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29,
1990 [File No. 1-8002] and incorporated herein by
reference). (Maximum number of shares issuable is
130,500 shares, after adjustment to reflect share
increases approved in 1990 and 1992, 3-for-2 stock
split effected in January 1990, 5-for-4 stock split
effected in May 1990, and 2-for-1 stock split
effected in November 1993).
10.32 Thermo Electron Corporation - Thermo Energy Systems
Corporation Nonqualified Stock Option Plan (filed as
Exhibit 10.12 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29,
1990 [File No. 1-8002] and incorporated herein by
reference).
36<PAGE>
10.33 Thermo Electron Corporation - ThermoTrex Corporation
(formerly Thermo Electron Technologies Corporation)
Nonqualified Stock Option Plan (filed as Exhibit
10.13 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 29, 1990 [File
No. 1-8002] and incorporated herein by reference).
(Maximum number of shares issuable is 180,000
shares, after adjustment to reflect 3-for-2 stock
split effected in October 1993).
10.34 Thermo Electron Corporation - Thermo Fibertek Inc.
Nonqualified Stock Option Plan (filed as Exhibit
10.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 28, 1991 [File
No. 1-8002] and incorporated herein by reference).
(Maximum number of shares issuable is 400,000
shares, after adjustment to reflect 2-for-1 stock
split effected in September 1992).
10.35 Thermo Electron Corporation - Thermo Voltek Corp.
(formerly Universal Voltronics Corp.) Nonqualified
Stock Option Plan (filed as Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-8002]
and incorporated herein by reference). (Maximum
number of shares issuable is 37,500 shares, after
adjustment to reflect 3-for-2 stock split effected
in November 1993).
10.36 Thermo Electron Corporation - Thermedics Detection
Inc. Nonqualified Stock Option Plan (filed as
Exhibit 10.20 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended January 2, 1993
[File No. 1-8002] and incorporated herein by
reference).
10.37 Thermo Energy Systems Corporation Incentive Stock
Option Plan (filed as Exhibit 10.18 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-8002]
(Maximum number number of shares issuable is 900,000
shares, after adjustment to reflect share increase
approved in December 1993).
10.38 Thermo Energy Systems Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.19 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended January 2, 1993 [File No. 1-8002]
and incorporated herein by reference). (Maximum
number of shares issuable is 900,000 shares, after
giving effect to share increase approved in December
1993).
37<PAGE>
10.39 Thermedics Inc. Nonqualified Stock Option Plan
(filed as Exhibit 10(e) to Thermedics' Registration
Statement on Form S-1 [Reg. No. 33-84380] and
incorporated herein by reference). (Maximum number
of shares issuable is 1,931,923 shares, after
adjustment to reflect share increases approved in
1986 and 1992, 5-for-4 stock split effected in
January 1985, 4-for-3 stock split effected in
September 1985, and 3-for-2 stock splits effected in
October 1986 and November 1993).
10.40 Thermedics Inc. Incentive Stock Option Plan (filed
as Exhibit 10(d) to Thermedics' Registration
Statement on Form S-1 [Reg. No. 33-84380] and
incorporated herein by reference). (Maximum number
of shares issuable is 1,931,923 shares, after
adjustment to reflect share increases approved in
1986 and 1992, 5-for-4 stock split effected in
January 1985, 4-for-3 stock split effected in
September 1985, and 3-for-2 stock splits effected in
October 1986 and November 1993).
10.41 Thermedics Inc. Equity Incentive Plan (filed as
Appendix A to the Proxy Statement dated May 10, 1993
of Thermedics Inc. [File No. 1-9567] and
incorporated herein by reference). (Maximum number
of shares issuable is 1,500,000 shares, after
adjustment to reflect 3-for-2 stock split effected
in November 1993).
10.42 Thermo Cardiosystems Inc. Incentive Stock Option
Plan (filed as Exhibit 10(f) to Thermo
Cardiosystems' Registration Statement on Form S-1
[Reg. No. 33-25144] and incorporated herein by
reference). (Maximum number of shares issuable is
1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split
effected in January 1990, 5-for-4 stock split
effected in May 1990, and 2-for-1 stock split
effected in November 1993).
10.43 Thermo Cardiosystems Inc. Nonqualified Stock Option
Plan (filed as Exhibit 10(g) to Thermo
Cardiosystems' Registration Statement on Form S-1
[Reg. No. 33-25144] and incorporated herein by
reference). (Maximum number of shares issuable is
1,143,750 shares, after adjustment to reflect share
increase approved in 1992, 3-for-2 stock split
effected in January 1990, 5-for-4 stock split
effected in May 1990, and 2-for-1 stock split
effected in November 1993).
38<PAGE>
10.44 Thermo Voltek Corp. (formerly Universal Voltronics
Corp.) 1985 Stock Option Plan (filed as Exhibit
10.14 to Thermo Voltek's Annual Report on Form 10-K
for the fiscal year ended June 30, 1985 [File No.
0-8245] and incorporated herein by reference).
(Maximum number of shares issuable is 200,000
shares, after adjustment to reflect 1-for-3 reverse
stock split effected in November 1992 and 3-for-2
stock split effected in November 1993).
10.45 Thermo Voltek Corp. (formerly Universal Voltronics
Corp.) 1990 Stock Option Plan (filed as Exhibit 10.2
to Thermo Voltek's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990 [File No.
1-10574] and incorporated herein by reference).
(Maximum number of shares issuable is 400,000
shares, after adjustment to reflect share increase
in 1993, 1-for-3 reverse stock split effected in
November 1992, and 3-for-2 stock split effected in
November 1993).
10.46 Thermo Instrument Systems Inc. Incentive Stock
Option Plan (filed as Exhibit 10(c) to Thermo
Instrument's Registration Statement on Form S-1
[Reg. No. 33-6762] and incorporated herein by
reference). (Maximum number of shares issuable is
1,500,000 shares, after adjustment to reflect share
increase approved in 1990 and 3-for-2 stock splits
effected in January 1988 and July 1993).
10.47 Thermo Instrument Systems Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10(d) to Thermo
Instrument's Registration Statement on Form S-1
[Reg. No. 33-6762] and incorporated herein by
reference). (Maximum number of shares issuable is
1,500,000 shares, after adjustment to reflect share
increase approved in 1990 and 3-for-2 stock splits
effected in January 1988 and July 1993).
10.48 Thermo Instrument Systems Inc. Equity Incentive Plan
(filed as Appendix A to the Proxy Statement dated
April 27, 1993 of Thermo Instrument Systems Inc.
[File No. 1-9786] and incorporated herein by
reference). (Maximum number of shares issuable is
2,150,000 shares, after adjustment to reflect share
increase approved in December 1993 and 3-for-2 stock
split effected in July 1993).
10.49 Thermo Instrument Systems Inc. (formerly Thermo
Environmental Corporation) Incentive Stock Option
Plan (filed as Exhibit 10(d) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable is
618,750 shares, after giving effect to share
increase approved in 1987 and adjustment to reflect
3-for-2 stock split effected in July 1993).
39<PAGE>
10.50 Thermo Instrument Systems Inc. (formerly Thermo
Environmental Corporation) Nonqualified Stock Option
Plan (filed as Exhibit 10(e) to Thermo
Environmental's Registration Statement on Form S-1
[Reg. No. 33-329] and incorporated herein by
reference). (Maximum number of shares issuable is
618,750 shares, after giving effect to share
increase approved in 1987 and adjustment to reflect
3-for-2 stock split effected in July 1993).
10.51 ThermoTrex Corporation (formerly Thermo Electron
Technologies Corporation) Incentive Stock Option
Plan (filed as Exhibit 10(h) to ThermoTrex's
Registration Statement on Form S-1 [Reg. No.
33-40972] and incorporated herein by reference).
(Maximum number of shares issuable is 1,945,000
shares, after giving effect to share increases
approved in 1992 and 1993, and 3-for-2 stock split
effected in October 1993).
10.52 ThermoTrex Corporation (formerly Thermo Electron
Technologies Corporation) Nonqualified Stock Option
Plan (filed as Exhibit 10(i) to ThermoTrex's
Registration Statement on Form S-1 [Reg. No.
33-40972] and incorporated herein by reference).
(Maximum number of shares issuable is 1,945,000
shares, after giving effect to share increases
approved in 1992 and 1993, and 3-for-2 stock split
effected in October 1993).
10.53 ThermoTrex Corporation - ThermoLase Inc.
Nonqualified Stock Option Plan (filed as Exhibit
10.53 to ThermoTrex Corporation's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994
[File No. 1-10791] and incorporated herein by
reference).
10.54 ThermoLase Inc. Nonqualified Stock Option Plan
(filed as Exhibit 10.54 to ThermoTrex Corporation's
Annual Report on Form 10-K for the fiscal year ended
January 1, 1994 [File No. 1-10791] and incorporated
herein by reference).
10.55 ThermoLase Inc. Incentive Stock Option Plan (filed
as Exhibit 10.55 to ThermoTrex Corporation's Annual
Report on Form 10-K for the fiscal year ended
January 1, 1994 [File No. 1-10791] and incorporated
herein by reference).
10.56 Thermo Fibertek Inc. Incentive Stock Option Plan
(filed as Exhibit 10(k) to Thermo Fibertek's
Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
10.57 Thermo Fibertek Inc. Nonqualified Stock Option Plan
(filed as Exhibit 10(l) to Thermo Fibertek's
Registration Statement on Form S-1 [Reg. No.
33-51172] and incorporated herein by reference).
40<PAGE>
10.58 Thermo Power Corporation (formerly Tecogen Inc.)
Incentive Stock Option Plan (filed as Exhibit 10(h)
to Thermo Power's Registration Statement on Form S-1
[Reg. No. 33-14017] and incorporated herein by
reference). (Maximum number of shares issuable is
950,000 shares, after adjustment to reflect share
increases approved in 1990, 1992, and 1993).
10.59 Thermo Power Corporation (formerly Tecogen Inc.)
Nonqualified Stock Option Plan (filed as Exhibit
10(i) to Thermo Power's Registration Statement on
Form S-1 [Reg. No. 33-14017] and incorporated herein
by reference). (Maximum number of shares issuable is
950,000 shares, after giving effect to share
increases approved in 1990, 1992, and 1993).
10.60 Thermo Power Corporation Equity Incentive Plan
(filed as Appendix A to the Proxy Statement dated
February 8, 1994 of Thermo Power Corporation [File
No. 1-10573] and incorporated herein by reference).
10.61 Thermo Process Systems Inc. Incentive Stock Option
Plan (filed as Exhibit 10(h) to Thermo Process'
Registration Statement on Form S-1 [Reg. No.
33-6763] and incorporated herein by reference).
(Maximum number of shares issuable is 1,850,000
shares, after adjustment to reflect share increases
approved in 1987, 1989, and 1992, 6-for-5 stock
splits effected in July 1988 and March 1989, and
3-for-2 stock split effected in September 1989).
10.62 Thermo Process Systems Inc. Nonqualified Stock
Option Plan (filed as Exhibit 10(i) to Thermo
Process' Registration Statement on Form S-1 [Reg.
No. 33-6763] and incorporated herein by reference).
(Maximum number of shares issuable is 1,850,000
shares, after adjustment to reflect share increases
approved in 1987, 1989, and 1992, 6-for-5 stock
splits effected in July 1988 and March 1989, and
3-for-2 stock split effected in September 1989).
10.63 Thermo Process Systems Inc. Equity Incentive Plan
(filed as Exhibit 10.63 to Thermedics' Annual Report
on Form 10-K for the year ended January 1, 1994
[File No. 1-9567] and incorporated herein by
reference).
10.64 Thermo Process Systems Inc. - Thermo Remediation
Nonqualified Stock Option Plan (filed as Exhibit
10(l) to Thermo Process Systems Inc.'s Quarterly
Report on Form 10-Q for the fiscal quarter ended
January 1, 1994 [File No. 1-9549] and incorporated
herein by reference).
10.65 Thermo Remediation Inc. Equity Incentive Plan (filed
as Exhibit 10.7 to Thermo Remediation's Registration
Statement on Form S-1 [Reg. No. 33-70544] and
incorporated herein by reference).
41<PAGE>
11 Statements re: computation of earnings per share.
13 Annual Report to shareholders (only those portions
of the Registrant's Annual Report to Shareholders
incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen & Co.
42<PAGE>
Exhibit 3.2
Revised 12/93
THERMO ELECTRON CORPORATION
BY-LAWS
TABLE OF CONTENTS
Title Page
Article I - Offices ...................................................1
Article II - Stockholders .............................................1
Section 1. Annual Meeting ......................................1
Section 2. Special Meetings ....................................1
Section 3. Notice of Meetings ..................................1
Section 4. Quorum ..............................................2
Section 5. Voting ..............................................2
Section 6. Presiding Officer and Secretary .....................2
Section 7. Proxies .............................................2
Section 8. Judges ..............................................2
Section 9. List of Stockholders ................................3
Article III- Directors ................................................
................................................
................................................3
Section 1. Number, Election and Tenure .........................3
Section 2. Vacancies ...........................................3
Section 3. Resignations ....................................... 4
Section 4. Meetings ............................................4
Section 5. Quorum ..............................................4
Section 6. Compensation of Directors ...........................4
Section 7. Committees ..........................................5
<PAGE>
Title Page
Article IV - Officers and Agents ......................................5
Section 1. General Provisions ..................................5
Section 2. The President .......................................5
Section 3. Vice Presidents .....................................6
Section 4. Chief Financial Officer .............................6
Section 5. The Treasurer ......................................6
Section 6. The Secretary .......................................6
Section 7. Assistant Treasurer .................................7
Section 8. Assistant Secretary .................................7
Section 9. Other Officers ......................................7
Section 10. Delegation of Duties ................................7
Article V - Capital Stock .............................................7
Section 1. Certificates for Shares .............................7
Section 2. Transfer of Shares of Stock .........................7
Section 3. Lost, Stolen or Destroyed Certificates ..............8
Section 4. Closing of Transfer Books; Record Date ..............8
Section 5. Maintenance of Stock Ledger .........................8
Article VI - Seal .....................................................9
Article VII - Waiver ..................................................9
Article VIII - Checks, Notes, Drafts, etc. ............................9
Article IX - Amendments ...............................................9
<PAGE>
THERMO ELECTRON CORPORATION
BY-LAWS
ARTICLE I - OFFICES
The principal office of the Corporation in the State of Delaware is located
at 100 West Tenth Street in the City of Wilmington, County of New Castle, State
of Delaware, and the name of the resident agent in charge thereof is called The
Corporation Trust Company. The Corporation may also have offices at such other
places, within or without the State of Delaware, as the Board of Directors may
from time to time determine.
ARTICLE II - STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting shall be held in the
Corporation's offices in Waltham, Massachusetts, or at such other place within
or without the State of Delaware, and at such time, as may be specified in the
notice of meeting or waiver thereof, on the second Wednesday in May in each year
or on such other date within six months of the end of the Corporation's fiscal
year as may be fixed by the Board of Directors.
Section 2. Special Meetings. A special meeting of the stockholders of the
Corporation, unless otherwise regulated by statute, may be called by the
President and shall be called by the President, the Secretary or an Assistant
Secretary when directed to do so by resolution of the Board of Directors at a
duly convened meeting of the Board, or at the request in writing of a majority
of the Board of Directors. Such request shall state the purpose or purposes of
the proposed meeting. On failure of any officer above specified to call such
special meeting when duly requested, the signers of such request may call such
special meeting over their own signatures. Special meetings shall be held at
such place within or without the State of Delaware as may be specified in the
call thereof. Business transacted at all special meetings shall be confined to
the objects stated in the call.
Section 3. Notice of Meetings. Written notice of every meeting of the
stockholders shall be served by the Secretary or an Assistant Secretary, either
personally or by mail upon each stockholder of record entitled to vote at such
meeting, at least ten days before the meeting. If mailed, the notice of a
meeting shall be directed to a stockholder at his last known post office
address. The notice of every meeting of the stockholders shall state the
purpose or purposes for which the meeting is called and the time when and the
place where it is to be held.
1<PAGE>
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, at any meeting of the stockholders there must be
present in person or by proxy the holders of record of a majority of all shares
of stock issued and outstanding and entitled to vote upon any question to be
considered at the meeting in order to constitute a quorum for the transaction of
any business, but a lesser interest may adjourn the meeting from time to time
without notice other than announcement at the meeting until a quorum be present,
and thereupon any business may be transacted at the adjourned meeting which
might have been transacted at the meeting originally called. Except as
otherwise provided by law, or by the Certificate of Incorporation or by these
By-Laws, the vote of a majority of the shares present and entitled to vote at a
meeting shall decide any question brought before such meeting.
Section 5. Voting. At every meeting of the stockholders, except as may be
otherwise provided in the Certificate of Incorporation or in these By-Laws,
every stockholder of the Corporation entitled to vote thereat shall be entitled
to one vote for each share of stock entitled to vote standing in his name on the
books of the Corporation at the time of the meeting, or, if a record date shall
have been fixed as hereinafter provided, on such record date; but, except where
the transfer books of the Corporation shall have been closed or a record date
shall have been fixed, no share of stock shall be voted on at any election for
directors which shall have been transferred on the books of the Corporation
within 20 days next preceding such election of directors. No person may be
elected a director unless his name shall have first been put before the meeting
or the stockholders by nomination of one of the stockholders. Upon the demand
of any stockholder entitled to vote, the vote for directors, or the vote upon
any question before a meeting, shall be by ballot, but otherwise the method of
voting shall be discretionary with the presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all meetings of the
stockholders, the President of the Corporation, or in his absence a Vice
President or if none be present, the appointee of the meeting, shall preside.
The Secretary of the Corporation, or in his absence an Assistant Secretary, or
if none be present the appointee of the Presiding Officer of the meeting, shall
act as Secretary of the meeting.
Section 7. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy, but no proxy shall be voted
on after three years from its date, unless such proxy provides for a longer
period. Every proxy must be executed in writing by the stockholder himself, or
by his duly authorized attorney, and dated, but need not be sealed, witnessed or
acknowledged. Proxies shall be delivered to the Secretary of the Corporation
before the meeting or to the Judges at the meeting.
Section 8. Judges. At each meeting of the stockholders at which the vote
for directors or the vote upon any question before the meeting is taken by
ballot, the polls shall be opened and closed by, and the proxies and ballots
shall be received and taken in charge by, and all questions touching on the
qualifications of voters and the validity of proxies and the acceptance and
rejection of the same shall be decided by two Judges. Such Judges may be
appointed by the Board of Directors before the meeting, but if no such
appointment shall have been made, they shall be appointed by the meeting. If
for any reason any Judge previously appointed shall fail to
2<PAGE>
attend or refuse or be unable to serve, a Judge in his place shall be appointed
by the meeting. Any appointment of Judges by the meeting shall be by per capita
vote of the stockholders present and entitled to vote.
Section 9. List of Stockholders. At least ten days prior to every election
of directors a complete list of the stockholders entitled to vote at such
election, arranged in alphabetical order and indicating the number of voting
shares held by each, shall be prepared and certified by the Secretary or an
Assistant Secretary. Such list shall be filed at the place where the election
is to be held and shall, at all times during the usual hours for business and
during the whole time of said election, be opened to the examination of any
stockholder.
ARTICLE III - DIRECTORS
Section 1. Number, Election and Tenure. Except as may be otherwise
specifically provided by law, the Restated Certificate of Incorporation or by
these By-Laws, the power, business, property and affairs of the Corporation
shall be exercised and managed by a board of directors which shall consist of
not less than eight or more than twelve directors. Within such limit, the number
of directors shall be determined by resolution of the board of directors. The
board of directors shall be divided into three classes as nearly as equal in
number as possible. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible. Such classes shall consist
of one class of directors who shall be elected for a three-year term expiring at
the annual meeting of stockholders held in 1986; a second class of directors who
shall be elected for a three-year term expiring at the annual meeting of
stockholders held in 1987; and a third class of directors who shall be elected
for a three-year term expiring at the annual meeting of stockholders held in
1988. At each annual meeting of stockholders beginning in 1986, the successors
of the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, or until his earlier death, resignation, retirement,
disqualification or removal. Except as provided in Section 2 of this Article,
directors shall be elected by a plurality of the votes cast at the annual
meeting of stockholders. No director need be a stockholder.
Section 2. Vacancies. Any vacancy on the Board of Directors that results
from an increase in the number of directors may be filled only by a majority of
the Board of Directors then in office, provided that a quorum is present, and
any other vacancy occurring in the Board of Directors may be filled only by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall be elected for the same
remaining term as that of his predecessor in office. Any additional director of
any class elected to fill a vacancy resulting from an increase in any such class
shall hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director.
3<PAGE>
Section 3. Resignations. Any director may resign from his office at any
time by delivering his resignation in writing to the Corporation, and the
acceptance of such resignation, unless required by the terms thereof, shall not
be necessary to make such resignation effective.
Section 4. Meetings. The Board of Directors may hold its meetings in such
place or places within or without the State of Delaware as the Board from time
to time by resolution may determine or as shall be specified in the respective
notices or waivers of notice thereof, and the directors may adopt such rules and
regulations for the conduct of their meetings and the management of the
Corporation, not inconsistent with these By-Laws, as they may deem proper. An
annual meeting of the Board for the election of officers shall be held within
three days following the day on which the annual meeting of the stockholders for
the election of directors shall have been held. The Board of Directors from
time to time by resolution may fix a time and place (or varying times and
places) for the annual and other regular meetings of the Board; provided, that,
unless a time and place is so fixed for any annual meeting of the Board, the
same shall be held immediately following the annual meeting of the stockholders
at the same place at which such meeting shall have been held. No notice of the
annual or other regular meetings of the Board need be given. Other meetings of
the Board of Directors shall be held whenever called by the President or by any
two of the directors for the time being in office; and the Secretary or an
Assistant Secretary shall give notice of each such meeting to each director by
mailing the same not later than the second day before the meeting, or personally
or by telegraphing, cabling or telephoning the same not later than the day
before the meeting. No notice of a meeting need be given if all directors are
present in person. Any business may be transacted at any meeting of the Board
of Directors, whether or not specified in a notice of the meeting. Any action
required or permitted to be taken at any meeting of the Board of Directors may
be taken without a meeting, if prior to such action a written consent thereto is
signed by all members of the Board, and such written consent is filed with the
minutes of proceedings of the Board.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Restated Certificate of Incorporation or these By-Laws, at all meetings
of the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors. If there be less than a quorum at any meeting of the
Board of Directors, a majority of those present (or if only one be present, then
that one) may adjourn the meeting from time to time, without notice other than
announcement at the meeting which shall be so adjourned, until a quorum shall be
present.
Section 6. Compensation of Directors. The Board of Directors shall have
the power to fix the compensation of directors and members of committees of the
Board. The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors, as well as a stated salary as director.
No such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings.
4<PAGE>
Section 7. Committees. The Board of Directors may, by resolution or
resolutions, passed by a majority of the whole Board, from time to time
designate an Executive Committee and such other committee or committees as it
may determine, each committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in said resolution or resolutions,
shall have and may exercise any powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may have the
power to authorize the seal of the corporation to be affixed to all papers which
may require it. Any action required or permitted to be taken at any meeting of
the committee may be taken without a meeting, if prior to such action a written
consent thereto is signed by all members of such committee, and such written
consent is filed with the minutes of proceedings of the committee.
ARTICLE IV - OFFICERS AND AGENTS
Section 1. General Provisions. The officers of the Corporation shall be a
President, a Chief Financial Officer, a Treasurer and a Secretary, and may
include one or more Vice Presidents, one or more Assistant Treasurers and one or
more Assistant Secretaries, all of whom shall be appointed by the Board of
Directors as soon as may be after the election of directors in each year. The
President shall be chosen from among the directors. Any two offices, except
those of President and Vice President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity if such instrument is required by law or by these By-Laws to be
executed, acknowledged or verified by any two or more officers. Each of such
officers shall serve until the annual meeting of the Board of Directors next
succeeding his appointment and until his successor shall have been chosen and
shall have qualified. The Board of Directors may appoint such officers, agents
and employees as it may deem necessary or proper, who shall respectively have
such authority and perform such duties as may from time to time be prescribed by
the Board of Directors. All officers, agents and employees appointed by the
Board of Directors shall be subject to removal at any time by the affirmative
vote of a majority of the whole Board. Other agents and employees may be
removed at any time by the Board of Directors, by the officer appointing them,
or by any other superior upon whom such power of removal may be conferred by the
Board of Directors. The salaries of the officers of the Corporation shall be
fixed by the Board of Directors, but this power may be delegated to any officer.
Section 2. The President. The President shall be the principal executive
officer of the Corporation and shall preside at all meetings of the stockholders
and of the Board of Directors. Subject to the control of the Board of Directors,
he shall have general charge of the business and affairs of the Corporation and
shall keep the Board fully advised. At the direction of the Board of Directors,
he shall have power in the name of the Corporation and on its behalf to execute
any and all deeds, mortgages, contracts, agreements and other instruments in
writing. He shall employ and discharge employees and agents of the Corporation,
except such as shall hold their offices by appointment of the Board of
Directors, but he may delegate these powers to other officers as to employees
under their immediate supervision. He shall have such powers and perform such
duties as generally pertain to the office of President, as well as such further
powers and duties as may be prescribed by the Board of Directors. The President
shall have full power
5<PAGE>
and authority on behalf of the Corporation to execute any stockholders' consents
and to attend and act and to vote in person or by proxy at any meetings of
stockholders of any corporation in which the Corporation may own stock, and at
any such meeting shall possess and may exercise any and all of the rights and
powers incident to the ownership of such stock and which, as the owner thereof,
the Corporation might have possessed and exercised if present. The Board of
Directors, by resolution from time to time, may confer like powers upon any
other person or persons.
Section 3. Vice Presidents. Each Vice President shall have such powers and
perform such duties as the Board of Directors or the President may from time to
time prescribe, and shall perform such other duties as may be prescribed in
these By-Laws. In the absence or inability to act of the President, the Vice
President next in order as designated by the Board of Directors or, in the
absence of such designation, senior in length of service in such capacity who
shall be present and able to act, shall perform all the duties and may exercise
any of the powers of the President, subject to the control of the Board of
Directors. The performance of any duty by a Vice President shall be conclusive
evidence of his power to act.
Section 4. Chief Financial Officer. The Board of Directors shall designate
the President or a Vice President to serve as the Chief Financial Officer of the
Corporation. The Chief Financial Officer shall be responsible for the financial
records and affairs of the Corporation and shall have such further powers and
duties as are incident to the position of Chief Financial Officer, subject to
the direction of the President and the Board of Directors. The Chief Financial
Officer shall supervise the activities of the Treasurer of the Corporation, who
shall be subordinate to and report to the Chief Financial Officer. The Chief
Financial Officer shall perform such of the duties of the President on behalf of
the Corporation as may be assigned to him from time to time by the Board of
Directors, the Chairman of the Board or the President.
Section 5. The Treasurer. The Treasurer shall have the care and custody of
all funds and securities of the Corporation which may come into his hands and
shall deposit the same to the credit of the Corporation in such bank or banks or
other depository or depositories as the Board of Directors may designate. He
may endorse all commercial documents requiring endorsements for or on behalf of
the Corporation and may sign all receipts and vouchers for payments made to the
Corporation. He shall be subordinate to and responsible to the President or
Vice President who is designated Chief Financial Officer by the Board of
Directors. He shall render an account of his transactions to the Board of
Directors as often as they shall require the same and shall at all reasonable
times exhibit his books and accounts to any director; shall cause to be entered
regularly in books kept for that purpose full and accurate account of all moneys
received and paid by him on account of the Corporation; and shall have such
further powers and duties as are incident to the position of Treasurer, subject
to the control of the Board of Directors. He may be required by the Board of
Directors to give a bond for the faithful discharge of his duties in such sum
and with such surety as the Board may require.
Section 6. The Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders and shall attend to
the giving and serving of all notices of the Corporation. He shall have custody
of the seal of the Corporation and shall affix the seal
6<PAGE>
to all certificates of shares of stock of the Corporation and to such other
papers or documents as may be proper and, when the seal is so affixed, he shall
attest the same by his signature wherever required. He shall have charge of the
stock certificate book, transfer book and stock ledger, and such other books and
papers as the Board of Directors may direct. He shall, in general, perform all
the duties of Secretary, subject to the control of the Board of Directors.
Section 7. Assistant Treasurers. In the absence or inability of the
Treasurer to act, any Assistant Treasurer may perform all the duties and
exercise all of the powers of the Treasurer, subject to the control of the Board
of Directors. The performance of any such duty shall be conclusive evidence of
his power to act. An Assistant Treasurer shall also perform such other duties
as the Treasurer or the Board of Directors may from time to time assign to him.
Section 8. Assistant Secretaries. In the absence or inability of the
Secretary to act, any Assistant Secretary may perform all the duties and
exercise all the powers of the Secretary, subject to the control of the Board of
Directors. The performance of any such duty shall be conclusive evidence of his
power to act. An Assistant Secretary shall also perform such other duties as
the Secretary or the Board of Directors may from time to time assign to him.
Section 9. Other Officers. Other officers shall perform such duties and
have such powers as may from time to time be assigned to them by the Board of
Directors.
Section 10. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer, for the time being, the powers or duties, or any of them, of
such officer upon any other officer, or upon any director.
ARTICLE V - CAPITAL STOCK
Section 1. Certificate for Shares. Certificates for shares of stock of
the Corporation certifying the number and class of shares owned shall be issued
to each stockholder in such form not inconsistent with the Certificate of
Incorporation and these By-Laws, as shall be approved by the Board of Directors.
The certificates for the shares of each class shall be numbered and registered
in the order in which they are issued and shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and the seal of the Corporation shall be affixed
thereto. All certificates exchanged or returned to the Corporation shall be
cancelled.
Section 2. Transfer of Shares of Stock. Transfers of shares shall be made
only upon the books of the Corporation by the holder, in person or by attorney
lawfully constituted in writing, and on the surrender of the certificate or
certificates for such shares properly assigned. The Board of Directors shall
have the power to make all such rules and regulations, not inconsistent with the
Certificate of Incorporation and these By-Laws, as they may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
7<PAGE>
Section 3. Lost, Stolen or Destroyed Certificates. The Board of Directors,
in their discretion, may require the owner of any certificate of stock alleged
to have been lost, stolen or destroyed, or his legal representatives, to give
the Corporation a bond in such sum as they may direct, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate, as a condition of
the issue of a new certificate of stock in the place of any certificate
theretofore issued alleged to have been lost, stolen or destroyed. Proper and
legal evidence of such loss, theft or destruction shall be procured for the
Board, if required. The Board of Directors, in their discretion, may refuse to
issue such new certificate, save upon the order of some court having
jurisdiction in such matters.
Section 4. Closing of Transfer Books: Record Date. The Board of Directors
shall have power to close the stock transfer books of the Corporation for a
period not exceeding 50 days preceding the date of any meeting of stockholders
or the date for payment of any dividend or the date for allotment of rights or
the date when any change or conversion or exchange of capital stock shall go
into effect or for a period of not exceeding 50 days in connection with
obtaining the consent of stockholders for any purpose; provided, however, that
in lieu of closing the stock transfer books as aforesaid, the Board of Directors
may fix in advance a date, not exceeding 50 days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining such consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend, or to receive such allotment of rights, or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. Maintenance of Stock Ledger. The original or a duplicate stock
ledger containing the names and addresses of the stockholders, and the number of
shares held by them, respectively, shall at all times, during the usual hours
for business, be open to the examination of every stockholder at the principal
office or place of business of the Corporation in the State of Delaware.
ARTICLE VI - SEAL
The seal of the Corporation shall consist of a flat-faced circular die with
the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "Delaware" inscribed thereon.
8<PAGE>
ARTICLE VII - WAIVER
Whenever any notice whatever is required to be given by statute or under
the provisions of the Certificate of Incorporation or By-Laws of this
Corporation a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VIII - CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors shall from time to time
determine.
ARTICLE IX - AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, and new
By-Laws may be adopted, (1) by the stockholders, at any annual meeting, or at
any special meeting called for that purpose, as provided and subject to the
limitations set forth in the Restated Certificate of Incorporation or (2) by the
Board of Directors, (a) at any duly convened meeting by a majority vote of the
whole Board, or (b) without a meeting by prior written consent signed by all
members of the Board and filed with the minutes of proceedings of the Board, but
any such action of the Board of Directors may be amended or repealed by the
stockholders at any annual meeting or any special meeting called for that
purpose as provided and subject to the limitations set forth in the Restated
Certificate of Incorporation. The time and place, as fixed by these By-Laws, of
the annual meeting of the stockholders for the election of directors shall not
be changed within 60 days next before the day on which the election is to be
held, and a notice of any change shall be given to each stockholder entitled to
vote there at least 20 days before the election is held, in person or by letter
mailed to his last known post office address.
AA931540013
9<PAGE>
Exhibit 10.5
Amended and Restated
Reimbursement Agreement
among
Chemical Trust Company of California,
not in its individual capacity
but solely as Owner Trustee
and
Delano Energy Company Inc.
and
ABN AMRO Bank N.V.,
Boston Branch,
for Itself and as Agent
and
The First National Bank of Boston,
as Co-Agent,
Bank of Montreal,
as Co-Agent,
Barclays Bank PLC,
as Co-Agent,
Societe Generale,
as Co-Agent,
and
BayBank
as Lead Manager,
As of December 31, 1993
<PAGE>
Table of Contents
-----------------
Page
Section 1. Status of Agreement 2
Section 2. The Letter of Credit Facility 2
Section 2.1. Reimbursement of Drawings 3
Section 2.2. Reimbursement of Liquidity
Advances 4
Section 2.3. Payment of Other Amounts
Relating to Drawings 4
Section 2.4. Reserve Requirements, Taxes, etc. 5
Section 2.5. Alternative Credit Facility 6
Section 2.6. Substitute Letter of Credit 6
Section 2.7. Nature of Obligations of Banks 6
Section 2A. Conditions Precedent to Closing 7
Section 2A.1. Conditions Precedent To Be
Satisfied By Delano Energy 7
Section 2A.2. Conditions Precedent to be
Satisfied by the Agent 12
Section 2A.3. Conditions Precedent to be
Satisfied by the Owner Trustee 13
Section 2A.4. Other Conditions Precedent 13
Section 3. Interest; Fees 15
Section 3.1. Interest 15
3.1.1. Payment of Interest 15
3.1.2. Certain Definitions 16
3.1.3. Deductibility of Interest
Incurred by Banks 16
Section 3.2. Agent's Fee and Upfront Fee 17
Section 3.3. Calculations 18
Section 3.4. Capital Adequacy Requirements 18
Section 3.5. Letter of Credit Fees 18
Section 3.6. Fronting Fee 19
Section 4. Liquidity Advance Payment Provisions 19
Section 4.1. Payment at Maturity 19
Section 4.2. Voluntary Prepayments 19
Section 4.3. Mandatory Prepayments 20
Section 4.4. Payment and Interest Cutoff 20
<PAGE>
Section 5. General Covenants 20
Section 5.1. Corporate Existence 20
Section 5.2. Performance of Covenants, etc. 20
Section 5.3. Certain Covenants with Respect
to Basic Documents 21
5.3.1. Amendment, Enforcement, etc.
by Borrowers 21
5.3.2. Amendment, Enforcement, etc.
by Agent 21
5.3.3. Effect of Event of Default 22
5.3.4. Certain Payments 22
5.3.5. Recording, etc. 22
5.3.6. Power of Attorney 23
Section 5.4. Investments 23
Section 5.5. Regulation 24
Section 5.6. Special Covenants Relating
to the Bonds 24
5.6.1. Covenant to Redeem 1989 Bonds 24
5.6.2. Covenant to Redeem 1990 Bonds 24
5.6.2.1. Covenant to Redeem
1991 Bonds 24
5.6.3. [RESERVED] 24
5.6.4. Redemption of Bonds upon
Event of Loss 24
5.6.5. Prepayment of Liquidity Advances 25
5.6.6. No Change of Interest Rate Mode 25
5.6.7. Reserve Requirement for 1990 Bonds 25
5.6.7.1. Reserve Requirement for
1991 Bonds 25
5.6.8. Interest Rate Protection 25
Section 5.7. Maintenance of Property 26
Section 5.8. Maintenance of Office 26
Section 5.9. Authorization 26
Section 5.10. Limitation on Indebtedness 26
Section 5.11. Limitation on Investments
and Loans 27
Section 5.12. Limitation on Merger,
Consolidation, Sale of Assets 27
Section 5.13. Limitation on Certain Transac-
tions with Affiliates 27
Section 5.14. Limitation on Distributions
and Similar Transactions 28
Section 5.15. Further Assurances 29
<PAGE>
5.15.1 General Assurances 29
5.15.2. Change of Location 29
5.15.3. Maintenance of Reserves, etc. 29
5.15.4. Security 29
5.15.5. Additional Assignments 30
5.15.6. Opinion of Counsel 30
Section 5.16. Support Documents 31
5.16.1. No Changes in Support Documents 31
5.16.2. Compliance with Support Documents 31
5.16.3. Fuel Supply 31
Section 5.17. Accounting 32
5.17.1. Records and Accounts 32
5.17.2. Financial Statements 32
5.17.3. Certificates and Information 33
5.17.4. Facility Records 34
5.17.5. Revenue Trust Agreement Reports 35
5.17.6. Operating Standards Support
Agreement Reports 36
5.17.7. Inspection, Final Punch
List Actions 36
5.17.8. Specifications 37
5.17.9. Other Information 38
Section 5.18. Environmental Covenants 38
5.18.1. Compliance 38
5.18.2. Notices 38
Section 5.19. Qualifying Facility 39
Section 5.20. Supplemental Reserve Fund 39
Section 5.21. Major Maintenance Reserve Fund 39
Section 5.22. Type of Business 40
Section 5.23. Payment of Taxes 40
Section 5.24. Identification 40
Section 5.25. Filing Reports; Notices;
Inspection; Information, Etc. 40
5.25.1. Governmental Reports 40
5.25.2. Notices of Material Events 41
Section 5.26. Use of Facility; Maintenance and
Operation; Operation and
Maintenance Manual 42
5.26.1. General 42
5.26.2. Issuer Requirement 42
Section 5.27. OutPut/Capacity Tests; Plans
and Specifications 43
Section 5.28. Compliance 43
<PAGE>
5.28.1. Laws, etc. 43
5.28.2. Regulatory Acts 44
5.28.3. Authorization Requirement 44
5.28.4. Pollution Control and
Hazardous Substances 44
Section 5.29. Payment of Claims and Obligations 45
Section 5.30. Restriction on Liens 45
Section 5.31. Certain Transfers 46
5.31.1. Interests in Facility 46
5.31.2. Location 46
5.31.3. Possession 46
Section 5.32. No Abandonment 46
Section 5.33. Construction Warranties 46
Section 5.34. Certain Obligations and Duties
of the Borrowers 47
Section 5.35. Completion of Construction 47
5.35.1. Modifications to Construction
Contracts 47
5.35.2. Materials; Compliance: Etc. 47
5.35.3. Notices and Documents 48
Section 5.36. Replacement 48
5.36.1. Replacement of Parts 48
5.36.2. Removal of Parts 48
Section 5.37. Events of Loss, Etc. 49
5.37.1. Notice 49
5.37.2. Event of Loss 49
5.37.3. Application of Payments with
Respect to Event of Loss 49
5.37.4. Application of Payments Not
Relating to Event of Loss 49
5.37.5. Disposition of Payments Not
Payable to the Borrowers 50
Section 5.38. Insurance 50
5.38.1. Insurance Coverages 50
5.38.2. Delivery of Policies, etc. 51
5.38.3. Annual Insurance Report 51
5.38.4. Notice by Insurers. etc. 54
5.38.5. Independent Insurance 54
Section 5.39. [RESERVED] 54
Section 5.40. Owner Trustee's Location 54
Section 5.41. Tax-Exempt Status of Bonds 54
Section 5.42. Original Lease 55
<PAGE>
Section 5.43. [RESERVED] 55
Section 5.44. [RESERVED] 55
Section 5.45. Release of Lessee Security 55
Section 5.46. Breakage Fees 55
Section 5A. Representations and Warranties
of Delano Energy 55
Section 5A.1. Corporate Existence 55
Section 5A.2. Power and Authorization 56
Section 5A.3. Execution, Delivery and
Enforceability 56
Section 5A.4. No Legal Bar 56
Section 5A.5. Violations; Defaults 56
Section 5A.6. Governmental Actions 57
Section 5A.7. Litigation 57
Section 5A.8. Payment of Taxes 57
Section 5A.9. Chief Place of Business, etc. 57
Section 5A.10. Full Disclosure 58
Section 5A.11. Financial Statements 58
Section 5A.12. Litigation Regarding Agreements 58
Section 5A.13. Public Utility Status 58
Section 5A.14. Title to the Facility and
the Land 59
Section 5A.15. Taxes, etc. 59
Section 5A.16. Construction of the Facility 59
Section 5A.17. Interconnection 60
Section 5A.18. Facility Support 60
Section 5A.19. Revenue Trust Agreement 60
Section 5A.20. Fuel Supply Contracts and
Price Support 60
Section 5A.21. FERC Qualification 61
Section 5A.22. Holding Company and Investment
Company Acts; Public Utility
Regulation 61
Section 5A.23. Securities Act 61
Section 5A.24. Base Case Pro Forma 61
Section 5A.25. Representations to FERC 61
Section 5A.26. Licenses, Etc. 62
Section 5A.27. Granted Rights 62
Section 5A.28. Hazardous Materials 62
Section 5A.29. Margin Stock 63
Section 5A.30. Employee Benefit Plans 63
Section 5A.31. Working Capital Requirement 64
Section 5A.32. Natural Gas 64
Section 5B. Representations and Warranties of
the Owner Trustee 64
Section 5B.1. Organization 64
Section 5B.2. Power and Authorization 64
Section 5B.3. Execution, Delivery and
Enforceability 65
Section 5B.4. No Legal Bar 65
<PAGE>
Section 5B.5. FERC Qualification 65
Section 5B.6. No Liens 66
Section 5B.7. Litigation 66
Section 5B.8. Principal Corporate Trust Office 66
Section 5B.9. Knowledge of Lease Defaults 66
Section 6. Defaults 66
Section 6.1. Events of Default 66
Section 6.2. Remedies upon Event of Default 68
Section 6.3. Annulment of Defaults 70
Section 6.4. Waivers 70
Section 6.5. Course of Dealing 70
Section 6.6. Application of Proceeds 70
Section 6.7. [RESERVED] 71
Section 6.8. Defaults Under Bond Documents 71
Section 7. Definitions 71
Section 7.1. Cross References 71
Section 7.2. Bank Agreement 71
Section 7.3. Bank Obligations 72
Section 7.4. Bank Security 72
Section 7.5. Co-Agents 72
Section 7.6. Default 72
Section 7.7. Delano Energy Assignment of Leases 72
Section 7.8. Delano Energy Deed of Trust 72
Section 7.9. Delano Energy Security Agreement 73
Section 7.10. Delano Energy Stock Pledge
Agreement 73
Section 7.11. Facility 73
Section 7.12. Lead Manager 73
Section 7.13. Phase I Land 73
Section 7.14. Phase II Land 73
Section 7.15. Security Documents 73
Section 8. Expenses; Indemnity; Liability 73
Section 8.1. Expenses 73
Section 8.2. Indemnity with Respect to
Letters of Credit 74
Section 8.3. Liability of Issuing Bank 74
Section 8.4. Indemnity with Respect to
Bank Security 76
Section 8.5. Survival of Covenants 76
Section 9. Notices 76
Section 10. Operations 76
Section 10.1. Interests in Credits 77
Section 10.2. Payments 77
Section 10.3. Agent's Authority to Act 78
Section 10.4. Agent's Resignation 79
<PAGE>
Section 10.5. Amendments, Consents,
Waivers, etc. 80
Section 10.6. Payments, etc. 81
Section 10.7. Concerning the Agent 81
10.7.1. Action in Good Faith, etc. 81
10.7.2. No Implied Duties, etc. 81
10.7.3. Validity, etc. 82
10.7.4. Compliance 82
10.7.5. Employment of Agents and Counsel 82
10.7.6. Reliance on Documents and Counsel 82
10.7.7. Agent's Reimbursement 82
10.7.8. Rights as Credit Provider 83
Section 10.8. Independent Credit Decision 83
Section 10.9. Indemnification 84
Section 10.10. Amendments to Section 10 84
Section 10.11. Actions Under Bond Documents 84
Section 10.12. Required Banks 84
Section 11. Sharing of Payments, Etc. 85
Section 12. Survival of Covenants 85
Section 13. Discharge 85
Section 14. Successors and Assigns; Bank
Participants 86
Section 14.1. Bank Participations 86
Section 14.2. Certain Rights of Bank
Participants 87
Section 14.3. Transfer of Percentage Interests 87
Section 15. Waiver of Jury Trial 88
Section 16. Payments From Owner Trust Estate Only 89
Section 17. [RESERVED] 89
Section 18. Miscellaneous 89
Section 19. Disclaimer of Warranties 90
Section 20. Bank Substitution 90
<PAGE>
Table of Exhibits
-----------------
Exhibit 2 Forms of Letters of Credit
Exhibit 2A.1.5 Title Report Liens
Exhibit 2A.1.7 Governmental Actions
Exhibit 5.6.1 Scheduled Redemptions of 1989 Bonds
Exhibit 5.6.2 Scheduled Redemptions of 1990 Bonds
Exhibit 5.6.2.1 Scheduled Redemptions of 1991 Bonds
Exhibit 5.17.4 Forms of Quarterly Operation and
Generation Report, Quarterly Fuel
Report, Environmental Variances
Report, and Monthly Operation and
Generation Report
Exhibit 5.17.5 Form of Quarterly Cash Report
Exhibit 5.17.7A Final Punch List
Exhibit 5.17.7B Independent Engineers' Scope of Work
Exhibit 5.21 Major Maintenance Reserve Required
Amount
Exhibit 5A.16 Performance Tests and Guaranties
Exhibit 5A.24 Base Case Pro Forma
Exhibit 5A.30 Employee Benefit Plans
Exhibit 7.11 Description of the Facility
Exhibit 7.13 Phase I Land
Exhibit 7.14 Phase II Land
Exhibit 14.3 Form of Joinder Agreement
<PAGE>
Chemical Trust Company
of California, not in its individual capacity
but solely as Owner Trustee
50 California Street
San Francisco, California 94111
Delano Energy Company Inc.
81 Wyman Street
Waltham, Massachusetts 02254-9046
AMENDED AND RESTATED REIMBURSEMENT AGREEMENT
As of December 31, 1993
ABN AMRO Bank N.V.,
for Itself and as Agent
Exchange Place
53 State Street, 19th Floor
Boston, Massachusetts 02109
Attn: Manager
With a copy to:
135 S. LaSalle Street, Suite 560
Chicago, Illinois 60603
Attn: Project Finance Group
Re: Delano Energy Project
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Stefan Breuer
Vice President
Energy and Utilities Division
Bank of Montreal
707 Wilshire Blvd., Suite 4840
Los Angeles, CA 90017
Attn: Lawrence E. Jones
Barclays Bank PLC
222 Broadway, 11th Floor
New York, NY 10038
Attn: Mark Tuminello
Societe Generale
1111 Bagby, Suite 2020
Houston, TX 77002
Attn: Stephen W. Warfel, U.S. Project Finance
1<PAGE>
BayBank
175 Federal Street
Boston, MA 02110
Attn: Timothy M. Laurion
Such additional bank or banks
as shall become party hereto
pursuant to Section 14.3 hereof
Ladies and Gentlemen:
Chemical Trust Company of California, a California company
(successor-by-merger to Manufacturers Hanover Trust Company of California), not
in its individual capacity but solely as Owner Trustee under the Owner Trust
Agreement dated as of December 3, 1990 (as the same may have been amended from
time to time) between Thermo Energy Systems Corporation, a Delaware corporation
(herein, with its permitted successors and assigns, called the "Owner
Participant") and said Chemical Trust Company of California (herein in such
capacity, with its permitted successors and assigns, called the "Owner
Trustee"), and Delano Energy Company, Inc., a Delaware corporation ("Delano
Energy"; the Owner Trustee and Delano Energy being sometimes collectively
referred to herein as the "Borrowers") each hereby jointly and severally agree
with each of you as follows:
SECTION 1. STATUS OF AGREEMENT.
This Agreement constitutes, among other things, a restatement of (i) the
Reimbursement Agreement dated as of December 3, 1990 among the Owner Trustee,
FNBB, for itself and as Agent, ABN AMRO and ABN AMRO as Swap Bank, and (ii) the
Reimbursement Agreement dated as of October 1, 1991 among Delano Biomass, ABN
AMRO as Facility Agent and ABN AMRO Bank N.V., New York Branch, as
Administrative Agent. This Agreement, as from time to time in effect,
constitutes the "Reimbursement Agreement" and the "Construction Loan Agreement"
referred to in the Bond Indentures, the Intercreditor Agreements and the other
Bond Documents.
SECTION 2. THE LETTER OF CREDIT FACILITY.
For the benefit of the Owner Trustee and the Owner Participant (with
respect to items (a) and (b) below) and Delano Energy (as
successor-by-assignment to Delano Biomass) (with respect to item (c) below),
there has been issued by Algemene Bank Nederland N.V., now known as ABN AMRO
Bank N.V. ("ABN AMRO"), acting through its Boston Branch (in such capacity, the
"Issuing Bank"):
(a) A Letter of Credit (the "1989 Tax-exempt Financing Credit") in
the stated amount of $29,432,076.71, of which $28,900,000 secures the
principal of the 1989 Bonds and
2<PAGE>
$532,076.71 secures up to 56 days' interest accrued on the 1989 Bonds on or
prior to the maturity thereof, calculated at 12 percent per annum for a
365-day year.
(b) A Letter of Credit (the "1990 Tax-exempt Financing Credit") in
the stated amount of $34,218,608.22, of which $33,600,000.00 secures the
principal of the 1990 Bonds and $618,608.22 secures up to 56 days' interest
accrued on the 1990 Bonds on or prior to the maturity thereof, calculated
at 12 percent per annum for a 365-day year.
(c) A Letter of Credit (the "1991 Tax-exempt Financing Credit") in
the stated amount of $58,558,630.14, of which $57,500,000.00 secures the
principal of the 1991 Bonds and $1,058,630.14 secures up to 56 days'
interest accrued on the 1991 Bonds on or prior to the maturity thereof,
calculated at 12 percent per annum for a 365-day year. Each of the Letters
of Credit is substantially in the form of Exhibit 2 attached hereto.
Each Letter of Credit shall expire on December 29, 2000 (with respect to each
such Letter of Credit, the "Termination Date"). Each of you participates in
each of the Letters of Credit to the extent of your respective Percentage
Interests as set forth in Section 10.1 hereof.
Section 2.1. Reimbursement of Drawings. At such time as any payment
shall be made in respect of any drawing under any Letter of Credit, and in no
event prior to such payment, the Borrowers agree to pay to the Issuing Bank at
its principal banking office in Boston, Massachusetts for the account of the
Issuing Bank or of each of you in accordance with your Percentage Interests, as
the case may be, a sum equal to the amount so drawn which shall be due and
payable on the date of the respective drawing (and which, if not paid on such
drawing date, shall bear interest to the payment date at a rate per annum equal
to the Delay Rate), except as otherwise provided in Section 2.2 hereof. Payment
by the Swap Bank to the Issuing Bank of all or any portion of an amount drawn
under a Letter of Credit to pay interest on the Bonds shall satisfy the
obligation of the Borrowers to the Issuing Bank with respect to such amount or
portion thereof, but the obligations of the Borrowers under this Section 2.1 are
unconditional and shall not be excused by any failure or delay in payment by the
Swap Bank under the Swap Agreements, for whatever reason. In the event that any
payment received by the Issuing Bank from the Swap Bank shall exceed the amount
due and payable under this Section 2.1 with respect to interest on the Bonds
drawn under the Letters of Credit, including accrued interest thereon, if any,
the Issuing Bank shall promptly remit the amount of such excess to the Revenue
Trustee for deposit in the Supplemental Reserve Fund established under Section
4.1 of the Revenue Trust Agreement.
3<PAGE>
Section 2.2. Reimbursement of Liquidity Advances.
(a) If the conditions precedent contained in Section 2.2(b) hereof
are satisfied at the time of payment by the Issuing Bank of any Drawing under a
Letter of Credit (i) for the purpose of redeeming Bonds pursuant to
Section 4.01(b)(ii)(A) of the 1989-90 Bond Indenture (Determination of
Taxability), (ii) for the purpose of redeeming Bonds pursuant to Section
4.01(b)(ii)(A) of the 1991 Bond Indenture (Determination of Taxability), (iii)
for the purpose of purchasing Bonds under Section 8.15(c) of the 1989-90 Bond
Indenture (Remarketing), or (iv) for the purpose of purchasing Bonds under
Section 8.15(c) of the 1991 Bond Indenture (Remarketing) (each a "Liquidity
Drawing") each such Liquidity Drawing shall constitute an advance ("Liquidity
Advance") to the Borrowers. The Borrowers promise to pay to the Issuing Bank at
its principal banking office in Boston, Massachusetts for the account of the
Issuing Bank or of each of you in accordance with your Percentage Interests, as
the case may be, each Liquidity Advance on the earliest of (i) in the case of
Liquidity Advances extending as a result of a drawing described in clause (iii)
or (iv) above, the date on which any Bonds purchased with funds disbursed under
the relevant Letter of Credit in connection with such Liquidity Drawing and held
by either of the Borrowers, or its agent, for the account of such Borrower, are
redeemed or canceled pursuant to the relevant Bond Indenture, (ii) the date on
which any Bonds purchased by either of the Borrowers, or its agent, for the
account of such Borrower, with funds disbursed under any Letter of Credit are
remarketed pursuant to the relevant Bond Indenture, (iii) the date on which the
Letters of Credit are replaced pursuant to the terms of Section 2.5 hereof, or
(iv) the Termination Date with respect to the relevant Letter of Credit.
(b) Following any payment by the Issuing Bank under any Letter of
Credit pursuant to a Liquidity Drawing, a Liquidity Advance shall be made
available to the Borrowers only if on the date of payment of such Liquidity
Drawing by the Issuing Bank no event has occurred and is continuing, or would
result from such payment, which constitutes a Default or an Event of Default.
Unless the Borrowers shall have previously advised the Issuing Bank in
writing or the Issuing Bank has actual knowledge that an event has occurred and
is continuing, or would result from such payment, which constitutes a Default or
an Event of Default, the Borrowers shall be deemed to have represented and
warranted on the date of such payment that no event has occurred and is
continuing, or would result from such payment, which constitutes a Default or an
Event of Default.
Section 2.3. Payment of Other Amounts Relating to Drawings. In addition
to its reimbursement obligation in Sections 2.1 and 2.2, the Borrowers hereby
agree to pay to the Agent at its principal banking office in Boston,
Massachusetts
4<PAGE>
for the account of each of you in accordance with your Percentage Interests
(except for fees owing solely to the Issuing Bank, which shall be paid directly
to the Issuing Bank):
(a) on the date of each Drawing under a Letter of Credit, a sum equal
to such amount as shall be necessary to cover letter of credit negotiation
fees, the reasonable costs of transferring funds and other costs and
expenses of the Issuing Bank, if any, incurred in connection with such
Drawing;
(b) on demand, any amount that is paid by the Agent or any other of
you in connection with the exercise of the discretionary rights provided in
Section 6.8; and
(c) interest on any and all amounts remaining unpaid by the Borrowers
under this Section 2 (including unpaid amounts of interest to the extent
permitted by law) at any time from the date such amounts become due and
payable until payment in full, payable on demand, at a rate per annum equal
to the Delay Rate.
Section 2.4. Reserve Requirements, Taxes, etc. If any change in any law,
executive order or regulation, or in any request or directive of any
administrative or governmental authority (whether or not having the force of
law), or in the interpretation of any of the foregoing by any court or
administrative or governmental authority charged with the administration thereof
shall either (i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against any Letter of Credit or (ii) impose on any of you
any tax or other cost or condition regarding this Agreement or any Letter of
Credit, and the effect of any such change shall be to increase the cost to any
of you of issuing or maintaining any Letter of Credit or participating therein
or shall reduce any amount receivable or received by you in respect of any
Letter of Credit or participating therein, then, upon demand by the Agent, the
Borrowers shall immediately pay to the Agent for your respective accounts
additional amounts which shall be sufficient to compensate you for such
increased cost, together with interest on each such amount from the date
demanded until payment in full thereof at a rate per annum equal to the
Effective Rate; provided, however, that the foregoing provision shall not apply
to any such charge with respect to (a) taxes imposed upon or measured by the net
income of any of you or (b) taxes or other conditions which would have been
imposed even if this Agreement had not been entered into or the Letters of
Credit had not been issued. Your determination of the amount of such costs, if
done in good faith, shall, in the absence of demonstrable error, be conclusive.
The covenants contained in this Section 2.4 shall survive the termination of the
other provisions of this Agreement.
5<PAGE>
Section 2.5. Alternative Credit Facility. (a) The Borrowers may replace
all (but not less than all) of the Letters of Credit and the Swap Agreements
with an Alternative Credit Facility issued by a bank or financial institution
other than one of you, in accordance with the terms of the CPC Loan Agreements
and the Bond Indentures upon (i) surrender of all outstanding Letters of Credit
to the Agent; (ii) payment in full of all Bank Obligations including Bank
Obligations under the Swap Agreements; and (iii) delivery to the Agent of
releases (on terms reasonably acceptable to the Agent) by the Bond Trustee, the
Owner Trustee, the Owner Participant and Delano Energy of all further liability
of the Agent, the Issuing Bank, the Swap Bank and each other of you under the
Letters of Credit and the Bank Agreements and the Swap Agreements.
(b) The Borrowers may replace all (but not less than all) of the
Letters of Credit with an Alternative Credit Facility issued by a bank or
financial institution other than one of you without simultaneously replacing the
Swap Agreements upon (i) surrender of all outstanding Letters of Credit to the
Agent; (ii) payment in full of all Bank Obligations other than Bank Obligations
under the Swap Agreements; and (iii) delivery to the Agent of releases (on terms
reasonably acceptable to the Agent) by the Bond Trustee, the Owner Trustee, the
Owner Participant and Delano Energy of all further liability of the Agent, the
Issuing Bank and each other of you under the Letters of Credit and the Bank
Agreements. The replacement of the Letters of Credit without the simultaneous
replacement of the Swap Agreements is further conditioned on the continued lien
position of the Swap Bank in the Facility, the Land and the other assets of
Delano Energy and the Owner Trustee as provided in the Lessor Security Documents
and the Security Documents; such lien to be pari passu with the lien to be
granted to the new issuer of the Letters of Credit provided, however, that such
pari passu sharing shall be limited, with respect to such new issuer, as of any
particular point in time to only the principal amount which would have been
outstanding on such date under the existing Letters of Credit in accordance with
the Bond redemption schedules attached hereto as Exhibits 5.6.1, 5.6.2 and
5.6.2.1 and any interest accruing thereon; and the balance shall be subordinate
to the obligations owed to the Swap Bank.
Section 2.6 Substitute Letter of Credit. It is understood and agreed
that neither the Issuing Bank nor any other of you shall have any obligation
hereunder to issue or participate in any Substitute Letter of Credit (as defined
in the Bond Indentures) contemplated under the provisions of the CPC Loan
Agreements.
Section 2.7. Nature of Obligations of Banks. Your obligations under this
Agreement are several and are not joint or joint and several. Each of you
represents that you are making the extension of credit contemplated hereby as
principal (subject
6<PAGE>
to Section 14 hereof) and not as agent or as trustee for any pension plan, trust
or other Person.
Section 2A. Conditions Precedent to Closing.
Section 2A.1. Conditions Precedent To Be Satisfied By Delano Energy. The
obligations of the Agent and the Banks hereunder shall be subject to compliance
with all of the following conditions precedent, to the satisfaction of the
Agent:
2A.1.1. Each of the Basic Documents shall have been duly authorized,
executed and delivered by the parties thereto, shall be satisfactory in form and
substance to the Agent, and shall be in full force and effect; each party to
each Basic Document shall have complied in all material respects with such
party's obligations thereunder; no default or event of default, or event, which
with notice or lapse of time or both would constitute a default or event of
default, shall exist under any of said Basic Documents then in effect or in the
performance by any party thereto of any of its obligations thereunder, or would
exist under any of said Basic Documents or in the performance by any party
thereto of any of its obligations thereunder after giving effect to the
transactions to occur on the Document Delivery Date as contemplated hereby and
thereby; no Event of Loss, or event or condition which with lapse of time would
constitute an Event of Loss shall have occurred; and all required consents shall
have been obtained and shall be in full force and effect.
2A.1.2. All actions reasonably requested by the Agent in order to
perfect the assignments of revenues and other security interests created by the
Revenue Trust Agreement shall have been taken; and all other provisions of the
Revenue Trust Agreement to be complied with or performed on or prior to the
Document Delivery Date shall have been complied with or performed.
2A.1.3. The Owner Participant and the Banks shall have been furnished
with true, correct and complete copies of the Fuel Supply Contracts referred to
in Section 5.16.3.
2A.1.4. Prior to the Document Delivery Date, the Agent shall have
received copies of a Class A survey of the Land, satisfactory in form and
substance to the Agent, prepared in accordance with Minimum Standard Detail
requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted
by ALTA and ACSM in 1986, certified (to the Agent, the Banks and the title
insurance company described in Section 2A.1.5 below) by the surveyor pursuant to
a certificate in form and substance reasonably satisfactory to the Agent,
showing (i) the location of the Land and all improvements thereon, (ii) no
encroachment on the Land and no encroachment by the Facility, as constructed, on
7<PAGE>
adjoining property, and (iii) no other defect, Lien, or encumbrance, other than
Title Report Liens.
2A.1.5. Prior to the Document Delivery Date, the Agent shall have
received copies of a mortgagee title insurance policy, in substance and form,
and issued by an insurer, satisfactory to the Agent, including endorsements
satisfactory to the Agent, insuring the Agent's interests in the Facility and
the Land, subject only to Title Report Liens set forth in Exhibit 2A.1.5 hereto
and to such other exceptions as shall be reasonably satisfactory to the Agent,
and title reinsurance policies, in substance and form, and issued by reinsurers
satisfactory to the Agent, providing for reinsurance in such amounts which shall
be allocated among such reinsurers as the Agent shall designate, insuring the
Agent's interests in the Facility and the Land.
2A.1.6. On the Document Delivery Date, insurance complying with the
requirements of Section 5.38 hereof shall be in full force and effect; the Agent
shall have received (i) certificates of insurance with respect to all insurance
policies in effect with respect to the Facility and (ii) a report of Alexander &
Alexander, or another independent insurance broker or independent insurance
consultant satisfactory to the Agent, setting forth the insurance obtained by
the Borrowers in accordance with Section 5.38 hereof and certifying that such
insurance complies in all material respects with the requirements of
Section 5.38 hereof, is in full force and effect, names the Revenue Trustee and
the Agent, for the interests of the Banks, as each of their respective interests
may appear, as an additional insured or loss payee, as appropriate, provides
that the Agent shall receive at least 45 days' prior written notice of any
cancellation or reduction of coverage, and that all premiums then due thereon
have been paid; and the Agent shall have received certified copies of all
insurance policies with respect to the Facility which the Borrowers are required
to maintain pursuant to Section 5.38 hereof (or, at the option of Delano Energy
with the consent of the Agent, which consent shall not be unreasonably withheld,
certificates therefor signed by the insurer or an agent authorized to bind the
insurer, with copies of such policies to be provided by Delano Energy to the
Agent as soon as practicable, but in any event no later than 90 days following
the Document Delivery Date).
2A.1.7. Except as set forth in Exhibit 2A.1.7 hereto with respect to
Governmental Actions to be completed after the Document Delivery Date which are
either routine in nature or cannot be (or are not normally) applied for prior to
the time they are required, all Governmental Actions which are necessary or
advisable in connection with the execution, delivery and performance of this
Agreement or any other Basic Document and the transactions contemplated hereby
or thereby, including without limitation the construction, financing and
operation of the Facility, shall have been duly obtained or made and shall be in
full force and effect, and no proceeding, or notice threatening a
8<PAGE>
proceeding concerning any change, revocation, modification or qualification to
any such Governmental Action or other consent or approval shall have been
initiated or issued with respect to the Facility or the operation thereof or the
Land. Each such Governmental Action shall have been certified by Delano Energy
as being final (subject to any conditions which may be set forth therein) and in
full force and effect on the Document Delivery Date and Delano Energy shall have
obtained all consents, approvals and transfers of any Governmental Action which
are required as a result of the transactions contemplated by this Agreement, or
shall have demonstrated to the reasonable satisfaction of the Agent that no such
consents, approvals or transfers are needed. There shall have been delivered to
the Agent, at or prior to the Document Delivery Date, a copy of each such
Governmental Action and other consents and approvals, including, without
limitation, true and complete copies of all notices to and from FERC pursuant to
18 C.F.R. Section 292.207(a) concerning the status of the Facility as a
qualifying facility, as shall have been requested by any of the foregoing
Persons. Without limiting the generality of the foregoing, all Governmental
Actions needed in order to be in compliance with this Section 2A.1.7 (other than
Governmental Actions set forth in Exhibit 2A.1.7) shall have been obtained or
taken. The Facility and the Land and the operations thereof and Delano Energy
shall be in material compliance with all Laws, including without limitation
(i) all Laws relating to (x) the construction, use, occupancy and operation of
the Facility by Delano Energy, (y) the ownership of Phase I by the Owner Trustee
and the leasing of Phase I by the Owner Trustee to Delano Energy, and (z) the
ownership of Phase II by Delano Energy; including without limitation all
applicable zoning and municipal ordinances and (ii) all environmental laws,
including without limitation all such Laws relating to air, water and hazardous
wastes and the operation of the Facility by Delano Energy, and the use in the
Facility by Delano Energy of the fuel subject to the Fuel Supply Contracts.
2A.1.8. All approvals and consents of any trustee or the holders of
any indebtedness, obligations or securities of Delano Energy, Thermo Systems,
Thermo Electron or any other Person party to any Basic Document which are
required in connection with any of the transactions contemplated by this
Agreement or any other Basic Document shall have been duly obtained and shall be
in form and substance satisfactory to the Agent; and a counterpart or certified
copy of each such approval or consent and an executed certificate of a duly
authorized officer of Delano Energy, Thermo Systems, Thermo Electron, or such
other Person, as the case may be, to the effect that such approvals and consents
are in full force and effect without any amendment or modification, shall have
been delivered to the Agent.
2A.1.9. Resolutions, certificates or other evidence of corporate
action satisfactory in form and substance to the Agent
9<PAGE>
with respect to actions taken by Delano Energy, Thermo Systems or Thermo
Electron or any other Person (other than Fuel Contractors) party to any Basic
Document, shall have been duly executed and delivered and shall be in full force
and effect.
2A.1.10. (a) All necessary or desirable recordings and filings of or
with respect to the Revenue Trust Agreement, the Delano Energy Security
Agreement, the Delano Energy Deed of Trust, the Delano Energy Assignment of
Leases, the Delano Energy Stock Pledge Agreement and any other Basic Document
(or of appropriate notices or memoranda thereof) shall have been duly made, and
all financing statements and other instruments relating thereto shall have been
duly executed, delivered and recorded or filed, in all such places as may be
required by law, or as may be deemed necessary or desirable by the Agent, in
order to establish, preserve, protect and perfect the interests and rights (and
the priority thereof) of the Agent created or intended to be created thereby;
all of such recordings and filings shall be in full force and effect; and all
taxes and fees in connection therewith shall have been paid by Delano Energy.
The Agent, for the benefit of the Banks, shall have a first Lien on, and a prior
perfected security interest in, all right, title, estate and interest of Delano
Energy in and to the Land, the Facility and the Collateral, prior and superior
to all other Liens thereon, existing or future, except Permitted Liens. The
Agent shall have received authenticated copies or other evidence of all filings,
recordings and other actions obtained or made in order to create and perfect
such Lien on, and perfected security interest in, the Collateral.
(b) All filings, recordings and other actions that are necessary or
desirable in order to establish, protect, preserve and perfect the Agent's first
Lien on and prior perfected security interest in all estate, right, title and
interest of the Owner Trustee in and to the Owner Trust Estate for the benefit
of the Banks, prior and superior to all other Liens, existing or future
(assuming the timely filing of continuation statements), except Permitted Liens,
shall have been duly made or taken, and all fees, taxes and other charges
relating to such filings and recordings and other actions shall have been paid
by Delano Energy. The Agent shall have a first Lien on, and prior perfected
security interest in, all estate, right, title and interest of the Owner Trustee
in and to the Owner Trust Estate for the benefit of the Banks, prior and
superior to all other Liens thereon, existing or future, except Permitted Liens.
The Agent shall have received authenticated copies or other evidence of all
filings, recordings and other actions obtained or made in order to create and
perfect such first Lien on, and perfected security interest in, the Owner Trust
Estate.
2A.1.11. The representations and warranties of Delano Energy
contained herein or in any other Basic Document or made in writing by Delano
Energy or any of its officers in connection with the transactions contemplated
hereby or thereby shall be
10<PAGE>
true and correct on and as of the Document Delivery Date with the same effect as
if made on and as of such date (unless any such representation or warranty is
stated to be true and correct on and as of another date, in which case such
representation or warranty shall be true and correct as of the date as of which
made); Delano Energy shall have performed and complied with all agreements and
conditions contained herein and in each other Basic Document required to be
performed or complied with by it prior to or on the Document Delivery Date;
nothing shall have occurred after January 1, 1993 which might materially
adversely affect the properties, business, prospects or financial condition of
Delano Energy, or the ability of Delano Energy to perform its obligations
hereunder or under any other Basic Document; no event or condition shall have
occurred and be continuing, or would result from the consummation of any of the
transactions contemplated hereby, which constitutes a Default; and the Agent
shall have received an Officer's Certificate of Delano Energy to the foregoing
effects.
2A.1.12. The representations and warranties of each of Thermo Systems
and Thermo Electron contained in each Basic Document to which either Thermo
Systems or Thermo Electron is a party or made in writing by Thermo Systems or
Thermo Electron or any of their respective officers in connection with the
transactions contemplated hereby or thereby shall be true and correct on and as
of the Document Delivery Date with the same effect as if made on and as of such
date (unless any such representation or warranty is stated to be true and
correct on and as of another date, in which case such representation or warranty
shall be true and correct as of the date as of which made); each of Thermo
Systems and Thermo Electron shall have performed and complied with all
agreements and conditions contained therein required to be performed or complied
with by either of them prior to or on the Document Delivery Date; no event or
condition shall have occurred and be continuing, or would result from the
consummation of any of the transactions contemplated hereby which constitutes a
default, or would after notice or lapse of time or both constitute a default,
under any of the Basic Documents to which either Thermo Systems or Thermo
Electron is a party; and the Agent shall have received Officer's Certificates of
each of Thermo Systems and Thermo Electron to the foregoing effects.
2A.1.13. Opinions of each of the following counsel, satisfactory in
form and substance to the Agent, shall have been executed and delivered by such
counsel:
(i) the opinion, addressed to the Agent for the benefit of the Banks,
the Owner Trustee and the Owner Participant, of Messrs. Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel to Delano Energy and Thermo
Systems;
11<PAGE>
(ii) the opinion, addressed to the Agent for the benefit of the Banks,
the Owner Trustee and the Owner Participant, of Messrs. Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., counsel to Thermo Electron;
(iii) the opinion, addressed to the Agent for the benefit of the
Banks, the Owner Trustee and the Owner Participant, of Messrs. Pillsbury,
Madison & Sutro, special California counsel to Delano Energy and Thermo
Systems;
(iv) a letter, addressed to the Agent for the benefit of the Banks,
the Owner Trustee and the Owner Participant, of Messrs. Pillsbury, Madison
& Sutro, special California counsel to Delano Energy and Thermo Systems,
with respect to Zoning Matters;
(v) a letter, addressed to the Agent for the benefit of the Banks, of
Messrs. Pillsbury, Madison & Sutro, special California counsel to Delano
Energy and Thermo Systems, with respect to California sales and use taxes;
(vi) [RESERVED];
(vii) the opinion of Messrs. Best, Best & Krieger to the effect that,
among other things, the transactions contemplated hereby will not adversely
affect the tax exempt status of the Bonds;
(viii) the opinion, addressed to CPCFA, of Messrs. Best, Best &
Krieger, with reliance letters to the Owner Participant and the Banks;
(ix) [RESERVED];
(x) the opinion of Graham and James, counsel to Delano Energy, as to
FERC regulatory matters and Qualifying Facility status;
(xi) the opinion, addressed to the Agent for the benefit of the Banks,
ABN AMRO and the Owner Trustee, of Messrs. Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., counsel to Delano Energy, as to certain matters in
respect of investment of accounts; and
(xii) the opinion, addressed to the Agent for the benefit of the
Banks and the Owner Participant, of Messrs. Kelly, Drye & Warren as counsel
to the Owner Trustee.
Section 2A.2. Conditions Precedent to be Satisfied by the Agent. The
Agent, as Phase II Agent, shall have executed and delivered to Thermo Electron
the Release of Guaranty.
12<PAGE>
Section 2A.3. Conditions Precedent to be Satisfied by the Owner Trustee.
2A.3.1. Each of the Basic Documents to which the Owner Trustee is a
party shall have been duly authorized, executed and delivered by the Owner
Trustee, shall be satisfactory in form and substance to the Agent, and shall be
in full force and effect; and no default or event of default, or event, which
with notice or lapse of time or both would constitute a default or event of
default, shall exist under any of said Basic Documents then in effect or in the
performance by the Owner Trustee of any of its obligations thereunder, or would
exist under any of said Basic Documents or in the performance by the Owner
Trustee of any of its obligations thereunder after giving effect to the
transactions to occur on the Document Delivery Date as contemplated hereby and
thereby.
2A.3.2. The representations and warranties of the Owner Trustee
contained in Section 5B hereof or made in writing by the Owner Trustee or any of
its officers in connection with the transactions contemplated hereby or thereby
shall be true and correct on and as of the Document Delivery Date with the same
effect as if made on and as of such date (unless any such representation or
warranty is stated to be true and correct on and as of another date, in which
case such representation or warranty shall be true and correct as of the date as
of which made); and the Owner Trustee shall have performed and complied with all
agreements and conditions contained herein required to be performed or complied
with by it prior to or on the Document Delivery Date.
Section 2A.4. Other Conditions Precedent.
2A.4.1. (a) Neither the Owner Participant nor the Owner Trustee nor
any of their Affiliates shall, by reason of (i) the beneficial or legal
ownership of the Phase I or any Part by the Owner Participant or the Owner
Trustee or (ii) the lease of Phase I to Delano Energy under the Lease or
(iii) any other transaction contemplated by this Agreement or any of the other
Basic Documents, be deemed, by any governmental authority having jurisdiction,
to be, or to be subject to regulations as, an "electric utility," "electrical
corporation," "electrical company," "public utility," "public utility company"
or a "public utility holding company" under any law or governmental regulation,
Federal, state or local, and any consent, order or approval of, or filing with,
any governmental authority necessary to accomplish this result shall have been
duly obtained or made, shall be satisfactory in form and substance to the Owner
Participant and the Owner Trustee, shall be in full force and effect, and shall
not be the subject of any pending or threatened administrative or judicial
proceeding.
13<PAGE>
(b) No Bank shall by reason of (i) the ownership of Phase I by the
Owner Trustee or the operation thereof by Delano Energy, (ii) the ownership and
operation of Phase II by Delano Energy; (iii) the Reimbursement Agreement,
(iv) the issuance of the Letters of Credit, (v) the securing of the Bank
Obligations by Liens on the Owner Trust Estate, the Facility and the Land,
(vi) the Swap Agreements, or (vii) any other transaction contemplated by this
Agreement or any of the other Basic Documents, be deemed by any governmental
authority to be, or to be subject to regulation as, an "electric utility,"
"electrical corporation," "electrical company," "public utility," "public
utility company" or "public utility holding company" under any existing law,
rule or regulation of any governmental authority.
2A.4.2. No change shall have occurred since June 1, 1993, in any
applicable law or regulation or in the interpretation thereof by any
governmental or regulatory authority which, in the opinion of the Owner
Participant, the Owner Trustee or the Agent would make any such Person's or any
Bank's participation in the transactions contemplated hereby illegal or would
subject any of them or any of their Affiliates to any penalty or other liability
or onerous condition or to regulation by any governmental or regulatory
authority to which such Person is not otherwise subject in a substantially
similar manner.
2A.4.3. The Banks shall have received a report from the Independent
Engineers in form and substance satisfactory to each Bank.
2A.4.4. The Banks shall have received a report from TSS Consultants,
Inc., as Fuel Consultant, in form and substance satisfactory to each Bank.
2A.4.5. The Banks shall have received a report from Gale, Smith and
Co., Inc., as insurance consultant, in form and substance satisfactory to each
Bank.
2A.4.6. The Banks shall have received the results of searches
conducted in the UCC, tax lien and judgment lien filing records in California
and Massachusetts.
2A.4.7. The bills for the fees and disbursements of Messrs. Chapman
and Cutler, special counsel to the Banks, as reflected in the statement of such
special counsel delivered prior to the Document Delivery Date, shall each have
been approved for payment on or before the Document Delivery Date.
2A.4.8. All obligations of Delano Energy under the Phase II
Reimbursement Agreement, excluding obligations accruing from and after the date
hereof in respect of the 1991 Tax-exempt Financing Credit, shall have been paid
or performed.
14<PAGE>
2A.4.9. The bills for the fees and disbursements of ABN AMRO and
FNBB, as reflected in the respective statements thereof delivered prior to the
Document Delivery Date, shall each have been approved for payment on or before
the Document Delivery Date.
2A.4.10. There shall have been no default or event of default, or
event or condition which, with the giving of notice or the passage of time, or
both, would constitute a default or event of default, under the Bond Indentures,
and there shall be no more than $120,000,000 in aggregate principal amount of
Bonds outstanding on the Document Delivery Date.
2A.4.11. The Swap Agreements shall have been executed and delivered
and shall be in full force and effect.
2A.4.12. The SCE Credit shall be in effect, as provided in the
Restatement Agreement.
2A.4.13. The Agent shall have received an appraisal report with
respect to the Facility from Barakat & Chamberlin, in form and substance
satisfactory to each Bank and which satisfies all applicable requirements for
appraisals set forth in the Federal Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
2A.4.14. All proceedings taken in connection with the Overall
Transaction and all documents and papers relating thereto shall be satisfactory
to each Bank, and each Bank shall have received copies of such documents and
papers as each may reasonably request in connection therewith, all in form and
substance satisfactory to each Bank.
SECTION 3. INTEREST; FEES.
Section 3.1. Interest. The principal amount of all Liquidity
Advances shall accrue and bear interest at a rate per annum equal to (i) the sum
of the Federal Funds Rate plus one half of one percent (0.50%) plus the
then-applicable Letter of Credit Fee Rate (as described in Section 3.5 below),
such rate to be in effect for the first seven calendar days following such
Liquidity Advance, and (ii) the Effective Rate, at all times thereafter.
3.1.1. Payment of Interest. Prior to the due date or any
accelerated maturity of any Liquidity Advance, the Borrowers will, on June 30
and December 31 in each year (or, if such day is not a Business Day, on the next
succeeding Business Day), beginning on the first such date after such Liquidity
Advance is made, pay the accrued and unpaid interest thereon. On any due date
or accelerated maturity of any Liquidity Advance all accrued and unpaid interest
on such Liquidity Advance shall be forthwith due and payable. In addition, the
Borrowers will, on
15<PAGE>
demand, pay interest on any overdue installments of principal and, to the extent
not prohibited by applicable law, on any overdue installments of interest and
fees owed to any of you hereunder in respect of any Liquidity Advance at a rate
per annum which is at all times equal to the Delay Rate. All payments of
interest hereunder shall be made by the Borrowers to the Agent for the account
of each of you in accordance with your respective Percentage Interests.
3.1.2. Certain Definitions. For purposes of this Agreement:
(a) The term "Effective Rate" shall mean a rate per annum equal to
(i) prior to January 1, 1995 the sum of one percent (1%) plus the Base
Rate, (ii) after December 31, 1994 and prior to January 1, 1997 the sum of
one and one-eighth percent (1.125%) plus the Base Rate and (iii) thereafter
the sum of one and three-eighths percent (1.375%) plus the Base Rate.
(b) The term "Base Rate" shall mean for any day the greater of (i)
the per annum rate of interest from time to time announced by the Agent at
its principal banking office in Boston, Massachusetts as its Base Rate in
effect for such day and (ii) the sum of one-half of one percent (.50%) plus
the Federal Funds Rate. Upon request by the Borrowers at any time that a
Liquidity Advance is outstanding, the Agent shall advise the Borrowers of
the Base Rate then in effect, provided that any failure to so advise the
Borrowers of such rate shall not affect the obligations of the Borrowers
hereunder.
(c) The term "Federal Funds Rate" shall mean for any day the per
annum rate equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as such weighted average is published for such day
(or, if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York or, if such rate is
not so published for such Business Day, the average of the quoted rates for
such Business Day on such transactions received by the Agent from three
federal funds brokers of recognized standing selected by the Agent. Each
determination by the Agent of the Federal Funds Rate shall, in the absence
of demonstrable error, be conclusive.
3.1.3. Deductibility of Interest Incurred by Banks. In the event
that, notwithstanding the provisions of this Agreement and the Bond Documents to
the contrary, any of you shall be advised by your tax advisers that under
Section 265 of the Code or any other provision of the Code all or any portion of
interest charges on obligations incurred or deemed incurred by
16<PAGE>
such of you to finance the maintenance of the Liquidity Advances is disallowed
as a deduction for federal income tax purposes, then the Effective Rate shall be
adjusted from and after the June 30 or December 31 next preceding the date on
which such of you notifies the Agent and the Borrowers of such nondeductibility
to a rate equal to the Effective Rate as from time to time in effect multiplied
by the sum of (a) one plus (b) the product of (i) the percentage, expressed as a
decimal, of interest incurred or deemed incurred by you that is so disallowed
under the Code times (ii) the highest marginal statutory rate of federal income
tax imposed on corporations as from time to time in effect. In addition, the
Borrowers promptly shall pay to the Agent for the account of each of you in
accordance with your respective Percentage Interests an amount equal to the
difference between the amount of interest previously paid on the Liquidity
Advances with respect to the period commencing on the earliest date on which
such disallowance took effect and the amount that would have been paid for such
period had interest been calculated as provided in the preceding sentence. The
covenant contained in this Section 3.1.3 shall survive the termination of the
other provisions of this Agreement.
Section 3.2. Agent's Fee and Upfront Fee. The Borrowers will pay to the
Agent (with respect to clause (a) below, for the benefit of the Banks) the
following fees:
(a) an Upfront Fee (the "Upfront Fee"), due and payable at the
Document Delivery Date, equal to the sum of the following:
A) 1.375% of the amount of the exposure retained under the
Letters of Credit on the Document Delivery Date by Co-Agents
other than ABN AMRO and FNBB;
B) 1.125% of the amount of the exposure retained under the
Letters of Credit on the Document Delivery Date by the Lead
Manager; and
C) 0.6875% of the amount of exposure retained under the Letters
of Credit on the Document Delivery Date by ABN AMRO and
FNBB; and
(b) an Administrative Fee (the "Administrative Fee") equal to $90,000
per year, due and payable in arrears on each anniversary of the Closing
Date with a final payment due on the date of the final payment of the Bank
Obligations. The Administrative Fee will escalate annually from the
Closing Date in accordance with increases in CPI; provided, however, that
the Administrative Fee shall not be decreased in the event of a decrease in
CPI in any year.
17<PAGE>
Section 3.3. Calculations. Calculations of amounts of interest or
amounts expressed as interest for all purposes of this Agreement shall be made
on a daily basis and on the basis of a 360-day year for the actual number of
days elapsed, and amounts of interest and commitment fees payable on the last
Business Day of any calendar or fiscal period shall include the amounts thereof
calculated for the entire period.
Section 3.4. Capital Adequacy Requirements. If after the date hereof any
of you shall have determined that the adoption of any law, rule or regulation
regarding capital adequacy, or any change therein (including without limitation
any change according to a prescribed schedule of increasing requirements,
whether or not known on the date hereof), or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such one of you with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the capital of such one of you as a consequence of its commitment to extend
credit hereunder and/or its issuance of or participation in the Letters of
Credit to a level below that which such one of you could have achieved but for
such adoption, change or compliance (taking into consideration the policies of
such one of you with respect to capital adequacy), then from time to time,
within 30 days after demand by such one of you, the Borrowers shall pay to such
one of you such additional amount or amounts as will compensate such one of you
for such reduced return relating to its commitment or such issuance or
participation hereunder; provided, however, that any such increase relating to
such commitment (but not such issuance or participation) shall be prospective
only from the date of demand. Such one of you shall deliver to the Borrowers,
not later than the date of making such demand, a certificate specifying the
event by reason of which it is entitled to make such claim and setting forth in
reasonable detail the basis and computation of such claim, which computation
shall be conclusive absent manifest error. The covenants contained in this
Section 3.4 shall survive the termination of the other provisions of this
Agreement.
Section 3.5. Letter of Credit Fees. In consideration of your commitments
to pay drawings under the Letters of Credit and to participate therein, the
Borrowers hereby agree to pay to the Agent for the benefit of the Banks a letter
of credit fee with respect to each of the Letters of Credit computed (on the
basis of a year of 360 days) on the amount from time to time available to be
drawn under such Letter of Credit from and including the dates of issuance
thereof through and including the date of expiration thereof at the following
rates: (a) with respect to the 1989 Tax-exempt Financing Credit and the 1990
Tax-exempt Financing Credit, (i) prior to January 1, 1996 at the rate of one
18<PAGE>
and five-hundredths percent (1.05%) per annum, (ii) after December 31, 1995 and
prior to January 1, 1997 at the rate of one and three-tenths percent (1.30%) per
annum and (iii) thereafter at the rate of one and fifty-five-hundredths percent
(1.55%) per annum and (b) with respect to the 1991 Tax-exempt Financing Credit,
(i) prior to January 1, 1995 at the rate of one and three-quarters percent
(1.75%) per annum and (ii) thereafter at the rate of two percent (2.00%) per
annum. Each percentage referred to in the preceding sentence shall constitute
the "Letter of Credit Fee Rate" for the period specified. Each letter of credit
fee payable under this Section 3.5 shall be payable semiannually in arrears on
June 30 and December 31 of each year (or, if such day is not a Business Day, on
the next succeeding Business Day), commencing June 30, 1994.
Section 3.6. Fronting Fee. In further consideration of the Issuing
Bank's commitment to issue and to continue to provide the Letters of Credit, the
Borrowers hereby agree to pay to the Issuing Bank an annual Fronting Fee (the
"Fronting Fee") with respect to each of the Letters of Credit equal to one
quarter of one percent (0.25%) of the outstanding undrawn portion of each Letter
of Credit, subject to adjustment pursuant to the provisions of the following
sentence. Notwithstanding the foregoing, if at any time one or more of the
Banks is rated (i) lower than "A" by Standard & Poor's Ratings Group or "A2 " by
Moody's Investors Service and (ii) lower than "BBB+" by Standard & Poor's
Ratings Group or "Baa1" by Moody's Investors Service, then in such case the
portion of the Fronting Fee allocable to such Bank's Percentage Interest shall
be increased to four-tenths of one percent (0.40%). The Fronting Fee shall be
payable at the same time, and in the same manner, as the Letter of Credit Fees
described in Section 3.5 above.
SECTION 4. LIQUIDITY ADVANCE PAYMENT PROVISIONS.
The Borrowers covenant that so long as (i) any Bank shall be committed to
extend credit under this Agreement or (ii) any Letter of Credit is outstanding
or (iii) any Bank Obligations are outstanding:
Section 4.1. Payment at Maturity. On the due date of each Liquidity
Advance or on any accelerated maturity of any Liquidity Advance, the Borrowers
shall pay to the Agent for your several accounts the entire principal amount of
such Liquidity Advance then outstanding, together with all accrued and unpaid
interest thereon and all other Bank Obligations owing to any of you hereunder or
under any other Bank Agreement.
Section 4.2. Voluntary Prepayments. Upon not less than three Business
Days' prior written notice to the Agent, the Borrowers may at any time or from
time to time prepay all or any part of the outstanding principal amount of any
Liquidity Advance in such amounts as are not less than $100,000 in the aggregate
19<PAGE>
for any one such payment, unless such payment is equal to the entire outstanding
amount of all such Liquidity Advances at a prepayment price equal to the
principal amount prepaid plus accrued and unpaid interest thereon, without
premium. No partial prepayment pursuant to this Section 4.2 shall affect the
obligation of the Borrowers to make the prepayments required by Section 4.3.
Section 4.3. Mandatory Prepayments. On each date on which the Borrowers
are required to prepay a Liquidity Advance in whole or in part under Section
5.6.4 or 5.6.5 hereof, the Borrowers shall prepay such Liquidity Advance in the
principal amount required under Section 5.6.4 or 5.6.5, as the case may be, at a
prepayment price equal to the principal amount thereof plus accrued and unpaid
interest thereon, without premium.
Section 4.4. Payment and Interest Cutoff. Upon all prepayments of
Liquidity Advances, in whole or in part, pursuant to this Agreement, there shall
be paid to the Agent for your several accounts in accordance with the Percentage
Interests the principal amount thereof to be prepaid together with unpaid
interest in respect thereof accrued to the date of prepayment. Notice of
prepayment having been given in compliance with Section 4.2 and whether or not
notice is given of prepayments pursuant to Section 4.3, the amount specified to
be prepaid shall become due and payable on the date specified for prepayment and
from and after said date (unless the Borrowers shall default in the payment
thereof) interest thereon shall cease to accrue.
SECTION 5. GENERAL COVENANTS.
The Borrowers covenant that until all of the Bank Obligations shall have
been paid in full or so long as any Bank shall be committed under this Agreement
or any other Bank Agreement, they will comply with the following provisions:
Section 5.1. Corporate Existence. The Borrowers will each do, or cause
to be done, all things necessary to preserve and keep in full force and effect
their respective existence, franchises, rights and privileges as a corporation
and present corporate structure to the extent necessary to preserve the
legality, validity and enforceability of the Bank Obligations and the full
benefits and security of this Agreement, the Lessor Security Documents, the
Lessee Security Agreement, the Implementation Agreement and the Security
Documents for the Bank Obligations. The Borrowers will not take any action or
fail to take any action so as to cease to be empowered to exercise such powers
as may be necessary or appropriate for the purposes of enabling the Borrowers to
carry out the provisions of this Agreement.
Section 5.2. Performance of Covenants, etc. The Borrowers will
faithfully perform and observe at all times any and all
20<PAGE>
covenants, undertakings, stipulations and provisions to be performed by them
under the Basic Documents and the Bank Agreements. In addition, the Borrowers
will comply with (a) the applicable laws and regulations wherever their business
is conducted, and (b) all agreements and instruments by which they or any of
their properties may be bound and all applicable decrees, orders and judgments
in such manner that there will not result in the imposition of substantial
penalties or a material and adverse effect on the financial condition,
properties or business of the Borrowers. Except for the Lease, the Borrowers
hereby represent and warrant that they have not granted and hereby covenant that
they will not grant any of their right, title or interest in the Bank Security
to anyone other than the Agent.
Section 5.3. Certain Covenants with Respect to Basic Documents. The
Borrowers covenant and agree as follows with respect to the Basic Documents:
5.3.1. Amendment, Enforcement, etc. by Borrowers. Notwithstanding
any provision to the contrary in any other Basic Document, but subject to
Section 5.16.1 hereof, the Borrowers will not, without the prior written consent
of the Agent, enter into any agreement or take or consent to any action
subordinating, amending, modifying, supplementing, releasing, terminating or
enforcing any rights, powers or privileges under or in respect of any Basic
Document, or waiving, excusing, rescinding, avoiding, disaffirming, abating,
suspending, deferring, impairing, compromising or settling any obligation
thereunder or any liability consequent thereon, whether or not there shall have
occurred any Lease Event of Default or default, breach or failure to perform
under or in respect of any Basic Document, and notwithstanding any bankruptcy,
insolvency, reorganization, arrangement, readjustment, liquidation, dissolution,
winding-up or other proceeding against or affecting Delano Energy, the Owner
Participant or the Owner Trustee and notwithstanding any action with respect to
any Basic Document which may be taken by an assignee, receiver or trustee in
bankruptcy (or other similar official) or other party to, or the court, referee,
bankruptcy judge or officer or officers in, any such proceeding (any action or
attempted action by either Borrower contrary to this Section 5.3.1, unless and
until approved, ratified and confirmed in writing by the Agent, being void and
of no effect).
5.3.2. Amendment, Enforcement, etc. by Agent. If no Event of
Default shall have occurred and be continuing, the Agent will not take any
action of the nature referred to in Section 5.3.1 under or in connection with
any Basic Document, or enforce the same, without, in each case, the prior
written consent of the Borrowers; provided, however, that the prior written
consent of the Borrowers shall not be required in connection with the giving
21<PAGE>
of notices or the making of demands for payments which are for the benefit of
the Agent or of the Banks.
5.3.3. Effect of Event of Default. During the continuance of any
Event of Default, the Agent is empowered to exercise, in place of the Owner
Trustee, the remedies of the Owner Trustee under the Lease (including the power
of the Owner Trustee to declare the Lease to be in default pursuant to the
provisions thereof) and the remedies of the Borrowers under each other Basic
Document. Without limiting the generality of the foregoing, during the
continuance of any Event of Default, the Agent, acting directly or through
counsel or other authorized representatives, shall have the exclusive power to
direct and control all proceedings of any nature involving the Borrowers with
respect to the Basic Documents, including, without limitation, the giving or
making of any notice, consent, waiver or demand, the institution and conduct of
any legal proceedings, the making of any agreements incident to such proceedings
(and the settlement or other disposition of any such proceedings) and the taking
of any one or more of the actions with respect to such agreements and
instruments as the Agent may, in its discretion, deem necessary or appropriate
to protect and preserve the right and interest of the Agent in and to all
amounts payable to it or to the Owner Trustee under the Lease or to the
Borrowers under any of the other Basic Documents, including without limitation
the right to sue for, give acquittance for, to settle, adjust or compromise any
claim with respect to any such amounts. The foregoing provisions of this
Section 5.3.3 shall not affect the rights of the Borrowers to receive notices
under any Basic Document.
5.3.4. Certain Payments. Except to the extent that the same have
been properly paid to the Borrowers by the Revenue Trustee, the Borrowers will
remit to the Agent, forthwith upon receipt, all monies and property of any kind
received by them under or in respect of the Basic Documents, without offset,
counterclaim, deduction, suspension, abatement or diminution, and the Borrowers
will not seek to recover from the Agent any monies paid to the Agent by virtue
of this Section 5.3.4.
5.3.5. Recording, etc. The Borrowers will from time to time upon
the written request of the Agent execute and deliver such agreements,
instruments and documents as the Agent may reasonably request in order to
provide the Agent with the full benefits of the Grants contained in the Bank
Agreements and will cooperate in connection with the taking of all action
reasonably requested from time to time by the Agent or Delano Energy or
identified in any Opinion of Counsel delivered to the Agent pursuant to
Section 2A.1.13(iii) hereof to maintain and preserve the Lien of the Security
Documents, the Lessor Security Documents and the Basic Documents, including,
without limitation, subject to the provisions of Section 16 hereof, paying (or
causing Delano Energy to pay, pursuant to Section 17 of the Participation
22<PAGE>
Agreement) all required taxes and filing, recording and registration fees in
connection therewith and executing and delivering such instruments of further
assurance as the Agent or Delano Energy may from time to time reasonably request
or as may be identified in any Opinion of Counsel delivered to the Agent
pursuant to Section 2A.1.13(iii) hereof to evidence the perfection of the Lien
of the Security Documents, the Lessor Security Documents and the Basic Documents
and the estates, interests, rights, powers, privileges and immunities conferred
or intended to be conferred upon the Agent thereby, it being understood that the
Borrowers shall have no such obligations absent either (i) such request by the
Agent or (ii) identification of such action in any Opinion of Counsel delivered
to the Agent pursuant to Section 2A.1.13(iii) hereof.
5.3.6. Power of Attorney. The Borrowers (subject to the provisions
of Sections 5.3.1 through 5.3.4 hereof) hereby constitute and appoint the Agent
their true and lawful agent and attorney-in-fact, irrevocably, with full power
(in the name of the Borrowers or either of them or otherwise) to ask, require,
demand and receive any and all monies and claims for monies payable and to
become payable to the Borrowers from Delano Energy or any other Persons under or
arising out of the Basic Documents (including without limitation all amounts of
Rent and other payments due from Delano Energy under the Lease), to endorse any
checks or other instruments or orders in connection therewith to give
instructions and to file any claims, institute any proceedings, take any action
or exercise any right, power or privilege under any of the aforesaid agreements
or instruments which the Agent may deem to be necessary or advisable in the
circumstances, and, if an Event of Default shall have occurred and be
continuing, to make any settlements in connection therewith; provided, however,
that such power of attorney shall not be construed to permit, nor shall it
authorize the Agent to take, any actions inconsistent with the provisions of
this Agreement or in derogation of the rights of the Borrowers hereunder. The
powers with which the Agent is hereby irrevocably vested include, but are not
limited to, the powers specifically referred to in Sections 5.3.1 through 5.3.4
hereof.
Section 5.4. Investments. Notwithstanding the provisions of Section 5.05
of the Bond Indentures, the Borrowers will permit the proceeds from the issuance
of the Bonds (including without limitation all amounts from time to time held in
the Construction Fund, the Bond Fund and any Reserve Fund created under the Bond
Indentures) to be invested only in Investment Securities. The Borrowers will
not directly or indirectly purchase or carry any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
or any regulations, interpretations or rulings thereunder as from time to time
in effect or make any Investment prohibited by the Comprehensive Anti-Apartheid
Act of 1986 or by any applicable comparable state statute.
23<PAGE>
Section 5.5. Regulation. Not more than 50% in the aggregate of the
ownership interests in either of the Borrowers shall be owned by public utility
companies and/or public utility holding companies so long as the effect of such
ownership of 50% or more would be to cause the Facility or Phase I or Phase II
to fail to be a qualifying small power production facility as defined in the
then applicable FERC regulations issued under the Public Utility Regulatory
Policies Act of 1978, as amended, or any successor thereto.
Section 5.6. Special Covenants Relating to the Bonds. The Borrowers
covenant and agree as follow with regard to the Bonds:
5.6.1. Covenant to Redeem 1989 Bonds. Subject to Section 5.6.5
hereof, the Owner Trustee shall cause the principal of the 1989 Bonds to be
redeemed under Section 4.01(b)(i)(B) of the 1989-90 Bond Indenture on each June
30 and December 31 specified in Exhibit 5.6.1 attached hereto (or, if such date
is not a Business Day, on the next succeeding Business Day), in the amount set
forth next to such date in said Exhibit 5.6.1. Each of you hereby consents to
such redemptions.
5.6.2. Covenant to Redeem 1990 Bonds. Subject to Section 5.6.5
hereof, the Owner Trustee shall cause the principal of the 1990 Bonds to be
redeemed under Section 4.01(b)(i)(B) of the 1989-90 Bond Indenture on each June
30 and December 31 specified in Exhibit 5.6.2 attached hereto (or, if such date
is not a Business Day, on the next succeeding Business Day), in the amount set
forth next to such date in said Exhibit 5.6.2. Each of you hereby consents to
such redemptions.
5.6.2.1. Covenant to Redeem 1991 Bonds. Subject to Section
5.6.5 hereof, Delano Energy shall cause the principal of the 1991 Bonds to be
redeemed under Section 4.01(b)(i)(B) of the 1991 Bond Indenture on each June 30
and December 31 specified in Exhibit 5.6.2.1 attached hereto (or, if such date
is not a Business Day, on the next succeeding Business Day), in the amount set
forth next to such date in said Exhibit 5.6.2.1. Each of you hereby consents to
such redemptions.
5.6.3. [RESERVED]
5.6.4. Redemption of Bonds upon Event of Loss. Notwithstanding any
provision of the Bond Documents to the contrary, if an Event of Loss shall have
occurred, the Owner Trustee or Delano Energy, as appropriate, shall cause the
Bonds to be redeemed under Section 4.01(b)(i)(B) of the Bond Indentures in whole
and shall prepay the Liquidity Advances in whole on the date of such redemption.
In such case the redemption of the Bonds and the prepayment of the Liquidity
Advances shall be effected as of the date the insurance proceeds payable as a
result of such Event of Loss are received by the Agent, and the
24<PAGE>
portion of the payment allocable to the redemption of the Bonds shall be applied
to reimburse the Issuing Bank for the redemption price drawn under the Letters
of Credit on the date of such drawing. Each of you hereby consents to such
redemptions of the Bonds.
5.6.5. Prepayment of Liquidity Advances. Notwithstanding the
provisions of the foregoing Sections 5.6.1 through 5.6.2.1, inclusive, in the
event that on any date on which a redemption of the Bonds shall be required
pursuant to Section 5.6.1, 5.6.2 or 5.6.2.1 there shall be outstanding any
Liquidity Advances (and whether or not any Bonds shall be outstanding on such
date), then the Borrowers on such date shall prepay principal of the Liquidity
Advances in an aggregate principal amount equal to the lesser of (a) the
aggregate principal amount of Bonds otherwise required to be redeemed on such
date under Section 5.6.1, 5.6.2 or 5.6.2.1, as the case may be, and (b) such
aggregate principal amount of the Liquidity Advances as may then be outstanding.
To the extent that the amount described in clause (a) of the preceding sentence
shall exceed the amount described in clause (b), the Borrowers shall cause Bonds
to be redeemed on such date as provided in Section 5.6.1, 5.6.2 or 5.6.2.1, as
the case may be, but shall be required to effect such redemption on such date
only to such extent.
5.6.6. No Change of Interest Rate Mode. The Borrowers shall not
exercise their options under Section 2.02(b) of the Bond Indentures to elect
that the applicable Bonds bear interest at any rate other than the Daily
Interest Rate (as defined in the applicable Bond Indenture).
5.6.7. Reserve Requirement for 1990 Bonds. So long as the 1990
Bonds shall be outstanding, the "Reserve Requirement" with respect thereto for
purposes of the 1989-90 Bond Indenture shall be zero.
5.6.7.1. Reserve Requirement for 1991 Bonds. So long as the
1991 Bonds shall be outstanding, the "Reserve Requirement" with respect thereto
for purposes of the 1991 Bond Indenture shall be zero.
5.6.8. Interest Rate Protection. The Borrowers shall not exercise
any right to terminate the obligations of the Swap Bank under the Swap
Agreements except with the written consent of the Required Banks or in
connection with the replacement of the Letters of Credit with an Alternative
Credit Facility under Section 2.5. In the event that on any date prior to
December 31, 2000, the Swap Agreements shall be terminated in whole or in part
for any reason (including without limitation any extension of the scheduled
amortization of the Bonds) or the Swap Bank shall have failed to make payments
under the Swap Agreements for any reason for a period of longer than 30 days,
then not later than 60 days
25<PAGE>
following such date the Borrowers shall enter into one or more interest rate
protection agreements, each in form and substance satisfactory to each of you
with an LC Bank as provider, which will cap all of the Borrowers' exposure to
interest rate risk under the CPC Loan Agreements until December 31, 2000 at a
rate not to exceed a rate approved by each of you. The Borrowers shall not
consent to any assignment of the Swap Bank's obligations under the Swap
Agreements to any bank other than an LC Bank without the prior written consent
of the Required Banks.
Section 5.7. Maintenance of Property. The Borrowers will keep their
assets in good repair, working order and condition, and make all needed and
proper repairs, replacements, additions and improvements thereto as are
necessary for the conduct of its business. The Borrowers shall not agree to or
implement any modification to the Facility that could adversely affect the
Facility's capacity or efficiency without the prior consent of the Agent and the
Required Banks.
Section 5.8. Maintenance of Office. Delano Energy will maintain an
office in Delano, California or at such other place in Massachusetts or
California as Delano Energy shall designate at least thirty days prior to any
change of such office by written notice, addressed as provided in Section 23 of
the Participation Agreement, where notices, presentations and demands to or upon
Delano Energy may be given.
Section 5.9. Authorization. Upon written request of the Agent or any of
its representatives, the Borrowers shall furnish to the requesting party or
representative, evidence of authority identifying the person or persons who are
currently authorized to act for or on behalf of the Borrowers.
Section 5.10. Limitation on Indebtedness. The Borrowers will not create,
incur, assume, guarantee or otherwise become or remain liable in respect of any
Indebtedness, except that the foregoing limitation shall not apply to:
(i) Indebtedness incurred for accounts payable and expense accruals
incurred or assumed in the ordinary course of business to providers of
goods or services that are Essential Operating Expenses, on account of the
current provision thereof, and not including any liability for money
borrowed or similar extension of credit, up to an maximum aggregate of
$500,000 outstanding at any one time, provided, that none of such
Indebtedness shall have remained unpaid for more than 90 days after it
became payable, unless it is being contested by the Borrowers in good faith
and appropriate amounts shall have been segregated as funds held for future
disbursement by the Revenue Trustee under the provisions of the Revenue
Trust Agreement;
26<PAGE>
(ii) purchase money Indebtedness and Indebtedness in respect of
capitalized lease obligations, not in excess of $1,000,000 aggregate
principal amount at any one time outstanding;
(iii) liabilities in respect of the SCE Credit;
(iv) Indebtedness incurred to Thermo Electron or any Affiliate
thereof for money borrowed from Thermo Electron or such Affiliate, to the
extent that the Basic Documents contemplate such borrowing, or that such
sums are borrowed for the payment of Essential Operating Expenses or
payments of obligations of Delano Energy under any of the Basic Documents,
or for other purposes of Delano Energy contemplated by the Basic Documents,
provided that such Indebtedness shall in each case be unsecured, and
subordinated to all Indebtedness of Delano to the Agent pursuant to the
Subordination Agreement or another subordination agreement in form and
substance satisfactory to the Agent;
(v) Indebtedness for taxes, assessments, and other governmental
charges and levies constituting or included in Essential Operating
Expenses;
(vi) liabilities in respect of endorsements of negotiable instruments
for deposit or collection in the ordinary course of business; and
(vii) indebtedness to the Banks incurred hereunder.
Section 5.11. Limitation on Investments and Loans. Delano Energy will not
make, directly or indirectly, or allow to subsist any Investment other than
Investment Securities. Delano Energy will not make or agree to make any loans
or advances or contributions of capital to any other Person.
Section 5.12. Limitation on Merger, Consolidation, Sale of Assets. The
Borrowers will not merge, consolidate or amalgamate with any other Person or
liquidate or dissolve themselves (or suffer any liquidation or dissolution); or
sell or lease or sell and lease back or otherwise dispose of all or
substantially all of their property, assets and business to any other Person; or
sell, lease or otherwise dispose of any portion of such property, assets or
business except in the ordinary course of business.
Section 5.13. Limitation on Certain Transactions with Affiliates. The
Borrowers will not sell, convey, transfer or otherwise dispose of, any of their
assets to any Affiliate of Delano Energy (except sales of products in the
ordinary course of business at prices and on terms no less favorable to the
Borrowers than prices and terms offered to Persons who are not Affiliates of
Delano Energy), except as required by any Basic
27<PAGE>
Document. The Borrowers will not purchase or otherwise acquire any services or
assets of an Affiliate of Delano Energy (except purchases of products and
services in the ordinary course of business at prices and on terms no less
favorable to the Borrowers than prices and terms available from such Affiliate
to any Persons who are not Affiliates of Delano Energy), except as required by
any Basic Document. The limitation contained in the foregoing sentence shall
not apply to purchases of fuel under the Thermo Fuel Contract, which purchases
shall be made on the terms set forth therein.
Section 5.14. Limitation on Distributions and Similar Transactions. The
Borrowers will not directly or indirectly make any distribution of their assets
or operating profits, or pay any distribution, dividends or make any other
distribution (whether in cash, stock or in property) to any stockholder or
purchase or redeem any stock or make any payment on or with respect to any
Subordinated Obligations (all such distributions, purchases, payments and other
actions being collectively called "Restricted Distributions"), except that so
long as immediately prior and after giving effect thereto no Event of Loss or
Default or Event of Default has occurred and is continuing, the Borrowers may
make Restricted Distributions, but only out of cash which is (i) not held by the
Revenue Trustee, (ii) is not in the Disbursement Account, and (iii) has not been
withdrawn from the Revenue Trust Estate for a specific purpose as provided in
the Revenue Trust Agreement; provided; however, that the cumulative amount of
such Restricted Distributions (other than those in respect of Withdrawn Funds)
shall not exceed the cumulative amount of Distributed Amounts. In addition, the
Borrowers may make Restricted Distributions consisting of Withdrawn Funds and
Income Tax Payments. In addition to the foregoing Restricted Distributions, if
Delano Energy's Working Capital exceeds the Working Capital Requirement, Delano
Energy may, on two Business Days' notice following satisfaction of the
conditions precedent set forth in the following sentence, request the Revenue
Trustee to make a special distribution (the "Special Distribution") determined
as follows: for the period commencing on the date of Firm Operation of Phase II
(as such term is defined in the SCE Contract) and ending on the day prior to the
Document Delivery Date, the difference between Power Revenues earned by Phase II
during such period less (i) Essential Operating Expenses attributable to Phase
II during such period, (ii) all "Bank Obligations" (as such term is defined in
the Phase II Reimbursement Agreement) payable during such period and (iii) the
total amount of closing costs relating to the transactions contemplated herein
which were previously approved in writing by the Agent and which were paid as
Essential Operating Expenses; provided, however, that such Special Distribution
shall not exceed the Special Distribution Amount. As used in the formula
contained in the preceding sentence, the term "Essential Operating Expenses
attributable to Phase II" shall be deemed to be the greater of (i) the amount
certified by Delano Energy as
28<PAGE>
being the amount of Essential Operating Expenses paid with respect to Phase II
during such period and (ii) the amount determined by multiplying the total
amount of Essential Operating Expenses for the Facility during such period times
a fraction, the numerator of which is the Power Revenues earned by Phase II
during such period and the denominator of which is the Power Revenues earned by
the Facility during such period. The Special Distribution may only be made so
long as no Default shall have occurred and be continuing at the time of such
requested Special Distribution. The foregoing to the contrary notwithstanding,
nothing in this Section 5.14 shall prohibit the payment of the Deemed Equity
Return or the Income Tax Payments if all of the conditions for such payment as
set forth in the Revenue Trust Agreement have been otherwise satisfied.
Section 5.15. Further Assurances.
5.15.1. General Assurances. The Borrowers shall defend the title to
the Facility and the Land as warranted in Section 5A.14 hereof against any and
all claims and demands whatsoever. The Borrowers shall cause the Basic
Documents and any amendments and supplements to any of them (together with any
other instruments, financing statements, continuation statements, records or
papers necessary in connection therewith) to be recorded and/or filed and
re-recorded and/or re-filed in each jurisdiction as and to the extent required
by law in order to, and shall take such other actions as may from time to time
be necessary to preserve, protect and perfect each of the other rights and
interests created by any of the Basic Documents in favor of the Agent, subject
to no Liens other than Permitted Liens.
5.15.2. Change of Location. The Borrowers will not change the
location of their respective principal places of business or the respective
offices where they keep their respective corporate records and books of account
or their names without giving at least 30 days' prior notice to the Agent
specifying the new address or name and taking such action as may be required by
Section 5.15.1 hereof.
5.15.3. Maintenance of Reserves, etc. The Borrowers shall fund the
Supplemental Reserve Fund and the Major Maintenance Reserve as required by, and
shall at all times comply with all other terms of, the Revenue Trust Agreement.
The Borrowers shall take such actions as may from time to time be necessary to
preserve, protect and perfect each of the rights and security interests in the
General Revenue Fund, Supplemental Reserve Fund and Major Maintenance Reserve
Fund created by the Revenue Trust Agreement in favor of the Agent, subject to no
other Liens.
5.15.4. Security. Delano Energy covenants and agrees that it shall
(i) provide under the Security Agreement a
29<PAGE>
perfected, first priority security interest to the Agent, in all Power Revenues
receivable, and the proceeds thereof, including, without limitation, such a
security interest in each contract, agreement, or arrangement under which Delano
Energy may from time to time sell power produced or otherwise derive Power
Revenues (each individually a "Power Contract", and collectively the "Power
Contracts"), including without limitation the Power Purchase Agreement and the
Ancillary Power Contracts; (ii) instruct the power purchaser to pay to the
Revenue Trustee all revenues and other payments at any time due, owing,
otherwise payable, or otherwise to be paid, to or for the account of Delano
Energy, from or by such power purchaser, including, without limitation, Power
Revenues; (iii) furnish to each Bank a copy of each Power Contract and each
amendment thereto and a consent to assignment of each such Power Contract in
form and substance satisfactory to the Agent; and (iv) in the event that through
error or otherwise any payment, funds, or other asset or property constituting
or representing Power Revenues, or any part thereof, or any item in lieu thereof
or in substitution therefor, should be paid to Delano Energy, then Delano Energy
shall forthwith pay over or transfer the same to the Revenue Trustee to be held
in and disposed of as part of the General Revenue Fund.
5.15.5. Additional Assignments. The Borrowers shall assign to the
Agent for the benefit of the Banks all of its rights, claims and benefits under
such other contracts, sub-contracts or other similar arrangements, in
substitution for, or in replacement of, any of the Support Documents, or which
fulfill similar purposes, either in whole or in part, as any of the Support
Documents, as the Agent may from time to time reasonably require for the purpose
of securing the obligations of the Borrowers under any of the Basic Documents.
5.15.6. Opinion of Counsel. On March 1 of each year, commencing on
March 1, 1995, Delano Energy will deliver to each Bank an opinion of counsel
stating in form and substance satisfactory to the Agent that all actions
required to be taken pursuant to this Section 5 to the date of such opinion have
been duly taken and specifying what actions, if any, required by this Section 5,
(i) have been taken since the date of the previous opinion required by this
sentence (or since the Closing Date, in the case of the first such opinion) and
(ii) are required or advisable to be taken during the twelve-month period
following the date of such opinion in order to comply with Sections 5.28.1 and
5.28.3 hereof. Delano Energy shall cause all such actions referred to in
clause (ii) of the preceding sentence to be duly and timely taken, and promptly
upon effecting each thereof, shall, at Delano Energy's expense, furnish to the
Agent an opinion of such counsel specifying any such action and stating that
such action has been duly taken.
30<PAGE>
Section 5.16. Support Documents.
5.16.1. No Changes in Support Documents. The Borrowers shall not
cancel, terminate, amend, supplement, modify, waive or otherwise allow to
expire, any of the provisions of any of the Support Documents, or consent to or
permit any such cancellation, termination, amendment, supplement or modification
of any of the Support Documents except (i) in the case of any Fuel Supply
Contract or Ancillary Power Contract (except any Ancillary Power Contract
affecting Power Revenues), in a manner that does not materially adversely affect
any Bank and (ii) in the case of each of the Operating Standards Support
Agreement, the Power Purchase Agreement, the Subordination Agreement, and the
Fuel Contractor Consents, with the written consent of the Required Banks. The
provisions of the immediately preceding sentence shall not prevent the
termination of any Fuel Supply Contract which is not needed in order to meet the
requirements of Section 5.16.3 hereof. The Borrowers shall not enter into any
agreement in substitute for, or in addition to, any of the Support Documents
other than the Fuel Supply Contracts without the prior written consent of the
Agent, which consent shall not be unreasonably withheld. Delano Energy shall at
all times maintain a wood ash removal and disposal program satisfactory to the
Banks. The Banks agree that the program shall be satisfied by the execution of
an Ash Disposal Contract with Hondo Chemical, satisfactory in form and content
to the Agent, for all wood ash generated by the Facility and the delivery of a
consent to assignment with respect thereto by Hondo Chemical to the Agent.
5.16.2. Compliance with Support Documents. The Borrowers shall
(i) duly perform all obligations to be performed by them under the Support
Documents in a manner that does not adversely affect the Banks, (ii) promptly
take any and all action as may be necessary to protect and preserve their rights
under the Support Documents and to enforce or secure the performance by the
other parties thereto of their respective obligations thereunder provided,
however, that in the case of any Fuel Supply Contract or Ancillary Power
Contract not affecting Power Revenues, the Borrowers shall not be required to
take such action unless the failure to take such action would adversely affect
the Banks, and (iii) use their best efforts to obtain all orders, consents,
permits, licenses and approvals, and make all registrations, declarations and
filings, necessary to keep the Support Documents in full force and effect.
5.16.3. Fuel Supply. Delano Energy shall, at any date, be a party to
Fuel Supply Contracts (other than the Thermo Fuel Contract) providing for at
least 50% of the projected fuel requirements of the Facility (including 100% of
the Offset Fuel Requirements of the Facility), which contain terms and
conditions, and have been entered into with Fuel Contractors, satisfactory in
each case to the Agent (whose weighted average term is equal to or in excess of
December 31, 2000) for the
31<PAGE>
remaining total of the Facility's wood fuel need with an initial weighted
average price no greater than $41.00 per bone dry ton F.O.B. the Facility during
the first year of the contracts and escalating at a weighted average rate no
greater than 3.5% per annum. Each Fuel Supply Contract shall at all times have
a remaining term of not less than one year; provided, that in the twelve months
prior to the Termination Date, each Fuel Supply Contract shall have at all times
a remaining term extending at least through the Termination Date. If any such
Fuel Supply Contract is terminated for any reason so that the requirements of
the immediately preceding two sentences are not met, Delano Energy shall, within
30 days after such termination, furnish to the Agent for its approval a proposed
substitute Fuel Supply Contract (or amendment to an existing Fuel Supply
Contract) so that the requirements of the immediately preceding sentence will be
met. In addition, the Thermo Fuel Contract shall remain in effect at all times
through March 31, 2001, (or Delano Energy shall have entered into a successor
contract satisfactory in form and substance to the Agent), and, in addition to
the foregoing requirements, Delano Energy shall use its best efforts to maintain
at all times an adequate fuel supply for the Facility. Delano Energy shall,
upon the request of the Agent, cause all Offset Fuel to be segregated from the
balance of the fuel for the Facility. In addition to the foregoing, Delano
Energy shall at all times maintain on the Land a minimum 30-day supply of wood
fuel for the Facility.
Section 5.17. Accounting; Reports; Information.
5.17.1. Records and Accounts. The Borrowers will keep true records
and books of account in which full, true and correct entries will be made in
accordance with generally accepted accounting principles, consistently applied,
and maintain adequate accounts and reserves for all taxes (including income
taxes), all depreciation, depletion, obsolescence and amortization of its
properties, all contingencies and all other reserves.
5.17.2. Financial Statements. Delano Energy shall furnish to each
Bank, (i) as soon as available, and in any event within 120 days after the end
of each fiscal year of Delano Energy, the balance sheet of Delano Energy as of
the end of such fiscal year and related statements of income, stockholders'
equity and cash flows of Delano Energy for such fiscal year, all in reasonable
detail (including, without limitation, the calculation of the Fixed Charge
Coverage Ratio, and also consolidating information for Phase I and Phase II and
such additional information as the Agent may require in order to verify the
calculation of the Special Distribution as set forth in Section 5.14 hereof),
prepared in accordance with generally accepted accounting principles applied on
a basis consistently maintained throughout the period involved, unless any
inconsistency therein is approved in writing by the accountants
32<PAGE>
certifying such financial statements, and certified by Arthur Andersen & Co. or
other independent certified public accountants of nationally recognized standing
selected by Delano Energy; (ii) as soon as available, and in any event within 45
days after the end of each of the first three quarterly periods of each fiscal
year of Delano Energy, the balance sheet of Delano Energy as of the end of such
quarterly period, and related statements of income, stockholders' equity and
cash flows of Delano Energy, for the three-month and the twelve-month periods
then ending, in each case including a comparison with the comparable period from
the previous year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles applied on a basis consistently
maintained throughout the periods involved, unless any inconsistency therein is
approved in writing by the accountants described in clause (i) above, and
certified by a principal financial officer of Delano Energy (subject to normal
year-end adjustments); (iii) as soon as available and in any case at least 30
days after the end of each fiscal quarter, a copy of the quarterly reports
referenced in the San Joaquin Valley Unified Air Pollution Control District
Authority to Construct Certificates dated August 2, 1993, indicating compliance
with the offset fuel requirements; and (iv) concurrently with the delivery of
the financial statements referred to in clause (i) above, a certificate of the
independent certified public accountants who certified such statements, stating
that in making the examination necessary for the audit of such financial
statements they obtained no knowledge of any default by Delano Energy in the
observance, performance or fulfillment of any of the covenants contained in this
Agreement or any other Basic Document, or if they shall have obtained knowledge
of any such default, specifying the same.
5.17.3. Certificates and Information. Delano Energy shall furnish to
each Bank, (i) concurrently with the delivery of the financial statements
referred to in Section 5.17.2 above, (a) a certificate of a principal executive
officer of Delano Energy stating that such officer has made or caused to be made
under his supervision a review of the transactions and conditions of each Basic
Document during the fiscal period covered by such financial statements, and, to
the best of his knowledge after due inquiry, that Delano Energy has observed and
complied in all material respects with each and every covenant and agreement of
Delano Energy contained in each Basic Document and that no default under any of
Basic Documents has occurred and is continuing (or, if any such event or
condition shall exist, specifying the nature and status thereof), and (b) the
Property Report; (ii) promptly upon the availability thereof, copies of (a) all
material audit reports submitted to Delano Energy by independent public
accountants in connection with any annual, interim or special audit of the
accounts of Delano Energy made by such accountants, (b) all material reports to
any stockholder of Delano Energy, (c) all material reports or statements which
Delano Energy may make to, or file with, the Securities and
33<PAGE>
Exchange Commission, FERC, the air quality board or any public body succeeding
to any or all of the functions of any of such Commissions or Boards (excluding
any such reports or statements which are treated as confidential and not
available to the public, in accordance with applicable law, by the entity with
which they are filed, for so long as such confidentiality shall be maintained),
and (d) all orders, determinations or other written actions as to the Facility
or the operation or financing thereof, and any other actions by any of such
Commissions or Boards or by an administrative or regulatory agency of any state
having jurisdiction over the utility operations of Delano Energy having a
material adverse effect on the business, properties or prospects of Delano
Energy or its ability to perform its obligations under any Basic Document;
(iii) prompt notice of any change in independent public accountants or any
material litigation (other than individual personal injury claims) relating to
or affecting the Facility or the operation thereof or the Land and of any
litigation calling into question the validity or enforceability of any Basic
Document; (iv) promptly after any officer of Delano Energy obtains knowledge of
the occurrence of any event or condition which constitutes a Default hereunder,
a certificate of a principal executive officer of Delano Energy specifying the
nature of such condition or event, the period of existence thereof, the action
Delano Energy has taken or proposes to take with respect thereto and the date,
if any, on which it is estimated that such event or condition will be remedied
or terminated; (v) on the Closing Date and on each anniversary of the Closing
Date, a proposed quarterly operating budget with respect to the operations of
the Facility for the following fiscal year; (vi) as soon as available, and in
any event within 30 days after the end of each fiscal quarter of Delano Energy,
a report with respect to the operations of the Facility setting forth the
comparison between the projected operating budget for such fiscal quarter and
the actual results of operations for such fiscal quarter; (vii) as soon as
practicable, and in any event within 15 days after the end of each calendar
month, operating and maintenance records, including records of the Facility's
power output and fuel usage during that month; (viii) promptly upon obtaining
knowledge thereof, notice of any Default hereunder or any default or event which
with the giving of notice or passage of time or both would constitute a default
by any other party under any other Basic Document or any Support Document or any
notice or assertion of such a default or any event which would give rise to a
right to terminate, refuse to perform or decrease payments otherwise due by any
other party thereto; and (ix) promptly, such additional financial and other
information as Delano Energy may be required to furnish to the holder of any
other security or indebtedness of Delano Energy or as any Bank from time to time
may reasonably request.
5.17.4. Facility Records. Delano Energy shall provide to each Bank
on a quarterly basis until the repayment in full of all Bank Obligations (i) the
Quarterly Operating and Generation
34<PAGE>
Report substantially in the form appearing as part of Exhibit 5.17.4 hereto
showing, without limitation, results for both the preceding fiscal quarter and
the year-to-date, (ii) the Quarterly Fuel Report substantially in the form
appearing as part of Exhibit 5.17.4 hereto, (iii) the Environmental Variances
Report substantially in the form appearing as part of Exhibit 5.17.4 hereto, and
(iv) such other information in connection with or supplemental to the foregoing
as any Bank may from time to time reasonably require. Such reports shall be
provided not later than 45 days after the end of each calendar quarter. In
addition, Delano Energy shall provide to each Bank on a monthly basis until
repayment in full of all Bank Obligations the Monthly Operating and Generation
Report substantially in the form appearing as part of Exhibit 5.17.4 hereto, not
later than 15 days after the end of each month.
5.17.5. Revenue Trust Agreement Reports.
5.17.5.1. The Borrowers shall use amounts which are withdrawn
under the Revenue Trust Agreement for the payment of Essential Operating
Expenses only for the payment of such Essential Operating Expenses. Delano
Energy will use the Disbursement Account only (i) to pay Essential Operating
Expenses, (ii) to make payments into a Reserve Fund (iii) [RESERVED], (iv) to
make payments required to be paid by the terms hereof, and (v) to pay all
Transaction Costs. Delano Energy shall provide for the maintenance of detailed
accounts and records recording all cash receipts and all expenditures of the
Borrowers, reflecting: (a) all receipts, classified as between disbursements
received from the Revenue Trustee and disbursements from other sources; (b) all
expenditures, classified as between expenditures made out of funds received from
the Revenue Trustee and funds received from other sources; and (c) unexpended
receipts. Such records shall make such categorizations and further
classifications as the Agent may reasonably request. Delano Energy shall deliver
copies of the statements for (x) all accounts maintained under the Revenue Trust
Agreement and (y) the Disbursement Account to the Agent on a monthly basis no
later than the 15th day of the following month.
5.17.5.2. Delano Energy shall furnish to each Bank a summary
report (the "Quarterly Cash Report") for each Quarterly Reporting Period
showing, according to such classifications and categorizations, (a) all such
receipts, (b) all such disbursements, and (c) all unexpended funds received,
which shall further be identified as between unallocated funds and funds held
for particular items or categories of expenditure. In addition, Delano Energy
shall include in each Quarterly Cash Report such information as any Bank may
reasonably require regarding accrued liabilities, unaccrued liabilities,
commitments, contracts, purchase orders, and other obligations incurred relative
to any or all items of Essential Operating Expenses, including, without
limitation,
35<PAGE>
amounts thereof. Each Quarterly Cash Report shall be in a form satisfactory to
each Bank, shall be certified as complete and correct by the principal financial
officers of Delano Energy, and shall be delivered to each Bank on or before the
45th day following the end of the applicable Quarterly Reporting Period,
substantially in the form of Exhibit 5.17.5 hereto.
5.17.6. Operating Standards Support Agreement Reports. In the event
that Delano Energy shall have Negative Cash Flow during any calendar year,
Delano Energy shall, within 45 days after the end of such period, prepare and
furnish to Thermo Electron and each Bank a report which shall state with respect
to such period, (a) the Adjusted Available Funds, (b) the Facility Cash Flow and
(c) Pro Forma Cash Flow. Each such report shall be in such form as may
reasonably be requested by Thermo Electron or the Agent on behalf of any Bank,
shall set forth in reasonable detail the data and computations upon which it is
based, including relevant data as to the output and efficiency of the Facility,
and shall be certified by the chief executive officer or chief financial officer
of Delano Energy and, if the Agent, on behalf of any Bank so requires, by
independent accountants and engineers satisfactory to such Person. The failure
of Delano Energy to furnish any such report, or to furnish any such report in a
timely fashion, shall not relieve Thermo Electron of its obligations under the
Operating Standards Support Agreement, nor shall any error or inaccuracy
contained in any such report be binding upon Delano Energy, the Owner Trustee,
the Owner Participant or any Bank. In the event of any dispute or disagreement
as to any of the matters set forth above, including without limitation the
amount of Adjusted Available Funds, Anticipated Output, Anticipated Peak Month
Output, Facility Cash Flow or Pro Forma Cash Flow, the determination thereof by
the Independent Engineers or such other independent accountants or engineers
selected by the Agent and reasonably acceptable to Delano Energy shall be
conclusive and binding upon Thermo Electron, Delano Energy, the Owner Trustee,
the Owner Participant and the Banks. The fees and expenses of any such
engineers or accountants shall be borne by Delano Energy.
5.17.7. Inspection, Final Punch List Actions. The Borrowers shall
permit any Person designated by the Agent at the expense of such designating
party, to visit and inspect any of the properties or examine (and make copies of
or take extracts from) the books of account or financial records of the
Borrowers, to inspect the Facility and Delano Energy's books and records with
respect thereto, and to discuss its affairs, finances and accounts with its
principal officers and with their independent public accountants (and, when
requested, Delano Energy shall instruct its accountants so to discuss such
matters), all at such times during normal business hours and as often as may be
reasonably requested. The Borrowers will furnish to each Bank (i) within 30
days after receipt thereof, a copy of any notice or order of any governmental
authority asserting that either
36<PAGE>
Borrower is not in compliance in any material respect with any law, ordinance or
regulation relating to environmental matters applicable to the Facility or the
Land, (ii) within 30 days after the end of each calendar year, an accurate
statement in reasonable detail regarding the condition and state of repair of
the Facility, and (iii) at such other time or times as the Agent may reasonably
request, accurate statements regarding the condition and state of repair of the
Facility or Land or any part thereof in such detail as the Agent may reasonably
request. If any Property Report delivered pursuant to Section 5.17.3 hereof
reveals that a problem may exist at the Facility or on the Land, and if the
Agent reasonably believes that further investigation is necessary, Delano Energy
shall hire with the Agent's approval and at Delano Energy's cost and expense, an
engineer reasonably acceptable to the party initiating such further
investigation and Delano Energy, to review the problem and recommend solutions
thereto. Upon request of the party initiating such further investigation,
Delano Energy shall implement all such recommended solutions within Delano
Energy's control, or, if Delano Energy so requests, such solution as has been
approved by the Agent in its reasonable discretion, as promptly as possible.
The Independent Engineers shall, on or before the Document Delivery Date,
prepare a list of corrective actions to be taken by Delano Energy with respect
to the Facility attached hereto as Exhibit 5.17.7A (the "Final Punch List").
Delano Energy shall not be entitled to request or receive any distributions
pursuant to Sections 3.3.2(h) or (i) of the Revenue Trust Agreement until such
time as the Independent Engineers have delivered to the Agent a certificate
certifying that the items set forth on the Final Punch List have been properly
performed. The Independent Engineers shall perform an inspection of the
Facility upon the completion of the items on the Final Punch List, in accordance
with the scope of work attached hereto as Exhibit 5.17.7B. Following certified
completion of the items on the Final Punch List, the Independent Engineers may,
at the Agent's discretion, be retained annually thereafter though the repayment
of the Bank Obligations, to monitor operating performance of the Facility. With
respect only to the period following certified completion of the items on the
Final Punch List, then so long as (a) the Fixed Charge Coverage Ratio is in
excess of or equal to 1.15 times for the preceding calendar year and (b) no
event of default has occurred or is continuing, the expenses related to the
Independent Engineers' work will be for the account of the Banks. If (x) the
Fixed Charge Coverage Ratio falls below 1.15 times during any calendar year, or
(y) an event of default has occurred or is continuing, then Delano Energy shall
pay to the Agent up to $10,000 per annum to offset the costs related to the
Independent Engineers' work, with the balance being for the account of the
Banks.
5.17.8. Specifications. Delano Energy will at all times cause an
accurate and complete set of the "as built" plans and specifications relating to
the Facility to be maintained at
37<PAGE>
the Facility and available for inspection by representatives and agents of the
Agent, which plans and specifications shall be amended and supplemented from
time to time to reflect all current improvements, additions and modifications to
the Facility.
5.17.9. Other Information. The Borrowers shall provide such
information regarding the operation of the Facility, the generation of power by
the Facility, the transmission of power generated by the Facility, and the sale
of power generated by the Facility (to the extent that such information has not
been provided pursuant to any other section of this Agreement or the
Participation Agreement), as the Agent may from time to time reasonably require
and shall furnish promptly to the Agent such financial information, including
but not limited to information relative to capital expenditures made or
proposed, and contracts, agreements or other obligations incurred relative to
the Borrowers or their business or the Facility or its operations, as the Agent
may from time to time reasonably request, and in each case within such time as
the Agent may reasonably require.
Section 5.18. Environmental Covenants.
5.18.1. Compliance. The Borrowers shall comply with, and ensure
compliance by any and all occupants of the Facility or the Land with, all
applicable Environmental Laws and any other federal, state and local
environmental standards and requirements affecting the Facility or the Land,
including, without limitation, all federal, state and local Laws, regulations
and orders with respect to the presence (however and by whomsoever generated,
and whether now existing or hereafter arising) and the discharge and removal of
Hazardous Materials; will keep the Facility and the Land free of any Lien
imposed pursuant to such laws, regulations or orders; and will pay or cause to
be paid when due any and all costs in connection with any of the foregoing,
including, without limitation, the cost of delineation, removal, treatment and
0disposal of any such Hazardous Materials. If the Borrowers fail to do any of
the foregoing, then the Agent may, but shall have no obligation to, cause the
Facility or the Land, as the case may be, to be freed from such Hazardous
Materials, and the cost of such removal shall be borne by the Borrowers and the
obligation to pay such cost shall be included as Bank Obligations hereunder.
The Borrowers will give the Agent and each of its agents and employees access to
the Facility and the Land, and the Borrowers hereby specifically grant to the
Agent a license to remove such Hazardous Materials. The Borrowers shall not use
the Facility or the Land to generate, manufacture, refine, produce, treat,
store, handle, dispose of, transfer, process or transport Hazardous Materials
other than (i) as necessary to operate the Facility and (ii) in compliance with
all applicable law.
5.18.2. Notices. The Borrowers will notify each Bank promptly upon
receipt by either Borrower or, to their knowledge,
38<PAGE>
by the Federal government of any notice or advice from any governmental
authority or any other source with respect to Hazardous Materials on, from or
affecting the Facility or the Land.
Section 5.19. Qualifying Facility. The Borrowers shall provide each Bank
prompt notice of all events, conditions or occurrences of which either Borrower
has notice which have caused or may cause the loss of the Facility's status as a
Qualifying Facility. The Borrowers shall not take any action or fail to take
any action which could result in (i) either Borrower or any Bank becoming
subject to financial, organization or rate regulation as an "electric utility,"
"electrical corporation," "electrical company," "public utility," "public
utility company" or "public utility holding company" under any existing law,
rule or regulation of any governmental authority, or (ii) the Facility no longer
being a Qualifying Facility. The Borrowers shall take all appropriate actions
in order to maintain and reestablish the Qualifying Facility status of the
Facility. On or before March 15, 1994, the Borrowers shall apply to FERC for
recertification of the Facility as a Qualifying Facility reflecting the
differences, if any, between the Facility as built and the Facility as described
in the prior certification (in which case the Borrowers shall thereafter
diligently pursue such recertification).
Section 5.20. Supplemental Reserve Fund. Delano Energy shall, not later
than the Document Delivery Date, cause there to be deposited in the Supplemental
Reserve Fund an amount equal to the Supplemental Reserve Required Amount.
Section 5.21. Major Maintenance Reserve Fund. Delano Energy shall cause
the Revenue Trustee to deposit on each Distribution Date the amounts determined
according to the formula set forth in the following sentence (the "Major
Maintenance Reserve Required Amount") into a reserve account (the "Major
Maintenance Reserve Fund") held pursuant to the Revenue Trust Agreement for
purposes of funding major maintenance items with respect to the Facility
consisting of (i) rebagging the baghouse, (ii) overhaul of turbine/generator,
(iii) superheater replacement and (iv) in-bed tube replacement. The Major
Maintenance Reserve Required Amount as of any Distribution Date shall be (a) the
amount scheduled on Exhibit 5.21 hereto as of such Distribution Date less (b)
the sum of (i) the aggregate amount expended by Delano Energy in the calendar
year preceding such Distribution Date and (ii) the amount, if any, by which the
aggregate amounts expended by Delano Energy in all prior calendar years
(following the Document Delivery Date) exceeds the aggregate amount scheduled on
Exhibit 5.21 hereto for such calendar years, in all cases for major maintenance
expenditures approved by the Agent, less (c) all interest earned with respect to
the Major Maintenance Reserve Fund balance during the preceeding calendar year.
In the event that in any year there shall be insufficient
39<PAGE>
funds available to fully fund the Major Maintenance Reserve Required Amount, the
shortfall shall be added to the Major Maintenance Reserve Required Amount for
the following year(s) until it has been fully funded into the Major Maintenance
Reserve Fund.
Section 5.22. Type of Business. The Borrowers will engage only in the
businesses of (i) developing, constructing, owning, leasing (as lessee), and
operating the Facility, and (ii) selling electrical power.
Section 5.23. Payment of Taxes. The Borrowers will promptly pay and
discharge, before the same shall become in arrears, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profit or
upon any property, real, personal or mixed, or any part thereof belonging to it
(collectively, "Taxes") and will duly and timely file all tax returns, reports
and other documents required in connection therewith.
Section 5.24. Identification. If and to the extent required by written
notice to the Borrowers from the Agent, the Borrowers shall, at their sole cost
and expense, attach to or place on such Parts as the Agent may designate in
writing, a sign, stencil, plaque or label stating that such Parts and the
Facility are subject to the Lien of the Basic Documents. The Borrowers will
reattach and replace, at its sole cost and expertise, any such sign, stencil,
plaque or label which becomes illegible or ceases to be affixed thereto or
placed thereon. The Borrowers will not allow the name of any other Person to be
attached to or placed on any Part a designation that might be interpreted as a
claim of ownership with respect thereto adverse to the Lien of the Basic
Documents.
Section 5.25. Filing Reports; Notices; Inspection; Information, Etc.
5.25.1. Governmental Reports. In the event that any report,
application or other document (herein "Report") with respect to the condition or
operation of the Facility or any Part shall be required to be filed or submitted
by any Bank to any Federal, state, municipal or other governmental or regulatory
authority, the Borrowers shall prepare and deliver the Report to the Person
required to file or submit such Report within a reasonable time prior to the
date for filing or submission, and the Borrowers shall thereafter file or submit
the same unless the Person required to file or submit such Report shall
otherwise request. The Person required to submit such report shall execute any
such Report prepared and delivered by the Borrowers if such Report is
accompanied by a written request for execution thereof, provided that (i) such
Report is required by applicable law or regulation with respect to the Facility
to be executed by such Person, (ii) the execution by such Person of such Report
will not
40<PAGE>
involve any possibility of the imposition of any criminal liability or penalty
or (unless indemnified by the Borrowers in such manner and form, and with such
security, as shall be satisfactory to the Person required to file or submit such
Report) any civil liability or penalty upon the Person required to file or
submit such Report, and will not adversely affect any rights of any Bank
hereunder or under any other Basic Document, (iii) such Report is in form and
substance satisfactory to the Person required to file or submit such Report, and
(iv) if requested by the Person required to file or submit such Report, such
Report and request for execution are accompanied by an Opinion of Counsel,
obtained at the Borrowers' sole cost and expense, satisfactory to the Person
required to file or submit such Report, as to the matters set forth in
clauses (i) and (ii) above.
5.25.2. Notices of Material Events. The Borrowers will promptly give
notice to each Bank, including brief particulars of:
(i) the occurrence of any Event of Default;
(ii) the occurrence of any default under any mortgage, deed of trust,
overdraft, or other credit facility, loan agreement, lease, guarantee,
indemnity, or any other contract or instrument that is material to the
operation of the Facility, or the generation of electric power by the
Facility, or the transmission or sale of electric power generated by the
Facility, and to which either Borrower is a party, or by which the
Facility, any Part, any material Realty Right, or other material property
or property right, of either Borrower is bound or affected, or other event
or condition thereunder, of itself entitling, or with the giving of notice
or lapse of time or both entitling, the holder thereof or any party thereto
(other than the Borrowers) to exercise any right or remedy thereunder,
including but not limited to a remedy of acceleration of future payments or
similar remedy;
(iii) the occurrence, in a single incident or series of related
incidents of any accident or other casualty involving damage to the
Facility, the cost of repairing of which would or is likely to cost more
than $50,000 in the aggregate;
(iv) the occurrence of a default under either of the Construction
Contracts of which either Borrower has actual knowledge, or the occurrence
of a default under any subcontract or any contract of a supplier, or the
terms of any purchase or sale of goods or equipment, in connection with the
Construction Contracts or the construction of the Facility, of which either
Borrower has actual knowledge; and
41<PAGE>
(v) the institution of, or the receipt by either Borrower of any
written communication threatening the institution of, any action, suit,
proceeding or investigation before any court, governmental agency,
commission arbitration tribunal, or official, against or affecting either
Borrower or any Affiliate of Delano Energy, the Facility, the operation of
the Facility, the generation of electric power by the Facility, or the
transmission or sale of electric power generated by the Facility, which, if
adversely determined, could adversely affect the financial position,
business, or prospects of either Borrower or impair or prevent its
operation of the Facility, its generation of electric power by the
Facility, or its transmission or sale of such electric power or the
performance of its obligations under any Basic Document.
Section 5.26. Use of Facility; Maintenance and Operation; Operation and
Maintenance Manual.
5.26.1. General. The Borrowers will use the Facility in a prudent,
responsible, careful and proper manner, solely in the conduct of its lawful
business, and in accordance with sound industry practices. The Borrowers shall,
at their sole cost and expense, maintain, service, clean and repair all Parts
and furnish all Parts, mechanisms, tools and devices necessary to maintain the
Facility in good order and repair so that the condition and operating efficiency
thereof will at all times be maintained and preserved at a level consistent with
accepted norms for boilers and generating plants of similar type and capacity
and so that the Facility is kept in the same condition and repair as it was on
the Closing Date, ordinary wear and tear excepted. In addition, the Borrowers
will at their sole cost and expense maintain and operate the Facility in
accordance with a manual assembled by Delano Energy for that purpose ("Operation
and Maintenance Manual"). The Operation and Maintenance Manual shall
(i) include, without limitation, provisions with respect to maintenance
training, maintenance planning and preventive maintenance and (i) be available
at the Facility for inspection by the Agent. Delano Energy will maintain at the
Facility the final version of the Operation and Maintenance Manual with all
revisions and updates. The Borrowers will not enter into any contract for the
overall operation or maintenance of the Facility without the prior written
consent of the Agent.
5.26.2. Issuer Requirement. For so long as any Bond is outstanding,
the Borrowers shall operate the Facility as a "project" within the meaning of
the California Pollution Control Financing Authority Act, as amended and
supplemented (the "Act"), for the disposal of solid waste and the Borrowers
shall make no changes to the Facility or to the operation thereof which would
adversely affect the qualification of the Facility under the Act or impair the
exclusion from gross income of interest on the Bonds for purposes of federal
income taxation.
42<PAGE>
Section 5.27. OutPut/Capacity Tests; Plans and Specifications. Delano
Energy shall provide to each Bank, upon receipt thereof by Delano Energy, a copy
of any output/capacity test conducted at the Facility by SCE or any other Power
Purchaser.
Section 5.28. Compliance.
5.28.1. Laws, etc. The Borrowers shall, at their sole cost and
expense, conform to and comply or cause compliance with:
(i) all laws, statutes, rules, regulations, ordinances, approvals,
consents, authorizations, orders and other requirements of governmental or
regulatory agencies or authorities with respect to the design, acquisition,
manufacture, construction, erection, installation, assembly, use,
maintenance, servicing, storage, finishing, condition or operation of the
Land, the Facility or any Part (including, without limitation, all zoning,
pollution and environmental control requirements, all requirements relating
to the generation of electric power by, or the transmission or sale of
electric power generated by, the Facility, and all requirements as to
changing or replacing any Part from time to time incorporated or installed
in, or attached to, the Facility or incorporating or installing in, or
attaching or adding to, the Facility any additional or other Part), except
(a) to the extent valid variances, waivers, exemptions or similar
exceptions have been obtained therefrom or (b) for violations of any such
law or requirement the validity of which is being contested by the
Borrowers in good faith by appropriate proceedings diligently prosecuted,
provided that no violation referred to in this clause (b) involves any
danger of (I) criminal or civil penalties with respect to any Bank,
(II) foreclosure, sale, forfeiture or loss of any Part, (III) a material
and adverse effect on the operation of the Facility or on the business,
prospects or revenues of either Borrower or (IV) the impairment of either
Borrower's ability to perform its obligations hereunder or under any of the
other Basic Documents;
(ii) the provisions of each of the Support Documents and all
Governmental Actions;
(iii) the terms and conditions of all insurance policies in effect
with respect to the Land, the Facility or any Part and required to be
maintained under Section 5.38 hereof;
(iv) all operating, repair and maintenance standards as are required
to permit the enforcement of material
43<PAGE>
warranty claims against the respective contractors with respect to the
Facility or any Part; and
(v) all applicable manufacturer, contractor and other appropriate
specifications and procedures.
5.28.2. Regulatory Acts. The Borrowers will at all times (i) o all
things necessary to preserve and keep in full force and effect its certification
by FERC as a small power production facility which meets the requirements for
qualification set forth in 18 C.F.R. 292.207(a), (ii) comply with all applicable
laws and all applicable requirements in effect from time to time with respect to
qualification as a Qualifying Facility under Section 210 of the Public Utility
Regulatory Policies Act of 1978, 16 U.S.C. 824a-3 and Section 228.5 of the
California Public Utilities Code and (iii) comply with all applicable Federal,
state and local environmental laws, regulations and ordinances. Upon receipt of
any notice of noncompliance, violation, termination, cancellation or revocation
with respect to any of the foregoing, the Borrowers shall immediately notify
each Bank and enclose a copy of such notice.
5.28.3. Authorization Requirement. In the event that any additional
Governmental Action is required for the completion of the construction of the
Facility, the operation of the Facility, the generation of electric power by the
Facility, or the transmission or sale of electric power generated by the
Facility, the Borrowers will immediately give notice thereof to each Bank and
will immediately take or cause to be taken all necessary steps within the power
of the Borrowers to obtain and comply with such Governmental Action.
5.28.4. Pollution Control and Hazardous Substances. The Borrowers
shall not release, emit or discharge into the environment Hazardous Materials in
excess of federally or state permitted releases or reportable quantities, or
other concentrations, standards or limitations under the foregoing laws or any
state law governing the protection of health and the environment or under any
other federal, state or local laws, regulations or Governmental Authorizations
in connection with the construction, fuel supply, power generation and
transmission, waste disposal or any other operations or processes relating to
the Facility. The Borrowers shall not, except in accordance with applicable
law, (i) store or dispose, or allow the storage or disposal, of any Hazardous
Materials on or in the Facility or the Land or (ii) transport or arrange for the
transportation of any Hazardous Materials to or from the Land. If the Agent
reasonably believes that there may be the presence or the possible presence of
any Hazardous Materials on or in the Facility or the Land in violation of
applicable Law, the Borrowers shall, upon the written request of the Agent and
at the Borrowers' cost, take any and all actions necessary to reasonably assure
the Agent that no Hazardous Materials are stored or disposed on or in the
Facility
44<PAGE>
or the Land in violation of applicable law. The Borrowers shall promptly notify
the Agent in writing of any release or threatened release of any Hazardous
Materials at or from the Facility or the Land, or of any notice of a release or
threatened release of any Hazardous Materials, or for the costs for the cleanup
thereof (including, without limitation by assessment, containment or removal),
received by either Borrower or by any Person for whose conduct either Borrower
is or may be responsible from any federal, state or other governmental
authority. To the extent allowable by law or contract, the Borrowers shall
indemnify and hold each Indemnitee harmless from, and defend each such
Indemnitee against, any and all claims, demands and liabilities, including
reasonable attorneys' fees, of whatever nature relating to or in any way arising
due to the release, emission or discharge into the environment of Hazardous
Materials, by the Borrowers or any prior owner or user of the Facility or the
Land or arising out of the Borrowers' failure to observe the covenants contained
in this Section 5.28.4. The indemnities contained in this Section 5.28.4 shall
be in addition to and not in derogation of the indemnities set forth in
Section 8.4 hereof and shall survive the repayment in full of all Bank
Obligations.
Section 5.29. Payment of Claims and Obligations. In the normal course of
business, and subject to the provisions of the Revenue Trust Agreement, the
Borrowers will pay and discharge, at or before the fixed or extended maturity
thereof, all of its material obligations and liabilities, including, without
limitation, liabilities for Essential Operating Expenses, and claims of any kind
on account of Essential Operating Expenses (including claims for labor,
material, or supplies) which, if unpaid, might by law become a lien or charge
upon any of the income or property of the Borrowers, the Facility or the Land,
excepting, however, in each case, any of such obligations, liabilities or claims
that are being contested in good faith and by appropriate measures, provided
that the Revenue Trustee is holding appropriate, segregated reserves therefor as
sums held for future disbursement as Essential Operating Expenses.
Section 5.30. Restriction on Liens. The Borrowers shall not, directly or
indirectly, create, incur, assume or suffer to exist any Lien on or with respect
to any of its property or assets, including without limitation the Facility, the
Land or any Part, title thereto or any interest therein or in this Lease, except
Permitted Liens, and the Borrowers shall comply with the provisions of the
proviso to clause (iii) of the definition of "Permitted Liens" in the Glossary
attached as Appendix A to the Participation Agreement. If the Borrowers propose
a Lien which is a Permitted Lien under clause (v) of the definition of
"Permitted Liens," the Agent shall, at the Borrowers' request, execute such
instruments and other documents as shall be necessary for such purpose, provided
that (i) the execution of such instruments and other documents by the Agent is
required under applicable law to create the Permitted Lien and if requested by
any Bank, the
45<PAGE>
Borrowers shall have provided each Bank with an opinion of counsel satisfactory
to each Bank to such effect, (ii) such instruments and other documents shall
have been prepared or have been caused to be prepared by the Borrowers without
expense to the Banks and shall be in form and substance satisfactory to the
Agent, and (iii) the Borrowers shall have provided each Bank with such
additional information and documentation concerning the requested Permitted Lien
as any such Person shall have requested. The Borrowers shall promptly, at their
own expense, take such action as may be necessary to duly discharge or eliminate
in a manner satisfactory to the Agent any Lien which is not a Permitted Lien if
the same shall arise at any time. Except as provided in Section 5.15.1 hereof,
the Borrowers will not file any financing statement under the Uniform Commercial
Code as in effect in any jurisdiction, or other instruments creating or giving
notice of any Lien, or analogous document, in any jurisdiction.
Section 5.31. Certain Transfers.
5.31.1. Interests in Facility. Except as permitted under
Section 5.36 hereof, the Borrowers will not sell, transfer, convey or assign to,
or in any manner create in, any Person, any interest in the Facility or the
Land. Any attempted assignment by either Borrower in violation of these
provisions shall be void.
5.31.2. Location. The Borrowers will not remove, or permit to be
removed, any Part from the Land without the prior consent of the Agent unless
such Part is removed pursuant to Section 5.36 hereof.
5.31.3. Possession. The Borrowers will not, without the prior
consent of the Agent, sublease or in any other manner sell, assign, transfer,
dispose of or (except as expressly permitted by Section 5.36 hereof) relinquish
possession of any Part to any Person.
Section 5.32. No Abandonment. The Borrowers shall not abandon the
Facility.
Section 5.33. Construction Warranties. The Borrowers shall maintain in
full force and effect the Borrowers' rights, claims, interests and benefits
under all warranties and other or similar rights, claims, interests and benefits
in respect of the Facility or of work performed, or required to be performed,
under or in respect of the Construction Contracts, or any modification thereof
or change thereunder, by the Contractor, or in respect of any Part or any part
of such work that is procured, or required or permitted to be procured, by the
Contractor from others, including, without limitation, manufacturers, vendors,
suppliers, and subcontractors. The Borrowers shall collaterally assign to the
Agent, so far as they are assignable, and diligently enforce
46<PAGE>
for the Agent's benefit, whether or not they are assignable, all rights, claims,
interests and benefits of the Borrowers under or in respect of all warranties
by, or similar obligations of, each manufacturer, vendor and subcontractor of
any Part. The Borrowers shall promptly notify each Bank in writing of any
actual or potential claim against the Contractor, or any manufacturer, vendor,
supplier or subcontractor, and provide such further information as any Bank may
reasonably require in connection therewith. The Borrowers shall not compromise,
settle, release or discharge any right, claim, interest or benefit under the
Construction Contract or against any manufacturer, vendor, supplier or
subcontractor, without the prior written consent of the Agent.
Section 5.34. Certain Obligations and Duties of the Borrowers. The
Borrowers will faithfully perform and observe all of the Borrowers' obligations
and duties under the Construction Contracts, and shall cause the performance and
observance, of all obligations and duties of the Borrowers to the extent
necessary to preserve and protect for the Agent all rights, claims, interests
and benefits available to the Agent under or in respect of the Construction
Contracts, the Contractors' warranties thereunder or any warranty or obligation
of any manufacturer, vendor, supplier or subcontractor in connection with the
construction or completion of the Facility or otherwise referred to under
Section 5.35 hereof or in connection with the completion of the Facility or the
attainment of satisfaction of the performance guarantees referred to in
Section 5A.16 hereof.
Section 5.35. Completion of Construction.
5.35.1. Modifications to Construction Contracts. The Borrowers shall
not consent to any modification or change in the Construction Contracts without
the written consent of the Agent and, if required by law or contract, any third
party.
5.35.2. Materials; Compliance: Etc. No materials, fixtures,
equipment or articles to be incorporated into the Facility shall be used in the
completion of construction and equipping of the Facility unless on and after the
date of installation thereof good title thereto, free of all Liens shall, by
virtue of such installation and without further act, automatically vests in one
or the other of the Borrowers. The Borrowers and/or the Contractor have,
(i) obtained or maintained all approvals, authorizations, licenses or permits
from all local, state and Federal governmental agencies or otherwise necessary
for the proper completion of the construction, (ii) fully complied in all
material respects with all Federal, state and local laws, ordinances, codes,
regulations and orders of public authorities in effect from time to time and
(iii) paid all royalties, all sales, consumer, use and similar taxes imposed,
all fees for permits, licenses, approvals and
47<PAGE>
inspections, and all license fees and other governmental fees necessary, in
connection with such completion of construction.
5.35.3. Notices and Documents. Upon receipt of any notice of
noncompliance, violation, termination, cancellation, revocation or default with
respect to any approval, consent, order, authorization or license heretofore or
hereafter obtained with respect to the Facility, the Borrowers shall notify each
Bank and enclose a copy of such notice. The Borrowers, to the extent from time
to time requested by the Agent, shall deliver to such Person copies of all
documents (including, without limitation, reports, schedules, certificates and
governmental authorizations) furnished to the Borrowers by the Contractor. The
Independent Engineer and authorized representatives of each Bank shall have the
right to enter the Facility at all reasonable times for the purpose of
inspecting the Facility and the progress of the work of completion.
Section 5.36. Replacement.
5.36.1. Replacement of Parts. In the event that any Part shall
become worn out, lost, stolen, destroyed, seized, condemned, confiscated,
requisitioned, damaged beyond repair or permanently rendered unfit for normal
use for any reason whatsoever, the Borrowers, at their sole cost and expense,
shall promptly replace such Part. Each such replacement Part shall be free and
clear of all Liens and shall be in as good operating condition as, and shall
have a utility at least equal to, the Part being replaced, it being assumed for
this purpose that such replaced Part was in the condition and repair and had the
utility required to be maintained by the terms hereof. If any such replacement
Part or related group of Parts has a cost (including installation) in excess of
$50,000, prior to or on the date of installation thereof, the Borrowers at their
sole cost and expense shall (a) take such action as the Agent may request in
order to subject such Part to the Lien of the Basic Documents and (c) furnish
each Bank with such evidence of the Borrowers' title to, and of the condition
of, such Part as such Person may reasonably request.
5.36.2. Removal of Parts. The Borrowers may, in the ordinary course
of maintenance, service, repair, overhaul or testing, remove from the Facility
any Part, provided that the Borrowers promptly return such Part to the Facility
after completion of such maintenance, service, repair, overhaul or testing. In
no event shall any change be made in the location of any such Part which removes
such Part into a jurisdiction in which filings and recordings have not been made
in the manner required by law to preserve the validity, perfection and priority
of the security interest of the Agent in such Part.
48<PAGE>
Section 5.37. Events of Loss, Etc.
5.37.1. Notice. If an Event of Loss with respect to the Facility
shall occur, the Borrowers shall promptly give each Bank notice thereof
specifying the circumstances of such Event of Loss.
5.37.2. Event of Loss. If an Event of Loss with respect to the
Facility shall occur, the Bonds shall be redeemed pursuant to the provisions of
Section 5.6.4 hereof, and the Borrowers shall pay to the Agent, immediately upon
demand, all Bank Obligations then due and owing, after giving effect to such
redemption.
5.37.3. Application of Payments with Respect to Event of Loss. Any
payments received at any time by the Borrowers from any governmental authority,
insurer, contractor or other Person with respect to an Event of Loss shall be
applied in payment of the amount required to be paid by the Borrowers to the
Agent pursuant to Section 5.37.2 hereof to the extent not already paid by the
Borrowers, and, after such amount shall have been paid by the Borrowers to the
Agent, shall, unless an Event of Default shall have occurred and be continuing,
be applied to reimburse the Borrowers for their payment of such amount, and the
balance, if any, of any such payments remaining thereafter shall, unless an
Event of Default shall have occurred and be continuing, be paid to the
Borrowers.
5.37.4. Application of Payments Not Relating to Event of Loss. Any
payments received at any time by the Borrowers from any governmental authority,
insurer, contractor or other Person with respect to any condemnation,
confiscation or seizure of, or requisition of title to or use of, or theft of,
or loss of use of, or damage to, any part of the Facility not constituting an
Event of Loss shall, (i) if such payments shall be in the aggregate in excess of
$250,000, be paid over to or retained by the Agent, and (ii) if such payments
shall be in the aggregate $250,000 or less, and if no Event of Default has
occurred and is continuing, be paid over to or retained by the Borrowers. In
either case, such payments shall be released, as repair or replacement shall be
completed, to the Borrowers upon receipt by Agent, (A) of invoices evidencing
the amounts to be paid by the Borrowers with respect to such repair or
replacement and (B) of an Officer's Certificate of Delano Energy (with copies to
each Bank) stating that such repair or replacement was made in full compliance
with all applicable laws and that, after giving effect to such repair or
replacement, the Facility is in compliance with this Section 5, is at least
equal in value and general utility as it was prior to the damage or destruction
and is at least equal in operating capacity as it was prior to the damage or
destruction. Such payments may also be released, as repair or replacement shall
progress, to the Borrowers upon receipt by Agent of (I) invoices evidencing the
amounts to be paid by the
49<PAGE>
Borrowers with respect to such repair and replacement, (II) an Officer's
Certificate of Delano Energy (with copies to each Bank) demonstrating that the
Borrowers have available funds sufficient to fully complete such repairs or
replacement and identifying the source(s) of such funds, and (III) an Officer's
Certificate of Delano Energy (with copies to each Bank) (a) stating the total
cost of all required repairs or replacements and (b) stating that, when all such
repairs or replacements are completed in accordance with the plans and
specifications provided to the Independent Engineers by Delano Energy, the
Facility will be in compliance with this Section 5 and all applicable laws, will
be at least equal in value and general utility as it was prior to the damage or
destruction and will be at least equal in operating capacity as it was prior to
the damage or destruction.
5.37.5. Disposition of Payments Not Payable to the Borrowers. Any
amounts which would be payable to the Borrowers, or which the Borrowers would be
entitled to retain pursuant to this Section 5.37, but which are not so payable
or retainable solely because an Event of Default shall have occurred and be
continuing, shall be retained by, or paid to, the Agent (without any liability
for interest) and held by Agent as security for the Bank Obligations, and shall
be paid over to the Borrowers when no Event of Default shall be continuing,
unless the Agent shall have commenced realization upon its collateral under the
Basic Documents, in which case such amounts shall be retained by Agent.
Section 5.38. Insurance.
5.38.1. Insurance Coverages. The Borrowers, at their sole cost and
expense, shall maintain at all times insurance with respect to the Facility:
(i) in such form (including, without limitation, the form of the loss payable
clauses) and with such insurers and reinsurers as shall be reasonably
satisfactory to the Agent; (ii) in amounts sufficient to prevent the Borrowers
from being co-insurers of any partial loss under the applicable policies; and
(iii) in such amounts, and against such insurable hazards, casualties, risks and
contingencies, as the Borrowers would maintain in the prudent management of
their property, as are maintained by others (who are not self-insurers)
similarly situated in respect of property similar to the Facility and as shall
be reasonably satisfactory to the Agent. Delano Energy agrees that it shall
purchase other increased insurance as the Agent's insurance consultant may
reasonably require (subject to a commercially available standard; provided,
however, that reasonable increased cost alone shall not render such insurance
commercially unavailable). Insurers and reinsurers rated A-,8 or better by A.M.
Best are deemed acceptable unless the Agent notifies the Borrowers to the
contrary. All insurance policies required hereby covering loss or damage to the
Facility shall name the Agent as the sole loss payee. All policies shall be
endorsed to make payments of loss to Delano Energy for direct damages up to
$250,000 with notice to the Agent; all direct
50<PAGE>
damage loss in excess of $250,000 and all business interruption loss payments
shall be payable to the Agent. All liability policies (other than workman's
compensation policies) shall name Revenue Trustee and each Bank as additional
insureds. Each policy shall (a) insure Revenue Trustee and each Bank and their
respective interests regardless of any breach or violation by the Borrowers of
any warranties, declarations or conditions contained in such policy or any
action or inaction of the Borrowers or other interests insured under such
policy, the occupation or use of the Facility or the Land by the Borrowers for
purposes more hazardous than permitted by the terms of any of such policies or
any change in the title to or ownership of any portion of the Facility or the
Land; (b) expressly provide that all provisions thereof, except the limits of
liability (which shall be applicable to all insureds as a group) and liability
for premiums (which shall be solely a liability of the Borrowers), be primary
and operate in the same manner as if there were a separate policy covering each
such insured, without right of contribution from any other insurance which may
be carried by any insured, including, without limitation, any insurance carried
by any Bank pursuant to Section 5.38.5 hereof; (c) waive any right of
subrogation of the insurers against the Banks; (d) waive any right of the
insurers to any set-off or counterclaim or any other deduction, whether by
attachment or otherwise, in respect of any liability of, any Bank or the
Borrowers; (e) provide that all deductibles provided for thereon shall be
allocated solely to the account of the Borrowers; and (f) provide that each Bank
shall have the right, as against the insurer, to pay any premium due if the
Borrowers shall neglect to do the same. All general liability and umbrella
liability/excess liability policies shall be on "occurrence" forms. All
insurance proceeds received with respect to the Facility shall be applied as
provided in Section 5.37 hereof. Such insurance coverages will, in any event,
include the following:
(i) Comprehensive General Liability Insurance, including contractual
liability, bodily injury liability, personal injury liability, broad form
property damage coverage, explosion, collapse and underground (XCU)
coverage, including coverage for all claims for damages for personal
injury, and claims for property damage which may arise out of, or result
from either (a) the Borrowers' operations of the Facility, or (b) any other
Person who shall be present at the Facility or on the Land, including,
without limitation, independent contractors. The limits of liability for
comprehensive general liability to the public per occurrence, per location,
for bodily injury and property damage shall be $1,000,000 combined single
limit and a $2,000,000 annual aggregate, and shall include a cross
liability endorsement;
(ii) Comprehensive Automobile Liability Coverage (business owner's
policy), including Automobile Contractual Liability insuring all owned,
non-owned, hired or leased
51<PAGE>
vehicles, with limits of $5,000,000 combined single limit for bodily injury
and property damage;
(iii) Worker's Compensation and Employers' Liability Insurance of
$1,000,000 for any one accident or occurrence or series of accidents or
occurrences arising out of any one event;
(iv) Umbrella Liability Insurance (excluding automobile liability
coverage), the limits of which shall be in such amounts necessary to
provide a total coverage of $14,000,000 per occurrence, per location, of
insurance, following the terms of the underlying Comprehensive General
Liability and Employers' Liability Insurance. In the event that coverages
are not project specific or include a per location aggregate endorsement,
Delano Energy shall notify the Agent in the event that the aggregate limits
are reduced below $7,500,000 and Delano Energy shall take immediate steps
to restore the limits for the Facility to $14,000,000;
(v) Property Insurance on an "All Risk" basis for physical loss or
damage including, but not limited to, loss by earthquake or flood (in
amounts of at least $35,000,000) to buildings, machinery, plant property,
equipment, inventory, transmission lines (whether owned by the Borrowers or
for which the Borrowers have the risk of loss), goods in transit or in
storage (whether on or off site), extra expense coverage for costs incurred
to resume Facility operations after a loss, Business Interruption coverage,
and All Risk Contingent Business Interruption coverage. The valuation for
property shall not, at any time, be less than the full replacement cost of
the Facility or $116,000,000, whichever is greater. Business Interruption
coverage shall be on a gross earnings basis. Contingent Business
Interruption coverage shall be in an amount to cover loss of revenues
resulting from loss of fuel supply and inability of power purchaser to
accept produced power (but in any event not less than $5,000,000);
(vi) Boiler and Machinery Insurance, extended comprehensive standard
form and including expediting coverage in the amount of $500,000, to the
extent not included in All Risk Property Insurance, subject to a limit per
accident of the greater of (x) the value representing the full replacement
cost or (y) $50,000,000. The valuation shall be the same as that with
respect to property under the All Risk Property Insurance coverage,
including Business Interruption coverage and Contingent Business
Interruption coverage on a Gross Earnings basis; and
(vii) The deductible amount for property insurance policies shall not
be in excess of: (x) $100,000 for direct damage; (y) 30 days for business
interruption; and (z) 5% of value for earthquake and flood.
52<PAGE>
In the event that insurance coverages under clauses (v) and (vi) above, except
earthquake and flood coverages, are not insured with the same carrier, both
policies under clauses (v) and (vi), except earthquake and flood coverages,
shall be endorsed to include a joint loss agreement.
Business Interruption coverage, Contingent Business Interruption coverage
and earthquake insurance are required under clauses (v) and (vi) above to the
extent that such coverages are available for comparable projects at commercially
reasonable rates to insureds of a standing comparable to Thermo Electron's
standing at May 31 of each year.
5.38.2. Delivery of Policies, etc. The Borrowers will deliver to the
Agent certified copies of all insurance policies which the Borrowers are
required to maintain pursuant to this Section 5.38 and certificates thereof
executed by the insurer or its duly authorized agent. Each such policy and
certificate shall expressly state that such insurance is primary insurance and
not in excess of, supplemental to or subject to contribution by, any insurance
maintained by any Bank. Delano Energy will also deliver to each Bank (with a
copy to the Agent's insurance consultant), promptly upon request of any such
Person, an Officer's Certificate of Delano Energy setting forth such details as
may be reasonably requested by the Agent as to all such insurance policies and
certifying that the same comply with the requirements of this Section 5.38, that
all premiums then due thereon have been paid and that the same are in full force
and effect. Delano Energy shall from time to time deliver to the Agent
certificates of insurance and such other evidence as the Agent may request to
evidence to the Agent's satisfaction that the insurance required pursuant to
this Section 5.38 continues to be maintained at all times. Delano Energy agrees
that it shall promptly obtain and maintain, at its sole cost and expense, such
additional insurance coverages as the Agent may from time to time reasonably
deem appropriate.
5.38.3. Annual Insurance Report. Annually, as soon as practicable
after the effective date of the All Risk Property Insurance policy, or its
anniversary date, as appropriate, and in any event within 30 days thereafter,
the Borrowers will deliver to the Agent (with a copy to the Agent's insurance
consultant) a report by an independent insurance broker or independent insurance
consultant satisfactory to each Bank, setting forth the insurance obtained by
the Borrowers pursuant to this Section 5.38 and then in effect, and stating
whether, in the opinion of such independent insurance broker or independent
insurance consultant, such insurance complies with the requirements of this
Section 5.38 and, to the extent the Facility is insured under the Thermo
Electron corporate coverages, including a review of outstanding unreported
claims. Such report shall also set forth recommendations of such independent
broker or independent
53<PAGE>
insurance consultant as to additional insurance, if any, reasonably required for
the protection of respective interests of the Agent, each Bank, the Revenue
Trustee and Delano Energy in the light of available insurance coverage and
practice on comparable equipment similarly situated. The Borrowers shall
provide copies of all insurance policies to the Agent (with a copy to the
Agent's insurance consultant) within 90 days after the effective date of the All
Risk Property Insurance policy or its anniversary date, as appropriate.
5.38.4. Notice by Insurers. etc. The Borrowers shall cause the
insurers with whom they maintain the insurance required by this Section 5.38 to
agree to advise the Agent in writing promptly of any act or omission on the part
of the Borrowers of which they have knowledge and which might invalidate or
render unenforceable, in whole or in part, any such insurance. The Borrowers
shall also cause such insurers to agree to advise the Agent in writing, at least
45 days prior thereto, of the modification, cancellation, expiration or
termination of any such insurance, and at least 10 days prior thereto of
cancellation due to nonpayment of premiums. Prior to any termination, the
Borrowers shall provide new certificates of insurance for the insurance policies
replacing the terminating policies. In the event that the Borrowers shall fail
to maintain insurance as provided in this Section 5.38, the Agent may at its
option maintain the insurance required hereby and, in such event, the Borrowers
shall reimburse the Agent upon demand for the cost thereof together with
interest thereon at the Delay Rate.
5.38.5. Independent Insurance. Nothing in this Section 5.38 shall
prohibit any Bank from maintaining, at such Bank's expense, additional insurance
for its own account with respect to liability, or loss or damage to the Facility
or any Part.
Section 5.39. [RESERVED]
Section 5.40. Owner Trustee's Location. The Owner Trustee hereby agrees
that it will not change its location (within the meaning of Section 9-103(3)(d)
of the Uniform Commercial Code) without first giving the Agent at least thirty
days prior written notice and filing all financing statements which are
necessary to continue the perfection of the security interests in the Owner
Trust Estate Granted by the Owner Trustee under the Lessor Security Documents.
Section 5.41. Tax-Exempt Status of Bonds. It is the intention of the
parties hereto that interest on the Bonds shall be and remain tax-exempt. To
that end Delano Energy, the Owner Participant and the Owner Trustee agree that
all funds invested under any Basic Document shall be invested in accordance with
instructions of nationally recognized bond counsel acceptable to the Agent so
that no such investment shall cause any of the Bonds
54<PAGE>
to lose their status as tax-exempt. Delano Energy and the Owner Trustee shall
cooperate to ensure that the provisions of Section 148 of the Code are complied
with in respect of all such investments.
Section 5.42. Original Lease. Delano Energy and the Owner Trustee hereby
agree, as among themselves, that the only original counterpart of the Lease that
shall constitute "chattel paper" within the meaning of the Uniform Commercial
Code of any jurisdiction is the original executed counterpart which has been
identified as counterpart no. 1 on the cover page and the signature page thereof
by Delano Energy and the Owner Trustee.
Section 5.43. [RESERVED]
Section 5.44. [RESERVED]
Section 5.45. Release of Lessee Security. At any time after one year and
one day following the later to occur of (i) the recording of the Deed of Trust
and (ii) the filing of all necessary UCC-1 Financing Statements with respect to
the Security Agreement, the Agent shall have the right, but not the obligation,
to instruct the Owner Trustee to release its liens created under the Lessee
Security Agreement, the Implementation Agreement and the Option to Acquire Stock
Agreement. The Owner Trustee agrees that it will, at Delano Energy's sole cost
and expense, promptly execute and deliver releases in form and substance
satisfactory to the Agent to accomplish the foregoing. Delano Energy agrees,
promptly upon request, to execute and deliver to the Agent a certificate stating
that Delano Energy is not bankrupt nor insolvent (or, if so, stating so), which
certificate will be used by the Agent in its determination of whether or not to
request said releases.
Section 5.46. Breakage Fees. The Owner Trustee shall pay, as soon as
practicable, to the Revenue Trustee for deposit into the General Revenue Fund an
amount equal to any Breakage Fee payable to the Owner Trustee under Section 6(e)
of the Swap Agreements when paid.
SECTION 5A. REPRESENTATIONS AND WARRANTIES OF DELANO ENERGY.
Delano Energy hereby represents and warrants that:
Section 5A.1. Corporate Existence. Delano Energy is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the power and authority to own its assets and to transact its
business as now conducted and as presently proposed to be conducted by it.
Delano Energy is duly licensed or qualified and is in good standing as a foreign
corporation in the State of California and in each other jurisdiction in which
licensing or qualification is
55<PAGE>
necessary to transact its business as now conducted or as presently proposed to
be conducted by it.
Section 5A.2. Power and Authorization. Delano Energy has full power,
authority and legal right to execute, deliver and perform this Agreement, and
each other Basic Document to which it is or is to become a party, and the
execution, delivery and performance by Delano Energy of the Basic Documents have
been duly authorized by all necessary action on the part of Delano Energy, and
do not require any shareholder approval or the approval or consent of any
trustee or holder of any indebtedness or obligations of Delano Energy.
Section 5A.3. Execution, Delivery and Enforceability. This Agreement has
been duly executed and delivered by Delano Energy and constitutes, and each
other Basic Document will upon execution and delivery thereof by Delano Energy
constitute, legal, valid and binding obligations of Delano Energy enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting generally
the enforcement of creditors' rights.
Section 5A.4. No Legal Bar. The execution, delivery and performance by
Delano Energy of the Basic Documents (i) will not violate any provision of any
applicable law or regulation or any order, writ, judgment or decree of any
court, arbitrator or governmental authority applicable to Delano Energy or to
any of its assets, (ii) will not violate any provision of Delano Energy's
charter or by-laws, and (iii) will not violate any provision of, or constitute a
default under, or result in the creation or imposition, of any Lien on any of
the assets of Delano Energy pursuant to the provisions of any mortgage,
contract, agreement or other undertaking of which Delano Energy is a party or
which purports to be binding upon Delano Energy or upon any of its assets.
Section 5A.5. Violations; Defaults. No Default or Event of Default has
occurred and is continuing. Delano Energy is not in default under any other
Basic Document or in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any security or other evidence
of any obligation for borrowed money or evidenced by notes, debentures or other
similar instruments, or in any mortgage, deed of trust, indenture or loan
agreement with respect thereto, and Delano Energy is not in violation, in any
material respect, of, any applicable law, or in violation of or in default, in
any material respect, with respect to any applicable order, writ, judgment, or
decree of any court, arbitrator or governmental authority (including, without
limitation, laws, regulations and requirements with respect to equal employment
opportunity, occupational safety and health or environmental protection), the
consequences of which violation or default might have a material
56<PAGE>
adverse effect on the properties, business, prospects or financial condition of
Delano Energy.
Section 5A.6. Governmental Actions. No Governmental Actions are required
in connection with the participation by Delano Energy, Thermo Electron or the
Banks in the transactions contemplated hereby or by the Basic Documents or with
respect to the participation by any of such Persons in the construction, use,
occupancy or operation of the Facility, compliance with Environmental Laws by
any such Person, the ownership and the operation of the Facility by Delano
Energy, the use in the Facility by Delano Energy of the fuel subject to the Fuel
Supply Contracts, or the execution, delivery and performance by any of such
Persons of the Basic Documents to which such Person is a party, except (i) such
as are set forth in Exhibit 2A.1.7 hereto, each of which (other than those set
forth in Exhibit 2A.1.7 hereto) has been duly obtained or made, is in full
force and effect and is not the subject of any pending or threatened judicial or
administrative proceedings, and (ii) in respect of the Banks, such as may be
required under banking, or other regulatory laws, rules or regulations
applicable to such Persons in respect of their lending or financing activities,
or similar activities.
Section 5A.7. Litigation. There are no actions, suits, investigations or
proceedings (whether or not purportedly on behalf of Delano Energy) pending or,
to the best knowledge of Delano Energy, threatened against or affecting Delano
Energy or any of its properties, which, if adversely determined, might either in
any case or in the aggregate have a material adverse effect (i) on Delano
Energy's ability to deliver, or perform its obligations under any Basic Document
or (ii) on the properties, business, prospects or financial condition of Delano
Energy.
Section 5A.8. Payment of Taxes. Delano Energy has filed all Federal,
state and local tax returns which are required to be filed and has paid all
taxes which have become due pursuant to such returns or pursuant to any
assessment received by it, and Delano Energy has no knowledge of any actual or
proposed deficiency or additional assessment in connection therewith which
either in any case or in the aggregate, would be materially adverse to Delano
Energy. The charges, accruals and reserves on the books of Delano Energy in
respect of Federal, state and local taxes for all open years, and for the
current fiscal year, make adequate provision for all unpaid tax liabilities for
such periods.
Section 5A.9. Chief Place of Business, etc. The chief place of business
of Delano Energy is located in Delano, California and the offices where it keeps
its records concerning the Facility and all original contracts relating thereto
are located in Delano, California, with copies thereof located in Waltham,
Massachusetts.
57<PAGE>
Section 5A.10. Full Disclosure. Neither this Agreement nor any other
Basic Document or certificate, written statement or other document furnished to
the Banks by or on behalf of Delano Energy at Delano Energy's direction or with
Delano Energy's knowledge in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact which Delano Energy has not disclosed
to the parties hereto in writing prior to the date hereof which materially
adversely affects or, so far as Delano Energy can now reasonably foresee, will
materially adversely affect the properties, business, prospects or financial
condition of Delano Energy or the ability of Delano Energy to perform its
obligations under any Basic Document, and Delano Energy is not a party to and is
not bound by any agreement which materially adversely affects or, so far as
Delano Energy can now reasonably foresee, will materially adversely affect the
properties, business, prospects or financial condition of Delano Energy or the
ability of Delano Energy to perform its obligations under any Basic Document.
Section 5A.11. Financial Statements. The financial statements of Delano
Energy for its fiscal year ending January 2, 1993, including its balance sheet
and related statements of income and of cash flows, have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present its financial position as at that date and for the fiscal
period then ended; and since the date of such financial statements there has
been no material adverse change in its financial position.
Section 5A.12. Litigation Regarding Agreements. No Basic Document is the
subject of any pending or threatened administrative or judicial proceedings.
Section 5A.13. Public Utility Status. No Bank shall by reason of (i) the
ownership of the Facility or the operation thereof by Delano Energy, (ii) the
issuance, sale or purchase of the Bonds, (iii) the issuance of the Letters of
Credit, (iv) the execution and delivery by the Agent or any Bank of the
Reimbursement Agreement, the Security Agreement, the Deed of Trust, the
Assignment of Leases, the Swap Agreements or any other Basic Document, or
(v) the securing of the Bank Obligations by Liens on the Bank Security be deemed
by any governmental authority having jurisdiction to be, or be subject to
regulation as, an "electric utility," "electrical corporation," "electrical
company," "public utility," "public utility company" or "public utility holding
company" under any existing law, rule or regulation of the federal government or
of any state or subdivision thereof, and all consents, orders or approvals of,
or filings with, all governmental authorities necessary to accomplish this
result have been duly obtained or made and are in
58<PAGE>
full force and effect and are not the subject of any pending or threatened
administrative or judicial proceedings. So long as the Facility remains a
Qualifying Facility, by reason of the exercise by the Agent of any remedies
under the Basic Documents, including without limitation, the acquisition through
foreclosure of the right, title and interest to Facility or leasehold interest
in the Land of Delano Energy, no Bank shall be deemed by any governmental
authority to be, or to be subject to financial, organizational or rate
regulation as, an "electric utility," "electrical corporation," "electrical
company," "public utility," "public utility company" or "public utility holding
company" under any existing law, rule or regulation of the federal government or
of any state or subdivision thereof.
Section 5A.14. Title to the Facility and the Land. (a)
Delano Energy has good title to Phase II and the Land with good right and power
to convey title to Phase II and the Land, free and clear of all Liens except
Title Report Liens.
(b) The Owner Trustee has good title to Phase I with good right and
power to convey title to Phase I, free and clear of all Liens except Title
Report Liens.
Section 5A.15. Taxes, etc. Except for transfer taxes and registration,
recordation and other miscellaneous fees payable in connection with the
recordation of the Deed of Trust and the Assignment of Leases, (or of
appropriate supplements thereto or notices or memoranda thereof) and the filing
of financing statements with respect to the Security Agreement, the Revenue
Trust Agreement, the Support Documents, neither (i) the construction of the
Facility, (ii) the recordation of the Deed of Trust, (iii) the issuance of the
Bonds and the Letters of Credit, (iv) the execution and delivery of this
Reimbursement Agreement or any other Basic Document by the respective parties
thereto, nor (v) the consummation of any of the transactions contemplated hereby
or thereby on or prior to the Document Delivery Date, will result in any tax,
levy, impost, duty, charge or withholding imposed by the United States, the
State of California, the Commonwealth of Massachusetts or any taxing authority
or political subdivision thereof on or with respect to such construction, sale,
transfer, lease, recordation, execution, delivery or consummation or upon or
with respect to the Agent or any Bank.
Section 5A.16. Construction of the Facility. Construction of the
Facility (i) has been substantially completed in a good and workmanlike manner
in conformity with good construction and engineering practice (with the
exception of the Final Punch List), and (ii) conforms in all material respects
to the description of the Facility set forth in Exhibit 7.11 hereto; no Event of
Loss has occurred with respect to the Facility (or any material Part thereof);
the Facility achieved the Performance Guarantees as established by the
Performance Tests, each of which
59<PAGE>
are described in Exhibit 5A.16 hereto; "Substantial Completion" and "Acceptance"
(as such terms are defined in the Construction Contracts) have occurred under
the Construction Contracts and a "Certificate of Completion" have been filed
within the meaning of the 1991 Bond Indenture. Such construction has been
completed in accordance with, and operation of the Facility as constructed does
not, and shall not, violate any laws, ordinances, rules, regulations or orders
applicable thereto, including, without limitation, any thereof relating to
matters of health, safety or environmental protection, other than immaterial
violations that do not, and would not, in any case or in the aggregate, prevent
or interfere with the continuous satisfactory operation of the Facility, result
in the imposition of penalties on any Bank or involve material costs of cleanup
or correction. All sums due and owing under the Construction Contract have been
paid.
Section 5A.17. Interconnection. Both of Phase I and Phase II have been
interconnected with the electrical system of SCE, and have started energy
deliveries and have achieved "Firm Operation" within the meaning of, and
otherwise are in compliance with, the Power Purchase Agreement and the
Interconnection Agreement.
Section 5A.18. Facility Support. The facilities constructed to supply
water to the Facility and the sources of water are capable of supplying water at
a rate sufficient for the efficient operation of the Facility at its name-plate
rating; the easements, rights-of-way and other rights and real property relating
to the Facility are sufficient for the operation, maintenance and use of the
Facility and uses incidental thereto; and the fuel processing and transportation
system of the Facility is capable of delivering fuel to the Facility at a rate
sufficient for the efficient operation of the Facility at its name-plate rating.
All other necessary actions have been taken or arrangements made so that the
Facility may be operated at its name-plate rating.
Section 5A.19. Revenue Trust Agreement. The trusts provided for in the
Revenue Trust Agreement have been established; all actions reasonably requested
by the Agent in order to perfect the assignments to the Agent of revenues and
other security interests created by the Revenue Trust Agreement have been taken;
and all other provisions of the Revenue Trust Agreement to be complied with or
performed prior to the Document Delivery Date have been complied with or
performed.
Section 5A.20. Fuel Supply Contracts and Price Support. Fuel Supply
Contracts (other than the Thermo Fuel Contract) providing for at least 50% of
the projected fuel requirements of the Facility and complying with
Section 5.16.3 hereof have been entered into. Each such Fuel Supply Contract is
the legal, valid and binding obligation of each Fuel Contractor party to such a
Fuel Supply Contract and enforceable against each such Fuel
60<PAGE>
Contractor in accordance with its terms. Delano Energy, Thermo Systems and
Thermo Electron have entered into the Thermo Fuel Contract. The Thermo Fuel
Contract is the legal, valid and binding obligation of each party thereto and is
enforceable against each such Person in accordance with its terms.
Section 5A.21. FERC Qualification. The Facility is certified by FERC as
a small power production facility which meets the requirements for qualification
set forth in 18 C.F.R. Section 292.207 and meets all requirements of a Qualified
Facility. Such certification is without any terms or conditions which would
prevent or materially hinder Delano Energy's operating the Facility or which
would have a materially adverse effect on the financial condition of Delano
Energy, and such certification has not been revoked, suspended, or terminated.
Section 5A.22. Holding Company and Investment Company Acts; Public Utility
Regulation. Delano Energy is not a "holding company", or a "subsidiary
company", or an "affiliate" of a "holding company", as such terms are defined in
the Public Utility Holding Company Act of 1935; nor is it an "investment
company" or a company controlled by or under common control with an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended. Delano Energy is not a public utility nor is it subject to any
regulation as a public utility under any Federal or state law. Delano Energy is
exempt from all sections of the Federal Power Act, except those enumerated in 18
CFR Section 292.601(c)(1)-(4).
Section 5A.23. Securities Act. Neither Delano Energy nor anyone acting
on its behalf has directly or indirectly offered any interest in the Facility,
the Land, the Bonds, or the CPC Loan Agreements or any similar securities with
respect to any of the foregoing for sale to, or solicited any offer to acquire
any of the same from, anyone in a manner which would result in a violation of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
Section 5A.24. Base Case Pro Forma. Delano Energy has reviewed the Base
Case Pro Forma attached hereto as Exhibit 5A.24. The projected financial
information and results therein are based on assumptions concerning events that
have not yet occurred. Some of these assumptions may prove inaccurate, and
events inevitably may not materialize, and unanticipated events and
circumstances may occur. Therefore, the actual results achieved during the
projected period are likely to vary from the projections and such variations may
be material. However, Delano Energy believes that the projections contained in
the Base Case Pro Forma are reasonable.
Section 5A.25. Representations to FERC. All representations made to FERC
by Delano Energy or its Affiliates or their representatives in connection with
any application made
61<PAGE>
to FERC with respect to the Facility (including the application for
re-certification of the Facility as a Qualifying Facility pursuant to Section
5.19 hereof) are true and correct on the date hereof and the documents delivered
and submissions made by any such Persons in connection with any such application
did not at the time of their delivery or submission contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained in such documents or submissions not misleading.
Section 5A.26. Licenses, Etc. Delano Energy has obtained all licenses,
trademarks, patents or agreements with respect to the usage of technology and
all other permits necessary for the construction, completion, use, ownership,
leasing, operation and maintenance of the Facility, provided, however, that this
Section 5A.26 shall not be deemed to be a representation with respect to
Governmental Actions.
Section 5A.27. Granted Rights. The rights granted by Delano Energy to
the Agent for the benefit of the Banks pursuant to the Deed of Trust and the
Security Agreement comprise all material rights necessary to operate and
maintain the Facility and the Land in accordance with all applicable law as
contemplated herein and in the other Basic Documents and provide adequate means
of ingress and egress for any reasonable purpose in connection with the
operation of the Facility. There are no rights, services or materials required
for the construction, completion, ownership, leasing, use, maintenance or
operation of the Facility in accordance with the Basic Documents, other than
(x) those rights granted by, or to be provided by Delano Energy pursuant to, the
Basic Documents or (y) those that can be reasonably be expected to be
commercially available.
Section 5A.28. Hazardous Materials. (a) To the best of Delano Energy's
knowledge, no Hazardous Materials are present on the Land (including, but not
limited to, residual soil and groundwater), except for "designated waste" which
may from time to time be contained in the overflow pond and Hazardous Materials
(such as fuels or solvents) stored at the Facility which are normal to the
operation of the Facility. No Hazardous Materials are present in concentration
levels exceeding those permitted under any applicable law, and all Hazardous
Materials have been stored and handled in accordance with applicable law.
(b) Neither Delano Energy nor, with respect to the Facility or the
Land any Affiliate of Delano Energy has been identified in any litigation,
administrative proceeding or investigation as a potential responsible party for
any liability under any and all federal, state or local laws, regulations or
orders with respect to the discharge and removal of Hazardous Materials.
62<PAGE>
(c) Other than (i) as necessary to operate the Facility, and (ii) in
compliance with all applicable law, no portion of the Facility or the Land is
now or, to the best of Delano Energy's knowledge, has ever been used to
generate, manufacture, refine, produce, treat, store, handle, dispose of,
transfer, process or transport Hazardous Materials. Delano Energy has not used,
and does not intend to use, any portion of the Facility or the Land for such
purposes.
(d) To the best of Delano Energy's knowledge, Delano Energy has not
transferred Hazardous Materials from the Land or Facility to another location
which is not in compliance with all applicable federal, state or local
environmental laws, regulations or permit requirements.
(e) To the best of Delano Energy's knowledge, the Facility and the
Land are in compliance with all applicable federal, state and local
Environmental Laws affecting the Facility and the Land, and there are no
environmental conditions which could interfere with the continued operation of
the Facility.
Section 5A.29. Margin Stock. Delano Energy has not and will not, directly
or indirectly, use any of the funds giving rise to Bank Obligations for the
purpose, whether immediate, incidental or ultimate, of buying a "margin stock"
within the meaning of the Securities Exchange Act of 1934 or of maintaining,
reducing or retiring any indebtedness originally incurred to purchase a stock
that is currently a "margin stock", or for any other purpose which might violate
or result in a violation of Section 7 of the Securities Exchange Act of 1934,
including without limitation, Regulations G, T and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. Delano Energy does not
own or have any present intention of acquiring any such "margin stock".
Section 5A.30. Employee Benefit Plans. No accumulated funding deficiency,
whether or not waived, exists with respect to any employee benefit plan which is
subject to the provisions of Title IV of ERISA and in respect of which Delano
Energy or any of its Affiliates is (or if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an employer (each individually a "Plan,"
and collectively, the "Plans"). No liability to the Pension Benefit Guaranty
Corporation has been or is reasonably presently expected by Delano Energy to be
incurred with respect to any Plan which is or would be materially adverse to
Delano Energy, and to the best of Delano Energy's knowledge after due inquiry,
each such Plan is in material compliance with the applicable provisions of ERISA
and the Code. Delano Energy has not incurred and does not reasonably presently
expect to incur any withdrawal liability under Title IV of ERISA with respect to
any Plan which is a multi-employer plan which is or would be materially adverse
to Delano Energy. Neither the
63<PAGE>
execution and delivery of this Agreement or any other Basic Document will
involve any transaction which constitutes a prohibited transaction which could
subject any party hereto to the penalty or tax on prohibited transactions
imposed by Section 502 of ERISA or Section 4975 of the Code. Exhibit 5A.30
hereto contains a complete and correct list of all Plans with respect to which
Delano Energy is a party in interest and with respect to which its securities
are employer securities. As used in this Section 5A.30, the term "accumulated
funding deficiency" has the meaning specified in Section 302 of ERISA and
Section 412 of the Code, the term "employer" has the meaning specified in
Section 3.5 of ERISA, the term "multi-employer plan" has the meaning specified
in Section 4001(a)(3) of ERISA, the term "prohibited transaction" has the
meaning specified in Section 406 of ERISA and Section 4975 of the Code, the
terms "employee benefit plan" and "party in interest" have the respective
meanings specified in Section 3 of ERISA and the term "employer securities" has
the meaning specified in Section 407(d)(1) of ERISA.
Section 5A.31. Working Capital Requirement. Delano Energy has fulfilled
the Working Capital Requirement.
Section 5A.32. Natural Gas. Phase II is technically capable to operate on
natural gas in combination with wood/biomass fuel. Phase II is permitted by the
State of California to generate up to 100% of its rated capacity utilizing
biomass fuel exclusively, and up to 35% of its rated capacity utilizing natural
gas.
SECTION 5B. REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE.
The Owner Trustee hereby represents and warrants, except as specifically
indicated, solely in its capacity as trustee under the Owner Trust Agreement and
not in its individual capacity, that:
Section 5B.1. Organization. CTCC, in its individual capacity, is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
Section 5B.2. Power and Authorization. (i) CTCC, in its individual
capacity, has full power, authority and legal right to execute, deliver and
perform the Owner Trust Agreement, and has taken all necessary corporate and
trust action to authorize the execution, delivery and performance by it of the
Owner Trust Agreement; and (ii) the Owner Trustee has full power, authority and
legal right to execute, deliver and perform this Agreement, the Lease, the CPC
Assignment and Assumption Agreement, the Participation Agreement, the Swap
Agreements, the Lessor Security Agreement, the Lessee Option Agreement and each
other Basic Document to which it is or is to become a party (each
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individually an "Owner Trustee Document" and collectively, the "Owner Trustee
Documents") and has taken all necessary corporate and trust action to authorize
the execution, delivery and performance by it of the Owner Trustee Documents.
There is no fact which the Owner Trustee has not disclosed to the parties hereto
in writing prior to the date hereof which materially adversely affects or, so
far as the Owner Trustee can now reasonably foresee, will materially adversely
affect the ability of the Owner Trustee to perform its obligations under any of
the Owner Trustee Documents.
Section 5B.3. Execution, Delivery and Enforceability. (i) the Owner Trust
Agreement has been duly executed and delivered by CTCC, in its individual
capacity, and constitutes the legal, valid and binding obligation of CTCC,
enforceable against CTCC in accordance with its terms; and (ii) the Owner
Trustee Documents have been, or will be, duly executed and delivered by the
Owner Trustee and constitute, or will constitute, legal, valid and binding
obligations of the Owner Trustee, enforceable against the Owner Trustee in
accordance with their respective terms; in each case as limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or affecting
generally the enforcement of creditors' rights.
Section 5B.4. No Legal Bar. The execution, delivery and performance by
CTCC, in its individual capacity, of the Owner Trust Agreement and the
execution, delivery and performance by the Owner Trustee of the Owner Trustee
Documents (i) will not violate any provision of any applicable law or regulation
affecting the validity or enforceability as to CTCC, in its individual capacity,
of the Owner Trust Agreement or the Owner Trustee of the Owner Trustee
Documents, or any order, writ, judgment or decree of any court, arbitrator or
governmental authority applicable to the Owner Trustee or CTCC, in its
individual capacity, or the Owner Trustee, as the case may be, or to any of the
assets of either (other than laws, regulations or orders to which they may be
subject by reason of the business activities of Delano Energy or the nature or
use of the Facility), (ii) will not violate the corporate charter or by-laws of
CTCC, and (iii) will not violate any provision of, or constitute a default
under, or result in the creation or imposition of any Lien (except for the Lien
of the Lessor Security Documents) on any of the assets of CTCC, in its
individual capacity, or the Owner Trustee, as the case may be, pursuant to the
provisions of any mortgage, indenture, contract, agreement or other undertaking
to which CTCC, in its individual capacity, or the Owner Trustee, as the case may
be, is a party or which purports to be binding upon CTCC, in its individual
capacity, or the Owner Trustee, as the case may be, or upon any of their assets.
Section 5B.5. FERC Qualification. The Owner Trustee does not own, for
purposes of 18 C.F.R. Section 292.204(a)(2), another
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small power production facility located within one mile of the Facility.
Section 5B.6. No Liens. There are no Lessor Liens resulting from acts of
or claims against the Owner Trustee or CTCC, in its individual capacity,
affecting the title of the Owner Trustee to the Facility.
Section 5B.7. Litigation. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Owner Trustee, threatened against
the Owner Trustee (in any capacity) before any court, arbitrator or
administrative or governmental body and which relates to its banking or trust
powers which, individually or in the aggregate, if decided adversely to the
interests of the Owner Trustee in such capacity would have a material adverse
effect upon the ability of the Owner Trustee (in any capacity) to perform its
obligations under the Owner Trust Agreement or the Owner Trustee Documents (in
any capacity).
Section 5B.8. Principal Corporate Trust Office. The chief place of
business and chief executive office of the Owner Trustee and the office where
its records concerning the accounts and contract rights relating to the
transactions contemplated hereby are kept, is located at the address set forth
in Section 23 of the Participation Agreement.
Section 5B.9. Knowledge of Lease Defaults. To the knowledge of the Owner
Trustee, no Lease Default, Lease Event of Default, Default or Event of Default
has occurred and is continuing. The Owner Trustee is not in violation of any of
the terms of this Agreement or any other Owner Trustee Document.
SECTION 6. DEFAULTS.
Section 6.1. Events of Default. Each of the following events or
conditions shall constitute an Event of Default hereunder (whether or not any
such event or condition shall be voluntary or involuntary, or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
governmental or public authority or agency):
6.1.1. The Borrowers shall fail to make any payment in respect of:
(a) any amount payable under Section 2.1, Section 3.2, Section 3.5 or Section
3.6 hereof, and any interest due thereon, as and when such amount and interest
shall become due, which failure shall continue for a period of five Business
Days; (b) interest on any Liquidity Advance or any other interest owing to you
under this Agreement as the same shall become due, which failure shall continue
for a period of five Business Days; (c) principal of any Liquidity Advance as
the same shall become due, whether at the due date or by acceleration or
otherwise,
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which failure shall continue for a period of five Business Days; (d) any amount
payable to the Swap Bank under the Swap Agreements, and any interest thereon, as
and when such amount and interest shall become due, which failure shall continue
for a period of five Business Days; or (e) fees or other amounts owing to the
Agent or any Bank under this Agreement, the Swap Agreements or any other Bank
Agreement (other than amounts described in clause (a), (b), (c) or (d) above) as
the same shall become due, which failure shall continue for a period of five
Business Days after the Agent, the Swap Bank or any Bank shall have given notice
of the amount thereof to the Owner Trustee or Delano Energy, as appropriate.
6.1.2. Delano Energy, Thermo Electron, the Owner Trustee or the
Owner Participant shall fail to perform or observe any other covenant, condition
or agreement herein, any covenant, condition or agreement in the Participation
Agreement running to or for the benefit of any Bank or any covenant, condition
or agreement contained in any other Bank Agreement and such failure shall
continue unremedied for a period of 30 days after written notice thereof shall
have been given to Delano Energy, Thermo Electron and the Owner Trustee by the
Agent or any Bank, which written notice shall state that it is a "Notice of
Default" under this Agreement.
6.1.3. Delano Energy, the Owner Trustee or the Owner Participant
shall commence a voluntary case under any chapter of the federal Bankruptcy
Code, or shall consent to (or fail to controvert in a timely manner) the
commencement of an involuntary case against Delano Energy, the Owner Trustee or
the Owner Participant under said Code.
6.1.4. Delano Energy, the Owner Trustee or the Owner Participant
shall institute proceedings for liquidation, rehabilitation, readjustment or
composition (or for any related or similar purpose) under any law (other than
the federal Bankruptcy Code) relating to financially distressed debtors, their
creditors or property, or shall consent to (or fail to controvert in a timely
manner) the institution of any such proceedings against Delano Energy, the Owner
Trustee or the Owner Participant.
6.1.5. Delano Energy, the Owner Trustee or the Owner Participant
shall make an assignment for the benefit of creditors or enter into any
arrangement for the adjustment or composition of debts or claims or consent to
the appointment of a custodian, receiver, trustee or other officer with similar
powers for itself or any of its property.
6.1.6. A court or other governmental authority or agency having
jurisdiction shall enter a decree or order (a) for the appointment of a
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of Delano Energy, the Owner Trustee or the Owner Participant, or of
any part of the
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property of such person or for the winding-up or liquidation of the affairs of
such person, and such decree or order shall remain in force undischarged and
unstayed for a period of more than 60 days, or (b) for the sequestration or
attachment of any property of Delano Energy, the Owner Trustee or the Owner
Participant without its unconditional return to the possession of such Person,
or its unconditional release from such sequestration or attachment, within 30
days thereafter.
6.1.7. A court having jurisdiction shall enter an order for relief
in any involuntary case commenced against Delano Energy, the Owner Trustee or
the Owner Participant for relief in any involuntary case commenced against
Delano Energy, the Owner Trustee or the Owner Participant under the federal
Bankruptcy Code, and such order shall remain in force undischarged and unstayed
for a period of more than 30 days.
6.1.8. The Bond Trustee shall have drawn upon any of the Letters of
Credit to redeem any of the Bonds in full on account of the acceleration of the
stated maturity of any of the Bonds under Article VII of either of the Bond
Indentures.
6.1.9. Any representation or warranty made by Delano Energy herein
or in any other Basic Document shall have been or shall be incorrect or
misleading in any material respect when made, and the same shall have a material
adverse effect on Delano Energy, the Facility or Delano Energy's ability to
perform its obligations hereunder or under any Basic Document.
6.1.10. Any Lease Event of Default shall occur and be continuing.
6.1.11. The Owner Participant shall make any transfer of all or any
portion of its beneficial interest, or Delano Energy shall make any transfer of
all or any portion of its interest in the Facility, other than in accordance
with Section 19 of the Participation Agreement.
6.1.12. The Facility shall at any time cease to be a Qualifying
Facility.
Section 6.2. Remedies upon Event of Default. Upon the occurrence of an
Event of Default and in each and every such case,
(a) the Agent may (and, upon the request of the Required Banks,
shall) proceed to protect and enforce your and its rights by suit in
equity, action at law and/or other appropriate proceeding either for
specific performance of any covenant or condition contained in this
Agreement or any other Bank Agreement or in any instrument or assignment
delivered to the Agent pursuant to this Agreement or any other Bank
Agreement, or in aid of the exercise of any power
68<PAGE>
granted in this Agreement or any other Bank Agreement or any such
instrument or assignment,
(b) the Issuing Bank may (and, upon the request of the Required
Banks, shall) give notice to the Bond Trustee of the occurrence of an Event
of Default for the purpose of terminating the Letters of Credit, in which
event all of the unpaid balance of the Bank Obligations then outstanding
shall automatically become due and payable immediately upon the making of
the Drawings under the Letters of Credit required to be made by the Bond
Trustee as the result of such notice,
(c) if there shall have occurred an Event of Default under
Section 6.1.8 hereof, the unpaid balance of the Bank Obligations shall
automatically become due and payable, and
(d) the Agent may (and, upon the request of the Required Banks,
shall) by notice in writing to the Borrowers declare the unpaid balance of
the Liquidity Advances , if any, and all other Bank Obligations then
outstanding to be forthwith due and payable; provided, however, that those
Bank Obligations consisting of obligations to make reimbursement payments
under Section 2.1 hereof with respect to any Drawing shall not become due
and payable until payment shall be made with respect to said Drawing under
a Letter of Credit.
Immediately upon the occurrence of the events described in clause (b), (c) or
(d) above (but, in the case of clause (d), subject to the proviso stated
therein), all of the Bank Obligations at the time outstanding, including without
limitation all principal of and accrued interest on any Liquidity Advance at the
time outstanding and all other reimbursement obligations, shall become due and
payable in full without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived, your obligations to extend
credit hereunder shall terminate, the Agent may proceed to enforce payment of
the Bank Obligations in such manner as it may elect and to realize upon any and
all rights in the Bank Security, including without limitation to exercise any
and all rights under the Lessor Security Documents and the Security Documents or
any of them, and each of you may offset and apply toward the payment of the Bank
Obligations any Indebtedness from such one of you to the Borrowers or to any
other obligor on the Bank Obligations, including without limitation any
Indebtedness represented by deposits in any general or special account
maintained with such one of you. It is expressly understood that no remedy
conferred under this Agreement or any other Bank Agreement is intended to be
exclusive of any other remedy or remedies, but each and every remedy shall be
cumulative and shall be in addition to every other remedy given herein or
therein or now or hereafter existing at law or in equity or by statute.
69<PAGE>
Section 6.3. Annulment of Defaults. An Event of Default shall not be
deemed to be in existence for any purpose of this Agreement if the Agent shall
have waived such event in writing or stated in writing that the same has been
cured to its reasonable satisfaction (subject to the requirements of
Section 10.5, to the extent that the consent of the Required Banks or of the
holders of a stated percentage of the Percentage Interests may be required), but
no such waiver shall extend to or affect any subsequent Event of Default or
impair any rights of the Agent or any Bank upon the occurrence thereof.
Section 6.4. Waivers. The Borrowers hereby waive to the extent not
prohibited by applicable law (a) all presentments, demands for performance,
notices of nonperformance (except to the extent required by the provisions
hereof or of any other Bank Agreement), protests, notices of protest, notices of
intent to accelerate and notices of dishonor in connection with any of the Bank
Obligations, (b) any requirement of diligence or promptness on the part of the
Agent or any of you in the enforcement of its or your rights under the
provisions of this Agreement or any Bank Agreement, (c) any and all notices of
every kind and description which may be required to be given by any statute or
rule of law and (d) any defense of any kind (except payment) which it may now or
hereafter have with respect to its liability under this Agreement or with
respect to the Bank Obligations.
Section 6.5. Course of Dealing. No course of dealing between the
Borrowers and the Agent or any Bank shall operate as a waiver of any of the
rights of the Agent or any Bank under this Agreement or any Bank Agreement or
with respect to any of the Bank Obligations. No delay or omission on the part
of the Agent or any Bank in exercising any right under this Agreement or any
Bank Agreement or with respect to any of the Bank Obligations shall operate as a
waiver of such right or any other right hereunder. A waiver on any one occasion
shall not be construed as a bar to or waiver of any right or remedy on any
future occasion. No waiver or consent shall be binding unless it is in writing
and signed by the Agent or such one or more of the Banks as may be required by
the provisions of this Agreement. The issuance of any Letter of Credit or the
making of any other extension of credit hereunder during the existence of a
Default shall not constitute a waiver thereof. The giving, taking or
enforcement of any other additional security, collateral or guaranty for the
payment of the Bank Obligations shall not operate to prejudice, waive or affect
the security under any of the Bank Agreements or any rights, powers or remedies
hereunder or thereunder, nor shall the Agent or any Bank be required to first
look to, enforce or exhaust such other or additional security, collateral or
guaranties.
Section 6.6. Application of Proceeds. The proceeds of all sales and
collections, and any other moneys (including any cash contained in the Bank
Security) held or realized by the Agent as
70<PAGE>
the result of its exercise of remedies hereunder and under the other Bank
Agreements following the occurrence of any Event of Default the application of
which is not otherwise herein provided for shall be applied as follows:
First, to the payment of the costs and expenses of such sale or sales
and collections, and the reasonable compensation of the Agent and your
counsel.
Second, any surplus then remaining to the payment of the Bank
Obligations then due and payable secured by such Bank Security in such
order and manner as the Agent may in its sole discretion determine,
consistent with the provisions of Section 10.2 hereof.
Third, in the event that the maturity of the Bank Obligations shall
not have been accelerated under clause (b), (c) or (d) of Section 6.2, any
surplus then remaining to the performance of the Bank Obligations which
remain unperformed pursuant to clause First or Second of this Section 6.6,
consistent with the provisions of the Lessor Security Documents and the
Security Documents.
Fourth, any surplus then remaining shall be deposited in the account
of the Borrowers, subject, however, to the rights of the holders of any
then existing Liens on the Owner Trust Estate and/or the Facility of which
the Agent has actual notice.
Section 6.7. [RESERVED]
Section 6.8. Defaults Under Bond Documents. Upon three days' prior
notice to the Borrowers, except in an emergency in which case notice shall be
promptly given after cure, the Agent may cure any Event of Default under either
Bond Indenture specified by the Bond Trustee; provided, however, that nothing
contained herein shall obligate the Agent to cure such an Event of Default.
SECTION 7. DEFINITIONS. For purposes of this Agreement:
Section 7.1. Cross References. Capitalized terms used in this Agreement
without specific definition herein shall have the meanings assigned or referred
to in the Glossary attached as Appendix A to the Participation Agreement.
Section 7.2. Bank Agreement. The term "Bank Agreement" shall include
this Agreement, the Participation Agreement, each Lessor Security Document, each
Security Document, the Swap Agreements, each Joinder Agreement, the TE Support
Agreements, each Bond Document to which the Agent or any Bank is a party and any
other present or future agreement from time to time entered into between Delano
Energy, the Owner Trustee, the Owner
71<PAGE>
Participant, Thermo Systems or Thermo Electron and the Agent in its capacity as
Agent under this Agreement for all of the Banks or between Delano Energy, the
Owner Trustee, the Owner Participant, Thermo Systems or Thermo Electron and the
Agent or any Bank so long as such agreement either relates to any of the above
or is stated to be a Bank Agreement, each as from time to time amended or
modified, and all statements, reports or certificates delivered by Delano
Energy, the Owner Trustee, the Owner Participant, Thermo Systems or Thermo
Electron to the Agent or any of the Banks in connection herewith or therewith.
Section 7.3. Bank Obligations. The term "Bank Obligations" shall mean
all present and future obligations and Indebtedness of the Borrowers owing to
any of the Banks under this Agreement, the Swap Agreements or any other Bank
Agreement, as from time to time amended or modified, including without
limitation (i) the obligation to pay the Liquidity Advances, (ii) any matured or
contingent obligations of the Borrowers in respect of the Letters of Credit,
including without limitation any obligation of the Borrowers under this
Agreement or any other Bank Agreement to reimburse any of you for payments made
under the Letters of Credit, (iii) any obligations owing to the Swap Bank under
the Swap Agreements, and (iv) the obligations to pay interest, agency fees,
commitment fees, Letter of Credit Fees, the fees described in Section 3.2 hereof
and other amounts and charges from time to time owed hereunder or under any Bank
Agreement or drafts presented under the Letters of Credit.
Section 7.4. Bank Security. The term "Bank Security" shall mean all
assets now or from time to time hereafter encumbered or subjected to a security
interest or charge (or intended or required so to be) pursuant to this Agreement
or any other Bank Agreement to secure the payment or performance of any of the
Bank Obligations, including without limitation the assets described or referred
to in the Lessor Security Documents and the Security Documents.
Section 7.5. Co-Agents. The term "Co-Agents" shall mean ABN AMRO, FNBB,
Societe Generale, Bank of Montreal and Barclays Bank PLC.
Section 7.6. Default. The term "Default" shall mean an Event of Default
as defined in Section 6.1 hereof or an event or condition which with the passage
of time or giving of notice, or both, would become such an Event of Default.
Section 7.7. Delano Energy Assignment of Leases. The term "Delano Energy
Assignment of Leases" shall mean that certain Assignment of Leases and Rents
dated as of December 31, 1993 from Delano Energy to the Agent for the benefit of
the Banks.
Section 7.8. Delano Energy Deed of Trust. The term "Delano Energy Deed
of Trust" shall mean that certain Deed of
72<PAGE>
Trust dated as of December 31, 1993 from Delano Energy to the Agent for the
benefit of the Banks.
Section 7.9. Delano Energy Security Agreement. The term "Delano Energy
Security Agreement" shall mean that certain Security Agreement dated as of
December 31, 1993 from Delano Energy to the Agent for the benefit of the Banks.
Section 7.10. Delano Energy Stock Pledge Agreement. The term "Delano
Energy Stock Pledge Agreement" shall mean that certain Pledge Agreement dated as
of December 31, 1993 from Thermo Systems to the Agent for the benefit of the
Banks.
Section 7.11. Facility. The term "Facility" shall mean the depreciable
assets comprising a biomass-fired power plant in Delano, California conforming
generally to the description contained in Exhibit 7.11 hereto.
Section 7.12. Lead Manager. The term "Lead Manager" shall mean BayBank.
Section 7.13. Phase I Land. The term "Phase I Land" shall mean the real
property described in Exhibit 7.13 hereto.
Section 7.14. Phase II Land. The term "Phase II Land" shall mean the real
property described in Exhibit 7.14 hereto.
Section 7.15. Security Documents. The term "Security Documents" shall
mean, collectively, the Delano Energy Deed of Trust, the Delano Energy
Assignment of Leases, the Delano Energy Stock Pledge Agreement and the Delano
Energy Security Agreement.
SECTION 8. EXPENSES; INDEMNITY; LIABILITY.
Section 8.1. Expenses. Whether or not the transactions contemplated
hereby shall be consummated, the Borrowers will bear (a) all expenses (including
the fees and disbursements of your special counsel, Chapman and Cutler, and such
other counsel with whom the Agent may consult and the costs and expenses of
printing this Agreement) in connection with the preparation and duplication of
this Agreement and each other Bank Agreement, the transactions contemplated
hereby and thereby and any amendment or modification hereof and thereof and
operations hereunder and thereunder, (b) all taxes, including recording and
filing fees and transfer and documentary stamp and similar taxes at any time
payable in respect of this Agreement or any other Bank Agreement or the
incurrence of the Bank Obligations or the taking of the Bank Security, (c) all
expenses incurred by the Agent, any Bank or any other holder of any Bank
Obligation in connection with the enforcement of any rights hereunder or under
any Bank Agreement, including without limitation costs of collection and
reasonable attorneys' fees and out-of-pocket expenses and (d) all reasonable
costs, fees and expenses (including counsel fees) of the Banks
73<PAGE>
and the Revenue Trustee in connection with (i) any supplements, amendments or
modifications to, or waivers of, or consents or other documents relating to the
Overall Transaction, provided, that so long as no Default shall have occurred
and be continuing or shall have given rise to the supplement, amendment,
modification, waiver, consent or other document in question, and provided,
further, that such supplement, amendment, modification, waiver or consent is not
necessary or appropriate to secure for the requesting or initiating Person or
Persons the benefits to be enjoyed by such Person or Persons in the Overall
Transaction, Delano Energy shall only be required to pay such costs, fees and
expenses relating to supplements, amendments, modifications, waivers, or
consents requested or initiated by Delano Energy. The obligations of Delano
Energy under this Section 8.1 shall survive payment and performance in full of
the Bank Obligations and termination of this Agreement.
Section 8.2. Indemnity with Respect to Letters of Credit. To the extent
not prohibited by applicable law, the Borrowers hereby indemnify and hold the
Agent and each of the Banks harmless from and against any and all claims,
damages, losses, liabilities, reasonable costs or expenses (including all
reasonable and necessary counsel fees and expenses) which any of them may incur
or which may be claimed against any of them by any Person by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make lawful payment under, the Letters of Credit or the issuance, sale and
delivery of the Bonds; provided, however, that the Borrowers shall not be
required to indemnify the Agent or any Bank for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
the gross negligence or willful misconduct of the Agent or such Bank in
connection with its obligations hereunder.
Section 8.3. Liability of Issuing Bank.
(a) The Uniform Customs and Practice for Documentary Credits (1983
Revision), International Chamber of Commerce Publication No. 400 (the "Uniform
Customs and Practice"), shall be binding on the parties except to the extent
otherwise from time to time agreed by them in writing. As between the Borrowers
and the Issuing Bank, the Borrowers assume all risks of the acts or omissions of
the Bond Trustee and any transferee of any Letter of Credit with respect to the
use of the Letters of Credit. In furtherance of, and not in limitation of, the
rights and powers of the Issuing Bank under the Uniform Customs and Practice,
but subject to all the other provisions of this Section 8.3, neither the Issuing
Bank nor any of its officers, directors, employees or agents shall be liable or
responsible for, and the Borrowers assume all responsibility for: (i) the use
which may be made of the Letters of Credit and any acts or omissions of the Bond
Trustee or any transferee in connection therewith; (ii) the validity,
sufficiency or genuineness of documents, or of any
74<PAGE>
endorsement(s) thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (iii) payment by
the Issuing Bank against presentation of documents that do not comply with the
terms of the Letters of Credit, including without limitation failure of any
documents to bear any reference or adequate reference to the relevant Letter of
Credit; (iv) the failure of any instrument to bear any reference or adequate
reference to the relevant Letter of Credit or the failure of any person to
surrender the Letters of Credit or to forward documents in the manner required
by the Letters of Credit or otherwise to comply with the terms and conditions of
the Letters of Credit; (v) the good faith or acts of any Person other than the
Issuing Bank and its agents and employees; (vi) the existence, form, sufficiency
or breach of or default under the Bond Indenture, any Bond, the Power Purchase
Agreement, any other Basic Document, any Bank Agreement or any other agreement
or instrument of any nature whatsoever; (vii) any delay in giving or failure to
give any notice, demand or protest; (viii) any error, omission, delay in or
nondelivery or any notice or other communication, however sent; or (ix) any
other circumstances whatsoever in making or failing to making payment under the
Letters of Credit; provided, however, that the Borrowers shall have a claim
against the Issuing Bank, and the Issuing Bank shall be liable to the Borrowers,
to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by either of the Borrowers which such Borrower
proves were caused by (x) the Issuing Bank's willful misconduct or gross
negligence in determining whether documents presented under the Letters of
Credit comply with the terms of the Letters of Credit or (y) the Issuing Bank's
willful failure to pay under any Letter of Credit after the presentation to it
by the Bond Trustee (or a successor trustee to whom the applicable Letter of
Credit has been transferred in accordance with its terms) of a sight draft and
certificate strictly complying with the terms and conditions of such Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
(b) The determination whether the required documents are presented
prior to the expiration of the Letters of Credit and whether such other
documents are in proper and sufficient form for compliance with the Letters of
Credit shall be made by the Issuing Bank in its sole discretion, which
determination shall be conclusive and binding upon the Borrowers. The Issuing
Bank may honor, as complying with the terms of the applicable Letter of Credit
and this Agreement, any documents otherwise in order signed or issued by a
successor trustee under the Bond Indenture. Any action, inaction or omission on
the part of the Issuing Bank under or in connection with the Letters of Credit
or related instruments or documents, if in good faith and in conformity with
such laws, regulations or commercial or banking customs as the Issuing Bank may
deem to be applicable, shall be
75<PAGE>
binding upon the Borrowers, shall not place the Issuing Bank under any liability
to the Borrowers, and shall not affect, impair or prevent the vesting of any of
the rights or powers of the Issuing Bank hereunder or the Borrowers' obligation
hereunder to make reimbursement.
(c) If either Borrower requests or consents in writing to any
modification or extension of any of the Letters of Credit or waives failure of
any draft, certificate or other document to comply with the terms of any of the
Letters of Credit, the Issuing Bank shall be deemed to have relied and be
entitled to rely on such request, consent or waiver with respect to any action
taken or omitted by the Issuing Bank pursuant thereto, and such modification,
extension or waiver shall be binding upon the Borrowers.
Section 8.4. Indemnity with Respect to Bank Security. The Borrowers will
indemnify and save and hold the Agent and each Bank harmless from and against
any and all claims, damages, loss, liability or judgments which may be incurred
or sustained by the Agent or any Bank or asserted against the Agent or any Bank,
directly or indirectly, in connection with the existence of or the exercise of
any of the security rights with respect to the Bank Security, including without
limitation any claim relating thereto asserted against the Agent or any Bank by
any holder (other than the Agent or a Bank) of a security interest in any
property included in the Bank Security; provided, however, that the foregoing
shall not extend to actions not taken in good faith by the Agent or such Bank,
any action or failure to act in accordance with an opinion of counsel to the
Agent or such Bank being conclusively deemed to be in good faith, and shall not
waive the obligations of the Agent to exercise remedies under the Lessor
Security Documents in a commercially reasonable manner. The Agent shall have no
duty as to the collection or protection of the Bank Security or any part thereof
or any income thereon, or as to the preservation of any rights pertaining
thereto, beyond the safe custody of any Bank Security actually in its
possession.
Section 8.5. Survival of Covenants. The covenants contained in
Sections 8.1, 8.2, 8.3 and 8.4 shall survive the termination of this Agreement.
SECTION 9. NOTICES.
Any notice or other communication in connection with this Agreement shall
be delivered as provided in Section 23 of the Participation Agreement.
SECTION 10. OPERATIONS.
The extension of credits and the operations under this Agreement shall be
governed by the following provisions:
76<PAGE>
Section 10.1. Interests in Credits. The percentage interest of each of
you in the credits extended under this Agreement shall be as follows:
Percentage
Name Interest Amount
---- ----------- -----------
ABN AMRO 25.0000002% $30,552,329
FNBB 25.0000002% $30,552,329
Societe Generale 15.6250004% $19,095,206
Bank of Montreal 13.2812495% $16,230,924
Barclays Bank PLC 13.2812495% $16,230,924
BayBank 7.8125002% $9,547,603
100% $122,209,315
adjusted as you may agree from time to time pursuant to any Joinder Agreement or
otherwise among yourselves (the "Percentage Interests"). References in any Bank
Agreement to your respective Percentage Interests are to such interests as from
time to time in effect.
Section 10.2. Payments. All payments and prepayments of principal and
interest in respect of the Liquidity Advances and, except as otherwise specified
in this Agreement, all other amounts owing hereunder shall, as a matter of
convenience, be made to the Agent in immediately available funds at its
principal banking office in Boston, Massachusetts and the shares thereof of the
others of you shall be credited to you by the Agent and the applicable interest
and other amounts shall be paid in proportion to your Percentage Interests,
except that amounts paid in respect of the Bank Obligations described in
Sections 2.3, 2.4, 3.1.3, 3.2, 3.4, 3.6 and 8 hereof shall be paid to such of
you as are owed such amounts irrespective of your Percentage Interests and
except as you may otherwise agree in writing. All proceeds of sales and
collections and moneys applied to the payment of the Bank Obligations under
Section 6.6 shall be paid to the Banks in proportion to the Percentage
Interests, except that in the event there is owing to any of the Banks an amount
of Bank Obligations (including without limitation Bank Obligations owing under
Section 2.3, 2.4, 2.5, 3.1.3, 3.2, 3.4 or 8 hereof or under the Swap Agreements)
that is not evidenced by the obligation to reimburse Drawings under the Letters
of Credit, then for the purposes of this sentence the Percentage Interests shall
be adjusted to reflect the actual percentage interest of each of the Banks in
the aggregate amount of the Bank Obligations then outstanding.
77<PAGE>
Each of you other than the Issuing Bank shall participate with the
Issuing Bank in each Letter of Credit to the extent of your respective
Percentage Interests. In the event of a Drawing under any Letter of Credit that
is not reimbursed in full in cash on or before 1:00 p.m., Boston time, on the
date of such Drawing, each of you (other than the Issuing Bank) hereby
authorizes and requests the Agent to advance to the Issuing Bank, pursuant to
the terms hereof, its respective Percentage Interest in the Drawing; and each of
you agrees forthwith to reimburse the Agent in immediately available funds at
its principal banking office in Boston, Massachusetts for the amount of such
Percentage Interest. The Agent may, in its sole discretion, apply any payment
to which any of you is otherwise entitled pursuant to this Agreement to the
payment of any obligations of such one of you to the Agent then due and payable
under this Agreement. Any reimbursement amount not paid by any of you on the
date the same is advanced by the Issuing Bank shall bear interest from such date
until payment shall be made in full at a rate per annum equal to the Federal
Funds Rate. Upon its subsequent receipt of any payment on account of such a
Drawing from the Borrowers or any guarantor, the Agent as promptly as possible
shall remit to each other of you its respective Percentage Interest in such
payment. Each of you acknowledges and agrees that your obligation hereunder to
pay the Agent any participation amount shall be absolute, irrevocable and
unconditional and shall not be affected by any event or circumstance, whether
occurring before or after the issuance of any Letter of Credit or the payment of
a Drawing thereunder, including without limitation (a) the existence of any
Default, (b) any change in the financial condition of Delano Energy, the Owner
Trustee, the Owner Participant, Thermo Electron, Thermo Systems, any guarantor
or any other Person or (c) any act or omission to act by the Agent, the Issuing
Bank, Delano Energy, the Owner Participant, the Owner Trustee, Thermo Electron,
Thermo Systems or any other Person.
Section 10.3. Agent's Authority to Act. Each of you hereby appoints and
authorizes the Agent to take such action as agent on your behalf (including on
behalf of ABN AMRO in its capacity as Swap Bank), in part as successor Agent to
FNBB (under the Phase I Reimbursement Agreement, and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers as are reasonably incidental thereto. In holding any Bank
Security and in acting hereunder and under any other Bank Agreement, the Agent
is acting for its own account to the extent of its Percentage Interest and for
the accounts of the other Banks to the extent of their interests in the Bank
Obligations, and all action in connection with the enforcement or exercise of
any remedies (other than your rights of set-off as provided in Section 6.2
hereof and the right of the Swap Bank to suspend or terminate its obligations
under Section 6(a) of the Swap Agreements) in respect of the Bank Obligations,
the Bank Security and the Bank Agreements, shall be taken by the
78<PAGE>
Agent; provided, that following the occurrence of an Event of Default, the Agent
shall exercise such remedies as instructed by such of you as hold at least 51%
of the Percentage Interests calculated as provided in the last sentence of the
first paragraph of Section 10.2 hereof. Before taking any action as Agent
hereunder, the Agent may request appropriate indemnity satisfactory to it from
each other Bank and may, but shall not be obligated to, refuse to take any such
action until it has received such indemnity from each other Bank. The Agent may
rely on writings sent to it by telecopier in taking action under this Agreement.
Section 10.4. Agent's Resignation. The Agent may resign at any time by
giving at least 60 days' prior written notice of its intention to do so to each
other Bank and to Delano Energy, the Owner Trustee and the Owner Participant,
and upon the appointment by the Required Banks of a successor Agent satisfactory
to the Borrowers. The Agent shall resign if, at any time, (i) as a result of a
transfer of a portion of its Participation Interest, its remaining Participation
Interest is lower than any other LC Banks' Participation Interest (provided,
however, that the Agent shall not be under such obligation to resign if the
reason that its Participation Interest has become lower than any other LC Bank's
Participation Interest is because such LC Bank has acquired an additional
Participation Interest from another existing LC Bank) and (ii) the Majority
Banks have requested in writing that the Agent so resign. If no successor Agent
shall have been appointed as provided above and shall have accepted such
appointment within 45 days after the retiring Agent's giving of such notice of
resignation, then the retiring Agent may with the consent of the Borrowers,
which shall not be unreasonably withheld, appoint a successor Agent which shall
be a bank or a trust company organized under the laws of the United States of
America or any state thereof and having a combined capital, surplus and
undivided profits of at least $100,000,000. Any successor Agent appointed
hereunder may be removed upon the written request of the Required Banks, which
request shall also appoint a successor Agent satisfactory to the Borrowers. No
resignation or removal of the Agent or any successor Agent shall be effective
until a new Agent shall have been appointed in the manner provided in this
Section 10.4 and shall have accepted, in writing, such appointment. Upon the
appointment of a new Agent hereunder and the acceptance of such appointment by
the new Agent, the term "Agent" for all purposes of this Agreement and the other
Bank Agreements thereafter shall mean such successor. After any retiring
Agent's resignation hereunder as Agent, or the removal hereunder of any
successor Agent, the provisions of this Agreement shall continue to inure to the
benefit of such Agent as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. On the date of the resignation or removal of
the Agent or any successor Agent under this Section 10.4, such Agent shall be
paid its Agent's fees under Section 3.2
79<PAGE>
hereof accrued to the effective date of such resignation or removal.
Section 10.5. Amendments, Consents, Waivers, etc. Except as hereinafter
set forth, the Agent with, but only with, the written consent of the Required
Banks may take or refrain from taking any action under this Agreement or any
other Bank Agreement (other than the Swap Agreements), including without
limitation giving written consent to any modification of or amendment to and
waiving in writing compliance with any covenant or condition in this Agreement
or any other Bank Agreement or any Default or Event of Default hereunder or
thereunder, and may dispose of, compromise or otherwise deal with all or any
part of the Bank Security as it may deem proper, all of which actions shall be
binding upon all of you; provided, however, that without the written consent of
such of you as own 100% of the Percentage Interests:
(a) no reduction in the interest rate on, or the Letter of Credit
Fees relating to, the Bank Obligations shall be made;
(b) no extension or postponement of the stated time of payment of or
reduction of any amount constituting Bank Obligations (including without
limitation the reimbursement obligations provided for in Sections 2.1 and
2.2 hereof) shall be made (except in the case of Bank Obligations owing to
only one of you under Section 2.3, 2.4, 3.4 or 8 or the Swap Agreements, in
which event only the consent of such one of you shall be required);
(c) no extension or postponement of the time for redemptions of the
Bonds and prepayments of the Liquidity Advances set forth in Section 5.6
hereof shall be made;
(d) no increase in the amount, or extension of the term, of your
commitment beyond that provided for under Sections 2 and 10.1 hereof shall
be made;
(e) no alteration of your rights of set-off contained in Section 6.2
hereof shall be made;
(f) no item of Bank Security (including the proceeds thereof) shall
be released except in accordance with the express terms of the applicable
Bank Agreement;
(g) no consent of the Agent provided for under Sections 5.3 or 5.16.1
hereof shall be given; and
(h) neither (i) this Section 10.5 nor (ii) the definition of
"Required Banks" contained in Section 10.12 hereof nor (iii) any provision
of this Agreement relating to the amount of Percentage Interests the
holders of which are
80<PAGE>
required in order to take or refrain from taking any action under this
Agreement or any other Bank Agreement shall be modified or amended.
Upon receipt of any written notice of a Default from Delano Energy, the
Owner Trustee or the Owner Participant, any written request of the Borrowers for
consent to any modification to or amendment of or waiver of compliance with any
covenant or condition in this Agreement or any other Bank Agreement or any
Default or Event of Default hereunder or thereunder or any written request of
the Borrowers for release of all or any part of the Bank Security, the Agent
promptly shall give written notice thereof to each of you. Contemporaneously
with the giving of any written notice from the Agent to the Borrowers asserting
that a Default exists, the Agent shall deliver a copy thereof to each of you.
In addition to the foregoing, no amendment to Sections 14.1, 14.2 or 14.3
hereof shall be effective without the consent of the Issuing Bank.
Section 10.6. Payments, etc. The Borrowers shall be fully protected in
making all payments to the Agent and in dealing with the Agent hereunder as
provided in this Agreement.
Section 10.7. Concerning the Agent. The following provisions shall apply
to the Agent and the conduct of the Agent's duties hereunder:
10.7.1. Action in Good Faith, etc. The Agent and its officers,
directors, employees and agents shall be under no liability to any of you, to
any future holder of any interest in the Bank Obligations or to the Borrowers
for any action or failure to act taken or suffered in good faith and without
gross negligence or for any action or failure to act taken or suffered in good
faith in accordance with an opinion of its counsel. The Agent shall in all
cases be entitled to rely, and shall be fully protected in relying, on
instructions given to the Agent by the required holders of Percentage Interests
as provided in this Agreement.
10.7.2. No Implied Duties, etc. The Agent shall have and may
exercise such powers as are specifically delegated to the Agent under this
Agreement or any other Bank Agreement together with all other powers as may be
incidental thereto. The Agent shall have no implied duties to any Person or any
obligation to take any action under this Agreement or any other Bank Agreement
except for any action which this Agreement or any other Bank Agreement
specifically provides shall be taken by the Agent. Before taking any action
under this Agreement or any other Bank Agreement, the Agent may request an
appropriate specific indemnity satisfactory to it from each of you in addition
to the general indemnity provided for in Section 10.9, and until the
81<PAGE>
Agent has received such specific indemnity, the Agent shall not be obligated to
take (although it may in its sole discretion take) any such action under this
Agreement or any other Bank Agreement. The Agent agrees that it shall, upon the
request of any Bank, (i) request any documents or other information from the
Borrowers which it is permitted to request hereunder or under any other Basic
Document and (ii) provide to such Bank copies of any specific written materials
which the Agent has received from the Borrowers.
10.7.3. Validity, etc. The Agent shall not be responsible to any of
you or any future holder of any interest in the Bank Obligations (i) for the
legality, validity, enforceability or effectiveness of this Agreement or any
other Bank Agreement, (ii) for any recitals, reports, representations,
warranties or statements contained in or made in connection with this Agreement
or any other Bank Agreement, (iii) for the existence or value of any assets
included in the Bank Security or (iv) for the specification or failure to
specify any particular assets to be included in the Bank Security.
10.7.4. Compliance. The Agent shall not be obligated to ascertain or
inquire as to the performance or observance of any of the terms of this
Agreement or any other Bank Agreement; and in connection with any extension of
credit under this Agreement or any other Bank Agreement, the Agent shall be
fully protected in relying on a certificate of either Borrower as to the
fulfillment by such Borrower of any conditions to such extension of credit.
10.7.5. Employment of Agents and Counsel. The Agent may execute any
of its duties as Agent under this Agreement or any other Bank Agreement by or
through employees, agents and attorneys-in-fact and shall not be answerable to
any of you or the Borrowers (except as to money or securities received by the
Agent or the Agent's authorized agents) for the default or misconduct of any
such employees, agents or attorneys-in-fact selected by the Agent with
reasonable care. The Agent shall be entitled to advice of counsel concerning
all matters pertaining to the agency hereby created and its duties hereunder.
10.7.6. Reliance on Documents and Counsel. The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any affidavit,
certificate, cablegram, consent, instrument, letter, notice, order, document,
statement, telecopy, telex or teletype message or writing believed in good faith
by the Agent to be genuine and correct and to have been signed, sent or made by
the Person or Persons and, with respect to legal matters, upon the opinion of
counsel selected by the Agent.
10.7.7. Agent's Reimbursement. Each of you severally agrees to
reimburse the Agent in the amount of your Percentage Interest thereof for any
expenses not reimbursed by the Borrowers
82<PAGE>
(without limiting its obligation to make such reimbursement): (i) for which the
Agent is entitled to reimbursement by the Borrowers under this Agreement or any
other Bank Agreement (or which this Agreement or any other Bank Agreement
provides is to be paid by, or is to be to the account of, the Banks, including,
without limitation, reimbursement for the Independent Engineers' expenses which
the Borrowers are not, by the terms hereof, liable for), and (ii) after the
occurrence of a Default, for any other reasonable expenses incurred by the Agent
on your behalf in connection with the enforcement of your rights under this
Agreement or any other Bank Agreement. The covenants contained in this
Section 10.7.7 shall survive the termination of the other provisions of this
Agreement.
10.7.8. Rights as Credit Provider. With respect to any credit
extended by it hereunder, ABN AMRO shall have the same rights and powers
hereunder as any other of you and may exercise such rights and powers as though
it were not the Agent, and unless the context otherwise specifies, ABN AMRO
shall be treated in its individual capacity as though it were not the Agent
hereunder. Without limiting the generality of the foregoing, the Percentage
Interest of ABN AMRO shall be included in any computations hereunder of
Percentage Interests. ABN AMRO and its affiliates may accept deposits from,
lend money to, act as trustee for and generally engage in any kind of banking or
trust business with Delano Energy, the Owner Trustee, the Owner Participant,
Thermo Electron, Thermo Systems and any Person who may do business with or own
an equity interest in any of them, all as if ABN AMRO were not the Agent and
without any duty to account therefor to the others of you.
Section 10.8. Independent Credit Decision. Each of you acknowledges that
you have independently and without reliance upon the Agent, based on such
information with respect to Delano Energy, the Owner Trustee, the Owner
Participant, Thermo Electron, Thermo Systems and the Facility as you have deemed
appropriate, made your own credit analysis and decision to enter into this
Agreement and extend the credits provided for hereunder. Each of you represents
to the Agent that you will continue to make your own independent credit and
other decisions in taking or not taking action under this Agreement or any other
Bank Agreement. Each of you expressly acknowledges that neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to such one of you, and no
act by the Agent taken under this Agreement or any other Bank Agreement,
including without limitation any review of the affairs of Delano Energy, the
Owner Trustee, the Owner Participant, Thermo Electron or Thermo Systems, shall
be deemed to constitute any representation or warranty by the Agent. Except for
notices, reports and other documents expressly required to be furnished to each
of you by the Agent under this Agreement or any other Bank Agreement, the Agent
shall not have any duty or responsibility to provide any of
83<PAGE>
you with any credit or other information concerning the business, operations,
property, condition, financial or otherwise, or creditworthiness of Delano
Energy, the Owner Trustee, the Owner Participant, Thermo Electron or Thermo
Systems which may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
Section 10.9. Indemnification. The holders of the Bank Obligations hereby
agree to indemnify the Agent (to the extent not reimbursed by or on behalf of
the Borrowers and without limiting its obligation to do so), ratably according
to their Percentage Interests, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments and suits, and any
and all reasonable costs, expenses or disbursements, of any kind whatsoever
which may at any time be imposed on, incurred by or asserted against the Agent
relating to or arising out of this Agreement, any other Bank Agreement, the
transactions contemplated hereby or thereby, or any action taken or omitted by
the Agent in connection with any of the foregoing; provided, however, that the
foregoing shall not extend to actions or omissions which were not taken in good
faith or which were taken with gross negligence by the Agent. The covenants
contained in this Section 10.9 shall survive the termination of the other
provisions of this Agreement.
Section 10.10. Amendments to Section 10. Any of the provisions of this
Section 10 (other than those of Sections 10.5 and 10.6 and this Section 10.10)
may be amended or waived in a manner which does not affect the rights or
obligations of the Borrowers hereunder by the agreement of such of you as hold
100% of the Percentage Interests without prior notice to the Borrowers;
provided, however, that prompt notice of any such amendment shall be given to
the Borrowers. Sections 10.5 and 10.6 and this Section 10.10 may be amended
only with the consent of all of you and the Borrowers.
Section 10.11. Actions Under Bond Documents. The Issuing Bank shall
exercise the rights and remedies accorded to it as "Credit Bank" under the Bond
Indentures and the CPC Loan Agreements upon the instructions of the Required
Banks (which may include the Issuing Bank). Before taking action hereunder, the
Issuing Bank may request appropriate indemnity satisfactory to it from the other
Banks, ratably according to their respective Percentage Interests, and may, but
shall not be obligated to, refuse to take any such action until it has received
such indemnity from each other Bank.
Section 10.12. Required Banks. For purposes of this Agreement the
term "Required Banks" shall mean such of you as shall hold in the aggregate not
less than 66 2/3% of the Percentage Interests.
84<PAGE>
SECTION 11. SHARING OF PAYMENTS, ETC.
If any of you shall obtain, at a time when an Event of Default has occurred
and is continuing, any payment (whether voluntary, involuntary, through the
exercise of any right of set-off or otherwise) on account of the Bank
Obligations in excess of the Percentage Interest of such one of you (calculated
as provided in the last sentence of the first paragraph of Section 10.2 hereof)
in all payments on account of the Bank Obligations that have been made since the
occurrence of such Event of Default, then such one of you shall purchase from
the rest of you such participation in the Bank Obligations held by each other of
you as shall be necessary to cause such purchaser to share the excess payment
ratably with each other of you; provided, however, that if all or any portion of
such excess payment is thereafter recovered from such purchases, then such
purchases shall be rescinded and the purchase prices restored to the extent of
such recovery, but without interest. The Borrowers agree that any one of you so
purchasing a participation from another of you pursuant to this Section 11 may
exercise all rights of payment (including the right of set-off) with respect to
such participation as fully as if such one of you were the direct creditor of
the Borrowers in the amount of such participation.
SECTION 12. SURVIVAL OF COVENANTS.
All covenants, agreements, representations and warranties made herein or in
any other Bank Agreement and in certificates delivered pursuant hereto or
thereto shall be deemed to have been material and relied on by you,
notwithstanding any investigation made by you or on your behalf, and shall
survive the execution and delivery to you hereof and thereof.
SECTION 13. DISCHARGE.
If the Borrowers shall pay in full the Bank Obligations or cause them to be
paid in full, or if the Bank Obligations shall otherwise have been paid in full
and if at the time each of the Letters of Credit shall have been terminated in
accordance with their respective terms and none of the Banks is any longer under
any obligation under any Letter of Credit, this Agreement, the Swap Agreements
or any other Bank Agreement (or such obligation has been duly waived in
writing), then this Agreement and the rights hereby granted shall cease,
terminate and be void (except as set forth in Sections 2.4, 3.1.3, 3.4, 8.5,
10.7.7 and 10.9 hereof), and at the request of the Borrowers, and at their
expense, you and the Agent shall release and discharge your rights hereunder and
release and discharge all of the Bank Security without recourse against you or
the Agent and to that end shall execute and deliver to the Borrowers at their
own expense such releases, reassignments and other documents (or cause the same
to be done) as the Borrowers shall reasonably
85<PAGE>
request (including, without limitation, the written notice described in Section
12.1(i) of the Revenue Trust Agreement), and you and the Agent shall pay over to
the Borrowers any money and deliver to them any other property then held by you
as Bank Security (or cause the same to be done). It is expressly understood and
agreed that termination of the Letters of Credit and payment of the Bank
Obligations other than those owing under the Swap Agreements (whether or not in
connection with the provision of an Alternative Credit Facility) will not
terminate the rights of the Agent or the Swap Bank with respect to the Bank
Security under the Bank Agreements and will not terminate this Agreement.
SECTION 14. SUCCESSORS AND ASSIGNS; BANK PARTICIPANTS.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, including as such
successors and assigns all holders of any Bank Obligation, except that (i) the
Borrowers may not assign their rights or obligations under this Agreement and
(ii) none of you shall be entitled to assign your Percentage Interests in this
Agreement or the credits extended hereunder except as set forth below in this
Section 14.
Section 14.1. Bank Participations. Each of you may at any time sell,
assign, transfer, grant participations in or otherwise dispose of your
Percentage Interest in the credits made hereunder and your right, title and
interest therein and thereto (each such sale, assignment, transfer, grant or
other disposition being referred to herein as a "Bank Participation") to any
banks or other financial institutions (the "Bank Participants") so long as
(i) such one of you shall remain liable to perform all of your obligations under
this Agreement, (ii) any transfer of rights by any of you to a Bank Participant
with respect to any credit hereunder shall state that such rights shall exist
solely as a result of the agreement between such Bank Participant and such one
of you, (iii) the documents evidencing such Bank Participation shall provide
that the Bank Participant will not grant further participations, (iv) except as
provided in Section 14.2, the documents evidencing such Bank Participation shall
not confer on any Person (other than the parties hereto) (a) any right to vote
on, approve or sign amendments or waivers, (b) any other independent benefit or
(c) any legal or equitable right, remedy or other claim under this Agreement or
the Bank Agreements, (v) none of you shall participate more than 45% of your
interest in the Bank Obligations and (vi) no Bank Participation shall be for
less than $5,000,000 of the Bank Obligations and commitments hereunder.
Promptly after granting any Bank Participation, such one of you shall inform
Delano Energy, the Owner Trustee, the Owner Participant and the Agent of the
identity of the Bank Participant. The Agent and the Borrowers may for all
purposes of this Agreement and the other Bank Agreements, including for purposes
of any payment or
86<PAGE>
indemnification due hereunder or thereunder, treat each of you as the holder of
your respective Percentage Interest in the credits extended hereunder,
notwithstanding any Bank Participation. Nothing in this Section 14 shall
restrict any of you (1) from granting participations in all or any portion of
your Percentage Interest in the credits extended hereunder to any corporate
affiliate of such one of you or (2) from assigning all or any part of the
credits extended hereunder or any other Bank Agreement (x) to any corporate
affiliate of such one of you which assumes all your obligations with respect
hereto and thereto, or (y) to any other of you in accordance with Section 10.
Section 14.2. Certain Rights of Bank Participants. Notwithstanding
Section 14.1 above, the documents evidencing any Bank Participation may provide
that such one of you party thereto will not consent to (i) the reduction in or
forgiveness of the stated principal of or rate of interest on or fee with
respect to any credit extended hereunder, or (ii) the extension or postponement
of any stated date for payment of principal, interest or fee or of any letter of
credit termination date fixed with respect to any credit extended hereunder for
more than 90 days, except in each case with the consent of the Bank Participant
party to such Bank Participation.
Section 14.3. Transfer of Percentage Interests. (a)(i) With the prior
written consent of the Agent (which shall not be unreasonably withheld), any LC
Bank may transfer all or any portion (provided; that in the case of a partial
transfer, the transfering Bank retains at least $5,000,000 of Bank Obligations)
of its respective Percentage Interest in the credits extended hereunder and all
or such portion of its obligations hereunder to any other LC Bank or (ii) with
the prior written consent of the Agent (which shall not be unreasonably
withheld), any LC Bank may transfer all or a portion consisting of at least
$5,000,000 of Bank Obligations (provided; that in the case of a partial
transfer, the transfering Bank retains at least $5,000,000 of Bank Obligations)
of its respective Percentage Interest in the credits extended hereunder and all
or such portion of its obligations hereunder to any bank or (iii) with the prior
written consent of the Agent and each LC Bank (which shall not be unreasonably
withheld, except as set forth in the proviso to the following sentence), any LC
Bank may transfer all or a portion of its respective Percentage Interest in a
manner other than those described in the preceding clauses (i) and (ii). In
each case involving an assignment to a bank not presently an LC Bank, such
assignee bank shall execute an agreement in the form of Exhibit 14.3 hereto (a
"Joinder Agreement") adding such bank as a party to this Agreement and adjusting
the Percentage Interests accordingly; provided, however, that the Issuing Bank
must approve all such assignees, and may withhold its consent in its sole
discretion if the proposed assignee does not meet the minimum requirements for
assignees as set forth in the Issuing Bank's internal policies as may then be in
effect. No such
87<PAGE>
transfer to a bank not already a party to this Agreement shall take effect
unless and until a Joinder Agreement has been executed and delivered by the
Borrowers, the Agent, the Issuing Bank, each LC Bank and such bank (provided,
however, that the failure of any LC Bank to execute such Joinder Agreement shall
not affect the validity of such Joinder Agreement if such LC Bank's consent was
not required for the respective transfer); and the Borrowers agree to execute
and deliver such Joinder Agreement when and as so requested by the Agent;
provided that such Joinder Agreement does not adversely affect the duties of the
Borrowers hereunder. In the event of a transfer from one LC Bank to another LC
Bank, the parties shall execute appropriate amendments of Section 10.1 hereof.
In the event that the transferor is not an Issuing Bank and is transferring all
of its right and obligations hereunder pursuant to such Joinder Agreement, the
parties shall execute and deliver an appropriate release and discharge of the
transferor's rights and obligations hereunder.
(b) In the event that any Bank's commercial paper or certificate of
deposit rating is at any time (i) lower than "A-1" by Standard & Poor's
Corporation and (ii) lower than "P-1 " by Moody's Investors Service, then in
such case the Issuing Bank shall have the right, but not the obligation, to
cause such Bank to transfer all of its Percentage Interest to a bank selected by
the Agent in the manner set forth in the preceding clause (a). Such new bank
may be an LC Bank (including the Agent).
SECTION 15. WAIVER OF JURY TRIAL.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE
BORROWERS HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT OR ANY OTHER BANK AGREEMENT OR THE SUBJECT MATTER
HEREOF OR THEREOF OR ANY BANK OBLIGATION OR IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE AGENT, ANY OF THE BANKS, OR THE BORROWERS
IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE
BORROWERS ACKNOWLEDGE THAT THEY HAVE BEEN INFORMED BY THE AGENT AND THE BANKS
THAT THE PROVISIONS OF THIS SECTION 15 CONSTITUTE A MATERIAL INDUCEMENT UPON
WHICH THEY HAVE RELIED, ARE RELYING AND WILL RELY IN ENTERING INTO THIS
AGREEMENT OR ANY OTHER BANK AGREEMENT. The Agent, any Bank or the Borrowers may
file an original counterpart or a copy of this Section 15 with any court as
written evidence of the consent of the Borrowers, the Agent and any Bank to the
waiver of its rights to trial by jury.
88<PAGE>
SECTION 16. PAYMENTS FROM OWNER TRUST ESTATE ONLY.
All payments to be made by the Owner Trustee with respect to the Bank
Obligations and with respect to any indemnity pursuant to Section 8 herein shall
be made only from the Owner Trust Estate. The Agent and each of you agree that
the Owner Trustee shall not be personally liable for any of the Bank
Obligations. Delano Energy hereby confirms to each Bank that no limitation on
the liability of, or recourse to, the Owner Trustee shall in any way limit or
restrict the joint and several liability of Delano Energy for the repayment in
full of the Bank Obligations. Anything in this Agreement or any other Bank
Agreement to the contrary notwithstanding, each and all of the representations,
undertakings and agreements herein or therein made on the part of the Owner
Trustee are made and intended not as personal representations, undertakings and
agreements by or for the purpose or with the intention of binding it personally
but are made and intended for the purpose of binding only the Owner Trust
Estate; this Agreement and the other Bank Agreements to which the Owner Trustee
is a party are executed and delivered by CTCC solely in the exercise of the
powers expressly conferred upon it as trustee under the Owner Trust Agreement
and not in its individual capacity; and, except as expressly provided in the
Participation Agreement, no personal liability or responsibility is assumed
hereunder or thereunder by or shall at any time be enforceable against CTCC in
its individual capacity on account of any representation, undertaking or
agreement hereunder or thereunder of the Owner Trustee, either expressed or
implied, all such personal liability, if any, being expressly waived by the
Agent, by each Bank and by all Persons claiming by, through or under the Agent
or any Bank; provided, however, that the Agent, each Bank and any Person
claiming by, through or under any of you, making claim under this Agreement or
under any other Bank Agreement may look to the Owner Trust Estate for
satisfaction of same. The Owner Trustee may seek instructions from the Owner
Participant in exercising its rights or performing its duties hereunder. The
foregoing limitation on recourse against the Owner Trustee shall not in any way
be deemed to limit, restrict or diminish the liability of Delano Energy
hereunder to the Agent and/or the Banks.
SECTION 17. [RESERVED]
SECTION 18. MISCELLANEOUS.
The invalidity or unenforceability of any term or provision hereof shall
not affect the validity or enforceability of any other term or provision hereof.
The headings in this Agreement are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof. References to Sections are to
the corresponding provisions of this Agreement unless otherwise expressly
stated. This Agreement may be executed in any number of counterparts which
together shall constitute one
89<PAGE>
instrument and shall be governed by and construed in accordance with the laws
(other than the conflicts of laws rules) of The Commonwealth of Massachusetts.
All obligations of the Borrowers hereunder shall be joint and several.
SECTION 19. DISCLAIMER OF WARRANTIES.
NO BANK MAKES, NOR SHALL ANY SUCH BANK BE DEEMED TO HAVE MADE (I) ANY
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE DESIGN OR
CONDITION OF, OR AS TO THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN,
OR AS TO THE SUITABILITY FOR ANY PURPOSE OF, THE FACILITY OR ANY PART THEREOF OR
AS TO THE ABILITY OF THE FACILITY TO PERFORM ANY FUNCTION, OR (II) ANY WARRANTY
OF MERCHANTABILITY OR FITNESS OF THE FACILITY OR ANY PART FOR ANY PARTICULAR
PURPOSE OR AS TO THE TITLE OR ANY INTEREST IN THE FACILITY OR ANY PART OR AS TO
ANY OTHER MATTER RELATING TO THE FACILITY, IT BEING AGREED THAT ALL SUCH RISKS
AS BETWEEN DELANO ENERGY AND EACH BANK ARE TO BE BORNE BY DELANO ENERGY, AND THE
BENEFITS OF ANY AND ALL IMPLIED WARRANTIES AND REPRESENTATIONS OF ANY BANK ARE
HEREBY WAIVED BY DELANO ENERGY. DELANO ENERGY CONFIRMS THAT IT HAS SELECTED THE
FACILITY AND EACH PART ON THE BASIS OF ITS OWN JUDGMENT, ACKNOWLEDGES THAT THE
FACILITY AND EACH PART THEREOF IS OF A DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY DELANO ENERGY AND DETERMINED BY DELANO ENERGY TO BE SUITABLE FOR ITS
PURPOSES, EXPRESSLY DISCLAIMS RELIANCE UPON ANY STATEMENTS, REPRESENTATIONS OR
WARRANTIES MADE BY ANY BANK, AND ACKNOWLEDGES THAT NO BANK IS A MANUFACTURER OR
VENDOR OF THE FACILITY OR OF ANY PART OR AN AGENT OF ANY MANUFACTURER OR VENDOR
OF THE FACILITY OR OF ANY PART.
SECTION 20. BANK SUBSTITUTION.
Prior to the Document Delivery Date, The Bank of Tokyo Trust Company was a
"Bank" under the Reimbursement Agreement dated as of October 1, 1991 among
Delano Biomass, ABN AMRO, as Facility Agent and ABN AMRO Bank N.V., New York
Branch, as Administrative Agent (the "1991 Reimbursement Agreement"). As of the
Document Delivery Date and its receipt on the Document Delivery Date of payment
of the fees, and of any other amounts, payable to it under the 1991
Reimbursement Agreement on the Document Delivery Date, The Bank of Tokyo Trust
Company shall no longer be a Bank and shall have no obligations or rights under
this Amended and Restated Reimbursement Agreement, and the Banks signatory
hereto shall, as of the Document Delivery Date, be the Banks hereunder with the
respective Percentage Interests set forth in Section 10.1 hereof.
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and the accompanying copies thereof in the appropriate
space below and return the same to the undersigned. This letter shall become a
binding agreement among you and between each of you and the Borrowers when each
of the
90<PAGE>
Borrowers and the Agent shall have one or more copies hereof executed by each of
the undersigned and each of you.
Very truly yours,
Chemical Trust Company of California,
not in its individual capacity but
solely as Owner Trustee
By /s/ Rose T. Maravilla
Assistant Vice President
Delano Energy Company Inc.,
a Delaware corporation
By /s/ Parimal S. Patel
Vice President
The foregoing Agreement is hereby
accepted and agreed to:
ABN AMRO Bank N.V.,
for Itself and as Agent
By /s/ Brian G. Slayne
Assistant Vice President
By /s/ R. E. James Hunter
Vice President
The First National Bank of Boston
By /s/ Stefan Breuer
Vice President
Bank of Montreal
By /s/ Lawrence E. Jones, P.E.
Director
Barclays Bank PLC
By /s/ Mark Tuminello
Director
By /s/ Alistair Buchan
Associate Director
91<PAGE>
Societe Generale
By /s/ William G. Schmid
Vice President
By /s/ Salvatore Galatioto
Vice President
BayBank
By /s/ Timothy M. Laurion
Loan Officer (Special)
The foregoing Agreement is hereby
accepted:
ABN AMRO Bank N.V., Cayman Islands Branch
By /s/ Brian G. Slayne
Assistant Vice President
By /s/ R. E. James Hunter
Vice President
92<PAGE>
Exhibit 5.6.1
Scheduled Redemptions of 1989 Bonds
-----------------------------------
Redemption Date Amount
--------------- -----------
12-31-94 $ 0
12-31-95 4,000,000
6-30-96 200,000
12-31-96 4,000,000
6-30-97 0
12-31-97 3,300,000
6-30-98 0
12-31-98 4,000,000
6-30-99 0
12-31-99 6,300,000
6-30-00 0
12-31-00 7,100,000
-----------
Total: $28,900,000
93<PAGE>
Exhibit 5.6.2
Scheduled Redemptions of 1990 Bonds
-----------------------------------
Redemption Date Amount
--------------- -----------
12-31-94 $ 3,400,000
12-31-95 3,300,000
6-30-96 400,000
12-31-96 4,500,000
6-30-97 0
12-31-97 3,800,000
6-30-98 0
12-31-98 4,400,000
6-30-99 0
12-31-99 6,400,000
6-30-00 0
12-31-00 7,400,000
-----------
Total: $33,600,000
<PAGE>
Exhibit 5.6.2.1
Scheduled Redemptions of 1991 Bonds
-----------------------------------
Redemption Date Amount
--------------- -----------
2-31-94 $ 7,800,000
12-31-95 6,200,000
6-30-96 0
12-31-96 7,500,000
6-30-97 800,000
12-31-97 11,300,000
6-30-98 7,700,000
12-31-98 5,800,000
6-30-99 3,900,000
12-31-99 5,500,000
6-30-00 1,000,000
12-31-00 0
-----------
Total: $57,500,000
<PAGE>
Exhibit 14.3
Form of Joinder Agreement
-------------------------
As of ______________, ____
ABN AMRO Bank N.V., Boston Branch,
for Itself and as Agent
Exchange Place, 53 State Street
Boston, Massachusetts 02109
Chemical Trust Company of California,
as Owner Trustee under the Owner Trust Agreement
50 California Street
San Francisco, California 94111
Delano Energy Company Inc.
81 Wyman Street
Waltham, Massachusetts 02254-9046
Ladies and Gentlemen:
The undersigned _____________________________, a ________________ (as from
time to time in effect, the "New Bank"), hereby agrees with each of you as
follows:
1. Reference; Definitions. Reference is made to the Amended and Restated
Reimbursement Agreement dated as of December 31, 1993 (as from time to time in
effect, the "Reimbursement Agreement") by and among Chemical Trust Company of
California, not in its individual capacity but solely as owner trustee under the
Owner Trust Agreement therein referred to (the "Owner Trustee"), Delano Energy
Company Inc., and ABN AMRO Bank N.V., Boston Branch, for Itself and as Agent
(collectively, the "Existing Banks"). Terms defined in the Reimbursement
Agreement as amended hereby or the Participation Agreement referred to therein
and not otherwise defined in this Agreement are used in this Agreement as so
defined.
2. Joinder. Effective as of _________________, ____ (the "Effective
Date"), the New Bank hereby joins in and becomes a party to the Reimbursement
Agreement as a credit provider having a _____% Percentage Interest in the Letter
of Credit Facility established under Section 2 of the Reimbursement Agreement.
From and after the Effective Date the New Bank will be entitled to the rights
and benefits of a credit provider under the Reimbursement Agreement as amended
hereby and will be bound by and will perform all obligations of a credit
provider under the Reimbursement Agreement as amended hereby pursuant to the
respective terms and conditions thereof.
<PAGE>
[Add provisions for adjustment of letter of credit fees, as applicable.]
[Add provisions releasing transferor bank, if applicable.]
3. Amendment of Section 10.01. Section 10.1 of the Reimbursement
Agreement is amended, effective the Effective Date, to read in its entirety as
follows:
10.1. Interests in Credits. The percentage interest of each of
you in the credits extended under this Agreement shall be as follows:
Percentage
Name Interest Amount
- ---- ---------- ------
____100% $________
adjusted as you may agree from time to time pursuant to any Joinder Agreement or
otherwise among yourselves (the "Percentage Interests"). Reference in any Bank
Agreement to your respective Percentage Interests are to such interests as from
time to time in effect.
4. Representations and Acknowledgments of New Bank. Without limiting the
generality of the joinder contained in Section 2 hereof, the New Bank
specifically joins in the representations and acknowledgments contained in
Section 10.8 of the Reimbursement Agreement, acknowledges that it has reviewed
the Bank Agreements, the Basic Documents and such financial and other
information as it deems necessary to make the decision to join the Reimbursement
Agreement and the credits thereunder and confirms its obligation to indemnify
the Agent as provided in Section 10.9 of the Reimbursement Agreement. The New
Bank acknowledges that the transfer of credit hereunder by the [transferor
bank(s)] to the New Bank is made without recourse or warranty of any kind on the
part of any Existing Bank.
5. Notice Address. For the purpose of Section 9 of the Reimbursement
Agreement and Section 23 of the Participation Agreement, the initial notice
address of the New Bank will be as follows:
____________________________
____________________________
____________________________
____________________________
6. Nonrecourse. Anything in this Agreement or any other Bank Agreement
to the contrary notwithstanding, each and all of
<PAGE>
the representations, undertakings and agreements herein or therein made on the
part of the Owner Trustee are made and intended not as personal representations,
undertakings and agreements by or for the purpose or with the intention of
binding it personally but are made and intended for the purpose of binding only
the Owner Trust Estate; this Agreement and the other Bank Agreements to which
the Owner Trustee is a party are executed and delivered by Chemical Trust
Company of California solely in the exercise of the powers expressly conferred
upon it as trustee under the Owner Trust Agreement and not in its individual
capacity; and no personal liability or responsibility is assumed hereunder or
thereunder by or shall at any time be enforceable against Chemical Trust Company
of California in its individual capacity or the Owner Participant on account of
any representation, undertaking or agreement hereunder or thereunder of the
Owner Trustee, either expressed or implied, all such personal liability, if any,
being expressly waived by the Existing Banks and the New Bank and by all Persons
claiming by, through or under the Existing Banks or the New Bank; provided,
however, that the Existing Banks and the New Bank and any Person claiming by,
through or under the Existing Banks or the New Bank making claim under this
Agreement or under any other Bank Agreement may look to the Owner Trust Estate
for satisfaction of same. The Owner Trustee may seek instructions from the
Owner Participant in exercising its rights or performing its duties hereunder.
7. Miscellaneous. The Reimbursement Agreement as amended hereby and each
of the other Bank Agreements are each confirmed in full force and effect. The
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of any other term or provision hereof or thereof.
The headings of this Agreement are for convenience of reference only and shall
not alter or otherwise affect the meaning hereof. This Agreement may be
executed in any number of counterparts which together shall constitute one
instrument, shall be governed by and construed in accordance with the laws
(other than the conflicts of law rules) of The Commonwealth of Massachusetts and
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns.
If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and the accompanying copies thereof in the appropriate
space below and return the same to the undersigned. This letter shall become a
binding agreement between each of you and the undersigned as of the date hereof
when so accepted and agreed to by each of you.
Very truly yours,
[Name of New Bank]
By:
<PAGE>
Title:
Accepted and Agreed to:
Chemical Trust Company of California,
not in its individual capacity but
solely as Owner Trustee
By: ____________________________
Title:
Delano Energy Company Inc.
By: ____________________________
Title:
ABN AMRO Bank N.V.,
Boston Branch,
for Itself and as Agent
By: ____________________________
Title:
By: ____________________________
Title:
ABN AMRO Bank N.V.,
Boston Branch,
as Issuing Bank
By: ____________________________
Title:
By:
Title:
[Add other Banks, if appropriate]
<PAGE>
Exhibit 10.6
AMENDED AND RESTATED PARTICIPATION AGREEMENT
dated as of December 31, 1993
Among
DELANO ENERGY COMPANY INC.,
as Lessee,
THERMO ENERGY SYSTEMS CORPORATION,
Individually and as Owner Participant,
CHEMICAL TRUST COMPANY OF CALIFORNIA,
as Owner Trustee,
ABN AMRO BANK N.V., BOSTON BRANCH,
for itself and as Agent,
THE FIRST NATIONAL BANK OF BOSTON,
as Co-Agent,
BANK OF MONTREAL,
as Co-Agent,
BARCLAYS BANK PLC,
as Co-Agent,
SOCIETE GENERALE,
as Co-Agent,
BAYBANK as Lead Manager,
and
ABN AMRO BANK N.V., CAYMAN ISLANDS BRANCH,
the Swap Bank
and joined in by
THERMO ELECTRON CORPORATION
Relating to the 48.1 Mw (net) biomass-fired Power
Plant Located in Delano, California
<PAGE>
TABLE OF CONTENTS
PAGE
Witnesseth ............................................... 1
Section 1. Definitions ............................. 2
Section 2. Commitment of the Owner Participant ..... 2
Section 3. Closing ................................. 3
Section 3.1. Document Delivery Date .................. 3
Section 3.2. [Reserved] .............................. 3
Section 3.3. [Reserved] .............................. 3
Section 3.4. Conditions Precedent to be Satisfied by
the Owner Participant. .................. 3
Section 3.5. Conditions Precedent to be Satisfied by
the Banks ............................... 4
Section 3.6. [Reserved] .............................. 4
Section 4. Collateral Support Agreements ........... 4
Section 4.1. TE Support Agreements ................... 4
Section 4.2. Other Support ........................... 5
Section 4.3. Assignments of Support .................. 5
Section 5. [Reserved] .............................. 5
Section 6. Representations and Warranties of Thermo
Systems ................................. 5
Section 6.1. Corporate Existence ..................... 5
Section 6.2. Power and Authorization ................. 5
Section 6.3. Execution, Delivery and Enforceability .. 6
Section 6.4. No Legal Bar ............................ 6
Section 6.5. Litigation .............................. 6
Section 6.6. FERC Qualification ...................... 6
Section 6.7. No Lessor Liens ......................... 7
Section 6.8. Employee Retirement Income Security Act
of 1974 ................................. 7
Section 6.9. Securities Act .......................... 7
Section 6.10 Knowledge of Defaults ................... 7
Section 7. Representations and Warranties of Thermo
Electron ................................ 7
Section 7.1. Corporate Existence ..................... 7
Section 7.2. Power, Authorization and Net Worth ...... 7
Section 7.3. Execution, Delivery and Enforceability .. 8
Section 7.4. No Legal Bar ............................ 8
Section 7.5. Litigation .............................. 8
Section 7.6. Financial Statements .................... 9
Section 7.7. Securities Act .......................... 9
Section 7.8. Disclosure .............................. 9
Section 8. [Reserved] .............................. 9
Section 9. [Reserved] .............................. 9
<PAGE>
PAGE
Section 10. [Reserved] .............................. 9
Section 11. [Reserved] .............................. 9
Section 12. [Reserved] .............................. 9
Section 13. Continuing Covenants of Thermo Systems .. 9
Section 13.1. Financial Statements and Other
Information ............................. 10
Section 13.2. Maintenance of Office ................... 10
Section 13.3. Business and Corporate Existence ........ 10
Section 13.4. Maintenance of Ownership ................ 10
Section 13.5. Compliance with Certain Support
Documents ............................... 11
Section 14. Continuing Covenants of Thermo Electron . 11
Section 14.1. Financial Statements and Other
Information ............................. 11
Section 14.2. Maintenance of Office ................... 11
Section 14.3. Business; Corporate Existence and Net
Worth ................................... 12
Section 14.4. Maintenance of Ownership ................ 12
Section 14.5. Compliance with Certain Support
Documents ............................... 12
Section 15. [Reserved] .............................. 12
Section 16. Indemnity Provisions .................... 12
Section 16.1. General Indemnity ....................... 12
Section 16.2. Notice; Right to Contest Claim .......... 13
Section 16.3. General Tax Indemnity ................... 14
Section 16.4. Tax Contests ............................ 17
Section 16.5. [Reserved] .............................. 19
Section 16.6. Survival and Effect of Indemnities ...... 19
Section 17. Transaction Costs; Ongoing Expenses and
Fees .................................... 19
Section 17.1. [Reserved] .............................. 19
Section 17.2. [Reserved] .............................. 19
Section 17.3. [Reserved] .............................. 19
Section 17.4. [Reserved] .............................. 19
Section 17.5. Trustees' Fees and Expenses ............. 19
Section 17.6. [Reserved] .............................. 19
Section 17.7. [Reserved] .............................. 19
Section 17.8. Certain Adjustments ..................... 19
Section 17.9. Late Payments ........................... 20
Section 18. [Reserved] .............................. 20
Section 19 Transfer of Owner Participant's Interest 20
Section 19.1. Transfer by Owner Participant ........... 20
Section 19.2. Notice to Delano Energy ................. 21
Section 19.3. Release ................................. 21
<PAGE>
PAGE
Section 20. Indemnification and Other Covenants and
Rights .................................. 21
Section 21 Liabilities of Participants and Trustees 22
Section 22 [Reserved] .............................. 22
Section 23 Notices ................................. 22
Section 24. Miscellaneous ........................... 24
Section 24.1. Nonrecourse ............................. 24
Section 24.2. Severability ............................ 24
Section 24.3. Waivers; Modifications .................. 24
Section 24.4. Binding Effect; Successors and Assigns .. 25
Section 24.5. Reproduction of Documents ............... 25
Section 24.6. Survival of Agreement, etc. ............. 25
Section 24.7. Brokers ................................. 26
Section 24.8. Captions; References .................... 26
Section 24.9. Execution in Counterparts ............... 26
Section 24.10. Governing Law ........................... 26
Section 24.11. Integration ............................. 26
Section 24.12. Rights of Owner Participant ............. 26
Section 24.13. Lessor Liens ............................ 26
Section 24.14. Compliance with Owner Trust Agreement ... 27
Section 24.15. Tax-Exempt Status of Bonds .............. 27
Section 24.16. Replacement of Owner Trustee ............ 27
Section 24.17. Payments From Owner Trust Estate Only ... 27
<PAGE>
LIST OF ATTACHMENTS
APPENDIX A, Glossary
<PAGE>
AMENDED AND RESTATED PARTICIPATION AGREEMENT
This AMENDED AND RESTATED PARTICIPATION AGREEMENT is dated as of
December 31, 1993, among (i) Delano Energy Company Inc., a Delaware corporation,
(ii) Thermo Energy Systems Corporation, a Delaware corporation, individually and
in its capacity as Owner Participant, (iii) Chemical Trust Company of
California, a California company (successor-by-merger to Manufacturers Hanover
Trust Company of California), not in its individual capacity (except as
otherwise expressly provided herein) but solely as Owner Trustee under the Owner
Trust Agreement referred to herein, (iv) ABN AMRO Bank N.V., Boston Branch
(formerly known as Algemene Bank Nederland N.V., Boston Branch), for itself and
as agent for the Banks (and, in its capacity as such agent, as successor to
FNBB), (v) The First National Bank of Boston, a national banking association,
(vi) Bank of Montreal, a chartered bank of Canada acting through its Los Angeles
Branch, (vii) Barclays Bank PLC, an English corporation acting through its New
York Branch, (viii) BayBank, a national banking association, (ix) Societe
Generale, a French banking organization and (x) ABN AMRO Bank N.V., Cayman
Islands Branch (formerly known as Algemene Bank Nederland N.V., Cayman Islands
Branch), and joined in by Thermo Electron Corporation, a Delaware corporation.
A.Delano Energy, Thermo Systems, Owner Participant, the Owner Trustee,
FNBB as Agent, ABN AMRO and the Swap Bank entered into a Participation Agreement
dated as of December 3, 1990 (the "1990 Participation Agreement") joined in by
Thermo Electron, pertaining to the financing of Phase I pursuant to which the
Owner Trustee purchased all of Delano Energy's right, title and interest in
Phase I and leased Phase I back to Delano Energy.
B.Prior to the execution and delivery of the 1990 Participation Agreement,
Delano Energy arranged long-term debt financing for Phase I through the issuance
of the 1989 Bonds and the 1990 Bonds by the CPCFA. The proceeds of the 1989
Bonds and 1990 Bonds were loaned by the CPCFA to Delano Energy pursuant to a
Loan Agreement dated as of August 1, 1989, as supplemented by the First
Supplemental Loan Agreement dated as of November 15, 1990 between the CPCFA and
Delano Energy (the "CPC Phase I Loan Agreement").
C.The obligation of the CPCFA to pay principal and interest on the 1989
Bonds and 1990 Bonds was backed by the 1989 Tax-exempt Financing Credit and the
1990 Tax-exempt Financing Credit, each in favor of the Bond Trustee, as
indenture trustee for the holders of the 1989 Bonds and 1990 Bonds, for the
account of Delano Energy under the Construction Loan Agreement.
1<PAGE>
D.Prior to or concurrently with the acquisition of Phase I by the Owner
Trustee, (1) the obligations of Delano Energy under the CPC Phase I Loan
Agreement were assigned to and assumed by the Owner Trustee on a non-recourse
basis, (2) all of the obligations of Delano Energy under the Construction Loan
Agreement were paid in full and the commitments thereunder of FNBB and ABN AMRO
were terminated, except that the 1989 Tax-exempt Financing Credit and the 1990
Tax-exempt Financing Credit remained outstanding, (3) the Construction Loan
Agreement was amended and restated as a Reimbursement Agreement among the Owner
Trustee, FNBB, for itself and as Agent, ABN AMRO and ABN AMRO as Swap Bank (the
"Phase I Reimbursement Agreement"), and (4) in consideration of the credit
support provided by FNBB and ABN AMRO and the interest rate protection provided
by the Swap Bank with respect to the 1989 Bonds and 1990 Bonds, substantially
all of the rights of the Owner Trustee in Phase I and under various related
agreements were Granted by the Owner Trustee to FNBB, as Agent for the benefit
of the Banks, as security for the payment and performance of the obligations of
the Owner Trustee to FNBB as Agent, FNBB, ABN AMRO and the Swap Bank under
various agreements entered into in connection with the 1990 Participation
Agreement.
E.Delano Biomass Energy Company, Inc., a California corporation ("Delano
Biomass") has (i) built Phase II, (ii) transferred all of its right, title and
interest in Phase II to Delano Energy and (iii) merged into Delano Energy with
Delano Energy being the surviving corporation.
F.Delano Energy, Thermo Systems, the Owner Participant, the Owner Trustee,
ABN AMRO, FNBB, Societe Generale, Southwest Agency, Bank of Montreal, Barclays
Bank, PLC, BayBank and the Swap Bank propose to enter into this Amended and
Restated Participation Agreement, to be joined in by Thermo Electron, in order
to modify the 1990 Participation Agreement as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used in this Agreement without specific definition herein
shall have the meanings assigned or referred to in the Glossary attached as
Appendix A hereto.
SECTION 2. COMMITMENT OF THE OWNER PARTICIPANT
(a) On the 1990 Closing Date with respect to Phase I, the Owner
Participant (i) entered into the Owner Trust Agreement with the Owner Trustee,
(ii) made an equity investment in the beneficial ownership of the Facility
consisting of $19,000,000 in
2<PAGE>
immediately available funds and (iii) caused the Owner Trustee(A) to apply the
equity investment referred to in clause (ii) above and to assume on a
non-recourse basis $72,000,000 principal amount of long-term debt under the CPC
Phase I Loan Agreement in order to purchase Phase I and (B) to enter into the
1990 Participation Agreement and each of the other Basic Documents (with respect
to Phase I) to which the Owner Trustee is a party.
(b) Subject to the terms and conditions of this Agreement, on the
Closing Date referred to in Section 3.1 hereof, the Owner Participant shall
cause the Owner Trustee to enter into this Agreement and each of the other Basic
Documents to which the Owner Trustee is to become a party, or which is being
amended or amended and restated in connection herewith.
SECTION 3. CLOSING
Section 3.1. Document Delivery Date. Subject to the satisfaction by
Delano Energy (or the waiver thereof by the Owner Participant and the Agent) on
or before the Document Delivery Date of each of the conditions precedent listed
in Section 2A.1 of the Reimbursement Agreement, subject to the satisfaction by
the Owner Trustee (or the waiver thereof by the Owner Participant, Delano Energy
and the Agent) of the conditions precedent listed in Section 2A.3 of the
Reimbursement Agreement, subject to the satisfaction by the Owner Participant
(or the waiver thereof by Delano Energy and the Agent) of the conditions
precedent listed in Section 3.4 hereof, subject to the satisfaction by the Agent
and the Banks (or the waiver thereof by the Owner Participant and Delano Energy)
of the conditions precedent listed in Section 3.5 hereof, and subject to the
satisfaction (or waiver by the Person in whose favor the condition is granted)
of the conditions set forth in Section 2A.4 of the Reimbursement Agreement, and
to the receipt by the Owner Participant, Delano Energy or the Agent, as the case
may be, of such evidence of the satisfaction of such conditions as such Person
may reasonably request, the closing shall take place at 1:00 p.m. (Chicago time)
on December 31, 1993, at the offices of Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, or at such other time as the parties hereto may
mutually agree.
Section 3.2. [RESERVED]
Section 3.3. [RESERVED]
Section 3.4. Conditions Precedent to be Satisfied by the Owner
Participant.
3.4.1. Each of the Basic Documents to which the Owner Participant is
a party shall have been duly authorized, executed and delivered by the Owner
Participant, shall be satisfactory in form and substance to the Agent, and shall
be in
3<PAGE>
full force and effect; and no default or event of default, or event, which with
notice or lapse of time or both would constitute a default or event of default,
shall exist under any of said Basic Documents then in effect or in the
performance by the Owner Participant of any of its obligations thereunder, or
would exist under any of said Basic Documents or in the performance by the Owner
Participant of any of its obligations thereunder after giving effect to the
transactions to occur on the Closing Date as contemplated hereby and thereby.
3.4.2. The representations and warranties of the Owner Participant
contained in Section 6 hereof or made in writing by the Owner Participant or any
of its officers in connection with the transactions contemplated hereby or
thereby shall be true and correct on and as of the Closing Date with the same
effect as if made on and as of such date (unless any such representation or
warranty is stated to be true and correct on and as of another date, in which
case such representation or warranty shall be true and correct as of the date as
of which made); and the Owner Participant shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it prior to or on the Closing Date.
Section 3.5. Conditions Precedent to be Satisfied by the Banks. Each
of the Basic Documents to which any Bank is a party shall have been duly
authorized, executed and delivered by such Bank, shall be satisfactory in form
and substance to the Owner Participant, Delano Energy and each Bank, and shall
be in full force and effect; and no default or event of default, or event, which
with notice or lapse of time or both would constitute a default or event of
default on the part of the Banks, shall exist under any of said Basic Documents
then in effect or in the performance by any Bank of any of its obligations
thereunder, after giving effect to the transactions to occur on the Closing Date
as contemplated hereby and thereby.
Section 3.6. [RESERVED]
SECTION 4. COLLATERAL SUPPORT AGREEMENTS
The following collateral support agreements are collectively referred to as
the "Support Documents":
Section 4.1. TE Support Agreements.
4.1.1. The Operating Standards Support Agreement;
4.1.2. The Construction Contracts; and
4.1.3. The Thermo Fuel Contract.
4<PAGE>
Section 4.2. Other Support.
4.2.1. The Fuel Supply Contracts;
4.2.2. The Power Purchase Agreement and the following related
contracts: (i) the Interconnection Facilities Agreement - Added Facilities Basis
dated as of August 15, 1988 (the "Interconnection Agreement") between SCE and
Delano Energy, and (ii) each other related contract (if any) pertaining to the
production of electrical power by the Facility (each of the Interconnection
Agreement and each such other contract being herein referred to individually as
an "Ancillary Power Contract" and collectively as the "Ancillary Power
Contracts");
4.2.3. The Subordination Agreement; and
4.2.4. The Ash Disposal Contract.
Section 4.3. Assignments of Support.
4.3.1. The SCE Consent;
4.3.2. The Fuel Contractor Consents; and
4.3.3. The Ash Disposal Consent.
SECTION 5. [RESERVED]
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THERMO SYSTEMS
Thermo Systems hereby represents and warrants that:
Section 6.1. Corporate Existence. Thermo Systems is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the power and authority to own its assets and to transact its
business as now conducted and as presently proposed to be conducted by it.
Thermo Systems is duly licensed or qualified and is in good standing as a
foreign corporation in the State of California and in each other jurisdiction in
which licensing or qualification is necessary to transact its business as now
conducted or as presently proposed to be conducted by it.
Section 6.2. Power and Authorization. Thermo Systems has full power,
authority and legal right to execute, deliver and perform this Agreement, the
Owner Trust Agreement, the Subordination Agreement, the Delano Energy Stock
Pledge Agreement, the Thermo Fuel Contract, the Fuel Contractor Consent relating
to the Thermo Fuel Contract and each other Basic Document to which it is or is
to become a party (each individually a "Thermo Systems Document" and
collectively, the "Thermo Systems Documents"), and the execution, delivery and
5<PAGE>
performance by Thermo Systems of the Thermo Systems Documents have been duly
authorized by all necessary action on the part of Thermo Systems, and do not
require any shareholder approval or the approval or consent of any trustee or
holder of any indebtedness or obligations of Thermo Systems. There is no fact
which Thermo Systems has not disclosed to the parties hereto in writing prior to
the date hereof which materially adversely affects or, so far as Thermo Systems
can now reasonably foresee, will materially adversely affect the ability of
Thermo Systems to perform its obligations under any of the Thermo Systems
Documents.
Section 6.3. Execution, Delivery and Enforceability. This Agreement
has been duly executed and delivered by Thermo Systems and constitutes, and each
other Thermo Systems Document will upon execution and delivery thereof by Thermo
Systems constitute, legal, valid and binding obligations of Thermo Systems
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting generally the enforcement of creditors' rights.
Section 6.4. No Legal Bar. The execution, delivery and performance by
Thermo Systems of the Thermo Systems Documents (i) will not violate any
provision of any applicable law or regulation or any order, writ, judgment or
decree of any court, arbitrator or governmental authority applicable to Thermo
Systems or to any of its assets, (ii) will not violate any provision of its
corporate charter or by-laws, and (iii) will not violate any provision of, or
constitute a default under, or result in the creation or imposition of any Lien
on any of the assets of Thermo Systems or on the Owner Trust Estate pursuant to
the provisions of any mortgage, indenture, contract, agreement or other
undertaking of which Thermo Systems is a party or which purports to be binding
upon Thermo Systems or upon any of its assets.
Section 6.5. Litigation. There are no actions, suits, investigations
or proceedings (whether or not purportedly on behalf of Delano Energy) pending
or, to the best knowledge of Thermo Systems, threatened against or affecting
Thermo Systems or any of its properties, which, if adversely determined, might
either in any case or in the aggregate have a material adverse effect (i) on the
Thermo Systems' ability to deliver, or perform its obligations under any Thermo
Systems Document or (ii) on the properties, business, prospects or financial
condition of Thermo Systems.
Section 6.6. FERC Qualification. Thermo Systems does not own, for
purposes of 18 C.F.R. Section 292.204(a)(2), another small power production
facility located within one mile of the Facility. Thermo Systems is not a
person primarily engaged in the generation or sale of electric power (other than
electric power solely from co-generation facilities or small power
6<PAGE>
production facilities), within the meaning of 18 C.F.R. Section 292.206.
Section 6.7. No Lessor Liens. There are no Lessor Liens affecting the
title of the Owner Trustee to the Facility.
Section 6.8. Employee Retirement Income Security Act of 1974. Thermo
Systems has acquired its beneficial interest in the Facility for its own account
and with its general corporate assets and not with the assets of any employee
benefit plan or any separate account in which any employee benefit plan has any
interest, or with assets deemed to be the assets of any employee benefit plan.
As used in this Section 6.8, the terms "separate account" and "employee benefit
plan" shall have the respective meanings assigned to them in ERISA.
Section 6.9. Securities Act. Neither Thermo Systems nor anyone
authorized to act on its behalf has directly or indirectly offered any interest
in the Owner Trust Estate, the Facility, the Bonds or any similar securities for
sale to, or solicited any offer to acquire any of the same from, anyone in a
manner which would result in a violation of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, and Thermo Systems
has acquired its interest in the Owner Trust Estate created under the Owner
Trust Agreement in a manner which has not resulted in a violation of said Act or
the rules and regulations promulgated thereunder.
Section 6.10. Knowledge of Defaults. To the knowledge of Thermo
Systems, no Lease Default or Lease Event of Default has occurred and is
continuing. Thermo Systems is not in violation of any term of this Agreement or
any other Basic Document.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON
Thermo Electron hereby represents and warrants that:
Section 7.1. Corporate Existence. Thermo Electron is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the power and authority to own its assets and to
transact its business as now conducted and as presently proposed to be conducted
by it. Thermo Electron is duly licensed or qualified and is in good standing as
a foreign corporation in the State of California and in each other jurisdiction
in which licensing or qualification is necessary to transact its business as now
conducted or as presently proposed to be conducted by it.
Section 7.2. Power, Authorization and Net Worth. Thermo Electron has
full power, authority and legal right to execute, deliver and perform this
Agreement, the Operating Standards Support Agreement, the Subordination
Agreement, the
7<PAGE>
Thermo Fuel Contract, the Fuel Contractor Consent relating to the Thermo Fuel
Contract and each other Basic Document to which it is or is to become a party
(each individually a "Thermo Electron Document" and collectively, the "Thermo
Electron Documents"), and the execution, delivery and performance by Thermo
Electron of the Thermo Electron Documents have been duly authorized by all
necessary action on the part of Thermo Electron, and do not require any
shareholder approval or the approval or consent of any trustee or holder of any
indebtedness or obligations of Thermo Electron. Thermo Electron has a net worth
of at least $75,000,000 on the Closing Date. There is no fact which Thermo
Electron has not disclosed to the parties hereto in writing prior to the date
hereof which materially adversely affects or, so far as Thermo Electron can now
reasonably foresee, will materially adversely affect the ability of Thermo
Electron to perform its obligations under any of the Thermo Electron Documents.
Section 7.3. Execution, Delivery and Enforceability. This Agreement
has been duly executed and delivered by Thermo Electron and constitutes, and
each other Thermo Electron Document will upon execution and delivery thereof by
Thermo Electron constitute, legal, valid and binding obligations of Thermo
Electron enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting generally the enforcement of creditors' rights.
Section 7.4. No Legal Bar. The execution, delivery and performance by
Thermo Electron of the Thermo Electron Documents (i) will not violate any
provision of any applicable law or regulation or any order, writ, judgment or
decree of any court, arbitrator or governmental authority applicable to Thermo
Electron or to any of its assets, (ii) will not violate any provision of its
corporate charter or by-laws, and (iii) will not violate any provision of, or
constitute a default under, or result in the creation or imposition of any Lien
on any of the assets of Thermo Electron pursuant to the provisions of any
mortgage, indenture, contract, agreement or other undertaking of which Thermo
Electron is a party or which purports to be binding upon Thermo Electron or upon
any of its assets.
Section 7.5. Litigation. There are no actions, suits, investigations
or proceedings (whether or not purportedly on behalf of Delano Energy) pending
or, to the best knowledge of Thermo Electron, threatened against or affecting
Thermo Electron or any of its properties, which, if adversely determined, might
either in any case or in the aggregate have a material adverse effect (i) on
Thermo Electron's ability to deliver, or perform its obligations under any
Thermo Electron Document or (ii) on the properties, business, prospects or
financial condition of Thermo Electron.
8<PAGE>
Section 7.6. Financial Statements. The financial statements of Thermo
Electron for its fiscal year ended January 2, 1993, including its balance sheet
and related statements of income and of cash flows have been prepared in
accordance with generally accepted accounting principles, consistently applied,
and fairly present its financial position as at that date and for the fiscal
period then ended; and since the date of such financial statements there has
been no material adverse change in its financial position.
Section 7.7. Securities Act. Neither Thermo Electron nor anyone acting
on its behalf has directly or indirectly offered any interest in the Owner Trust
Estate, the Facility, the Bonds or any similar securities for sale to, or
solicited any offer to acquire any of the same from, anyone in a manner which
would result in a violation of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Section 7.8. Disclosure. Neither Thermo Electron nor any Affiliate of
Thermo Electron, nor any Person acting on behalf of Thermo Electron, shall
furnish or has furnished any information contained in or to be contained in an
official statement or other disclosure document used or to be used by the
Remarketing Agent in connection with the offering of the Bonds for sale, whether
such official statement or disclosure document was prepared in accordance with
Section 3 of the Remarketing Agreement, any comparable section of a predecessor
or successor agreement to the Remarketing Agreement or was otherwise prepared
and distributed by the Remarketing Agent, which information contains any untrue
statement of a material fact or omission to state any material fact necessary to
make such statements not misleading, in light of the circumstances under which
they were made.
SECTION 8. [RESERVED]
SECTION 9. [RESERVED]
SECTION 10. [RESERVED]
SECTION 11. [RESERVED]
SECTION 12. [RESERVED]
SECTION 13. CONTINUING COVENANTS OF THERMO SYSTEMS
Except as otherwise consented to by the Agent in writing, Thermo Systems
covenants and agrees that so long as the Facility is leased under the Lease or
any liability of Delano Energy or any of its Affiliates hereunder or under any
of the other Basic Documents remains unpaid or unperformed, and undischarged:
9<PAGE>
Section 13.1. Financial Statements and Other Information. Thermo
Systems will at all times keep proper books of record and account in which full,
true and correct entries shall be made and will furnish to the Agent:
(i) as soon as available, and in any event within 120 days after the
end of each fiscal year of Thermo Systems, the balance sheet of Thermo
Systems as of the end of such fiscal year and related statements of
income, stockholders' equity and cash flows of Thermo Systems for such
fiscal year, all in reasonable detail, prepared in accordance with
generally accepted accounting principles applied on a basis
consistently maintained throughout the period involved, unless any
inconsistency therein is approved in writing by the accountants
reviewing or certifying such financial statements and, until such time
as separately certified financial statements are available, certified
by the Chief Financial Officer of Thermo Systems, and thereafter
certified by Arthur Andersen & Co. or other independent certified
public accountants reasonably acceptable to the Agent; and
(ii) with reasonable promptness, such other information respecting the
business, assets, financial condition and results of operations of
Thermo Systems as the Agent may from time to time reasonably request.
Section 13.2. Maintenance of Office. Thermo Systems will maintain an
office in Waltham, Massachusetts, or at such other place in the United States of
America as Thermo Systems shall designate not less than thirty days prior to any
change of such office by written notice, addressed as provided in Section 23
hereof, where notices, presentations and demands to or upon Thermo Systems may
be given or made.
Section 13.3. Business and Corporate Existence. Thermo Systems will
(i) keep in full force and effect its separate corporate existence and all
rights, licenses, leases and franchises reasonably necessary to the conduct of
its business, and (ii) comply with (a) the applicable laws and regulations
wherever its business is conducted, (b) the provisions of its corporate charter
or by-laws, and (c) all agreements and instruments by which it or any of its
properties may be bound and all applicable decrees, orders and judgments in such
manner that there will not result in the imposition of substantial penalties or
a material and adverse effect on the financial condition, properties or business
of Thermo Systems.
Section 13.4. Maintenance of Ownership. Thermo Systems alone will
maintain direct ownership of 100% of the issued and outstanding capital stock of
Delano Energy.
10<PAGE>
Section 13.5. Compliance with Certain Support Documents. Thermo
Systems shall (i) duly perform all obligations to be performed by it under the
Thermo Systems Documents, and (ii) use its best efforts to obtain all orders,
consents, permits, licenses and approvals, and make all registrations,
declarations and filings, necessary to keep the Thermo Systems Documents in full
force and effect.
SECTION 14. CONTINUING COVENANTS OF THERMO ELECTRON
Except as otherwise consented to by the Owner Participant and the Agent in
writing, Thermo Electron covenants and agrees that so long as the Facility is
leased under the Lease or any liability of Delano Energy or any of its
Affiliates hereunder or under any of the other Basic Documents remains unpaid or
unperformed, and undischarged:
Section 14.1. Financial Statements and Other Information. Thermo
Electron will at all times keep proper books of record and account in which
full, true and correct entries shall be made and will furnish to the Owner
Participant and each Bank:
(i) as soon as available, and in any event within 120 days after the
end of each fiscal year of Thermo Electron, the consolidated balance
sheet of Thermo Electron as of the end of such fiscal year and related
consolidated statements of income, stockholders' equity and cash flows
of Thermo Electron for such fiscal year, all in reasonable detail,
prepared in accordance with generally accepted accounting principles
applied on a basis consistently maintained throughout the period
involved, unless any inconsistency therein is approved in writing by
the accountants certifying such financial statements, and certified by
Arthur Andersen & Co. or other independent certified public
accountants reasonably acceptable to the Owner Participant and the
Agent; and
(ii) with reasonable promptness, such other information respecting the
business, assets, financial condition and results of operations of
Thermo Electron as the Owner Participant and the Agent may from time
to time reasonably request.
Section 14.2. Maintenance of Office. Thermo Electron will maintain an
office in Waltham, Massachusetts, or at such other place in the United States of
America as Thermo Electron shall designate not less than thirty days prior to
any change of such office by written notice, addressed as provided in Section 23
hereof, where notices, presentations and demands to or upon Thermo Electron may
be given or made.
11<PAGE>
Section 14.3. Business; Corporate Existence and Net Worth. Thermo
Electron will (i) keep in full force and effect its separate corporate existence
and all rights, licenses, leases and franchises reasonably necessary to the
conduct of its business, (ii) comply with (a) the applicable laws and
regulations wherever its business is conducted, (b) the provisions of its
corporate charter or by-laws, and (c) all agreements and instruments by which it
or any of its properties may be bound and all applicable decrees, orders and
judgments in such manner that there will not result in a material and adverse
effect on the financial condition, properties or business of Thermo Electron
such that Thermo Electron shall be unable to fulfill its obligations under any
Basic Document, and (iii) so long as Thermo Electron has continuing obligations
under any Basic Document, maintain a net worth of not less than $75,000,000.
Section 14.4. Maintenance of Ownership. Thermo Systems alone will
maintain direct ownership of 100% of the issued and outstanding capital stock of
Delano Energy and Thermo Electron will maintain direct ownership of at least 51%
of the issued and outstanding capital stock of Thermo Systems.
Section 14.5. Compliance with Certain Support Documents. Thermo
Electron shall duly perform all obligations to be performed by it under the TE
Support Agreements.
SECTION 15. [RESERVED]
SECTION 16. INDEMNITY PROVISIONS
Section 16.1. General Indemnity. Delano Energy and the Owner Trustee
do hereby jointly and severally assume liability for, and do hereby jointly and
severally agree on written demand to indemnify, protect, save and hold harmless
each Indemnitee and its agents, directors, officers and employees from and
against, any and all liabilities, obligations, losses, damages, penalties,
claims (whether founded or unfounded), actions, suits, judgments (wherever
awarded and without any limitation as to amount), costs (including costs of
enforcement of the Reimbursement Agreement, the Lease or any of the other Basic
Documents against Delano Energy resulting from the breach thereof by Delano
Energy), expenses and disbursements (including legal fees and expenses and costs
of investigation), of whatsoever kind and nature (herein collectively called
"Liabilities"), whether or not any of the transactions contemplated hereby are
consummated, which may be imposed on, incurred by or asserted against any
Indemnitee in any way relating to or arising out of:
(i) the manufacture, installation, purchase, delivery, ownership,
lease, sublease, possession, rental, use, condition, operation,
transportation,
12<PAGE>
return, sale, replacement, storage or disposition of the Facility or
any Part (including, without limitation, Liabilities in any way
relating to or arising out of injury to persons, property or the
environment, patent or invention rights, or common law or strict
liability in tort or the negligence of such Indemnitee);
(ii) Delano Energy's failure to comply with any environmental, health,
safety or sanitation law, code, ordinance, rule or regulation or any
interpretation or order of any regulatory or administrative authority
with respect thereto;
(iii) any release, use, generation, treatment or storage of oil or
Hazardous Materials or substances on, upon or into the Land or located
at the Facility;
(iv) any and all damage to natural resources or real property and/or
harm or injury to Persons resulting or alleged to have resulted from
such failure to comply and/or release of oil or Hazardous Materials or
substances; or
(v) this Agreement, the 1990 Participation Agreement or any of the
other Basic Documents or any of the transactions contemplated hereby
or thereby, or any part hereof or thereof, or any other document or
instrument hereafter executed and delivered pursuant to the terms
hereof or thereof, or the enforcement of any of the terms of this
Agreement, any of the other Basic Documents or any other document or
instrument hereafter executed and delivered pursuant to the terms
hereof or thereof, or the enforcement of any agreement, restriction or
legal requirement affecting the Facility or any part thereof, or the
ownership, operation or use of the Facility or any Part, except that
the items or events covered by this clause (v) shall not include any
items or events covered by clauses (i), (ii), (iii) or (iv) of this
Section 16.1;
provided, that Delano Energy and the Owner Trustee shall not be required to
indemnify any Indemnitee for (a) Liabilities resulting from the gross negligence
of such Indemnitee or from the willful misconduct of any Indemnitee, or (b) any
expenses to be borne by such Indemnitee pursuant to the express provisions
hereof or of the Reimbursement Agreement or the Lease. Delano Energy's and the
Owner Trustee's indemnification obligations under clause (v) of this
Section 16.1 shall not terminate with respect to any such act or event occurring
prior to the payment and performance in full of all Bank Obligations).
Upon the payment in full of any Liability by Delano Energy and/or the
Owner Trustee in accordance with this
13<PAGE>
Section 16.1, Delano Energy and/or the Owner Trustee, as the case may be, shall
be subrogated to any right of such Indemnitee in respect of the matter against
which indemnity has been given.
Notwithstanding the foregoing provisions of this Section 16.1, Delano
Energy and the Owner Trustee assume no liability for taxes, levies, assessments,
imposts, duties, charges and withholdings (and penalties, fines and interest
thereon) except as specifically provided in Section 16.3 hereof.
Section 16.2. Notice; Right to Contest Claim. If any claim is made
against any Indemnitee on account of any Liability indemnified against under
Section 16.1 hereof, such Indemnitee shall, upon its receipt of written notice
of such claim, give prompt written notice thereof to Delano Energy and the Owner
Trustee. Any failure to so notify Delano Energy and/or the Owner Trustee shall
not discharge, diminish or relieve Delano Energy or the Owner Trustee, as the
case may be, from any indemnification obligations set forth in Section 16.1
hereof, and any payment by Delano Energy or the Owner Trustee to an Indemnitee
pursuant to Section 16.1 hereof shall not be deemed to constitute a waiver or
release of any right or remedy (including any remedy of damages) which Delano
Energy or the Owner Trustee, as the case may be, may have against such
Indemnitee as a result of any failure by such Indemnitee to give Delano Energy
and/or the Owner Trustee notice of any claim in the manner provided in the first
sentence of this Section 16.2, provided that Delano Energy and the Owner Trustee
shall have no such right or remedy unless such failure of such Indemnitee to
give notice of such claim caused Delano Energy and/or the Owner Trustee, as the
case may be, to be unable to contest the Liability indemnified against. Delano
Energy and the Owner Trustee, at their sole cost and expense, may contest in
good faith any Liability indemnified against under Section 16.1 hereof, provided
that (i) such contest will not involve any danger of the sale, forfeiture or
loss of, or the creation of any Lien (other than a Permitted Lien) on, the
Facility or any Part or any interest therein, or of any impairment of the
payment of Rent by Delano Energy or the payment of Bank Obligations by Delano
Energy or the Owner Trustee; (ii) such contest will not adversely affect the
Facility or any Part, or any property, assets or rights of an Indemnitee; and
(iii) such Liability does not relate in any way to the business of any
Indemnitee other than the ownership, leasing and financing of the Facility. If
the Liability relates to the business of an Indemnitee other than the ownership,
leasing and financing of the Facility and such Indemnitee does not consent to
the contest thereof by Delano Energy and/or the Owner Trustee, or if the
Liability must under applicable law be contested by the Indemnitee, Delano
Energy or the Owner Trustee may request such Indemnitee to contest such
Liability and such Indemnitee will contest such Liability in good faith,
provided that (a) Delano Energy and the Owner Trustee shall furnish such
Indemnitee with an opinion of independent counsel reasonably satisfactory to
such Indemnitee to the effect
14<PAGE>
that there exists a reasonable basis for contesting such Liability, (b) such
Indemnitee may determine the court of competent jurisdiction in which to contest
such Liability, (c) the conduct of the litigation shall remain within the sole
discretion of such Indemnitee (but such Indemnitee will keep Delano Energy and
the Owner Trustee informed as to the progress of such litigation and will
consult with Delano Energy's and the Owner Trustee's counsel if requested),
(d) such Indemnitee shall not be required to undertake judicial proceedings if
the Liability being contested is less than $25,000, (e) the conditions set forth
in clauses (i) and (ii) of the proviso to the preceding sentence shall be
satisfied, and (f) Delano Energy and the Owner Trustee shall have agreed to
indemnify such Indemnitee in a manner satisfactory to such Indemnitee and shall
have provided such Indemnitee with reasonable evidence of Delano Energy's and
the Owner Trustee's ability to pay such Indemnitee for any liability or loss
which such Indemnitee may incur as a result of contesting such Liability and
shall have agreed to pay such Indemnitee on demand all costs and expenses that
it may incur in connection with contesting such Liability, including, without
limitation, reasonable attorneys', accountants', engineers' and like
professional fees and disbursements, the reasonable fees and expenses of
attorneys in the regular employ of such Indemnitee and the amount of any
interest or penalty that may be payable as a result of contesting such
Liability. If an Indemnitee is contesting a Liability pursuant to the foregoing
sentence solely because such Liability must under applicable law be contested by
it and such Liability does not relate to the business of such Indemnitee other
than the ownership, leasing and financing of the Facility, a settlement of such
contest by such Indemnitee without Delano Energy's and the Owner Trustee's
consent (which consent shall not be unreasonably withheld) shall constitute a
release of Delano Energy's and the Owner Trustee's indemnity obligations with
respect to such Liability.
Section 16.3. General Tax Indemnity. Delano Energy and the Owner
Trustee shall pay, and shall indemnify, protect, save and keep harmless each
Indemnitee from and against, all license and registration fees and all taxes
(including, without limitation, income, franchise, excise, sales, use,
occupational, personal or real property and stamp taxes), levies, assessments,
imposts, duties, charges or withholdings of any nature whatsoever, together with
any penalties, fines or interest thereon, imposed against such Indemnitee,
Delano Energy, the Owner Trustee or any of them or the Facility, any Part or the
Land by any Federal, state or local government or taxing authority in the United
States upon or with respect to the Facility, any Part or the Land or any
interest in any thereof, or upon or with respect to the manufacture,
installation, purchase, delivery, ownership, warranty, lease, sublease,
financing, possession, rental, use, operations, transportation, return, sale,
replacement, storage or disposition of any thereof, or upon or with respect to
the Rent, receipts, earnings or gains arising
15<PAGE>
from the Facility, any Part or the Land or the income or proceeds with respect
to any such property or upon or with respect to this Agreement, the
Reimbursement Agreement, the Lease, or any other Basic Document (including the
performance of any of the transactions contemplated hereby or thereby) (herein
collectively called "Taxes," and individually, a "Tax"), excluding, however:
(i) Federal taxes, fees or other charges that are based on, or
measured by, net income;
(ii) taxes imposed by the State of California that are based on, or
measured by, net income; and
(iii) other taxes, fees or other charges that are based on, or
measured by, net income to the extent imposed by the state, city or
municipality in which the principal office of the Indemnitee is
located or by any political subdivision of such state, city or
municipality;
provided, that Delano Energy and the Owner Trustee shall and hereby do agree to
pay any such Taxes referred to in the foregoing clauses (i) through (iii) that
are based on, or measured by, Rent payable under the Lease or the net income
therefrom which are in substitution for or relieve Delano Energy and/or the
Owner Trustee from any taxes, fees or other charges which Delano Energy or the
Owner Trustee would otherwise be obligated to pay under the terms of this
Section 16.3. In case any report or return is required to be made with respect
to any taxes, fees or other charges indemnified against by Delano Energy and the
Owner Trustee under this Section 16.3, (a) where legally permissible Delano
Energy will make such report or return when and as required under applicable
laws or regulations setting forth therein the Owner Trustee's ownership of Phase
I and send a copy of such report or return to each of the Owner Participant, the
Owner Trustee and the Agent, (b) in other cases, will notify the Owner Trustee
of such requirement at least 60 days prior to the date such report or return is
required to be made or promptly upon Delano Energy's first obtaining knowledge
of the requirement of such report or return, whichever is later, and make such
report or return in a manner satisfactory to the Owner Participant and the
Agent, provided that Delano Energy shall not be obligated to make any report or
return with respect to a Tax that is not related to the financing, ownership,
operation or leasing of the Facility.
16.3.1. If, prior to the payment by such Indemnitee of any Tax
indemnified against, Delano Energy shall not have provided such Indemnitee with
sufficient funds to pay such Tax, the amount of such Tax paid by the Indemnitee
shall bear interest from the date of payment thereof by such Indemnitee to the
date of reimbursement therefor by Delano Energy at the Delay Rate.
16<PAGE>
16.3.2. Delano Energy shall be obligated under this Section 16.3
irrespective of whether such Indemnitee shall also be indemnified with respect
to any such Tax elsewhere under the Lease, the Reimbursement Agreement or under
any other Basic Document or by any other Person, and such Indemnitee may proceed
directly against Delano Energy and/or the Owner Trustee under this Section 16.3
without first resorting to any such other rights of indemnification. Upon
payment in full of any indemnities by Delano Energy and/or the Owner Trustee in
accordance with this Section 16.3, Delano Energy and/or the Owner Trustee, as
the case may be, shall be subrogated to any right of such Indemnitee in respect
of the matter against which indemnity has been given.
16.3.3. All amounts payable by Delano Energy and the Owner Trustee
pursuant to this Section 16.3 shall be payable directly to the Person entitled
to payment or indemnification.
Section 16.4. Tax Contests. If any claim is made against any
Indemnitee for any Tax indemnified against under Section 16.3, such Indemnitee
shall, upon its receipt of written notice of such claim, given prompt written
notice thereof to Delano Energy and the Owner Trustee. Delano Energy and/or the
Owner Trustee, at their sole cost and expense, may contest in good faith any
taxes, fees or other charges indemnified against under Section 16.3, provided
that (i) such contest will not involve any danger of the sale, forfeiture or
loss of, or the creation of any Lien (other than a Permitted Lien) on, the
Facility, any Part or any interest therein, or of any impairment of the payment
of Bank Obligations by Delano Energy and/or the Owner Trustee, (ii) such contest
will not adversely affect the Facility or any Part, or any other property,
assets or rights of an Indemnitee, and (iii) such Taxes do not relate in any way
to the business of any Indemnitee other than the ownership, leasing and
financing of the Facility.
16.4.1. If any Tax relates to the business of an Indemnitee other
than the ownership, leasing and financing of the Facility and such Indemnitee
does not consent to the contest thereof by Delano Energy and/or the Owner
Trustee, or if the Tax must under applicable law be contested by the Indemnitee,
Delano Energy and/or the Owner Trustee, as the case may be, may request such
Indemnitee to contest such Tax whereupon such Indemnitee shall contest the same
in good faith, but only if the following conditions are met: (i) Delano Energy
and/or the Owner Trustee, as the case may be, shall furnish such Indemnitee with
an opinion of independent counsel reasonably satisfactory to such Indemnitee to
the effect that a reasonable basis as set forth in A.B.A. Opinion 85-352 for
contesting such Tax exists, (ii) such Indemnitee may determine the court of
competent jurisdiction or other forum in which to contest such Tax, (iii) the
conduct of the proceedings shall remain within the sole discretion of such
Indemnitee (but such Indemnitee will keep Delano Energy and/or
17<PAGE>
the Owner Trustee, as the case may be, informed as to the progress thereof and
will consult with Delano Energy's or the Owner Trustee's counsel if requested),
(iv) such Indemnitee shall not be required to undertake judicial proceedings if
the amount of the Tax or Taxes to be contested is less than $25,000 (and for
this purpose any contest that relates to an issue that would affect more than
one taxable year shall be treated as involving the total potential undiscounted
Taxes, taking into account all taxable years to which the issue could relate),
(v) the conditions set forth in clauses (i) and (ii) of Section 16.4 hereof
shall be satisfied, (vi) Delano Energy and/or the Owner Trustee, as the case may
be, shall have agreed to indemnify such Indemnitee in a manner, and with
security, satisfactory to such Indemnitee for any liability or loss which such
Indemnitee may incur as a result of contesting such Tax and shall have agreed to
pay such Indemnitee on demand all costs and expenses that it may incur in
connection with contesting such Tax, including, without limitation, reasonable
fees and expenses of attorneys', accountants', engineers', and like professional
fees and disbursements, the reasonable fees and expenses of attorneys in the
regular employ of such Indemnitee and the amount of any interest or penalty that
may be payable as a result of contesting such Tax, and (vii) if such Indemnitee
shall elect to contest such Tax by paying the amount claimed and seeking a
refund, Delano Energy and/or the Owner Trustee, as the case may be, shall have
provided such Indemnitee with sufficient funds to pay the Tax so claimed or, if
such Indemnitee shall have paid the Tax indemnified against and shall thereafter
have demanded from Delano Energy and/or the Owner Trustee, as the case may be,
the payment or indemnity provided for in Section 16.3, promptly following such
demand Delano Energy and/or the Owner Trustee, as the case may be, shall have
paid to such Indemnitee all amounts (including interest) required to be paid
under Section 16.3. If Delano Energy and/or the Owner Trustee provide funds to
such Indemnitee in an amount sufficient to pay the Tax and requests that such
Indemnitee contest the proposed adjustment by seeking a refund of such Tax, then
upon receipt by such Indemnitee of a refund (or credit against tax which does
not result in a refund because it is applied against any tax deficiencies of
such Indemnitee) of any Taxes paid with funds so provided by Delano Energy
and/or the Owner Trustee, such Indemnitee shall forthwith pay to Delano Energy
and/or the Owner Trustee, as the case may be, the amount so provided by Delano
Energy and/or the Owner Trustee and subsequently refunded or credited to such
Indemnitee, together with any interest thereon that has been paid or credited to
such Indemnitee in respect to such refund or credit. If an Indemnitee is
contesting a Tax pursuant to the foregoing provisions of this Section 16.4
solely because such Tax must under applicable laws be contested by it and such
Tax does not relate solely to the Indemnitee's ownership, leasing or financing
of the Facility, the Indemnitee may make a settlement of such contest without
Delano Energy's or the Owner Trustee's consent in which event Delano Energy and
the Owner Trustee shall not be
18<PAGE>
obligated to make any indemnification payment to such Indemnitee in respect of
the Tax in question.
Section 16.5. [Reserved]
Section 16.6. Survival and Effect of Indemnities. The indemnities of
Delano Energy and the Owner Trustee provided for in this Agreement and Delano
Energy's and the Owner Trustee's obligations under any and all thereof,
including specifically the indemnities provided for in Sections 16.1 and 16.3
hereof, shall survive any investigation or any other action taken by any
Indemnitee and the expiration or other termination of this Agreement or any
other Basic Document. Delano Energy's and the Owner Trustee's obligations under
the indemnities provided for in this Agreement shall be those of a primary
obligor (and not of a guarantor or surety) whether or not the Indemnitee shall
also be indemnified with respect to the same matter under the terms of any other
document or instrument or by any other Person, and any Indemnitee seeking
indemnification from Delano Energy and/or the Owner Trustee pursuant to any
provision of this Agreement may proceed directly against Delano Energy and/or
the Owner Trustee without first seeking to enforce any other right of
indemnification.
SECTION 17. TRANSACTION COSTS; ONGOING EXPENSES AND FEES
Section 17.1. [Reserved]
Section 17.2. [Reserved]
Section 17.3. [Reserved]
Section 17.4. [Reserved]
Section 17.5. Trustees' Fees and Expenses. Delano Energy shall pay,
promptly upon demand therefor, the continuing annual administration fees and all
filing, recording, registration and other fees and out-of-pocket expenses of the
Owner Trustee, the Agent, the Revenue Trustee, the Bond Trustee and the
"Registrar" and the "Paying Agent" under the Bond Indenture in connection with
the Overall Transactions.
Section 17.6. [Reserved]
Section 17.7. [Reserved]
Section 17.8. Certain Adjustments. The Borrowers shall pay to the
Revenue Trustee for deposit in the Supplemental Reserve Fund an amount equal to
the positive difference, if any, between the amount paid by the Swap Bank to the
Issuing Bank pursuant to Section 2 of the Swap Agreements less the interest due
on the Bonds on the same date such amount was due under the Swap Agreements.
19<PAGE>
Section 17.9. Late Payments. If payment of any amount due hereunder is
not paid in full when due, and remains unpaid five days after demand therefor by
the party entitled thereto, such overdue amount, including, to the extent
permitted by law, overdue interest, shall bear interest, payable on demand, for
each day from and including the date payment thereof was due to but excluding
the date of actual payment, at a rate equal to the Delay Rate.
SECTION 18. [RESERVED]
SECTION 19. TRANSFER OF OWNER PARTICIPANT'S INTEREST
Section 19.1. Transfer by Owner Participant. The Owner Participant
shall not assign (except to the Agent to secure payment and performance of the
Secured Obligations), convey or otherwise transfer, voluntarily or
involuntarily, any of its beneficial interest in and to the Facility, this
Agreement, the Lease or any other Basic Document or Support Document, or its
leasehold interest in the Land, except on the conditions set forth in this
Section 19. The Owner Participant may transfer to one, but not more than one,
other Person (herein referred to as the "Transferee"), after the Closing Date,
all or any proportionate part of such aggregate beneficial interest, subject to
the conditions that:
(i) the Transferee shall have the requisite power and authority to
enter into and carry out the transactions contemplated by this
Agreement and the other Basic Documents;
(ii) the Transferee shall enter into an agreement or agreements, in
form and substance reasonably satisfactory to Delano Energy, and the
Agent, and for so long as any Bonds are outstanding under the Bond
Indentures, CPCFA (as evidenced by the written consent of CPCFA, which
consent may, in CPCFA's sole discretion, be conditioned upon the
credit rating on the Bonds as determined by Standard & Poor's
Corporation or Moody's Investors Service, remaining at substantially
the same rating level of the Bonds immediately prior to the effective
date of such sale or transfer), whereby the Transferee confirms that
it shall be deemed a party to this Agreement and each other Basic
Document to which the Owner Participant is a party, and agrees to
provide all of the representations, warranties and agreements of the
Owner Participant under Section 6 hereof and to be bound by all of the
terms of, and to undertake all the obligations of, the Owner
Participant contained in the Basic Documents to which it is a party,
including being the beneficial owner of the Facility under the terms
of
20<PAGE>
the Owner Trust Agreement and this Agreement; and the Transferee and
the Owner Participant shall enter into such agreements, in form and
substance reasonably satisfactory to Delano Energy, the Agent, and
CPCFA to transfer such right, title or interest to the Transferee; and
CPCFA (as evidenced by CPCFA's written approval),
(iii) the Transferee shall be either (A) a bank, trust company or
insurance company, pension trust, credit or finance corporation or
other financial institution organized under the laws of the United
States or any State thereof with capital and surplus of at least
$50,000,000, or (B) a business corporation or leasing corporation or
any other entity experienced in transactions of the type contemplated
by this Agreement, organized and operating under the laws of any State
of the United States with a net worth of at least $50,000,000, or
(C) a subsidiary of any Person described in clause (A) or (B) above
whose obligations under the Basic Documents are guaranteed by such
Person by instruments reasonably satisfactory in form and substance to
the Owner Trustee and the Agent, or (D) an Affiliate of the Owner
Participant whose obligations are guaranteed by the Owner Participant.
Upon any transfer permitted by this Section 19, except as otherwise
expressly provided herein, each reference herein to the Owner Participant shall
thereafter be deemed to be a reference to the Transferee.
Section 19.2. Notice to Delano Energy. If the Owner Participant
proposes to transfer all or any portion of its interest hereunder pursuant to
this Section 19, it shall give written notice to Delano Energy, the Owner
Trustee, each Bank and CPCFA specifying the name and address of the proposed
Transferee and specifying the facts necessary to determine compliance with this
Section 19.
Section 19.3. Release. The parties hereto agree that, upon the
transfer of all or any portion of the Owner Participant's interest pursuant to
this Section 19, the Owner Participant shall be thereby released from all of its
future obligations under this Agreement and the other Basic Documents with
respect to the interest so transferred, except for accrued obligations and those
attributable to periods prior to such transfer.
SECTION 20. INDEMNIFICATION AND OTHER COVENANTS AND RIGHTS
If any of the Owner Participant, the Owner Trustee or the Agent shall be
requested by Delano Energy to take or refrain from
21<PAGE>
taking any action in connection with the transactions contemplated hereby, which
such Person has not expressly agreed to take or refrain from taking in the Lease
or this Agreement, Delano Energy shall furnish such reasonable indemnity as may
be requested by such Person.
SECTION 21. LIABILITIES OF PARTICIPANTS AND TRUSTEES
Neither the Owner Participant, the Owner Trustee nor any Bank shall have
any obligation or duty to Delano Energy or any other Person with respect to the
transactions contemplated hereby, except those obligations or duties expressly
set forth in this Agreement and in each of the other Basic Documents to which
such Person is a party.
SECTION 22. [RESERVED]
SECTION 23. NOTICES
All notices, requests, demands and other communications required or
contemplated by the provisions hereof or of any other Basic Document shall refer
on their face to the "Delano Energy Project" (although failure to do so shall
not make such notice ineffective), shall, unless otherwise specified, be in
writing or by telex or telegraph, and shall be deemed to have been given when
received, if addressed as follows:
If to the Owner Participant:
Thermo Energy Systems Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attn: Mr. Parimal Patel
If to the Owner Trustee:
Chemical Trust Company of California
50 California Street
10th Floor
San Francisco, CA 94111
Attn: Rose Maravilla
If to the Agent or to ABN AMRO Bank N.V., Boston Branch,
or to ABN AMRO Bank N.V., Cayman Islands Branch:
ABN AMRO Bank N.V., Boston Branch
Exchange Place
53 State Street, 19th Floor
Boston, Massachusetts 02109
Attn: Vice President and Manager
22<PAGE>
With a copy to:
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 560
Chicago, Illinois 60603
Attn: Project Finance Group
Re: Delano Energy Co., Inc.
If to FNBB:
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
Attn: Stefan Breuer, Vice President,
Energy and Utilities Division
If to Bank of Montreal:
707 Wilshire Blvd., Suite 4840
Los Angeles, CA 90017
Attn: Lawrence E. Jones, P.E.,
Director, Natural Resources
If to Barclays Bank PLC:
222 Broadway, 11th Floor
New York, NY 10038
Attn: Mark Tuminello
Project Finance Group
222 Broadway, 11th Floor
New York, NY 10038
Attn: Stephanie Gledhill
Client Service Representative
If to Societe Generale:
1111 Bagby, Suite 2020
Houston, TX 77002
Attn: Stephen W. Warfel
U.S. Project Finance
If to BayBank:
175 Federal Street
Boston, MA 02110
Attn: Timothy M. Laurion
If to Delano Energy:
Delano Energy Company Inc.
81 Wyman Street
Waltham, MA 02254-9046
Attn: Mr. Parimal Patel
23<PAGE>
If to Thermo Electron or to Thermo Systems:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254-9046
Attn: Mr. Parimal Patel
or, as to any of such Persons, to such other address as such Persons may from
time to time specify to the parties hereto in writing.
SECTION 24. MISCELLANEOUS
Section 24.1. Nonrecourse. Except as expressly provided herein, each
and all of the representations, undertakings and agreements herein made on the
part of the Owner Trustee are made and intended not as personal representations,
undertakings and agreements by or for the purpose or with the intention of
binding it or the Owner Participant personally but are made and intended for the
purpose of binding only the Owner Trust Estate, and this Agreement, except as
expressly provided herein, is executed and delivered by CTCC solely in the
exercise of the powers expressly conferred upon it as trustee under the Owner
Trust Agreement and not in its individual capacity; and no personal liability or
responsibility is assumed hereunder by or shall at any time be enforceable
against CTCC in its individual capacity or Owner Participant on account of any
representation, undertaking or agreement hereunder of the Owner Trustee, either
expressed or implied, all such personal liability, if any, being expressly
waived by the parties hereto and by all Persons claiming by, through or under
the parties hereto; provided, however, that the parties hereto or any Person
claiming by, through or under the parties hereto, making claim hereunder, may
look to the Owner Trust Estate for satisfaction of same. The Owner Trustee may
seek instructions from the Owner Participant in exercising its rights or
performing its duties hereunder.
Section 24.2. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not of itself invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, Delano Energy hereby waives any provision of law that renders
any provision hereof prohibited or unenforceable in any respect.
Section 24.3. Waivers; Modifications. No term or provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver,
24<PAGE>
discharge or termination is sought; and no such instrument shall be effective,
unless a signed copy thereof shall have been delivered to the Owner Participant,
the Owner Trustee and the Agent.
Section 24.4. Binding Effect; Successors and Assigns. The terms and
provisions of this Agreement and the respective rights and obligations of the
parties hereunder shall be binding upon, and inure to the benefit of, their
respective successors and assigns, provided that Delano Energy shall not assign
any of its rights or obligations hereunder without the prior written consent of
the other parties hereto; and Thermo Electron shall not assign any of its
obligations hereunder without the prior written consent of the other parties
hereto.
Section 24.5. Reproduction of Documents. This Agreement and all
documents relating hereto, including, without limitation, (i) consents, waivers
and modifications which may hereafter be executed, (ii) documents received by
the Lessor, the Owner Participant or the Indenture Trustee on the Closing Date,
and (iii) financial statements, certificates and other information previously or
hereafter furnished to the parties, may be reproduced by the parties hereto, by
any photographic, photostatic, microfilm, microcard, miniature photographic or
other similar process and the parties may destroy any original document so
reproduced. Each party hereto stipulates that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business), and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
Section 24.6. Survival of Agreement, etc. All agreements,
representations and warranties contained herein or made in writing by or on
behalf of any party hereto in connection with the transactions contemplated
hereby shall survive the execution and delivery of this Agreement and each other
document and instrument delivered in connection with the consummation of the
transactions contemplated hereby, any investigation at any time made by a party
hereto or on behalf of a party hereto. All statements contained in any
certificate or other instrument delivered by or on behalf of any party hereto
pursuant hereto or in connection with the transactions contemplated hereby shall
be deemed representations and warranties by such party hereunder. No
termination of the Lease for any reason shall release Delano Energy from any
liabilities it may have to any other Person whether explicitly set forth herein
or arising from any misrepresentation by Delano Energy herein contained or any
breach by Delano Energy of its warranties or covenants herein contained.
25<PAGE>
Section 24.7. Brokers. No broker, finder, investment broker or
intermediary has been retained by any of the parties to this Agreement.
Section 24.8. Captions; References. The captions in this Agreement and
in the table of contents are for convenience of reference only and shall not
define or limit any of the terms or provisions hereof. Reference herein to
sections and subsections without reference to the document in which they are
contained are references to this Agreement.
Section 24.9. Execution in Counterparts. This Agreement may be
executed by the parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
Section 24.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of The Commonwealth of Massachusetts.
This Agreement is being made and delivered in The Commonwealth of Massachusetts.
Section 24.11. Integration. This Agreement contains or expressly
incorporates by reference the entire and exclusive agreement of the parties with
respect to the matters contemplated herein and supersedes all prior negotiations
related thereto; provided, however, that nothing herein shall be deemed to
extinguish, waive, release or terminate, in whole or in part, any obligations or
liabilities created under the 1990 Participation Agreement which remain
unsatisfied as of the Closing Date.
Section 24.12. Rights of Owner Participant. Notwithstanding anything
to the contrary contained herein, in the Reimbursement Agreement or in any other
Basic Document, so long as the Owner Participant is an Affiliate of Thermo
Electron and/or Delano Energy, the Owner Participant shall have no right to take
or withhold any action, or give or withhold any consent, if the effect thereof
is to prevent the Agent and/or the Banks from taking or withholding any action,
or giving or withholding any consent hereunder which action or consent, as the
case may be, would have ordinarily required the consent or action of the Owner
Participant in concert with the Agent, under the Reimbursement Agreement or
under any other Basic Document.
Section 24.13. Lessor Liens. Neither the Owner Participant, CTCC, in
its individual capacity, nor the Owner Trustee, as the case may be, shall cause
or permit to exist at any time any Lessor Lien arising by, through and under
such Person, and each of them shall, at its own expense, promptly take such
action as may be necessary to discharge any such Lessor Lien. Each of the Owner
Participant, CTCC, in its individual capacity, and the Owner Trustee agrees
severally but not jointly to indemnify each Bank from and against all
liabilities,
26<PAGE>
obligations, losses and damages of every kind and nature imposed on incurred by
or asserted against any Bank arising out of the imposition of any Lessor Lien
created by the Person in question.
Section 24.14. Compliance with Owner Trust Agreement. Each of the
Owner Participant and the Owner Trustee shall comply with the terms of the Owner
Trust Agreement (as the same may be hereinafter supplemented, modified or
amended from time to time in accordance with the terms thereof), and neither the
Owner Participant nor the Owner Trustee shall amend, supplement or otherwise
modify any provision of the Owner Trust Agreement in any manner adversely
affecting any party to this Agreement without the prior written consent of such
party. The Owner Participant shall not terminate the Owner Trust Agreement and
revoke the trusts created thereby, so long as any obligations remain outstanding
under the Letters of Credit or the Reimbursement Agreement unless the Agent
shall have given its prior written consent to such termination.
Section 24.15. Tax-Exempt Status of Bonds. It is the intention of the
parties hereto that interest on the Bonds shall be and remain tax-exempt. To
that end the Owner Participant agrees that all funds invested under any Basic
Document shall be invested in accordance with instructions of nationally
recognized bond counsel acceptable to the Agent so that no such investment shall
cause any of the Bonds to lose their status as tax-exempt. The Owner
Participant shall cooperate to ensure that the provisions of Section 148 of the
Code are complied with in respect of all such investments.
Section 24.16. Replacement of Owner Trustee. No successor to the Owner
Trustee (other than a successor by merger or consolidation of Owner Trustee with
or into another Person) shall be substituted pursuant to the terms of the Owner
Trust Agreement without the prior approval of the Agent, which approval shall
not be unreasonably withheld.
Section 24.17. Payments From Owner Trust Estate Only. All payments to
be made by the Owner Trustee hereunder shall be made only from the Owner Trust
Estate. The parties hereto agree that the Owner Trustee shall not be personally
liable for any of its obligations hereunder. Delano Energy hereby confirms to
each Bank that no limitation on the liability of, or recourse to, the Owner
Trustee shall in any way limit or restrict the joint and several liability of
Delano Energy for the repayment in full of the Bank Obligations. Anything in
this Agreement or any other Bank Agreement to the contrary notwithstanding, each
and all of the representations, undertakings and agreements herein or therein
made on the part of the Owner Trustee are made and intended not as personal
representations, undertakings and agreements by or for the purpose or with the
intention of binding it personally but are made and intended for the purpose of
binding only the Owner Trust Estate; this Agreement and the other
27<PAGE>
Bank Agreements to which the Owner Trustee is a party are executed and delivered
by CTCC solely in the exercise of the powers expressly conferred upon it as
trustee under the Owner Trust Agreement and not in its individual capacity; and,
except as expressly provided in the Participation Agreement, no personal
liability or responsibility is assumed hereunder or thereunder by or shall at
any time be enforceable against CTCC in its individual capacity on account of
any representation, undertaking or agreement hereunder or thereunder of the
Owner Trustee, either expressed or implied, all such personal liability, if any,
being expressly waived by the Agent, by each Bank and by all Persons claiming
by, through or under the Agent or any Bank; provided, however, that the Agent,
each Bank and any Person claiming by, through or under any of you, making claim
under this Agreement or under any other Bank Agreement may look to the Owner
Trust Estate for satisfaction of same. The Owner Trustee may seek instructions
from the Owner Participant in exercising its rights or performing its duties
hereunder. The foregoing limitation on recourse against the Owner Trustee shall
not in any way be deemed to limit, restrict or diminish the liability of Delano
Energy hereunder to the Agent and/or the Banks.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as an instrument under seal by their respective officers thereunto
duly authorized as of the day and year first above written.
DELANO ENERGY COMPANY INC.
By /s/ Parimal Patel
Title: Vice President
THERMO ENERGY SYSTEMS CORPORATION,
INDIVIDUALLY AND IN ITS CAPACITY
AS OWNER PARTICIPANT
By /s/ Parimal Patel
Title: Vice President
THERMO ELECTRON CORPORATION
By /s/ Parimal Patel
Title: Vice President
28<PAGE>
CHEMICAL TRUST COMPANY OF
CALIFORNIA, AS OWNER TRUSTEE,
AND, TO THE EXTENT INDICATED, IN
ITS INDIVIDUAL CAPACITY
By /s/ Rose Maravilla
Title: Assistant Vice President
ABN AMRO Bank N.V., Boston Branch,
for itself and as Agent
By /s/ Brian G. Slayne
Title: Assistant Vice President
By /s/ R. E. James Hunter
Title: Senior Vice President
The First National Bank of Boston
By /s/ Stefan Breuer
Title: Vice President
Bank of Montreal
By /s/ Lawrence E. Jones
Title: Director
Barclays Bank PLC
By /s/ Mark Tuminello
Title: Director
By /s/ Alistair Buchan
Title: Associate Director
Societe Generale
By /s/ William G. Schmidt
Title: Vice President
29<PAGE>
BayBank
By /s/ Timothy M. Laurion
Title: Loan Officer (Special)
ABN AMRO Bank N.V.,
Cayman Islands Branch
By /s/ R. E. James Hunter
Title: Vice President
By /s/ Brian G. Slayne
Title: Assistant Vice President
30<PAGE>
Appendix A
Glossary
Each of the following terms shall have the following meanings (such
definitions to be equally applicable to both singular and plural forms of the
terms defined), except as otherwise expressly provided in the agreement to which
this Glossary is attached or referred to:
"ABN AMRO" shall mean ABN AMRO Bank N.V., Boston Branch and its successors
and assigns.
"Acceleration" as applied to the Bank Obligations shall mean any part of
the Bank Obligations becoming immediately due and payable as provided in Section
6.2 of the Reimbursement Agreement.
"Act" as defined in Section 5.26.2 of the Reimbursement Agreement.
"Actual Output" as defined in Section 1 of the Operating Standards Support
Agreement.
"Adjusted Available Funds" as defined in Section 1 of the Operating
Standards Support Agreement.
"Affiliate" of any Person shall mean any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition the term "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities
or by contract or otherwise.
"Agency Agreements" shall mean, collectively, (i) the Agency Agreement
executed by the Bond Trustee and the 1989-90 Collateral Agent dated as of August
1, 1989, and (ii) the Agency Agreement executed by the Bond Trustee and the 1991
Collateral Agent dated as of October 1, 1991, each as in effect on the Closing
Date and as the same may from time to time be amended, modified or supplemented
in accordance with the terms thereof.
"Agent" shall mean ABN AMRO, in its capacity as administrative agent under
the Reimbursement Agreement for itself and the Banks, and for any other banks
from time to time party to the Reimbursement Agreement and any successor agent
under the Reimbursement Agreement.
31<PAGE>
"Agreement," "hereto," "hereof," "hereunder" and words of similar import
when used in any agreement to which this Glossary is attached shall mean such
agreement, as the same may from time to time be amended, modified or
supplemented in accordance with the terms thereof.
"All-in Rate" shall mean (a) with respect to the 1989 Bonds and the 1990
Bonds 7.72% per annum which is the sum of (i) the "Fixed Rate" in the
Confirmation to the Swap Agreement of 6.65% per annum plus (ii) the initial
Letter of Credit Fee Rate of 1.07% per annum (expressed as a percentage of the
outstanding principal amount of the 1989 Bonds and 1990 Bonds without including
the "Investment Component" of the respective Letters of Credit) plus (iii) the
fee of the Remarketing Agent under Section 6(a) of the Remarketing Agreement of
0.125% per annum and (b) with respect to the 1991 Bonds 5.38% per annum which is
the sum of (i) the "Fixed Rate" in the Confirmation to the Swap Agreement of
3.60% per annum plus (ii) the initial Letter of Credit Fee Rate of 1.78% per
annum (expressed as a percentage of the outstanding principal amount of the 1991
Bonds without including the "Investment Component" of the respective Letter of
Credit) plus (iii) the fee of the Remarketing Agent under Section 6(a) of the
Remarketing Agreement of 0.125% per annum.
"Alternative Credit Facility" shall have the meaning assigned to the term
"Security Arrangement" in the Bond Indentures.
"Ancillary Power Contracts" as defined in Section 4.2.2 of the
Participation Agreement.
"Anticipated Output" as defined in Section 1 of the Operating Standards
Support Agreement.
"Anticipated Peak Month Output" as defined in Section 1 of the Operating
Standards Support Agreement.
"Applicable Rate" as defined in Section 1 of the Operating Standards
Support Agreement.
"Ash Disposal Consent" shall mean the Ash Disposal Consent dated as of
January 8, 1994 among the Lessor, the Agent and Hondo Chemical, as the same may
from time to time be amended, modified, supplemented in accordance with the term
thereof.
"Ash Disposal Contract" shall mean the Ash Management Contract dated as of
January 8, 1994 between Delano Energy and Hondo Chemical, as the same may from
time to time be amended, modified, supplemented in accordance with the term
thereof.
"Assigned Property" as defined in Section 2 of the Assignment of Leases.
32<PAGE>
"Assignment of Leases" shall mean the Assignment of Leases and Rents dated
as of December 3, 1990, as amended by that First Amendment to Assignment of
Leases and Rents dated as of December 31, 1993, by the Lessor to the Agent, as
the same may from time to time be amended, modified or supplemented in
accordance with the terms thereof.
"Available Cash" as defined in Section 1 of the Operating Standards Support
Agreement.
"Available Funds" as defined in Section 1 of the Operating Standards
Support Agreement.
"Available Reserves" shall mean, as of any date, the assets held by the
Revenue Trustee in the General Revenue Fund pursuant to the Revenue Trust
Agreement.
"Banks" shall mean the LC Banks and the Swap Bank.
"Bank Agreements" as defined in Section 7 of the Reimbursement Agreement.
"Bank Obligations" as defined in Section 7 of the Reimbursement Agreement.
"Bank Participant" as defined in Section 14.1 of the Reimbursement
Agreement.
"Bank Participation" as defined in Section 14.1 of the Reimbursement
Agreement.
"Bank Security" as collectively defined in Section 2 of the Lessor Security
Agreement and in Section 7 of the Reimbursement Agreement.
"Base Case Pro Forma" shall mean the Base Case Pro Forma set forth as
Exhibit) 5A.24 to the Reimbursement Agreement.
"Base Lease Term" shall mean the period beginning on January 1, 1991 and
ending on January 1, 2001.
"Base Rate" as defined in Section 3.1.2(b) of the Reimbursement Agreement.
"Base Rent" shall mean the Rent payable pursuant to Section 3.2 of the
Lease with respect to the Base Lease Term.
"Basic Documents" shall mean the Participation Agreement, the Owner Trust
Agreement, the Bill of Sale, the Lease, the Revenue Trust Agreement, the CPC
Assignment and Assumption Agreements, the Restatement Agreement, the
Reimbursement Agreement, Delano Energy Security Agreement, Delano Energy Deed of
Trust, the Delano Energy Stock Pledge Agreement, the Delano Energy Assignment of
Leases, the Lessee Security Agreement, the
33<PAGE>
Implementation Agreement, the Option to Acquire Stock Agreement, the Lessor
Security Agreement, the Lessor Deed of Trust, the Assignment of Leases, the
Consent to Assignment of Leases, the Support Documents, the Letters of Credit,
the Bonds, the Bond Documents, the Swap Agreements and the Remarketing
Agreements (and any amendments, modifications and/or supplements to any of the
foregoing which may from time to time be entered into), and shall also mean any
other instrument or document which, with the consent or agreement of Delano
Energy, states that it is a Basic Document as said term is used in the
Participation Agreement.
"Beneficiary" as defined in the preamble to the Revenue Trust Agreement.
"Bill of Sale" shall mean the instrument delivered on or prior to the 1990
Closing Date conveying from Delano Energy to the Lessor all of the property
constituting Phase I.
"Bond Documents" shall mean the Bonds, the CPC Loan Agreements, the Bond
Indentures, the Agency Agreements, the Bond Pledge Agreements, the Intercreditor
Agreements and the Remarketing Agreements relating to the Bonds.
"Bond Indentures" shall mean, collectively, (i) the Indenture of Trust
dated as of August 1, 1989, as supplemented by the First Supplemental Indenture
of Trust dated as of May 1, 1990 between the CPCFA and the Bond Trustee (the
"1989-90 Bond Indenture"), and (ii) the Indenture of Trust dated as of October
1, 1991 between the CPCFA and the Bond Trustee (the "1991 Bond Indenture"), each
as in effect on the Closing Date and as the same may from time to time be
amended, modified or supplemented in accordance with the terms thereof.
"Bond Pledge Agreements" shall mean, collectively, (i) the Pledge and
Security Agreement executed by Delano Energy in favor of the 1989-90 Collateral
Agent dated as of August 1, 1989, and (ii) the Bond Pledge and Security
Agreement executed by Delano Biomass in favor of the 1991 Collateral Agent,
dated as of October 1, 1991, each as assigned to and assumed by the Owner
Trustee under the Participation Agreement and as the same may from time to time
be amended, modified or supplemented in accordance with the terms thereof.
"Bond Trustee" shall mean Bankers Trust Company as the trustee under the
Bond Indentures, or any of its successors, in such capacity.
"Bonds" shall mean shall mean the 1989 Bonds, the 1990 Bonds and the 1991
Bonds.
"Breakage Fee" shall mean the amounts payable pursuant to Section 6(e) of
the Swap Agreements.
34<PAGE>
"Business Day" shall mean any day other than a Saturday, a Sunday or any
other day on which banking institutions in Illinois, Massachusetts or New York
are required or authorized by law to be closed or any day on which the New York
Stock Exchange is closed.
"Closing Date" shall mean December 31, 1993.
"Co-Agents" as defined in Section 7 of the Reimbursement Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as from time to time
amended, and any redesignated or successor provisions, and those provisions of
the Internal Revenue Code of 1954 as remain applicable to the Facility and the
transactions contemplated by the Basic Documents pursuant to Sections 203, 204
and 211 of the Tax Reform Act of 1986. For clarity, certain references to
specific sections of the Code, as that term is defined herein, may be
specifically designated as provisions of the "1954 Code."
"Collateral" as defined in Section 2.1 of Delano Energy Security Agreement.
"Completion" shall mean the occurrence of the events described in Section
5A.16 of the Reimbursement Agreement.
"Confirmations" shall mean, collectively, the 1990 Confirmation and the
1993 Confirmation.
"Consent to Assignment of Leases" shall mean the Consent to Assignment of
Leases by Delano Energy, as the same may from time to time be amended, modified
or supplemented in accordance with the terms thereof.
"Construction Contracts" shall mean, collectively, the Phase I Construction
Contract and the Phase II Construction Contract.
"Construction Loan Agreement" shall mean the Construction Loan Agreement, dated
as of December 22, 1988 among Lessee, FNBB and ABN AMRO, as in effect on the
1990 Closing Date.
"Contractor" shall mean Thermo Electron.
"CPC Assignment and Assumption Agreements" shall mean, collectively, (i)
the Assignment and Assumption Agreement dated as of December 3, 1990 among
Lessor, Lessee, the Bond Trustee and the CPCFA, and (ii) the Assignment and
Assumption Agreement dated as of December 1, 1993 among Delano Biomass, Delano
Energy, the Bond Trustee and the CPCFA, as the same may from time to time be
amended, modified or supplemented in accordance with the terms thereof.
"CPC Loan Agreements" shall mean, collectively, the CPC Phase I Loan
Agreement and the CPC Phase II Loan Agreement.
35<PAGE>
"CPC Phase I Loan Agreement" shall mean the Loan Agreement dated as of
August 1, 1989, as supplemented by the First Supplemental Loan Agreement dated
as of May 1, 1990, and a Second Supplemental Loan Agreement dated as of November
15, 1990 between the CPCFA and Delano Energy, as assigned to and assumed by the
Owner Trustee under the Participation Agreement, as in effect on the Closing
Date and as the same may from time to time be amended, modified or supplemented
in accordance with the terms thereof.
"CPC Phase II Loan Agreement" shall mean the Loan Agreement dated as of
October 1, 1991 between the CPCFA and Delano Energy, as successor-by-merger to
Delano Biomass, as in effect on the Closing Date and as the same may from time
to time be amended, modified or supplemented in accordance with the terms
thereof.
"CPCFA" shall mean the California Pollution Control Financing Authority, or
any successor agency.
"CPI" shall mean, for any year X the amount determined in accordance with
the following formula:
CPI = CPx - CPy + 1
---------
CPy
Where CP = Consumer Price Index for all Urban Consumers, seasonally
adjusted, as published by the United States Department
of Labor, or a substitute index acceptable to Delano
Energy and the Agent if such index is no longer
published or the method of computation thereof is
substantially modified to result in a Consumer Price
Index for any given period which is materially
different from the Consumer Price Index that would
result under the prior method of computation for the
same period.
CPx = CP as of June 30 of calendar year X.
CPy = CP as of June 30, 1993.
"CTCC" shall mean Chemical Trust Company of California, in its individual
capacity.
"Deemed Equity Return" as defined in Article 5 of the Revenue Trust
Agreement.
"Default" shall mean an Event of Default as defined in Section 6.1 of the
Reimbursement Agreement or an event or
36<PAGE>
condition which with the passage of time or giving of notice, or both, would
become such an Event of Default.
"Delano Biomass" shall mean Delano Biomass Energy Company, Inc., a
California corporation.
"Delano Energy" shall mean Delano Energy Company, Inc., a Delaware
corporation.
"Delano Energy Assignment of Leases" as defined in Section 7 of the
Reimbursement Agreement.
"Delano Energy Deed of Trust" as defined in Section 7 of the Reimbursement
Agreement.
"Delano Energy Security Agreement" as defined in Section 7 of the
Reimbursement Agreement.
"Delano Energy Stock Pledge Agreement" as defined in Section 7 of the
Reimbursement Agreement.
"Delay Rate" shall mean the greater of (i) a rate per annum equal to the
Base Rate plus three and one-half percent (3-1/2%) or (ii) the All-in Rate with
respect to the 1989 Bonds and the 1990 Bonds, provided, however, that the Delay
Rate shall not exceed the highest rate allowed by applicable law. All
computations of the Delay Rate shall be made on a daily basis and on the basis
of a 360-day year and compounded monthly.
"Disbursement Account" shall mean checking account number 520-98598 (or any
other account in substitution therefor) which Delano Energy maintains at FNBB
and operates in accordance with Section 5.17.5 of the Reimbursement Agreement.
"Distributed Amounts" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
"Distribution Amount" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
"Distribution Date" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
"Document Delivery Date" as defined in the Escrow Agreement.
"Drawing" shall have the meaning provided therefor in the Letters of
Credit.
"Effective Rate" as defined in Section 3.1.2 of the Reimbursement
Agreement.
"Efficiency Standard" as defined in Section 1 of the Operating Standards
Support Agreement.
37<PAGE>
"Engineer" shall mean an individual who is an engineer or a partnership or
a corporation engaged in an engineering business, who or which may be employed
by Delano Energy, and in any case who or which is generally accepted as being
qualified as to any matters as to which such individual or entity may be
certifying or opining.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1986 ("CERCLA"), 42 U.S.C. Section 2601 et
seq., the Hazardous Substances Account Act ("HSAA"), California Health and
Safety Code Section 2300 et seq., the Toxic Substance Control Act ("TSCA"), 15
U.S.C. Section 2601 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1802, the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 9601 et seq., the Porter-Cologne Water Quality Control Act,
California Water Code Section 13000, et seq., the Clean Water Act, 33 U.S.C.
1251 et seq. and Clean Air Act, 42 U.S.C. Section 7401 et seq., and any rules,
regulations or ordinances adopted, or other criteria and guidelines promulgated
pursuant to the preceding laws and any other similar federal, state or local
laws, rules, regulations and ordinances now or hereafter in effect.
"Environmental Variances Report" as defined in Section 5.17.4 of the
Reimbursement Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" shall mean the Escrow Agreement dated as of December 31,
1993 among Delano Energy, Thermo Systems, Thermo Electron, the Agent, the Swap
Bank and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., as escrow Agent,
as the same may from time to time be amended, modified or supplemented in
accordance with the terms thereof.
"Essential Operating Expenses" shall mean the operating expenses of Delano
Energy (or other similar operator in possession of the Facility) that are
reasonably required to maintain, operate, and administer the maintenance and
operation of, the Facility, whether owed to Thermo Electron or its Affiliates or
to any other Person but specifically excluding Base Rent, management fees and
expenses paid or payable to Thermo Systems or Thermo Electron, Income Tax
Payments and Indemnity Deferrals. Essential Operating Expenses shall also
include (i) the Special Distribution upon satisfaction of the conditions in
Section 5.14 of the Reimbursement Agreement, (ii) transaction expenses paid by
Delano Energy on the Document Delivery Date which are approved in writing by the
Agent and (iii) state taxes paid directly by Delano Energy.
"Event of Default" as defined in Section 6.1 of the Reimbursement
Agreement.
38<PAGE>
"Event of Loss" shall mean any of the following events or conditions:
(i) the actual or constructive total loss of all or substantially all
of the Facility or the Parts, occurring through any cause whatsoever; or
(ii) all or substantially all of the Facility or the Parts shall become
lost, stolen, destroyed, damaged beyond repair and/or permanently rendered
unfit for normal use as a consequence of any event whatsoever; or
(iii) the condemnation, confiscation or seizure of, or other
requisition of title to, or use of, all or substantially all of the
Facility or the Parts (including the taking of title to, or use of, all or
substantially all of the Facility or the Parts under power of eminent
domain or by forfeiture pursuant to any proceeding commenced under any
provision of law providing for escheat), provided that, in the case of a
requisition of use of all or substantially all of the Facility or the Parts
by a governmental authority, such requisition shall have resulted in the
loss of use by Delano Energy of the Facility or such Parts for a period (a)
of at least 180 consecutive days or (b) extending beyond the Lease Term; or
(iv) the occurrence of one or more events of the type described in
paragraphs (i) through (iii) above with respect to Parts (constituting
less than substantially all of the Parts) the aggregate original cost of
which exceeds 50% of the then current fair market value of the Facility as
determined by the Agent, and which the Agent elects to treat as an Event of
Loss by giving notice of such election to Delano Energy within 90 days
after the Agent is notified of such Event of Loss by Delano Energy; or
(v) the occurrence of one or more events of the type described in
paragraphs (i) through (iii) above with respect to one or more Parts (but
less than substantially all of the Parts) which Delano Energy determines,
subject to the reasonable concurrence of the Agent, renders the Facility
useless or incapable of performing under the Power Purchase Agreement or
which cannot be repaired in a manner that will permit Delano Energy to
perform its obligations under the Lease and the Reimbursement Agreement; or
(vi) the occurrence of a casualty, or any other event, which results in
an insurance settlement on the basis of a total loss or constructive total
loss of the Facility.
The date of occurrence of any Event of Loss shall be the date of the casualty or
other occurrence specified above giving rise to such Event of Loss. If the date
of such casualty or such other occurrence shall be uncertain, such date shall be
the date on
39<PAGE>
which either Delano Energy first became aware of, or reasonably should first
have become aware of, such casualty or other occurrence.
"Excess Balance" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
"Facility" shall mean the depreciable assets comprising a biomass-fired
power plant in Delano, California conforming generally to the description
contained in Exhibit 7.11 to the Reimbursement Agreement.
"Facility Cash Flow" as defined in Section 1 of the Operating Standards
Support Agreement.
"Facility Revenues" as defined in Section 1 of the Operating Standards
Support Agreement.
"Federal Bankruptcy Code" shall mean the Federal Bankruptcy Code, 11 U.S.C.
Section 101 et seq., as amended.
"Federal Funds Rate" as defined in Section 3.1.2(c) of the Reimbursement
Agreement.
"Federal Tax Laws" at any date or with respect to any period, means and
includes (i) all federal tax statutes, including without limitation (A) the
Internal Revenue Code of 1954 (the "1954 Code"), (B) the 1954 Code as amended
through October 21, 1986 (the "Old Code"), (C) the Code, (D) any redesignation
of the Code and (E) all other federal tax statutes, such as but not limited to
Revenue Acts and also including any federal tax provisions included in any
Public Law or other federal statute, that are in force and effect and applicable
to such date of period; and (ii) all rules and regulations, including without
limitation Treasury Regulations and Temporary Regulations, whether legislative
regulations, statutorily authorized implementing regulations, interpretive rules
or regulations, or procedural rules, regulations, or amendments that may at any
time be promulgated, adopted or published and applicable or to be applicable to
such date or period, under a federal tax statute that is applicable or to be
applicable to such date or period, and includes, without limitation, revenue
rulings that may be cited as precedent.
"FERC" shall mean the Federal Energy Regulatory Commission, or any
successor federal agency.
"Final Punch List" as defined in Section 5.17.7 of the Reimbursement
Agreement.
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio of (x)
the sum of (a) Facility Cash Flow for such period plus (b) the Deemed Equity
Return and all Bank Obligations
40<PAGE>
deducted in computing Facility Cash Flow for such period to (y) the amount
referred to in clause (b).
"FNBB" shall mean The First National Bank of Boston, a national banking
association, and its successors and assigns.
"Force Majeure" as defined in Section 1 of the Operating Standards Support
Agreement.
"Fronting Fees" as defined in Section 3.6 of the Reimbursement Agreement.
"Fuel Contractor" shall mean a supplier of fuel under any Fuel Supply
Contract; or, in the event that another supplier of fuel shall at any time be
substituted for such supplier, or any other prior substitute supplier, such
substitute supplier.
"Fuel Contractor Consents" shall mean the Agreement and Consents to
Security Interests, each among Delano Energy, the Agent and a Fuel Contractor,
as the same may be amended, modified or supplemented in accordance with the
terms thereof.
"Fuel Supply Contracts" shall mean each of the fuel supply and
transportation contracts and any substitutions therefor entered into pursuant to
Section 5.16.3 of the Reimbursement Agreement.
"General Revenue Fund" shall mean the General Revenue Fund established in
accordance with the provisions of the Revenue Trust Agreement.
"Governmental Actions" shall mean all authorizations, consents, approvals,
waivers, exemptions, variances, franchises permissions, permits and licenses of,
filings and declarations with, and submissions to, federal, state, local and
other governmental authorities, including, without limitation, each public
utility regulatory commission having jurisdiction over Delano Energy including
without limitation the Governmental Actions described on Exhibit 2A.1.7 to the
Reimbursement Agreement.
"Grant" with respect to any property or right shall mean mortgage,
hypothecate, pledge and assign, and create a security interest in, the same; and
the term "Granted" with respect thereto shall mean mortgaged, hypothecated,
pledged and assigned, and created a security interest in, the same.
"Grantor" as defined in the preamble to the Revenue Trust Agreement.
"Hazardous Materials" shall mean, without limitation, (a) any hazardous
materials, hazardous wastes, air pollutants, toxic wastes or other hazardous
substances which are regulated pursuant to any Environmental Law, and (b) any
asbestos or
41<PAGE>
asbestos-containing substances whether or not the same are defined as hazardous,
toxic, dangerous waste, dangerous substance or dangerous material under any
environmental laws.
"Holding Company Act" shall mean the Public Utility Holding Company Act of
1935, as amended.
"Hondo Chemical" shall mean Hondo Chemical, a California corporation.
"Income Tax Payments" shall mean an amount, determined on any Distribution
Date, which is deemed to be equal to the federal and state income taxes which
Delano Energy would be required to pay if Delano Energy were an independent
entity and which shall be calculated as of any Distribution Date pursuant to the
following formula: (Power Revenues minus the amounts described in Sections 3.3.1
and 3.3.1.1 of the Revenue Trust Agreement) times 0.392.
"Indebtedness" shall mean all obligations, whether now existing or
hereafter created, contingent and otherwise, which, in accordance with generally
accepted accounting principles, should be classified as liabilities upon the
balance sheet of an obligor under the accrual method of accounting, or to which
reference should be made by footnotes thereto, including, without limitation, in
any event and whether or not so classified: (i) all debt and similar monetary
obligations, whether direct or indirect; (ii) all liabilities secured by any
mortgage, pledge, security interest, lien, charges, or other encumbrance
existing on property owned or acquired subject thereto, whether or not the
liability secured thereby shall have been assumed; (iii) all liabilities and
obligations under sales and leasebacks, or other leases; (iv) all guarantees,
endorsements, and other contingent obligations, whether direct or indirect, in
respect of indebtedness of others, including any obligation to supply funds in
any manner, to invest, directly or indirectly, in the debtor, or to purchase
Indebtedness, or to assure the owner of Indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the Indebtedness held by such owner, or otherwise;
and (v) all obligations incurred, including obligations of reimbursement, under
any letter of credit.
"Indemnitees" shall mean the Owner Trustee, CTCC, the Revenue Trustee, each
Bank and their respective successors and assigns.
"Independent Engineers" shall mean Stone & Webster Engineering Corporation,
or another engineer not an Affiliate of Delano Energy which is satisfactory to
the Agent.
"Interconnection Agreement" as defined in Section 4.2.2 of the
Participation Agreement.
42<PAGE>
"Intercreditor Agreements" shall mean, collectively, (i) the Intercreditor
Agreement executed by the CPCFA, the Bond Trustee and the Collateral Agent dated
as of August 1, 1989, and (ii) the Intercreditor Agreement executed by the
CPCFA, the Bond Trustee and ABN AMRO, as collateral agent, dated as of October
1, 1991, each as in effect on the Closing Date and as the same may from time to
time be amended, modified or supplemented in accordance with the terms thereof.
"Investment" shall mean any expenditure made or any liability incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
loan, advance, capital contribution, or transfers or property to, or in respect
of any guarantee, endorsement (other than endorsement of checks for deposit or
collection), assumption of liability or other commitment in respect of any
Indebtedness or other obligation of any other Person.
"Investment Securities" shall mean (a) full faith and credit obligations of
the United States Government maturing within three months from the date of
original issuance thereof, (b) commercial paper rated at least "P-1" by Moody's
Investors Service, Inc. or at least "A1" by Standard & Poor's Corporation (or
comparably rated by either such organization or any successor thereto if the
rating system of such organization shall have been changed or there shall have
been such a successor) and having a remaining term until maturity of not more
than 90 days from the date such investment is made, (c) certificates of deposit
with a remaining term until maturity of not more than 90 days from the date such
investment is made, issued by, or demand money market or sweep accounts in, any
bank or trust company organized under the laws of the United States of America,
any state thereof or the District of Columbia (provided, however, that such bank
or trust company shall be a member of the Federal Reserve System whose
outstanding commercial paper is rated at least P-2 by Moody's Investors Service,
Inc. and at least A-2 by Standard & Poor's Corporation, and shall have a
combined capital, surplus and undivided profits in excess of $300,000,000), (d)
any money market fund registered under the Investment Company Act of 1940 (15
U.S.C. Section 809-1 et seq.) as from time to time amended, the portfolio of
which consists of or is collateralized by United States government obligations
and United States agency obligations and (e) Tax Exempt Investment Securities.
"Issuing Bank" as defined in Section 2 of the Reimbursement Agreement.
"Joinder Agreement" as defined in Section 14.3 of the Reimbursement
Agreement.
"Land" shall mean, collectively, (i) the Phase I Land and (ii) the Phase II
Land.
43<PAGE>
"Laws" shall mean all laws, rules, regulations, ordinances, approvals,
consents, authorizations, orders and other requirements of Federal, state and
local governmental or regulatory agencies or authorities.
"LC Banks" shall mean the Agent, the Issuing Bank, FNBB, ABN AMRO, Societe
Generale, Bank of Montreal, Barclays Bank PLC, BayBank and any additional banks
which may become parties to the Reimbursement Agreement or participants in the
Letters of Credit.
"LC Annexes" shall mean Annex K to each of the Letters of Credit.
"Lead Manager" as defined in Section 7 of the Reimbursement Agreement.
"Lease" shall mean the Amended and Restated Lease Agreement dated as of
December 31, 1993 between Owner Trustee and Delano Energy, as the same may from
time to time be amended, modified or supplemented in accordance with the terms
thereof.
"Lease Default" shall mean (i) a Lease Event of Default or (ii) any event
or condition which after the giving of notice or lapse of time or both would
become such a Lease Event of Default.
"Lease Event of Default" shall mean any event or condition defined as such
in Section 16 of the Lease.
"Lease Term" shall mean the Base Lease Term; provided, however, that the
Lease Term shall end on the Lease Termination Date.
"Lease Termination Date" shall mean the date on which the Lease terminates,
whether at the end of the Lease Term or otherwise in accordance with the terms
of the Lease.
"Lessee" shall mean Delano Energy Company Inc., a Delaware corporation, and
its successors and, to the extent permitted under the Lease, assigns.
"Lessee Security Agreement" shall mean the Lessee Security Agreement dated
as of December 3, 1990, as amended by that certain First Amendment to Lessee
Security Agreement dated as of January 31, 1991 and as further amended by that
certain Second Amendment to Lessee Security Agreement dated as of December 31,
1993, between Delano Energy and the Owner Trustee, as the same may from time to
time be further amended, modified or supplemented in accordance with the terms
thereof.
"Lessor" shall mean the Owner Trustee, in its capacity as lessor under the
Lease.
"Lessor Deed of Trust" shall mean the Deed of Trust dated as of December 3,
1990, as amended by that certain First Amendment
44<PAGE>
to Deed of Trust dated as of December 31, 1993, from the Owner Trustee, as
grantor, to Commonwealth Land Title Company, as trustee, for the benefit of the
Agent, as beneficiary, as the same may from time to time be further amended,
modified or supplemented in accordance with the terms thereof.
"Lessor Liens" shall mean Unrelated Liens resulting from acts of or claims
against the Owner Trustee, CTCC, or the Owner Participant.
"Lessor Security Agreement" shall mean the Lessor Security Agreement and
Grant of Lien dated as of December 3, 1990, as amended by that certain First
Amendment to Lessor Security Agreement dated as of December 31, 1993, between
the Owner Trustee and the Agent, as the same may from time to time be further
amended, modified or supplemented in accordance with the terms thereof.
"Lessor Security Documents" shall mean the Lessor Security Agreement, the
Lessor Deed of Trust and the Assignment of Leases.
"Letter of Credit Fee Rate" as defined in Section 3.5 of the Reimbursement
Agreement.
"Letter of Credit Fees" shall mean, collectively, the Letter of Credit fees
described in Section 3.5 of the Reimbursement Agreement and the Fronting Fee
described in Section 3.6 of the Reimbursement Agreement.
"Letters of Credit" shall mean the 1989 Tax-exempt Financing Credit, the
1990 Tax-exempt Financing Credit and the 1991 Tax-exempt Financing Credit.
"Liabilities" as defined in Section 16.1 of the Participation Agreement.
"Liens" shall mean liens, mortgages, security interests, pledges, charges,
easements or encumbrances of any kind, including those arising under conditional
sale agreements or other title retention agreements.
"Liquidity Advances" as defined in Section 2.2 of the Reimbursement
Agreement.
"Liquidity Drawing" as defined in Section 2.2 of the Reimbursement
Agreement.
"Major Maintenance Reserve Fund" shall mean the Major Maintenance Reserve
Fund established in accordance with the provisions of the Revenue Trust
Agreement.
"Major Maintenance Reserve Required Amount" as defined in Section 5.21 of
the Reimbursement Agreement.
45<PAGE>
"Negative Cash Flow" as defined in Section 1 of the Operating Standards
Support Agreement.
"Notional Amount" as defined in Section 3.3.1.1(1) of the Revenue Trust
Agreement.
"Obligations" shall mean all Indebtedness and other obligations now or
hereafter owing by Delano Energy to the Owner Trustee under the Participation
Agreement, the 1990 Participation Agreement, the Lease and any other Basic
Document, including without limitation (i) the obligation to pay Rent under the
Lease and (ii) the performance by Delano Energy of its obligations and
agreements under the Participation Agreement, the 1990 Participation Agreement,
the Lease and any other Basic Document.
"Officer's Certificate" shall mean (i) with respect to Delano Energy, the Owner
Trustee or the Revenue Trustee, a certificate signed by a Responsible Officer,
and (ii) with respect to any other corporation or the corporate general partner
of any other entity, a certificate signed by the President, any Vice-President
or the Controller, Treasurer or any Assistant Treasurer of such corporation,
and, with respect to any other entity, a certificate signed on behalf of such
entity by any Person generally authorized to execute and deliver contracts on
behalf of such entity.
"Offset Fuel Requirements of the Facility" shall mean the quantity of
offset fuel which provides 100% of the offset fuel credit, stated in pounds per
year, required from time to time by the Kern County Air Pollution Control
District in each of Delano Energy's Authority to Construct or Permit to Operate
with respect to the Facility.
"Operating Standards Support Agreement" shall mean the Amended and Restated
Operating Standards Support Agreement dated as of December 31, 1993, between
Delano Energy and Thermo Electron, as the same may be from time to time amended,
modified or supplemented in accordance with the terms thereof.
"Operation and Maintenance Manual" as defined in Section 5.26 of the
Reimbursement Agreement.
"Opinion of Counsel" shall mean an opinion or opinions in writing, signed
by legal counsel, which opinion or opinions are addressed to, and which opinion
or opinions and legal counsel are satisfactory to, the Person receiving such
opinion or opinions.
"Original Lease" as defined in Recital A of the Lease.
"Overall Transaction" shall mean the transactions contemplated by the
Participation Agreement and the other Basic Documents.
"Owner Participant" shall mean Thermo Systems.
46<PAGE>
"Owner Trust Agreement" shall mean the Owner Trust Agreement dated as of
December 3, 1990, as amended by that certain First Amendment to Owner Trust
Agreement dated as of December 31, 1993, between CTCC and the Owner Participant,
as the same may be from time to time amended, modified or supplemented in
accordance with the terms thereof.
"Owner Trust Estate" as defined in Section 1.03 of the Owner Trust
Agreement.
"Owner Trustee" shall mean Chemical Trust Company of California, a
California corporation, solely in its capacity as Owner Trustee under the Owner
Trust Agreement, and not in its individual capacity, and its successors and
assigns.
"Owner Trustee Documents" as defined in Section 5B.2 of the Reimbursement
Agreement.
"Part" shall mean any of the items of property constituting part of the
Facility together with all substitutions for and replacements of such item of
property.
"Participation Agreement" shall mean the Amended and Restated Participation
Agreement dated as of December 31, 1993 among Delano Energy, Thermo Systems, the
Owner Participant, the Owner Trustee and the Banks, and joined in by Thermo
Electron, as the same may from time to time be amended, modified or supplemented
in accordance with the terms thereof.
"Percentage Interests" as defined in Section 10.1 of the Reimbursement
Agreement.
"Performance Guarantees" as described in Exhibit 5A.16 to the
Reimbursement Agreement.
"Performance Tests" as described in Exhibit 5A.16 to the Reimbursement
Agreement.
"Permitted Liens" shall mean (i) the respective rights and interests of
Delano Energy, the Owner Trustee and the Owner Participant, as provided in the
Basic Documents, (ii) Liens for taxes either not yet due or being contested in
good faith by Delano Energy, (iii) materialmen's, mechanic's, workmen's,
repairmen's, employees or other like Liens (a) arising out of the construction
of the Facility, not to exceed $50,000 in the aggregate, (b) arising in the
ordinary course of business securing obligations which are not more than 60 days
overdue, or (c) which are being contested in good faith by Delano Energy by
appropriate proceedings diligently prosecuted, provided that if at any time the
aggregate amount of all such Liens being contested exceeds $50,000, Delano
Energy shall have adequately bonded such excess or shall have deposited with the
Agent an amount equal to such excess in escrow, (iv) Liens arising out of
judgments or awards against Delano Energy with respect to which
47<PAGE>
at the time an appeal or proceeding for review is being diligently prosecuted in
good faith and there shall have been secured a stay of execution pending such
appeal of proceeding for review, and for the payment of which adequate reserves
have been provided, (v) easements, rights-of-way, exceptions or reservations for
the purpose of telephone lines, telegraph lines, power lines, pipelines,
conveyors, roads, railroads, drains and sewers, and other like purposes, which
do not impair the use or operating efficiency of the Facility for the purpose
for which it is intended or materially detract from the value of the Facility,
(vi) Title Report Liens, (vii) the Lien of the Lessor Security Documents, (viii)
Liens on assets acquired with Indebtedness permitted by clause (ii) of Section
5.10 of the Reimbursement Agreement securing only the Indebtedness incurred to
acquire the asset in question; provided, however, that no contest, appeal or
proceeding referred to in clause (ii), (iii) or (iv) above shall involve any
danger of the foreclosure, sale, forfeiture or loss of the Facility or any part
thereof, and (ix) Liens in favor of the Agent and the Banks, as provided in the
Security Documents.
"Person" shall mean any individual, corporation, partnership, joint
venture, business association, joint stock company, trust or unincorporated
organization or any government or political subdivision thereof or any
governmental agency.
"Phase I" shall mean that portion of the Facility financed pursuant to the
1990 Participation Agreement
"Phase I Construction Contract" shall mean the Agreement for Construction
of a Wood and Agricultural Waste Fired Power Plant at Delano, California dated
December 9, 1988 between Delano Energy and Thermo Electron, as in effect on the
Closing Date and as the same may from time to time be amended, modified or
supplemented in accordance with the terms thereof.
"Phase I Land" shall mean the real property described in Exhibit 7.13 to
the Reimbursement Agreement.
"Phase I Reimbursement Agreement" shall mean the Reimbursement Agreement
dated as of December 3, 1990 among the Owner Trustee, FNBB, for itself and as
Agent, ABN AMRO and ABN AMRO Bank N.V., Cayman Islands Branch, as Swap Bank.
"Phase II" shall mean that portion of the Facility not constituting
Phase I.
"Phase II Construction Contact" shall mean the Agreement for Construction
of a Wood and Agricultural Waste Fired Power Plant at Delano, California dated
October 1, 1991 between Delano Energy, as successor-by-merger to Delano Biomass
and Thermo Electron, as in effect on the Closing Date and as the same may from
time to time be amended, modified or supplemented in accordance with the terms
thereof.
48<PAGE>
"Phase II Land" shall mean the real property described in Exhibit 7.14 to
the Reimbursement Agreement.
"Phase II Reimbursement Agreement" shall mean the Reimbursement Agreement
dated as of October 1, 1991 among Delano Biomass, ABN AMRO as Facility Agent and
ABN AMRO Bank N.V., New York Branch, as Administrative Agent.
"Plan" as defined in Section 5A.30 of the Reimbursement Agreement.
"Pledged Bonds" shall mean Bonds purchased pursuant to a Drawing under a
Letter of Credit and not remarketed.
"Power Contract" as defined in Section 5.15.4 of the Reimbursement
Agreement.
"Power Purchase Agreement" shall mean the Amended and Restated Power
Purchase Contract executed on July 31, 1987 between SCE and Delano Energy (QFID
No. 1023), as in effect on the Closing Date and as the same may from time to
time be amended, modified or supplemented in accordance with the terms thereof
including, without limitation, the amendments entered into as of December 3,
1990, September 12, 1988. and December 3, 1993.
"Power Revenues" shall mean all revenues generated or derived, or to be
generated or derived, from the sale or other disposition of power generated or
to be generated by the Facility, including, without limitation, all payments for
electricity and other amounts paid or payable, or to be paid or payable, in
respect of the Power Purchase Agreement, any other Power Contract, any other
agreement, or any sale, disposition, or other transaction in respect of which
revenues are, or are to be, generated or derived from such sale or other
disposition of such power; and any amounts in lieu of, or in substitution for,
any of the foregoing.
"Pro Forma Cash Flow" as defined in Section 1 of the Operating Standards
Support Agreement.
"Property Report" shall mean a report which shall accompany the annual
financial statements of Delano Energy delivered pursuant to Section 5.17.3 of
the Reimbursement Agreement describing in reasonable detail (i) the status,
condition and location of the Facility and the Parts, or stating that there has
been no change in such status, condition or location since the previous year's
report (or, in the case of the Property Report to be furnished in 1994 with
respect to Phase II, since the Closing Date), (ii) any exercise by Delano Energy
of rights under any Construction Contract or against any contractor, vendor,
supplier, materialman or similar Person with respect to a Material Part or other
material element of the Facility, (iii) any repair to the Facility or any Part
at an actual or projected
49<PAGE>
cost exceeding $50,000 (iv) any period of ten (10) days or more during which the
Facility was not in operation, whatever the reason, and (v) any material
violation of Law involving the Land, the Facility, or the operation thereof, in
each case during the period since the previous year's report (or, in the case of
the Property Report to be furnished in 1994 with respect to Phase II, since the
Closing Date). Each Property Report shall (i) state whether the Facility is in
the condition required to be maintained by the Reimbursement Agreement, and if
it is not, what action Delano Energy is taking or intends to take to correct the
problem, and (ii) be certified as true and correct by a Responsible Officer of
Delano Energy.
"Qualifying Facility" shall mean a "qualifying facility" under Section 210
of the Public Utility Regulatory Policies Act of 1978, 16 U.S.C. 824a-3 and
Section 228.5 of the California Public Utilities Code.
"Quarterly Cash Report" as defined in Section 5.17.5.2 of the Reimbursement
Agreement.
"Quarterly Fuel Report" as defined in Section 5.17.4 of the Reimbursement
Agreement.
"Quarterly Operating and Generation Report" as defined in Section 5.17.4 of
the Reimbursement Agreement.
"Realty Rights" shall mean all rights and interests in and to the Land, and
in and to any and all improvements thereto, therein, or thereon, at any time
existing, and including without limitation rights under ground leases,
easements, rights of way, and water rights, and all related or ancillary rights
and interests in real property or fixtures that are necessary or appropriate for
the use and operation of, and the quiet and peaceable enjoyment of, the Facility
throughout its entire economic life.
"Receivables" as defined in Section 2.1 of the Delano Energy Security
Agreement.
"Reimbursement Agreement" shall mean the Amended and Restated Reimbursement
Agreement dated as of December 31, 1993 among the Lessor, Delano Energy and the
LC Banks, as the same may from time to time be amended, modified or supplemented
in accordance with the terms thereof.
"Release of Guaranty" shall mean the Release of Guaranty dated as of
December 31, 1993 executed by ABN AMRO Bank N.V. in its capacity as
Administrative Agent under the Phase II Reimbursement Agreement.
"Remarketing Agent" shall mean, collectively, Hambro Resource Development
Incorporated and Fleet Securities, Inc. and their successors and assigns.
50<PAGE>
"Remarketing Agreements" shall mean, collectively, (i) the Remarketing
Agreement dated as of December 3, 1990 among the Remarketing Agent, Delano
Energy and the Owner Trustee and (ii) the Remarketing Agreement dated as of
October 1, 1991 among the Remarketing Agent, Delano Energy and the Owner
Trustee, as the same may from time to time be amended, modified or supplemented
in accordance with the terms hereof.
"Rent" shall mean Base Rent.
"Rent Payment Date" shall mean each June 30 and December 31 during the
Lease Term.
"Rental Period" shall mean each or any of the forty (40) successive
semiannual periods included in the Base Lease Term, and the semiannual periods
included in the Renewal Term, if any.
"Reorganization" as defined in Section 5 of the Subordination Agreement.
"Required Banks" as defined in Section 10.12 of the Reimbursement
Agreement.
"Report" as defined in Section 5.1 of the Lease.
"Reserve Funds" shall mean all funds held by the Revenue Trustee under the
Revenue Trust Agreement in the General Revenue Fund, the Supplemental Reserve
Fund or the Major Maintenance Reserve Fund or funds otherwise held in or
designated to be held in any of the foregoing Funds pursuant to the Revenue
Trust Agreement.
"Responsible Officer" shall mean, (i) with respect to the Owner Trustee or
the Revenue Trustee, any officer or assistant officer in its department charged
with corporate trust administration; (ii) with respect to Delano Energy, the
President or a Vice President; and (iii) with respect to the Owner Participant,
the President or a Vice President.
"Restatement Agreement" shall mean the Restatement Agreement dated as of
December 3, 1990 among Delano Energy, the Lessor and the LC Banks, as the same
may from time to time be amended, modified or supplemented in accordance with
the terms thereof.
"Restricted Distributions" as defined in Section 5.14 of the Reimbursement
Agreement.
"Retained Amount" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
"Retained Amount Balance" as defined in Section 3.3.2 of the Revenue Trust
Agreement.
51<PAGE>
"Revenue Trust Agreement" shall mean the Amended and Restated Revenue Trust
Agreement dated as of December 31, 1993, among Delano Energy and the Owner
Trustee, as Grantors, the Revenue Trustee and the Agent, as Beneficiary, as the
same may from time to time be amended, modified or supplemented in accordance
with the terms thereof.
"Revenue Trust Estate" as defined in Section 2.1 of the Revenue Trust
Agreement.
"Revenue Trustee" as defined in the preamble to the Revenue Trust
Agreement.
"SCE" shall mean Southern California Edison Company, a California
corporation, and its successors and assigns.
"SCE Consent" shall mean, collectively, (a) the Phase II Consent and
Confirmation dated December 8, 1993 from SCE, (b) the Consent to Assignments and
Agreement dated as of December 31, 1993, and (c) the Consent to Option and
Assignments dated as of January 31, 1991, among Delano Energy, the Lessor, the
Agent and SCE, as the same may from time to time be amended, modified or
supplemented in accordance with the terms thereof.
"SCE Credit" shall mean the Letter of Credit dated October 13, 1989 issued
by FNBB to SCE for the account of Delano Energy in the stated amount of
$1,733,796, which reimbursement obligations in respect thereof are presently
guaranteed by Thermo Electron.
"SEC" shall mean the Securities and Exchange Commission or any successor
federal agency.
"Secured Obligations" as defined in Section 3 of the Lessor Security
Agreement.
"Security Documents" as defined in Section 7 of the Reimbursement
Agreement.
"Senior Obligations" as defined in Section 2.1 of the Subordination
Agreement.
"Special Distribution" as defined in Section 5.14 of the Reimbursement
Agreement.
"Special Distribution Amount" shall mean $5,000,000.
"Subject Land" as defined in Section B of Delano Energy Deed of Trust.
"Subordinated Obligations" as defined in Section 2.1 of the Subordination
Agreement.
52<PAGE>
"Subordination Agreement" shall mean the Subordination Agreement dated as
of December 31, 1993 among Delano Energy, Thermo Systems, Thermo Electron and
the Agent, as the same may from time to time be amended, modified or
supplemented in accordance with the terms thereof.
"Subsidiary" of any corporation shall mean any other corporation of which
more than 50% of the outstanding voting shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such corporation and/or by
one or more of its Subsidiaries.
"Substitute Letter of Credit" shall have the meaning provided therefor in
the Bond Indentures, and shall be substantially in the form of Exhibit 2 to the
Reimbursement Agreement.
"Supplemental Reserve Fund" shall mean the Supplemental Reserve Fund
established in accordance with the provisions of the Revenue Trust Agreement.
"Supplemental Reserve Required Amount" shall mean $100,000.
"Support Documents" shall mean the Operating Standards Support Agreement,
the Construction Contracts, the Power Purchase Agreement, the Ancillary Power
Contracts, the Subordination Agreement, the Thermo Fuel Contract, the Fuel
Supply Contracts, the Ash Disposal Contract, the SCE Consent, the Fuel
Contractor Consents and the Ash Disposal Consent.
"Swap Agreements" shall mean the Interest Rate and Currency Exchange
Agreement dated as of December 3, 1990 between the Owner Trustee and Delano
Energy and the Swap Bank (including the Confirmations), as the same may from
time to time be amended, modified or supplemented in accordance with the terms
thereof.
"Swap Bank" shall mean ABN AMRO acting through its Cayman Islands Branch
(or such other branch as ABN AMRO may from time to time designate), or any other
LC Bank who may replace such Bank in such capacity.
"Tax Exempt Investment Securities" shall mean (a) obligations of a state or
local government, interest on which is excluded from gross income for federal
income tax purposes, whether or not such interest is includable as an item of
tax preference or otherwise includable directly or indirectly for purposes of
calculating other tax liabilities, including any alternative minimum tax or
environmental tax under the Code, and for which a nationally recognized rating
service is maintaining a rating within the top two rating categories of such
rating service and (b) shares in a regulated investment company whose assets
consist of such obligations, except as to rating requirements.
53<PAGE>
"Taxes" as defined in Section 5.23 of the Reimbursement Agreement.
"Termination Date" as defined in Section 2 of the Reimbursement Agreement.
"TE Support Agreements" as defined in Section 4.1 of the Participation
Agreement.
"Thermo Electron" shall mean Thermo Electron Corporation, a Delaware
corporation.
"Thermo Electron Documents" as defined in Section 7.2 of the Participation
Agreement.
"Thermo Fuel Contract" shall mean the Amended and Restated Thermo Fuel
Contract dated as of December 31, 1993 between Delano Energy and Thermo Systems,
and joined in by Thermo Electron.
"Thermo Systems" shall mean Thermo Energy Systems Corporation, a Delaware
corporation.
"Thermo Systems Documents" as defined in Section 6.2 of the Participation
Agreement.
"Title Report Liens" shall mean the Liens and Encumbrances listed in
Exhibit 2A.1.5 to the Reimbursement Agreement.
"Transaction Costs" shall mean all fees, costs and expenses (other than
fees, costs and expenses incurred by Delano Energy) associated with the
negotiation, documentation and closing of the Overall Transaction, including the
fees (including legal fees), expenses, and out-of-pocket fees and expenses of
the Owner Trustee, the Revenue Trustee, ABN AMRO, FNBB, CPCFA and any other
trustees, all appraisal, engineering and consulting fees and costs, the cost of
title insurance, all recording fees and costs, state transfer taxes, costs of
interest rate swap protection, document production costs and any other expenses
reasonably incurred by any of the foregoing Persons (except Delano Energy) in
connection with the negotiation, documentation and closing of the Overall
Transaction.
"Transferee" as defined in Section 19.1 of the Participation Agreement.
"UCC" as defined in Section 1.3 of Delano Energy Security Agreement.
"Uniform Customs and Practice" as defined in Section 8.3(a) of the
Reimbursement Agreement.
"Unrelated Liens" shall mean Liens resulting from acts of or claims against
the Owner Trustee, CTCC, in its individual
54<PAGE>
capacity, the Owner Participant or any Bank arising out of events or conditions
not related or connected to the ownership of the Facility, being Lessor under
the Lease, or the Overall Transaction.
"Withdrawn Funds" shall mean funds withdrawn from the Major Maintenance
Reserve Fund in accordance with the provisions contained in Section 5A.4 of the
Revenue Trust Agreement.
"Working Capital" shall mean at any date as of which the amount thereof
shall be determined the sum of (i) cash held in the Disbursement Account, (ii)
Available Reserves, (iii) receivables and (iv) inventory, less (iv) current
liabilities (excluding the current portion of long term debt). The amount of
receivables, inventory and current liabilities shall be determined in accordance
with generally accepted accounting principles.
"Working Capital Requirement" as defined in Section 3.3.2 of the Revenue
Trust Agreement.
"Worth at the Time of Award" as defined in Section 17 of the Lease.
"1989 Bonds" shall mean the Variable Rate Demand and Resource Recovery
Revenue Bonds, Series 1989, issued by the CPCFA pursuant to the 1989-90 Bond
Indenture on August 31, 1989.
"1989 Tax-exempt Financing Credit" as defined in Section 2(a) of the
Reimbursement Agreement.
"1989-90 Collateral Agent" shall mean FNBB in its capacity as collateral
agent for the Banks under the 1989-90 Bond Pledge Agreement.
"1989-90 Notional Amount" as defined in Section 3.3.1.1(1) of the Revenue
Trust Agreement.
"1990 Bonds" shall mean the Variable Rate Demand and Resource Recovery
Revenue Bonds, Series 1990, issued by the CPCFA pursuant to the 1989-90 Bond
Indenture on May 24, 1990.
"1990 Closing Date" shall mean December 3, 1990.
"1990 Confirmation" shall mean the letter agreement dated December 3, 1990
between Delano Energy, the Owner Trustee and the Swap Bank.
"1990 Participation Agreement" as defined in Recital A of the Participation
Agreement.
"1990 Revenue Trust Agreement" as defined in the Recitals of the Revenue
Trust Agreement.
55<PAGE>
"1990 Tax-exempt Financing Credit" as defined in Section 2(b) of the
Reimbursement Agreement.
"1991 Bonds" shall mean the Variable Rate Demand and Resource Recovery
Revenue Bonds, Series 1991, issued by the CPCFA pursuant to the 1991 Bond
Indenture on October 17, 1991.
"1991 Collateral Agent" shall mean ABN AMRO in its capacity as collateral
agent for the Banks under the 1991 Bond Pledge Agreement.
"1991 Notional Amount" as defined in Section 3.3.1.1(1) of the Revenue
Trust Agreement.
"1991 Tax-exempt Financing Credit" as defined in Section 2(c) of the
Reimbursement Agreement.
"1993 Confirmation" shall mean the letter agreement dated as of December
31, 1993 between Delano Energy, the Owner Trustee and the Swap Bank.
56<PAGE>
Exhibit 11
Thermo Electron Corporation
Computation of Earnings per Share
1993 1992 1991
----------- ----------- -----------
Computation of Fully Diluted
Earnings per Share Before
Cumulative Effect of Change
in Accounting Principle:
Income:
Income per primary computation $76,633,000 $60,594,000 $47,054,000
Add: Convertible debt interest, 10,273,000 6,010,000 4,166,000
net of tax
----------- ----------- -----------
Income applicable to common stock
assuming full dilution (a) $86,906,000 $66,604,000 $51,220,000
----------- ----------- -----------
Shares:
Weighted average shares outstanding 43,779,422 40,049,444 35,836,484
Add: Shares issuable from assumed
conversion of convertible
debentures 11,256,368 6,483,917 5,027,151
Shares issuable from assumed
exercise of options (as
determined by the application
of the treasury stock method) 483,718 629,911 847,848
----------- ----------- -----------
Weighted average shares outstanding,
as adjusted (b) 55,519,508 47,163,272 41,711,483
----------- ----------- -----------
Fully diluted earnings per share
before cumulative effect of change
in accounting principle (a) / (b) $ 1.57 $ 1.41 $ 1.23
=========== =========== ===========
<PAGE>
Thermo Electron Corporation
Computation of Earnings per Share (continued)
1993 1992 1991
----------- ----------- -----------
Computation of Fully Diluted
Earnings per Share:
Income:
Income per primary computation $76,633,000 $59,156,000 $47,054,000
Add: Convertible debt interest,
net of tax 10,273,000 6,010,000 4,166,000
----------- ----------- -----------
Income applicable to common stock
assuming full dilution (c) $86,906,000 $65,166,000 $51,220,000
----------- ----------- -----------
Shares:
Weighted average shares outstanding 43,779,422 40,049,444 35,836,484
Add: Shares issuable from assumed
conversion of convertible
debentures 11,256,368 6,483,917 5,027,151
Shares issuable from exercise
of options (as determined by
the application of the treasury
stock method) 483,718 629,911 847,848
----------- ----------- -----------
Weighted average shares outstanding,
as adjusted (d) 55,519,508 47,163,272 41,711,483
----------- ----------- -----------
Fully diluted earnings per share
(c) / (d) $ 1.57 $ 1.38 $ 1.23
<PAGE> =========== =========== ===========
Exhibit 13
THERMO ELECTRON CORPORATION
1993 Financial Statements
<PAGE>
Thermo Electron Corporation
Consolidated Statement of Income
(In thousands except per
share amounts) 1993 1992 1991
- ------------------------------------------------------------------------------
Revenues:
Product sales and revenues $1,103,558 $ 808,928 $ 666,565
Service revenues 121,987 114,268 112,003
Research and development
contract revenues 24,173 25,776 26,916
---------- ---------- ----------
1,249,718 948,972 805,484
---------- ---------- ----------
Costs and Expenses:
Cost of products 664,201 521,668 444,273
Cost of services 91,292 87,307 89,347
Expenses for research and
development and new lines
of business (a) 87,027 62,343 52,609
Selling, general and
administrative expenses 283,590 209,392 177,304
Costs associated with divisional
and product restructuring
(Note 11) 8,261 - 3,709
---------- ---------- ----------
1,134,371 880,710 767,242
---------- ---------- ----------
Gain on Issuance of Stock by
Subsidiaries (Note 9) 39,863 30,212 27,367
Other Income (Expense),
Net (Note 10) (24,091) 3,496 13,564
---------- ---------- ----------
Income Before Income Taxes, Minority
Interest, and Cumulative Effect of
Change in Accounting Principle 131,119 101,970 79,173
Provision for Income Taxes (Note 8) 33,400 27,474 24,850
Minority Interest Expense 21,086 13,902 7,269
---------- ---------- ----------
Income Before Cumulative Effect of
Change in Accounting Principle 76,633 60,594 47,054
Cumulative Effect of Change in
Accounting Principle, Net of
Tax (Note 7) - 1,438 -
---------- ---------- ----------
Net Income $ 76,633 $ 59,156 $ 47,054
========== ========== ==========
Before Cumulative Effect of Change
in Accounting Principle:
Primary earnings per share $ 1.75 $ 1.51 $ 1.31
Fully diluted earnings per share $ 1.57 $ 1.41 $ 1.23
Primary Earnings per Share $ 1.75 $ 1.48 $ 1.31
Fully Diluted Earnings per Share $ 1.57 $ 1.38 $ 1.23
Primary Weighted Average Shares 43,779 40,049 35,836
Fully Diluted Weighted
Average Shares 55,520 47,163 41,711
1<PAGE>
Thermo Electron Corporation
Consolidated Statement of Income (continued)
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------------
(a) Includes costs of:
Research and development
contracts $ 20,435 $ 19,426 $ 21,196
Internally funded research
and development 58,943 38,675 26,171
Other expenses for new lines
of business 7,649 4,242 5,242
---------- ---------- ----------
$ 87,027 $ 62,343 $ 52,609
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
2<PAGE>
Thermo Electron Corporation
Consolidated Balance Sheet
(In thousands) 1993 1992
- ------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 325,744 $ 190,601
Short-term investments, at cost (quoted market
value of $377,183 and $180,060) 374,450 178,101
Accounts receivable, less allowances
of $14,129 and $11,341 267,377 204,750
Unbilled contract costs and fees 32,574 25,941
Inventories:
Work in process and finished goods 82,385 60,629
Raw materials and supplies 110,437 106,619
Prepaid income taxes (Note 8) 39,258 54,377
Prepaid expenses 12,318 8,716
---------- ----------
1,244,543 829,734
---------- ----------
Assets Related to Projects Under Construction:
Restricted funds (quoted market value
of $34,100 and $95,639) 34,100 95,348
Facilities under construction 128,040 133,876
---------- ----------
162,140 229,224
---------- ----------
Property, Plant and Equipment, at Cost:
Land 40,570 35,729
Buildings 116,895 99,502
Alternative-energy facilities 199,800 30,554
Machinery, equipment and leasehold improvements 224,629 205,508
---------- ----------
581,894 371,293
Less: Accumulated depreciation and amortization 134,423 113,383
---------- ----------
447,471 257,910
---------- ----------
Long-term Marketable Securities, at Cost
(quoted market value of $45,125 and $45,731) 43,630 44,497
---------- ----------
Other Assets 102,347 92,870
---------- ----------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 473,579 364,030
---------- ----------
$2,473,710 $1,818,265
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3<PAGE>
Thermo Electron Corporation
Consolidated Balance Sheet (continued)
(In thousands except share amounts) 1993 1992
- ------------------------------------------------------------------------------
Liabilities and Shareholders' Investment
Current Liabilities:
Notes payable $ 45,851 $ 22,034
Accounts payable 85,278 69,473
Billings in excess of contract costs and fees 8,564 7,987
Accrued payroll and employee benefits 49,029 45,115
Accrued income taxes (Note 8) 7,713 9,796
Accrued installation and warranty costs 26,049 17,179
Other accrued expenses (Note 2) 193,762 154,786
---------- ----------
416,246 326,370
---------- ----------
Deferred Income Taxes (Note 8) 48,387 34,171
Other Deferred Items 58,152 35,500
Liabilities Related to Projects Under
Construction (Note 5):
Payables and accrued expenses 10,680 5,874
Tax-exempt obligations 142,069 199,536
---------- ----------
152,749 205,410
---------- ----------
Long-term Obligations (Note 5):
Senior convertible obligations 275,000 260,000
Subordinated convertible obligations 238,386 199,829
Nonrecourse tax-exempt obligations 108,800 -
Other 25,275 34,323
---------- ----------
647,461 494,152
---------- ----------
Minority Interest 277,681 164,293
Commitments and Contingencies (Note 6)
Common Stock of Subsidiaries Subject to Redemption
($15,390 and $5,468 redemption values) 14,511 5,468
Shareholders' Investment (Notes 3 and 4):
Preferred stock, $100 par value, 50,000 shares
authorized; none issued
Common stock, $1 par value, 100,000,000 shares
authorized; 47,950,580 and 27,099,598 shares issued 47,951 27,100
Capital in excess of par value 467,076 257,105
Retained earnings 362,138 285,505
---------- ----------
877,165 569,710
Treasury stock at cost, 31,898 and 85,342 shares (1,212) (3,810)
Cumulative translation adjustment (13,591) (7,949)
Deferred compensation (Note 7) (3,839) (5,050)
---------- ----------
858,523 552,901
---------- ----------
$2,473,710 $1,818,265
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
4<PAGE>
Thermo Electron Corporation
Consolidated Statement of Cash Flows
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------------
Operating Activities:
Net income $ 76,633 $ 59,156 $ 47,054
Adjustments to reconcile net
income to net cash provided by
operating activities:
Cumulative effect of change in
accounting principle (Note 7) - 1,438 -
Depreciation and amortization 42,356 29,228 23,391
Costs associated with divisional
and product restructuring (Note 11) 8,261 - 3,709
Equity in losses of
unconsolidated subsidiaries 21,076 3,948 1,663
Provision for losses on
accounts receivable 2,675 2,021 3,020
Increase in deferred
income taxes 13,888 12,273 169
Gain on sale of investments (2,469) (4,968) (7,622)
Gain on issuance of stock by
subsidiaries (Note 9) (39,863) (30,212) (27,367)
Minority interest expense 21,086 13,902 7,269
Other noncash expenses 7,850 11,549 6,804
Changes in current accounts,
excluding the effects
of acquisitions:
Accounts receivable (43,171) (10,763) (10,220)
Inventories (6,525) (4,753) 8,224
Other current assets (230) (9,860) 5,276
Accounts payable 10,014 (2,479) (10,140)
Other current liabilities 15,355 (15,363) (11,684)
Other (198) (175) (142)
--------- --------- ---------
Net cash provided by
operating activities 126,738 54,942 39,404
--------- --------- ---------
Investing Activities:
Acquisitions, net of cash acquired
(Note 2) (142,962) (251,738) (7,552)
Purchases of property, plant
and equipment (56,580) (60,007) (33,469)
Purchases of long-term investments (20,573) (70,340) (21,278)
Proceeds from sale of long-term
investments 16,651 35,899 15,814
(Increase) decrease in short-term
investments (193,894) 68,260 (175,701)
Increase in assets related to
construction projects (3,781) (132,971) (67,790)
Other 1,848 313 (4,834)
--------- --------- ---------
Net cash used in investing
activities $(399,291) $(410,584) $(294,810)
--------- --------- ---------
5<PAGE>
Thermo Electron Corporation
Consolidated Statement of Cash Flows (continued)
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------------
Financing Activities:
Proceeds from issuance of
long-term obligations $ 102,151 $ 255,694 $ 162,273
Repayment and repurchase of
long-term obligations (11,732) (27,415) (10,493)
Proceeds from issuance of
tax-exempt obligations - 133,536 66,000
Proceeds from issuance of Company
and subsidiary common stock 378,790 100,749 64,947
Purchases of Company and
subsidiary common stock (57,198) (45,334) (11,663)
Other (941) 485 (430)
--------- --------- ---------
Net cash provided by
financing activities 411,070 417,715 270,634
--------- --------- ---------
Exchange Rate Effect on Cash (3,374) (2,424) (2,499)
--------- --------- ---------
Increase in Cash and
Cash Equivalents 135,143 59,649 12,729
Cash and Cash Equivalents at
Beginning of Year 190,601 130,952 118,223
--------- --------- ---------
Cash and Cash Equivalents
at End of Year $ 325,744 $ 190,601 $ 130,952
========= ========= =========
Cash Paid For:
Interest $ 29,438 $ 18,287 $ 15,426
Income taxes $ 9,699 $ 16,593 $ 15,723
Noncash Activities:
Conversions of convertible
obligations $ 50,403 $ 13,863 $ 109,865
Subsidiary stock issued for
acquired business (Note 2) $ - $ 9,673 $ 1,026
Purchase of electric
generating facility
through assumption of debt $ 66,900 $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
6<PAGE>
Thermo Electron Corporation
Consolidated Statement of Shareholders' Investment
Capital in
Common Stock, Excess of Par Retained
(In thousands) $1 Par Value Value Earnings
- -------------------------------------------------------------------------------
Balance December 29, 1990 $ 21,878 $111,037 $175,850
Net income - - 47,054
Acquisition expenses paid by
shareholders of International
Technidyne Corporation - 1,135 -
Purchases of Company common stock - - -
Private placements of Company
common stock 750 25,678 -
Issuance of stock under employees'
and directors' stock plans 412 8,804 -
Conversions of convertible obligations 2,818 81,675 -
Effect of majority-owned
subsidiaries' common stock
transactions - 1,922 3,445
Cumulative translation adjustment - - -
Amortization of deferred compensation - - -
-------- -------- --------
Balance December 28, 1991 25,858 230,251 226,349
Net income - - 59,156
Purchases of Company common stock - - -
Private placement of Company common
stock (Note 3) 800 33,455 -
Issuance of stock under employees'
and directors' stock plans 358 4,241 -
Tax benefit related to employees'
and directors' stock plans - 4,773 -
Conversion of convertible obligations 84 2,894 -
Effect of majority-owned
subsidiaries' common stock
transactions - (18,509) -
Cumulative translation adjustment - - -
Amortization of deferred compensation - - -
-------- -------- --------
Balance January 2, 1993 27,100 257,105 285,505
Net income - - 76,633
Public offering of Company common
stock (Note 3) 4,500 241,505 -
Issuance of stock under employees'
and directors' stock plans 216 763 -
Conversion of convertible obligations 285 6,619 -
Effect of majority-owned
subsidiaries' common stock
transactions - (23,066) -
Effect of three-for-two stock split 15,850 (15,850) -
Cumulative translation adjustment - - -
Amortization of deferred compensation - - -
-------- -------- --------
Balance January 1, 1994 $ 47,951 $467,076 $362,138
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
7<PAGE>
Thermo Electron Corporation
Consolidated Statement of Shareholders' Investment (continued)
Cumulative
Treasury Translation Deferred
(In thousands) Stock Adjustment Compensation
- -------------------------------------------------------------------------------
Balance December 29, 1990 $ (1,288) $9,381 $(6,646)
Net income - - -
Acquisition expenses paid by
shareholders of International
Technidyne Corporation - - -
Purchases of Company common stock (8,236) - -
Private placements of Company
common stock - - -
Issuance of stock under employees'
and directors' stock plans 8,486 - -
Conversions of convertible obligations - - -
Effect of majority-owned
subsidiaries' common stock
transactions - - -
Cumulative translation adjustment - (3,849) -
Amortization of deferred compensation - - 636
-------- -------- --------
Balance December 28, 1991 (1,038) 5,532 (6,010)
Net income - - -
Purchases of Company common stock (6,214) - -
Private placement of Company common
stock (Note 3) - - -
Issuance of stock under employees'
and directors' stock plans 3,442 - -
Tax benefit related to employees'
and directors' stock plans - - -
Conversion of convertible obligations - - -
Effect of majority-owned
subsidiaries' common stock
transactions - - -
Cumulative translation adjustment - (13,481) -
Amortization of deferred compensation - - 960
-------- -------- --------
Balance January 2, 1993 (3,810) (7,949) (5,050)
Net income - - -
Public offering of Company common
stock (Note 3) - - -
Issuance of stock under employees'
and directors' stock plans 2,598 - -
Conversion of convertible obligations - - -
Effect of majority-owned
subsidiaries' common stock
transactions - - -
Effect of three-for-two stock split - - -
Cumulative translation adjustment - (5,642) -
Amortization of deferred compensation - - 1,211
-------- -------- --------
Balance January 1, 1994 $ (1,212) $(13,591) $ (3,839)
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
8<PAGE>
Notes to Consolidated Financial Statements
1.Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Thermo Electron Corporation and its majority- and wholly owned subsidiaries (the
Company). All material intercompany accounts and transactions have been
eliminated. Majority-owned public subsidiaries include Thermedics Inc., Thermo
Instrument Systems Inc., Thermo Process Systems Inc., Thermo Power Corporation,
ThermoTrex Corporation, and Thermo Fibertek Inc. Thermo Cardiosystems Inc. and
Thermo Voltek Corp. are majority-owned public subsidiaries of Thermedics. Thermo
Remediation Inc. is a majority-owned public subsidiary of Thermo Process. Thermo
Energy Systems Corporation is a majority-owned, privately held subsidiary of the
Company; ThermoLase Inc. is a majority-owned, privately held subsidiary of
ThermoTrex; and J. Amerika N.V. is a majority-owned, privately held subsidiary
of Thermo Process. The Company accounts for investments in businesses in which
it owns between 20% and 50% under the equity method.
Fiscal Year
The Company has adopted a fiscal year ending the Saturday nearest December 31.
References to 1993, 1992, and 1991 are for the fiscal years ended January 1,
1994, January 2, 1993, and December 28, 1991, respectively. Fiscal year 1993 and
1991 each included 52 weeks; 1992 included 53 weeks.
Revenue Recognition
For the majority of its operations, the Company recognizes revenues based upon
shipment of its products or completion of services rendered. The Company
provides a reserve for its estimate of warranty and installation costs at the
time of shipment. Revenues and profits on substantially all contracts are
recognized using the percentage-of-completion method. Revenues recorded under
the percentage-of-completion method were $176,627,000 in 1993, $186,407,000 in
1992, and $173,210,000 in 1991. The percentage of completion is determined by
relating either the actual costs or actual labor incurred to management's
estimate of total costs or total labor, respectively, to be incurred on each
contract. If a loss is indicated on any contract in process, a provision is made
currently for the entire loss. The Company's contracts generally provide for
billing of customers upon the attainment of certain milestones specified in each
contract. Revenues earned on contracts in process in excess of billings are
classified as "Unbilled contract costs and fees," and amounts billed in excess
of revenues earned are classified as "Billings in excess of contract costs and
fees" in the accompanying balance sheet. There are no significant amounts
included in the accompanying balance sheet that are not expected to be recovered
from existing contracts at current contract values or that are not expected to
be collected within one year, including amounts that are billed but not paid
under retainage provisions.
Gain on Issuance of Stock by Subsidiaries
At the time a subsidiary sells its stock to unrelated parties at a price in
excess of its book value, the Company's net investment in that subsidiary
increases. If at that time the subsidiary is an operating entity and not engaged
principally in research and development, the Company records the increase as a
gain.
If gains have been recognized on issuances of a subsidiary's stock and
shares of the subsidiary are subsequently repurchased by the subsidiary or the
Company, gain recognition does not occur on issuances subsequent to the date of
a repurchase until such time as shares have been issued in an amount equivalent
to the number of repurchased shares. Such transactions are reflected as equity
9<PAGE>
transactions and the net effect of these transactions is reflected in the
accompanying statement of shareholders' investment as "Effect of majority-owned
subsidiaries' common stock transactions."
Income Taxes
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes," as of the beginning of 1992. Under SFAS No. 109,
deferred income taxes are recognized based on the expected future tax
consequences of differences between the financial statement basis and the tax
basis of assets and liabilities calculated using enacted tax rates in effect for
the year in which the differences are expected to be reflected in the tax
return. Prior to 1992, the Company recorded income taxes on timing differences
between financial statement and tax treatment of income and expenses under
Accounting Principles Board Opinion No. 11. The implementation of SFAS No. 109
and the effect of adoption were not material to the Company's financial
statements.
Earnings per Share
Primary earnings per share have been computed based on the weighted average
number of common shares outstanding during the year. Because the effect of
common stock equivalents was not material, they have been excluded from the
primary earnings per share calculation. Fully diluted earnings per share assumes
the effect of the conversion of the Company's dilutive convertible obligations
and elimination of the related interest expense, the exercise of stock options,
and their related income tax effects.
Stock Splits
All share and per share information has been restated to reflect a three-for-two
stock split, effected in the form of a 50% stock dividend, that was distributed
in October 1993.
In addition, all share and per share information pertaining to Thermedics,
Thermo Instrument, ThermoTrex, and Thermo Voltek has been restated to reflect
three-for-two stock splits, effected in the form of 50% stock dividends, that
were distributed in 1993. All share and per share information pertaining to
Thermo Cardiosystems and ThermoLase has been restated to reflect two-for-one
stock splits, effected in the form of 100% stock dividends, that was distributed
for Thermo Cardiosystems in 1993 and will be effected for ThermoLase on
March 15, 1994.
Cash and Cash Equivalents
Cash equivalents consist principally of U.S. government agency securities, bank
time deposits, and commercial paper purchased with an original maturity of three
months or less. These investments are carried at cost. The fair market value of
cash and cash equivalents was $325,823,000 and $191,004,000 at January 1, 1994
and January 2, 1993, respectively.
Short- and Long-term Investments
Short- and long-term investments consist principally of corporate notes and U.S.
government agency securities. Securities with an original maturity of greater
than three months, which the Company intends to hold for less than one year, are
classified as short-term. Securities that are intended to be held for more than
one year are classified as long-term. These investments are carried at the lower
of cost or market value.
In May 1993, the Financial Accounting Standards Board issued SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115
requires that marketable equity and debt securities considered trading
securities be accounted for at market value with the difference between cost and
market value recorded currently in the statement of income; that securities
considered available-for-sale be accounted for at market value, with the
difference between cost and market value, net of related tax effects, recorded
10<PAGE>
currently as a component of shareholders' investment; and that debt securities
considered held-to-maturity be recorded at amortized cost. The Company is
required to adopt SFAS No. 115 at the beginning of fiscal 1994. Management
believes that the marketable equity and debt securities in the accompanying
balance sheet will be considered available-for-sale and that the adoption of
SFAS No. 115 will result in a total increase to shareholders' investment of
approximately $2,600,000.
Inventories
Inventories are stated at the lower of cost (on a first-in, first-out or
weighted average basis) or market value and include materials, labor, and
manufacturing overhead.
Property, Plant and Equipment
The costs of additions and improvements are capitalized, while maintenance and
repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings and improvements -- 10 to 40
years, alternative-energy facilities -- 25 years, machinery and equipment --
3 to 20 years, and leasehold improvements -- the shorter of the term of the
lease or the life of the asset.
Assets Related to Projects Under Construction
"Facilities under construction" in the accompanying 1992 balance sheet included
an alternative-energy facility that was under construction in Delano,
California. This facility was completed in 1993 and is included in
"Alternative-energy facilities" in the accompanying 1993 balance sheet.
"Facilities under construction" in fiscal 1993 and 1992 include a
waste-recycling facility located in San Diego County, California. Construction
costs for this facility were capitalized as incurred. Construction was completed
in early 1994.
"Restricted funds" in the accompanying balance sheet represent unexpended
proceeds from the issuance of tax-exempt obligations (Note 5), which are
invested principally in U.S. government agency securities and municipal
tax-exempt obligations. These investments are carried at the lower of cost or
market value.
In August 1993, the Company agreed, in exchange for a cash settlement, to
terminate a power sales agreement between a subsidiary of the Company and a
utility. The power sales agreement required the utility to purchase the power to
be generated by the Company's 55-megawatt natural gas cogeneration facility
under development on Staten Island, New York. Under the termination agreement,
the Company received $9.0 million in August 1993, with subsequent payments to be
made as follows: $3.6 million in 1994; $2.7 million in 1995; $1.8 million in
1996; and $0.9 million in 1997. The Company will be obligated to return $8.2
million of this settlement if the Company elects to proceed with the Staten
Island facility and it achieves commercial operation before January 1, 2000.
Accordingly, the Company has deferred recognition of $8.2 million of revenues,
pending final determination of the project's status. During 1993, the Company
recorded revenues of $9.8 million and segment income of $5.4 million from the
termination of the power sales agreement.
Other Assets
"Other assets" in the accompanying balance sheet includes capitalized costs
associated with the Company's operation of certain alternative-energy power
plants, as well as the cost of acquired trademarks, patents, and other
identifiable intangible assets. These assets are being amortized using the
straight-line method over their estimated useful lives, which range from 4 to 20
years. These assets were $41,252,000 and $49,646,000, net of accumulated
amortization of $16,699,000 and $11,002,000, at year-end 1993 and 1992,
respectively.
11<PAGE>
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired businesses is
amortized using the straight-line method principally over 40 years. Accumulated
amortization was $32,439,000 and $20,954,000 at year-end 1993 and 1992,
respectively. The Company continually assesses whether a change in circumstances
has occurred subsequent to an acquisition that would indicate that the future
useful life of the asset should be revised. The Company considers the future
earnings potential of the acquired business in assessing the recoverability of
this asset.
Common Stock of Subsidiaries Subject to Redemption
In March 1993, ThermoLase sold 3,078,000 units at $5 per unit, each unit
consisting of one share of ThermoLase common stock and one redemption right. A
redemption right allows holders to redeem ThermoLase common stock for $5 per
share, and is exercisable in December 1996 and 1997. The redemption rights are
guaranteed on a subordinated basis by the Company.
"Common stock of subsidiaries subject to redemption" in the accompanying
1992 balance sheet represents amounts associated with redemption rights
outstanding that were issued in connection with the Thermo Cardiosystems 1989
initial public offering and were guaranteed on a subordinated basis by the
Company. These redemption rights expired at the end of 1993 and, as a result,
the Company transferred $5,468,000 of "Common stock of subsidiary subject to
redemption" to "Minority interest" and "Capital in excess of par value."
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are translated
at year-end exchange rates, and revenues and expenses are translated at average
exchange rates for the year in accordance with SFAS No. 52, "Foreign Currency
Translation." Resulting translation adjustments are reflected as a separate
component of shareholders' investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
Presentation
Certain amounts in 1992 and 1991 have been reclassified to conform to the 1993
financial statement presentation.
2.Acquisitions
In February 1993, Thermo Instrument acquired Spectra-Physics Analytical, a
manufacturer of liquid chromatography and capillary electrophoresis analytical
instruments, for $67.3 million in cash. In 1993, the Company's majority-owned
subsidiaries made several other acquisitions for $76.5 million in cash.
In 1992, Thermo Instrument acquired Nicolet Instrument Corporation. The
total purchase price to the Company was approximately $175 million. Nicolet
designs, manufactures, and markets instrumentation for a broad range of
analytical chemistry, neurodiagnostic, and electronic engineering
problem-solving applications in science and industry.
In 1992, the Company's majority-owned subsidiaries made several other
acquisitions for $77.7 million in cash, assumption of debt in the amount of $7.3
million, prepayment of debt in the amount of $1.5 million, and issuance of
common stock and stock options of a majority-owned subsidiary valued at
approximately $12.3 million.
These acquisitions have been accounted for as purchases and their results
of operations have been included in the accompanying financial statements from
their respective dates of acquisition. The aggregate cost of these acquisitions
exceeded the estimated fair value of the acquired net assets by $325 million,
12<PAGE>
which is being amortized principally over 40 years. Allocation of the purchase
price was based on the fair value of the net assets acquired and, for
acquisitions completed in fiscal 1993, is subject to adjustment.
Based on unaudited data, the following table presents selected financial
information for the Company, Spectra-Physics Analytical, and Nicolet on a pro
forma basis, assuming the companies had been combined since the beginning of
1992. Net income and earnings per share are shown before Nicolet's discontinued
operations, which occurred in fiscal 1992. The effect on the Company's financial
statements of the acquisitions not included in the pro forma data was not
significant.
(In thousands except per share amounts) 1993 1992
- -----------------------------------------------------------------
Revenues $1,257,523 $1,105,907
Income before cumulative effect
of change in accounting principle 75,631 43,016
Earnings per share before cumulative
effect of change in accounting
principle:
Primary 1.73 1.07
Fully diluted 1.55 1.04
The pro forma results for 1992 include a $10.8 million reorganization
charge recorded by Nicolet prior to its acquisition by the Company and a
one-time $3.3 million charge for certain acquisition-related expenses incurred
by Nicolet prior to its acquisition by the Company. The pro forma results are
not necessarily indicative of future operations or the actual results that would
have occurred had the acquisitions been made at the beginning of 1992.
"Other accrued expenses" in the accompanying balance sheet includes
approximately $41 million and $48 million at year-end 1993 and 1992,
respectively, for estimated severance, relocation, and other restructuring
reserves associated with acquisitions.
3.Common Stock
In 1993, the Company sold 6,750,000 shares of its common stock in a public
offering for net proceeds of $246.0 million. In 1992, the Company sold 1,200,000
shares of its common stock in a private placement for net proceeds of $34.3
million.
At January 1, 1994, the Company had reserved 26,732,077 unissued shares of
its common stock for possible issuance under employees' and directors' stock
plans, for possible conversion of the Company's 4 5/8%, 4 7/8%, and 6 3/4%
convertible debentures, and for possible exchange of subsidiaries' convertible
obligations into common stock of the Company. The subsidiaries' obligations are
convertible into common stock of the Company in the event of a change in
control, as defined in the related fiscal agency agreement, that has not been
approved by the Company's Board of Directors (Note 5). The conversion price
would be equal to 50% of the price of the Company's common stock prior to the
change in control.
4.Stock-based Compensation Plans
The Company has several stock-based compensation plans for its key employees,
directors, and others, which permit the award of stock-based incentives in the
stock of the Company and its majority-owned subsidiaries. The Company has a
nonqualified stock option plan, adopted in 1974, and an incentive stock option
plan, adopted in 1981, which permit the award of stock options to key employees.
13<PAGE>
The incentive stock option plan expired in 1991 and no grants may be made after
that date. An equity incentive plan, adopted in 1989, permits the grant of a
variety of stock and stock-based awards as determined by the human resources
committee of the Company's Board of Directors (the Board Committee), including
restricted stock, stock options, stock bonus shares or performance-based shares.
To date, only nonqualified stock options have been awarded under this plan. The
option recipients and the terms of options granted under these plans are
determined by the Board Committee. Generally, options presently outstanding
under these plans are exercisable immediately, but are subject to certain
transfer restrictions and the right of the Company to repurchase shares issued
upon exercise of the options at the exercise price upon certain events. The
restrictions and repurchase rights generally lapse ratably over periods ranging
from three to ten years after the first anniversary of the grant date, depending
on the term of the option, which may range from five to twelve years. In
addition, under certain options, shares acquired upon exercise are restricted
from resale until retirement or other events. Nonqualified options may be
granted at any price determined by the Board Committee, although incentive stock
options must be granted at not less than fair market value on the date of grant.
Generally, stock options have been granted at fair market value. The Company
also has a directors' stock option plan, adopted in 1993, that provides for the
annual grant of stock options of the Company and its majority-owned subsidiaries
to nonemployee directors pursuant to a formula approved by the Company's
shareholders. Options awarded under this plan are exercisable six months after
the date of grant and expire seven years after the date of grant. In addition to
the Company's stock-based compensation plans, certain officers and key employees
may also participate in stock-based compensation plans of the Company's
majority-owned subsidiaries.
No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity. A summary of the Company's stock option
information is as follows:
1993 1992 1991
--------------- --------------- ---------------
Number Total Number Total Number Total
of Option of Option of Option
(In thousands) Shares Price Shares Price Shares Price
- -------------------------------------------------------------------------------
Options outstanding,
beginning of year 2,074 $45,550 1,965 $34,276 2,366 $33,390
Granted 1,225 48,610 634 17,997 369 9,260
Exercised (317) (4,319) (480) (5,648) (746) (8,029)
Lapsed or canceled (21) (483) (45) (1,075) (24) (345)
----- ------- ----- ------- ----- -------
Options outstanding, end of
year 2,961 $89,358 2,074 $45,550 1,965 $34,276
===== ======= ===== ======= ===== =======
Options exercisable 2,961 $89,358 2,067 $45,444 1,965 $34,276
===== ======= ===== ======= ===== =======
Options available for grant 292 1,195 1,786
===== ===== =====
14<PAGE>
5. Long-term Obligations and Other Financing Arrangements
Long-term obligations of the Company are as follows:
(In thousands except per share amounts) 1993 1992
- -----------------------------------------------------------------------------
4 5/8% Senior convertible debentures,
due 1997, convertible at $32.25 per share $205,000 $260,000
4 7/8% Subordinated convertible debentures,
due 1997, convertible at $32.25 per share 55,000 -
6 3/4% Subordinated convertible debentures,
due 2001, convertible at $23.00 per share 67,173 74,215
3 3/4% Senior convertible debentures,
due 2000, convertible into shares of
Thermo Instrument at $31.75 per share 70,000 -
6 5/8% Subordinated convertible debentures,
due 2001, convertible into shares of
Thermo Instrument at $17.59 per share 49,569 84,240
6 1/2% Subordinated convertible debentures,
due 1998, convertible into shares of
Thermedics at $10.42 per share 12,997 20,307
6 1/2% Subordinated convertible debentures,
due 1997, convertible into shares of
Thermo Process at $10.33 per share 18,547 18,547
5 1/2% Subordinated convertible notes,
due 2002, convertible into shares of
Thermo Cardiosystems at $9.88 per share 600 600
4% Subordinated convertible note, due 1995,
convertible into shares of Thermo Cardiosystems
at $3.60 per share - 1,920
3 3/4% Subordinated convertible debentures,
due 2000, convertible into shares of Thermo
Voltek at $11.75 per share 34,500 -
8.1% Nonrecourse tax-exempt obligation, payable in
semi-annual installments, with a final payment
in 2000 62,500 -
5.7% Nonrecourse tax-exempt obligation, payable in
semi-annual installments, with a final payment
in 2000 57,500 -
10.23% Mortgage loan secured by property with a
net book value of $16,826, payable in monthly
installments, with final payment in 2004 11,535 12,150
Other 21,375 25,650
-------- --------
666,296 497,629
Less: Current maturities of long-term obligations 18,835 3,477
-------- --------
$647,461 $494,152
======== ========
The debentures that are convertible into subsidiary common stock have been
issued by the respective subsidiaries and are guaranteed by the Company.
In the event of a change in control of the Company, as defined in the
related fiscal agency agreement, that has not been approved by the Company's
Board of Directors, each holder of the 4 5/8%, 4 7/8%, and 6 3/4% convertible
debentures issued by the Company will have the right to require the Company to
buy all or part of the holders' debentures, at par value plus accrued interest,
within 50 calendar days after the date of expiration of a specified approval
period. In addition, the obligations convertible into subsidiary common stock
become convertible into common stock of the Company at a conversion price equal
15<PAGE>
to 50% of the price of the Company's common stock prior to the change in
control.
"Nonrecourse tax-exempt obligations" represent obligations issued by the
California Pollution Control Financing Authority, the proceeds of which were
used to finance two alternative-energy facilities (Delano I and Delano II)
located in Delano, California. Delano I was previously leased to a subsidiary of
the Company by a third party owner/lessor and was purchased by the subsidiary in
December 1993. Construction of Delano II was completed in 1993. The obligations
are payable only by the subsidiary that owns the facilities and are not
guaranteed by the Company.
"Tax-exempt obligations" in the accompanying 1993 and 1992 balance sheet
includes $8.5 million and $66 million, respectively, of tax-exempt obligations
issued by the California Pollution Control Financing Authority in October 1991,
the proceeds of which were loaned to the Company to finance the construction of
the Delano II alternative-energy facility. In 1993, $57.5 million of these
obligations were renegotiated and are included in the accompanying 1993 balance
sheet as "Nonrecourse tax-exempt obligations," discussed above. In February
1994, the remaining $8.5 million of these tax-exempt obligations was repaid.
Prior to the renegotiation and repayment, these obligations carried a floating
rate of interest, which varied daily based on short-term, tax-exempt markets.
The interest rate ranged from 2.5% to 6.1% in 1993, and from 2.65% to 6.1% in
1992.
"Tax-exempt obligations" in the accompanying 1993 and 1992 balance sheet
also includes $133.5 million of tax-exempt obligations due 1995 through 2017
issued by the California Pollution Control Financing Authority in January 1992,
the proceeds of which were loaned to the Company to finance the construction of
a waste-recycling facility in San Diego County, California. Of these tax-exempt
bonds, $95 million carry fixed rates of interest ranging from 5.3% to 6.75%, and
$39 million carry a floating rate of interest, which varies weekly based on
short-term, tax-exempt markets. The interest rate ranged from 4.25% to 6.85% in
1993, and from 2.95% to 5.4% in 1992.
The Company capitalized interest expense, net of interest income, incurred
in connection with the construction of the Delano II and San Diego County
facilities discussed above. These amounts were $8.4 million and $7.1 million in
1993 and 1992, respectively.
The annual requirements for long-term obligations and tax-exempt
obligations, are as follows:
Long-term Tax-exempt
(In thousands) Obligations Obligations
- -----------------------------------------------------------------
1994 $ 18,835 $ 8,500
1995 16,287 2,685
1996 19,101 3,369
1997 300,388 2,610
1998 37,663 2,895
1999 and thereafter 274,022 122,010
-------- --------
$666,296 $142,069
======== ========
Certain of the Company's obligations include requirements to maintain
predetermined financial ratios. At January 1, 1994, the Company was in
compliance with these requirements.
Based upon quoted market prices and upon borrowing rates currently
available to the Company for debt of the same remaining maturities, the fair
market value of the Company's long-term obligations, including the Company's
tax-exempt obligations, was approximately $1,040 million and $810 million at
January 1, 1994 and January 2, 1993, respectively.
16<PAGE>
6.Commitments and Contingencies
Litigation
The Company participates in the operation of the Dade County Downtown Government
Center cogeneration facility in Miami, Florida, through a 50/50 joint venture of
subsidiaries of the Company and Rolls-Royce, Inc. Because the demand for power
and chilled water at the Dade County Downtown Government Center complex has been
substantially less than anticipated since the plant's startup in 1987, and
because the Company believes Dade County (the County) has breached its
contractual obligations with respect to the use of power at County facilities
outside the Government Center (affecting plant efficiency), the joint venture
has experienced continuing losses.
The joint venture sells electricity to Dade County pursuant to an energy
purchase contract signed in 1983. The joint venture sells over half of its
actual output to the County and the balance to Florida Power and Light, the
local utility. The joint venture has sued the County in Florida state court,
seeking in excess of $60 million in damages and alleging that the County was in
breach of the energy purchase contract and had misrepresented its demand for
electrical power. The County has asserted counterclaims in excess of $28 million
against the joint venture, the Company, and Rolls-Royce, alleging, among other
things, failure to properly maintain and operate the facility and to use its
best efforts to maximize use of the facility's output. The County has also
asserted that the joint venture is responsible for local property taxes on the
project, totaling approximately $10.5 million to date, which the joint venture
disputes. In May 1993, the County filed a petition with the Florida Public
Service Commission, asserting that the joint venture was engaged in the retail
sale of electricity without complying with rules governing public utilities. The
County has filed a similar motion in the state court case alleging that the
contract was illegal. Trial of the state court action has been delayed while the
County and the joint venture attempt to settle the dispute.
In May 1993, the County brought a parallel proceeding before the Federal
Energy Regulatory Commission (FERC) seeking to terminate the project's
qualifying facility status under the Public Utility Regulatory Policies Act of
1978 (PURPA) for failure to meet certain required efficiency standards at
various times from 1987 to the present. (PURPA generally obligates utilities,
such as Florida Power and Light, to purchase electricity from qualifying
facilities at the utilities' avoided cost and exempts qualifying facilities from
various federal and state regulations, such as the Federal Power Act (FPA).) The
Company believes the project currently meets the efficiency standards and
therefore currently has qualifying facility status. However, on October 21,
1993, FERC issued an order finding that, although the project met the efficiency
standards for 1992, the project did not meet such standards from 1987 through
1991. FERC denied the joint venture's request for a waiver of the efficiency
standards for that period and also directed the joint venture to show cause why
FERC should not find that the joint venture was a public utility for FPA
purposes during that period. If the joint venture is retroactively deemed a
public utility under FPA, FERC could impose refund liabilities and other
penalties to the extent FERC does not find either that the joint venture
complied with relevant FERC regulations or that the regulations should be
waived. The joint venture has been granted a rehearing of the FERC decision and
has asserted various grounds for reversal. The joint venture is also entitled to
appeal FERC's final decision, if necessary. In the rehearing, the County and
Florida Power and Light have argued before FERC that the project did not meet
the efficiency standards for 1992. The County is also using FERC's decision in
an attempt to have the state court declare the energy purchase contract illegal
under Federal law.
The joint venture leases its generating equipment from Florida Energy
Partners Limited Partnership (FEP). If the energy purchase contract were to be
held illegal, FEP could declare a default by the joint venture under the lease
17<PAGE>
with FEP, and the County could be released from its obligation to buy
electricity from the joint venture. In the lease, the joint venture also
covenanted that the project would maintain PURPA qualifying facility status. If
the joint venture is deemed to have breached this covenant, FEP could declare a
default under the lease. In the event of a default, among other things, FEP
could seek to sell or re-lease the equipment and the Company generally would be
liable for one-half of any deficiency between (a) in the event of a sale,
approximately $54 million and the amount realized from the sale or (b) in the
case of re-lease, one-half of the difference between the present value of future
rentals and prepayment penalty under the lease (approximately $42 million) and
the present value of a fair rental value to be collected from a new tenant.
The joint venture's revenues for the year ended January 1, 1994 and the
cumulative period from 1987 through 1991 were $5.0 million and $26.3 million,
respectively. The Company reports its interest in the joint venture's results of
operations using the equity method of accounting. Under this method, the Company
records 50% of the joint venture's loss, but does not report as revenues any of
the joint venture's revenues.
The Company is contingently liable with respect to other lawsuits and
matters that arose in the normal course of business.
In the opinion of management, these contingencies will not have a material
adverse effect upon the financial position of the Company.
Operating Leases
The Company leases portions of its office and operating facilities under various
noncancelable operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $14,718,000 in 1993, $11,231,000 in
1992, and $11,410,000 in 1991. Minimum rental commitments under noncancelable
operating leases at January 1, 1994, are as follows:
(In thousands)
- ----------------------------------------------------------------
1994 $14,314
1995 12,187
1996 7,974
1997 6,129
1998 3,866
1999 and thereafter 7,962
-------
$52,432
=======
7.Employee Benefit Plans
401(k) Savings Plan
The Company's 401(k) savings plan covers the majority of the Company's eligible
full-time U.S. employees. Contributions to the plan are made by both the
employee and the Company. Company contributions are based on the level of
employee contributions. For this plan, the Company contributed and charged to
expense $4,517,000, $3,460,000, and $3,342,000 in 1993, 1992, and 1991,
respectively.
Employee Stock Ownership Plan
The Company's Employee Stock Ownership Plan (ESOP) covers eligible full-time
U.S. employees. The Company borrowed funds from a financial institution and then
loaned these funds to the ESOP to purchase shares of common stock of the Company
and its majority-owned subsidiaries. The loan balance between the Company and
the financial institution was paid off in 1992. The loan between the Company and
the ESOP is still outstanding. The shares purchased are reported as "Deferred
compensation" in the accompanying balance sheet. The Company makes annual
contributions to the ESOP and shares are allocated to plan participants based on
employee compensation. For this plan, the Company charged to expense $1,125,000,
18<PAGE>
$1,103,000, and $1,131,000 in 1993, 1992, and 1991, respectively. These amounts
included interest expense of $228,000 and $590,000 in 1992 and 1991,
respectively.
Employee Stock Purchase Plan
Substantially all of the Company's full-time U.S. employees are eligible to
participate in employee stock purchase plans sponsored by the Company or by the
Company's majority-owned public subsidiaries. Under these plans, shares of the
Company's common stock may be purchased at the end of a 12-month plan year at
85% of the fair market value at the beginning of the plan year, and the shares
purchased are subject to a one-year resale restriction. Prior to November 1993,
the exercise price for the applicable shares was based on 85% of the lower of
the fair market value at the beginning or end of the plan year. Shares are
purchased through payroll deductions of up to 10% of each participating
employee's gross wages. Participants of employee stock purchase plans sponsored
by the Company's majority-owned public subsidiaries may also elect to purchase
shares of the subsidiary by which they are employed. During 1993, 1992, and
1991, the Company issued 125,268 shares, 85,300 shares, and 210,847 shares,
respectively, of its common stock under these plans.
Post-retirement Benefits
Two of the Company's subsidiaries provide post-retirement medical benefits for
employees who meet certain age and length-of-service requirements. As of the
beginning of fiscal 1992, the Company adopted SFAS No. 106, "Accounting for
Post-retirement Benefits Other Than Pensions," which required the Company to
change to the accrual method of accounting for post-retirement medical benefits.
Prior to fiscal 1992, the cost of these benefits was recognized as premiums were
paid, and was not material for 1991.
The Company elected to recognize the cumulative effect of its accumulated
post-retirement benefit obligation in 1992, which resulted in a charge of
$1,438,000, net of tax benefits of $844,000. The annual expense incurred under
SFAS No. 106 for 1993 and 1992 and the related obligations required under this
statement are not material to the Company's financial statements.
Post-employment Benefits
The Company provides certain post-employment benefits to inactive and former
employees. The Company is required to adopt SFAS No. 112, "Employers' Accounting
for Post-employment Benefits," at the beginning of fiscal 1994. SFAS No. 112
requires that the cost of post-employment benefits be recognized at the time the
event prompting payment occurs and a reasonable estimate can be made. Management
believes that the adoption of this statement will not have a material impact on
the Company's financial statements.
8.Income Taxes
As discussed in Note 1, the Company adopted SFAS No. 109 in 1992.
The components of income before income taxes, minority interest, and
cumulative effect of change in accounting principle are as follows:
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Domestic $113,152 $ 83,943 $ 59,970
Foreign 17,967 18,027 19,203
-------- -------- --------
$131,119 $101,970 $ 79,173
======== ======== ========
19<PAGE>
The provision for income taxes consists of the following:
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Currently payable:
Federal $10,270 $12,280 $ 4,445
Foreign 8,643 7,058 4,624
State 5,320 3,923 4,149
------- ------- -------
24,233 23,261 13,218
------- ------- -------
Deferred (prepaid),
net:
Federal 6,821 4,018 9,714
Foreign 931 1,010 1,105
State 1,415 (815) 813
------- ------- -------
9,167 4,213 11,632
------- ------- -------
$33,400 $27,474 $24,850
======= ======= =======
The provision for income taxes that is currently payable does not reflect
$3,354,000 and $7,579,000 of tax benefits allocated to "Capital in excess of par
value" or $2,280,000 and $3,137,000 of tax benefits that reduced "Cost in excess
of acquired companies" in 1993 and 1992, respectively.
The provision for income taxes differs from the provision calculated by
applying the statutory federal income tax rate of 35% in 1993 and 34% in 1992
and 1991 to income before income taxes, minority interest, and cumulative effect
of change in accounting principle due to the following:
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Income tax provision
at statutory rate $ 45,892 $ 34,670 $ 26,919
Increases (decreases)
resulting from:
Gain on issuance of stock by
subsidiaries (13,770) (10,272) (8,639)
State income taxes, net of
federal tax 4,299 2,051 3,267
Tax-exempt and tax-preferred
investment income (1,207) (251) (514)
Investment and research and
development tax credits (6,625) - -
Foreign tax rate and tax
law differential 3,969 1,916 709
Tax benefit of foreign
sales corporation (1,366) (989) -
Minority interest in
partnership (losses) income (1,057) (1,157) 96
Amortization of cost in excess
of net assets of acquired
companies 3,400 1,674 1,455
Nondeductible expenses 1,008 198 1,292
Other, net (1,143) (366) 265
-------- -------- --------
$ 33,400 $ 27,474 $ 24,850
======== ======== ========
20<PAGE>
Deferred income taxes and short- and long-term prepaid income taxes at
year-end 1993 and 1992 consist of the following:
(In thousands) 1993 1992
- ------------------------------------------------------------------------
Deferred income taxes:
Depreciation $38,108 $22,747
Intangible assets 8,214 9,186
Other 2,065 2,238
------- -------
$48,387 $34,171
======= =======
Prepaid income taxes:
Reserves and accruals $29,855 $35,074
Inventory basis difference 10,801 11,555
Capitalized cost and joint
venture equity 7,071 1,259
Accrued compensation 7,653 7,189
Allowance for doubtful accounts 4,108 3,473
Net operating loss carryforwards 5,200 4,419
Federal tax credit carryforwards 3,193 3,640
Other, net 7,270 3,524
------- -------
75,151 70,133
Less: Valuation allowance 20,402 15,756
------- -------
$54,749 $54,377
======= =======
The valuation allowance relates to uncertainty surrounding the realization
of tax loss and credit carryforwards and the realization of tax benefits
attributable to purchase accounting reserves and certain other tax assets of the
Company and certain subsidiaries. Of the year-end 1993 valuation allowance, $9.5
million will be used to reduce "Cost in excess of net assets of acquired
companies" when any portion of the related deferred tax asset is recognized.
The increase in the valuation allowance is primarily attributable to the
establishment of valuation allowances for tax attributes of certain
acquisitions, net of utilization of previously unbenefited tax attributes.
The Company has not recognized a deferred tax liability for the
undistributed earnings of its domestic subsidiaries because the Company does not
expect these earnings to be remitted and become subject to tax. The Company
believes it can implement certain tax strategies to recover its share of all
undistributed earnings of its domestic subsidiaries tax-free.
The Company has not provided deferred taxes on the basis difference in its
investment in public or privately held subsidiaries, resulting primarily from
the issuance of stock by subsidiaries, as the Company intends to maintain its
majority interest in these subsidiaries.
Provision has not been made for U.S. or additional foreign taxes on $73
million of undistributed earnings of foreign subsidiaries that could be subject
to taxation if remitted to the U.S. because the Company plans to keep these
amounts permanently reinvested overseas. The Company believes that any
additional U.S. tax liability due upon remittance of such earnings would be
immaterial due to available U.S. foreign tax credits.
21<PAGE>
9. Transactions in Stock of Subsidiaries
"Gain on issuance of stock by subsidiaries" in the accompanying statement of
income results primarily from the following transactions:
1993
Public offering of 3,225,000 shares of Thermedics common stock at $10.00
per share for net proceeds of $29,980,000 resulted in a gain of $10,707,000.
Public offering of 4,312,500 shares of Thermo Power common stock at $9.00
per share for net proceeds of $35,998,000 resulted in a gain of $10,578,000.
Private placements of 2,062,500 shares of ThermoTrex common stock at $11.17
and $14.50 per share for net proceeds of $27,463,000 resulted in a gain of
$11,400,000.
Private placement of 200,000 shares and initial public offering of
1,100,000 shares of Thermo Remediation at $9.89 and $12.50 per share,
respectively, for net proceeds of $14,554,000 resulted in a gain of $4,239,000.
Conversion of $7,270,000 of Thermedics 6 1/2% subordinated convertible
debentures convertible at $10.42 per share into 697,919 shares of Thermedics
common stock resulted in a gain of $2,506,000.
1992
Private placement of 2,709,356 shares and initial public offering of
3,000,000 shares of Thermo Fibertek common stock at $6.70 to $8.00 per share for
net proceeds of $39,748,000 resulted in a gain of $23,303,000.
Issuance of 1,566,480 restricted shares of ThermoTrex common stock valued
at $6.17 per share, or $9,673,000, to acquire Lorad Corporation resulted in a
gain of $3,081,000.
Private placement of 375,000 shares of ThermoTrex common stock at $10.67
per share for net proceeds of $3,556,000 resulted in a gain of $1,745,000.
1991
Conversion of $9,099,000 of Thermo Instrument 6% and 6 3/4% subordinated
convertible debentures convertible at $12.19 and $10.83 per share, respectively,
into 766,786 shares of Thermo Instrument common stock resulted in a gain of
$3,707,000.
Conversion of $6,200,000 of Thermo Process 6 1/2% subordinated convertible
debentures convertible at $10.33 per share into 600,191 shares of Thermo Process
common stock resulted in a gain of $3,043,000.
Repurchase of $3,700,000 of Thermedics 6 1/2% subordinated convertible
debentures convertible at $10.42 per share for $941,000 in cash and 367,500
shares of Thermedics common stock valued at $7.14 per share, or $2,625,000,
resulted in a gain of $1,010,000.
Private placement of 1,660,197 shares and initial public offering of
2,250,000 shares of ThermoTrex common stock at $5.55 and $8.00 per share,
respectively, for net proceeds of $24,764,000 resulted in a gain of $13,958,000.
Private placement of 1,591,549 shares of common stock of J. Amerika N.V. at
6.00 Dutch guilders per share for net proceeds of $4,573,000 resulted in a gain
of $2,148,000.
Sale of 244,200 shares of Thermo Cardiosystems common stock by Thermedics
at an average price of $8.43 per share for net proceeds of $2,040,000 resulted
in a taxable gain of $1,958,000.
The Company's ownership percentage in these subsidiaries changed primarily
as a result of the transactions listed above, as well as the Company's purchases
of shares of majority-owned subsidiary stock, the subsidiaries' purchases of
their own stock, the sale of subsidiaries' stock by the Company or by the
subsidiaries under employees' and directors' stock plans or in other
transactions, and the conversion of convertible obligations held by the Company,
its subsidiaries, or by third parties.
22<PAGE>
The Company's ownership percentages at year-end were as follows:
1993 1992 1991
- --------------------------------------------------------------
Thermo Instrument 81% 81% 80%
Thermo Fibertek 80% 80% 100%
Thermedics 52% 59% 59%
Thermo Power 52% 81% 81%
ThermoTrex 55% 62% 70%
Thermo Process 72% 71% 71%
Thermo Energy Systems 88% 87% 87%
Thermo Cardiosystems (a) 57% 58% 55%
Thermo Voltek (a) 67% 57% 52%
Thermo Remediation (b) 67% 85% 93%
ThermoLase (c) 81% 100% 100%
(a) Reflects combined ownership by Thermo Electron and Thermedics.
(b) Reflects ownership by Thermo Process.
(c) Reflects ownership by ThermoTrex.
10. Other Income (Expense), Net
The components of "Other income (expense), net" in the accompanying statement of
income are:
(In thousands) 1993 1992 1991
- -----------------------------------------------------------------
Royalty income $ 1,741 $ 1,732 $ 2,341
Interest income 23,883 24,624 22,297
Interest expense (31,643) (24,296) (18,323)
Equity in losses of
unconsolidated
subsidiaries (21,076) (3,948) (1,663)
Gain on sale of
investments 2,469 4,968 7,622
Other income, net 535 416 1,290
-------- -------- --------
$(24,091) $ 3,496 $ 13,564
======== ======== ========
11. Costs Associated with Divisional and Product Restructuring
"Costs associated with divisional and product restructuring" in the accompanying
statement of income resulted from the restructuring of certain of the Company's
operations, the closing of certain facilities, and the phasing out of certain
low-technology products. The 1993 charge to expense primarily represents a
$1,645,000 reserve for the closing of a joint venture operation in the
alternative-energy power plant business, $1,900,000 for the write-off of
machinery and equipment and costs to phase out a product line in the Company's
metal-fabrication services business, a $1,200,000 reserve for restructing at the
Company's steam turbines and compressors business, and $2,660,000 for the
write-off of mobile soil-remediation assets and other related expenses.
The 1991 charge to expense primarily represents a $3,225,000 reserve for
restructuring to effect certain changes in the Company's operations designed to
reduce expenses and $444,000 for the write-down of goodwill associated with the
restructuring of the Company's flotation-dryer business.
23<PAGE>
12. Business Segment and Geographical Information
The Company's business segments include the following:
Instruments: environmental-monitoring and analytical instruments
Alternative-energy Systems: alternative-energy power plants, waste-recycling
facility, industrial refrigeration systems, natural gas engines, cooling and
cogeneration units, turbines and compressors
Process Equipment: paper-recycling equipment, papermaking systems and
accessories, metallurgical processing systems, electroplating equipment
Biomedical Products: biomedical materials, mammography and biopsy systems,
skin-incision devices, blood coagulation-monitoring equipment, left
ventricular-assist devices, neurophysiology monitoring instruments
Services: thermal waste treatment, waste-oil recycling, metallurgical heat
treating and fabrication, laboratory analysis, environmental sciences
Advanced Technologies: explosives- and drug-detectors, product quality
assurance systems, electronic test equipment, power conversion systems,
development of avionics products and medical systems.
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Revenues:
Instruments $ 516,712 $ 349,261 $ 283,612
Alternative-energy Systems 242,662 221,877 180,379
Process Equipment 167,524 160,459 168,812
Biomedical Products 127,533 58,167 28,341
Services 121,987 114,268 112,003
Advanced Technologies 76,304 46,075 34,192
Intersegment Sales
Elimination (a) (3,004) (1,135) (1,855)
---------- ---------- ----------
$1,249,718 $ 948,972 $ 805,484
========== ========== ==========
Segment Income (b):
Instruments $ 91,412 $ 59,758 $ 48,700
Alternative-energy Systems 14,434 1,767 (913)
Process Equipment 13,924 13,891 12,922
Biomedical Products 5,758 1,252 (601)
Services 9,263 8,411 5,189
Advanced Technologies 7,841 1,989 (1,394)
---------- ---------- ----------
Total Segment Income 142,632 87,068 63,903
Equity in Losses of
Unconsolidated Subsidiaries (21,076) (3,948) (1,663)
Corporate (c) 9,563 18,850 16,933
---------- ---------- ----------
Income Before Income Taxes,
Minority Interest, and
Cumulative Effect of Change
in Accounting Principle $ 131,119 $ 101,970 $ 79,173
========== ========== ==========
Identifiable Assets:
Instruments $ 850,688 $ 531,320 $ 444,237
Alternative-energy Systems 593,247 406,515 234,952
Process Equipment 179,251 172,984 141,061
Biomedical Products 285,715 228,781 92,042
Services 146,658 129,656 122,242
Advanced Technologies 169,488 81,409 78,784
Corporate (d) 248,663 267,600 86,173
---------- ---------- ----------
$2,473,710 $1,818,265 $1,199,491
========== ========== ==========
24<PAGE>
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------
Depreciation and Amortization:
Instruments $ 18,059 $ 10,786 $ 8,153
Alternative-energy Systems 4,982 3,511 2,391
Process Equipment 4,277 3,792 3,558
Biomedical Products 5,328 2,922 1,726
Services 6,641 5,845 5,479
Advanced Technologies 1,843 1,277 1,043
Corporate 1,226 1,095 1,041
---------- ---------- ----------
$ 42,356 $ 29,228 $ 23,391
========== ========== ==========
Capital Expenditures:
Instruments $ 6,347 $ 4,650 $ 4,174
Alternative-energy Systems (e) 92,862 38,097 6,034
Process Equipment 2,631 3,721 4,414
Biomedical Products 9,042 2,245 1,792
Services 7,583 8,550 5,773
Advanced Technologies 2,774 1,681 1,006
Corporate 2,241 1,063 10,276
---------- ---------- ----------
$ 123,480 $ 60,007 $ 33,469
========== ========== ==========
Export Sales Included Above (f) $ 219,631 $ 131,755 $ 103,806
========== ========== ==========
Foreign Operations
Included Above:
Revenues:
Europe $ 223,707 $ 198,066 $ 173,350
Other 32,835 22,941 20,894
---------- ---------- ----------
$ 256,542 $ 221,007 $ 194,244
========== ========== ==========
Income Before Income Taxes,
Minority Interest, and
Cumulative Effect of Change
in Accounting Principle:
Europe $ 11,305 $ 17,627 $ 16,362
Other 6,662 400 2,841
---------- ---------- ----------
$ 17,967 $ 18,027 $ 19,203
========== ========== ==========
Identifiable Assets:
Europe $ 299,091 $ 239,431 $ 205,124
Other 41,068 36,877 31,303
---------- ---------- ----------
$ 340,159 $ 276,308 $ 236,427
========== ========== ==========
(a) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(b) Segment income is income before corporate general and administrative
expenses, costs associated with divisional and product restructuring,
other income and expense, minority interest expense, and income taxes.
(c) Includes corporate general and administrative expenses, costs
associated with divisional and product restructuring, other income and
expense, and gain on issuance of stock by subsidiaries.
(d) Primarily cash and cash equivalents, short- and long-term investments,
and property and equipment at the Company's Waltham, Massachusetts,
headquarters.
(e) Includes $88.4 million in 1993 for the purchase of an alternative-energy
facility in Delano, California, and $30.5 million in 1992 for the purchase
of an alternative-energy facility in Whitefield, New Hampshire.
(f) In general, export revenues are denominated in U.S. dollars.
25<PAGE>
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
of Thermo Electron Corporation:
We have audited the accompanying consolidated balance sheet of Thermo
Electron Corporation (a Delaware corporation) and subsidiaries as of January 1,
1994 and January 2, 1993, and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in the
period ended January 1, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Thermo
Electron Corporation and subsidiaries as of January 1, 1994 and January 2, 1993,
and the results of their operations and their cash flows for each of the three
years in the period ended January 1, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the consolidated financial statements, effective
December 29, 1991, the Company changed its method of accounting for
post-retirement benefits other than pensions.
Arthur Andersen & Co.
Boston, Massachusetts
February 17, 1994
26<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company develops and manufactures a broad range of products that are sold
worldwide. The Company expands its products and services by developing and
commercializing its own core technologies and by making strategic acquisitions
of complementary businesses. The majority of the Company's businesses fall into
three broad market segments: environmental, energy, and selected health and
safety instrumentation.
An important component of the Company's strategy is to establish leading
positions in its markets through the application of proprietary technology,
whether developed internally or acquired. A key contribution to the growth of
the Company's segment income (as defined in the results of operations below),
particularly over the last two years, has been the ability to identify
attractive acquisition opportunities, complete those acquisitions, and derive a
growing income contribution from these newly acquired businesses as they are
integrated into the Company's business segments.
The Company seeks to minimize its dependence on any specific product or
market by maintaining and diversifying its portfolio of businesses and
technologies. Similarly, the Company's goal is to maintain a balance in its
businesses between those affected by various regulatory cycles and those more
dependent on the general level of economic activity. To date, the Company's
overall financial performance has been relatively unaffected by the recession in
the U.S. economy in 1991 and 1992 and the general economic weakness in Europe
and Japan in 1992 and 1993. This is due in large part to strong contributions
from newly acquired businesses and the continued strength of businesses
primarily driven by environmental regulation. Although the Company is
diversified in terms of technology, product offerings, and geographic markets
served, the future financial performance of the Company as a whole depends upon,
among other factors, the strength of worldwide economies and the continued
adoption and diligent enforcement of environmental regulations.
The Company believes that maintaining an entrepreneurial atmosphere is
essential to its continued growth and development. In order to preserve this
atmosphere, the Company adopted in 1983 a strategy of spinning out certain of
its businesses into separate subsidiaries and having these subsidiaries sell a
minority interest to outside investors. The Company believes that this strategy
provides additional motivation and incentives for the management of the
subsidiaries through the establishment of subsidiary-level stock option
incentive programs, as well as capital to support the subsidiaries' growth. As a
result of the sale of stock by subsidiaries, the issuance of shares by
subsidiaries upon conversion of indebtedness, and similar transactions, the
Company records gains that represent the increase in the Company's net
investment in the subsidiaries and are classified as "Gain on issuance of stock
by subsidiaries" in the accompanying statement of income. These gains have
represented a substantial portion of the net income reported by the Company in
recent years. Although the Company expects to continue this strategy in the
future, its goal is to continue increasing segment income over the next few
years so that gains generated by sales of stock by its subsidiaries will
represent a decreasing portion of net income. The size and timing of these
transactions are dependent on market and other conditions that are beyond the
Company's control. Accordingly, there can be no assurance that the Company will
be able to generate gains from such transactions in the future.
27<PAGE>
Results of Operations
1993 Compared With 1992
Sales in 1993 were $1,249.7 million, an increase of $300.7 million, or 32%, over
1992. Segment income was $142.6 million, compared with $87.1 million in 1992, an
increase of 64%. (Segment income is income before corporate general and
administrative expenses, costs associated with divisional and product
restructuring, other income and expense, minority interest expense, and income
taxes.)
Sales from the Instruments segment were $516.7 million, an increase of
$167.5 million, or 48%, over 1992. Sales increased approximately $153 million
due to additional revenues from acquired businesses, including Nicolet
Instrument Corporation in August 1992, Gamma-Metrics in January 1993,
Spectra-Physics Analytical in February 1993, and divisions of FAG Kugelfischer
Georg Shafer AG in October 1993. The remainder of the increase was due to
increased demand for products from existing businesses. Segment income margin
(segment income margin is segment income as a percentage of sales) was 17.7%,
compared with 17.1% in 1992. Segment income margin improved principally due to
changes in product mix and continuing efforts to reduce costs.
Sales from the Alternative-energy Systems segment were $242.7 million, an
increase of $20.8 million, or 9%, over 1992. Within this segment, sales from
Thermo Energy Systems Corporation, which consists of revenues from
alternative-energy power plant operations, were $117.7 million, compared with
$104.8 million in 1992. Included in 1993 sales from plant operations is $9.8
million recorded as a result of the termination of a power sales agreement, and
$3.1 million from the one-time sale of gas pipeline rights. The 1992 period
included $2.0 million received in settlement of a dispute over lost development
fees. Excluding the nonrecurring items from both years, revenues from plant
operations increased 2% as a result of annual contractual energy rate increases
under power sales contracts, offset in part by increased utility-imposed
curtailments of power output at two California plants. Construction revenues
from the Delano II alternative-energy facility, which was completed in 1993,
were $10.9 million, compared with $35.8 million in 1992. Sales from Thermo Power
were $77.4 million, compared with $43.9 million in 1992. This increase results
principally from the acquisition of FES, Inc. by Thermo Power in October 1992,
offset in part by slight declines in revenues from the Crusader Engines and
Tecogen divisions. Sales of Peter Brotherhood Ltd. steam turbines and
compressors were slightly below 1992 levels.
Segment income from the Alternative-energy Systems segment was $14.4
million, compared with $1.8 million in 1992. Thermo Energy Systems Corporation
segment income was $13.2 million, compared with $5.7 million in 1992. The 1993
period included $8.6 million of income from the termination of a power sales
agreement and the one-time sale of gas pipeline rights. The 1992 period included
$2.0 million received in settlement of a dispute over lost development fees.
Excluding the nonrecurring items from both years, segment income from Thermo
Energy Systems Corporation was $4.6 million in 1993 and $3.7 million in 1992.
This improvement resulted from lower lease expense, offset in part by
depreciation expense, resulting from the September 1992 purchase of the
Whitefield, New Hampshire, plant and the December 1993 purchase of the Delano I
facility in Delano, California. In addition, segment income from Thermo Energy
Systems Corporation was favorably affected by contractual energy rate increases.
These improvements were partially offset by utility-imposed curtailments of
power output at two California plants, and higher maintenance costs in 1993 to
implement equipment modifications at one California plant, similar to those
completed at another California plant. Post-startup data indicates improvement
in the modified plants' operations. Total curtailments of power output in 1993
were approximately 90% of the maximum allowable curtailments under the Company's
agreements with the utility, compared with less than 10% in 1992. The utility
28<PAGE>
that purchases the output of two of the Company's California plants has the
right to curtail the plants' power output up to 1,000 hours per year during
periods of low demand. The utility commonly experiences low demand following
periods of heavy rain or snow, when hydroelectric power is available. In 1992,
Alternative-energy Systems segment income reflected the establishment of a
reserve of $5.0 million for probable cost overruns on projects under
construction. Segment income at Thermo Power improved principally as a result of
increased revenues at FES and efforts to reduce costs, offset by a decline at
Peter Brotherhood due to lower sales and increased price competition.
In January 1994, one of the Company's alternative-energy facilities
suffered major equipment damage to its turbine-generator, which will interrupt
its operations for approximately six months. The Company expects that the cost
of repairs and lost profits will be substantially reimbursed under the terms of
its business insurance policies.
In 1994, the Company will begin to derive revenues from the operation of
the 22-megawatt Delano II alternative-energy facility, as well as from the
recently completed waste-recycling facility in San Diego County, California.
Sales in the Process Equipment segment were $167.5 million, compared with
$160.5 million in 1992. Within this segment, sales from Thermo Fibertek were
$137.1 million, compared with $125.6 million in 1992. Sales at Thermo Fibertek
increased by $18.6 million as a result of the acquisition of the Engineered
Systems Division (AES) of Albany International Corp. in June 1993, by $9.7
million due to the inclusion for a full year of Vickerys Holdings Limited, which
was acquired in September 1992, and by $4.5 million from the North American
accessories, flotation-dryer, and pollution-control equipment businesses. These
increases were partially offset by a decline in sales of $15.9 million in Thermo
Fibertek's paper-recycling equipment business, which continues to be affected by
the poor financial condition of the paper industry, particularly in Europe, and
by the unfavorable effects of a stronger U.S. dollar upon currency translation,
which decreased sales by approximately $3.7 million. Sales of Holcroft
heat-treating systems, which remain depressed, were $16.1 million, compared with
$15.4 million in 1992. Sales of automated electroplating equipment from the
Company's wholly owned Napco, Inc. subsidiary declined to $14.3 million from
$19.5 million in 1993, due to continuing weak demand. The Process Equipment
segment income margin was 8.3%, compared with 8.7% in 1992. Thermo Fibertek's
segment income margin was 11.6%, compared with 12.5% in 1992. This decline was
primarily due to lower sales of paper-recycling equipment, and to a lesser
extent, competitive pricing pressure experienced by foreign paper-recycling
operations. Segment income improved at Holcroft, resulting from reduced costs,
offset by a decline at Napco. Napco incurred a segment loss of $1.5 million,
compared with income of $0.6 million in 1992, as a result of lower sales,
pricing pressure, and increased costs to complete jobs.
Sales in the Biomedical Products segment were $127.5 million, compared with
$58.2 million in 1992. Sales increased $59.1 million due to the inclusion of
sales, for a full year, from Lorad Corporation, which was acquired by the
Company's ThermoTrex subsidiary in November 1992, and from the acquisition of
Nicolet's biomedical products business as part of the acquisition of Nicolet in
August 1992. Sales also increased $4.2 million from the introduction of
Thermedics' fragrance samplers, which were developed from the Company's polymer
technology, with the balance of the increase primarily from higher demand for
blood coagulation-monitoring products at the Company's wholly owned
International Technidyne Corporation subsidiary. Segment income improved to $5.8
million from $1.3 million in 1992, principally as a result of increased sales.
Sales in the Services segment were $122.0 million, compared with $114.3
million in 1992. Within this segment, sales from soil-remediation services
increased by $8.8 million, primarily as a result of higher production at
regional soil-remediation centers. Sales of metallurgical services declined by
$1.3 million due to continuing weakness in aerospace and defense-related
businesses. Sales from environmental sciences and engineering services were
about the same level as in 1992. Segment income margin improved to 7.6%,
29<PAGE>
compared with 7.4% in 1992, due to an improved sales mix and efforts to reduce
costs.
Sales from the Advanced Technologies segment were $76.3 million, compared
with $46.1 million in 1992. Sales increased $24.4 million due to increased
demand, principally from one customer, for Thermedics' high-speed product
quality assurance system. Sales also increased $7.2 million at Thermo Voltek,
due to the inclusion, for a full year, of revenues from KeyTek Instrument Corp.,
which was acquired in June 1992, and the inclusion of revenues from Comtest
Instrumentation, which was acquired in August 1993. These increases were offset
in part by a decline in sales from a specific contract at Thermo Voltek's
Universal Voltronics division, which was essentially completed in 1993. Segment
income was $7.8 million, compared with $2.0 million in 1992, resulting primarily
from increased sales.
In 1993, the Company recorded $8.3 million of "Costs associated with
divisional and product restructuring," which are described in Note 11 to
Consolidated Financial Statements. Of the $8.3 million, the Alternative-energy
Systems segment recorded $3.2 million, the Process Equipment segment recorded
$0.5 million, and the Services segment recorded $4.6 million. There were no such
costs recorded in 1992. Such amounts were not included in segment income
discussed above.
As a result of the sale of stock by subsidiaries, the issuance of shares by
subsidiaries upon conversion of indebtedness, and similar transactions, the
Company recorded gains of $39.9 million in 1993 and $30.2 million in 1992. Such
gains represent the increase in the Company's proportionate share of the
subsidiaries' equity and are classified as "Gain on issuance of stock by
subsidiaries" in the accompanying statement of income. See Notes 1 and 9 to
Consolidated Financial Statements for a more complete description of these
transactions.
"Other income (expense), net" in the accompanying statement of income
includes equity in losses of unconsolidated subsidiaries, which represents the
Company's portion of results from entities in which the Company's ownership is
50% or less, primarily the operation of the Dade County cogeneration facility.
This plant, which is operated by a 50/50 joint venture of subsidiaries of the
Company and Rolls-Royce, Inc., supplies electricity and chilled water to the
Dade County Downtown Government Center complex in Miami, Florida. The loss for
1993 was $21.1 million, compared with a loss of $3.9 million in 1992, with the
Dade County cogeneration facility accounting for $20.7 million and $3.4 million
of these losses, respectively. The Dade County loss for 1993 includes a
provision of $15.0 million, discussed below. The remaining increase resulted
from higher fuel costs and legal expenses pertaining to the legal actions
described in Note 6 to Consolidated Financial Statements. Because the demand for
power and chilled water at the Dade County Downtown Government Center complex
has been substantially less than anticipated since the plant's startup in 1987,
and because the Company believes that Dade County (the County) has breached its
contractual obligations with respect to the use of power at County facilities
outside the Government Center (affecting plant efficiency), the joint venture
has experienced continuing losses. Although the Company continues to pursue
various alternatives to improve the profitability of this plant, such actions to
date have not been effective, and there is no assurance that this situation will
improve. The Company expects that its share of the future net cash flows of the
joint venture will be less than the carrying amount of its investment and future
obligations under the joint venture agreement, and has therefore established a
reserve in the amount of $15.0 million. This reserve was determined by
discounting to present value the Company's share of estimated future negative
net cash flows of the joint venture, and represents management's estimate of the
probable results. The Company is involved in litigation and regulatory
proceedings with respect to the Dade County project that could require
additional reserves, if the outcome of one or more of these matters is adverse
to the Company (see Note 6 to Consolidated Financial Statements).
30<PAGE>
1992 Compared With 1991
Sales in 1992 were $949.0 million, compared with $805.5 million in 1991. Segment
income was $87.1 million, compared with $63.9 million in 1991.
Sales from the Instruments segment were $349.3 million, an increase of
$65.6 million, or 23%, over 1991. Sales increased $54.9 million due to the
acquisitions of Gas Tech in May 1992 and Nicolet in August 1992. Sales from most
existing businesses also increased in 1992. Segment income margin was 17.1%,
compared with 17.2% in 1991. Improved margins from existing businesses, due to
reduced manufacturing costs, were offset by lower segment income margins at Gas
Tech and Nicolet.
Sales from the Alternative-energy Systems segment were $221.9 million, an
increase of $41.5 million, or 23%, over 1991. Within this segment, sales from
Thermo Energy Systems Corporation increased to $104.8 million from $92.4 million
in 1991. This increase results from higher contractual rates on electricity sold
and increased output at plants in California due to less utility-imposed
curtailments of power output and fewer operating problems during the 1992
period. The 1992 period also included $2.0 million received in settlement of a
dispute over lost development fees with a former joint venture partner.
Construction revenues from the Delano II alternative-energy facility were $35.8
million, compared with $20.1 million in 1991. Sales from Thermo Power were $43.9
million, compared with $29.1 million in 1991. The acquisition of FES by Thermo
Power in October 1992 contributed $10.1 million in revenues. Also, within Thermo
Power, revenues from the Crusader Engines division were $19.2 million, an
increase of $8.1 million from the depressed 1991 level, while sales of Tecogen
packaged-cogeneration units and research services declined 19% to $14.6 million
due to lower demand. Sales of Peter Brotherhood steam turbines and compressors
were at about the same level as in 1991.
Segment income from the Alternative-energy Systems segment was $1.8
million, compared with a loss of $0.9 million in 1991. Thermo Energy Systems
Corporation segment income increased to $5.7 million from $0.5 million in 1991
due to $2.0 million received in settlement of a dispute over lost development
fees; lower lease expense at the Company's alternative-energy plant in
Whitefield, New Hampshire, resulting from the purchase of this plant by the
Company in September 1992; and increased revenues from plant operations. Segment
loss from power plant construction was $5.9 million in 1992, compared with
segment income of $0.9 million in 1991, principally due to the establishment of
a $5.0 million reserve for probable cost overruns on projects under
construction. The comparison is also affected by the inclusion in 1991 segment
income of a net contribution of $2.0 million from the favorable resolution of
reserves established against subcontractor overrun claims on previously
completed projects, offset in part by costs associated with the abandonment of
two projects then under development. Segment income improved at Thermo Power and
Peter Brotherhood principally as a result of increased revenues and efforts to
reduce costs.
Sales in the Process Equipment segment were $160.5 million, compared with
$168.8 million in 1991. Sales of Holcroft heat-treating systems declined $9.7
million reflecting continued low order activity. This decline was offset in part
by the inclusion of $4.8 million in revenues from Vickerys Holdings Limited,
which was acquired by Thermo Fibertek in September 1992. Segment income margin
was 8.7%, compared with 7.7% in 1991. The 1992 improvement resulted primarily
from increased margins at Thermo Fibertek's flotation-dryer and
pollution-control equipment business compared with 1991, which was affected by
unusually high warranty costs, and to a lesser extent, a shift in product mix to
higher-margin paper-recycling equipment.
Sales in the Biomedical Products segment were $58.2 million, compared with
$28.3 million in 1991. Sales increased $23.4 million due to the acquisition of
Nicolet's biomedical products business in August 1992 and the ThermoTrex
acquisition of Lorad in November 1992. Sales also increased due to higher demand
for blood coagulation-monitoring instruments and skin-incision devices at the
Company's International Technidyne Corporation (ITC) subsidiary. Segment income
31<PAGE>
was $1.3 million, compared with a loss of $0.6 million in 1991. This improvement
results principally from increased revenues and improved profitability at ITC.
Sales in the Services segment were $114.3 million, compared with $112.0
million in 1991. Within this segment, sales from soil-remediation services
increased by $7.9 million, primarily as a result of additional regional
soil-remediation centers in operation. Sales of metallurgical services declined
by $4.7 million due to weakness in defense-related business. Sales from
environmental science and analytical laboratory services were down 2% compared
with 1991. Segment income margin improved to 7.4%, compared with 4.6% in 1991,
resulting from a more favorable sales mix and actions taken to reduce costs.
Sales from the Advanced Technologies segment were $46.1 million, compared
with $34.2 million in 1991. Sales increased primarily due to the acquisition of
KeyTek by Thermo Voltek in June 1992, which contributed $6.0 million in sales,
and shipments by Thermedics to a new customer of a high-speed product quality
assurance system introduced in mid-1992. Segment income was $2.0 million,
compared with a loss of $1.4 million in 1991, resulting primarily from increased
sales.
As a result of the sale of stock by subsidiaries, the issuance of shares by
subsidiaries upon conversion of indebtedness, and similar transactions, the
Company recorded gains of $30.2 million in 1992 and $27.4 million in 1991. See
Notes 1 and 9 to Consolidated Financial Statements for a more complete
description of these transactions.
"Other income (expense), net" in the accompanying statement of income
includes equity in losses of unconsolidated subsidiaries. The loss in 1992 was
$3.9 million, compared with a loss of $1.7 million in 1991, with the Dade County
cogeneration plant accounting for $3.4 million and $1.6 million of these losses,
respectively. The loss from the Dade County cogeneration plant increased
principally due to ongoing higher lease costs, and to a lesser extent, higher
fuel and maintenance costs.
The Company recorded gains on sale of investments of $5.0 million in 1992
and $7.6 million in 1991. Such gains are also included in "Other income
(expense), net" in the accompanying statement of income.
Financial Condition
Liquidity and Capital Resources
Consolidated working capital was $828.3 million at January 1, 1994, compared
with $503.4 million at January 2, 1993. Included in working capital were cash
and short-term investments of $700.2 million at January 1, 1994, compared with
$368.7 million at January 2, 1993. In addition, at January 1, 1994, the Company
had $43.6 million of long-term marketable securities, compared with $44.5
million at January 2, 1993. In July 1993, the Company completed a public
offering of 6,750,000 shares of common stock for net proceeds of $246.0 million.
A substantial percentage of the Company's consolidated cash and short-term
investments is held by subsidiaries that are not wholly owned by the Company.
This percentage may vary significantly over time. Pursuant to the Thermo
Electron Corporate Charter (the Charter), to which each of the majority-owned
subsidiaries of the Company is a party, Thermo Electron utilizes the combined
financial resources of Thermo Electron and its subsidiaries to provide banking,
credit, and other financial services to its subsidiaries so that each member of
the Thermo Electron group of companies may benefit from the financial strength
of the entire organization. Toward that end, the Charter states that each member
of the group may be required to provide certain credit support to the
consolidated entity. Nonetheless, the Company's ability to access assets held by
its majority-owned subsidiaries through dividends, loans, or other transactions
is subject in each instance to a fiduciary duty owed to the minority
shareholders of the relevant subsidiary. In addition, dividends received by
Thermo Electron from a subsidiary that does not consolidate with Thermo Electron
32<PAGE>
for tax purposes are subject to tax. Therefore, under certain circumstances, a
portion of the Company's consolidated cash and short-term investments may not be
readily available to Thermo Electron or certain of its subsidiaries.
The Company intends for the foreseeable future to maintain at least 80%
ownership of its Thermo Instrument and Thermo Fibertek subsidiaries, which is
required in order to continue to file a consolidated federal income tax return
with these subsidiaries. In addition, the Company intends to maintain greater
than 50% ownership of its other majority-owned subsidiaries so that the Company
may continue to consolidate with these subsidiaries for financial reporting
purposes. This may require the purchase by the Company of additional shares or
convertible debentures of these companies from time to time as the number of
outstanding shares issued by these companies increases, either in the open
market or directly from the subsidiaries, at prevailing market prices. See Note
5 to Consolidated Financial Statements for a description of outstanding
convertible debentures issued by Thermo Instrument. In addition, at January 1,
1994, Thermo Instrument and Thermo Fibertek had outstanding stock options of
1,894,000 and 1,691,000 shares, respectively, exercisable at various prices and
subject to certain vesting schedules. The Company's other majority-owned
subsidiaries also have outstanding stock options and/or convertible debentures.
If the Company were to lose its ability to consolidate for tax purposes with
Thermo Instrument and/or Thermo Fibertek, the Company would incur an additional
tax liability, which could be substantial.
In 1993, the Company expended $143.0 million, net of cash acquired, for
acquisitions (see Note 2 to Consolidated Financial Statements) and $56.6 million
for purchases of property, plant and equipment. The Company has signed an
agreement to purchase several businesses within the EnviroTech Measurements &
Controls group of Baker Hughes Incorporated for approximately $134 million,
subject to regulatory approvals and other closing conditions. In August 1993,
the Company's Peter Brotherhood subsidiary finalized an agreement with a United
Kingdom-based company to sell its present 11.6 acre facility in Peterborough,
England, for 12.0 million British pounds sterling (approximately $17.8 million
at current exchange rates). The first payment, for approximately 25% of the
selling price, is expected in early 1994, with final payment before the end of
1994. Peter Brotherhood will use the proceeds from the sale to construct a new
and more efficient facility within the Peterborough area. In early 1994, the
Company completed construction of a waste-recycling facility in San Diego
County, California. In the event that this facility is not sold to a third
party, the Company is obligated to contribute $15.0 million of equity to the
project. The project is also subject to $133.5 million of tax-exempt
obligations, included in the accompanying balance sheet, which would be assumed
by any purchaser. The Company has no material commitments for purchases of
property, plant and equipment and expects that, for 1994, such expenditures will
approximate the 1993 level.
During 1993, the Company and its majority-owned subsidiaries expended $57.2
million to purchase common stock of the Company and its subsidiaries. The
Company expects that these purchases will continue in 1994.
Pending Accounting Changes
The Company is required to adopt Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for Post-employment Benefits,"
and SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," at the beginning of fiscal 1994. Management does not expect that
SFAS No. 112 will have a material adverse effect on its results of operations.
Management believes that the adoption of SFAS No. 115 will result in a
cumulative effect of a change in accounting principle adjustment to
shareholders' investment of approximately $2.6 million.
33<PAGE>
Information as to Publicly Owned Businesses (Unaudited)
(In thousands) 1993 1992 1991
- ------------------------------------------------------------------------------
Revenues:
Thermo Instrument Systems Inc. $ 584,176 $ 423,199 $ 338,747
Thermo Fibertek Inc. 137,088 125,577 124,731
Thermedics Inc. (a) 80,220 45,778 32,295
Thermo Power Corporation 77,360 43,904 29,131
ThermoTrex Corporation 54,329 19,843 16,801
Thermo Process Systems Inc. (b) 53,839 47,082 50,632
---------- ---------- ----------
987,012 705,383 592,337
Wholly and majority-owned
nonpublic companies 262,706 243,589 213,147
---------- ---------- ----------
$1,249,718 $ 948,972 $ 805,484
========== ========== ==========
Segment Income (c):
Thermo Instrument Systems Inc. $ 96,786 $ 63,373 $ 49,742
Thermo Fibertek Inc. 15,902 15,716 14,652
Thermedics Inc. (a) 8,292 841 (3,048)
Thermo Power Corporation 2,707 715 (3,158)
ThermoTrex Corporation 485 (1,185) (113)
Thermo Process Systems Inc. (b) 1,338 371 (1,487)
---------- ---------- ----------
125,510 79,831 56,588
Wholly and majority-owned
nonpublic companies 17,122 7,237 7,315
---------- ---------- ----------
142,632 87,068 63,903
Equity in Losses of
Unconsolidated Subsidiaries (21,076) (3,948) (1,663)
Corporate 9,563 18,850 16,933
---------- ---------- ----------
Income Before Income Taxes,
Minority Interest, and
Cumulative Effect of Change
in Accounting Principle $ 131,119 $ 101,970 $ 79,173
========== ========== ==========
(a) Includes Thermo Cardiosystems Inc. and Thermo Voltek Corp.
(b) Includes Thermo Remediation Inc.
(c) Segment income is income before corporate general and administrative
expenses, costs associated with divisional and product restructuring,
other income and expense, minority interest expense, and income taxes.
34<PAGE>
Quarterly Information (Unaudited)
(In thousands except per share amounts)
1993(a) First(b) Second Third Fourth
- ------------------------------------------------------------------------------
Revenues $292,763 $300,449 $318,380 $338,126
Gross profit 104,781 110,071 124,832 134,106
Net income 15,448 17,606 20,923 22,656
Earning per share:
Primary 0.38 0.43 0.45 0.48
Fully diluted 0.34 0.39 0.40 0.43
1992(c) First(d) Second Third(e) Fourth
- ------------------------------------------------------------------------------
Revenues $204,385 $210,065 $242,918 $291,604
Gross profit 61,758 70,119 88,726 99,968
Income before
cumulative effect
of change in
accounting
principle 12,634 13,904 15,516 18,540
Net income 11,196 13,904 15,516 18,540
Earnings per share
before cumulative
effect of change in
accounting
principle:
Primary 0.32 0.35 0.39 0.46
Fully diluted 0.31 0.33 0.35 0.41
Earnings per share:
Primary 0.28 0.35 0.39 0.46
Fully diluted 0.27 0.33 0.35 0.41
- ------------------------------------------------------------------------------
(a) Results include pre-tax gains of $11,101,000, $10,617,000, $3,461,000, and
$14,684,000 in the first, second, third, and fourth quarters,
respectively, from the issuance of stock by subsidiaries.
(b) Results reflect the February 1993 acquisition of Spectra-Physics
Analytical.
(c) Results include pre-tax gains of $8,251,000, $5,076,000, $3,876,000, and
$13,009,000 in the first, second, third, and fourth quarters,
respectively, from the issuance of stock by subsidiaries.
(d) The first quarter of 1992 was restated to reflect the adoption of
Statement of Financial Accounting Standards No. 106, "Accounting for
Post-retirement Benefits Other Than Pensions."
(e) Results reflect the August 1992 acquisition of Nicolet Instrument
Corporation.
35<PAGE>
Common Stock Market Information
The following table shows the market range for the Company's common stock based
on reported sales prices on the New York Stock Exchange (symbol TMO) for 1993
and 1992. Prices have been restated to reflect a three-for-two stock split
distributed in October 1993.
1993 1992
--------------------- ---------------------
Quarter High Low High Low
- ---------------------------------------------------------------
First $38 $31 1/3 $31 2/3 $26 1/4
Second 41 1/6 36 1/3 29 1/12 25 1/6
Third 43 1/4 37 1/4 28 1/3 25
Fourth 43 38 1/8 31 1/2 26 1/2
The closing market price on the New York Stock Exchange for the Company's
common stock on February 25, 1994, was $39 1/2 per share.
As of February 25, 1994, the Company had 6,406 holders of record of its
common stock. This does not include holdings in street or nominee names.
Common stock of the following majority-owned public subsidiaries is traded
on the American Stock Exchange: Thermedics Inc. (TMD), Thermo Instrument Systems
Inc. (THI), Thermo Power Corporation (THP), Thermo Process Systems Inc. (TPI),
Thermo Cardiosystems Inc. (TCA), Thermo Voltek Corp. (TVL), ThermoTrex
Corporation (TKN), Thermo Fibertek Inc. (TFT), and Thermo Remediation Inc.
(THN).
Dividend Policy
The Company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use earnings
to finance expansion and growth. Payment of dividends will rest within the
discretion of the Board of Directors and will depend upon, among other factors,
the Company's earnings, capital requirements, and financial condition.
Transfer Agent and Common Stock Registrar
The Bank of Boston is the stock transfer agent and maintains shareholder
accounting records. The agent will respond to questions on issuances of stock
certificates, changes of ownership, lost stock certificates, and changes of
address. For these and similar matters, please direct inquiries to:
The Bank of Boston
Post Office Box 644
Mail Stop: 45-02-09
Boston, Massachusetts 02102-0644
(617) 575-2900
Shareholder Services
Shareholders of Thermo Electron Corporation who desire information about the
Company are invited to contact John N. Hatsopoulos, Chief Financial Officer,
Thermo Electron Corporation, 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046, by letter or telephone at (617) 622-1111.
A mailing list is maintained to enable shareholders whose stock is held in
street name, and other interested individuals, to receive quarterly and annual
reports as quickly as possible. If you would like your name added to the list,
please notify this office.
36<PAGE>
Annual Meeting
The annual meeting of shareholders will be held on Tuesday, May 24, 1994, at
5:30 p.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina.
Form 10-K Report
A copy of the Annual Report on Form 10-K for the fiscal year ended January 1,
1994, as filed with the Securities and Exchange Commission, may be obtained
without charge by writing to John N. Hatsopoulos, Chief Financial Officer,
Thermo Electron Corporation, 81 Wyman Street, P.O. Box 9046, Waltham,
Massachusetts 02254-9046.
37<PAGE>
<TABLE>
Ten Year Financial Summary
(In millions except per share amounts)
<CAPTION>
1993(a) 1992(b) 1991(c) 1990(d) 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $1,249.7 $949.0 $805.5 $720.7 $623.0 $540.7 $419.9 $359.1 $286.2 $253.3
Costs and Expenses:
Cost of revenues 755.5 609.0 533.6 465.3 424.2 359.6 280.3 244.8 194.9 172.6
Expenses for R&D
and new lines
of business 87.0 62.3 52.6 54.0 46.4 43.2 31.4 26.5 21.5 21.6
Selling, general and
administrative
expenses 283.6 209.4 177.3 163.1 130.0 113.7 91.5 72.7 56.9 48.2
Costs associated
with divisional
and product
restructuring 8.3 - 3.7 1.0 2.2 0.9 3.5 7.1 4.3 0.1
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
1,134.4 880.7 767.2 683.4 602.8 517.4 406.7 351.1 277.6 242.5
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Gain on Issuance
of Stock by
Subsidiaries 39.9 30.2 27.4 20.3 16.8 6.0 16.1 15.9 9.1 -
Other Income
(Expense), Net (24.1) 3.5 13.5 2.3 3.3 4.5 (0.6) (3.3) (4.7) (5.1)
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Income Before
Income Taxes,
Minority Interest,
and Cumulative
Effect of Change
in Accounting
Principle 131.1 102.0 79.2 59.9 40.3 33.8 28.7 20.6 13.0 5.7
Provision for
Income Taxes 33.4 27.5 24.8 17.8 10.4 9.0 6.0 4.0 2.5 0.1
38<PAGE>
Ten Year Financial Summary (continued)
(In millions except per share amounts)
1993(a) 1992(b) 1991(c) 1990(d) 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------
Minority Interest
Expense $ 21.1 $ 13.9 $ 7.3 $ 7.1 $ 3.3 $ 2.0 $ 1.9 $ 0.5 $ (0.1) $ (0.1)
-------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Income Before
Cumulative Effect
of Change in
Accounting
Principle 76.6 60.6 47.1 35.0 26.6 22.8 20.8 16.1 10.6 5.7
Cumulative Effect
of Change in
Accounting
Principle, Net
of Tax (e) - 1.4 - - - - - - - -
--------- ------- ------- ------- ------- ------- ------- ------- ------- ------
Net Income $ 76.6 $ 59.2 $ 47.1 $ 35.0 $ 26.6 $ 22.8 $ 20.8 $ 16.1 $ 10.6 $ 5.7
========= ======= ======= ======= ======= ======= ======= ======= ======= ======
Earnings per Share
Before Cumulative
Effect of Change
in Accounting
Principle:
Primary $ 1.75 $ 1.51 $ 1.31 $ 1.09 $ 0.86 $ 0.77 $ 0.68 $ 0.55 $ 0.42 $ 0.24
Fully diluted $ 1.57 $ 1.41 $ 1.23 $ 1.03 $ 0.84 $ 0.75 $ 0.67 $ 0.54 $ 0.41 $ 0.23
Earnings per Share:
Primary $ 1.75 $ 1.48 $ 1.31 $ 1.09 $ 0.86 $ 0.77 $ 0.68 $ 0.55 $ 0.42 $ 0.24
Fully diluted $ 1.57 $ 1.38 $ 1.23 $ 1.03 $ 0.84 $ 0.75 $ 0.67 $ 0.54 $ 0.41 $ 0.23
Balance Sheet Data:
Working capital $ 828.3 $ 503.4 $ 463.5 $ 241.4 $ 276.0 $ 218.8 $ 210.9 $ 124.3 $ 79.1 $ 51.3
Total assets 2,473.7 1,818.3 1,199.5 904.4 664.1 524.4 460.8 332.6 240.9 208.0
39<PAGE>
Ten Year Financial Summary (continued)
(In millions)
1993(a) 1992(b) 1991(c) 1990(d) 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------
Net assets
related to
construction
projects $ 9.4 $ 23.8 $ 29.4 $ - $ - $ - $ - $ - $ - $ -
Long-term
obligations 647.5 494.2 255.0 210.0 176.9 152.7 135.7 61.4 49.1 47.5
Minority Interest 277.7 164.3 122.5 83.9 51.8 22.6 25.8 20.1 6.6 1.3
Common stock of
subsidiaries
subject to
redemption 14.5 5.5 5.5 8.7 13.1 - - - - -
Shareholders'
investment 858.5 552.9 480.9 310.2 226.4 194.3 173.5 153.1 106.7 87.8
<FN>
(a) Reflects the February 1993 acquisition of Spectra-Physics Analytical and the Company's 1993 public
offering of common stock for net proceeds of $246.0 million.
(b) Reflects the August 1992 acquisition of Nicolet Instrument Corporation and the issuance of $260.0
million principal amount of convertible debentures.
(c) Reflects the issuance of $164.0 million principal amount of convertible debentures.
(d) Reflects the May 1990 acquisition of Finnigan Corporation.
(e) Reflects the adoption in fiscal 1992 of Statement of Financial Accounting Standards No. 106,
"Accounting for Post-retirement Benefits Other Than Pensions".
</TABLE>
40<PAGE>
Exhibit 21
Subsidiaries of the Registrant
At March 8, 1994, Thermo Electron owned the following companies:
STATE OR PERCENT
JURISDICTION OF
OF OWNER-
NAME INCORPORATION SHIP
- -------------------------------------------------------------------------------
Napco Europe Limited United Kingdom 100
Nicolet Biomedical Inc. California 100
Eden Medical Electronics, Inc. Delaware 100
Eden Medizinische Elektronik GmbH Germany 100
Neuroscience Limited United Kingdom 100
Peter Brotherhood Holdings Ltd. United Kingdom 100
Peter Brotherhood Limited United Kingdom 100
D.S.T. Pattern & Engineering Co. Ltd. United Kingdom 100
FES International Limited United Kingdom 100
Link Control Technology Ltd. United Kingdom 100
Machtech Ltd. United Kingdom 100
Peter Brotherhood Pension Fund Trustees Ltd. United Kingdom 100
Sensonics Ltd. United Kingdom 100
Thermo Electron Realty Limited United Kingdom 100
Thermo Holdings Limited United Kingdom 100
Brotherhood Environmental Engineering Services United Kingdom 100
Limited
Termo Electron, S.A. de C.V. Mexico 100
The Thermo Electron Companies Inc. Wisconsin 100
Bay State Wood Energy Company, Inc. Massachusetts 100
Delano Biomass Energy Company, Inc. California 100
Gulf Precision, Inc. Arizona 100
Seeley Enterprises, Inc. New Mexico 100
International Technidyne Corporation Delaware 100
Loftus Furnace Company Pennsylvania 100
Medway Recycling Company, Inc. Massachusetts 100
Metal Treating Inc. Wisconsin 100
Methuen Steam Company, Inc. Massachusetts 100
Met-Therm, Inc. Ohio 100
NAPCO, Inc. Connecticut 100
New Hampshire Wood Energy Co., Inc. New Hampshire 100
Nicolet Instrument of California Inc. California 100
North Carbondale Minerals, Inc. California 100
North County Recycling, Inc. California 100
Overly, Inc. Wisconsin 100
Perfection Heat Treating Company Michigan 100
Salem Steam Company, Inc. Massachusetts 100
San Marcos Resource Recovery, Inc. California 100
Seminole Energy Company Florida 100
Southern Ocean County Resource Recovery, Inc. New Jersey 100
Staten Island Cogeneration, Inc. New York 100
TE Energy Systems, Inc. Massachusetts 100
TEC Cogeneration Inc. Florida 100
South Florida Cogeneration Associates Florida 50*
TEC Energy Corporation California 100
North County Resource Recovery Associates California 50*
(50% of which shares are owned directly by
San Marcos Resource Recovery, Inc.)
Tecomet Inc. Massachusetts 100
TECOMP Inc. Michigan 100
Page 1<PAGE>
Exhibit 21
Subsidiaries of the Registrant
At March 8, 1994, Thermo Electron owned the following companies:
STATE OR PERCENT
JURISDICTION OF
OF OWNER-
NAME INCORPORATION SHIP
- -------------------------------------------------------------------------------
Thermedics Inc. Massachusetts 52**
Corpak Inc. Massachusetts 100
Walpak Company Illinois 100
Thermedics Detection Inc. Massachusetts 100
ThermedeTec Corporation Delaware 100
Thermedics Detection de Mexico, S.A. de C.V. Mexico 100
Thermedics Detection GmbH Germany 100
Thermedics Detection Limited United Kingdom 100
Thermedics Detection Scandinavia AS Norway 100
Thermedics F. S. C. Inc. U. S. Virgin 100
Islands
TMD Securities Corporation Massachusetts 100
Thermo Cardiosystems Inc. Massachusetts 54**
TCA Securities Corporation Massachusetts 100
Thermo Voltek Corp. Delaware 53**
KeyTek Instrument Corp. Massachusetts 100
Residu Pensioen B.V. Netherlands 100
Comtest Instrumentation, B.V. Netherlands 100
Comtest Limited United Kingdom 100
KeyTek FSC, Ltd. U.S. Virgin 100
Islands
UVC Realty Corp. New York 100
Thermo Administrative Services Corporation Delaware 100
Thermo Electron of Conway, Inc. New Hampshire 100
Thermo Electron Foundation, Inc. Massachusetts 100
Thermo Electron Metallurgical Services, Inc. Texas 100
Thermo Energy Systems Corporation Delaware 88**
Coos Biomass Corporation California 100
Delano Energy Company Inc. Delaware 100
Delano Operations Company, Inc. California 100
SFS Corporation New Hampshire 100
TES Securities Corporation Delaware 100
Thermendota, Inc. California 100
Mendota Biomass Power, Ltd. California 60*
California Agriwaste Corporation California 100
Golden Fuel Company California 50*
MBPL Agriwaste Corporation California 100
Thermo Central Florida Corporation Delaware 100
Thermo Electron of Maine, Inc. Maine 100
Gorbell/Thermo Electron Power Company Maine 80*
Thermo Electron of New Hampshire, Inc. New Hampshire 100
Hemphill Power and Light Company New Hampshire 66*
Thermo Electron of Whitefield, Inc. New Hampshire 100
Whitefield Power and Light Company New Hampshire 61*
(39% of which shares are owned
directly by SFS Corporation)
Thermo Fuels Company, Inc. California 100
Woodland Biomass Power, Inc. California 100
Woodland Biomass Power, Ltd. California 99*
Thermo Fibertek Inc. Delaware 80**
AES Equipos y Sistemas S.A. de C.V. Mexico 100
Page 2<PAGE>
Exhibit 21
Subsidiaries of the Registrant
At March 8, 1994, Thermo Electron owned the following companies:
STATE OR PERCENT
JURISDICTION OF
OF OWNER-
NAME INCORPORATION SHIP
- -------------------------------------------------------------------------------
Thermo AES Canada Inc. Canada 100
Thermo Electron Web Systems, Inc. Massachusetts 100
Fiberprep Inc. Delaware 51
(17% of which shares are owned
directly by E. & M. Lamort, S.A.)
Fiberprep Securities Corporation Delaware 100
Thermo Electron Wisconsin, Inc. Wisconsin 100
TMO Lamort Holdings Inc. Delaware 100
E. & M. Lamort, S.A. France 100
Lamort GmbH Germany 85
Lamort Italia S.R.L. Italy 90
Lamort Paper Services Ltd. United Kingdom 85
Nordiska Lamort Lodding A.B. Sweden 100
Vickerys Holdings Limited United Kingdom 100
Vickerys Limited United Kingdom 100
Chinell Fabricators Limited United Kingdom 100
Paperliners Limited New Zealand 100
Vickerys Projects Limited United Kingdom 100
Winterburn Limited United Kingdom 100
Thermo Instrument Systems Inc. Delaware 81**
Analytical Instrument Development, Inc. Pennsylvania 100
Eberline Instrument Company Limited United Kingdom 100
Eberline Instrument Corporation New Mexico 100
Finnigan Corporation Virginia 100
Finnigan Instruments, Inc. New York 100
Finnigan International Sales, Inc. California 100
Finnigan MAT China, Inc. California 100
Finnigan MAT (Delaware), Inc. Delaware 100
Finnigan MAT Instruments, Inc. Nevada 100
Finnigan MAT International Sales, Inc. California 100
Finnigan MAT (Nevada), Inc. Nevada 100
Finnigan MAT AG Switzerland 100
Finnigan MAT Canada, Ltd. Canada 100
Finnigan MAT GmbH Germany 100
Finnigan MAT Ltd. United Kingdom 100
Finnigan MAT AB Sweden 100
Finnigan MAT S.A.R.L. France 100
Finnigan MAT S.R.L. Italy 100
Thermo Separation Products S.R.L. Italy 100
Thermo Instruments Australia Pty. Limited Australia 100
Finnigan Properties, Inc. California 100
Gamma-Metrics California 100
Gamma-Metrics International F.S.C. Inc. Guam 100
Gas Tech Inc. California 100
Gas Tech Australia, Pty. Ltd. Australia 50
Gas Tech Partnership California 50*
Gastech Instruments Canada Ltd. Canada 100
Imaging Systems International, Incorporated Wisconsin 100
National Nuclear Corporation California 100
Nicolet Instrument Corporation Wisconsin 100
Nicolet Instrument Canada, Inc. Canada 100
Page 3<PAGE>
Exhibit 21
Subsidiaries of the Registrant
At March 8, 1994, Thermo Electron owned the following companies:
STATE OR PERCENT
JURISDICTION OF
OF OWNER-
NAME INCORPORATION SHIP
- -------------------------------------------------------------------------------
Nicolet Instrument GmbH Germany 100
Nicolet Instrument Limited United Kingdom 100
Nicolet Instrument S.A.R.L. France 100
Nicolet Japan K.K. Japan 100
Project Phoenix of Madison, Inc. Wisconsin 100
Spectra-Tech, Europe Limited United Kingdom 100
Spectra-Tech, Inc. Wisconsin 100
Thermo Environmental Corporation Massachusetts 100
TEV Administrative Services Corporation Delaware 100
Thermo Analytical Inc. Massachusetts 100
Eberline Analytical Corporation New Mexico 100
Skinner & Sherman, Inc. Massachusetts 100
Skinner & Sherman Laboratories, Inc. Massachusetts 100
Skinner & Sherman Technology, Inc. Massachusetts 100
TMA/NORCAL Inc. California 100
Thermo Water Management Inc. Delaware 100
Bettigole Andrews & Clark, Inc. New York 100
N.H. Bettigole Co., Inc. Delaware 100
N.H. Bettigole, P.A. New Jersey 100
N.H. Bettigole, P.C. New York 100
Fellows, Read & Associates, Inc. New Jersey 100
Normandeau Associates, Inc. New Hampshire 100
Thermo Consulting Engineers Inc. Delaware 100
George A. Schock & Associates, Inc. New Jersey 100
Jennison Engineering, Inc. Vermont 100
Thermo Environmental Instruments Inc. California 100
MIE Acquisition, Inc. Massachusetts 100
Thermo Instrument Controls Inc. Delaware 100
Thermo Instrument Systems Japan Holdings, Inc. Delaware 100
Nippon Jarrell-Ash Company, Ltd. Japan 100
Thermo Instruments F.S.C. Inc. U.S. Virgin 100
Islands
Thermo Jarrell Ash Corporation Massachusetts 100
Scientific Measurement Systems Inc. Colorado 100
Thermo Instrument Systems (F.E.) Limited China 100
Thermo Instruments (Canada) Inc. Canada 100
Eberline Instruments (Canada) Ltd. Canada 100
Thermo Separation Products AG Switzerland 100
Thermo Separation Products Inc. Delaware 100
Thermo Instrument Systems (France) S.A. France 100
Thermo Separation Products S.A. France 100
Thermo Instrument Systems K.K. Japan 100
Van Hengel Holding B.V. Netherlands 100
Thermo Electron Limited United Kingdom 100
Planweld Limited United Kingdom 100
Hilger Analytical Limited United Kingdom 100
Thermo Instrument Systems B.V. Netherlands 100
Thermo Automation Services (ThAS) B.V. Netherlands 100
Thermo Instrument Systems GmbH Germany 100
Thermo Separation Products GmbH Germany 100
Thermo Jarrell Ash (Europe) B.V. Netherlands 100
Page 4<PAGE>
Exhibit 21
Subsidiaries of the Registrant
At March 8, 1994, Thermo Electron owned the following companies:
STATE OR PERCENT
JURISDICTION OF
OF OWNER-
NAME INCORPORATION SHIP
- -------------------------------------------------------------------------------
Thermo Jarrell Ash, S.A. Spain 100
Thermo Separation Products B.V. Netherlands 100
Thermo Separation Products B.V. B.A. Belgium 100
Thermo Power Corporation Massachusetts 52**
Takepine Limited United Kingdom 100
Tecogen Securities Corporation Massachusetts 100
Thermo Process Systems Inc. Delaware 72**
Beheersmaatschappij J. Amerika N.V. Netherlands 71
Amerika Tankinstallaties B.V. Netherlands 100
High-Tech Trouble-Shooters B.V. Netherlands 100
Jac. Amerika en Zonen B.V. Netherlands 100
Holcroft (Canada) Limited Canada 100
Holcroft Corporation Delaware 100
Holcroft GmbH Germany 100
Terra Tech Labs, Inc. Delaware 100
Thermo Incineration Inc. Michigan 100
Thermo Process Services Inc. Delaware 100
Cal-Doran Metallurgical Services, Inc. California 100
Thermo Process Services Midwest Inc. Delaware 100
Metallurgical, Inc. Minnesota 100
Thermo Remediation Inc. Delaware 67**
TPST Soil Recyclers of Florida Inc. Delaware 100
TPST Soil Recyclers of Oregon Inc. Oregon 100
TPST Soil Recyclers of South Carolina Inc. Delaware 100
TPST Soil Recyclers of Virginia Inc. Delaware 100
Thermo Fluids Inc. Delaware 100
Thermo Securities Corporation Delaware 100
Thermo Soil Recyclers Inc. Massachusetts 100
Thermo Technology Ventures Inc. Idaho 100
Plasma Quench Investment Limited Partnership Delaware 60*
ThermoTrex Corporation Delaware 55**
LORAD Corporation Connecticut 100
ThermoLase Inc. Delaware 81**
CBI Laboratories, Inc. Texas 100
ThermoTrex East Inc. Massachusetts 100
TMO, Inc. Massachusetts 100
TMOI Inc. Delaware 100
Thermo Electron F. S. C. Inc. U. S. Virgin 100
Islands
Thermo Electron (London) Ltd. United Kingdom 50
Thermo Electron (UK) Limited United Kingdom 100
* Joint Venture/Partnership
** As of 1/1/94
Page 5<PAGE>
Exhibit 23
Consent of Independent Public Accountants
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated February 17, 1994 included in or incorporated by
reference into Thermo Electron Corporation's Annual Report on Form 10-K for the
year ended January 1, 1994 into the Company's previously filed Registration
Statement No. 33-00182 on Form S-8, Registration Statement No. 33-8993 on Form
S-8, Registration Statement No. 33-8973 on Form S-8, Registration Statement No.
33-16460 on Form S-8, Registration Statement No. 33-16466 on Form S-8,
Registration Statement No. 33-25052 on Form S-8, Registration Statement No.
33-37865 on Form S-8, Registration Statement No. 33-37867 on Form S-8,
Registration Statement No. 33-36223 on Form S-8, Registration Statement No.
33-52826 on Form S-8, Registration Statement No. 33-52804 on Form S-8,
Registration Statement No. 33-52806 on Form S-8, Registration Statement No.
33-52800 on Form S-8, Registration Statement No. 33-37868 on Form S-3,
Registration Statement No. 33-35657 on Form S-3, Registration Statement No.
33-34752 on Form S-3, Registration Statement No. 33-39434 on Form S-3,
Registration Statement No. 33-12748 on Form S-3, Registration Statement No.
33-39773 on Form S-3, Registration Statement No. 33-40669 on Form S-3,
Registration Statement No. 33-41256 on Form S-3, Registration Statement No.
33-42694 on Form S-3, Registration Statement No. 33-43706 on Form S-3,
Registration Statement No. 33-45401 on Form S-3, Registration Statement No.
33-45603 on Form S-3, and Registration Statement No. 33-50924 on Form S-3.
Arthur Andersen & Co.
Boston, Massachusetts
March 9, 1994
