<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 2000
REGISTRATION NO. 333-90661
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
THERMO ELECTRON CORPORATION
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3569 04-2209186
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer
of Incorporation or Industrial Classification Identification No.)
Organization) Code Number)
</TABLE>
81 WYMAN STREET
WALTHAM, MASSACHUSETTS 02454-9046
(781) 622-1000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
SANDRA L. LAMBERT, SECRETARY
THERMO ELECTRON CORPORATION
81 WYMAN STREET
WALTHAM, MASSACHUSETTS 02454-9046
(781) 622-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
SETH H. HOOGASIAN, ESQ. WILLIAM P. GELNAW, JR., P.C.
GENERAL COUNSEL CHOATE, HALL & STEWART
THERMO ELECTRON CORPORATION EXCHANGE PLACE
81 WYMAN STREET 53 STATE STREET
WALTHAM, MASSACHUSETTS 02454-9046 BOSTON, MASSACHUSETTS 02109
(781) 622-1000 (617) 248-5000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective time of the Registration Statement and as soon
as certain other conditions under the Agreement and Plan of Merger, dated as of
October 19, 1999, among Thermo Electron Corporation, TTT Acquisition
Corporation, and Thermo TerraTech Inc., attached as Appendix A to the Proxy
Statement-Prospectus forming a part of this Registration Statement as described
herein, are met or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED PROPOSED MAXIMUM
OF SECURITIES AMOUNT MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED TO BE REGISTERED(1) PRICE PER SHARE PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per
share(3).................................. 1,800,000 Not Applicable $32,347,514.06 $8,540
</TABLE>
(1) Represents the maximum number of shares of common stock of Thermo Electron
Corporation that may be issued pursuant to the merger agreement with Thermo
TerraTech Inc.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rules 457(f)(1) and 457(c) under the Securities Act of 1933,
calculated as the product of (a) $8.53125, the average of the high and low
per share prices of Thermo TerraTech common stock on July 18, 2000 as
reported in the consolidated transaction reporting system, and
(ii) 3,791,650, the aggregate number of shares of Thermo TerraTech common
stock outstanding on June 30, 2000 (other than shares owned by the
registrant) plus the number of such shares for which options were
outstanding on June 30, 2000, which options may be exercised before the date
of the merger described herein.
(3) The shares of Thermo Electron common stock being registered hereby include
associated preferred stock purchase rights. Until the occurrence of certain
prescribed events, such rights are not exercisable, are evidenced by the
certificate for the Thermo Electron common stock and will be transferred
along with and only with the Thermo Electron common stock.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
[THERMO TERRATECH LOGO]
Dear Stockholder:
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
The board of directors of Thermo TerraTech Inc. and a single member
committee of the board have approved a merger agreement with Thermo Electron
Corporation, Thermo TerraTech's parent corporation.
We will hold a special stockholders' meeting on , 2000 at
10:00 a.m. local time at the offices of Thermo Electron, 81 Wyman Street,
Waltham, Massachusetts at which we will ask you to adopt the merger agreement.
If the merger agreement is adopted:
- Thermo TerraTech will become a wholly owned subsidiary of Thermo Electron;
and
- You will receive a fraction of a share of Thermo Electron common stock
worth between $7.50 and $9.25 in exchange for each of your shares of
TerraTech common stock.
The number of shares that you will receive will be calculated using the
formula set forth in this proxy statement-prospectus. You may not know at the
time of the stockholders' meeting exactly how many shares of Thermo Electron
common stock you will receive. The maximum number of shares that may be offered
under this proxy statement-prospectus is 1.8 million.
Thermo Electron's common stock is listed on the New York Stock Exchange
under the symbol "TMO", and on August 9, 2000, Thermo Electron common stock
closed at $21.1875 per share.
PLEASE CAREFULLY CONSIDER ALL OF THE INFORMATION IN THIS PROXY
STATEMENT-PROSPECTUS REGARDING THERMO TERRATECH, THERMO ELECTRON AND THE MERGER,
INCLUDING IN PARTICULAR THE DISCUSSION IN THE SECTION CALLED "RISK FACTORS"
STARTING ON PAGE 15.
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATOR HAS APPROVED OR
DISAPPROVED THE THERMO ELECTRON COMMON STOCK TO BE ISSUED UNDER THIS PROXY
STATEMENT-PROSPECTUS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This proxy statement-prospectus is dated and was first mailed
to stockholders on or about .
Sincerely,
Brian D. Holt
President and Chief Executive Officer
<PAGE>
[Thermo TerraTech logo]
NOTICE OF SPECIAL MEETING
, 2000
TO THE STOCKHOLDERS OF
THERMO TERRATECH INC.
I am pleased to give you notice of and cordially invite you to attend,
either in person or by proxy, the special meeting of the stockholders of Thermo
TerraTech Inc., which will be held on , , 2000, at 10:00 a.m.,
local time, at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454, and at any adjournment or adjournments thereof.
The purposes of the special meeting are:
1. To consider and vote on a proposal to adopt a merger agreement dated as
of October 19, 1999, as amended, among Thermo TerraTech, Thermo Electron
Corporation and TTT Acquisition Corporation, a wholly owned subsidiary of
Thermo Electron. The merger agreement provides that TTT Acquisition will
be merged with and into Thermo TerraTech. In the merger, each stockholder
of Thermo TerraTech, other than Thermo Electron, will receive 0.4 share,
subject to adjustment as described in the enclosed proxy
statement-prospectus, of the common stock of Thermo Electron for each
outstanding share of common stock of Thermo TerraTech owned by each
public stockholder prior to the effective time of the merger. The merger
agreement is attached as Appendix A to and is described in the enclosed
proxy statement-prospectus.
2. To transact any other business which properly comes before the special
meeting.
Only stockholders of record at the close of business on August 2, 2000 will
receive notice of and be able to vote at the special meeting.
The enclosed proxy statement-prospectus describes the merger agreement, the
proposed merger and the actions to be taken in connection with the merger. The
holders of a majority of the outstanding shares of TerraTech common stock
entitled to vote must be present or represented by proxy at the special meeting
in order to constitute a quorum for the transaction of business. It is important
that your shares are represented at the special meeting regardless of the number
of shares you hold. Whether or not you are able to be at the special meeting in
person, please sign and return promptly the enclosed proxy card in the enclosed,
postage-paid envelope. You may revoke your proxy in the manner described in the
enclosed proxy statement-prospectus at any time before it is voted at the
special meeting.
This notice, and the enclosed proxy card and proxy statement-prospectus are
sent to you by order of Thermo TerraTech's board of directors.
SANDRA L. LAMBERT
Secretary
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SUMMARY..................................................... 5
RISK FACTORS................................................ 15
THE MERGER.................................................. 20
General................................................... 20
Background: Thermo Electron Spin-Outs and Reorganization
Plans................................................... 20
Background: The Merger.................................... 21
The Single Member Committee's and the Board's
Recommendation.......................................... 36
Opinion of Adams, Harkness & Hill......................... 39
Purpose and Reasons of Thermo Electron for the Merger..... 51
Purpose and Reasons of Thermo TerraTech for the Merger.... 53
Position of Thermo Electron as to Fairness of the
Merger.................................................. 53
Conflicts of Interest..................................... 53
Effects of the Merger..................................... 55
Conduct of Thermo TerraTech's Business After the Merger... 56
Conduct of the Business of Thermo TerraTech if the Merger
is Not Consummated...................................... 56
Conversion of Securities.................................. 56
Effect of the Merger on Thermo TerraTech Stock Options,
Warrants and Debentures................................. 58
Deferred Compensation Plan for Directors.................. 58
Transfer of Shares........................................ 59
Representations and Warranties............................ 59
Covenants................................................. 60
Conditions................................................ 61
Indemnification and Insurance............................. 61
Termination, Amendment and Waiver......................... 62
Expenses.................................................. 64
Accounting Treatment...................................... 64
Regulatory Approvals...................................... 64
Restrictions on Sales of Shares by Affiliates of Thermo
TerraTech and Thermo Electron........................... 64
Listing on the New York Stock Exchange of Thermo Electron
Common Stock to be Issued in the Merger................. 65
Dissenters' and Appraisal Rights.......................... 65
Comparative Per Share Market Price Data................... 65
THE SPECIAL MEETING......................................... 66
Proxy Solicitation........................................ 66
Record Date and Quorum Requirement........................ 66
Voting Procedures......................................... 66
Voting and Revocation of Proxies.......................... 67
Effective Time............................................ 67
SELECTED FINANCIAL INFORMATION--THERMO ELECTRON............. 68
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SELECTED FINANCIAL INFORMATION--THERMO TERRATECH............ 69
FEDERAL INCOME TAX CONSEQUENCES............................. 70
PROJECTED FINANCIAL DATA OF THERMO TERRATECH................ 72
INFORMATION ABOUT THERMO TERRATECH, THERMO ELECTRON AND TTT
ACQUISITION................................................. 75
COMPARISON OF RIGHTS OF HOLDERS OF THERMO TERRATECH AND
THERMO ELECTRON COMMON STOCK................................ 77
TRANSACTIONS WITH RELATED PARTIES........................... 85
RECENT DEVELOPMENTS......................................... 88
LEGAL OPINION............................................... 88
EXPERTS..................................................... 88
STOCKHOLDER PROPOSALS....................................... 88
WHERE YOU CAN FIND MORE INFORMATION......................... 89
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS............ 91
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS........ F-1
APPENDIX A--Agreement and Plan of Merger.................... A-1
APPENDIX A-1--Amendment No. 1 to Agreement and Plan of
Merger.................................................... A1-1
APPENDIX A-2--Amendment No. 2 to Agreement and Plan of
Merger.................................................... A2-1
APPENDIX B--Opinion of Adams, Harkness & Hill, Inc.......... B-1
APPENDIX C--Annual Report on Form 10-K of Thermo
TerraTech Inc. for the Fiscal Year ended April 1, 2000.... C-1
APPENDIX D--Current Report on Form 8-K dated April 14,
2000...................................................... D-1
APPENDIX E--Current Report on Form 8-K dated June 15,
2000...................................................... E-1
</TABLE>
4
<PAGE>
SUMMARY
This summary highlights selected information from the proxy
statement-prospectus and may not contain all of the information that is
important to you. You should carefully read this entire document and the other
documents we refer to for a more complete understanding of the merger. In
particular, you should read the documents that are attached to this proxy
statement-prospectus, including the merger agreement, as amended, which is
attached as Appendix A and incorporated by reference into this proxy
statement-prospectus. In addition, we incorporate by reference important
business and financial information about Thermo Electron and Thermo TerraTech
into this proxy statement-prospectus. You can obtain that information without
charge by following the instructions in the section entitled "Where You Can Find
More Information" on page of this proxy statement-prospectus. We have included
page references in parentheses to direct you to a more complete description of
the topics presented in this summary.
DATE, TIME AND PLACE OF THE SPECIAL MEETING (SEE PAGE )
The special meeting will be held on , , 2000, at 10:00 a.m.,
local time, at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454.
PURPOSE OF THE SPECIAL MEETING (SEE PAGE )
At the special meeting, the stockholders of Thermo TerraTech will consider
and vote on a proposal to adopt the merger agreement. The merger agreement
provides that a subsidiary of Thermo Electron would merge with and into Thermo
TerraTech. Thermo TerraTech would be the surviving corporation in the merger and
would then be a privately held, wholly owned subsidiary of Thermo Electron. Each
outstanding share of common stock of Thermo TerraTech, other than shares held by
Thermo TerraTech in treasury and shares held by Thermo Electron, will be
converted automatically into the right to receive 0.4 share of the common stock
of Thermo Electron. We refer to this fraction of a share of Thermo Electron
common stock, as adjusted as described in the rest of this section, as the
exchange ratio. The exchange ratio may be adjusted, as follows:
<TABLE>
<S> <C>
IF THE AVERAGE OF THE CLOSING PRICES OF YOU WILL RECEIVE THE FOLLOWING CONSIDERATION
THERMO ELECTRON COMMON STOCK DURING THE 20 PER TERRATECH SHARE IN THE MERGER:
TRADING DAYS ENDING FIVE TRADING DAYS BEFORE
THE MERGER OCCURS EQUALS:
Less than $18.75 Fraction of a share of Thermo Electron common
stock worth $7.50
Between $18.75 and $23.125 0.4 share of Thermo Electron common stock
More than $23.125 Fraction of a share of Thermo Electron common
stock worth $9.25
</TABLE>
RECORD DATE AND QUORUM (SEE PAGE )
You can vote at the special meeting if you owned TerraTech common stock at
the close of business on August 2, 2000, which is the record date for the
special meeting. You are entitled to one vote for each share of TerraTech common
stock held by you on the record date. At the close of business on the record
date, there were 19,111,110 shares of TerraTech common stock outstanding.
Holders of a majority of the outstanding shares of TerraTech common stock
entitled to vote at the special meeting must be present in person or represented
by proxy to constitute a quorum for the transaction of business.
5
<PAGE>
PARTIES TO THE MERGER (SEE PAGE )
THERMO ELECTRON
Thermo Electron develops, manufactures and sells measurement and detection
instruments that its customers use to monitor, collect, and analyze data. On
January 31, 2000, Thermo Electron announced that its board of directors had
authorized management to proceed with a major reorganization of the operations
of Thermo Electron and its subsidiaries, including Thermo TerraTech. As part of
this reorganization, Thermo Electron plans to:
- acquire the minority interests in most of its public subsidiaries;
- spin off its business that serves the healthcare industry with a range of
medical products for diagnosis and monitoring, and its paper recycling and
papermaking equipment business; and
- sell various non-core businesses.
Thermo Electron plans to take Thermo Ecotek Corporation, its electric power
generation business, private. Although Thermo Electron no longer considers
Thermo Ecotek a core business under its new strategy, Thermo Electron expects to
retain Thermo Ecotek after it is taken private while Thermo Electron continues
to evaluate how to best exit that business and create maximum value for Thermo
Electron stockholders.
The primary goal of the reorganization plan is for Thermo Electron and each
of its spun-off subsidiaries to focus on their core businesses.
Thermo Electron's principal executive offices are located at 81 Wyman
Street, Waltham, Massachusetts 02454-9046, and its telephone number is
(781) 622-1000.
THERMO TERRATECH
Thermo TerraTech provides a broad, specialized range of industrial
outsourcing services and manufacturing support. Thermo TerraTech operates in
four segments: environmental-liability management, engineering and design,
laboratory testing, and metal treating.
Thermo Electron has proposed to sell Thermo TerraTech's remaining
businesses, as part of Thermo Electron's corporate reorganization, announced on
January 31, 2000.
Thermo TerraTech's principal executive offices are located at 85 First
Avenue, Waltham, Massachusetts 02451, and its telephone number is
(781) 370-1640.
TTT ACQUISITION
TTT Acquisition is a newly-formed Delaware corporation organized by Thermo
Electron for the sole purpose of effecting the merger. TTT Acquisition has not
conducted any prior business.
TTT Acquisition's principal executive offices are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
VOTE REQUIRED AND REVOCATION OF PROXIES (SEE PAGES )
Under Delaware law, holders of a majority of the outstanding shares of
TerraTech common stock entitled to vote at the special meeting must adopt the
merger. Thermo Electron, which owns approximately 87% of the outstanding
TerraTech common stock, owns enough shares of TerraTech common stock to adopt
the merger under Delaware law without the vote of any other holders of TerraTech
common stock. Thermo Electron has agreed to vote its shares of TerraTech common
stock in favor of the merger agreement. See "THE SPECIAL MEETING--Voting
Procedures."
6
<PAGE>
You may revoke your proxy at any time before your shares are voted at the
special meeting by sending a written notice to the Secretary of Thermo
TerraTech, that is received prior to the special meeting, by executing and
returning a later-dated proxy or by voting by ballot at the special meeting. See
"THE SPECIAL MEETING--Voting and Revocation of Proxies."
If you send in your proxy card without instructions on to how to vote, your
shares will be voted "FOR" the adoption of the proposed merger agreement.
The board of directors of Thermo TerraTech does not expect any other matters
to be voted on at the special meeting. If any other matters do properly come
before the special meeting, the people named on the accompanying proxy card will
vote the shares represented by all properly executed proxies in their
discretion. However, shares represented by proxies that have been voted
"AGAINST" adoption of the merger agreement will not be used to vote "FOR"
adjournment of the special meeting to allow more time to solicit additional
votes "FOR" adoption of the merger agreement. See "THE SPECIAL MEETING--Voting
Procedures."
Please complete, sign and mail your proxy card in the enclosed envelope as
soon as possible after you have read this proxy statement-prospectus. You should
receive a proxy card from your broker if you hold your shares through a broker
as nominee. You must return your proxy card or attend the special meeting in
person in order for your vote to be counted.
EXCHANGE OF STOCK CERTIFICATES
Please do not send us your certificates for TerraTech common stock now. We
will send you instructions on how to exchange your shares of TerraTech common
stock for Thermo Electron common stock if the merger is completed.
OTHER QUESTIONS
Please call Thermo TerraTech's Investor Relations department at 781-622-1111
if you have any other questions.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE )
Thermo Electron intends to sell or dispose of Thermo TerraTech's assets
after the merger. Accordingly, Thermo Electron expects that the merger would
fail to satisfy one of the tests for a tax-free reorganization, namely, that the
business of the acquired company continue to be operated by the buyer, or that a
substantial portion of the acquired company's assets be used by the buyer.
Therefore, Thermo Electron expects that the merger will be treated as a taxable
exchange by the Thermo TerraTech stockholders of their shares of TerraTech
common stock for shares of Thermo Electron common stock. Each Thermo TerraTech
stockholder would realize taxable gain, or loss, to the extent that the fair
market value of the Thermo Electron common stock received by the stockholder in
the merger exceeds, or is less than, the stockholder's basis in the TerraTech
common stock exchanged in the merger. It is possible, although Thermo Electron
believes it is unlikely, that the merger would still qualify as a tax-free
reorganization depending on the timing of Thermo Electron's sales of Thermo
TerraTech's businesses after the merger. You should consult your own tax advisor
for a full understanding of the merger's tax consequences. Additionally, no gain
or loss will generally be recognized by Thermo TerraTech, Thermo Electron or TTT
Acquisition as a result of the merger. Please read the section called "FEDERAL
INCOME TAX CONSEQUENCES" for a fuller discussion of the tax consequences of the
merger.
7
<PAGE>
EFFECT OF THE MERGER ON THERMO TERRATECH STOCK OPTIONS, WARRANTS AND DEBENTURES
(SEE PAGES )
Thermo Electron will assume options and warrants to purchase shares of
TerraTech common stock under Thermo TerraTech's stock option plans and warrants
at the effective time of the merger. The Thermo TerraTech options and warrants
will be exercisable for Thermo Electron common stock after the merger. The
number of shares of Thermo Electron common stock underlying each option will
equal the number of shares of TerraTech common stock underlying the option
before the merger, multiplied by the exchange ratio. The exercise price for each
assumed option will be calculated by dividing the exercise price of the
TerraTech stock option before the merger by the exchange ratio, rounded up to
the nearest whole cent. The number of whole shares of Thermo Electron common
stock for which each warrant will be exercisable and the per share exercise
price of the TerraTech warrants will be determined under the terms of the
warrants.
After the merger, Thermo TerraTech's 4 5/8% convertible subordinated
debentures due May 1, 2003 will be convertible into shares of Thermo Electron
common stock, instead of TerraTech common stock. The debentures are now
convertible into TerraTech common stock at a price of $15.90 per share. A total
of $111,850,000 principal amount of the debentures was outstanding as of
June 30, 2000. Holders of the debentures will not have the right to require
Thermo TerraTech to redeem the debentures as a result of the merger. Assuming an
exchange ratio of 0.4, the debentures would be convertible into Thermo Electron
common stock at a conversion price of $39.75 per share.
See "THE MERGER--Effect of the Merger on Thermo TerraTech Stock Options,
Warrants and Debentures."
THE SINGLE MEMBER COMMITTEE'S AND THE BOARD'S RECOMMENDATION (SEE PAGES )
The board of directors of Thermo TerraTech appointed a committee of Mr.
Polyvios Vintiadis, the sole director of Thermo TerraTech who is not an officer
or employee of Thermo TerraTech, TTT Acquisition, or Thermo Electron, and who is
not a director of TTT Acquisition or Thermo Electron, to review the proposed
merger on behalf of the Thermo TerraTech stockholders other than Thermo Electron
and the officers and directors of Thermo Electron and Thermo TerraTech. The
single member committee considered the opinion of Adams, Harkness & Hill, Inc.
that the exchange ratio of 0.4 share of Thermo Electron common stock for each
share of TerraTech common stock, subject to adjustment, was fair, from a
financial point of view as of the date of its opinion, to the public
stockholders. Throughout this proxy statement-prospectus, the term "public
stockholders" refers to all Thermo TerraTech stockholders other than Thermo
Electron and the officers and directors of Thermo Electron and Thermo TerraTech.
After careful consideration, the single member committee determined that the
merger is fair to the public stockholders. The single member committee also
recommended that the board of directors approve the merger agreement and
recommend the merger agreement to the Thermo TerraTech stockholders for
adoption.
The board of directors has approved the merger agreement, declared it to be
advisable and recommends that the Thermo TerraTech stockholders adopt the merger
agreement.
OPINION OF ADAMS, HARKNESS & HILL (SEE PAGE )
Adams, Harkness & Hill gave its opinion to the single member committee on
October 19, 1999, that, as of the date of its opinion, the consideration to be
received in the merger was fair, from a financial point of view, to the public
stockholders of Thermo TerraTech. The full text of Adams, Harkness & Hill's
written opinion is attached to this proxy statement-prospectus as Appendix B.
The opinion of Adams, Harkness & Hill is not a recommendation as to how you
should vote on the merger. We urge you to read the opinion in its entirety. On
April 11, 2000, Adams, Harkness & Hill affirmed its opinion in a meeting with
the single member committee. Before affirming its opinion, Adams,
8
<PAGE>
Harkness & Hill considered the announcement on January 31, 2000 of Thermo
Electron's intention to sell Thermo TerraTech's remaining businesses and
additional financial information provided by Thermo TerraTech's management.
Adams, Harkness & Hill has also affirmed its opinion orally to the single member
committee as of the date of this proxy statement-prospectus.
PURPOSE AND REASONS OF THERMO ELECTRON FOR THE MERGER (SEE PAGE )
Thermo Electron intends to undertake the merger in order to acquire all of
the outstanding shares of TerraTech common stock. In deciding to undertake the
merger, Thermo Electron considered the following factors, among others:
- recent public capital market trends affecting small companies;
- the latest trends in Thermo TerraTech's markets, primarily the
environmental-liability and resource-management services industry;
- Thermo TerraTech's debt, including debt owed to Thermo Electron; and
- reducing the public information available to competitors about Thermo
TerraTech's business, which would result from Thermo TerraTech no longer
having to file reports with the Securities and Exchange Commission.
Thermo Electron also considered the advantages and disadvantages of some
alternatives to taking Thermo TerraTech private, including leaving Thermo
TerraTech as a public majority-owned subsidiary. Thermo Electron considered the
following factors, among others:
- the relative lack of liquidity for the TerraTech common stock;
- the impact on its own common stock of the issuance of shares to the Thermo
TerraTech stockholders; and
- the advancement of Thermo Electron's proposed corporate reorganization, in
the form in which it was originally proposed, to reduce the number of its
public subsidiaries. Thermo Electron announced a revised reorganization
plan on January 31, 2000.
PURPOSE AND REASONS OF THERMO TERRATECH FOR THE MERGER (SEE PAGE )
The purpose of Thermo TerraTech for engaging in the transactions
contemplated by the merger agreement, at the time the agreement was entered
into, was to become part of a larger operating entity and thereby potentially
realize improved operating and financial results and a stronger competitive
position. Thermo TerraTech considered substantially the same factors that Thermo
Electron did, as described above, in deciding to undertake the merger at the
time the merger agreement was signed.
POSITION OF THERMO ELECTRON AS TO FAIRNESS OF THE MERGER (SEE PAGE )
As of the date of the merger agreement, Thermo Electron adopted the
findings, analysis and recommendation of Thermo TerraTech's single member
committee and board on the fairness of the merger. Based solely on the findings,
analysis and recommendation of the single member committee and board and its own
review of the terms of the merger, Thermo Electron believes that the merger is
both procedurally and substantively fair to the public stockholders and that the
exchange ratio is fair to the public stockholders from a financial point of
view. Thermo Electron is not making any recommendation as to how you should vote
on the merger agreement.
9
<PAGE>
CONFLICTS OF INTEREST (SEE PAGE )
When you consider the recommendation of the single member committee and the
board regarding the merger, you should be aware that some officers and directors
of Thermo TerraTech have interests in the merger that are different from, or in
addition to, yours. These interests include ownership of TerraTech common stock,
options and warrants to purchase TerraTech common stock, compensation for
serving on committees of the Thermo TerraTech board of directors, ownership of
Thermo Electron common stock, and indemnification arrangements between the
directors and Thermo TerraTech and Thermo Electron.
In addition, some of Thermo Electron's officers and directors are also
officers and directors of Thermo TerraTech and have interests that are in
addition to, or different from, your interests. Thermo Electron considered these
potential conflicts of interest and based in part thereon, Thermo Electron's
proposed offer was conditioned on, among other things, the approval of the
merger by the single member committee and the receipt by the single member
committee of a fairness opinion from an investment banking firm.
CONDITIONS TO THE MERGER (SEE PAGE )
The completion of the merger depends upon meeting a number of conditions,
including the adoption of the merger agreement by the holders of a majority of
the outstanding shares of TerraTech common stock.
Thermo TerraTech's obligation to complete the merger is also subject to the
condition, among others, that at the time this proxy statement-prospectus is
mailed to you and at the effective time, Adams, Harkness & Hill shall have
reaffirmed orally and not withdrawn its fairness opinion. This condition may be
waived in writing by Thermo TerraTech if the single member committee approves.
The obligations of TTT Acquisition and Thermo Electron to effect the merger
are subject to the condition, which may be waived in writing by Thermo Electron,
that the single member committee shall not have withdrawn its recommendation
that the merger agreement, including the exchange ratio, is fair to, and in the
best interests of, the public stockholders of Thermo TerraTech.
TERMINATION AND EXPENSES (SEE PAGE )
The merger agreement may be terminated by the parties if their boards of
directors consent (in Thermo TerraTech's case, upon approval of the single
member committee).
In addition, each of Thermo TerraTech, upon approval of the single member
committee, and TTT Acquisition can terminate the merger agreement if the merger
has not been completed by September 30, 2000. TTT Acquisition can also terminate
the merger agreement if Thermo Electron would have to issue more than 1,800,000
shares of its common stock as a result of adjustments to the exchange ratio.
Thermo TerraTech can terminate the merger agreement if the single member
committee decides that not terminating the agreement would be inconsistent with
the board's or single member committee's fiduciary duties.
In the event that Thermo Electron would be required to issue more than
1,800,000 shares of its common stock, Thermo Electron would have to decide
whether to exercise its right to terminate the merger agreement. The factors
that Thermo Electron would consider in making this decision include the exact
number of shares it would be required to issue and the level of dilution to
Thermo Electron stockholders from that issuance; the market conditions existing
at the time the decision is made, including trends in the price of the Thermo
Electron common stock; and the financial condition of the business of Thermo
TerraTech.
10
<PAGE>
Neither party will have to pay a termination fee if the merger agreement is
terminated.
Each of the parties will pay its own costs and expenses in connection with
the merger agreement, whether or not the merger is consummated.
ACCOUNTING TREATMENT (SEE PAGE )
The merger will be accounted for as the acquisition of a minority interest
by Thermo Electron, using the purchase method of accounting.
FEDERAL AND STATE REGULATORY REQUIREMENTS (SEE PAGE )
There are no federal or state regulatory approvals required that have not
already been obtained in order for us to complete the merger, except for
(1) the requirements of the Delaware General Corporation Law relating to
stockholder approval and completion of the merger and (2) the requirements of
the federal and state securities laws.
RESTRICTIONS ON THE ABILITY TO SELL THERMO STOCK (SEE PAGE )
All shares of Thermo Electron common stock you receive in the merger will be
freely transferable unless you are considered an "affiliate" of Thermo Electron
under the Securities Act of 1933. Shares of Thermo Electron common stock held by
its affiliates may only be sold under a registration statement or exemption
under the Securities Act.
YOU DO NOT HAVE DISSENTERS' OR APPRAISAL RIGHTS
Under Delaware law, you are not entitled to dissenters' or appraisal rights
in the merger.
DIFFERENCES BETWEEN YOUR RIGHTS AS A THERMO TERRATECH STOCKHOLDER AND AS A
THERMO ELECTRON STOCKHOLDER (SEE PAGE )
There are differences between the rights you have as a holder of TerraTech
common stock and the rights you will have as a holder of Thermo Electron common
stock. For a description of these differences, please read the section called
"Comparison of Rights of Holders of Thermo TerraTech and Thermo Electron Common
Stock."
FORWARD LOOKING STATEMENTS IN THIS PROXY STATEMENT-PROSPECTUS
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Words such as "anticipates," "expects," "intends," "plans," "believes,"
"seeks," "estimates" and similar expressions identify forward-looking
statements. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual
results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties in the section entitled "RISK
FACTORS" on pages .
COMPARATIVE PER SHARE MARKET PRICE DATA
The Thermo Electron common stock is traded on the New York Stock Exchange
under the symbol "TMO." The TerraTech common stock is traded on the American
Stock Exchange under the symbol "TTT."
The following table presents the closing prices per share of the TerraTech
common stock and the closing prices per share of the Thermo Electron common
stock on the following dates:
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<PAGE>
- May 4, 1999, the last trading day before the public announcement of Thermo
Electron's proposal, with no price having been determined, to take Thermo
TerraTech private. In the case of the TerraTech common stock, closing
price information is given as of April 30, 1999, which was the last day on
which the TerraTech common stock traded before the May 5 announcement;
- October 19, 1999, the last trading day before the public announcement that
Thermo Electron and Thermo TerraTech had entered into the merger
agreement;
- April 12, 2000, the last trading day before the public announcement of the
revised exchange ratio; and
- August , 2000, the last trading day before the date of this proxy
statement-prospectus.
The chart also presents, in the line entitled "Equivalent Per Share Price,"
the price per share of TerraTech common stock you would have received if the
exchange ratio had been set under the terms of the merger agreement on each of
May 4, 1999, October 19, 1999, and August , 2000.
<TABLE>
<CAPTION>
APRIL 30, 1999/
STOCK/DATE MAY 4, 1999 OCTOBER 19, 1999 APRIL 12, 2000 AUGUST , 2000
---------- --------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Thermo TerraTech....................... $4.1875 $ 5.375 $ 7.50 $
Thermo Electron........................ 16.25 13.0625 19.8125
Equivalent Per Share Price............. 7.50 7.50 7.925
</TABLE>
You should obtain current stock price quotations for the Thermo Electron
common stock and the TerraTech common stock.
12
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
The following table presents unaudited pro forma combined selected financial
information for Thermo Electron and Thermo TerraTech, historical selected
financial information for Thermo Electron and Thermo TerraTech, and unaudited
pro forma combined per share data for Thermo Electron and Thermo TerraTech. The
historical financial information is derived from the financial statements of
Thermo Electron and Thermo TerraTech, included in or incorporated by reference
into this proxy statement-prospectus. The pro forma information is derived from
the pro forma combined condensed financial information included elsewhere in
this proxy statement-prospectus. The unaudited pro forma consolidated condensed
statement of operations data sets forth the results of operations for the three
months ended April 1, 2000, and the fiscal year ended January 1, 2000, as if the
merger had become effective at the beginning of 1999. The unaudited pro forma
consolidated condensed balance sheet data sets forth the financial position as
of April 1, 2000, as if the merger had become effective on April 1, 2000.
This data is not necessarily indicative of the results of the future
operations of the combined entity or the actual results that would have occurred
had the merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
APRIL 1, 2000 JANUARY 1, 2000
------------------- ------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
PRO FORMA COMBINED:
STATEMENT OF OPERATIONS DATA:
Revenues................................................. $ 598,929 $2,471,193
Income (Loss) from Continuing Operations Before
Extraordinary Items.................................... 15,291 (14,580)
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital.......................................... $1,629,388
Total Assets............................................. 5,201,922
Long-term Obligations.................................... 1,570,323
Minority Interest........................................ 364,900
Common Stock of Subsidiary Subject to Redemption......... 7,692
Shareholders' Investment................................. 2,038,986
PER SHARE DATA:
THERMO ELECTRON (HISTORICAL):
Book Value per Common Share.............................. $ 12.84 $ 12.87
Earnings (Loss) per Share from Continuing Operations
Before Extraordinary Items:
Basic.................................................. $ .10 $ (.09)
Diluted................................................ $ .09 $ (.11)
PRO FORMA:
COMBINED PER SHARE OF THERMO ELECTRON STOCK(1):
Book Value per Common Share.............................. $ 12.92
Earnings (Loss) per Share from Continuing Operations
Before Extraordinary Items:
Basic.................................................. $ .10 $ (.09)
Diluted................................................ $ .09 $ (.11)
</TABLE>
13
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
APRIL 1, 2000 JANUARY 1, 2000
------------------- ------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
COMBINED PER THERMO ELECTRON SHARE EQUIVALENT (2):
ASSUMING EXCHANGE RATIO OF .40 (3):
Book Value per Common Share............................. $5.17
Cash Dividends Declared per Share....................... -- --
Earnings (Loss) per Share from Continuing Operations
Before Extraordinary Items:
Basic................................................. $ .04 $(.04)
Diluted............................................... $ .04 $(.04)
ASSUMING EXCHANGE RATIO OF .73 (4):
Book Value per Common Share............................. $9.43
Cash Dividends Declared per Share....................... -- --
Earnings (Loss) per Share from Continuing Operations
Before Extraordinary Items:
Basic................................................. $ .07 $(.07)
Diluted............................................... $ .07 $(.08)
ASSUMING EXCHANGE RATIO OF .34 (5):
Book Value per Common Share............................. $4.39
Cash Dividends Declared per Share....................... -- --
Earnings (Loss) per Share from Continuing Operations
Before Extraordinary Items:
Basic................................................. $ .03 $(.03)
Diluted............................................... $ .03 $(.04)
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 1, 2000
-----------------
<S> <C>
THERMO TERRATECH (HISTORICAL):
Book Value per Common Share............................... $ 2.72
Loss per Share:
Basic................................................... $(2.27)
Diluted................................................. $(2.27)
</TABLE>
--------------------------
(1) Changes to the exchange ratio would not result in significant variances to
the pro forma combined per share of Thermo Electron stock information. As a
result, disclosures of the pro forma combined per share information at the
maximum and minimum of the range have not been presented.
(2) Pro forma combined per Thermo Electron share equivalent data has been
calculated based on the pro forma combined data for Thermo Electron common
stock, multiplied by assumed exchange ratios. See "SUMMARY--Purpose of the
Special Meeting" for a description of the exchange ratio. The exchange ratio
is the fraction of one Thermo Electron share which you would have received
for each share of TerraTech common stock in the merger.
(3) This pro forma combined per Thermo Electron share equivalent data applies
the unadjusted exchange ratio set forth in the merger agreement of .40 to
the pro forma combined condensed financial information, which is included
elsewhere in this proxy statement-prospectus, based on an average Thermo
Electron common stock price of $18.8125 (the closing price of Thermo
Electron common stock on April 24, 2000).
(4) This pro forma combined per Thermo Electron share equivalent data applies
the assumed exchange ratio of .73 to the pro forma combined condensed
financial information included elsewhere in this proxy statement-prospectus.
This pro forma combined per Thermo Electron share equivalent data assumes
Thermo Electron issues the maximum number of shares of its common stock
(1.8 million shares). Thermo Electron can elect to terminate the merger
agreement if the adjusted exchange ratio would require Thermo Electron to
issue more than 1.8 million shares of its common stock.
(5) This pro forma combined per Thermo Electron share equivalent data applies
the assumed exchange ratio of .34 to the pro forma combined condensed
financial information included elsewhere in this proxy statement-prospectus.
The exchange ratio of .34 is based on an average Thermo Electron common
stock price of $26.875 (the highest price for Thermo Electron common stock
for the 52-week period ended July 14, 2000).
14
<PAGE>
RISK FACTORS
If you hold your shares of TerraTech common stock until the merger, you will
be investing in Thermo Electron common stock. The following important factors,
among others, in some cases have affected, and in the future could affect,
Thermo Electron's actual results and could cause its actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, Thermo Electron. In addition to the other information contained in or
incorporated by reference into this proxy statement-prospectus, you should
carefully consider the following risk factors in deciding whether to vote for
the merger.
RISKS RELATED TO THERMO ELECTRON'S REORGANIZATION
BECAUSE THERMO ELECTRON'S REORGANIZATION IS VERY COMPLEX AND WILL REQUIRE THIRD
PARTY AND GOVERNMENTAL CONSENTS AND APPROVALS, IT MAY NOT BE ABLE TO
SUCCESSFULLY COMPLETE THIS REORGANIZATION OR TO DO SO ON THE TIME SCHEDULE IT
CONTEMPLATES.
Thermo Electron's reorganization consists of:
- the acquisition of the public minority interest in most of its
subsidiaries that have minority investors;
- the spin off to shareholders of two of its businesses; and
- the sale of a variety of non-core businesses.
In order to accomplish these objectives, Thermo Electron will need to obtain a
variety of third party and governmental consents and approvals. In particular,
in addition to the Internal Revenue Service ruling discussed below, Thermo
Electron will need to obtain:
- approval of the spin-offs and some of the other transactions by its board
of directors; and
- the receipt of any necessary third party contractual consents.
Thermo Electron also must make various filings with the SEC relating to the
reorganization that must comply with the SEC's rules.
If Thermo Electron does not receive these consents and approvals and make
the required filings with the SEC in compliance with its rules, it may not be
able to effect all aspects of the reorganization. If we are not able to effect
all aspects of the reorganization, we may not achieve all of the anticipated
benefits of our reorganization. Until Thermo Electron completes the entire
reorganization, it will continue to own and operate a diverse group of
businesses, some of which may continue to have minority stockholders.
Thermo Electron's reorganization is time-consuming and expensive, and
consumes management resources. The failure of Thermo Electron's management to
complete the proposed reorganization in a timely manner could negatively affect
the public market's confidence in its management, which in turn may adversely
affect the market price of Thermo Electron common stock.
THERMO ELECTRON DOES NOT EXPECT TO PROCEED WITH ITS TWO PLANNED SPIN-OFFS UNTIL
IT RECEIVES A FAVORABLE RULING FROM THE INTERNAL REVENUE SERVICE, WHICH THE
INTERNAL REVENUE SERVICE MAY NOT ISSUE OR MAY TAKE A SUBSTANTIAL PERIOD OF TIME
TO ISSUE.
Thermo Electron does not expect to spin-off its separation technologies and
fiber-based products business and its business that serves the healthcare
industry with a range of medical products for diagnostic and monitoring unless
it obtains a favorable ruling from the Internal Revenue Service. The Internal
Revenue Service may not grant the necessary ruling or may seek to impose
conditions to the granting of the ruling that are not acceptable to Thermo
Electron. Thermo Electron does not expect the Internal Revenue Service to issue
a tax ruling before the end of 2000, and additional delays are possible.
15
<PAGE>
AS PART OF THERMO ELECTRON'S REORGANIZATION, IT SEEKS TO DIVEST A SIGNIFICANT
NUMBER OF BUSINESSES; THERMO ELECTRON MAY NOT SUCCEED IN SELLING ALL OF THESE
BUSINESSES IN A TIMELY MANNER OR AT PRICES IT CONSIDERS ACCEPTABLE.
Thermo Electron plans to sell a significant number of businesses as part of
its reorganization. This process will entail a number of risks:
- Thermo Electron may not find buyers for all of these businesses.
- The timing of these dispositions is uncertain.
- Thermo Electron cannot be certain that the terms, including price, for the
sale of these businesses will be acceptable to it.
- Each of these sales will be subject to various conditions, including
conditions in the agreements governing the transaction and the receipt of
necessary governmental approvals.
EVEN IF THERMO ELECTRON SUCCEEDS IN COMPLETING ITS REORGANIZATION, IT WILL FACE
A NUMBER OF CHALLENGES IN INTEGRATING ITS INSTRUMENT BUSINESS.
Currently Thermo Electron operates its instrument business directly and
through a number of majority-owned subsidiaries. Thermo Electron has conducted
these operations largely as autonomous, unaffiliated businesses. As part of its
reorganization, Thermo Electron plans to manage these operations in a more
coordinated manner. The following factors may make it difficult to successfully
integrate and consolidate Thermo Electron's instrument operations:
- Thermo Electron's success in integrating these businesses will depend on
its ability to coordinate geographically separate organizations and
integrate personnel with different business backgrounds and corporate
cultures.
- Thermo Electron's ability to combine these businesses will require
coordination of administrative, sales and marketing, distribution and
accounting and finance functions and expansion of information and
management systems.
- The integration process could disrupt Thermo Electron's instrument
business.
- Retaining key employees of these businesses may be difficult.
THERMO ELECTRON'S REORGANIZATION CONTEMPLATES THE ISSUANCE OF A SIGNIFICANT
NUMBER OF ADDITIONAL SHARES OF ITS COMMON STOCK, WHICH MAY DEPRESS THE MARKET
PRICE OF ITS SHARES.
Thermo Electron expects to issue a substantial number of shares of its
common stock or securities exercisable for shares of its common stock in
connection with its reorganization. At June 30, 2000, 173,015,499 shares of
Thermo Electron common stock were outstanding. The number of shares of Thermo
Electron common stock outstanding may increase by as many as 55.2 million shares
because, as part of Thermo Electron's reorganization:
- Thermo Electron plans to exchange shares of its common stock for the
common stock held by minority stockholders in a number of its public
subsidiaries, including Thermo TerraTech. Thermo Electron expects to issue
a total of approximately 22.3 million shares of its common stock in these
transactions.
- Thermo Electron plans to assume employee stock options in these
transactions, including the merger with Thermo TerraTech, that would be
exercisable for approximately 15.3 million shares of its common stock. In
addition, Thermo Electron may be required to issue additional stock
options to retain its key employees.
- The debentures issued by some of Thermo Electron's subsidiaries, including
Thermo TerraTech, will become convertible into shares of Thermo Electron
common stock. Based on the total principal amounts outstanding of these
debentures and the conversion prices at June 30, 2000,
16
<PAGE>
Thermo Electron expects these debentures would be convertible into
approximately 17.6 million shares of its common stock.
The increase in the number of outstanding shares of Thermo Electron common
stock, as well as the potential future issuance of shares of Thermo Electron
common stock upon conversion of debentures or exercise of employee stock
options, may depress the market price of Thermo Electron common stock.
AS A RESULT OF THE SPIN-OFF OF THERMO FIBERTEK AND ITS SUBSIDIARIES, THERMO
ELECTRON WILL REMAIN AS THE GUARANTOR OF INDEBTEDNESS AND STOCK REDEMPTION
RIGHTS OF THESE COMPANIES EVEN THOUGH IT WILL NO LONGER CONTROL THEIR BUSINESS
OR OPERATIONS.
Thermo Electron has guaranteed the payment of principal and interest on
$153 million principal amount of debentures issued by Thermo Fibertek Inc. These
debentures mature in July 2004. Thermo Electron has also guaranteed the
financial obligations of Thermo Fibergen Inc., a subsidiary of Thermo Fibertek,
under stock redemption rights granted by Thermo Fibergen. Thermo Electron may
have to pay up to $60.1 million under these stock redemption rights, which
terminate in September 2000 or September 2001. Thermo Electron will remain
liable as a guarantor for these obligations following the spin-offs, although it
will no longer control the business or operations of Thermo Fibertek.
THERMO ELECTRON IS UNABLE TO PREDICT THE LIQUIDITY OR PROSPECTIVE PERFORMANCE OF
THE COMMON STOCK OF THE COMPANIES THAT IT INTENDS TO SPIN OFF.
Thermo Electron is unable to predict the liquidity or market performance of
the shares of the businesses it plans to spin off. Although Thermo Fibertek, the
company that conducts its separation technologies and fiber-based product
business, has publicly traded shares, the historic prices of these shares may
not be representative of the trading price of Thermo Fibertek's common stock
after the number of shares held by its stockholders other than Thermo Electron
increases as a result of the spin-off. Thermo Electron currently conducts its
business that serves the healthcare industry with a range of medical products
for diagnosis and monitoring both directly and through subsidiaries. There is
currently no public trading market for the shares of the company that will
conduct this business following the proposed spin-off. The businesses that
Thermo Electron is spinning off may not have the financial resources and
management skills necessary to succeed as independent entities.
RISKS RELATED TO THERMO ELECTRON'S BUSINESS AND FINANCIAL CONDITION
THERMO ELECTRON'S STOCK PRICE MAY BE VOLATILE, WHICH COULD CAUSE YOU TO LOSE
PART OR ALL OF YOUR INVESTMENT.
The market price for Thermo Electron common stock can be very volatile. As
of August 9, 2000, the 52-week range of the market price of Thermo Electron
common stock was $12.75 to $26.875 per share. The market price for Thermo
Electron common stock may be affected by a number of factors, including:
- the risks described in this proxy statement-prospectus;
- Thermo Electron's financial results; and
- general market conditions.
In addition, the stock market has experienced extreme price and volume
fluctuations. This volatility has significantly affected the market prices of
securities for reasons frequently unrelated to or disproportionate to the
operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of Thermo Electron common stock.
THERMO ELECTRON HAS ACQUIRED SEVERAL COMPANIES AND BUSINESSES; AS A RESULT IT
HAS RECORDED SIGNIFICANT GOODWILL ON ITS BALANCE SHEET, WHICH IT MUST
CONTINUALLY EVALUATE FOR POTENTIAL IMPAIRMENT.
Thermo Electron has acquired significant intangible assets, including
approximately $1.2 billion of cost in excess of net assets of acquired
companies, or goodwill, that it has recorded on its balance sheet
17
<PAGE>
as of January 1, 2000. Thermo Electron amortizes this goodwill principally over
40 year periods. Thermo Electron assesses the future useful life of the goodwill
it has on its books whenever events or changes in circumstances indicate that
the current useful life has diminished. These events or circumstances generally
include operating losses or a significant decline in earnings associated with
the acquired business or asset. Goodwill amortization from Thermo Electron's
continuing operations was $35 million in fiscal 1999. In addition, in fiscal
1999 it wrote off $29 million of goodwill attributable to its continuing
operations that it determined was impaired in connection with the planned sale
of its power electronics and test equipment business.
Thermo Electron expects to record additional goodwill in 2000 as a result of
its acquisition of the minority interests in most of its publicly-traded
subsidiaries. Thermo Electron's ability to realize the value of this asset will
depend on future cash flows of the businesses in which it acquires these
interests. These cash flows in turn depend in part on how well it can integrate
these businesses.
IT MAY BE DIFFICULT FOR THERMO ELECTRON TO EXPAND BECAUSE SOME OF THE MARKETS
FOR ITS PRODUCTS ARE NOT GROWING.
Some of the markets in which Thermo Electron competes have been flat or
declining over the past several years. To address this issue, Thermo Electron is
pursuing a number of strategies to improve its internal growth, including:
- finding new markets for its products;
- developing new applications for its technologies;
- combining sales and marketing operations in appropriate markets to compete
more effectively;
- actively funding research and development; and
- strengthening its presence in selected geographic markets.
Thermo Electron may not be able to successfully implement these strategies,
and these strategies may not result in growth of Thermo Electron's business.
THERMO ELECTRON HAS SIGNIFICANT INTERNATIONAL OPERATIONS, WHICH ENTAIL THE RISK
THAT EXCHANGE RATE FLUCTUATIONS MAY NEGATIVELY AFFECT DEMAND FOR ITS PRODUCTS
AND ITS PROFITABILITY.
International revenues account for a substantial portion of Thermo
Electron's revenues, and Thermo Electron intends to continue expanding its
presence in international markets. In 1999, Thermo Electron's international
revenues from continuing operations, including export revenues from the United
States, accounted for approximately 63% of its total revenues. International
revenues are subject to the risk that changes in exchange rates may adversely
affect product demand and the profitability in U.S. dollars of products and
services provided by Thermo Electron in foreign markets, where payment for
Thermo Electron's products and services is made in the local currency. For
example, in the first quarter of 2000, the unfavorable effects of currency
translation decreased revenues of Thermo Electron's continuing operations by
$15.6 million.
THERMO ELECTRON MUST DEVELOP NEW PRODUCTS, ADAPT TO RAPID AND SIGNIFICANT
TECHNOLOGICAL CHANGE, AND RESPOND TO INTRODUCTIONS OF NEW PRODUCTS IN ORDER TO
REMAIN COMPETITIVE.
Thermo Electron's growth strategy includes significant investment in product
development. Thermo Electron intends to increase spending in the area of
research and development. Thermo Electron sells its products in several
industries that are characterized by rapid and significant technological
changes, frequent new product and service introductions and enhancements and
evolving industry standards. Without the timely introduction of new products,
services and enhancements, Thermo Electron's products and services will likely
become technologically obsolete over time, in which case its revenue and
operating results would suffer.
18
<PAGE>
Thermo Electron's customers use many of its products to develop, test and
manufacture their own products. As a result, Thermo Electron must anticipate
industry trends and develop products in advance of the commercialization of its
customers' products. If it fails to adequately predict its customers' needs and
future activities, Thermo Electron may invest heavily in research and
development of products and services that do not lead to significant revenue.
Many of its products and products under development are technologically
innovative and require significant planning, design, development and testing at
the technological, product and manufacturing-process levels. These activities
require Thermo Electron to make significant investments.
Products in Thermo Electron's markets undergo rapid and significant
technological change because of quickly changing industry standards and the
introduction of new products and technologies that make existing products and
technologies uncompetitive or obsolete. Thermo Electron's competition may adapt
more quickly to new technologies and changes in its customers' requirements than
it can. The products Thermo Electron is currently developing, or those it will
develop in the future, may not be technologically feasible or accepted by the
marketplace, and its products or technologies could become uncompetitive or
obsolete.
CHANGES IN GOVERNMENTAL REGULATIONS MAY REDUCE DEMAND FOR THERMO ELECTRON'S
PRODUCTS OR INCREASE ITS EXPENSES.
Thermo Electron competes in many markets in which it and its customers must
comply with federal, state, local, and foreign regulations, such as
environmental, health and safety, and food and drug regulations. Thermo Electron
develops, configures, and markets its products to meet customer needs created by
those regulations. Any significant change in regulations could reduce demand for
Thermo Electron's products. For example, many of Thermo Electron's instruments
are marketed to the pharmaceutical industry for use in discovering and
developing drugs. Changes in the Food and Drug Administration's regulation of
the drug discovery and development process could have an adverse effect on the
demand for these products.
DEMAND FOR SOME OF THERMO ELECTRON'S PRODUCTS DEPENDS ON CAPITAL SPENDING
POLICIES OF ITS CUSTOMERS AND ON GOVERNMENT FUNDING POLICIES.
Thermo Electron's customers include manufacturers of semiconductors and
products incorporating semiconductors, pharmaceutical and chemical companies,
laboratories, universities, healthcare providers, government agencies, and
public and private research institutions. Many factors, including public policy
spending priorities, available resources, and economic cycles, have a
significant effect on the capital spending policies of these entities. These
policies in turn can have a significant effect on the demand for our products.
For example, a reduction in discretionary capital spending by petrochemical, oil
and gas, and mining companies, due to difficult market conditions, has adversely
affected Thermo Electron's businesses operating in the process control industry.
Similarly, softness in the semiconductor industry has resulted in lower revenues
at some Thermo Electron businesses. Also, Thermo Electron's Thermedics Detection
Inc. subsidiary has experienced lower demand for its detection instruments as a
result a shift in the process of recycling plastic containers in Europe, from
sanitizing and reusing recyclables, to melting and re-forming plastic
containers.
19
<PAGE>
THE MERGER
GENERAL
The Thermo TerraTech board of directors is using this proxy
statement-prospectus to solicit proxies from the holders of TerraTech common
stock for use at the TerraTech special meeting. At the special meeting, we will
ask holders of TerraTech common stock to adopt the merger agreement. You are
encouraged to read the merger agreement, as amended, which is attached as
Appendices A and A-1 to this proxy statement-prospectus, in its entirety.
BACKGROUND: THERMO ELECTRON SPIN-OUTS AND REORGANIZATION PLANS
Thermo Electron initially began the process of "spinning out" subsidiaries,
or selling a minority interest in its wholly-owned subsidiaries to the public,
with the spinout of Thermedics Inc. in 1983. Over the next fifteen years, Thermo
Electron spun out 20 additional subsidiaries and acquired the majority interest
in two subsidiaries that were already publicly traded when they were acquired.
The purposes of the spinout process included incentivizing management and
employees of the subsidiary with subsidiary-level stock options and other
stock-based compensation, and allowing greater access to the capital markets at
the subsidiary level. However, Thermo Electron ultimately determined that the
creation of its many subsidiaries had generated confusion among the public as to
its structure and the relationship among the various companies involved.
In August 1998, Thermo Electron announced a comprehensive reorganization
plan, the goals of which included the following:
- reducing the complexity of Thermo Electron's corporate structure by taking
private certain of its publicly traded subsidiaries;
- improving competitiveness and improving management coordination;
- retaining and growing businesses that Thermo Electron believed had the
most growth and profitability potential.
In May 1999, Thermo Electron announced its plan to expand its reorganization
plan by taking private four additional public subsidiaries, including Thermo
TerraTech. The announcement indicated that the transaction involving Thermo
TerraTech would be effected through an exchange of Thermo Electron common stock
for the common stock of Thermo TerraTech.
On January 31, 2000, Thermo Electron announced a revised reorganization
plan, which was the result of a thorough re-evaluation of Thermo Electron's
businesses and corporate structure. The reorganization plan calls for Thermo
Electron to take the following steps:
- acquire the public minority interest in most of its subsidiaries that have
minority investors,
- spin off its separation technologies and fiber-based products business and
its business that serves the healthcare industry with a range of medical
products for diagnosis and monitoring as dividends to Thermo Electron
stockholders, and
- sell several non-core businesses.
The primary goal of the reorganization is for Thermo Electron and each of
its spun-off subsidiaries to focus on their core businesses. The revised
reorganization plan also includes the proposed sale of each of Thermo
TerraTech's businesses. Thermo Electron intends to sell Thermo TerraTech's
businesses because Thermo Electron has decided to focus exclusively on
instrument businesses.
The component of the reorganization plan that involves taking some
subsidiaries private will reduce Thermo Electron's working capital by
approximately $325 million (of $1.45 billion in working capital at January 1,
2000). The results of operations of the businesses to be sold or spun off as
part of the reorganization are classified as discontinued operations in Thermo
Electron's financial statements included in its Annual Report on Form 10-K for
the year ended January 1, 2000. Revenues and loss from discontinued operations
were $1.83 billion and $111.5 million, respectively, in 1999.
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As of August 9, 2000, the status of the reorganization was as follows:
- Thermo Electron had acquired the publicly held minority equity interests
in 15 of its subsidiaries;
- Thermo Electron had set dates for the mergers of three additional
subsidiaries into Thermo Electron;
- Thermo Electron was seeking buyers for two of its publicly traded
subsidiaries;
- Thermo Electron had filed a ruling request with the IRS relating to the
two proposed spin-offs; and
- Thermo Electron was evaluating its options for its subsidiary,
Spectra-Physics Lasers, Inc.
Thermo Electron currently expects that it will complete the acquisitions of
minority interests in its subsidiaries in the third quarter of 2000 and the
spin-offs at the end of 2000 or early in 2001.
In addition, as of August 9, 2000, Thermo Electron had sold businesses with
total 1999 revenues of approximately $508.1 million under its reorganization
plan. Thermo Electron received total gross proceeds, including both cash and
non-cash consideration, of approximately $545.5 million from these sales.
If Thermo Electron completes its reorganization as described above, it will
not have any public subsidiaries, unless it decides to keep Spectra-Physics
Lasers as a public subsidiary.
Thermo Electron has acquired the minority public interest in some of its
subsidiaries for cash, while in other cases it is issuing its common stock in
exchange offers or mergers. The primary factor in Thermo Electron's decision
whether to offer the minority stockholders cash or common stock was the
outstanding principal amount, if any, and due date, of that subsidiary's
convertible debentures. In a stock-for-stock merger or exchange offer, these
debentures become convertible into Thermo Electron common stock. If Thermo
Electron takes the subsidiary private in a cash transaction, it must repay these
debentures immediately. For example, if Thermo Electron had offered cash in
exchange for each outstanding share of TerraTech common stock in this proposed
merger, it would have been required to repay an aggregate of $111,850,000 in
principal amount of Thermo TerraTech's debentures.
BACKGROUND: THE MERGER
As part of the ongoing review of Thermo Electron's entire corporate
structure in April, 1999, Thermo Electron's management began to examine Thermo
TerraTech's status as a public subsidiary. Thermo Electron examined the
following factors:
- the financial performance and profitability of Thermo TerraTech;
- uncertainty regarding Thermo TerraTech's future growth prospects;
- the potential benefits to Thermo TerraTech if it were to become part of a
larger business unit;
- recent public capital market trends affecting small companies, and how
those trends had affected Thermo TerraTech, including the low liquidity
for the public stockholders and the absence of significant analyst
coverage of the TerraTech common stock;
- the latest trends and conditions in Thermo TerraTech's markets, including
the easing by several state environmental authorities of underground
storage tank compliance and remediation requirements, resulting in more
lenient regulatory standards and lower levels of cleanup activity in most
states in which Thermo TerraTech conducts business, the increasing
availability of lower-priced disposal alternatives, and the seasonality of
Thermo TerraTech's businesses, which affects the work performed at Thermo
TerraTech's soil-remediation and fluids-recycling sites;
- Thermo TerraTech's debt, including $111,850,000 under its 4 5/8%
convertible subordinated debentures due May 2003, of which $515,000 is
owed to Thermo Electron, together with the $37,950,000 owed by ThermoRetec
under its 4 7/8% convertible subordinated debentures due
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May 2000, of which $4,300,000 was owed to Thermo Electron until the
maturity date of the ThermoRetec debentures on May 1, 2000;
- reducing the public information available to competitors about Thermo
TerraTech's business, which would result from Thermo TerraTech no longer
having to file reports with the SEC;
- eliminating other burdens on management from public reporting and other
tasks required of public companies, including, for example, time and
resources of management given to stockholder and analyst inquiries, and
investor and public relations;
- the costs associated with being a public company. For example, as a
private company Thermo TerraTech would no longer be required to file
quarterly, annual or other periodic reports with the SEC or publish and
distribute to its stockholders annual reports and proxy statements. Thermo
Electron anticipates that eliminating these requirements could result in
savings of approximately $450,000 per year, including fees for an audit by
an independent accounting firm and legal fees; and
- the ability of Thermo TerraTech's management to focus on long-term
business goals, as opposed to quarterly earnings, as a private company.
The uncertainty of Thermo Electron's management regarding Thermo TerraTech's
future growth prospects stemmed in large part from Thermo Electron's
observations of the unpredictability of consistent revenues from Thermo
TerraTech's service-based subsidiaries that are subject to seasonal influences,
such as The Randers Killam Group Inc. and ThermoRetec Corporation. Thermo
Electron believed that it was better able overall to absorb any fluctuations in
Thermo TerraTech's business, and that any uncertainties could be more closely
managed by Thermo Electron if Thermo TerraTech were no longer a public company.
As described below, Thermo Electron has taken Randers Killam and ThermoRetec
private in mergers for cash. The transactions involving Randers Killam and
ThermoRetec had originally been announced in August 1998. In the original
proposal, Randers Killam and ThermoRetec were to be taken private by Thermo
TerraTech in exchange for Thermo TerraTech stock. However, also as described
below, Thermo Electron ultimately decided that Thermo TerraTech would be taken
private as well, and therefore the proposed mergers with ThermoRetec and Randers
Killam were modified to become mergers with Thermo Electron in exchange for
Thermo Electron common stock. The consideration in the ThermoRetec and Randers
Killam mergers was later modified again to become cash.
Thermo Electron decided to propose mergers with Thermo TerraTech and its two
publicly traded subsidiaries as part of its corporate reorganization because all
three companies shared similar factors, as described in this section, that
weighed in favor of not maintaining them as publicly traded companies. Moreover,
because the financial results of Randers Killam and ThermoRetec are consolidated
with Thermo TerraTech's financial results, the unpredictability of revenues from
those two subsidiaries had negatively affected Thermo TerraTech's revenues.
Thermo Electron management also considered the relatively low volume of
trading in the TerraTech common stock and considered that the merger would
result in the public stockholders' receiving a somewhat more liquid, more
readily tradeable security in the form of the Thermo Electron common stock.
Management of Thermo Electron also considered that acquiring the minority
stockholder interest in Thermo TerraTech would advance the goal of Thermo
Electron's corporate reorganization, in the form in which it was then proposed,
to reduce the number of majority-owned, public subsidiaries of Thermo Electron.
Management of Thermo Electron also considered recent trends in the price of the
TerraTech common stock, although Thermo TerraTech's current stock price was not
a significant factor in the timing of Thermo Electron's decision to pursue the
merger.
Thermo Electron also considered the advantages and disadvantages of some
alternatives to acquiring the minority stockholder interest in Thermo TerraTech,
including (1) selling its ownership of Thermo TerraTech and (2) leaving Thermo
TerraTech as a majority-owned, public subsidiary.
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The first alternative, of selling Thermo Electron's equity interest in
Thermo TerraTech, was briefly considered by Thermo Electron management. However,
Thermo Electron at the time did not want to sell its ownership of Thermo
TerraTech, but rather intended to retain Thermo TerraTech as a part of Thermo
Electron. Thermo Electron believed that it was better able to absorb the
fluctuations in Thermo TerraTech's value than were the individual public
stockholders. Thermo Electron acknowledged that, while there were certain
characteristics of the TerraTech common stock that made Thermo TerraTech less
attractive as a public company, such as the overall downward trend of the price
of the common stock since the middle of 1997, the small public float which
resulted in limited liquidity for the public stockholders, and the absence of
significant analyst coverage, Thermo Electron still wanted to keep Thermo
TerraTech's operating businesses as part of its offerings to customers.
Accordingly, Thermo Electron determined that, while at that time it did not want
to sell Thermo TerraTech and wanted instead to maintain Thermo TerraTech's
business substantially as it was being operated, with the exception of
businesses that had been announced to be sold, it also did not want to keep
Thermo TerraTech as a public subsidiary. Thermo Electron did not consider any
other strategic alternatives at the time for Thermo TerraTech because it was
satisfied, based on its review of Thermo TerraTech and its fit within the Thermo
Electron organization, that the option of retaining its ownership of Thermo
TerraTech was preferable to any other option.
Thermo Electron has since determined that it will sell Thermo TerraTech's
businesses, as part of a comprehensive reorganization of Thermo Electron. Thermo
Electron decided to sell Thermo TerraTech's businesses as a result of a thorough
review of its corporate structure, in which Thermo Electron decided that it
would focus exclusively on its instrument businesses. Thermo TerraTech's
businesses consequently do not fit within Thermo Electron's future focus.
The advantages to leaving Thermo TerraTech as a majority-owned, public
subsidiary of Thermo Electron which were considered by Thermo Electron at the
time included the following:
- not having to issue additional shares of Thermo Electron common stock at a
time when the price of the shares was relatively low; and
- maintaining Thermo TerraTech's access to capital in the public markets as
a public company.
The disadvantages to leaving Thermo TerraTech as majority-owned, public
subsidiary which were considered by Thermo Electron at the time included the
following:
- the burden on Thermo TerraTech of its debt, including debt owed to Thermo
Electron;
- the costs of being a public company, including costs of SEC reporting
obligations and public and investor relations functions; and
- the public information available to competitors about Thermo TerraTech's
business through its SEC filings.
Thermo Electron concluded that the advantages of leaving Thermo TerraTech as
a majority-owned, public subsidiary were outweighed by the disadvantages, and
accordingly that alternative was rejected. Thermo TerraTech as a private company
would no longer have the pressures of public company reporting and close
scrutiny by competitors to interfere with its exclusive focus on managing and
operating its business. In addition, at the time the merger was originally
considered, the former public stockholders of Thermo TerraTech would transfer
their ownership of Thermo TerraTech to a company of which Thermo TerraTech was
still a part, which would mean that future strong financial performance by
Thermo TerraTech could potentially be reflected in the form of a potential
increase in the Thermo Electron stock price.
In April 1999, management of Thermo Electron decided to propose to the board
of directors of Thermo Electron that it include Thermo TerraTech in the
corporate reorganization and make an offer to acquire all of the shares of
TerraTech common stock that Thermo Electron did not already own, for shares of
Thermo Electron common stock.
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On May 5, 1999, the board of directors of Thermo Electron held a special
meeting at which Thermo Electron's management presented the proposal for Thermo
Electron to acquire all of the shares of common stock held by the public
stockholders of Thermo TerraTech. At that meeting, the Thermo Electron board of
directors discussed several factors presented by management regarding the
proposal, including the factors described in the preceding paragraphs.
The Thermo Electron board of directors also discussed the fact that
acquiring the minority stockholder interest in Thermo TerraTech would advance
the goal of Thermo Electron's proposed corporate reorganization, in the form in
which it was then proposed. After consideration of these factors, Thermo
Electron's board of directors authorized revisions to its corporate
reorganization plan to include taking Thermo TerraTech private.
On May 5, 1999, Thermo Electron issued a press release announcing that
Thermo TerraTech would be included in the reorganization of Thermo Electron and
its subsidiaries. Accordingly, under the revised plan, Thermo Electron would
acquire the minority interest in Thermo TerraTech, and Thermo Electron, rather
than Thermo TerraTech, would acquire the minority interests in Thermo
TerraTech's then majority-owned subsidiaries, ThermoRetec and Randers Killam.
The decisions to take Randers Killam and ThermoRetec private had already been
made at the time the decision was made to merge Thermo TerraTech into Thermo
Electron, and therefore the going-private transactions involving Randers Killam
and ThermoRetec did not have a material impact on the analysis by the Thermo
Electron board of directors or the single member committee of the value of
Thermo TerraTech. Because the decisions to take ThermoRetec and Randers Killam
private had been made independent of the decision to take Thermo TerraTech
private, the going-private decisions involving ThermoRetec and Randers Killam
were not considered by the Thermo Electron board of directors and the special
committee in their fairness analyses of the proposed transaction with Thermo
TerraTech. However, as described in "--Opinion of Adams, Harkness & Hill", the
financial results of both Randers Killam and ThermoRetec and their impact on the
consolidated financial results of Thermo TerraTech were analyzed by Adams,
Harkness & Hill in their report to the special committee.
Thermo Electron had originally proposed that Thermo TerraTech acquire the
public minority interests in ThermoRetec and Randers Killam in exchange for
stock of Thermo TerraTech. When it was decided that Thermo Electron would take
Thermo TerraTech private as well, the proposed consideration to the public
stockholders of ThermoRetec and Randers Killam was initially changed from
TerraTech common stock to Thermo Electron common stock. Due to the following
considerations relating to each of Randers Killam and ThermoRetec, and apart
from considerations relating to the proposed merger between Thermo Electron and
Thermo TerraTech, the public stockholders of Randers Killam and ThermoRetec
ultimately received $4.50 and $7.00 in cash per share, respectively, in exchange
for their shares of common stock of Randers Killam and ThermoRetec. The
considerations that led to the change in the form of consideration from stock of
Thermo Electron to cash were
- the fact that Randers Killam had not issued debentures that would come due
as a result of issuing cash in exchange for the public minority interest
in the company, and that the principal amount of ThermoRetec's debentures
was relatively small compared to other Thermo Electron companies'
debentures and was due comparatively soon, in May 2000;
- a desire on Thermo Electron's part to limit the number of additional
shares of its common stock that would be issued as consideration in the
proposed mergers; and
- in ThermoRetec's case, the advice of its tax consultants that obtaining
tax-free treatment under the Internal Revenue Code for the proposed
stock-for-stock transaction between ThermoRetec and Thermo Electron would
be difficult due to changes in Thermo Electron's beneficial ownership of
ThermoRetec before the merger.
The merger agreements between Thermo Electron and each of Randers Killam and
ThermoRetec were adopted by the stockholders of the subsidiaries at special
meetings held on May 15, 2000 and
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June 5, 2000, respectively. Following the special meetings, the companies were
each taken private and are now jointly-owned subsidiaries of Thermo Electron and
Thermo TerraTech.
The board of directors of Thermo TerraTech met on May 6, 1999 and decided
that, because Thermo Electron controlled approximately 87% of the outstanding
common stock of Thermo TerraTech, it wanted to appoint a special committee to
act on behalf of and in the interests of its public stockholders to evaluate the
merits of and negotiate the proposed transaction. The special committee would
also make a recommendation to the full board of directors of Thermo TerraTech on
whether or not to approve the transaction. The board appointed Mr. Polyvios
Vintiadis to act as the sole member of the committee. The board authorized the
single member committee to retain a legal advisor, an investment bank to provide
a fairness opinion and any other professional advisors that the single member
committee decided were necessary or appropriate to assist it in carrying out its
duties. The board also gave the single member committee and its advisors access
to all of the officers and management of Thermo TerraTech, Thermo Electron and
its direct and indirect subsidiaries, and their books, records, projections and
financial statements that the single member committee and its advisors believed
were needed for their review. The Thermo TerraTech board of directors, in
appointing Mr. Vintiadis to the single member committee, noted that
Mr. Vintiadis' position as a director of Thermo Instrument Systems Inc., then a
majority-owned subsidiary of Thermo Electron, and Randers Killam, then a
majority-owned subsidiary of Thermo TerraTech, did not prevent him from
fulfilling his duties as an independent member of the single member committee.
Mr. Vintiadis elected to resign from the board of directors of Randers Killam
effective July 26, 1999, because Randers Killam was proposed to be taken private
as part of Thermo Electron's corporate reorganization. Mr. Vintiadis did not
resign from the Thermo Instrument board because Thermo Instrument is not part of
the Thermo TerraTech group of Thermo Electron subsidiaries, and thus the Thermo
TerraTech board of directors believed that Mr. Vintiadis' continued service as a
member of the Thermo Instrument board would not interfere with his obligations
as part of the Thermo TerraTech single member committee.
In May 1999, the single member committee considered several law firms to act
as its legal advisor, and elected to retain Choate, Hall & Stewart as counsel to
the single member committee. The single member committee considered that Choate
Hall had already been selected to represent the single member committee of the
board of directors of Randers Killam in connection with Thermo Electron's
proposed acquisition of the minority interest of Randers Killam. The single
member committee believed it to be an advantage that Choate Hall was already
familiar with the companies involved in the transaction and that it had already
started its due diligence review of Thermo Electron. The single member committee
also determined that the interests of the single member committees of Thermo
TerraTech and Randers Killam were adverse to Thermo Electron and not adverse to
each other in the proposed two transactions.
In May 1999, the single member committee met with Choate Hall and discussed
the duties of single member committees in situations such as this one. The
single member committee discussed a proposed schedule for hiring an investment
banker and for conducting due diligence in connection with the proposed
transaction, including discussions with management of Thermo TerraTech, Randers
Killam, ThermoRetec and Thermo Electron about the business, financial condition
and prospects of Thermo TerraTech and Thermo Electron. The sole member of the
committee had substantial experience in working with investment bankers. Over
the next few weeks, the single member committee requested proposals from and
conducted telephone interviews with two investment banking firms, including
Adams, Harkness & Hill, Inc.
After due deliberation, the single member committee decided in late
May 1999 to retain Adams, Harkness & Hill. The single member committee selected
Adams, Harkness & Hill because of its reputation and experience generally, and
in particular its experience in providing fairness opinions in public
transactions. The single member committee considered that Adams, Harkness & Hill
had not previously acted as a financial advisor to or provided investment
banking services for Thermo Electron or any of its subsidiaries. The single
member committee also considered that Adams, Harkness & Hill
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was located in Boston and could therefore meet more easily with the single
member committee and conduct its due diligence review of Thermo Electron. In
making its decision to engage Adams, Harkness & Hill, the single member
committee noted and considered that Adams, Harkness & Hill already represented
the single member committee of the board of directors of Randers Killam and had
been contacted about representing the single member committee of the board of
directors of ThermoRetec about rendering its opinions as to the fairness of the
consideration to be issued to the respective public stockholders of ThermoRetec
and Randers Killam in connection with the proposed mergers. The single member
committee determined that the interests of the single member committees of
Thermo TerraTech, Randers Killam and ThermoRetec were adverse to Thermo Electron
and not adverse to each other in the proposed transactions and that retention of
Adams, Harkness & Hill by the single member committee was appropriate. The
single member committee decided that, given the corporate structure of Thermo
Electron, Thermo TerraTech, which is a first tier subsidiary of Thermo Electron,
and Randers Killam and ThermoRetec, which at the time were each majority-owned
subsidiaries of Thermo TerraTech, Adams, Harkness & Hill's engagement in the
parallel mergers and more detailed knowledge of Thermo Electron and its
subsidiaries would be an advantage to the single member committee. Adams,
Harkness & Hill agreed to assist the single member committee in, among other
things:
- conducting due diligence on Randers Killam, ThermoRetec and Thermo
Electron, including visiting the facilities and interviewing the
management of Thermo TerraTech, Randers Killam, ThermoRetec and Thermo
Electron;
- reviewing Thermo TerraTech and Thermo Electron's operating results and
financial position, in the context of the business condition in the
industry segments in which Thermo TerraTech and Thermo Electron compete
and reviewing similar information for a peer group of companies comparable
to Thermo TerraTech and Thermo Electron;
- evaluating the historical stock prices of Thermo TerraTech, Thermo
Electron and their peer group;
- identifying comparable business combinations and assessing the terms of
these precedent business combinations;
- preparing an analysis of Thermo TerraTech to determine valuation
parameters for Thermo TerraTech;
- assisting in evaluating and negotiating the terms and conditions of any
proposed offer from Thermo Electron; and
- providing a written opinion, and any oral opinions, if requested, as to
the fairness, from a financial point of view, of the consideration to be
received by the public stockholders in connection with any proposed offer
from Thermo Electron.
Following its engagement, Adams, Harkness & Hill continued its due diligence
review and analysis, including preparation of a financial model that
incorporated financial projections provided by Thermo TerraTech's and Thermo
Electron's management, review of the valuations of comparable public companies
and the financial terms of comparable merger transactions, and preparation of
discounted cash flow valuations. See "--Opinion of Adams, Harkness & Hill".
On May 24, 1999, Thermo TerraTech announced its plan to sell some operating
units of its majority-owned subsidiary, Randers Killam, including its Randers
division, BAC Killam and E3-Killam. In addition, Thermo TerraTech announced that
its majority-owned private subsidiary, Thermo EuroTech N.V., would sell its
used-oil processing operations and that ThermoRetec would sell some of its
soil-recycling facilities. As of the date of mailing this proxy
statement-prospectus to stockholders, Thermo TerraTech has entered into a
definitive agreements to sell some of these operating units, as set forth in
"INFORMATION ABOUT THERMO TERRATECH, THERMO ELECTRON AND TTT ACQUISITION--Thermo
TerraTech". Under the merger agreement, Thermo Electron must notify the single
member committee of any offers it receives for these businesses which contain a
proposed
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purchase price of greater than $3 million or in which the total value of the
assets being sold is greater than $3 million.
On June 8, 1999, the single member committee met with Adams, Harkness & Hill
and Choate Hall to review the status of the legal and financial due diligence
and discuss the proposed schedule for the transaction, including the timing of
Thermo Electron's proposed offer.
Throughout June and July, Adams, Harkness & Hill provided the single member
committee with regular updates on its progress on due diligence and preliminary
valuation methods. On July 22, 1999, the single member committee met with Adams,
Harkness & Hill and Choate Hall to review the preliminary valuation of Thermo
TerraTech and Thermo Electron established by Adams, Harkness & Hill and to
prepare for Thermo Electron's presentation and offer. The single member
committee decided in advance that it would defer responding to any offer until
it had fully considered the offer, reviewed its underlying assumptions and
analyses, and assessed the merits of the offer. Adams, Harkness & Hill discussed
the valuation methodologies it employed, including without limitation those
discussed in "--Opinion of Adams, Harkness & Hill", in determining its
preliminary valuations. The single member committee, Adams, Harkness & Hill and
Choate Hall discussed the appropriateness of the assumptions and analyses used
by Adams, Harkness & Hill in the preliminary valuation. There was also a
detailed discussion of the valuation methodologies used by Adams, Harkness &
Hill and any material assumptions used by Adams, Harkness & Hill to prepare its
preliminary valuation. After discussion, the single member committee authorized
Adams, Harkness & Hill to engage Environmental Business International, Inc., an
environmental consultant, for the limited purpose of reviewing assumptions about
the environmental industry in Adams, Harkness & Hill's preliminary valuation.
See "--Opinion of Adams, Harkness & Hill." Choate Hall again discussed with the
single member committee the duties and responsibilities of the independent
committee of the board of directors in evaluating and negotiating the terms of
the offer. Although the Thermo TerraTech board did not believe that
Mr. Vintiadis' service on the boards of Thermo TerraTech and Randers Killam
created an actual conflict of interest, in order to avoid the appearance of a
potential conflict, Mr. Vintiadis resigned as a director of Randers Killam
effective on July 26, 1999, prior to the beginning of negotiations with Thermo
Electron.
On July 23, 1999, Thermo Electron provided the single member committee and
Choate Hall with an initial draft of the merger agreement, which did not contain
proposed financial terms. The single member committee instructed Choate Hall to
review the proposed merger agreement and negotiate the agreement along the lines
discussed with the single member committee.
On August 16, 1999, Thermo Electron provided the single member committee
with a proposal to acquire the outstanding shares of Thermo TerraTech. Under
this proposal, each outstanding share of TerraTech common stock held by the
public shareholders would be exchanged for 0.26 share of Thermo Electron common
stock. On August 16, 1999, the date of the proposal, the closing stock prices
for Thermo TerraTech and Thermo Electron were $5.25 and $16.875, respectively.
While the terms of the proposal included a premium on the market value of the
TerraTech common stock, a substantial premium also had been added to the Thermo
Electron common stock, reflecting Thermo Electron's belief that its common stock
was then undervalued by the financial markets. The single member committee
instructed Adams, Harkness & Hill to review the terms of and assumptions
underlying the proposed exchange ratio.
On August 20, 1999, the single member committee held a telephone meeting
with Adams, Harkness & Hill and Choate Hall to review the proposed exchange
ratio. After detailed discussion, the single member committee determined that
Thermo Electron would have to propose a more acceptable alternative. The single
member committee decided that no proposed exchange ratio would be considered
that valued TerraTech common stock at less than its current market value or that
valued Thermo Electron stock at a premium to its then market value. The single
member committee also discussed possible ways to protect the public stockholders
from fluctuations in the price of TerraTech and Thermo Electron common stock,
including a collar on the proposed valuation and a oral update of
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the Adams, Harkness & Hill fairness opinion, as of the date the proxy
statement-prospectus is sent to Thermo TerraTech stockholders and/or immediately
prior to closing the transaction, to ensure that the transaction remained fair.
The single member committee also discussed the possibility of requiring that the
merger agreement be adopted by a majority of the public stockholders. The single
member committee subsequently determined that this requirement, which Thermo
Electron indicated it would not agree to, was unnecessary in light of other
procedural safeguards in the merger agreement. See "--The Single Member
Committee's and the Board's Recommendation". The single member committee
discussed requiring a "collar" on the proposed value of the deal, including a
minimum dollar value, or "floor", for each share of Thermo TerraTech common
stock held by the public stockholders. Using a "floor" would mean that, if the
market value of Thermo Electron common stock to be issued in the merger went
below the proposed floor, the exchange ratio would be adjusted so that each
outstanding share of TerraTech common stock would be worth the number of shares
of Thermo Electron common stock equal to a fixed dollar amount. For this
purpose, the Thermo Electron common stock would be valued based on the average
closing price of the stock during a specified period before the effective date
of the merger. Similarly, since the use of a collar on the value of a deal
typically involves both a floor value and a "ceiling" value, Mr. Vintiadis
suggested that, both as a matter of negotiating parity between the two sides and
customary practice, a maximum dollar value, or ceiling, could be placed on each
share of the TerraTech common stock held by the public stockholders if the
Thermo Electron common stock exceeded a set price. The single member committee
asked Adams, Harkness & Hill and Choate Hall to consider a two-way collar on the
price of Thermo Electron common stock. The single member committee also asked
Choate Hall to continue negotiations on the merger agreement along the lines
discussed at the meeting.
On August 24, 1999, Adams, Harkness & Hill formally communicated to
Mr. Theo Melas-Kyriazi, the chief financial officer of Thermo Electron, that the
exchange ratio which Thermo Electron had proposed was unacceptable and presented
the proposed collar structure. On August 26, 1999, Thermo Electron responded
with a new proposal that contained no premium on the trading price of Thermo
Electron common stock and a proposed implied exchange ratio of 0.4 share of
Thermo Electron common stock for each outstanding share of TerraTech common
stock held by the public stockholders. The exchange ratio would be subject to
adjustment based on the average closing price of Thermo Electron common stock
during a specified period prior to the effective time of the merger, but would
provide a minimum value, or floor, of $6.00 and a maximum value, or ceiling, of
$8.00 for each outstanding share of TerraTech common stock. The 0.4 proposed
exchange ratio was the equivalent of $6.425 per share of TerraTech common stock,
based on the $16.0625 closing price of Thermo Electron common stock on
August 24, 1999.
Later, on August 26, 1999, the single member committee held a telephone
meeting with Adams, Harkness & Hill and Choate Hall to discuss Thermo Electron's
revised proposal. After extensive discussion, the single member committee
determined that the overall value of Thermo TerraTech was still greater than
what was reflected in Thermo Electron's revised proposal. The single member
committee and Adams, Harkness & Hill believed that the prevailing trading price
of Thermo TerraTech did not reflect the underlying value of the company since,
among other considerations, the stock was thinly-traded. Moreover, in some cases
Thermo Electron had used different assumptions in its valuation of Thermo
TerraTech than those used in Adams, Harkness & Hill's preliminary projections.
The single member committee instructed Adams, Harkness & Hill to ask for an
increase in both the proposed minimum value and maximum value per share. The
closing price of Thermo Electron common stock on August 26, 1999 was $16.3125.
On August 23, 1999, the last day on which the TerraTech common stock traded
prior to August 26, 1999, the closing price of the TerraTech common stock was
$5.5625.
Several days later, Thermo Electron revised its proposal. On August 31,
1999, the single member committee held a telephone meeting with Adams,
Harkness & Hill and Choate Hall to discuss Thermo Electron's most recent
proposal, which contained an implied exchange ratio of 0.4 share of Thermo
Electron common stock for each share of outstanding TerraTech common stock held
by the public
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stockholders, subject to adjustment but having a minimum value of $6.80 and a
maximum value of $8.50 for each outstanding share. After discussion with Adams,
Harkness & Hill, the single member committee determined that although the
maximum value was acceptable, the proposed floor of $6.80 per share still did
not reflect sufficient overall value for Thermo TerraTech. After a discussion of
applicable legal requirements, the single member committee's responsibilities
and the applicability of the various pricing valuation models, the single member
committee determined that it would continue to seek a minimum price higher than
$6.80 per share. After several discussions between the single member committee
and Thermo Electron, in which the single member committee indicated that the
minimum value should be increased to $7.00 per share, Thermo Electron proposed
that the exchange ratio remain at 0.4, subject to a minimum value of $7.00 and a
maximum value of $8.50 for each outstanding share of TerraTech common stock. On
September 2, 1999, the single member committee indicated that it was prepared to
recommend this transaction as fair from a financial point of view to the public
stockholders, subject to negotiation of the other terms of the merger agreement
and delivery by Adams, Harkness & Hill of a fairness opinion. The closing prices
for Thermo Electron common stock and TerraTech common stock on September 1, 1999
were $15.875 and $5.375, respectively.
On September 7, 1999, the single member committee was told that Thermo
TerraTech's then majority-owned subsidiary, ThermoRetec, might shortly be
awarded a material contract which could increase the value of ThermoRetec and,
therefore, Thermo TerraTech. The single member committee decided to postpone
meeting with the full board of directors of Thermo TerraTech and making a
recommendation with respect to the merger until the impact, if any, of the new
ThermoRetec contract, if awarded, on the price of the TerraTech common stock
could be quantified and until negotiations between Thermo Electron and the
ThermoRetec single member committee were completed. These activities occurred
throughout September and the beginning of October. On October 7, 1999, Thermo
Electron made a new proposal to the single member committee, subject to approval
of a final merger agreement. After discussions with Adams, Harkness & Hill and
Choate Hall, the single member committee accepted Thermo Electron's offer of an
exchange ratio of 0.4, subject to adjustment but having a minimum value of $7.25
and a maximum value of $8.50 for each outstanding share of TerraTech common
stock.
The negotiations with the single member committee relating to the proposed
merger were not affected by Thermo Electron's ongoing reorganization plan,
except in the following manner. Although the price of the Thermo Electron common
stock during the latter part of negotiations relating to the merger agreement
was below the range set forth in the collar, Thermo Electron expected that its
stock price would increase as progress was made on its reorganization plan, in
the form in which it was then proposed, and that by the time the merger was
completed, the Thermo Electron stock price would have increased to be within the
range set forth in the collar. At the time the merger agreement was entered
into, Thermo Electron had not yet formulated its reorganization plan in its
current form, and accordingly had no plan at the time to sell Thermo TerraTech's
businesses.
On October 19, 1999, Adams, Harkness & Hill met with the single member
committee and Choate Hall to give its final report on the terms of the proposed
merger and rendered its oral opinion to the single member committee that the
proposal by Thermo Electron, of an exchange ratio of 0.4 share of Thermo
Electron common stock for each share of TerraTech common stock, subject to
adjustment but having a minimum value of $7.25 and a maximum value of $8.50 per
share was fair, from a financial point of view, to the public stockholders.
Adams, Harkness & Hill reviewed the various factors it considered in rendering
its opinion, which are described below under "--Opinion of Adams, Harkness &
Hill." The full board of directors of Thermo TerraTech then met to hear the
report of the single member committee and Adams, Harkness & Hill, to review the
terms of the merger agreement and to review the recommendations of the single
member committee.
After the terms of the transaction were outlined but before Adams, Harkness
& Hill provided its report or the single member committee made its
recommendation, the board meeting was adjourned. During the adjournment,
representatives of Thermo Electron expressed concern to the single member
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committee and its advisors over the decline in the trading price of the Thermo
Electron common stock since September. Thermo Electron's representatives also
expressed concern that Thermo Electron's board of directors would not support a
transaction which did not have a mechanism for limiting the potential dilution
to Thermo Electron's stockholders from the merger if the trading price of Thermo
Electron's common stock experienced a substantial drop. In other words, Thermo
Electron was concerned that the adjustments to the exchange ratio did not, as
then proposed, have any limit on the number of shares of Thermo Electron common
stock that could be issued. The representatives of Thermo Electron then left the
room and the single member committee met alone with its advisors. After a
detailed discussion of Thermo Electron's concerns, the single member committee
invited Mr. Melas-Kyriazi, acting on behalf of Thermo Electron, to meet with the
single member committee and its advisors. Mr. Melas-Kyriazi proposed to the
single member committee that the exchange ratio should not be permitted to
increase beyond a ratio of 0.65 shares of Thermo Electron common stock for each
share of TerraTech common stock. In other words, the exchange ratio would be
capped at 0.65 even if the price of Thermo Electron common stock fell to a level
which would otherwise have required a higher ratio. Mr. Melas-Kyriazi then left
the room and the single member committee again met privately with Choate Hall
and Adams, Harkness & Hill. After discussion, the single member committee
determined that it was reasonable that Thermo Electron have the ability to put
some limit on the total number of shares issuable in the merger. However, the
single member committee rejected Thermo Electron's proposal as presented because
it did not leave sufficient room for a potential decline in Thermo Electron's
common stock and would have required that Thermo TerraTech proceed with the
transaction even if the Thermo Electron common stock suffered a material decline
not protected by the collar. The single member committee advised Thermo Electron
that it believed Thermo Electron should only be in a position to not proceed
with the transaction if there were a substantial drop in Thermo Electron's stock
price. Thermo Electron then proposed to change the terms of the merger agreement
so that either party would be allowed to terminate the agreement if the average
of the closing prices of Thermo Electron common stock for a specified period
prior to the closing fell below a set number. After discussion and several
private meetings with its advisors, the single member committee agreed that, if
Thermo Electron would be required to issue, as a result of adjustments to the
exchange ratio, more than 1.8 million shares of Thermo Electron common stock to
the public stockholders, Thermo Electron could terminate the agreement. If
Thermo Electron did not terminate the merger agreement, no cap would be placed
on the upward adjustments to the exchange ratio and therefore there would be no
limit on the number of shares of Thermo Electron common stock issuable. In
connection with, and as a condition to, the addition of this provision limiting
the number of shares Thermo Electron would be required to issue, the single
member committee requested, and Thermo Electron agreed to, an increase in the
maximum value of the collar from $8.50 per share to $9.25 per share. In
addition, the single member committee requested and Thermo Electron agreed to
delete the provision which Thermo Electron had demanded be included in the
merger agreement pursuant to which Thermo Electron could refuse to close the
TerraTech merger if either of the proposed mergers of Thermo Electron with
Randers Killam or ThermoRetec did not close.
Adams, Harkness & Hill again met with the single member committee and
rendered its oral opinion to the single member committee that the revised
proposal by Thermo Electron, of an exchange ratio of 0.4 share of Thermo
Electron common stock for each share of TerraTech common stock, subject to
adjustment but having a minimum value of $7.25 and a maximum value of $9.25 was
fair, from a financial point of view, to the public stockholders. The meeting of
the full board then resumed, Adams, Harkness & Hill made its presentation and
the single member committee then recommended to the full board that it accept
Thermo Electron's offer and approve the merger agreement in the form presented
at the meeting. Adams, Harkness & Hill rendered its written opinion to the
single member committee on October 19, 1999, that, as of that date, the per
share consideration to be received in the proposed merger was fair, from a
financial point of view, to the public stockholders. The board of directors
unanimously approved the merger agreement, declared its advisability and
recommended that
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the stockholders vote in favor of the proposed merger. The 0.4 proposed exchange
ratio was the equivalent of $5.225 per share of TerraTech common stock, based on
the $13.0675 closing price of Thermo Electron common stock on October 19, 1999.
Later on October 19, 1999, the merger agreement was presented to the board
of directors of Thermo Electron at a special meeting. Thermo Electron's board of
directors unanimously approved the merger agreement. The merger agreement was
then duly executed by the parties. The next day, Thermo TerraTech issued a press
release announcing that, based on the recommendation of the single member
committee, its board of directors had approved the merger agreement with Thermo
Electron.
On January 31, 2000, Thermo Electron announced its revised reorganization
plan, under which it intends to sell each of Thermo TerraTech's businesses. By
the time Thermo Electron made the decision to sell Thermo TerraTech's
businesses, in January 2000, several significant steps had already been taken
towards completing the proposed merger between Thermo Electron and Thermo
TerraTech. Thermo Electron and the single member committee had negotiated the
merger agreement, which had been approved by both the Thermo Electron and Thermo
TerraTech boards of directors and executed by the parties. Given the progress
that had been made towards the goal of making Thermo TerraTech a private
company, and towards providing the stockholders of Thermo TerraTech with an
ongoing equity interest in Thermo Electron in exchange for their Thermo
TerraTech shares, neither Thermo Electron nor Thermo TerraTech wanted to abandon
the proposed merger agreement.
Thermo Electron and Thermo TerraTech both considered that completing the
proposed merger would allow the public stockholders to take advantage of the
terms of the merger agreement that had been negotiated by the single member
committee and its advisors on their behalf. The single member committee had
extensively negotiated the terms of the proposed consideration to be paid to the
public stockholders, and believed that the deal as agreed to with Thermo
Electron was fair to them. If the parties did not proceed with the merger
agreement, the public stockholders would most likely not have the benefit of a
representative and the representative's advisors, appointed specifically to
represent their interests, in the sales of Thermo TerraTech's businesses. The
Thermo TerraTech businesses were being, or were proposed to be, marketed either
by management of those businesses or by investment banks for sale as individual
businesses, and not as part of a larger entity. Moreover, the businesses were
being, or were proposed to be, marketed for sale to independent third party
buyers, with whom Thermo TerraTech would have, or was having, vigorous
negotiations as to the appropriate sale prices. Given these facts, Thermo
TerraTech did not intend to appoint a special committee of its board of
directors to protect the interests of the public stockholders in the context of
the sales of Thermo TerraTech's businesses, because it believed that
- the interests of the public stockholders were already being adequately
represented by the single member committee and its advisors, and
- the prices for the businesses would be arrived at through arms'-length
negotiations with unrelated third parties who had not been brought to the
negotiations by Thermo Electron.
In addition, Thermo Electron and Thermo TerraTech believed that the fact
that it was highly unlikely that the Thermo TerraTech businesses would be sold
in one piece to a single buyer meant that the minority stockholders would not
receive payment for their portion of the proceeds, if any, at one time. This
also meant that, because Thermo TerraTech did not intend to distribute proceeds
from the sales until a complete liquidation of its businesses had occurred, the
public stockholders would not receive payment for their portion of the proceeds
until an indefinite date in the future, creating greater uncertainty for the
public stockholders. Further, the ability of the public stockholders to receive
their portion of the proceeds from the sales would be subject to any
post-closing adjustments and indemnity provisions that were negotiated as part
of the sales, which introduced additional uncertainty into the timing and size
of any payments that the stockholders would receive. Moreover, Adams, Harkness &
Hill had advised the single member committee that the Thermo TerraTech
businesses were not likely to be sold at prices higher than the value estimates
that Adams, Harkness & Hill had used in its original
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analysis, which would mean that the public stockholders were not likely to
receive a significant amount as their portion of any proceeds from the sales.
Adams, Harkness & Hill reached this conclusion regarding the anticipated prices
for Thermo TerraTech's businesses after discussions that it held with management
of the businesses that were to be sold and with management of Thermo TerraTech
and Thermo Electron. These discussions revealed that management did not expect
much competition to purchase these businesses, which had not demonstrated strong
historic financial performance or great promise for improved performance, and
that therefore management did not expect the businesses to be sold for more than
Adams, Harkness & Hill had originally estimated they would receive upon sale.
Thermo Electron also considered the advantages to itself of proceeding with
the proposed merger, as opposed to abandoning the merger agreement and selling
all of the businesses of Thermo TerraTech while it was still a public company.
Thermo Electron considered the fact that, under the terms of the merger
agreement, it was unable to terminate the agreement without obtaining the
consent of the single member committee. Thermo Electron also believed that its
credibility in the eyes of its stockholders and the stockholders of Thermo
TerraTech would be jeopardized if Thermo Electron were to abandon the plan to
merge with Thermo TerraTech, which could expose Thermo Electron to shareholder
lawsuits. This was based on the keen interest that stockholders of Thermo
Electron and its public subsidiaries had shown in the progress of the
reorganization, as demonstrated by inquiries to its Investor Relations
department and meetings between management of Thermo Electron and stockholders
at all levels of the organization.
Moreover, Thermo Electron had expended significant amounts of management
time and resources in structuring and negotiating the proposed merger with
Thermo TerraTech, and had reached what it believed to be an agreement that was
fair to the public stockholders of Thermo TerraTech from a financial point of
view. Finally, Thermo Electron desired to complete the merger with Thermo
TerraTech as soon as possible, so that it could turn its attention to other
parts of its reorganization plan. Thermo Electron believed that following
through with the merger as agreed to with the single member committee, instead
of abandoning that plan and preparing a proxy statement regarding the vote that
would have to be taken in order to approve the sale of all of the assets of
Thermo TerraTech, would more rapidly accomplish Thermo Electron's goals while at
the same time providing a benefit to the Thermo TerraTech public stockholders in
the form of the proposed merger consideration.
In light of these considerations, Thermo Electron and Thermo TerraTech
decided to proceed with the proposed merger, despite the announcement that
Thermo Electron ultimately planned to sell Thermo TerraTech's businesses.
As a result of the January 31 announcement regarding the revised
reorganization plan, Thermo Electron's financial statements had to be restated
to take into account the effect of several dispositions and the spinoffs of its
separation technologies and fiber-based products business and its medical
products business. Because Thermo Electron did not expect the restatement of its
financial statements to be complete until mid-March 2000, on March 29, 2000,
Thermo Electron approached the single member committee to request that it
consider extending the deadline under the merger agreement for completion of the
merger from March 31, 2000 until July 31, 2000.
During March 2000, the single member committee had also instructed Adams,
Harkness & Hill to consider the impact, if any, of the January 31, 2000
announcement on its opinion as to the fairness of the merger. Adams, Harkness &
Hill held several discussions with members of Thermo TerraTech's and Thermo
Electron's management in order to obtain updated information as to the status of
Thermo TerraTech's businesses and was given updated projections for Thermo
TerraTech. Adams, Harkness & Hill also examined Thermo TerraTech's latest
Quarterly Report on Form 10-Q and Thermo Electron's latest Annual Report on Form
10-K for the quarter and fiscal year, respectively, ended January 1, 2000. See
"PROJECTED FINANCIAL DATA OF THERMO TERRATECH" and "--Opinion of Adams,
Harkness & Hill'.
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On March 31, 2000, Thermo Electron was informed by its tax counsel, Hale and
Dorr LLP, that a result of Thermo Electron's January 31, 2000 announcement that
it intended to sell Thermo TerraTech's businesses was that the merger, which the
parties had previously believed would be a tax-free reorganization under federal
income tax laws, would instead likely be treated as taxable to the public
stockholders of Thermo TerraTech at the time of the merger. Consequently, Hale
and Dorr would be unable to provide the parties to the merger agreement with an
opinion that the merger would be treated as a tax-free reorganization for
federal income tax purposes. The delivery of this opinion was a condition to
Thermo TerraTech's obligations under the merger agreement, which also included a
covenant that Thermo Electron would not take any action that would affect the
tax-free treatment of the merger. Mr. Melas-Kyriazi contacted the single member
committee and its advisors on April 1, 2000 to inform them of this development.
In response to the single member committee's suggestion that the value of
the merger transaction to the public stockholders increase to reflect the change
from a tax-deferred to a potentially taxable transaction, Thermo Electron
management replied strongly that Thermo Electron would not consider such an
increase because management believed that the proposed transaction was already
extremely attractive to the Thermo TerraTech public stockholders. The single
member committee indicated it would discuss and analyze the development further
before making any decision on the matter and would consider whether proceeding
with the proposed form of the transaction was fair to the public stockholders as
opposed to not proceeding with the proposed transaction or negotiating an
alternative solution with Thermo Electron.
From April 3 until April 7, 2000, the single member committee held numerous
telephonic meetings with each of Adams, Harkness & Hill and Choate Hall to
review in detail the impact of the change in the terms of the merger to a
structure in which the public stockholders would realize a taxable gain or loss
in the TerraTech common stock at the time of the merger, rather than at a later
date, and the impact, if any, of these developments on its decision as to the
fairness of the merger. The single member committee and its advisors also
considered Thermo Electron's request for an extension of the deadline for
termination of the merger agreement from March 31, 2000 to July 31, 2000.
The single member committee and its advisors considered that the
stockholders of Thermo TerraTech who would recognize a loss on their shares in
the merger would potentially benefit from being able to recognize that loss at
the time of the merger, which would likely be sooner than they could have
recognized that loss in a tax-free reorganization. However, the single member
committee and its advisors also recognized that the stockholders who would
recognize a gain on their shares would be adversely affected in that they would
have to recognize the gain, and be taxed on that gain, sooner than they
otherwise would have under a tax-free reorganization. Moreover, the advisors to
the single member committee pointed out that the stockholders would be taxed
based on the value of the Thermo Electron common stock as of the merger date.
Accordingly, stockholders who recognized a gain would have to pay tax based on
that value even if the price of the Thermo Electron common stock declined after
the merger. In addition, a stockholder who was to recognize gain on his Thermo
TerraTech shares might have to sell some of the Thermo Electron shares he
acquired in the merger in order to pay the tax on the gain on his Thermo
TerraTech shares. The single member committee noted that if the financial
performance of the Thermo Electron common stock were to decline and approach the
minimum value of the collar, which was then set at $7.25, a public stockholder
might be required to sell a greater number of the Thermo Electron shares
acquired by the public stockholder in the merger to pay that tax.
Adams, Harkness & Hill analyzed the volume of trading and the prices at
which the TerraTech common stock had traded over the three years leading up to
April 2000 and determined that, except for trades after announcements relating
to the proposed merger, the TerraTech common stock had not traded at or above
$7.25 per share since January 1998. After consulting with Adams, Harkness &
Hill, the single member committee believed that if the closing price of the
transaction were at or close to the maximum value of the collar of $9.25, the
transaction would continue to be fair to the public
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stockholders even if taxable because it was providing a substantial premium to
the public stockholders over the historical market price of the TerraTech common
stock. The single member committee believed that it should seek an increase at
the low end of the range, rather than at the high end, to improve the ability of
the public stockholders to mitigate any tax consequence should they be required
to sell shares at the low end of the collar in order to pay any taxes on the
gain on the sale of their shares.
In the course of its deliberations, the single member committee also
considered whether the public stockholders would be better off if the proposed
merger did not proceed and Thermo TerraTech remained a public company. After
analysis and discussion with its advisors, the single member committee believed
that the financial condition of Thermo TerraTech was such that the present value
of the proposed merger transaction, including the potential increase in the
value of the shares of Thermo Electron to be received in the proposed
transaction, was more attractive for the public stockholders. The single member
committee also considered Thermo Electron's announced plan to sell off the
individual businesses of Thermo TerraTech. After analysis and discussion with
its advisors, the single member committee believed that the present value of the
proposed transaction with Thermo Electron was more attractive than the value
likely to be obtained at a later date through a sale of the individual
businesses of Thermo TerraTech, considering in part that the sale of individual
businesses would be a taxable event to Thermo TerraTech and that the eventual
distribution of the sale proceeds to the Thermo TerraTech stockholders would
also likely be a taxable event to the stockholders.
Adams, Harkness & Hill had advised the single member committee that the
individual businesses of Thermo TerraTech were not expected to be sold at prices
higher than the value estimates that Adams, Harkness & Hill had used in its
original analysis. Based on that and the fact that all of the stockholders would
be taxed on any distributions when received, the single member committee
believed that terminating the merger agreement was not in the best interests of
the public stockholders. Moreover, the single member committee noted that Thermo
Electron's common stock price had improved from $13.065 on October 19, 1999, the
day on which the merger agreement was signed, to $20.125 on April 6, 2000.
In considering whether the proposed merger, if it failed to qualify as a
tax-free reorganization, and the resulting merger consideration were fair to the
public stockholders, the single member committee considered, among other
factors:
- that Adams, Harkness & Hill, after considering the implications of the
change from a tax-free to a taxable transaction, affirmed that the
proposed transaction was fair, from a financial point of view, to the
public stockholders even without any change in the merger consideration;
- that the "tax-free" reorganization would only defer the payment of taxes,
rather than exempt such payment, by the public stockholders on the gain,
if any, on the shares of TerraTech common stock, meaning that even in a
"tax-free" reorganization, the stockholders would be subject to tax when
they sold their shares of Thermo Electron common stock; and
- the effect on the public stockholders if the closing price of the
transaction were at or close to the minimum value of the collar of $7.25
as compared to if were at or close to the maximum value of the collar of
$9.25.
The single member committee contacted Mr. Melas-Kyriazi on April 7, 2000 and
proposed that, in light of the potential adverse tax consequences to Thermo
TerraTech stockholders who would recognize gain on their shares at the time of
the merger, the minimum value of the collar be increased from $7.25 to $7.50 per
share. The single member committee indicated that it would not require an
increase in the maximum value of the collar since it was comfortable that the
price at that level was exceptionally fair to the public stockholders. The
single member committee, its advisors, and Mr. Melas-Kyriazi held numerous
discussions regarding this proposal, during which the parties each presented
their positions on the matter as described above. Mr. Melas-Kyriazi subsequently
contacted the single member committee and agreed to amend the merger agreement
to provide for the increase
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in the minimum value of the collar to $7.50 per share, subject to the approval
of the Thermo Electron board of directors or a committee of the board. In light
of
- the discussions that had taken place during March and April 2000, which
revealed the parties' continued intent to proceed with the merger;
- the ability of the public stockholders to gain an equity interest in
Thermo Electron, which relative to Thermo TerraTech had reported improved
revenues and net income for the quarter ended January 1, 2000;
- the willingness of the parties to amend the merger agreement to increase
the minimum value of the collar from $7.25 per share to $7.50 per share;
and
- the flexibility built into the existing exchange ratio mechanism, which
takes into account changes in the price of Thermo Electron common stock
before the effective date of the merger,
the single member committee, after consultation with its advisors, believed
that the proposed exchange ratio as revised was fair from a financial point of
view to the public stockholders.
The full board of directors of Thermo TerraTech met telephonically on
April 11, 2000 to review the single member committee's findings and the proposed
amendments to the merger agreement. The single member committee described in
detail for the board the discussions it had with Thermo Electron, Adams,
Harkness & Hill and Choate Hall. The members of the board asked several
questions regarding the effect of the January 31, 2000 announcement on the tax
treatment of the merger. Adams, Harkness & Hill described for the board its
review of the revised terms of the merger agreement, and reaffirmed its opinion
that the proposed exchange ratio, as revised, was fair to the public
stockholders from a financial point of view. The board also reviewed and
reaffirmed the independence of the member of the single member committee in
light of his service as a member of a special committee of the board of
directors of Thermo Instrument, which had been formed to evaluate the terms of
other proposed going-private transactions involving some of the public
subsidiaries of Thermo Instrument. The Thermo TerraTech single member committee
then recommended to the board that it approve the proposed amendment to the
merger agreement, (1) removing the requirement that the merger be tax-free,
(2) increasing the minimum value to $7.50 per share and (3) extending the
termination date under the merger agreement to July 31, 2000. The board then
unanimously voted to approve the proposed amendment.
On April 12, 2000, the executive committee of the Thermo Electron board of
directors met to discuss the proposed amendment to the merger agreement. The
amendment was approved and then duly executed by the parties.
On May 9, 2000, ThermoRetec announced that its ThermoRetec Consulting
Corporation subsidiary had been awarded the new contract discussed above. The
announcement did not have any appreciable impact on the price of the TerraTech
common stock, which had closed at $7.9375 on May 5, 2000, the last day on which
the stock traded before the May 9 announcement, and which closed at $7.75 on
May 9. After discussion with its advisors, the single member committee did not
believe that the impact of the new ThermoRetec contract was sufficient to
justify further discussions with respect to the terms of the Thermo TerraTech
merger consideration.
On July 31, 2000, Thermo Electron and Thermo TerraTech entered into another
amendment to the merger agreement in order to extend the termination date under
the agreement from July 31, 2000 to September 30, 2000, in light of the fact
that the proxy statement-prospectus had not been cleared for mailing to the
stockholders of Thermo TerraTech by that date.
THE SINGLE MEMBER COMMITTEE'S AND THE BOARD'S RECOMMENDATION
The single member committee and the board believe that the terms of the
merger are fair to, and in the best interests of, the public stockholders. In
reaching this conclusion, the single member committee has determined that the
merger is both substantively and procedurally fair, and is therefore entirely
fair, to the public stockholders. The single member committee adopted the
analysis of Adams,
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Harkness & Hill relating to the fairness, from a financial point of view, of the
proposed exchange ratio to the public stockholders, in addition to the various
other factors it considered, as described below. See "--Opinion of Adams,
Harkness & Hill." The board has adopted the findings, analysis and
recommendation of the single member committee on both the substantive and
procedural fairness of the merger. Accordingly, the board has unanimously
approved the merger agreement and unanimously recommends that you vote to adopt
it.
In reaching their decisions to approve the merger agreement, and recommend
its approval to the public stockholders, the single member committee and the
board considered the following factors, each of which they believed to be
favorable:
--THE PREMIUM REFLECTED IN THE EXCHANGE RATIO. The single member committee
and the board considered the exchange ratio in light of the course of
negotiations with Thermo Electron and the historical market price of the common
stock, in making their respective decisions to approve the merger agreement.
- COURSE OF NEGOTIATIONS. The single member committee and the board
considered the history of negotiations concerning the merger agreement.
Thermo Electron had increased its initial proposal of 0.26 of a share of
Thermo Electron common stock per share of TerraTech common stock on
August 16, 1999, to an exchange ratio of 0.4 of a share of Thermo Electron
common stock with a value range of $6.00 to $8.00 per share offered on
August 26, 1999, to an exchange ratio of 0.4 of a share of Thermo Electron
common stock with a value range of $6.80 to $8.50 per share offered on
August 31, 1999, to an exchange ratio of 0.4 of a share of Thermo Electron
common stock with a value range of $7.00 to $8.50 per share offered later
on August 31, 1999, to an exchange ratio of 0.4 of a share of Thermo
Electron common stock with a value range of $7.25 to $8.50 per share
offered on October 7, 1999, and finally to an exchange ratio of 0.4 of a
share of Thermo Electron common stock with a value range of $7.25 to $9.25
per share offered on October 19, 1999. As indicated above, the minimum
value was increased to $7.50 per share in connection with the amendment to
the merger agreement.
- THE RELATIONSHIP OF THE EXCHANGE RATIO, WITH A MINIMUM VALUE OF $7.50 AND
A MAXIMUM VALUE OF $9.25, TO THE HISTORICAL MARKET PRICES FOR THE
TERRATECH COMMON STOCK. The single member committee and the board
considered the prevailing trading per share price of the TerraTech common
stock and the possibility that the price would remain depressed. The
single member committee and the board noted that it had been approximately
two years since the TerraTech common stock had consistently traded at or
above $7.25 (later, $7.50) and that the common stock had ranged from a
high of $12.0625 in the first quarter of 1997 to a low of $3.75 in the
fourth quarter of 1998. The single member committee and the board
concluded that the exchange ratio proposed by Thermo Electron would enable
the public stockholders to obtain a higher price for their stock than
would otherwise be available in the market at that time. The single member
committee further believed that the prevailing trading price in October
1999, prior to the announcement of the terms of the merger, reflected, in
part, Thermo Electron's previously announced intent to take Thermo
TerraTech private. The purchase by Thermo Electron would also eliminate
the exposure of the public stockholders to any future or continued
declines in the price of the TerraTech common stock.
--INFORMATION CONCERNING THE FINANCIAL PERFORMANCE, CONDITION, BUSINESS
OPERATIONS AND PROSPECTS OF THERMO TERRATECH. The single member committee and
the board considered the historical, current and potential future performance of
Thermo TerraTech and determined that the premium reflected in the exchange ratio
offered by Thermo Electron was attractive in light of Thermo TerraTech's current
performance, declining sales and profitability, and the uncertainty of its
growth prospects. In addition, the single member committee and the board
determined that the merger would shift the risk of the future financial
performance of Thermo TerraTech from the public stockholders, who do not have
the power to control Thermo TerraTech, entirely to Thermo Electron, which does
have the power to control Thermo TerraTech and has the resources to manage and
bear that risk over the long term.
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--TERMS OF THE MERGER AGREEMENT. The single member committee and the board
considered the terms of the merger agreement, including the following:
- the amount and form of the consideration;
- the limited number of conditions to Thermo Electron's obligations;
- the single member committee's right to modify, amend or withdraw its
recommendation and terminate the merger agreement if it determines after
consultation with outside legal counsel that failure to do so would be
inconsistent with the board's or the single member committee's fiduciary
duties under applicable law; and
- the absence of a termination fee if Thermo TerraTech terminates the merger
agreement.
The single member committee and the board believed that these factors made
the consummation of the transaction more likely than it would be if more
significant conditions were placed on the completion of the transaction.
Further, the single member committee and the board believed that the ability
of the single member committee to terminate the merger agreement without
payment of a termination fee in the event its fiduciary duties to the Thermo
TerraTech stockholders required it to do so provided the board with the
freedom to protect the interests of the public stockholders.
--THE IMPROVED TRADING MARKET FOR THEIR INVESTMENT THAT WOULD BE REALIZED BY
THE PUBLIC STOCKHOLDERS FROM THEIR RECEIPT OF THERMO ELECTRON COMMON STOCK. The
single member committee and the board believed that the public stockholders
would benefit from an improved trading market and liquidity in their investment
since Thermo Electron's significant ownership of the TerraTech common stock had
the following effects:
- resulted in a relatively small public float that limited the amount of
trading in the TerraTech common stock, and
- decreased the likelihood that a proposal to acquire the TerraTech common
stock would be made by an independent entity without the consent of Thermo
Electron. Furthermore, Thermo Electron had stated its intention at the
time to retain its majority holding in Thermo TerraTech, which foreclosed
the opportunity to consider an alternative transaction with a third party
purchaser of Thermo TerraTech, or otherwise provide liquidity to the
public stockholders. Thermo Electron has since announced, on January 31,
2000, that it intends to sell Thermo TerraTech's remaining businesses.
However, Thermo Electron management believes it is unlikely that Thermo
TerraTech will be sold as a whole to one buyer in one transaction.
--THE OPINION OF ADAMS, HARKNESS & HILL THAT THE CONSIDERATION OFFERED BY
THERMO ELECTRON OF 0.4 SHARE OF THERMO ELECTRON COMMON STOCK, SUBJECT TO
ADJUSTMENT BUT HAVING A MINIMUM VALUE OF $7.25 (SINCE REVISED TO $7.50) AND A
MAXIMUM VALUE OF $9.25 FOR EACH OUTSTANDING SHARE OF TERRATECH COMMON STOCK IS
FAIR, FROM A FINANCIAL POINT OF VIEW, AS OF THE DATE OF ITS OPINION, TO THE
PUBLIC STOCKHOLDERS. The single member committee reviewed the independent
financial analyses performed by Adams, Harkness & Hill, including analyses of
relative value and discounted cash flows, and found them to be reasonable. It
believed that Adams, Harkness & Hill's conclusion that the consideration offered
by Thermo Electron was fair, from a financial point of view, to the public
stockholders was a reasonable conclusion based on the analyses performed, and
accordingly the single member committee also adopted Adams, Harkness & Hill's
analysis. See "--Opinion of Adams, Harkness & Hill."
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The single member committee and the board also considered the following
factors, each of which they considered to be negative factors in their
deliberations concerning their decisions to approve the merger agreement:
- FOLLOWING THE MERGER, THE PUBLIC STOCKHOLDERS WILL NO LONGER PARTICIPATE
DIRECTLY IN THE FUTURE EARNINGS OR GROWTH, IF ANY, OF THERMO TERRATECH OR
BENEFIT FROM INCREASES, IF ANY, IN THE VALUE OF THERMO TERRATECH. The
single member committee and the board evaluated this in light of the
recent financial performance of Thermo TerraTech, the current industry
outlook and the risks and uncertainties associated with Thermo TerraTech's
future prospects, as described above.
- THE POSITIVE ASPECTS OF THERMO TERRATECH, INCLUDING ITS HIGH QUALITY
SERVICES, HIGHLY REGARDED MANAGEMENT TEAM, LEADING MARKET POSITION IN
CERTAIN AREAS, DIVERSIFIED CUSTOMER BASE AND STRONG EXISTING SERVICES
PORTFOLIO. The single member committee and the board believed that these
factors could contribute to the future success of Thermo TerraTech and
weighed in favor of continuing Thermo TerraTech as a public company.
However, these positive aspects were offset by the many other
considerations listed above.
- POTENTIAL OR ACTUAL CONFLICTS OF INTEREST OF OFFICERS AND DIRECTORS OF
THERMO TERRATECH IN CONNECTION WITH THE MERGER. See "--Conflicts of
Interest."
The members of the board, including the member of the single member
committee, evaluated the various factors considered in light of their knowledge
of the business, financial condition and prospects of Thermo TerraTech, and
sought and considered the advice of financial and legal advisors. In determining
that the merger is fair to the public stockholders, the single member committee
and the board considered the above factors as a whole and did not assign
specific or relative weights to them. The factors described above are all of the
material factors considered by the single member committee and the board. In the
view of the single member committee and the board, each of the positive factors
listed above, in the aggregate, reinforced their belief that the transaction was
in the best interests of the public stockholders and outweighed the negative
factors listed above.
The single member committee's and the board's belief as to the procedural
fairness of the merger was based, among other things, on the following factors:
- the single member committee consisted of an independent director appointed
by a majority of the board of directors to represent solely the interests
of the public stockholders and to provide independent consideration of the
transaction;
- the single member committee retained and was advised by independent legal
counsel;
- the single member committee retained Adams, Harkness & Hill to assist in
evaluating the proposed transaction and received advice from Adams,
Harkness & Hill; and
- the detailed review by the single member committee and its advisors of the
business and financial condition of Thermo TerraTech.
- the exchange ratio and the other terms and conditions of the merger
agreement resulted from active arms-length bargaining between
representatives of the single member committee on the one hand and
representatives of management of Thermo Electron on the other. No other
unaffiliated representative was retained to act solely on behalf of the
public stockholders for the purposes of negotiating the terms of the
merger or the merger agreement.
The single member committee had also discussed, with its advisors and with
Thermo Electron's representatives, the possibility of requiring the merger
agreement to be adopted by a majority of the public stockholders. However, the
single member committee and the board ultimately decided that, following
extensive negotiation of the terms of the merger agreement, ample procedural
safeguards had
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<PAGE>
been added at the single member committee's request to the merger agreement,
including, among others:
- the right of the single member committee to withdraw, modify or amend its
recommendation and terminate the merger agreement if it decides that
failure to do so would be inconsistent with its fiduciary duties;
- the condition that Adams, Harkness & Hill orally reaffirm and not withdraw
its opinion prior to the mailing of this proxy statement-prospectus and
the effective time of the merger; and
- the requirement that Thermo Electron notify the single member committee of
offers to purchase Thermo TerraTech's businesses. See "THE MERGER."
THE SINGLE MEMBER COMMITTEE AND THE BOARD HAVE APPROVED THE MERGER
AGREEMENT, BELIEVE THAT THE TERMS OF THE MERGER ARE FAIR TO THE PUBLIC
STOCKHOLDERS AND THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO ADOPT THE
MERGER AGREEMENT.
In considering the recommendation of the single member committee and the
board on the merger agreement, you should be aware that some members of the
single member committee and the board have interests in the merger that are
different from, or in addition to, your interests and that represent actual or
potential conflicts of interest. The single member committee and the board were
aware of these interests and considered them, among other matters, in approving
the merger agreement. See "--Conflicts of Interest."
In order to aid the evaluation of Thermo TerraTech by the single member
committee and Adams, Harkness & Hill and Adams, Harkness & Hill's assessment of
the fairness, from a financial point of view, of the consideration payable to
the public stockholders pursuant to the merger agreement, Thermo TerraTech gave
the single member committee and Adams, Harkness & Hill projected financial data
prepared by Thermo TerraTech management. See "PROJECTED FINANCIAL DATA OF THERMO
TERRATECH."
OPINION OF ADAMS, HARKNESS & HILL
Pursuant to a letter agreement dated as of May 13, 1999, Adams, Harkness &
Hill was retained by the single member committee to render an opinion as to the
fairness, from a financial point of view, to the public stockholders, of the
consideration to be received by the public stockholders in the merger. The
single member committee selected Adams, Harkness & Hill for a number of reasons,
including its qualifications, expertise and reputation in the area of valuation
and financial advisory work. Adams, Harkness & Hill is a nationally recognized
investment banking firm and is regularly engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for corporate and other
purposes. Adams, Harkness & Hill also was engaged by the single member
committees of the board of directors of each of ThermoRetec and Randers Killam,
to render opinions as to the fairness to the holders of common stock of
ThermoRetec and Randers Killam other than Thermo Electron and its affiliates, of
the consideration to be received by those stockholders in separate transactions
involving Thermo Electron. Adams, Harkness & Hill received customary fees for
those engagements. At the meeting of the TerraTech board on October 19, 1999,
Adams, Harkness & Hill rendered its oral opinion, subsequently confirmed in
writing, that, as of October 19, 1999, based upon and subject to the various
considerations set forth in the opinion, the consideration pursuant to the
merger agreement was fair from a financial point of view to the holders of
shares of TerraTech common stock other than Thermo Electron and its affiliates.
It is a condition to the obligation of Thermo TerraTech to effect the merger
that Adams, Harkness & Hill shall reaffirm orally its written opinion as of the
date of mailing of this proxy statement-prospectus and at the effective time.
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<PAGE>
Under Adams, Harkness & Hill's engagement letter with the single member
committee, Thermo TerraTech paid Adams, Harkness & Hill a retainer fee of
$50,000 and a fee of $87,500 upon the delivery of the written fairness opinion.
The latter fee was payable regardless of the opinion expressed in the letter.
Thermo TerraTech has also agreed to reimburse Adams, Harkness & Hill for all
reasonable fees of its legal advisors and all of its reasonable travel and other
expenses relating to its engagement. In addition, Thermo TerraTech has agreed to
indemnify Adams, Harkness & Hill and its affiliates against liabilities relating
to its engagement, except liabilities resulting from Adams, Harkness & Hill's
bad faith, willful misconduct or gross negligence.
THE FULL TEXT OF THE WRITTEN OPINION OF ADAMS, HARKNESS & HILL DATED OCTOBER
19, 1999, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY ADAMS, HARKNESS & HILL IN RENDERING ITS OPINION, IS ATTACHED AS
APPENDIX B TO THIS PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THERMO TERRATECH SHAREHOLDERS ARE URGED TO, AND SHOULD, READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. ADAMS, HARKNESS & HILL'S OPINION IS
DIRECTED TO THE SINGLE MEMBER COMMITTEE AND ADDRESSES ONLY THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED BY THE PUBLIC STOCKHOLDERS PURSUANT TO THE MERGER
AGREEMENT, FROM A FINANCIAL POINT OF VIEW AS OF OCTOBER 19, 1999, AND DOES NOT
ADDRESS ANY OTHER ASPECT OF THE MERGER OR CONSTITUTE A RECOMMENDATION TO ANY
HOLDER OF TERRATECH COMMON STOCK AS TO HOW TO VOTE AT THE SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF ADAMS, HARKNESS & HILL SET FORTH IN THIS PROXY
STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
The following is a summary of the various sources of information and
valuation methodologies used by Adams, Harkness & Hill in arriving at its
opinion regarding the proposed transaction with Thermo Electron. To determine
the fairness of the transaction, Adams, Harkness & Hill employed analyses based
on the following:
- Public company peers' financial performance and relative valuations;
- Transaction premiums paid in selected precedent acquisitions;
- Stock price performance of Thermo TerraTech, ThermoRetec, and
Randers Killam;
- Discounted cash flow analysis; and
- Break-up analysis of Thermo TerraTech.
In conducting its investigation and analysis and in arriving at its opinion,
Adams, Harkness & Hill reviewed the information and took into account the
financial and economic factors it deemed relevant and material under the
circumstances. The material actions undertaken by Adams, Harkness & Hill in its
analysis were as follows:
- Reviewed internal financial information concerning the business and
operations of Thermo TerraTech that was furnished to Adams, Harkness &
Hill by Thermo TerraTech's management for purposes of its analysis, as
well as publicly available information, including but not limited to
Thermo TerraTech's recent filings with the SEC;
- Reviewed the merger agreement in the form presented to the single member
committee;
- Compared the historical market prices and trading activity of the
TerraTech common stock with those of other publicly traded companies that
Adams, Harkness & Hill deemed relevant;
- Compared the financial position and operating results of Thermo TerraTech
with those of other publicly traded companies that Adams, Harkness & Hill
deemed relevant;
- Compared the proposed financial terms of the merger with the terms of
other merger and acquisition transactions that Adams, Harkness & Hill
deemed relevant; and
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- Held discussions with members of Thermo TerraTech's senior management
concerning Thermo TerraTech's historical and current financial condition
and operating results, as well as its future prospects.
Adams, Harkness & Hill also reviewed relevant industry market research
studies, company research reports and key economic and market indicators,
including interest rates, and general stock market performance. Specifically,
Adams, Harkness & Hill reviewed analyses of and held discussions with
representatives of Environmental Business International, Inc., an independent
strategic consulting firm serving the environmental services industry. Adams,
Harkness & Hill selected Environmental Business International because of its
reputation and experience in the environmental industry generally, and in
particular its experience in providing merger and acquisition support services,
market research and competitive analysis in this sector. Adams, Harkness & Hill
had engaged Environmental Business International, with Thermo TerraTech's
consent, in order to have access to its expertise in assessing the historical
and projected operating performance of Thermo TerraTech, ThermoRetec and
Randers Killam and the respective business units of these companies that compete
in the environmental services industry. Environmental Business International
provided Adams, Harkness & Hill with its professional opinion with respect to
the reasonableness of financial projections prepared by Thermo TerraTech for use
by Adams, Harkness & Hill in developing its opinion, as well as Environmental
Business International's professional opinion with respect to the thoroughness
of the financial and business analyses undertaken by Adams, Harkness & Hill in
its development of its opinion. Environmental Business International reviewed
the financial projections provided to Adams, Harkness & Hill by Thermo TerraTech
(see "PROJECTED FINANCIAL DATA OF THERMO TERRATECH") and additional financial
and business information, including Thermo TerraTech's business plans, provided
by Adams, Harkness & Hill and Thermo TerraTech. Environmental Business
International also held discussions with management of Thermo TerraTech and its
subsidiaries. Environmental Business International met with Adams, Harkness &
Hill in order to review the comparable companies selected by Adams, Harkness &
Hill for use in its analysis of Thermo TerraTech, as well as to review Adams,
Harkness & Hill's overall assessment of Thermo TerraTech. Following its
analysis, Environmental Business International concluded that the financial
projections were prepared by Thermo TerraTech management on a reasonable basis,
and that the analysis, procedures and industry assessments performed by Adams,
Harkness & Hill were sufficiently comprehensive. As Environmental Business
International had been retained by Adams, Harkness & Hill, Thermo TerraTech did
not give any instructions to Environmental Business International regarding its
work on behalf of Adams, Harkness & Hill. Neither Thermo TerraTech nor Adams,
Harkness & Hill placed any limitations on the scope of Environmental Business
International's investigation.
Other than as set forth above, Adams, Harkness & Hill did not review any
additional information in preparing its opinion that, independently, was
material to its analysis. As a part of its engagement, Adams, Harkness & Hill
was not requested to, and did not, solicit any third party indications of
interest in acquiring Thermo TerraTech. The single member committee did not
place any limitation upon Adams, Harkness & Hill with respect to the procedures
followed or factors considered by Adams, Harkness & Hill in rendering its
opinion.
In rendering its opinion, Adams, Harkness & Hill assumed and relied upon the
accuracy and completeness of all of the financial and other information that was
publicly available or provided to Adams, Harkness & Hill by, or on behalf of,
Thermo TerraTech, and did not independently verify that information. Adams,
Harkness & Hill assumed, with the single member committee's consent, that:
- All material assets and liabilities, contingent or otherwise, known or
unknown, of Thermo TerraTech are as set forth in its financial statements;
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- Obtaining all regulatory and other approvals and third party consents
required for consummation of the proposed merger would not have a material
effect on the anticipated benefits of the merger; and
- The merger would be consummated in accordance with the terms set forth in
the merger agreement, without any amendment thereto and without waiver by
Thermo TerraTech or Thermo Electron of any of the conditions to their
respective obligations thereunder.
Adams, Harkness & Hill assumed that the projections examined by it were
reasonably prepared based upon the best available estimates and good faith
judgments of Thermo TerraTech's senior management as to the future performance
of Thermo TerraTech. In conducting its review, Adams, Harkness & Hill did not
obtain an independent evaluation or appraisal of any of the assets or
liabilities, contingent or otherwise, of Thermo TerraTech. Adams, Harkness &
Hill's opinion did not predict or take into account any possible economic,
monetary or other changes which may occur, or information which may come
available, after the date of its written opinion.
PUBLIC COMPANY PEER ANALYSIS--THERMO TERRATECH
Thermo TerraTech provides industrial outsourcing services and manufacturing
support encompassing a broad range of specializations. Thermo TerraTech operated
in four segments at the time Adams, Harkness & Hill conducted its analyses:
environmental-liability management, engineering and design, laboratory testing,
and metal treating. Thermo TerraTech's metal treating segment was sold on
June 1, 2000. The environmental-liability management segment includes
ThermoRetec, a subsidiary of Thermo TerraTech. ThermoRetec is a national
provider of environmental-liability and resource-management services. Through a
nationwide network of offices, ThermoRetec offers these and related consulting
services in three areas: consulting and engineering, nuclear remediation, and
fluids recycling. ThermoRetec's fourth line of business, soil remediation, was
sold on June 6, 2000. Thermo TerraTech's majority-owned, privately-held Thermo
EuroTech N.V. subsidiary, located in the Netherlands, specializes in converting
"off-spec" and contaminated petroleum fluids into useable oil products. Thermo
EuroTech also provides in-plant waste management and recycling services through
its Ireland-based Green Sunrise Holdings Ltd. subsidiary.
The engineering and design segment includes Randers Killam, another
subsidiary of Thermo TerraTech. Randers Killam provides comprehensive
engineering and outsourcing services in three areas: water and wastewater
treatment, highway and bridge engineering, and infrastructure engineering.
Randers Killam's fourth line of business, process engineering and construction,
was sold on January 28, 2000. This segment also included, until its sale on
July 1, 2000, Thermo TerraTech's wholly owned Normandeau Associates Inc.
subsidiary, which provided consulting services that address natural resource
management issues. Thermo TerraTech's wholly owned Thermo Analytical Inc.
subsidiary, which represents the laboratory testing segment, operates analytical
laboratories that provide environmental- and pharmaceutical-testing services,
primarily to commercial clients throughout the United States. The metal treating
segment, which was part of Thermo TerraTech at the time Adams, Harkness & Hill
conducted its analysis, performs metallurgical processing services using
thermal-treatment equipment at locations in California, Minnesota, and
Wisconsin.
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Accordingly, Adams, Harkness & Hill established three groups of publicly
traded companies to address the four business areas in which Thermo TerraTech
operates, either directly, through wholly-owned subsidiaries, or indirectly,
through financial reporting consolidation of majority-owned subsidiaries
ThermoRetec and Randers Killam. The three groups consist of:
- ENVIRONMENTAL SERVICES COMPANIES
- Diversified Civil Engineering/Construction/Environmental/Consulting
Companies
1) Baker (Michael) Corp.;
2) Jacobs Engineering Group, Inc.; and
3) URS Corp.
- Environmental Services and Consulting Companies
1) EA Engineering Science & Technology;
2) Ecology and Environment;
3) GZA GeoEnvironmental Technologies;
4) Harding Lawson Associates Group; and
5) Tetra Tech Inc.
- Environmental Engineering and Remediation Services
1) IT Group Inc.;
2) National Environmental Services Co.;
3) Sevenson Environmental Services Inc.;
4) TRC Companies Inc.;
5) Versar, Inc.; and
6) Weston (Roy F.)
- METAL TREATMENT COMPANIES
1) Bodycote International;
2) Gibraltar Steel Corp.; and
3) Lindberg Corp.
- COMMERCIAL LABORATORIES
1) Applied Analytical Ind.;
2) BioReliance Corp.;
3) Covance Inc.;
4) Parexel International Corp.; and
5) Quintiles Transnational Corp.
Adams, Harkness & Hill selected these companies based on its review of their
respective businesses, assessment of their relative financial performance and
competitive position, and, in the case of companies competing in the
environmental services industry, consultation with Environmental Business
International. In some circumstances, companies which met most quantitative and
qualitative criteria for selection were excluded from the peer group analysis
because Adams, Harkness & Hill determined that a particular characteristic, such
as diversification of business operations, of one or more companies made them
less relevant for comparative purposes.
Adams, Harkness & Hill compared certain financial measures and metrics of
Thermo TerraTech with those of the peer group companies. Such information
included: market capitalization; enterprise value; price/projected calendar
1999 & 2000 earnings ratios; enterprise value/last twelve months' revenue; last
twelve months' operating margin; market capitalization/book value; and year/year
quarterly revenue growth.
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<PAGE>
Enterprise value/last twelve months' revenue and price/earnings multiples
imply the range of value public markets place on companies in a particular
market segment. Adams, Harkness & Hill employed an enterprise value valuation in
this analysis because this methodology implies value based on a company's
operations, regardless of how the company finances those operations. To
determine enterprise value, market capitalization is calculated as the product
of a company's common stock price per share multiplied by the number of diluted
shares outstanding. Adams, Harkness & Hill used the closing price per share on
October 8, 1999, for all public company comparable analyses. The market
capitalization is then adjusted for a company's debt and cash positions by
adding the debt balance and subtracting the cash balance to arrive at an
enterprise value. Unlike enterprise value-based valuation methodologies,
price/earnings-based valuation methodologies imply a value based on net
after-tax earnings inclusive of the earnings impact of how the company finances
its operations. The following equation illustrates the manner in which
enterprise value has been calculated:
((market value of equity) + (debt))-(cash, cash equivalents and short-term
investments)
In order of descending enterprise value/last twelve months' revenue, the
peer group companies, for which sufficient data was available, ranked as
follows:
- ENVIRONMENTAL SERVICES COMPANIES
1) Tetra Tech Inc.;
2) National Environmental Services Co.;
3) URS Corp.;
4) IT Group Inc.;
5) TRC Companies Inc.;
6) Versar, Inc.;
7) Sevenson Environmental Services Inc.;
8) Jacobs Engineering Group, Inc.;
9) Ecology and Environment;
10) Weston (Roy F.);
11) GZA GeoEnvironmental Technologies;
12) Baker (Michael) Corp.;
13) EA Engineering Science & Technology; and
14) Harding Lawson Associates Group
- METAL TREATMENT COMPANIES
1) Bodycote International;
2) Gibraltar Steel Corp.; and
3) Lindberg Corp.
- COMMERCIAL LABORATORIES
1) Applied Analytical Ind.;
2) Quintiles Transnational Corp.;
3) Covance Inc.;
4) BioReliance Corp.; and
5) Parexel International Corp.
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In order of descending price/projected calendar 1999 earnings, where
earnings per share estimates were available, the peer group companies ranked as
follows:
- ENVIRONMENTAL SERVICES COMPANIES
1) Tetra Tech Inc.;
2) EA Engineering Science & Technology;
3) Jacobs Engineering Group, Inc.;
4) TRC Companies Inc.;
5) Harding Lawson Associates Group;
6) URS Corp.; and
7) IT Group Inc.
- METAL TREATMENT COMPANIES
1) Gibraltar Steel Corp.; and
2) Lindberg Corp.
- COMMERCIAL LABORATORIES
1) Quintiles Transnational Corp.;
2) Parexel International Corp.; and
3) Covance Inc.
In order of descending price/projected calendar 2000 earnings, where
earnings per share estimates were available, the peer group companies ranked as
follows:
- ENVIRONMENTAL SERVICES COMPANIES
1) Tetra Tech Inc.;
2) Jacobs Engineering Group, Inc.;
3) URS Corp.;
4) IT Group Inc.; and
5) EA Engineering Science & Technology
- METAL TREATMENT COMPANIES
1) Gibraltar Steel Corp.; and
2) Lindberg Corp.
- COMMERCIAL LABORATORIES
1) BioReliance Corp.;
2) Applied Analytical Ind.;
3) Quintiles Transnational Corp.;
4) Covance Inc.; and
5) Parexel International Corp.
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The low, high and average financial ratios for the peer group companies are
listed in the table below:
- ENVIRONMENTAL SERVICES COMPANIES
<TABLE>
<CAPTION>
MULTIPLE LOW HIGH AVERAGE
-------- -------- -------- --------
<S> <C> <C> <C>
Enterprise value/last twelve months' revenue............. 0.1 1.2 0.6
Calendar year 1999 price/earnings........................ 8.5 21.2 14.1
Calendar year 2000 price/earnings........................ 4.2 17.6 9.5
</TABLE>
- METAL TREATMENT COMPANIES
<TABLE>
<CAPTION>
MULTIPLE LOW HIGH AVERAGE
-------- -------- -------- --------
<S> <C> <C> <C>
Enterprise value/last twelve months' revenue............. 0.8 2.7 1.4
Calendar year 1999 price/earnings........................ 6.0 12.1 9.1
Calendar year 2000 price/earnings........................ 5.9 10.5 8.2
</TABLE>
- COMMERCIAL LABORATORIES
<TABLE>
<CAPTION>
MULTIPLE LOW HIGH AVERAGE
-------- -------- -------- --------
<S> <C> <C> <C>
Enterprise value/last twelve months' revenue............ 0.4 2.5 1.2
Calendar year 1999 price/earnings....................... 10.7 13.9 11.9
Calendar year 2000 price/earnings....................... 8.8 11.5 10.0
</TABLE>
To arrive at Thermo TerraTech's price/earnings multiples for calendar
year 1999 and calendar year 2000, Adams, Harkness & Hill used Thermo TerraTech's
internal management projections, as external research analysts' projections have
not been published.
Adams, Harkness & Hill compared these ranges of multiples to the multiple
implied by the proposed consideration of approximately:
<TABLE>
<S> <C>
- Enterprise value/last twelve months' revenue:............. 0.9
- Calendar year 1999 price/earnings:........................ 24.3
- Calendar year 2000 price/earnings:........................ 12.0
</TABLE>
Based on this comparison and on its assessment of these financial measures
and metrics for Thermo TerraTech and the peer group companies, Adams,
Harkness & Hill noted that the value implied by the proposed consideration
compared favorably to the ranges calculated using peer group data particularly
with respect to the price earnings ratios for calendar years 1999 and 2000,
which were significantly above the average values for each peer group.
TRANSACTION PREMIUMS PAID ANALYSIS
Premiums paid in precedent public company change of control transactions
typically imply the range of consideration acquirers are willing to pay above a
seller's stock price prior to the announcement of the relevant transaction. In
this analysis, the value of consideration paid in transactions involving stock
is computed using the buyer's stock price immediately prior to announcement,
while the seller's stock price is measured one trading day, one week, and one
month prior to the announcement of the transaction. Adams, Harkness & Hill
reviewed 44 precedent transactions involving selected environmental services
companies from January 1, 1998 to October 19, 1999, of which seven transactions
involved the acquisition of the equity shares of publicly-traded companies for
which share price data was available. In addition, Adams, Harkness & Hill
reviewed 20 comparable precedent transactions involving selected metal treatment
companies and 21 precedent transactions involving selected commercial
laboratories. Adams, Harkness & Hill selected these
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transactions for consideration based on its review of the businesses involved in
the respective transactions and, with respect to transactions involving
companies in the environmental services industry, its consultation with
Environmental Business International. In reviewing the businesses involved in
the respective transactions, Adams, Harkness & Hill considered, among others,
the following relevant factors: industry segments and customers served by the
acquired company; the scale, financial performance and financial condition of
the acquired company, particularly with regard to the absolute and relative
valuations of the acquired company; and the competitive and strategic issues
driving the respective transactions.
Although Adams, Harkness & Hill is aware of the consolidation activity in
the competitive metal treatment and commercial laboratory industries, and as
such is aware of the appropriate metrics and multiples used to establish a range
of value for companies in the respective industries, such data for
publicly-traded companies was not sufficiently available.
In order of descending premium paid based on the seller's stock price one
trading day prior to announcement, the seven selected environmental transactions
that involved the acquisition of the equity shares of publicly-traded companies
for which share price data was available which were used were as follows:
1) Carmeuse Lime's acquisition of Dravo Corp.;
2) IT Group Inc.'s acquisition of Fluor Daniel GTI;
3) URS Corp.'s acquisition of Dames & Moore Group;
4) IT Group Inc.'s acquisition of OHM Corp.;
5) IT Group Inc.'s acquisition of Emcon;
6) USA Waste Services' acquisition of Trans American Waste Industries; and
7) Special purpose acquisition vehicle of Weiss, Peck & Greer's acquisition
of ATC Group Services.
Based upon Adams, Harkness & Hill's analysis of premia paid in selected
precedent environmental services industry transactions, the low, high and
average premia (discounts) paid to sellers' share prices, using the buyer's
share price on the day prior to the announcement date of the transaction to
calculate consideration in stock transactions, for the month, week, and day
prior to the announcements of such transactions are listed below:
<TABLE>
<CAPTION>
LOW HIGH AVERAGE
-------- -------- --------
<S> <C> <C> <C>
Premium Paid--1 Month prior.............................. 3% 74% 42%
Premium Paid--1 Week prior............................... (8%) 84% 33%
Premium Paid--1 Day prior................................ 0% 87% 31%
</TABLE>
Adams, Harkness & Hill compared these ranges of implied premia to the
implied premium offered by the difference between $7.25, assuming that no less
than that price would be paid, and the closing price of the Thermo TerraTech
common stock on the dates noted below:
Prior to announcement of the merger agreement (10/20/99):
<TABLE>
<S> <C>
- Premium Paid--1 Month prior:.............................. 30%
- Premium Paid--1 Week prior:............................... 38%
- Premium Paid--1 Day prior:................................ 35%
</TABLE>
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Adams, Harkness & Hill also compared these ranges of precedent premia to the
implied premium offered by the difference between $7.25, assuming no less than
that price would be paid, and the closing price of the Thermo TerraTech common
stock on the dates noted below:
Prior to Thermo Electron restructuring announcement (5/24/99):
<TABLE>
<S> <C>
- Premium Paid--1 Month prior:.............................. 61%
- Premium Paid--1 Week prior:............................... 66%
- Premium Paid--1 Day prior:................................ 41%
</TABLE>
Based on its assessment of the premiums paid in the selected precedent
transactions described above, Adams, Harkness & Hill noted that the ranges of
premiums implied by the proposed consideration of $7.25 compared favorably to
the range of premiums associated with the precedent transactions. Specifically,
Adams, Harkness & Hill noted that thc premia implied by the differences between
$7.25, assuming no less than that price would be paid, and the prices of the
Thermo TerraTech common stock both one day and one week prior to the
announcement of the Thermo Electron restructuring on April 24, 1999 and the
announcement of the merger agreement on October 20, 1999 were higher than the
average premia paid in the precedent transactions for the comparable relative
periods.
STOCK PRICE PERFORMANCE ANALYSIS
Adams, Harkness & Hill examined the following for Thermo TerraTech and
Thermo Electron:
1) 200-day stock price performance;
2) Stock price performance since initial public offering;
3) Stock price performance from January 1, 1998 to present compared to
the NASDAQ Composite, S&P 500 and Russell 2000 stock indices;
4) Stock price performance from January 1, 1998 to present compared to
an index of each companies' respective public company peers.
In addition, in assessing the value of the Thermo Electron common stock,
Adams, Harkness & Hill examined selected institutional research reports on the
Thermo Electron common stock, produced between February 25, 1999 and June 1,
1999, by a number of institutional research analysts.
Based on its assessment of stock price performance for Thermo TerraTech and
Thermo Electron, relative to the performance of major market indices and the
stock prices of public company peers, and its review of the selected
institutional research reports referenced above, Adams, Harkness & Hill noted
that the stock price of Thermo TerraTech had underperformed over the relevant
periods relative to the peer group and the relevant indices and, moreover, that
the value implied by the proposed consideration compared favorably to the range
of value within which Thermo TerraTech had traded over relevant comparative
periods.
DISCOUNTED CASH FLOW ANALYSIS
Adams, Harkness & Hill performed a discounted cash flow analysis to estimate
the present value of the stand-alone unlevered, i.e., before interest expense,
after-tax cash flows of Thermo TerraTech. To perform the discounted cash flow
analysis, Adams, Harkness & Hill used the following data sources and
assumptions:
- Thermo TerraTech's management projections for the year ended December 31,
1999 through the year ended December 31, 2003 for the following Thermo
TerraTech subsidiaries or divisions:
ThermoRetec;
Randers Killam;
Lancaster Labs;
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Metal Treating;
Normandeau; and
EuroTech.
- Unlevered after-tax cash flows were calculated as the after-tax (40%
effective rate) operating earnings of the above listed businesses adjusted
for the addition of non-cash expenses and the deduction of uses of cash
not reflected in the income statement.
- Weighted average costs of capital that ranged from 9.0% to 16.5% for the
Environmental Services Companies, such as ThermoRetec, Randers Killam,
Normandeau and EuroTech, and Metal Treatment Companies and from 11.0% to
18.5% for the Commercial Laboratories.
- Terminal values based on the above listed businesses' earnings before
interest and taxes for the year ended December 31, 2003, times earnings
before interest and taxes multiples that ranged from 7.0x to 12.0x for the
Environmental Services and Metal Treatment Companies, excluding EuroTech,
whose earnings before interest and taxes multiple ranged from 5.0x to
10.0x, and from 10.0x to 15.0x for Commercial Laboratories.
Adams, Harkness & Hill calculated the weighted average cost of capital for
each of the peer group companies, using a risk free rate of 6.0% and a market
risk premium of 7.4%, and arrived at the following ranges:
- Environmental Services Companies: 7.1% to 11.1%, with an average of 9.3%
- Metal Treatment Companies: 9.0% to 10.7%, with an average of 9.9%
- Commercial Laboratories: 9.2% to 14.1%, with an average of 11.9%
In order to calculate an appropriate range of terminal values, Adams,
Harkness & Hill also calculated an enterprise value/earnings before interest and
taxes multiple for each of the peer group companies and arrived at the following
ranges:
- Environmental Services Companies: 1.5x to 25.9x, with an average of 10.6x
- Metal Treatment Companies: 5.5x to 12.0x, with an average of 8.9x
- Commercial Laboratories: 3.1x to 12.7x with an average of 7.1x
For each of the above listed Thermo TerraTech businesses, Adams, Harkness &
Hill combined the calculated present value of cash flows for the year ended
December 31, 1999 through December 31, 2003 with the business' respective
terminal values to arrive at a range of enterprise values based on the above
assumptions.
The enterprise values of ThermoRetec, Randers Killam and EuroTech were then
multiplied by Thermo TerraTech's percent ownership of each entity and combined
with the enterprise values for the remaining businesses to arrive at a range of
total enterprise values for Thermo TerraTech. These enterprise values were
adjusted by adding Thermo TerraTech's cash balance and subtracting its debt
balance to arrive at implied market capitalizations, i.e., equity values. Adams,
Harkness & Hill divided the computed equity values by Thermo TerraTech's shares
outstanding and arrived at a range of implied per share values of $5.90 to
$17.21, with a median implied value of $10.88.
Based on its assessment of discounted cash flow values for Thermo TerraTech,
Adams, Harkness & Hill noted that the value implied by the proposed
consideration compared favorably to these values.
BREAK-UP ANALYSIS OF THERMO TERRATECH
Adams, Harkness & Hill performed a break-up analysis of Thermo TerraTech. A
break-up analysis is an assessment of the cumulative going concern value of
individual operations and/or assets if valued
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<PAGE>
on a stand-alone basis, assuming the arm's length sale of each operation to a
third party. This break-up analysis represents an assessment of the cumulative
pre-tax value of Thermo TerraTech's individual operations and/or assets, without
regard to capital gains taxes and transaction costs that would be associated
with the sale of the operations and/or assets.
Adams, Harkness & Hill derived an implied value for each of Thermo
TerraTech's businesses based on the high, low and median enterprise value/last
twelve months' revenue multiples from the businesses' respective public company
peers analyses.
ENTERPRISE VALUE/LAST TWELVE MONTHS' REVENUE MULTIPLE
<TABLE>
<CAPTION>
HIGH LOW MEDIAN
-------- -------- --------
<S> <C> <C> <C>
- ThermoRetec............................................ 1.3 0.2 0.5
- Randers Killam......................................... 1.3 0.2 0.5
- Lancaster Labs......................................... 2.5 0.4 1.0
- Metal Treating......................................... 2.7 0.8 0.8
- Normandeau............................................. 1.3 0.2 0.5
- EuroTech............................................... 1.3 0.2 0.5
</TABLE>
To arrive at a range of overall implied value for Thermo TerraTech, Adams,
Harkness & Hill undertook the following:
- Multiplied the respective businesses' last twelve months' revenues by the
above multiples to arrive at high, low and median implied valuations for
each business.
- The high, low and median valuations of ThermoRetec, Randers Killam and
EuroTech were then multiplied by Thermo TerraTech's percent ownership of
each entity and combined with the high, low and median valuations for the
remaining businesses to arrive at high, low and median enterprise values
for Thermo TerraTech.
- The high, low and median enterprise values were adjusted by adding Thermo
TerraTech's cash balance and subtracting its debt balance to arrive at
implied equity values.
- Adams, Harkness & Hill divided the computed equity values by Thermo
TerraTech's shares outstanding and arrived at implied per share values of:
high--$16.02 and median--$1.21. The low value was less than $0.00.
Based on its assessment of this implied cumulative break-up value, Adams,
Harkness & Hill noted that the value implied by the proposed consideration
compared favorably to the value implied by the cumulative break-up value.
However, Adams, Harkness & Hill noted that the relevance of its break-up
analysis was limited, given that it represents an assessment of the cumulative
pre-tax value of Thermo TerraTech's individual operations and/or assets, without
regard to capital gains taxes and transaction costs that would be associated
with the sale of the operations and/or assets.
REVIEW OF ANALYSES FOLLOWING JANUARY 31 ANNOUNCEMENT
In light of the January 31, 2000 announcement that Thermo Electron intended
to sell all of Thermo TerraTech's businesses, the change in the tax treatment of
the merger, and updated financial information for Thermo TerraTech, the single
member committee asked Adams, Harkness & Hill to review its opinion as to the
fairness of the proposed consideration in the merger and assess whether the
opinion could be affirmed. During March and early April 2000, Adams, Harkness &
Hill contacted management of Thermo TerraTech and Thermo Electron and reviewed
with them the current state of Thermo TerraTech's businesses, the status of
negotiations regarding the sales of its businesses, and updated projections and
financial statements for Thermo TerraTech. Adams, Harkness & Hill believed
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<PAGE>
that some form of increase in the value of the proposed consideration to the
public stockholders was justified in light of the potential negative tax
consequence to Thermo TerraTech stockholders who would realize a gain on the
sale of their Thermo TerraTech shares in the merger.
At a meeting on April 11, 2000, Adams, Harkness & Hill advised the single
member committee and the board that, based on its review of the information
described above and the increase in the minimum value of the collar from $7.25
per share to $7.50 per share, it was able to affirm its opinion that the
proposed exchange ratio, as revised, was fair to the public stockholders from a
financial point of view. Adams, Harkness & Hill based its affirmation on an
assessment of its original analysis supporting its opinion of October 19, 1999,
incorporating in that assessment the increase in the minimum value of the
collar, the changes, if any, in relative valuation within the peer group, and
the changes, if any, in the relative valuations of Thermo TerraTech,
ThermoRetec, Randers Killam, and Thermo Electron. Adams, Harkness & Hill
evaluated the financial performance and relative valuation of the public company
peers for the period between its original analysis and its affirmation on April
11, 2000, and concluded there had been no material change to the assumptions and
variables involved in its original analysis supporting its opinion of October
19, 1999. Similarly, Adams, Harkness & Hill assessed the stock price performance
and relative valuations of Thermo TerraTech, ThermoRetec, Randers Killam, and
Thermo Electron for the period between its original analysis supporting its
opinion of October 19, 1999, and its affirmation on April 11, 2000, and
concluded there had been no material change to the assumptions and variables
involved in its original analysis supporting its opinion of October 19, 1999. In
considering its affirmation, Adams, Harkness & Hill did not assess its original
analysis of transaction premiums paid in selected precedent transactions, its
discounted cash flow analysis, or its break-up analysis, as Adams, Harkness &
Hill was not aware of any material change in assumptions or circumstances,
including the announcement of any relevant precedent transactions, that would
impact its original analysis.
SUMMARY OF VALUATION ANALYSES
The foregoing summary describes all material analyses performed by Adams,
Harkness & Hill. However, the preparation of a fairness opinion is a complex
process and is not susceptible to partial analysis or summary description.
Adams, Harkness & Hill believes that its analyses must be considered as a whole,
and that selecting portions of such analysis without considering all analyses
and factors would create an incomplete view of the processes underlying its
opinion. Adams, Harkness & Hill did not attempt to assign specific weights to
particular analyses. However, there were no specific factors reviewed by Adams,
Harkness & Hill that did not support its opinion. Any estimates contained in
Adams, Harkness & Hill's analyses are not necessarily indicative of actual
values, which may be significantly more or less favorable than as set forth
therein. Estimates of values of companies do not purport to be appraisals or
necessarily to reflect the prices at which companies may actually be sold.
Taken together, the information and analyses employed by Adams, Harkness &
Hill lead to Adams, Harkness & Hill's overall opinion that the consideration to
be received in the merger is fair, from a financial point of view, to the public
stockholders.
PURPOSE AND REASONS OF THERMO ELECTRON FOR THE MERGER
Thermo Electron intends to undertake the merger agreement at this time in
order to acquire all of the outstanding shares of TerraTech common stock. In
deciding to acquire all of the outstanding shares of TerraTech common stock at
this time, Thermo Electron considered the following factors:
- recent public capital market trends affecting small companies;
- the latest trends in Thermo TerraTech's markets, primarily the
environmental-liability and resource-management services industry;
- Thermo TerraTech's debt, including debt owed to Thermo Electron;
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- reducing the public information available to competitors about Thermo
TerraTech's business, which would result from Thermo TerraTech no longer
having to file reports with the SEC;
- eliminating other burdens on management from public reporting and other
tasks required of public companies, including, for example, the dedication
of time and resources of management to stockholder and analyst inquiries,
and investor and public relations;
- the costs of being a private company, including elimination of fees
associated with SEC reporting and the related legal and accounting fees,
that Thermo Electron anticipates could result in savings of approximately
$450,000 per year, and
- the ability of Thermo TerraTech's management to focus on long-term
business goals, as opposed to quarterly earnings, as a private company.
In addition, the Thermo Electron board of directors considered the
advantages and disadvantages of some alternatives to acquiring the public
stockholder interest in Thermo TerraTech, including (1) selling its ownership of
Thermo TerraTech and (2) leaving Thermo TerraTech as a majority-owned, public
subsidiary. The first alternative, of selling its equity interest in Thermo
TerraTech, was briefly considered by Thermo Electron management, but it was not
an alternative that was pursued as reasonable, given that, at the time, Thermo
Electron did not want to sell its ownership of Thermo TerraTech. The advantages
to leaving Thermo TerraTech as a majority-owned, public subsidiary that Thermo
Electron considered included (1) the avoidance of dilution to the Thermo
Electron stockholders by the issuance of more of its shares of common stock as
consideration for shares of TerraTech common stock and (2) maintaining Thermo
TerraTech's access to capital in the public markets as a public company. The
disadvantages to leaving Thermo TerraTech as a majority-owned, public subsidiary
that Thermo Electron considered included the following:
- the burden on Thermo TerraTech of its debt, including debt owed to Thermo
Electron;
- the costs of being a public company; and
- the public information available to competitors about Thermo TerraTech's
business as result of its filing obligations with the SEC.
Thermo Electron also considered the number of Thermo TerraTech shares held
by the public stockholders, recent trends in the price of the TerraTech common
stock and the relative lack of liquidity for the TerraTech common stock. Thermo
Electron also reviewed the net overall cost of the transaction and its benefits,
including the transaction's contribution to Thermo Electron's earnings. Thermo
Electron also explored the impact on its own common stock of the issuance of
shares proposed to be used for this transaction. In addition, Thermo Electron
considered that, by acquiring the minority stockholder interest in Thermo
TerraTech, it would advance the goal of its proposed corporate reorganization,
in the form in which it was then proposed, to reduce the number of Thermo
Electron's majority-owned, public subsidiaries. After consideration of these
various factors, Thermo Electron decided to make a proposal to Thermo TerraTech
to acquire for stock, through a merger, all of the outstanding shares of
TerraTech common stock that it did not already own. After extensive negotiations
with the single member committee, Thermo Electron proposed an exchange ratio of
0.4 share of Thermo Electron common stock for every share of TerraTech common
stock, subject to adjustment. The floor price, $7.50 per share, represents a
premium of (1) approximately 79% over the closing price of the TerraTech common
stock on April 30, 1999, the last day on which trading in the TerraTech common
stock occurred prior to Thermo Electron's first public announcement of a
proposal to take Thermo TerraTech private, with no financial terms announced as
of that date, and (2) approximately 40% over the closing price of the TerraTech
common stock on October 19, 1999, the trading day immediately prior to the
public announcement of the financial terms of Thermo Electron's proposal.
As of June 30, 2000, Thermo Electron beneficially owned approximately 87% of
the outstanding TerraTech common stock.
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PURPOSE AND REASONS OF THERMO TERRATECH FOR THE MERGER
The purpose of Thermo TerraTech for engaging in the transactions
contemplated by the merger agreement, at the time the merger agreement was
entered into, was to become part of a larger operating entity and thereby
potentially realize improved operating and financial results and a stronger
competitive position. Thermo TerraTech considered the following factors in
determining to engage in the merger:
- the benefits to be gained from becoming part of a larger operating entity;
- recent public capital market trends affecting small companies;
- the latest trends in Thermo TerraTech's markets, primarily the
environmental-liability and resource-management services industry;
- the debt owed by Thermo TerraTech, including the debt owed to Thermo
Electron;
- reducing the public information available to competitors about Thermo
TerraTech's business, which would result from Thermo TerraTech no longer
having to file reports with the SEC;
- eliminating other burdens on management from public reporting and other
tasks required of public companies, including, for example, the dedication
of time and resources of management to stockholder and analyst inquiries,
and investor and public relations;
- the costs of being a private company. For example, as a private company,
Thermo TerraTech would not be required to file quarterly, annual or other
periodic reports with the SEC or publish and distribute to its
stockholders annual reports and proxy statements. Thermo Electron
anticipates that eliminating these requirements could result in savings of
approximately $450,000 per year, including the approximate cost of
associated legal and accounting fees; and
- the ability of Thermo TerraTech management to focus on long-term business
goals, as opposed to quarterly earnings, as a private company.
POSITION OF THERMO ELECTRON AS TO FAIRNESS OF THE MERGER
Thermo Electron considered the findings, analysis and recommendation of
TerraTech's single member committee and board with respect to the fairness of
the merger to the public stockholders. As of the date of the merger agreement,
Thermo Electron adopted the findings, analysis and recommendation of the single
member committee and the board with respect to the fairness of the merger. Based
solely on the findings, analysis and recommendation of the single member
committee and its own internal review of the terms of the merger, Thermo
Electron believes that the merger is both procedurally and substantively fair to
the public stockholders and that the exchange ratio is fair to the public
stockholders from a financial point of view. Thermo Electron did not attach
specific weights to any factors in reaching its belief as to fairness. Thermo
Electron is not making any recommendation as to how you should vote on the
merger agreement.
Some officers and directors of Thermo Electron are also officers and
directors of Thermo TerraTech and have interests that are in addition to, or
different from, your interests. See "--Conflicts of Interest." Thermo Electron
considered these potential conflicts of interest and based in part thereon,
Thermo Electron's proposed offer was conditioned on, among other things, the
approval of the merger by TerraTech's single member committee and the receipt by
the single member committee of a fairness opinion from an investment banking
firm.
CONFLICTS OF INTEREST
When you consider the recommendation of the board with respect to the
merger, you should be aware that some officers and directors of Thermo TerraTech
have interests in connection with the merger that are different from, or in
addition to yours, as summarized below. In making their respective decisions to
recommend the merger, the single member committee and the board were
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aware of these interests and considered them among the other matters described
above under "--The Single Member Committee's and the Board's Recommendation."
After the merger takes place, the current officers and directors of Thermo
TerraTech will continue as the officers and directors of Thermo TerraTech;
however, Thermo Electron intends to appoint a board of directors comprised
solely of members of the surviving corporation's and Thermo Electron's
management after the merger. Officers and directors who own TerraTech common
stock will receive shares of Thermo Electron common stock on the same terms as
all the other stockholders.
SINGLE MEMBER COMMITTEE
As compensation for serving on the single member committee, which formally
met with one or more of its advisors on 16 occasions, either in person or by
telephone, from May 1999 through the date of this proxy statement-prospectus,
the board has authorized that the member of the single member committee receive
a special retainer fee of $20,000 and additional fees of $1,000 for each meeting
attended in person and $500 for each meeting attended by telephone.
Mr. Vintiadis, the member of the single member committee, holds options to
acquire 6,000 shares of TerraTech common stock. The options have exercise prices
ranging from $4.16 to $10.03 per share. Under the terms of the merger agreement,
these options will be treated on the same terms as all the other holders of
Thermo TerraTech stock options and therefore will be assumed by Thermo Electron
and be converted into options to acquire shares of Thermo Electron common stock.
See "--Effect of the Merger on Thermo TerraTech Stock Options, Warrants and
Debentures." Mr. Vintiadis owns no shares of TerraTech common stock, and
accordingly will receive no shares of Thermo Electron common stock in the
merger. Mr. Vintiadis has deferred units equal to 11,583 shares of TerraTech
common stock under Thermo TerraTech's deferred compensation plan for directors,
which units will be converted into the right to receive 4,633 shares of Thermo
Electron common stock, assuming an exchange ratio of .4. See "--Deferred
Compensation Plan for Directors." The options and deferred units were issued to
Mr. Vintiadis under benefit plans approved by Thermo TerraTech's stockholders.
In addition, Mr. Vintiadis owned 2,500 shares of Thermo Electron common stock as
of May 31, 2000.
THERMO TERRATECH DIRECTORS AND EXECUTIVE OFFICERS
The members of the Thermo TerraTech board of directors, other than the
member of the single member committee, and executive officers of Thermo
TerraTech own 102,632 shares of TerraTech common stock and will receive 41,052
shares of Thermo Electron common stock in the merger, assuming an exchange ratio
of .4. In addition, these board members and executive officers hold options to
acquire 592,300 shares of TerraTech common stock, with exercise prices ranging
from $4.16 to $10.03 per share, which will be assumed by Thermo Electron and be
converted into options to acquire shares of Thermo Electron common stock on the
same terms as all the other holders of Thermo TerraTech stock options. See
"--Effect of the Merger on Thermo TerraTech Stock Options, Warrants and
Debentures." Deferred units equal to 23,587 shares of TerraTech common stock
have accumulated under Thermo TerraTech's deferred compensation plan for
directors, which units will be converted into the right to receive 9,434 shares
of Thermo Electron common stock (assuming an exchange ratio of .4), if the
directors elect to do so. See "--Deferred Compensation Plan for Directors." One
member of the Thermo TerraTech board of directors owns a warrant to purchase
12,500 shares of TerraTech common stock, which will be converted into a warrant
to purchase Thermo Electron common stock on the same terms as all the other
holders of warrants to purchase TerraTech common stock. See "--Effect of the
Merger on Thermo TerraTech Stock Options, Warrants and Debentures." These board
members and executive officers also beneficially owned 1,768,835 shares of
common stock of Thermo Electron as of May 31, 2000.
Further, the following members of the board and executive officers hold
director or officer positions with Thermo Electron. Mr. Theo Melas-Kyriazi, the
chief financial officer of Thermo TerraTech, is also a vice president and the
chief financial officer of Thermo Electron. Mr. Brian D.
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Holt, the president, chief executive officer and a director of Thermo TerraTech,
is also the chief operating officer, energy and environment, of Thermo Electron.
Mr. William A. Rainville, a director of Thermo TerraTech, is also the chief
operating officer, recycling and resource recovery, of Thermo Electron.
INDEMNIFICATION AND INSURANCE
The officers and directors of Thermo TerraTech are also covered under
various indemnification arrangements with Thermo Electron. See
"--Indemnification and Insurance."
EFFECTS OF THE MERGER
As a result of the merger, Thermo Electron will beneficially own the entire
equity interest in Thermo TerraTech. Thermo Electron will have complete control
over the conduct of Thermo TerraTech's business and will have a 100% interest in
the net book value and net earnings of Thermo TerraTech and any future increases
in the value of Thermo TerraTech. Thermo Electron's ownership of Thermo
TerraTech prior to the merger was approximately 87%. Upon completion of the
merger, Thermo Electron's interest in Thermo TerraTech's net book value of
$51.6 million on April 1, 2000, and net loss of $43.2 million for the fiscal
year ended April 1, 2000, respectively, would increase from approximately 87% of
such amounts to 100% of such amounts. You will no longer have any interest in,
and will not be a stockholder of, Thermo TerraTech and therefore will not
directly participate in Thermo TerraTech's future earnings and potential growth.
In addition, you will no longer bear the risk of any decreases in the value of
Thermo TerraTech. Instead, the stockholders of Thermo TerraTech other than
Thermo Electron will have the right to receive 0.4 share of Thermo Electron
common stock for each share held, subject to adjustment.
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In addition, after the merger, the TerraTech common stock will no longer be
traded on the American Stock Exchange, price quotations for sales of shares in
the public market will no longer be available and the registration of the
TerraTech common stock under the Exchange Act will be terminated. The
termination of registration of the TerraTech common stock under the Exchange Act
will eliminate Thermo TerraTech's obligation to file periodic financial and
other information with the SEC and will make most of the provisions of the
Exchange Act, such as the short-swing profit recovery provisions of
Section 16(b) and the requirement of furnishing a proxy or information statement
in connection with stockholders' meetings, no longer applicable.
Because Thermo Electron expects that it will sell or otherwise dispose of
the assets of Thermo TerraTech following the merger, it expects the merger to be
treated as a taxable exchange by the Thermo TerraTech shareholders of their
shares of TerraTech common stock for shares of Thermo
Electron common stock. As a result, each Thermo TerraTech shareholder will
realize taxable gain, or loss, to the extent that the fair market value of the
Thermo Electron common stock, plus any cash in lieu of fractional shares,
received by the shareholder in the merger exceeds, or is less than, the
shareholder's basis in the Thermo TerraTech stock that is surrendered. If Thermo
Electron does not dispose of substantially all of the assets of Thermo TerraTech
shortly after the merger, it is possible that the merger would qualify for
treatment as a "reorganization" under the Internal Revenue Code. This would mean
that shareholders of Thermo TerraTech would not recognize gain or loss upon
their exchange of TerraTech common stock for Thermo Electron common stock.
Although Thermo Electron currently believes that it is unlikely that the merger
will qualify as a reorganization, market conditions at the time that Thermo
Electron attempts to sell the Thermo TerraTech businesses might not be
favorable, and thus Thermo Electron would choose not to sell at that time, which
could delay the sales for a sufficient amount of time to allow the merger to
qualify as a reorganization. IN VIEW OF THE COMPLEXITIES OF FEDERAL INCOME AND
OTHER TAX LAWS, YOU SHOULD CONSULT WITH A TAX ADVISOR REGARDING, AMONG OTHER
THINGS, THE FEDERAL, STATE, LOCAL AND FOREIGN INCOME TAX CONSEQUENCES OF THE
MERGER APPLICABLE TO YOUR SPECIFIC CIRCUMSTANCES.
CONDUCT OF THERMO TERRATECH'S BUSINESS AFTER THE MERGER
Subject to the balance of this section, Thermo Electron expects that the
day-to-day business and operations of Thermo TerraTech will be conducted, for
the foreseeable future, substantially as they are currently being conducted by
Thermo TerraTech. Additionally, Thermo Electron does not currently contemplate
any material change in the composition of Thermo TerraTech's management except
that Thermo Electron intends to appoint a board of directors comprised of the
surviving corporation's management after the merger.
On January 31, 2000, Thermo Electron announced that it plans to sell Thermo
TerraTech's remaining businesses, in addition to the businesses that were
announced to be sold as of May 24, 1999. Please see "INFORMATION ABOUT THERMO
TERRATECH, THERMO ELECTRON AND TTT ACQUISITION" for a description of the
businesses that have been sold to date.
CONDUCT OF THE BUSINESS OF THERMO TERRATECH IF THE MERGER IS NOT CONSUMMATED
If the merger is not consummated, the board of directors expects that Thermo
TerraTech's current management will continue to operate Thermo TerraTech's
business substantially as currently operated, until its businesses are sold. See
"--Conduct of Thermo TerraTech's Business After the Merger." No other
alternatives are currently being considered.
CONVERSION OF SECURITIES
At the effective time of the merger, each share of TerraTech common stock,
other than shares held in treasury by Thermo TerraTech and shares held by Thermo
Electron, will be automatically converted into the right to receive 0.4 share of
Thermo Electron common stock, subject to adjustment as set forth below. Except
for the right to receive shares of Thermo Electron common stock, from and after
the
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<PAGE>
effective time, all shares of TerraTech common stock will no longer be
outstanding and will be canceled and retired and will cease to exist. Each
holder of a stock certificate formerly representing shares of TerraTech common
stock will after the effective time cease to have any rights with respect to the
shares, other than the right to receive shares of Thermo Electron common stock
for their shares of TerraTech common stock upon surrender of the stock
certificate.
In the merger, Thermo TerraTech stockholders will receive 0.4 share of
Thermo Electron common stock for each share of TerraTech common stock owned by
them, rounded down to the nearest whole share, without interest, plus a check
for any fractional share of Thermo Electron common stock. Holders of what would
have been a fractional share of Thermo Electron common stock will receive cash
equal to the closing price of the Thermo Electron common stock on the trading
day preceding the closing date, multiplied by the fraction of the share of
Thermo Electron common stock they would have received, rounded to the nearest
whole cent. The exchange ratio may be adjusted, as follows:
<TABLE>
<S> <C>
IF: THEN:
the average of the closing prices of Thermo the exchange ratio will change to be $7.50
Electron common stock during the 20 trading divided by the average of the closing prices
days ending five trading days before the of Thermo Electron common stock during the 20
merger times the exchange ratio (0.4)=less trading days ending five trading days before
than $7.50 the merger.
</TABLE>
EXAMPLE: If the average of the closing prices of Thermo Electron common stock
before the merger is $14.00, then using the formula set forth above:
$14.00 x 0.4=$5.60, which is less than $7.50. The exchange ratio would be
adjusted to be $7.50 divided by $14.00, or 0.53.
This would mean that, instead of receiving 0.4 share of Thermo Electron
common stock for every share of TerraTech common stock, you would receive 0.53
share of Thermo Electron common stock. However, Thermo Electron can elect to
terminate the merger agreement if the adjustment would require Thermo Electron
to issue more than 1.8 million shares of its common stock in the merger.
<TABLE>
<S> <C>
IF: THEN:
the average of the closing prices of Thermo the exchange ratio will change to be $9.25
Electron common stock during the 20 trading divided by the average of the closing prices
days ending five trading days before the of Thermo Electron common stock during the 20
merger times the exchange ratio (0.4)=more trading days ending five trading days before
than $9.25 the merger.
</TABLE>
EXAMPLE: If the average of the closing prices of Thermo Electron common stock
before the merger is $25.00, then using the formula set forth above:
$25.00 x 0.4=$10.00, which is more than $9.25. The exchange ratio would be
adjusted to be $9.25 divided by $25.00, or 0.37.
This would mean that, instead of receiving 0.4 share of Thermo Electron
common stock for every share of TerraTech common stock, you would receive
0.37 share of Thermo Electron common stock.
Assuming an exchange ratio of 0.4 share of Thermo Electron common stock for
every share of TerraTech common stock, Thermo TerraTech public stockholders
would hold approximately 0.6% of the outstanding Thermo Electron common stock
following the merger. Assuming both an exchange ratio of 0.4 and the exercise or
conversion of all outstanding Thermo TerraTech stock options, warrants and
debentures, which will, after the merger, be exercisable for or convertible into
Thermo Electron common stock, Thermo TerraTech public stockholders would hold
approximately 2.9% of the outstanding Thermo Electron common stock following the
merger.
You will not receive interest on the consideration payable upon the
surrender of your stock certificates. Payment of the exchange ratio to a person
who is not the registered holder of a stock
57
<PAGE>
certificate is conditioned upon the surrendered certificate being properly
endorsed and otherwise in proper form for transfer, as determined by the
exchange agent. Further, the person requesting payment will be required to pay
any transfer or other taxes required because of the payment to a person other
than the registered holder of the stock certificate, or establish to the
satisfaction of the exchange agent that any necessary tax has been paid or is
not payable. Six months after the effective time, Thermo Electron may require
the exchange agent to deliver to it any shares of Thermo Electron common stock
and any cash in lieu of fractional shares made available to the exchange agent
which have not been disbursed to Thermo TerraTech common stockholders. Neither
the exchange agent nor any party to the merger agreement will be liable to any
holder of stock certificates formerly representing shares for any amount paid
pursuant to any applicable abandoned property, escheat or similar law.
At the effective time, each share of common stock of TTT Acquisition will
automatically be converted into one share of common stock of the surviving
corporation. All shares held in treasury by Thermo TerraTech will, at the
effective time, cease to exist.
EFFECT OF THE MERGER ON THERMO TERRATECH STOCK OPTIONS, WARRANTS AND DEBENTURES
Thermo TerraTech has, from time to time, issued options to acquire TerraTech
common stock under its incentive and nonqualified stock option plans, its equity
incentive plan, and its directors stock option plan, each as amended. At the
effective time of the merger, each outstanding Thermo TerraTech stock option
under the TerraTech stock option plans, whether or not exercisable, will be
assumed by Thermo Electron. Each Thermo TerraTech stock option will continue to
have, and be subject to, substantially the same terms and conditions that it had
immediately prior to the effective time, except that:
- each Thermo TerraTech stock option will be exercisable for a number of
shares of Thermo Electron common stock determined by multiplying the
number of shares of TerraTech common stock issuable upon exercise of the
option immediately prior to the effective time by the exchange ratio; and
- the exercise price for the shares of Thermo Electron common stock issuable
upon exercise of the option will be determined by dividing the exercise
price per share of TerraTech common stock at which the option was
exercisable immediately prior to the effective time by the exchange ratio,
rounded up to the nearest whole cent.
In addition, at the effective time, all warrants to purchase TerraTech
common stock then outstanding shall be converted into warrants to purchase
Thermo Electron common stock. The number of whole shares of Thermo Electron
common stock for which each warrant will be exercisable and the per share
exercise price of the warrant will be determined in accordance with the terms of
the warrants.
After the merger, Thermo TerraTech's debentures will be convertible into
shares of Thermo Electron common stock, rather than into TerraTech common stock.
The debentures are currently convertible into TerraTech common stock at a price
of $15.90 per share. An aggregate of $111,850,000 principal amount of the
debentures was outstanding as of June 30, 2000. Holders of the debentures will
not have the right to cause Thermo TerraTech to redeem the debentures as a
result of the merger. Assuming an exchange ratio of 0.4, following the merger
the debentures will be convertible into Thermo Electron common stock at a
conversion price of $39.75 per share.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
At the effective time, subject to obtaining the consents of the affected
participants, the Thermo TerraTech deferred compensation plan for outside
directors will terminate, and Thermo TerraTech will distribute to each
participant either Thermo Electron common stock in an amount equal to the
balance of stock units credited as of the effective time multiplied by the
exchange ratio or the equivalent value of the Thermo Electron common stock in
cash. Two directors, Mr. Vintiadis, the member of the single member committee,
and Mr. Donald E. Noble had, as of May 31, 2000, deferred units equal to 11,583
58
<PAGE>
and 23,587 shares of TerraTech common stock under the deferred compensation
plan. If the directors elect to receive stock, assuming an exchange ratio of
0.4, they will receive 4,633 and 9,434 shares of Thermo Electron common stock,
respectively, at the effective time of the merger. If the directors elect to
receive cash, at the effective time of the merger they will receive cash equal
to the closing price of the Thermo Electron common stock on the trading day
preceding the closing date, multiplied by the number of shares of Thermo
Electron common stock they would have received, rounded to the nearest whole
cent.
TRANSFER OF SHARES
Shares of TerraTech common stock will not be transferred on the stock
transfer books at or after the effective time. If certificates representing such
shares are presented to Thermo TerraTech after the effective time, the shares
will be canceled and exchanged for shares of Thermo Electron common stock and
cash in lieu of fractional shares.
REPRESENTATIONS AND WARRANTIES
Thermo TerraTech made representations and warranties in the merger agreement
regarding, among other things, the following;
- its organization and good standing;
- its authority to enter into the merger agreement and consummate the
transactions contemplated in the agreement;
- its capitalization;
- the accuracy of information supplied by Thermo TerraTech for inclusion in
the registration statement of which this proxy statement-prospectus forms
a part;
- required governmental and other consents and approvals; and
- its receipt of a fairness opinion from Adams, Harkness & Hill.
Thermo Electron and TTT Acquisition made representations and warranties in
the merger agreement regarding, among other things, the following:
- their organization and good standing;
- their authority to enter into the merger agreement and consummate the
transactions contemplated in the agreement;
- Thermo Electron's capitalization;
- the accuracy of information supplied by Thermo Electron for inclusion in
forms and reports required to be filed with the SEC and supplied to Adams,
Harkness & Hill; and
- required governmental and other consents and approvals.
The representations and warranties of the parties in the merger agreement
will terminate at the completion of the merger.
Representations and warranties like these are made by parties to merger
agreements in order to assure the other parties involved that important facts
about a company and prerequisites to a merger transaction are true. For example,
it is important for a party to a merger agreement to know that the other party
has been authorized by its board of directors or other governing body to take
part in the transaction. If it turned out after the transaction that a company
was not really authorized to take part in the transaction, the merger could be
undone on the grounds that it was not entered into by two validly contracting
parties. That would be very disruptive for the parties concerned and their
stockholders. The merger agreement can be terminated, and the merger would not
happen, if one of our representations or warranties is materially untrue as of
the effective time of the merger, and we cannot make them true after we have
been notified by the other party that they are not true. The
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<PAGE>
termination of the merger agreement would affect you in that you would remain a
stockholder of Thermo TerraTech, and you would not become a stockholder of
Thermo Electron.
COVENANTS
In the merger agreement, Thermo TerraTech agreed that from the date of the
merger agreement until the earlier of termination of the merger agreement or the
effective time, it will:
- carry on its business in the usual, regular and ordinary course,
substantially consistent with past practice, except as consented to by
Thermo Electron;
- pay its debts and taxes when due subject to good faith disputes over its
debts or taxes;
- pay or perform other material obligations when due; and
- use its commercially reasonable efforts consistent with past practices and
policies to preserve its present business organization, keep available the
services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has business dealings.
In the merger agreement, Thermo Electron agreed that from the date of the
merger agreement until the earlier of the termination of the merger agreement or
the effective time, it will, except for actions contemplated by the merger
agreement or some other actions:
- carry on its business materially in the usual, regular and ordinary
course;
- pay its debts and taxes when due subject to good faith disputes over its
debts or taxes;
- pay or perform other material obligations when due; and
- use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep
available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensors,
licensees, and others with which it has business dealings.
In addition, Thermo Electron agreed that it will not, and will not permit
any of its material subsidiaries to, take any action which would make any of the
representations and warranties of Thermo Electron in the merger agreement untrue
or cause Thermo Electron not to be in compliance with any covenant in the merger
agreement.
Thermo Electron has also agreed to give prompt notice to Thermo TerraTech of
any written offers or indications of interest that it receives from a
prospective purchaser of any material properties or assets of Thermo TerraTech
or its subsidiaries, which set forth a proposed purchase price greater than
$3 million, or in which the book value of the assets being sold is greater than
$3 million, other than sales of assets in the ordinary course of business.
Covenants like these are included in merger agreements in order to create
obligations on a party to a merger agreement to do, or not to do, things that
are important to the other party before the merger happens. For example, it is
important to Thermo Electron that Thermo TerraTech continue to pay its bills and
maintain its current business until the merger, because Thermo Electron wants
Thermo TerraTech's business to have basically the same qualities when it merges
with Thermo Electron as it had when Thermo Electron decided it wanted to merge
with Thermo TerraTech. The merger agreement can be terminated, and the merger
would not happen, if we have not materially performed or complied with one of
our covenants as of the effective time of the merger, and we still cannot
materially perform or comply with the covenant after we have been notified by
the other party that we need to do so. The termination of the merger agreement
would affect you in that you would remain a stockholder of Thermo TerraTech, and
you would not become a stockholder of Thermo Electron.
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<PAGE>
CONDITIONS
The completion of the merger depends upon our meeting a number of
conditions, including the following:
- adoption of the merger agreement by the holders of a majority of the
outstanding shares of TerraTech common stock;
- the absence of any statute, injunction or other order that has the effect
of making the merger illegal or otherwise prohibits consummation of the
merger;
- the effectiveness of the registration statement of which this proxy
statement-prospectus forms a part and a resale registration statement
covering the sale of Thermo Electron common stock issuable upon exercise
of the TerraTech warrants assumed by Thermo Electron in the merger and the
absence of an order suspending the effectiveness of the registration
statements;
- the authorization for listing on the New York Stock Exchange of all shares
of Thermo Electron common stock issuable under the merger agreement;
- no event that would result in the issuance of the rights to purchase
Thermo Electron's Series B Junior Participating Preferred Stock shall have
occurred;
- each of Thermo Electron's, Thermo TerraTech's and TTT Acquisition's
representations and warranties in the merger agreement must be materially
true and correct on and as of the effective time of the merger; and
- each of Thermo Electron, Thermo TerraTech and TTT Acquisition shall have
materially performed or complied with the obligations that the merger
agreement requires each of them to perform or comply with at or prior to
the effective time of the merger.
In addition, Thermo TerraTech's obligation to complete the merger is subject
to these conditions, which may be waived in writing by Thermo TerraTech if the
single member committee approves:
- at the time this proxy statement-prospectus is mailed to you and at the
effective time of the merger, Adams, Harkness & Hill shall have reaffirmed
orally and not withdrawn its fairness opinion; and
- Thermo Electron shall have received any necessary state securities
approvals for the issuance of its common stock under the merger agreement.
The obligations of TTT Acquisition and Thermo Electron to effect the merger
are subject to the following condition, which may be waived in writing by Thermo
Electron:
- the single member committee shall not have withdrawn its recommendation to
the board of directors that the merger agreement, including the exchange
ratio, is fair to, and in the best interests of, the public stockholders
of Thermo TerraTech.
Conditions like these are put in merger agreements in order to make sure
that things that each party wants to have happen before the merger have in fact
occurred before the parties go through with the merger. For example, it is very
important to Thermo TerraTech that the Thermo Electron common stock which you
will receive in the merger is registered with the Securities and Exchange
Commission before the merger happens, so that you can freely resell it if you
are not an affiliate. If any of the conditions to the completion of the merger
is not met, and the failure by one party to meet the condition is not waived by
the other party, the merger agreement may be terminated, and the merger would
not happen. This would affect you in that you would remain a stockholder of
Thermo TerraTech and you would not become a stockholder of Thermo Electron.
INDEMNIFICATION AND INSURANCE
The surviving corporation shall, and Thermo Electron will cause the
surviving corporation to, fulfill and honor in all respects the indemnification
obligations of Thermo TerraTech, under Thermo TerraTech's Certificate of
Incorporation and Bylaws, each as in effect on the date of the merger
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agreement. The surviving corporation's Certificate of Incorporation and Bylaws
will contain the indemnification and elimination of liability for monetary
damages provisions that are currently set forth in Thermo TerraTech's
Certificate of Incorporation and Bylaws. Those provisions will not be amended,
repealed or otherwise modified for six years from the effective time in a manner
that would adversely affect the rights of those people who, as of the date of
the merger agreement and at any time from the date of the merger agreement until
the effective time, were directors or executive officers of Thermo TerraTech,
unless modifications are required by law.
In addition, Thermo Electron will cause the surviving corporation, either
directly or through participation in Thermo Electron's umbrella policy, to
maintain in effect, for six years after the effective time, a directors' and
officers' liability insurance policy covering the Thermo TerraTech directors and
officers who, on the date of the merger agreement, were then covered by Thermo
Electron's liability insurance policy. The coverage of that policy will be no
less favorable in amount and scope than the directors' and officers' existing
coverage. However, the surviving corporation will not be required to pay
premiums for that insurance if they would be more than 175% of the current
annual premiums, as adjusted for inflation each year, allocable to and paid by
Thermo TerraTech.
The merger agreement also provides that Thermo TerraTech will, regardless of
whether the merger becomes effective, indemnify Mr. Vintiadis against any costs
and expenses paid for any claim or action arising out of or pertaining to any
action or omission in his capacity as a director or fiduciary of Thermo
TerraTech, including as a member of the single member committee or in connection
with the merger, that occurs on, before or after the effective time, until the
statute of limitations relating to the action or omission expires. Thermo
TerraTech shall pay Mr. Vintiadis' expenses in advance of the final disposition
of the action upon receipt of an undertaking by Mr. Vintiadis to repay those
expenses if it is later decided that he is not entitled to the payment. If the
merger becomes effective, Thermo Electron will be jointly and severally
responsible for the indemnification and expenses advancement obligations
described above. If the merger does not become effective, Thermo Electron will
only be responsible for indemnifying or advancing expenses for matters that
relate to the work of the single member committee, the merger agreement or the
transactions contemplated by the merger agreement.
In addition, Thermo Electron has entered into separate indemnification
agreements with each of the members of the board of directors, including the
member of the single member committee. These agreements provide for
indemnification of and advancement of expenses to the Thermo TerraTech directors
directly by Thermo Electron in the event that a director, because of his or her
status as a director or officer of Thermo TerraTech, or service as a director,
officer or fiduciary of another company at the request of Thermo Electron, is
made or threatened to be made a party to any action, suit or other proceeding,
if the director acted in good faith and in a manner the director reasonably
believed to be in or not opposed to the best interests of Thermo Electron. In
addition, with respect to any criminal action or proceeding, indemnification
shall be made only if the director also had no reasonable cause to believe his
or her conduct was unlawful. In the case of any threatened, pending or completed
action, suit or proceeding by or in the right of Thermo Electron,
indemnification shall be made to the maximum extent permitted under Delaware
law.
Thermo Electron entered into these indemnification agreements with Thermo
TerraTech's officers and directors so that the indemnified officers and
directors would have supplemental protection in the event that indemnification
directly from Thermo TerraTech was not available either because of legal
restricions or because Thermo TerraTech did not have the funds to cover the
obligation.
TERMINATION, AMENDMENT AND WAIVER
At any time prior to the effective time, whether before or after adoption of
the merger agreement by the stockholders of Thermo TerraTech, the merger
agreement may be terminated by the mutual written consent of the board of
directors of TTT Acquisition and the board of directors of Thermo TerraTech,
upon approval of the single member committee.
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In addition, either TTT Acquisition or Thermo TerraTech, upon approval of
the single member committee, may terminate the merger agreement prior to the
effective time, whether before or after adoption of the merger agreement by the
stockholders of Thermo TerraTech, in the following circumstances:
- the merger has not been completed by September 30, 2000, in which case the
right of Thermo TerraTech to terminate shall be exercised as directed by
the single member committee, unless the party seeking to terminate has
breached the merger agreement and that breach has been a principal cause
of the failure of the merger to be completed;
- a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission issues an order, decree or ruling or
takes any other action enjoining, restraining or otherwise prohibiting the
merger and the order, decree, ruling or action is final and nonappealable;
or
- the stockholders of Thermo TerraTech have not adopted the merger
agreement, unless the party seeking to terminate has breached the merger
agreement and that breach has been the principal cause of or resulted in
the failure to obtain stockholder adoption of the merger agreement. Thermo
Electron has agreed to vote, or cause to be voted, all of the TerraTech
common stock owned by it and any of its subsidiaries in favor of the
merger.
In addition, TTT Acquisition may terminate the merger agreement prior to the
effective time, whether before or after adoption of the merger agreement by the
stockholders of Thermo TerraTech, if (1) Thermo TerraTech breaches any
representation, warranty, covenant or agreement in any material respect and
fails to cure the breach within 10 business days after written notice of the
breach from TTT Acquisition or (2) Thermo Electron would be required to issue
more than 1,800,000 shares of its common stock as a result of an adjustment to
the exchange ratio.
In the event that Thermo Electron would be required to issue more than
1,800,000 shares of its common stock, Thermo Electron would have to decide
whether to exercise its right to terminate the merger agreement. The factors
that Thermo Electron would consider in making this decision include the exact
number of shares it would be required to issue and the level of dilution to
Thermo Electron stockholders from that issuance; the market conditions existing
at the time the decision is made, including trends in the price of the Thermo
Electron common stock; and the financial condition of the business of Thermo
TerraTech.
Based on the number of shares of TerraTech common stock held by the public
stockholders as of June 30, 2000 (2,424,160), the price of Thermo Electron
common stock would have to reach approximately $10.10 per share in order to
require Thermo Electron to issue more than 1,800,000 shares in the merger,
calculated as follows:
2,424,160 x $7.50 (the minimum value of Thermo Electron stock issuable to
the public stockholders in the merger) = $18,181,200
$18,181,200 / 1,800,000 = $10.10 per share
Thermo TerraTech may terminate the merger agreement prior to the effective
time, whether before or after adoption of the merger agreement by the
stockholders of Thermo TerraTech, if:
- the single member committee determines after consultation with outside
legal counsel that failure to do so would be inconsistent with the board's
or the single member committee's fiduciary duties under applicable law,
which determination would result in the withdrawal or modification of the
single member committee's recommendation and, at the single member
committee's election, the termination of the merger agreement; or
- Thermo Electron or TTT Acquisition breaches any representation, warranty,
covenant or agreement in any material respect and fails to cure the breach
within 10 business days after written notice of the breach from Thermo
TerraTech.
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Subject to applicable law, the merger agreement may be amended by the
parties at any time by written agreement; provided, however, that Thermo
TerraTech may not amend the merger agreement without the approval of the single
member committee.
Neither party will have to pay a termination fee if the merger agreement is
terminated.
EXPENSES
The parties will to pay their own costs and expenses in connection with the
merger agreement. Assuming the merger is consummated, the estimated costs and
fees which will be paid by Thermo TerraTech are as follows:
<TABLE>
<CAPTION>
COST OR FEE ESTIMATED AMOUNT
----------- ----------------
<S> <C>
Financial advisory fees..................................... $137,500
Listing fees................................................ 14,750
Legal fees.................................................. 100,000
Accounting fees............................................. 15,000
Single member committee fees................................ 40,000
Printing and mailing fees................................... 100,000
Commission filing fees...................................... 3,316
Other regulatory filing fees................................ 5,000
Miscellaneous............................................... 34,434
--------
$450,000
========
</TABLE>
See "--Opinion of Adams, Harkness & Hill" for a description of the fees to
be paid to Adams, Harkness & Hill in connection with its engagement. For a
description of fees payable to the member of the single member committee, see
"--Conflicts of Interest."
ACCOUNTING TREATMENT
The merger will be accounted for as the acquisition of a minority interest
by Thermo Electron, using the purchase method of accounting.
REGULATORY APPROVALS
There are no federal or state regulatory approvals required that have not
already been obtained, nor any regulatory requirements complied with, in
connection with the consummation of the merger by any party to the merger
agreement, except for (1) the requirements of the Delaware General Corporation
Law relating to stockholder approval and completion of the merger and (2) the
requirements of the federal and state securities laws.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF THERMO TERRATECH AND THERMO
ELECTRON
The shares of Thermo Electron common stock to be issued in the merger will
be registered under the Securities Act of 1933, as amended, and will be freely
transferable under the Securities Act, except for shares of Thermo Electron
common stock issued to any person who is deemed to be an "affiliate" of either
of us at the time of the special meeting. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under the common control of either of us and may include some of our
respective officers and directors, as well as the principal stockholders of each
of us. Affiliates may not sell their shares of Thermo Electron common stock
acquired in the merger except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares;
- an exemption under paragraph (d) of Rule 145 under the Securities Act; or
- any other applicable exemption under the Securities Act.
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Thermo Electron's registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, does not cover the resale of shares of Thermo
Electron common stock to be received by affiliates in the merger.
LISTING ON THE NEW YORK STOCK EXCHANGE OF THERMO ELECTRON COMMON STOCK TO BE
ISSUED IN THE MERGER
Thermo Electron will use its best efforts to cause the shares of its common
stock to be issued in connection with the merger to be approved for listing on
the New York Stock Exchange before the completion of the merger.
DISSENTERS' AND APPRAISAL RIGHTS
Under Delaware law, shareholders of Thermo TerraTech are not entitled to
exercise dissenters' or appraisal rights as a result of the merger or to demand
payment for shares of TerraTech common stock.
COMPARATIVE PER SHARE MARKET PRICE DATA
The Thermo Electron common stock is traded on the New York Stock Exchange
under the symbol "TMO." The TerraTech common stock is traded on the American
Stock Exchange under the symbol "TTT."
The following table sets forth the closing prices per share of the TerraTech
common stock and the closing prices per share of Thermo Electron common stock on
the following dates:
- May 4, 1999, the last trading day before the public announcement of Thermo
Electron's proposal, with no price having been determined, to take Thermo
TerraTech private. In the case of the TerraTech common stock, closing
price information is given as of April 30, 1999, which was the last day on
which the TerraTech common stock traded before the May 5 announcement; and
- October 19, 1999, the last trading day before the public announcement that
Thermo Electron and Thermo TerraTech had entered into the merger
agreement;
- April 12, 2000, the last trading day before the public announcement of the
revised exchange ratio; and
- August , 2000, the last trading day before the date of this proxy
statement-prospectus.
The chart also presents, in the line entitled "Equivalent Per Share Price,"
the price per share of TerraTech common stock you would have received if the
exchange ratio had been set under the terms of the merger agreement on each of
May 4, 1999, October 19, 1999, April 12, 2000 and August , 2000.
<TABLE>
<CAPTION>
APRIL 30, 1999/
STOCK/DATE MAY 4, 1999 OCTOBER 19, 1999 APRIL 12, 2000 AUGUST , 2000
---------- --------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Thermo TerraTech....................... $4.1875 $ 5.375 $ 7.50 $
Thermo Electron........................ 16.25 13.0625 19.8125
Equivalent Per Share Price............. 7.50 7.50 7.925
</TABLE>
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THE SPECIAL MEETING
PROXY SOLICITATION
This proxy statement-prospectus is being delivered to you in connection with
the solicitation by the board of proxies to be voted at the special meeting to
be held on , 2000 at 10:00 a.m., local time, at the offices of
Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts 02454.
Thermo TerraTech will pay all expenses in connection with solicitation of the
proxy statement-prospectus. Officers, directors and regular employees of Thermo
TerraTech, who will receive no additional compensation for their services, may
solicit proxies by telephone or personal call. Thermo TerraTech has asked
brokers and nominees who hold stock in their names to give the proxy statement-
prospectus to their customers. This proxy statement-prospectus is first being
mailed on or about , 2000.
RECORD DATE AND QUORUM REQUIREMENT
Stockholders of record at the close of business on August 2, 2000 are
entitled to notice of, and to vote at, the special meeting. Each holder of
record of TerraTech common stock at the close of business on the record date is
entitled to one vote for each share then held on each matter voted on by
stockholders. At the close of business on the record date, there were 19,111,110
shares of TerraTech common stock issued and outstanding held by 962 holders of
record and by approximately 1,200 persons or entities holding in nominee name.
The holders of a majority of the outstanding shares entitled to vote at the
special meeting must be present in person or represented by proxy to constitute
a quorum for the transaction of business. Abstentions are counted for purposes
of determining whether a quorum exists. If you hold your shares of TerraTech
common stock through a broker, bank or other nominee, generally the nominee may
only vote your TerraTech common stock in accordance with your instructions.
However, if it has not timely received your instructions, the nominee may vote
on matters for which it has discretionary voting authority. Brokers generally
will not have discretionary voting authority to vote on the proposal to adopt
the merger agreement. If a nominee cannot vote on a matter because it does not
have discretionary voting authority, this is a "broker non-vote" on that matter.
Broker non-votes are also counted as shares present or represented at the
special meeting for purposes of determining whether a quorum exists.
VOTING PROCEDURES
Under Delaware law, holders of a majority of the outstanding shares of
TerraTech common stock entitled to vote at the special meeting must vote to
adopt the merger agreement. For purposes of the vote required under Delaware
law, a failure to vote, a vote to abstain and a broker non-vote will each have
the same legal effect as a vote against adoption of the merger agreement. Thermo
Electron, which owns approximately 87% of the outstanding TerraTech common
stock, owns enough shares to adopt the merger agreement without the vote of the
public stockholders and has agreed to vote in favor of the merger agreement. In
addition, Thermo TerraTech's directors and executive officers have expressed
their intention to vote to adopt the merger agreement.
If you execute a proxy card without giving instructions, the shares of
TerraTech common stock represented by that proxy card will be voted "FOR"
adoption of the proposed merger agreement.
The board is not aware of any other matters to be voted on at the special
meeting. If any other matters properly come before the special meeting,
including a motion to adjourn the special meeting in order to solicit additional
proxies, the persons named on the proxy card will vote the shares represented by
all properly executed proxies on those matters in their discretion, except that
shares represented by proxies that have been voted "AGAINST" adoption of the
merger agreement will not be
66
<PAGE>
used to vote "FOR" adjournment of the special meeting to allow additional time
to solicit additional votes "FOR" the merger agreement.
VOTING AND REVOCATION OF PROXIES
You may revoke your proxy at any time before it is exercised by one of the
following means:
- sending the secretary of Thermo TerraTech a notice revoking it;
- submitting a duly executed proxy with a later date; or
- voting in person at the special meeting.
All shares represented by each properly executed and not revoked proxy
received by the secretary of Thermo TerraTech prior to the special meeting will
be voted in accordance with the instructions given on the proxy. If no
instructions are indicated, the proxy will be voted to adopt the merger
agreement.
EFFECTIVE TIME
The merger will be effective as soon as practicable following stockholder
adoption of the merger agreement and the satisfaction or waiver of the terms and
conditions set forth in the merger agreement, and upon the filing of a
certificate of merger with the secretary of state of the State of Delaware. See
"THE MERGER--Conditions."
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SELECTED FINANCIAL INFORMATION--THERMO ELECTRON
The selected financial information presented below as of and for the fiscal
years ended January 1, 2000, and January 2, 1999, and for the fiscal year ended
January 3, 1998, has been derived from Thermo Electron's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report incorporated by reference into this
proxy statement-prospectus. The selected financial information presented below
as of January 3, 1998, and as of and for the fiscal years ended December 28,
1996, and December 30, 1995, has been derived from Thermo Electron's
Consolidated Financial Statements, which have been audited by Arthur Andersen
LLP, but have not been included or incorporated by reference herein. This
information should be read in conjunction with Thermo Electron's Consolidated
Financial Statements and related notes incorporated by reference into this proxy
statement-prospectus. The selected financial information as of and for the three
months ended April 1, 2000, and April 3, 1999, has not been audited but, in the
opinion of Thermo Electron, includes all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly such information in
accordance with generally accepted accounting principles applied on a consistent
basis. The results of operations for the three months ended April 1, 2000, are
not necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------- FISCAL YEAR (1)
APRIL 1, APRIL 3, ---------------------------------------------------------------
2000 1999 1999 (2) 1998 (3) 1997 1996 (4) 1995
---------- -------- ----------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.............................. $ 589,929 $555,750 $ 2,471,193 $2,055,805 $1,979,602 $1,573,005 $1,059,064
Income (Loss) from Continuing
Operations Before
Extraordinary Items................. 15,291 18,069 (14,580) 114,676 174,665 164,172 76,167
Net Income (Loss)..................... 15,823 28,299 (174,573) 181,901 239,328 190,816 139,582
Earnings (Loss) per Share from
Continuing Operations Before
Extraordinary Items:
Basic............................... .10 .11 (.09) .71 1.15 1.16 .60
Diluted............................. .09 .11 (.11) .67 1.05 1.03 .55
Earnings (Loss) per Share:
Basic............................... .10 .18 (1.10) 1.12 1.57 1.35 1.10
Diluted............................. .09 .17 (1.13) 1.08 1.41 1.17 .95
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital....................... $1,629,388 $ 1,450,858 $2,163,010 $2,001,963 $2,218,617 $1,317,146
Total Assets.......................... 5,177,187 5,181,842 5,421,060 4,961,046 4,546,942 3,247,952
Long-term Obligations................. 1,570,323 1,565,974 1,808,582 1,518,687 1,531,668 1,079,761
Minority Interest..................... 364,900 364,278 399,512 464,191 364,163 200,868
Common Stock of Subsidiaries Subject
to Redemption....................... 7,692 7,692 40,500 40,500 2,613 --
Shareholders' Investment.............. 2,014,251 2,014,486 2,254,802 2,007,862 1,755,576 1,311,311
OTHER DATA (UNAUDITED):
Book Value per Share.................. $ 12.84 $ 12.87 $ 14.23 $ 12.62 $ 11.71 $ 9.82
Cash Dividends
Declared per Share.................. -- -- -- -- -- --
</TABLE>
------------------------------
(1) Thermo Electron's 1999, 1998, 1997, 1996, and 1995 fiscal years ended
January 1, 2000, January 2, 1999, January 3, 1998, December 28, 1996, and
December 30, 1995, respectively.
(2) Reflects a $182.4 million pretax charge for restructuring and related costs.
(3) Reflects a $32.5 million pretax charge for restructuring and related costs,
the issuance of $150.0 million principal amount of Thermo Electron's notes,
and Thermo Electron's public offering of common stock for net proceeds of
$290.1 million.
(4) Reflects the issuance of $585.0 million principal amount of Thermo
Electron's convertible debentures.
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<PAGE>
SELECTED FINANCIAL INFORMATION--THERMO TERRATECH
The selected financial information presented below as of and for the fiscal
years ended April 1, 2000, and April 3, 1999, and for the fiscal year ended
April 4, 1998, has been derived from Thermo TerraTech's Consolidated Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included in or incorporated by
reference into this proxy statement-prospectus. The selected financial
information presented below as of April 4, 1998, and as of and for the fiscal
years ended March 29, 1997 and March 30, 1996, has been derived from Thermo
TerraTech's Consolidated Financial Statements, which have been audited by Arthur
Andersen LLP, but have not been included or incorporated by reference herein.
This information should be read in conjunction with Thermo TerraTech's
Consolidated Financial Statements and related notes included in or incorporated
by reference into this proxy statement-prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR (1)
----------------------------------------------------
2000 (2) 1999 (3) 1998 (4) 1997 (5) 1996
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $307,329 $310,039 $298,786 $278,503 $220,484
Net Income (Loss)........................................... (43,219) (1,421) 3,273 (162) 3,447
Earnings (Loss) per Share:
Basic..................................................... (2.27) (.07) .18 (.01) .20
Diluted................................................... (2.27) (.07) .17 (.01) .18
BALANCE SHEET DATA (AT END OF PERIOD):
Working Capital............................................. $ 30,733 $ 67,043 $ 69,319 $ 77,315 $ 66,008
Total Assets................................................ 304,553 350,465 360,526 393,784 333,656
Long-term Obligations....................................... 118,113 158,617 153,144 165,186 155,384
Shareholders' Investment.................................... 51,570 92,157 97,130 83,526 85,870
OTHER DATA (UNAUDITED):
Book Value per Share........................................ $ 2.72 $ 4.84 $ 4.97 $ 4.67 $ 4.89
Cash Dividends Declared per Share........................... -- -- -- -- --
</TABLE>
------------------------------
(1) Thermo TerraTech's 2000, 1999, 1998, 1997, and 1996 fiscal years ended
April 1, 2000, April 3, 1999, April 4, 1998, March 29, 1997, and March 30,
1996, respectively.
(2) Reflects a $58.7 million pretax charge for restructuring and related costs.
(3) Reflects a $10.2 million pretax charge for restructuring costs.
(4) Reflects a pretax gain of $3.0 million from ThermoRetec's sale of its
investment in a joint venture.
(5) Reflects $7.8 million of pretax restructuring costs and a loss $1.5 million
relating to the sale of Thermo TerraTech's J. Amerika division. Also
reflects the issuance of $115.0 million principal amount of 4 7/8%
subordinated convertible debentures, and a gain on issuance of stock by
subsidiary of $1.5 million.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax considerations relevant to the merger that are applicable to holders
of TerraTech common stock. This discussion is based on currently existing
provisions of the Internal Revenue Code, existing Treasury Regulations
thereunder and current administrative rulings and court decisions, all of which
are subject to change. Any such change, which may or may not be retroactive,
could alter the tax consequences to Thermo Electron, Thermo TerraTech or Thermo
TerraTech stockholders as described herein.
Thermo TerraTech stockholders should be aware that this discussion does not
deal with all federal income tax considerations that may be relevant to
particular Thermo TerraTech stockholders in light of their particular
circumstances, including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign persons, stockholders who own
their stock as part of a hedge, appreciated financial position, straddle or
conversion transaction, stockholders who do not own their stock as a capital
asset and stockholders who have acquired their stock upon the exercise of
employee options or otherwise as compensation. In addition, this discussion does
not address the following topics:
- the tax consequences of the merger under foreign, state or local tax laws,
- the tax consequences of transactions effectuated by a stockholder before
or after, or concurrently with, the merger, whether or not any such
transactions are undertaken in connection with the merger, including
without limitation any transaction in which shares of TerraTech common
stock are acquired or shares of Thermo Electron common stock are disposed
of,
- the tax consequences of the assumption by Thermo Electron of outstanding
options and warrants to acquire TerraTech common stock, or
- the tax consequences to holders of the debentures.
ACCORDINGLY, THERMO TERRATECH STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
MERGER.
Because Thermo Electron expects to sell or otherwise dispose of the assets
of Thermo TerraTech following the merger, it expects the merger to be treated as
a taxable exchange by the Thermo TerraTech shareholders of their shares of
TerraTech common stock for shares of Thermo Electron common stock. As a result,
each TerraTech shareholder will realize taxable gain, or loss, to the extent
that the fair market value of the Thermo Electron common stock, plus any cash in
lieu of fractional shares, received by the shareholder in the merger exceeds, or
is less than, the shareholder's basis in the TerraTech stock surrendered. If the
exchange is taxable, the stockholder's basis in the Thermo Electron stock
received in the merger will equal its fair market value at the time of the
merger, and its holding period will commence on the day following the merger.
If Thermo Electron does not dispose of substantially all of the assets of
Thermo TerraTech shortly after the merger, the merger may qualify for treatment
as a "reorganization" under the Internal Revenue Code. Although Thermo Electron
currently believes that result is unlikely, market conditions at the time that
Thermo Electron attempts to dispose of the Thermo TerraTech businesses could be
such that Thermo Electron would conclude that a current sale of the business
would not be advantageous, which could delay the sales for a sufficient amount
of time to allow the merger to qualify as a reorganization. If Thermo Electron
did retain a significant portion of the Thermo TerraTech businesses, and
assuming that the other requirements for a reorganization were met, the
following tax consequences would result:
- No gain or loss would be recognized by Thermo Electron, TTT Acquisition or
Thermo TerraTech as a result of the merger;
70
<PAGE>
- No gain or loss would be recognized by Thermo TerraTech stockholders upon
the exchange of TerraTech common stock solely for Thermo Electron common
stock in the merger, except to the extent of cash received in lieu of a
fractional share of Thermo Electron common stock;
- Cash received by the Thermo TerraTech stockholders in lieu of a fractional
share of Thermo Electron common stock would be treated as received as a
distribution in redemption of the fractional share, subject to the
provisions of Section 302 of the Internal Revenue Code, as if the
fractional share had been issued in the merger and then redeemed by Thermo
Electron. A Thermo TerraTech stockholder receiving such cash would
recognize gain or loss, upon such payment, measured by the difference, if
any, between the amount of cash received and the basis in such fractional
share;
- The tax basis of the Thermo Electron common stock received by Thermo
TerraTech stockholders in the merger would be equal to the tax basis of
the TerraTech common stock exchanged therefor in the merger, reduced by
any basis allocable to a fractional share of Thermo Electron common stock
treated as sold or exchanged under Section 302 of the Internal Revenue
Code; and
- The holding period for the shares of Thermo Electron common stock received
by each Thermo TerraTech stockholder in the merger would include the
holding period for the shares of TerraTech common stock exchanged therefor
in the merger, provided that the shares of TerraTech common stock were
held as capital assets at the effective time.
As discussed above, Thermo Electron expects that it will dispose of the
assets of Thermo TerraTech after the merger so that the merger will not qualify
as a "reorganization" for federal income tax purposes. Thermo Electron will
reassess this position as of the end of 2000 in light of the amount, if any, of
the assets of Thermo TerraTech then held by it. If Thermo Electron, in
consultation with its tax advisors, concludes that the merger should be
characterized as a "reorganization," it will notify the shareholders of
TerraTech common stock who surrendered their shares in the merger.
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<PAGE>
PROJECTED FINANCIAL DATA OF THERMO TERRATECH
Thermo TerraTech does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data, cash
flows or balance sheet and financial position information. However, in order to
aid the TerraTech single member committee and Adams, Harkness & Hill in their
evaluation of Thermo TerraTech and to aid Adams, Harkness & Hill in its
assessment of the fairness, from a financial point of view, of the consideration
of 0.4 shares of Thermo Electron common stock per share of TerraTech common
stock payable to the public stockholders in the merger, Thermo TerraTech, in
July 1999, gave the single member committee and Adams, Harkness & Hill
projections prepared by Thermo TerraTech's management. The following summary of
the projections is included in this proxy statement-prospectus only because the
projections were given to Adams, Harkness & Hill and the single member
committee. The projections do not reflect any of the effects of the merger or
other changes that may in the future be made to Thermo TerraTech and its assets,
business, operations, properties, policies, corporate structure, capitalization
and management. Except as set forth in the last paragraph, Thermo TerraTech has
not updated the projections to reflect changes that have occurred since their
preparation.
The projections were not prepared with a view toward public disclosure or
compliance with published guidelines of the SEC or the American Institute of
Certified Public Accountants regarding forward-looking information or generally
accepted accounting principles. Neither Thermo TerraTech's independent
accountants, nor any other independent accountants, have compiled, examined or
performed any procedures with respect to the prospective financial information
contained in the projections, nor have they expressed any opinion or given any
form of assurance on that information or its achievability, and assume no
responsibility for, and disclaim any association with, such prospective
financial information. Furthermore, the projections necessarily make many
assumptions, of which the material assumptions are set forth in the last
paragraph on this page. Many of these assumptions are beyond Thermo TerraTech's
control and may prove not to have been, or may no longer be, accurate.
Additionally, this information, except as otherwise indicated, does not reflect
revised prospects for Thermo TerraTech's businesses, changes in general business
and economic conditions, or any other transaction or event that has occurred or
that may occur and that was not anticipated at the time the information was
prepared. Accordingly, the information presented may not be indicative of
current values or future performance, which may be significantly more favorable
or less favorable than as set forth in the projections, and should not be
regarded as a representation that they will be achieved.
THE PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUE OF
THERMO TERRATECH MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THE PROJECTIONS.
MANY OF THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES ARE BEYOND
THERMO TERRATECH'S ABILITY TO CONTROL OR PREDICT. YOU SHOULD NOT PLACE UNDUE
RELIANCE ON THE PROJECTIONS. THE PROJECTIONS MAY NOT BE REALIZED, AND THERMO
TERRATECH'S FUTURE FINANCIAL RESULTS MAY MATERIALLY VARY FROM THE PROJECTIONS.
THERMO TERRATECH DOES NOT INTEND TO UPDATE OR REVISE THE PROJECTIONS.
The July 1999 projections were prepared by Thermo TerraTech based upon
management's estimates of the total market for its services and Thermo
TerraTech's own performance through 2003. In March 2000, as part of Adams,
Harkness & Hill's review of its fairness opinion in light of the announcement by
Thermo Electron of the proposed sales of Thermo TerraTech's businesses, Thermo
TerraTech provided Adams, Harkness & Hill with an update to the projections for
calendar year 2000. This update revised the information for calendar year 2000
to include the results of three of ThermoRetec's soil-recycling facilities for
the entire year, whereas the projections provided in July 1999 had only included
the results of such facilities for six months of calendar year 2000. At the time
the projections provided in July 1999 were prepared, it was assumed that such
facilities would be sold by mid-2000. At the time Thermo TerraTech provided the
revised projections, in March 2000, it included the results of the
soil-recycling facilities for all of 2000, because it did not expect that the
soil-recycling facilities would be sold until the end of 2000. However,
ThermoRetec has since entered into a non-binding letter of intent with respect
to the sales of the
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<PAGE>
three soil-recycling facilities. In addition, the revised projections include
the results of a refinery owned by Thermo EuroTech for all of calendar year
2000, whereas the July 1999 projections included the results of the refinery for
only six months of calendar year 2000.
Adams, Harkness & Hill considered the revised projections which Thermo
TerraTech provided in March 2000 in its review of its fairness opinion following
the announcement of the proposed sales of Thermo TerraTech's businesses.
However, the revised projections did not change Adams, Harkness & Hill's opinion
that the proposed consideration to be paid to the Thermo TerraTech public
stockholders in the merger remained fair, because Adams, Harkness & Hill did not
believe the changes set forth in the revised projections to be material to
Thermo TerraTech's business as a whole.
PROJECTIONS PROVIDED IN JULY 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
CALENDAR YEAR
----------------------------------------------------
1999 (P) 2000 (P) 2001 (P) 2002 (P) 2003 (P)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues.................................. $311,836 $288,745 $305,615 $330,711 358,342
Costs and Operating Expenses:
Cost of revenues........................ 243,849 222,043 234,378 253,855 274,594
Selling, general, and administrative
expenses.............................. 46,478 38,433 39,304 41,031 43,516
Restructuring costs..................... 53,689 -- -- -- --
-------- -------- -------- -------- --------
344,016 260,476 273,682 294,886 318,110
-------- -------- -------- -------- --------
Operating Income (Loss)................... (32,180) 28,269 31,933 35,825 40,232
Interest Income........................... 2,357 2,771 3,146 3,682 4,164
Interest Expense.......................... (8,858) (8,637) (8,307) (8,042) (7,792)
-------- -------- -------- -------- --------
Income (Loss) Before Provision for Income
Taxes................................... (38,681) 22,403 26,772 31,465 36,604
Provision for Income Taxes................ 2,407 9,921 12,037 14,363 16,788
Minority Interest Expense................. 953 275 275 275 275
-------- -------- -------- -------- --------
Net Income (Loss)......................... $(42,041) $ 12,207 $ 14,460 $ 16,827 $ 19,541
======== ======== ======== ======== ========
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net.................. $ 57,481 $ 52,921 $ 53,205 $ 55,591 $ 59,188
Unbilled Contract Costs and Fees.......... 18,531 14,359 14,535 15,839 16,938
Inventories............................... 1,015 122 122 122 122
Prepaid Income Taxes and Other Current
Assets.................................. 11,651 11,339 11,564 11,689 11,809
-------- -------- -------- -------- --------
Total Current Assets Excluding Cash and
Investments............................. 88,668 78,741 79,426 83,241 88,057
Property, Plant, and Equipment:
Balance, beginning of year.............. 91,419 72,660 71,112 70,048 69,655
Additions............................... 15,510 11,729 9,869 10,965 11,450
Depreciation expense.................... (12,032) (10,590) (10,933) (11,358) (11,388)
Sales and retirements................... (22,237) (2,687) -- -- --
-------- -------- -------- -------- --------
Balance, end of year...................... 72,660 71,112 70,048 69,655 69,717
Cost in Excess of Net Assets of Acquired
Companies............................... 88,706 86,848 84,242 81,636 79,030
</TABLE>
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<PAGE>
PROJECTIONS PROVIDED IN MARCH 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
CALENDAR YEAR
-----------------------------------------
2000 (P) 2001 (P) 2002 (P) 2003 (P)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues............................................ $310,543 $305,615 $330,711 $358,342
Costs and Operating Expenses:
Cost of revenues.................................. 240,306 234,378 253,855 274,594
Selling, general, and administrative expenses..... 43,532 39,304 41,031 43,516
Restructuring costs............................... 404 -- -- --
-------- -------- -------- --------
284,242 273,682 294,886 318,110
-------- -------- -------- --------
Operating Income (Loss)............................. 26,301 31,933 35,825 40,232
Interest Income..................................... 1,837 3,146 3,682 4,164
Interest Expense.................................... (7,568) (8,307) (8,042) (7,792)
-------- -------- -------- --------
Income (Loss) Before Provision for Income Taxes..... 20,570 26,772 31,465 36,604
Provision for Income Taxes.......................... 9,913 12,037 14,363 16,788
Minority Interest Expense........................... 702 275 275 275
Extraordinary Item, net of taxes and minority
interest.......................................... 250 0 0 0
-------- -------- -------- --------
Net Income (Loss)................................... $ 10,205 $ 14,460 $ 16,827 $ 19,541
======== ======== ======== ========
SELECTED BALANCE SHEET DATA:
Accounts Receivable, Net............................ $ 51,667 $ 53,205 $ 55,591 $ 59,188
Unbilled Contract Costs and Fees.................... 18,614 14,535 15,839 16,938
Inventories......................................... 2,188 122 122 122
Prepaid Income Taxes and Other Current Assets....... 9,542 11,564 11,689 11,809
-------- -------- -------- --------
Total Current Assets Excluding Cash and
Investments....................................... 82,011 79,426 83,241 88,057
Property, Plant, and Equipment:
Balance, beginning of year........................ 70,357 71,112 70,048 69,655
Additions......................................... 10,263 9,869 10,965 11,450
Depreciation expense.............................. (11,144) (10,933) (11,358) (11,388)
Sales and retirements............................. 0 -- -- --
-------- -------- -------- --------
Balance, end of year................................ 69,476 70,048 69,655 69,717
Cost in Excess of Net Assets of Acquired
Companies......................................... 86,194 84,242 81,636 79,030
</TABLE>
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<PAGE>
INFORMATION ABOUT THERMO TERRATECH, THERMO ELECTRON AND TTT ACQUISITION
THERMO ELECTRON
Thermo Electron develops, manufactures and sells measurement and detection
instruments that its customers use to monitor, collect, and analyze data. On
January 31, 2000, Thermo Electron announced that its board of directors had
authorized management to proceed with a major reorganization of the operations
of Thermo Electron and its subsidiaries, including Thermo TerraTech. As part of
this reorganization, Thermo Electron plans to:
- acquire the minority interests in most of its public subsidiaries;
- spin off its business that serves the healthcare industry with a range of
medical products for diagnosis and monitoring, and its paper recycling and
papermaking equipment business; and
- sell various non-core businesses.
Thermo Electron plans to take Thermo Ecotek Corporation, its electric power
generation business, private. Although Thermo Electron no longer considers
Thermo Ecotek a core business under its new strategy, Thermo Electron expects to
retain Thermo Ecotek after it is taken private while Thermo Electron continues
to evaluate how to best exit that business and create maximum value for Thermo
Electron stockholders.
The primary goal of the reorganization plan is for Thermo Electron and each
of its spun-off subsidiaries to focus on their core businesses.
Thermo Electron's principal executive offices are located at 81 Wyman
Street, Waltham, Massachusetts 02454-9046, and its telephone number is (781)
622-1000.
THERMO TERRATECH
Thermo TerraTech provides a broad, specialized range of industrial
outsourcing services and manufacturing support. Thermo TerraTech operates in
three segments: environmental-liability management, engineering and design,
laboratory testing, and metal treating. Thermo TerraTech's metal treating
segment was sold on June 1, 2000, as described below. The
environmental-liability management segment includes Thermo TerraTech's
ThermoRetec subsidiary, which is a national provider of environmental-liability
and resource-management services. Through a nationwide network of offices,
ThermoRetec offers these and related consulting services in three areas:
consulting and engineering, nuclear remediation, and fluids recycling.
ThermoRetec's fourth line of business, soil remediation, was sold on June 6,
2000. On June 5, 2000, ThermoRetec was taken private in a merger and became a
jointly owned subsidiary of Thermo Electron and Thermo TerraTech.
Thermo TerraTech's majority-owned, privately-held Thermo EuroTech N.V.
subsidiary, located in the Netherlands, specializes in converting "off-spec" and
contaminated petroleum fluids into useable oil products. Thermo EuroTech also
provides in-plant waste management and recycling services through its
Ireland-based Green Sunrise Holdings Ltd. subsidiary. Thermo TerraTech has sold
Green Sunrise, as described below. As of , 2000, Thermo TerraTech owned
% of Thermo EuroTech's outstanding common stock.
The engineering and design segment includes Thermo TerraTech's
Randers Killam subsidiary, which provides comprehensive engineering and
outsourcing services in three areas: water and wastewater treatment, highway and
bridge engineering, and infrastructure engineering. On May 15, 2000, Randers
Killam was taken private in a merger and became a jointly owned subsidiary of
Thermo Electron and Thermo TerraTech. This segment also included Thermo
TerraTech's wholly owned Normandeau Associates Inc. subsidiary, which provides
consulting services that address natural resource management issues. Normandeau
Associates was sold on June 6, 2000, as described below.
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Thermo TerraTech's wholly owned Thermo Analytical Inc. subsidiary, which
represents the laboratory testing segment, operates analytical laboratories that
provide environmental- and pharmaceutical-testing services, primarily to
commercial clients throughout the United States.
As described under "THE MERGER--Background of the Merger", on May 24, 1999,
Thermo TerraTech announced plans to sell some operating units of
Randers Killam, the used oil-processing operations at Thermo EuroTech, and the
soil-recycling facilities at ThermoRetec. In addition, on January 31, 2000,
Thermo Electron announced that it plans to sell the remaining businesses of
Thermo TerraTech. The sales of these businesses would affect the value of Thermo
TerraTech in that Thermo TerraTech would receive cash in exchange for the
businesses sold, and therefore the amount of cash Thermo TerraTech has would
increase.
As of the date of this proxy statement-prospectus, the following businesses
have been sold or have entered into letters of intent with respect to their
sale:
- On January 28, 2000, Randers Killam sold its Randers division for
$538,000, represented by a promissory note payable over three years at a
rate of 8% per year.
- On March 6, 2000, ThermoRetec sold one of its soil-recycling facilities
for $400,000 in cash, of which $250,000 was placed in escrow pending
potential post-closing adjustments.
- On April 14, 2000, Randers Killam sold its BAC Killam business. The
purchase price for the assets of that business was approximately
$3 million in cash, of which approximately $1.4 million was paid in cash
at closing and of which the balance represents accounts receivable that
would be paid to Randers Killam upon collection, less a five percent
collection fee.
- On August 1, 2000, Thermo TerraTech sold the stock of its Green Sunrise
Holdings Ltd. subsidiary for $8,248,000, of which $5,000,000 was paid in
cash and the remainder represented outstanding bank loans that were repaid
by the buyer.
- On June 1, 2000, Thermo TerraTech sold substantially all of the assets and
liabilities of its Metallurgical, Inc., Cal-Doran Metallurgical
Services, Inc., and Metal Treating Inc. subsidiaries. The purchase price
was $15.7 million in cash, subject to adjustment for changes in the net
book value of the assets purchased as of the closing date of the sale.
- On June 6, 2000, ThermoRetec entered into a binding asset purchase
agreement for the sale of its remaining soil-recycling facilities for
$15 million in cash. This transaction is expected to close on August 31,
2000.
- On July 1, 2000, Thermo TerraTech sold the stock of its Normandeau
Associates, Inc. subsidiary for $3.4 million in cash. In addition, the
buyer has the right to acquire Thermo TerraTech's shares of preferred
stock in Normandeau for the greater of $800,000 in cash or the fair market
value of the shares on the date the option is exercised. Under the terms
of the agreement, the buyer is required to purchase the shares of
preferred stock by the sixth year following the date of the agreement if
the shares have not been redeemed prior to that date.
Thermo TerraTech's principal executive offices are located at 85 First
Avenue, Waltham, Massachusetts 02451, and its telephone number is
(781) 370-1640.
TTT ACQUISITION
TTT Acquisition is a newly-formed Delaware corporation organized by Thermo
Electron for the sole purpose of effecting the merger. TTT Acquisition has not
conducted any prior business.
TTT Acquisition's principal executive offices are located at 81 Wyman
Street, P.O. Box 9046, Waltham, Massachusetts 02454-9046, and its telephone
number is (781) 622-1000.
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COMPARISON OF RIGHTS OF HOLDERS OF TERRATECH AND THERMO ELECTRON COMMON STOCK
This section of the proxy statement-prospectus describes the material
differences between the rights of holders of TerraTech common stock and Thermo
Electron common stock. While we believe that the description covers the material
differences between the two, this summary may not contain all of the information
that is important to you. You should carefully read this entire document and the
other documents we refer to for a more complete understanding of the differences
between being a stockholder of Thermo TerraTech and being a stockholder of
Thermo Electron.
As a stockholder of Thermo TerraTech, your rights are governed by Thermo
TerraTech's Certificate of Incorporation and Thermo TerraTech's Bylaws. After
completion of the merger, you will become a stockholder of Thermo Electron. As a
Thermo Electron stockholder, your rights will be governed by Thermo Electron's
Certificate of Incorporation and Thermo Electron's Bylaws. We are each
incorporated under the laws of the State of Delaware and accordingly, your
rights as a stockholder will continue to be governed by the Delaware General
Corporation Law after completion of the merger.
CLASSES OF COMMON STOCK OF THERMO TERRATECH AND THERMO ELECTRON
Thermo Electron and Thermo TerraTech each has only one class of common stock
issued and outstanding. There are 350,000,000 shares of Thermo Electron common
stock authorized, and Thermo TerraTech currently has 75,000,000 shares of
TerraTech common stock authorized. As of June 30, 2000, there were 173,015,499
outstanding shares of Thermo Electron common stock, and an aggregate of
51,666,823 shares reserved for issuance upon conversion of convertible
debentures and exercise of options. As of June 30, 2000, there were 19,029,446
outstanding shares of TerraTech common stock, and an aggregate of
8,402,081 shares reserved for issuance upon conversion of convertible debentures
and exercise of options and warrants.
Each of us has a large number of shares available for issuance that has been
authorized but not yet issued. We can issue up to our authorized number of
shares of common stock without going to stockholders to ask for approval of an
increase in our authorized shares, except in the following circumstances. We are
each subject to the stockholder approval requirements of the stock exchanges on
which our common stock is traded relating to issuance of common stock. The New
York Stock Exchange, on which the Thermo Electron common stock is listed,
requires that Thermo Electron obtain shareholder approval for the listing of
shares in the following cases:
- issuing more than 20% of its outstanding common stock in a transaction or
series of related transactions, other than a public offering for cash, or
a private financing involving the sale of common stock for cash at a price
at least equal to the greater of book or market value of the common stock;
or
- issuing more than one percent of its common stock to a director, officer
or substantial securityholder of Thermo Electron, or any of their
affiliates, except that in the case of substantial securityholders only,
the limit is increased to five percent if the sale of stock is for cash at
a price at least equal to the greater of book or market value of the
common stock.
The American Stock Exchange, on which the TerraTech common stock is listed,
requires that Thermo TerraTech obtain stockholder approval for the listing of
shares in the following cases:
- issuing more than 20% of its common stock for cash for less than the
greater of book or market value of the common stock;
- issuing more than five percent of its common stock in an acquisition if
any director, officer or substantial securityholder of Thermo TerraTech
individually has a five percent, or, collectively, a ten percent interest
in the company or assets being acquired or the consideration to be paid in
the acquisition; or
- issuing more than 20% of its common stock in an acquisition.
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In addition, the Delaware General Corporation Law would require us to obtain
stockholder approval to authorize a merger in which we were (1) the surviving
corporation and (2) obligated under the merger agreement to issue more than 20%
of our shares outstanding immediately before the effective date of the merger.
Accordingly, there are restrictions on the number of shares we can issue
without stockholder approval in these circumstances.
Thermo Electron has authorized a class of 50,000 shares of preferred stock,
of which Thermo Electron currently has 40,000 shares designated as Series B
junior participating preferred stock. The preferred stock is described below
under "Preferred Stock".
CLASSIFIED BOARD OF DIRECTORS
Delaware law provides that a corporation's board of directors may be divided
into various classes with staggered terms of office. Thermo Electron's board of
directors is divided into three classes, as nearly equal in size as possible,
with one class elected annually. Thermo Electron directors are elected for a
term of three years. The term of each director is subject to the election and
qualification of the director's successor and to the director's earlier death,
resignation or removal. Thermo Electron's classified board of directors may make
it more difficult for a third party to gain control of Thermo Electron.
Thermo TerraTech's board of directors is not divided into different classes.
Members of Thermo TerraTech's board of directors are elected by a majority of
the votes cast at the annual meeting of the stockholders. Thermo TerraTech
directors are elected until the next annual meeting of the stockholders and
until their successors are elected and qualified or until their earlier
resignation or removal.
The classified structure of Thermo Electron's board of directors serves to
ensure continuity and stability in a corporation's leadership in part because,
at any time, at least two-thirds of the board has had prior experience on the
board. The structure also would moderate the pace of any change in control of
Thermo Electron because all directors' terms do not expire at the same time,
which extends the time required to elect a majority of the board.
NUMBER OF DIRECTORS
Thermo Electron's board of directors currently consists of nine directors.
The number of directors on Thermo Electron's board is determined by resolution
of the board, but can not be less than three.
Thermo TerraTech's board of directors currently consists of six directors.
The number of directors on Thermo TerraTech's board can not be less than three
nor more than thirteen. The exact number of directors is fixed from time to time
by the board of directors or by the stockholders at an annual meeting.
Because there are more directors on Thermo Electron's board than there are
on Thermo TerraTech's board, more votes must be obtained in order for a vote to
be approved or denied by Thermo Electron's board.
REMOVAL OF DIRECTORS
Thermo TerraTech directors, or the entire Thermo TerraTech board, may be
removed with or without cause by the affirmative vote of the holders of a
majority of the shares of TerraTech common stock then entitled to vote at an
election of directors.
Neither the Certificate of Incorporation nor the Bylaws of Thermo Electron
contain an explicit procedure for the removal of a member of the board of
directors. Delaware law provides that unless otherwise provided in the
certificate of incorporation of a company, a director of a classified board such
as Thermo Electron's can be removed only for cause, by the holders of a majority
of the shares then entitled to vote at an election of directors of such company.
This means that, unlike for removal
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of a member of Thermo TerraTech's board, there must be a good reason for
removing a member of the Thermo Electron board, and that members of the Thermo
Electron board cannot simply be removed for any reason. This may make it harder
to remove a member of the Thermo Electron board than it would be to remove a
member of the Thermo TerraTech board.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Except as otherwise required by the Certificate of Incorporation or the
Delaware General Corporation Law, any vacancies in the Thermo Electron and
Thermo TerraTech boards of directors, however occurring, or any newly-created
directorship resulting from an increase in the number of seats on the board of
directors, will be filled by vote of a majority of the directors then in office,
even if less than a quorum, or by the sole remaining director, and not by the
stockholders. Newly created directorships or decreases in directorships in
Thermo Electron's board of directors will be apportioned among the classes of
directors so as to make all classes as nearly equal in number as practicable.
To the extent reasonably possible, any newly created Thermo Electron
directorship will be added to the class of directors whose term of office is to
expire at the latest date following the creation of that directorship, unless
otherwise provided for by resolution of the majority of the directors then in
office. Any newly eliminated Thermo Electron directorship will be subtracted
from the class whose office is to expire at the earliest date following the
elimination of the directorship, unless otherwise provided for by resolution of
the majority of the directors then in office.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Thermo Electron stockholders may take action at annual or special meetings
of stockholders, or by the written consent of stockholders having no less than
the minimum number of votes that would be necessary to take such action at a
meeting at which all shares entitled to vote on the matter were present and
voted.
Thermo TerraTech stockholders may take action at annual or special meetings
of stockholders, or by the written consent of stockholders having not less than
50% of all of the stock entitled to vote on the action if a meeting were held.
ABILITY TO CALL SPECIAL MEETINGS
Special meetings of Thermo Electron stockholders may be called only by
Thermo Electron's board of directors, the chairman of the board of directors, or
its chief executive officer. Special meetings of Thermo TerraTech stockholders
may be called only by Thermo TerraTech's board of directors, the chairman of the
board of directors, its president, or any vice president. This means that more
people are allowed to call a special stockholders' meeting for Thermo TerraTech
stockholders than are allowed to call a special stockholders' meeting for Thermo
Electron stockholders. This could mean that it would be easier to call a special
stockholders' meeting at Thermo TerraTech than at Thermo Electron, since more
people have the ability to make the decision to call the meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
The Thermo Electron Bylaws allow stockholders to nominate candidates for
election to Thermo Electron's board of directors or to propose business to be
transacted at an annual stockholder meeting. However, such nominations and
proposals may only be made by a stockholder who has given timely written notice
to the secretary of Thermo Electron before the annual stockholder meeting in the
manner described below.
Under Thermo Electron's Bylaws, to be timely, notice of stockholder
nominations or proposals to be made at an annual stockholder meeting must be
delivered to the secretary of Thermo Electron not less than 60 days nor more
than 75 days before the first anniversary of the date on which Thermo Electron
first mailed its proxy materials for the preceding year's annual stockholder
meeting. However,
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if the date of the annual meeting is moved ahead more than 30 days before or
delayed by more than 30 days after the anniversary of the preceding year's
annual stockholder meeting, notice to be timely must be delivered not later than
the close of business on the later of (1) the 90th day prior to such annual
meeting or (2) the 10th day following the day on which public announcement of
the date of such meeting is first made.
Stockholder nominations and proposals will not be brought before any Thermo
Electron stockholder meeting unless the nomination or proposal was brought
before the meeting in accordance with Thermo Electron's stockholder advance
notice procedure, as set forth in the Bylaws.
Thermo TerraTech does not have a provision in its Certificate of
Incorporation or Bylaws requiring advance notice or a specific procedural
process for stockholder nominations of candidates for election to the board of
directors or for stockholder proposals before Thermo TerraTech's annual
stockholder meeting.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Under Delaware law, a certificate of incorporation of a Delaware corporation
may be amended by approval of the board of directors of the corporation and the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote for the amendment, unless a higher vote is required by the corporation's
certificate of incorporation. Neither Thermo Electron nor Thermo TerraTech
currently has a higher vote required by their Certificates of Incorporation in
order to amend such documents.
AMENDMENT OF BYLAWS
Under Delaware law, stockholders entitled to vote have the power to adopt,
amend or repeal bylaws. In addition, a corporation may, in its certificate of
incorporation, confer that power upon the board of directors. The stockholders
always have the power to adopt, amend or repeal bylaws, even though the board
may also be delegated that power.
Thermo Electron's board of directors is authorized to alter, amend and
repeal Thermo Electron's Bylaws or to make new Bylaws. Thermo Electron's Bylaws
may also be altered, amended and repealed, or new Bylaws may be made, by the
affirmative vote of the holders of a majority of the shares of capital stock of
Thermo Electron issued and outstanding and entitled to vote, voting together as
a single class, except that the affirmative vote of the holders of at least
two-thirds of the shares of capital stock of Thermo Electron issued and
outstanding and entitled to vote is required to alter, amend or repeal, or make
new Bylaws inconsistent with, Article II, on matters relating to directors, or
Article VI, on amendments to the Bylaws, of the Bylaws.
Thermo TerraTech's board of directors is authorized to alter, amend and
repeal Thermo TerraTech's Bylaws at any meeting of the board. Thermo TerraTech's
Bylaws may also be altered, amended and repealed, or new Bylaws may be made, by
the affirmative vote of the holders of a majority of the shares of capital stock
of Thermo TerraTech issued and outstanding and entitled to vote, voting together
as a single class. Thermo TerraTech's Bylaws do not contain any supermajority
voting requirements for amendments by shareholders. This means that a lower
shareholder vote is required to change Thermo TerraTech's Bylaws than is
required to change Thermo Electron's Bylaws relating to directors and amendments
to the Bylaws. However, since Thermo Electron controls the stockholder vote at
Thermo TerraTech because of its ownership of more than 50% of Thermo TerraTech's
outstanding common stock, the fact that a lower stockholder vote is required to
change the Bylaws at Thermo TerraTech than at Thermo Electron does not have any
practical effect as far as unaffiliated stockholders are concerned.
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DELAWARE ANTI-TAKEOVER STATUTE
We are both subject to Section 203 of the Delaware General Corporation Law
which, under certain circumstances, may make it more difficult for a person who
would be an "interested stockholder", as defined in Section 203, in each of our
companies, to effect various business combinations with either of us for a
three-year period after becoming an interested stockholder. Under Delaware law,
a corporation's certificate of incorporation or bylaws may exclude a corporation
from the restrictions imposed by Section 203. Our respective certificates of
incorporation and bylaws do not exclude us from the restrictions imposed by
Section 203.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware law permits a corporation to indemnify officers and directors for
actions taken in good faith and in a manner they reasonably believed to be in,
or not opposed to, the best interests of the corporation, and with respect to
any criminal action or proceeding, which they had no reasonable cause to believe
was unlawful.
Thermo Electron's Certificate of Incorporation and Thermo TerraTech's Bylaws
each provide for the indemnification of their respective officers and directors.
The indemnification provisions state that any person who was or is a party or is
threatened to be made a party to any action, suit, or proceeding, whether civil,
criminal, administrative or investigative, other than an action or suit brought
by Thermo Electron or Thermo TerraTech, because that person either:
- is or was a director or officer of Thermo Electron or Thermo TerraTech, or
an employee or agent of Thermo TerraTech, or
- is or was serving at the request of Thermo Electron or Thermo TerraTech,
as a director or officer, or employee or agent, in the case of Thermo
TerraTech, of another corporation, partnership, joint venture, trust or
other enterprise,
will be indemnified against expenses, including attorney's fees, judgments,
fines, and amounts paid in settlement actually and reasonably incurred by him or
her in connection with the action, suit or proceeding, to the fullest extent
permitted by Delaware law. These indemnification rights are not exclusive of any
other right to which persons seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
In the case of any action or suit by Thermo Electron or Thermo TerraTech to
procure a judgment in its favor, no indemnification will be made (1) except for
expenses, including attorneys' fees, or (2) relating to any claim, issue or
matter as to which the director or officer has been judged to be liable to
Thermo Electron or Thermo TerraTech, unless and only to the extent that the
court determines that, despite the adjudication of liability but in view of all
of the circumstances of the case, the director or officer is entitled to
indemnity for such expenses which the court finds proper.
Additionally, we may each pay expenses incurred by our directors or officers
in defending a civil or criminal action, suit or proceeding in advance of the
final disposition of that action, suit or proceeding. However, those payments
will be made only if we receive an undertaking by or on behalf of the director
or officer to repay all amounts advanced if it is ultimately determined that he
or she is not entitled to be indemnified by us.
PREFERRED STOCK
Thermo Electron's board of directors may, without further action of Thermo
Electron's stockholders, issue up to 50,000 shares of preferred stock, in one or
more classes and one or more series and fix the number of shares in any class or
series. In a certificate of designation filed on January 31, 1996, 40,000 shares
of the preferred stock were designated as Series B junior participating
preferred stock. The terms of the Series B junior participating preferred stock
are described in "Stockholder Rights Plan", below. Thermo Electron's board may
fix the rights and preferences of any
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class or series of the remaining 10,000 shares of preferred stock, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, including sinking fund provisions, maturity dates, redemption prices
and liquidation preferences. The rights of the holders of Thermo Electron common
stock will be subject to, and may be adversely affected by, the rights of
holders of any preferred stock that may be issued in the future. Also, any
issuance of preferred stock could make it more difficult for a third party to
acquire, or discourage a third party from acquiring, a majority of the
outstanding voting stock of Thermo Electron.
Thermo TerraTech does not have any shares of preferred stock authorized.
This means that, if Thermo TerraTech ever wanted to issue any shares of
preferred stock, it would have to hold a stockholder meeting in order to obtain
approval for the amendment to its certificate of incorporation that would be
required in order to create a class of preferred stock.
STOCKHOLDER RIGHTS PLAN
Under Delaware law, every corporation may create and issue rights entitling
the holders of the rights to purchase from the corporation shares of its capital
stock of any class or classes, subject to any provisions in its certificate of
incorporation. The price and terms of the shares must be stated in the
certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of such rights.
Thermo Electron has entered into a rights agreement dated as of January 19,
1996 between Thermo Electron and BankBoston, N.A. as rights agent. As with most
stockholder rights agreements, the terms of Thermo Electron's rights agreement
are complex and not easily summarized, particularly as they relate to the
acquisition of Thermo Electron's common stock and to exercisability. The purpose
of Thermo Electron's stockholder rights agreement is to encourage potential
acquirors of a large percentage of Thermo Electron's common stock to initiate
negotiations with the board of directors relating to the acquisition, rather
than to proceed without the approval of the board. As described in more detail
below, the rights would cause substantial dilution to any party attempting to
acquire Thermo Electron unless the board of directors has found the transaction
to be fair and in the best interests of stockholders.
On January 19, 1996, Thermo Electron's board declared a dividend
distribution of one right for each outstanding share of Thermo Electron common
stock to stockholders of record at the close of business on January 29, 1996.
Each right entitles the registered holder to purchase from Thermo Electron a
unit consisting of one ten-thousandth of a share of Series B junior
participating preferred stock at a purchase price of $250.00 in cash per unit,
subject to adjustment. The following is a summary description of the terms of
the rights. Please read the rights agreement for the complete description of the
terms of the rights.
Initially, the rights attach to all outstanding Thermo Electron common stock
certificates and no separate rights certificates will be distributed. The rights
will separate from the Thermo Electron common stock, and a distribution date
will occur, upon the earlier of the following events:
- 10 days after a public announcement that a person or group of affiliated
or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Thermo
Electron common stock; or
- 10 business days following the start of a tender offer or exchange offer
that would result in a person or group beneficially owning 15% or more of
the outstanding shares of Thermo Electron common stock.
Until the distribution date:
- the rights will be evidenced by the Thermo Electron common stock
certificates and will be transferred only with the Thermo Electron common
stock certificates;
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- new Thermo Electron common stock certificates will incorporate the rights
agreement by reference; and
- the surrender for transfer of any certificates of Thermo Electron common
stock will also transfer the rights associated with the Thermo Electron
common stock represented by the certificate.
The rights are not exercisable until the distribution date and will expire
at the close of business on January 29, 2006, unless earlier redeemed or
exchanged by Thermo Electron as described below.
If a person acquires 15% or more of the shares of Thermo Electron common
stock, except as part of an offer for all of the outstanding shares of Thermo
Electron common stock that the board of directors has approved, if, each holder
of a right will thereafter have the right to exercise the right for a number of
shares of Thermo Electron common stock or, in some circumstances, cash, property
or other securities of Thermo Electron, equal to the exercise price of the right
divided by one-half of the current market price of the Thermo Electron common
stock on the date of the acquisition. However, rights are not exercisable
following the acquisition until the rights are no longer redeemable by Thermo
Electron as described below. Notwithstanding any of the foregoing, after the
acquisition, all rights that are, or, as described in the rights agreement,
were, beneficially owned by any acquiring person will be null and void. The
event set forth in this paragraph is referred to as a
"section 11(a)(ii) event."
For example, at an exercise price of $250.00 per right, each holder of
rights, other than acquiring persons or parties related to them, would be able
to purchase, for $250.00, a number of shares of Thermo Electron common stock, or
other consideration, as noted above, equal to $250.00 divided by one-half of the
current market price of the Thermo Electron common stock. Assuming that the
Thermo Electron common stock had a per share value of $50.00 at that time,
holders of each valid right would be entitled to purchase ten shares of Thermo
Electron common stock for $250.00.
If, at any time after a person has become an acquiring person:
- Thermo Electron is acquired in a merger or other transaction in which
Thermo Electron is not the surviving corporation, or its common stock is
changed or exchanged, other than a merger which follows an offer that is
approved by the board of directors, or
- 50% or more of Thermo Electron's assets or earning power is sold or
transferred,
each holder of a valid right shall thereafter have the right to receive,
upon exercise, a number of shares of common stock of the acquiring company equal
to the exercise price of the right divided by one-half of the current market
price of that company's common stock at the date the event occurs.
For example, at an exercise price of $250.00 per right, each holder of
rights, following an event described in the last paragraph, would be able to
purchase, for $250.00, a number of shares of common stock of the acquiring
company equal to $250.00 divided by one-half of the current market price of that
company's common stock. Assuming that the common stock had a per share value of
$100.00 at that time, holders of each valid right would be entitled to purchase
five shares of common stock of the acquiring company for $250.00.
At any time after a section 11(a)(ii) event, Thermo Electron's board may
exchange all or a part of the rights, other than rights owned by the acquiring
person that have become void, at an exchange ratio of one share of Thermo
Electron common stock, or one ten-thousandth of a share of preferred stock, per
right, subject to adjustment.
The preferred stock purchasable upon exercise of the rights will not be
redeemable. The rights of the preferred stock are protected by customary
antidilution provisions and, in light of Thermo Electron's stock dividend in
1996, currently provide for the following:
- a minimum preferential quarterly dividend payment of $100 per share and an
aggregate dividend per share of preferred stock of 15,000 times the
dividend declared per share of Thermo Electron common stock;
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- an aggregate payment per share of preferred stock, in the event of
liquidation, of 15,000 times the payment made per share of Thermo Electron
common stock, with a minimum preferential liquidating payment of $100 per
share;
- 15,000 votes per share of preferred stock, voting together with the Thermo
Electron common stock; and
- in the event of any merger, consolidation or other transaction in which
the Thermo Electron common stock is changed or exchanged, each share of
preferred stock will be entitled to 15,000 times the amount received per
share of Thermo Electron common stock.
Because of the nature of the preferred stock's dividend, liquidation and
voting rights, the value of one ten-thousandth of a share of preferred stock
purchasable upon exercise of each right should approximate the value of one
share of Thermo Electron common stock.
At any time until ten days after the stock acquisition date, Thermo Electron
may redeem the rights in whole, but not in part, at a price of $.01 per right,
payable in cash or stock. Immediately upon the decision of the board of
directors to redeem the rights, the rights will terminate and the only right of
the holders of rights will be to receive the $.01 redemption price.
Until a right is exercised, holders of rights, as such, will have no rights
as a stockholder of Thermo Electron, including the right to vote or to receive
dividends. While the distribution of the rights will not be taxable to
stockholders or to Thermo Electron, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for Thermo Electron common stock or other consideration or for
common stock of the acquiring company as set forth above.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire Thermo
Electron without conditioning the offer on a substantial number of rights being
acquired. The rights, however, should not affect any prospective offeror willing
to make an offer at a fair price and otherwise in the best interests of Thermo
Electron and its stockholders, as determined by a majority of the board of
directors. The rights should not interfere with any merger or other business
combination that is approved by the board of directors of Thermo Electron since
the board of directors can decide, at any time prior to the close of business on
the earlier of (1) the tenth day following the stock acquisition date or
(2) January 29, 2006, and in certain other circumstances, redeem all of the then
outstanding rights at the redemption price.
Thermo TerraTech has not entered into a stockholder rights agreement.
Accordingly, it does not have the protections against takeovers that are given
by stockholder rights agreements. However, as noted above in this section under
"--Delaware Anti-Takeover Statute", Thermo TerraTech is subject to Section 203
of the Delaware General Corporation Law, which may inhibit unsolicited takeover
attempts.
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TRANSACTIONS WITH RELATED PARTIES
Thermo Electron and each of the Thermo subsidiaries recognize that the
benefits and support that come from their affiliation are essential elements of
their individual performance. Accordingly, Thermo Electron and each of the
Thermo subsidiaries, including Thermo TerraTech, have adopted the Thermo
Electron corporate charter to define the relationships and set forth the nature
of the cooperation among themselves. The purpose of the charter is to ensure the
following:
- all of the companies and their stockholders are treated consistently and
fairly,
- the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined,
- each company has access to the combined resources and financial,
managerial and technological strengths of the others, and
- Thermo Electron and the Thermo subsidiaries together are able to obtain
the most favorable terms from outside parties.
To achieve these ends, the charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo subsidiaries to external financing
sources, ensuring compliance with external financial covenants and internal
financial policies, helping formulate long-range planning and providing other
banking and credit services. Under the charter, Thermo Electron may also
guarantee debt or other obligations of the Thermo subsidiaries or may obtain
external financing at the parent level for the benefit of the Thermo
subsidiaries. In some instances, the Thermo subsidiaries may provide credit
support to, or on behalf of, the consolidated entity or may obtain financing
directly from external financing sources. Under the charter, Thermo Electron
must determine that the group of companies complies with all covenants imposed
by external financing sources, including covenants related to borrowings of
Thermo Electron or other members of the group, and for apportioning those
constraints within the group. In addition, Thermo Electron establishes some
internal policies and procedures applicable to members of the group. The cost of
the services provided by Thermo Electron to the Thermo subsidiaries is covered
under existing corporate services agreements between Thermo Electron and the
Thermo subsidiaries.
The charter provides that it shall continue in effect so long as Thermo
Electron and at least one Thermo subsidiary participate. The charter may be
amended at any time by agreement of the participants. Any Thermo subsidiary,
including Thermo TerraTech, can withdraw from participation in the charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the charter if the subsidiary is no longer controlled by Thermo
Electron or does not comply with the charter or the policies and procedures
applicable to the Thermo group. A withdrawal from the charter automatically
terminates the corporate services agreement and tax allocation agreement, if
any, in effect between the withdrawing company and Thermo Electron. The
withdrawal does not terminate outstanding commitments to third parties made by
the withdrawing company, or by Thermo Electron or other members of the Thermo
group, prior to the withdrawal. In addition, a withdrawing company must continue
to comply with all policies and procedures applicable to the Thermo group and
provide some administrative functions required by Thermo Electron so long as the
withdrawing company is controlled by or affiliated with Thermo Electron.
As provided in the charter, Thermo TerraTech and Thermo Electron have
entered into a corporate services agreement under which Thermo Electron's
corporate staff provides various administrative
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<PAGE>
services, including general legal advice and services, risk management, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and financial and other services to Thermo TerraTech. Thermo
TerraTech is assessed for these services an annual fee equal to 0.8% of Thermo
TerraTech's revenues. The fee is reviewed annually and may be changed by mutual
agreement of Thermo TerraTech and Thermo Electron. During fiscal 1998, 1999 and
the fiscal year ended April 1, 2000, Thermo Electron assessed Thermo TerraTech
$2,845,000, $2,480,000 and $2,459,000 respectively, in fees under the services
agreement. Management believes that the charges under the services agreement are
reasonable and that the terms of the services agreement are fair to Thermo
TerraTech. In fiscal 1998, 1999 and the fiscal year ended April 1, 2000, Thermo
TerraTech paid Thermo Electron an additional $160,000, $765,000 and $7,000 for
administrative services required by Thermo TerraTech that were not covered by
the services agreement. The services agreement automatically renews for
successive one-year terms, unless canceled by Thermo TerraTech upon 30 days'
prior notice. In addition, the services agreement terminates automatically in
the event Thermo TerraTech is no longer a member of the Thermo group or ceases
to participate in the charter. If the services agreement is terminated, Thermo
TerraTech will pay a termination fee equal to the fee that was paid by Thermo
TerraTech for services under the services agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may provide
administrative services as requested by Thermo TerraTech or as required in order
to meet Thermo TerraTech's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge Thermo TerraTech a fee equal to the
market rate for comparable services if those services are provided to Thermo
TerraTech following termination.
Thermo TerraTech has entered into a tax allocation agreement with Thermo
Electron that outlines the terms under which Thermo TerraTech and some of its
subsidiaries will be included in Thermo Electron's consolidated federal and
state income tax returns. Under current law, Thermo TerraTech will be included
in Thermo Electron's tax returns as long as Thermo Electron owns at least 80% of
the outstanding TerraTech common stock. In years in which Thermo TerraTech has
taxable income, it will pay to Thermo Electron amounts comparable to the taxes
Thermo TerraTech would have paid if it had filed its own separate company tax
returns. If Thermo Electron's equity ownership of Thermo TerraTech were to drop
below 80%, Thermo TerraTech would file its own tax returns. In fiscal 1998 and
1999, Thermo TerraTech paid Thermo Electron $669,000 and $1,217,000 under the
tax allocation agreement. Thermo TerraTech paid no amounts to Thermo Electron
under the tax allocation agreement during the fiscal year ended April 1, 2000.
Thermo TerraTech leases an office and operating facility from Thermo
Electron. The total rental payments made to Thermo Electron during fiscal 1998,
1999 and 2000 under these agreements was $166,000, $166,000 and $166,000. The
future minimum payments due under the lease as of April 1, 2000, are $166,000
per year in fiscal 2000 through 2005.
Thermo TerraTech and Thermo Electron entered into a development agreement
under which Thermo Electron agreed to fund up to $4,000,000 of the direct and
indirect costs of Thermo TerraTech's development of soil-remediation centers. In
exchange for this funding, Thermo TerraTech granted Thermo Electron a royalty
equal to approximately 3% of net revenues from soil-remediation services
performed at the centers developed under this agreement. The royalty payments
may cease if the amounts paid by Thermo TerraTech yield a pre-tax internal rate
of return of approximately 30% to Thermo Electron on the funds advanced to
Thermo TerraTech under this agreement. Thermo TerraTech paid Thermo Electron
royalties under this agreement of $115,000, $186,000 and $196,000 in fiscal
1998, 1999 and 2000, respectively.
As of April 1, 2000, Thermo TerraTech owed Thermo Electron and its other
subsidiaries an aggregate of $2,403,000 for amounts due under the services
agreement and related administrative charges, for other products and services,
and for miscellaneous items, net of amounts owed to Thermo TerraTech by Thermo
Electron and its other subsidiaries for miscellaneous items. The largest amount
of net indebtedness owed by Thermo TerraTech to Thermo Electron and its other
subsidiaries since
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April 4, 1999 was $2,586,000. These amounts do not bear interest and are
expected to be paid in the normal course of business.
Thermo TerraTech has entered into a cash management arrangement with ABN
AMRO. The new arrangement with ABN AMRO consists of a zero balance arrangement,
which includes a $24,744,720 credit facility. Thermo TerraTech has access to
$9,020,000 under this credit facility. Funds borrowed by Thermo TerraTech under
this arrangement pay interest at a rate set by Thermo Finance B.V., a wholly-
owned subsidiary of Thermo Electron, at the beginning of each month, based on
euro market rates. Funds invested by Thermo TerraTech under the arrangement earn
a rate set by Thermo Finance B.V. at the beginning of each month, based on euro
market rates. Thermo Electron guarantees all of the obligations of each
participant in this arrangement. As of April 1, 2000, Thermo TerraTech had a
positive cash balance of approximately $2,228,000 and a negative cash balance of
approximately $8,965,000, based on an exchange rate of $0.4326/NLG 1.00. As of
April 1, 2000, the average annual interest rate earned on NLG deposits by
participants in this credit arrangement was approximately 3.079% and the average
annual interest rate paid on overdrafts was approximately 3.679%.
Thermo TerraTech purchases and sells products and services in the ordinary
course of business with other companies affiliated with Thermo Electron. In
fiscal 1998, 1999 and 2000, purchases from these companies totaled $938,000,
$231,000 and $641,000, respectively, and sales to these companies totaled
$320,000, $379,000 and $288,000, respectively.
The human resources committee of Thermo TerraTech's board of directors
established a stock holding policy that required its executive officers to
acquire and hold a minimum number of shares of TerraTech common stock. In order
to assist the executive officers in complying with the policy, Thermo TerraTech
also adopted a stock holding assistance plan under which it may make
interest-free loans to certain key employees, including its executive officers,
to enable them to purchase the TerraTech common stock in the open market. The
stock holding policy and the stock holding assistance plan have both been
amended to apply only to the chief executive officer. During fiscal 1998 and
1999, Dr. John P. Appleton, who retired as Thermo TerraTech's president and
chief executive officer as of March 31, 2000 and remains as an employee and as
chairman of Thermo TerraTech's board of directors, received loans in the
principal amount of $137,607 under this plan to purchase 20,000 shares, all of
which was outstanding as of April 1, 2000. The loan is repayable by March 31,
2002 through Dr. Appleton's sale of all or part, as necessary, of the 20,000
shares of Thermo TerraTech that were purchased with the loan, or, if applicable,
shares of Thermo Electron common stock received by Dr. Appleton in the proposed
merger with Thermo TerraTech; if, after such shares are sold, there remains an
outstanding balance under the loan, the balance will be forgiven.
On November 17, 1999, Thermo Electron entered into a retention agreement
with Dr. Appleton. The retention agreement provides that Dr. Appleton will
remain employed with Thermo TerraTech until March 31, 2002, and will work
part-time, on average, 20 hours per week, from April 1, 2000 until that date.
During the term of the agreement, Dr. Appleton will perform his normal
managerial work duties and use his best efforts to achieve the closings of sales
of certain Thermo TerraTech businesses as part of the Thermo Electron corporate
reorganization. The agreement provides for an annualized base salary of $112,500
from April 1, 2000 through March 31, 2001, and $112,500 from April 1, 2001
through March 31, 2002. Dr. Appleton is entitled to receive, for the period from
April 1, 2000 through the end of the agreement's term, a minimum bonus of
$100,000 and a maximum bonus of $300,000 for the completion of specific tasks
assigned to him, including efforts to sell certain Thermo TerraTech businesses.
Also, Thermo Electron agreed that, effective April 1, 2000, it would use its
best efforts to cause Dr. Appleton to be non-executive chairman of the board of
directors of Thermo TerraTech, as long as Thermo TerraTech remains a public
company. The agreement may be terminated by Thermo Electron at any time, with or
without cause, or by Dr. Appleton upon thirty days' prior written notice. The
agreement will also be terminated upon Dr. Appleton's death or disability. If
the agreement is terminated by Thermo Electron or at Dr. Appleton's election,
Thermo Electron will pay Dr. Appleton
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the compensation and benefits which would otherwise have been payable through
the termination date of the agreement. If the agreement is terminated by Thermo
Electron without cause, Thermo Electron will also pay Dr. Appleton a severance
payment equal to the balance of the base salary payable through March 31, 2002,
plus any unpaid minimum guaranteed bonus.
RECENT DEVELOPMENTS
On November 22, 1999, a putative class action complaint was filed in the
Court of Chancery of the State of Delaware in and for New Castle County by a
stockholder of ThermoRetec. The complaint names ThermoRetec, Thermo Electron and
certain directors of ThermoRetec as defendants and alleges, among other things,
that the proposed merger, if consummated, would force the minority shareholders
of ThermoRetec to sell their shares for an inadequate price, due to the
defendants' alleged failure to deal fairly with the interests of ThermoRetec's
minority shareholders. The complaint also alleges that:
- the merger does not meet the standard of entire fairness under Delaware
law and is not fair to ThermoRetec's public stockholders;
- the member of ThermoRetec's special committee is not independent because
of his ownership of the common stock of Thermo Electron, ThermoRetec and
Thermo TerraTech; and
- Adams, Harkness & Hill is "conflicted" because it is also representing the
special committees of Thermo TerraTech and Randers/Killam. The plaintiff
seeks damages and other relief, including that the court enjoin or rescind
the merger. The defendants have not yet filed an answer to the complaint.
On June 5, 2000, a special meeting of the stockholders of ThermoRetec was
held, at which the stockholders voted to adopt the merger agreement with Thermo
Electron. Following the special meeting, Thermo Electron and ThermoRetec filed a
certificate of merger with the State of Delaware, thereby completing the merger.
LEGAL OPINION
The validity of the shares of Thermo Electron common stock offered by this
proxy statement-prospectus will be passed upon for Thermo Electron by Seth H.
Hoogasian, Esq. Mr. Hoogasian is a full-time employee of Thermo Electron, is an
officer of Thermo TerraTech and Thermo Electron, and owns or has the right to
acquire 421,171 shares of Thermo Electron common stock, and 71,973 shares of the
common stock of Thermo Electron's subsidiaries.
EXPERTS
The financial statements of Thermo Electron and Thermo TerraTech
incorporated by reference in this proxy statement-prospectus and the financial
statement schedules incorporated by reference in the registration statement of
which this proxy statement-prospectus forms a part have been audited by Arthur
Andersen LLP, independent public accountants, to the extent and for the periods
as indicated in their reports with respect thereto, and are incorporated by
reference in reliance upon the authority of said firm as experts in giving said
reports.
STOCKHOLDER PROPOSALS
If the merger is not completed, Thermo TerraTech will set a date for its
2000 annual meeting of stockholders. Pursuant to Rule 14a-8 under the Exchange
Act, Thermo TerraTech stockholders may present proper proposals for inclusion in
Thermo TerraTech's proxy statement and for consideration at its 2000 annual
meeting of stockholders, in the event the merger is not completed, by submitting
the proposals to Thermo TerraTech in a timely manner. In order to be included
for the 2000 annual
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meeting, stockholder proposals must be received by Thermo TerraTech within a
reasonable time before the meeting, and must otherwise comply with the
requirements of Rule 14a-8.
WHERE YOU CAN FIND MORE INFORMATION
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE,
INCLUDING IMPORTANT BUSINESS AND FINANCIAL INFORMATION, WHICH ARE NOT PRESENTED
IN OR DELIVERED WITH THIS PROXY STATEMENT-PROSPECTUS.
All documents filed by Thermo Electron pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this proxy
statement-prospectus and before the date of the special meeting are incorporated
by reference into and are deemed to be a part of this proxy statement-
prospectus from the date of filing of those documents.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY INFORMATION THAT IS DIFFERENT.
THERMO TERRATECH
The following documents, filed by Thermo TerraTech (File No. 1-9549) with
the SEC, are hereby incorporated by reference into this proxy
statement-prospectus:
- Annual Report on Form 10-K for the fiscal year ended April 1, 2000;
- Amendment No. 1 on Form 10-K/A to Form 10-K, as filed with the SEC on
July 31, 2000;
- Current Report on Form 8-K filed on April 28, 2000 regarding the sale by
Randers/Killam of its BAC Killam subsidiary; and
- Current Report on Form 8-K filed on June 15, 2000 regarding the sale by
Thermo TerraTech of its metal treating business.
THERMO ELECTRON
The following documents, filed by Thermo Electron (File No. 1-8002) with the
SEC, are hereby incorporated by reference into this proxy statement-prospectus:
- Annual Report on Form 10-K for the fiscal year ended January 1, 2000;
- Amendment No. 1 on Form 10-K/A to Form 10-K, as filed with the SEC on
June 27, 2000;
- Current Report on Form 8-K filed on February 1, 2000 regarding Thermo
Electron's proposed reorganization plan;
- Quarterly Report on Form 10-Q for the fiscal quarter ended April 1, 2000;
- Proxy Statement dated April 19, 2000, filed with the SEC on April 21,
2000;
- Current Report on Form 8-K filed on May 2, 2000 regarding Thermo
Electron's financial results for the quarter ended April 1, 2000;
- Current Report on Form 8-K filed on June 14, 2000 regarding Thermo
Electron's financial results for the fiscal year and quarter ended
January 1, 2000;
- Current Report on Form 8-K filed on June 30, 2000 regarding the completion
of Thermo Electron's exchange offers for its subsidiaries Thermo
Instrument Systems Inc. and Thermedics Inc.;
- Current Report on Form 8-K filed on July 11, 2000 regarding the
appointment of Marijn Dekkers as chief operating officer;
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- Current Report on Form 8-K filed on August 3, 2000 regarding Thermo
Electron's financial results for the quarter ended July 1, 2000;
- The description of the Thermo Electron common stock which is contained in
Thermo Electron's Registration Statement on Form 8-A filed under the
Exchange Act on September 9, 1999; and
- The description of Thermo Electron's preferred stock purchase rights which
is contained in Thermo Electron's Registration Statement on Form 8-A filed
under the Exchange Act on June 21, 1999.
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this proxy statement-prospectus will be deemed to
be modified or superseded for purposes of this proxy statement-prospectus to the
extent that a statement contained in this proxy statement-prospectus or any
other subsequently filed document that is deemed to be incorporated by reference
into this proxy statement-prospectus modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this proxy statement-prospectus.
The documents incorporated by reference into this proxy statement-prospectus
are available from us upon request. We will provide a copy of any and all of the
information that is incorporated by reference in this proxy statement-prospectus
to any person, without charge, upon written or oral request. If exhibits to the
documents incorporated by reference in this proxy statement-prospectus are not
themselves specifically incorporated by reference in this proxy
statement-prospectus, then such exhibits will not be provided. ANY REQUEST FOR
DOCUMENTS SHOULD BE MADE BY , 2000 TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS.
Requests for documents relating to Thermo TerraTech or Thermo Electron
should be directed to: Sandra L. Lambert, Corporate Secretary, Thermo Electron
Corporation, 81 Wyman Street, Waltham, Massachusetts 02454 (telephone:
781-622-1000; facsimile: 781-768-6620).
We file reports, proxy statements and other information with the SEC. Copies
of our reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the SEC at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Reports, proxy statements and other information concerning Thermo TerraTech
may be inspected at:
The American Stock Exchange
86 Trinity Place
New York, New York 10006-1881
Reports, proxy statements and other information concerning Thermo Electron
may be inspected at:
The New York Stock Exchange
20 Broad Street
New York, New York 10005
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Room at the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at l-800-SEC-0330. The
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SEC maintains an Internet site that contains reports, proxy statements and other
information regarding each of us. The address of the SEC website is
http://www.sec.gov.
Thermo Electron has filed a registration statement on Form S-4 under the
Securities Act with the SEC with respect to the Thermo Electron common stock to
be issued to Thermo TerraTech stockholders in the merger. This proxy
statement-prospectus constitutes the prospectus of Thermo Electron filed as part
of the registration statement. This proxy statement-prospectus does not contain
all of the information set forth in the registration statement because parts of
the registration statement are omitted in accordance with the rules and
regulations of the SEC. The registration statement and its exhibits are
available for inspection and copying as set forth above.
Copies of Thermo TerraTech's Annual Report on Form 10-K for the fiscal year
ended April 1, 2000, its Current Report on Form 8-K dated April 14, 2000, and
its Current Report on Form 8-K dated June 15, 2000 are attached to this proxy
statement-prospectus as Appendices C, D and E, respectively. Please read each of
such documents in their entirety for the important information they contain
regarding the business of Thermo TerraTech.
If you have any questions about the merger, please call Thermo TerraTech
Investor Relations at 1-781-622-1111.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS PROXY STATEMENT-PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH OR INCORPORATED INTO THIS PROXY STATEMENT-PROSPECTUS BY REFERENCE OR IN
OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus (see "Where You Can Find More Information")
include forward-looking statements about Thermo Electron and Thermo TerraTech
within the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These statements relate to expectations concerning matters that are
not historical facts, such as future financial performance, anticipated
developments, business strategy, projected costs and plans and objectives of
Thermo Electron and Thermo TerraTech. Many of these statements are preceded by,
followed by or otherwise include the words "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" or similar expressions. These
statements may be made expressly in this document or may be incorporated by
reference to other documents Thermo Electron and Thermo TerraTech have filed
with the SEC.
Although each of Thermo Electron and Thermo TerraTech believes that such
forward-looking statements are reasonable, neither can assure you that such
expectations will prove to be correct. Forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties that
may cause actual results of Thermo Electron or Thermo TerraTech to be materially
different from any future results expressed or implied by either Thermo Electron
or Thermo TerraTech. The risks and uncertainties include those risks,
uncertainties and risk factors identified, among other places, under "Risk
Factors" in this document, and under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Thermo Electron's Annual
Report on Form 10-K for the year ended January 1, 2000.
The most important facts that could prevent Thermo Electron from achieving
its stated goals include, but are not limited to, the following:
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- Thermo Electron's corporate reorganization, which includes taking several
subsidiaries private, spinning off some subsidiaries and selling several
businesses, is very complex, expensive and time-consuming.
- Thermo Electron has acquired several companies and businesses; as a result
it has recorded significant goodwill on its balance sheet, which it must
continually evaluate for potential impairment.
- Thermo Electron has significant international operations, which entail the
risk that exchange rate fluctuations may negatively affect demand for its
products and its profitability.
- Thermo Electron must develop new products, adapt to rapid and significant
technological change, and respond to introductions of new products in
order to remain competitive.
- Changes in governmental regulations may reduce demand for Thermo
Electron's products or increase its expenses.
- Demand for some of Thermo Electron's products depends on capital spending
policies of its customers and on government funding policies.
We cannot always predict or determine after the fact what factors would
cause actual results to differ materially from those indicated by the
forward-looking statements or other statements. All cautionary statements should
be read as being applicable to all forward-looking statements wherever they
appear. Thermo Electron and Thermo TerraTech do not undertake any obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed herein might
not occur.
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THERMO ELECTRON CORPORATION
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION OF
THERMO ELECTRON CORPORATION (UNAUDITED)................... F-2
Pro Forma Consolidated Condensed Statement of Continuing
Operations for the three months ended April 1, 2000..... F-3
Pro Forma Consolidated Condensed Statement of Continuing
Operations for the year ended January 1, 2000........... F-4
Pro Forma Consolidated Condensed Balance Sheet as of
April 1, 2000........................................... F-5
Notes to Pro Forma Consolidated Condensed Financial
Statements.............................................. F-6
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION OF
THERMO TERRATECH INC. (UNAUDITED)......................... F-7
Pro Forma Consolidated Condensed Statement of Operations
for the fiscal year ended April 1, 2000................. F-8
Pro Forma Consolidated Condensed Balance Sheet as of
April 1, 2000........................................... F-9
Notes to Pro Forma Consolidated Condensed Financial
Statements.............................................. F-11
</TABLE>
F-1
<PAGE>
THERMO ELECTRON CORPORATION
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidated condensed statement of
operations sets forth the results of continuing operations for the three months
ended April 1, 2000, and the year ended January 1, 2000, as if the merger had
become effective at the beginning of 1999. The results of Thermo TerraTech are
reported as discontinued operations in the financial statements of Thermo
Electron. The only pro forma adjustment to the Pro Forma Consolidated Condensed
Statement of Continuing Operations is an increase in Thermo Electron's
outstanding shares. The following unaudited pro forma consolidated condensed
balance sheet sets forth the financial position as of April 1, 2000, as if the
merger had become effective on April 1, 2000. For purposes of determining the
number of shares of Thermo Electron that will be issued under the merger
agreement, an exchange ratio of .40 shares of Thermo Electron common stock for
each share of Thermo TerraTech common stock has been assumed. The pro forma
results of operations are not necessarily indicative of future operations or the
actual results that would have occurred had the merger become effective at the
beginning of 1999.
F-2
<PAGE>
THERMO ELECTRON CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF CONTINUING OPERATIONS
THREE MONTHS ENDED APRIL 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues................................................... $598,929 $ -- $598,929
-------- ---- --------
Costs and Operating Expenses:
Costs of revenues........................................ 325,183 -- 325,183
Selling, general, and administrative expenses............ 173,682 -- 173,682
Research and development expenses........................ 48,446 -- 48,446
Restructuring and other unusual costs, net............... (7,700) -- (7,700)
-------- ---- --------
539,611 -- 539,611
-------- ---- --------
Operating Income........................................... 59,318 -- 59,318
Other Expense, Net......................................... (21,172) -- (21,172)
-------- ---- --------
Income from Continuing Operations Before Income Taxes,
Minority Interest, and Extraordinary Items............... 38,146 -- 38,146
Income Tax Provision....................................... 16,728 -- 16,728
Minority Interest Expense.................................. 6,127 -- 6,127
-------- ---- --------
Income from Continuing Operations Before Extraordinary
Items.................................................... $ 15,291 $ -- $ 15,291
======== ==== ========
Earnings per Share from Continuing Operations Before
Extraordinary Items:
Basic.................................................... $ .10 $ .10
======== ========
Diluted.................................................. $ .09 $ .09
======== ========
Weighted Average Shares:
Basic.................................................... 156,813 970 157,783
======== ==== ========
Diluted.................................................. 157,464 970 158,434
======== ==== ========
</TABLE>
F-3
<PAGE>
THERMO ELECTRON CORPORATION
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF CONTINUING OPERATIONS
YEAR ENDED JANUARY 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues $2,471,193 $ -- $2,471,193
---------- ------- ----------
Costs and Operating Expenses:
Cost of revenues........................................ 1,378,494 -- 1,378,494
Selling, general, and administrative expenses........... 673,004 -- 673,004
Research and development expenses....................... 171,100 -- 171,100
Restructuring and other unusual costs, net.............. 149,589 -- 149,589
---------- ------- ----------
2,372,187 -- 2,372,187
---------- ------- ----------
Operating Income.......................................... 99,006 -- 99,006
Other Expense, Net........................................ (61,520) -- (61,520)
---------- ------- ----------
Income from Continuing Operations Before Income Taxes,
Minority Interest, and Extraordinary Items.............. 37,486 -- 37,486
Income Tax Provision...................................... 33,073 -- 33,073
Minority Interest Expense................................. 18,993 -- 18,993
---------- ------- ----------
Loss from Continuing Operations Before Extraordinary
Items................................................... $ (14,580) $ -- $ (14,580)
========== ======= ==========
Loss per Share from Continuing Operations Before
Extraordinary Items:
Basic................................................... $ (.09) $ -- $ (.09)
========== ======= ==========
Diluted................................................. $ (.11) $ -- $ (.11)
========== ======= ==========
Basic and Diluted Weighted Average Shares................. 157,987 970 158,957
========== ======= ==========
</TABLE>
F-4
<PAGE>
THERMO ELECTRON CORPORATION
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
APRIL 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 533,471 $ -- $ 533,471
Short-term available-for-sale investments, at quoted
market value.......................................... 426,015 -- 426,015
Accounts receivable, net................................ 534,569 -- 534,569
Other current assets.................................... 690,103 -- 690,103
Net assets of discontinued operations................... 502,629 -- 502,629
---------- -------- ----------
2,686,787 -- 2,686,787
---------- -------- ----------
Property, Plant, and Equipment, at Cost, Net.............. 424,874 -- 424,874
---------- -------- ----------
Other Assets.............................................. 233,486 -- 233,486
---------- -------- ----------
Cost in Excess of Net Assets of Acquired Companies........ 1,206,238 -- 1,206,238
---------- -------- ----------
Long-term Net Assets of Discontinued Operations........... 625,802 24,735 650,537
---------- -------- ----------
$5,177,187 $ 24,735 $5,201,922
========== ======== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities....................................... $1,057,399 $ -- $1,057,399
---------- -------- ----------
Deferred Income Taxes and Other Deferred Items............ 162,622 -- 162,622
---------- -------- ----------
Long-term Obligations:
Subordinated convertible obligations.................... 1,184,033 -- 1,184,033
Other................................................... 386,290 -- 386,290
---------- -------- ----------
1,570,323 -- 1,570,323
---------- -------- ----------
Minority Interest......................................... 364,900 -- 364,900
---------- -------- ----------
Common Stock of Subsidiary Subject to Redemption.......... 7,692 -- 7,692
---------- -------- ----------
Shareholders' Investment:
Common stock............................................ 167,990 970 168,960
Capital in excess of par value.......................... 1,061,754 23,765 1,085,519
Retained earnings....................................... 1,057,791 -- 1,057,791
Treasury stock at cost.................................. (193,457) -- (193,457)
Deferred compensation................................... (6,917) -- (6,917)
Accumulated other comprehensive items................... (72,910) -- (72,910)
---------- -------- ----------
2,014,251 24,735 2,038,986
---------- -------- ----------
$5,177,187 $ 24,735 $5,201,922
========== ======== ==========
</TABLE>
F-5
<PAGE>
THERMO ELECTRON CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1-- PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED STATEMENT
OF CONTINUING OPERATIONS (IN THOUSANDS EXCEPT IN TEXT)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
APRIL 1, 2000 JANUARY 1, 2000
------------------ ---------------
<S> <C> <C>
WEIGHTED AVERAGE SHARES
Increase in weighted average shares outstanding due to the
assumed issuance of 969,664 shares of Thermo Electron's
common stock for the acquisition of additional shares of
Thermo TerraTech as of the beginning of 1999.............. 970 970
--- -----
</TABLE>
NOTE 2-- PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED BALANCE
SHEET (IN THOUSANDS EXCEPT IN TEXT)
<TABLE>
<CAPTION>
APRIL 1, 2000
---------------
DEBIT (CREDIT)
<S> <C>
LONG-TERM NET ASSETS OF DISCONTINUED OPERATIONS
Increase in long-term net assets of discontinued operations
as a result of Thermo Electron's increased ownership of
Thermo TerraTech.......................................... $ 24,735
--------
COMMON STOCK
Increase in common stock due to the assumed issuance of
969,664 shares of Thermo Electron's common stock for the
acquisition of additional shares of Thermo TerraTech...... (970)
--------
CAPITAL IN EXCESS OF PAR VALUE
Increase in capital in excess of par value as a result of
Thermo Electron's increased ownership of Thermo TerraTech
and the conversion of outstanding stock options of Thermo
TerraTech into stock options of Thermo Electron........... (23,765)
--------
</TABLE>
F-6
<PAGE>
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
SALE OF RANDERS DIVISION
On January 28, 2000, Thermo TerraTech, through its The Randers Killam
Group Inc. majority-owned subsidiary ("Randers/Killam"), sold substantially all
of the assets and liabilities of its Randers division, exclusive of certain real
estate and certain ongoing litigation, to RGI Muskegon, Inc. The Randers
division provides engineering and construction services. The assets sold include
all of the Randers division's operating assets, active contracts and projects,
and real property. The liabilities assumed by the purchaser include all balance
sheet liabilities, all lease obligations, and all liabilities and obligations
under the active contracts and projects.
The selling price for the assets of the Randers division consisted of a
promissory note in the principal amount of $538,000 bearing interest at the rate
of 8.0% per annum and payable in 36 equal monthly installments of principal and
interest commencing March 1, 2000.
Thermo TerraTech incurred a loss on the sale of approximately $3.3 million,
which was included in restructuring costs for the fiscal year ended April 1,
2000.
SALE OF SOIL-REMEDIATION FACILITIES
On June 6, 2000, ThermoRetec Corporation ("ThermoRetec"), a subsidiary of
Thermo TerraTech, sold its five remaining soil-remediation facilities to
Remediation Technologies, Inc. for $15 million in cash.
SALE OF BAC KILLAM INC. SUBSIDIARY
On April 14, 2000, Randers/Killam sold its BAC Killam Inc. subsidiary to
Hatch Mott MacDonald, Inc. ("HMM") for approximately $3.0 million in cash, of
which approximately $1.4 million was paid in cash at closing and of which the
balance represents accounts receivable that would be paid to Randers/Killam upon
collection (less a five percent collection fee).
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated condensed statements of
operations set forth the results of operations for the fiscal year ended
April 1, 2000, as if the disposition and planned disposition of the Randers
division, the soil-remediation facilities, and BAC Killam (the "Dispositions")
had occurred at the beginning of fiscal 2000. The unaudited pro forma condensed
balance sheet sets forth the financial position as of April 1, 2000, as if the
Dispositions had occurred as of that date.
The pro forma results of operations are not necessarily indicative of future
operations or the actual results that would have occurred had the Dispositions
been consummated at the beginning of fiscal 2000. These statements should be
read in conjunction with the accompanying notes herein and the historical
consolidated financial statements and related notes of Thermo TerraTech included
in its Annual Report on Form 10-K, as amended, for the fiscal year ended April
1, 2000.
F-7
<PAGE>
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED APRIL 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
LESS:
---------------------------------
SOIL-
THERMO RANDERS REMEDIATION BAC PRO FORMA
TERRATECH DIVISION FACILITIES KILLAM ADJUSTMENTS PRO FORMA
--------- -------- ----------- -------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $307,329 $ 7,257 $23,376 $10,433 $ -- $266,263
-------- ------- ------- ------- ------- --------
Costs and Operating Expenses:
Cost of revenues...................... 243,382 6,953 15,957 8,557 -- 211,915
Selling, general, and administrative
expenses............................ 44,891 1,337 3,987 1,697 -- 37,870
Restructuring costs................... 56,981 7,898 9,646 10,995 -- 28,442
-------- ------- ------- ------- ------- --------
345,254 16,188 29,590 21,249 -- 278,227
-------- ------- ------- ------- ------- --------
Operating Loss.......................... (37,925) (8,931) (6,214) (10,816) -- (11,964)
Interest Income......................... 2,810 2 11 4 -- 2,793
Interest Expense........................ (8,743) (56) -- -- -- (8,687)
-------- ------- ------- ------- ------- --------
Loss Before Income Taxes, Minority
Interest, and Extraordinary Item...... (43,858) (8,985) (6,203) (10,812) -- (17,858)
Income Tax (Provision) Benefit.......... (2,522) 1,502 2,391 1,054 -- (7,469)
Minority Interest Income................ 3,054 -- -- -- (2,060) 994
-------- ------- ------- ------- ------- --------
Loss Before Extraordinary Item.......... $(43,326) $(7,483) $(3,812) $(9,758) $(2,060) $(24,333)
======== ======= ======= ======= ======= ========
Basic and Diluted Loss per Share Before
Extraordinary Item.................... $ (2.28) $ (1.28)
======== ========
Basic and Diluted Weighted Average
Shares................................ 19,033 19,033
======== ========
</TABLE>
F-8
<PAGE>
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
APRIL 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
LESS:
----------------------
SOIL-
THERMO REMEDIATION BAC PRO FORMA
TERRATECH FACILITIES KILLAM ADJUSTMENTS PRO FORMA
--------- ----------- -------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................... $ 4,157 $ -- $ -- $16,374 $ 20,531
Advance to affiliate........................... 47,748 -- -- -- 47,748
Accounts receivable, net....................... 51,537 4,458 1,374 -- 45,705
Unbilled contract costs and fees............... 20,875 128 -- -- 20,747
Inventories.................................... 2,001 -- -- -- 2,001
Deferred tax asset............................. 8,075 4,101 -- -- 3,974
Other current assets........................... 3,304 173 -- -- 3,131
-------- ------- ------ ------- --------
137,697 8,860 1,374 16,374 143,837
-------- ------- ------ ------- --------
Property, Plant, and Equipment, at Cost, Net..... 69,956 5,286 -- -- 64,670
-------- ------- ------ ------- --------
Other Assets..................................... 8,971 1,872 -- -- 7,099
-------- ------- ------ ------- --------
Cost in Excess of Net Assets of Acquired
Companies...................................... 87,929 1,278 -- -- 86,651
-------- ------- ------ ------- --------
$304,553 $17,296 $1,374 $16,374 $302,257
======== ======= ====== ======= ========
</TABLE>
F-9
<PAGE>
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (CONTINUED)
APRIL 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
LESS:
----------------------
SOIL-
THERMO REMEDIATION BAC PRO FORMA
TERRATECH FACILITIES KILLAM ADJUSTMENTS PRO FORMA
--------- ----------- -------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term obligations and current maturities
of long-term obligations..................... $ 20,480 $ -- $ -- $ -- $ 20,480
Subordinated convertible debentures............ 37,950 -- -- -- 37,950
Accounts payable............................... 15,164 2,154 -- -- 13,010
Accrued payroll and employee benefits.......... 12,443 485 -- -- 11,958
Accrued restructuring costs.................... 5,907 -- -- -- 5,907
Other accrued expenses......................... 12,617 1,792 -- 600 11,425
Due to parent company and affiliated
companies.................................... 2,403 -- -- -- 2,403
-------- ------- ------ ------- --------
106,964 4,431 -- 600 103,133
-------- ------- ------ ------- --------
Deferred Income Taxes............................ 1,451 -- -- -- 1,451
-------- ------- ------ ------- --------
Other Deferred Items............................. 1,118 -- -- -- 1,118
-------- ------- ------ ------- --------
Long-term Obligations............................ 118,113 -- -- -- 118,113
-------- ------- ------ ------- --------
Minority Interest................................ 25,337 -- -- 467 25,804
-------- ------- ------ ------- --------
Shareholders' Investment:
Common stock................................... 1,961 -- -- -- 1,961
Capital in excess of par value................. 71,220 -- -- -- 71,220
Accumulated deficit............................ (17,321) -- -- 1,068 (16,253)
Treasury stock, at cost........................ (5,042) -- -- -- (5,042)
Deferred compensation.......................... (189) -- -- -- (189)
Accumulated other comprehensive items.......... 941 -- -- -- 941
Parent company investment...................... -- 12,865 1,374 14,239 --
-------- ------- ------ ------- --------
51,570 12,865 1,374 15,307 52,638
-------- ------- ------ ------- --------
$304,553 $17,296 $1,374 $16,374 $302,257
======== ======= ====== ======= ========
</TABLE>
F-10
<PAGE>
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS
(IN THOUSANDS EXCEPT IN TEXT)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 1, 2000
-----------------
DEBIT (CREDIT)
<S> <C>
MINORITY INTEREST INCOME
Decrease in minority interest income as a result of the sale
of:
Randers division.......................................... $ 394
Soil-remediation facilities............................... 1,153
BAC Killam................................................ 513
-------
$ 2,060
=======
</TABLE>
NOTE 2--PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 1, 2000
-------------
DEBIT
(CREDIT)
<S> <C>
CASH AND CASH EQUIVALENTS
Cash received for sale of:
Soil-remediation facilities............................... $ 15,000
BAC Killam................................................ 1,374
--------
$ 16,374
--------
OTHER ACCRUED EXPENSES
Estimated accrued transaction costs, including legal fees,
incentive payments, and severance payable following the
sale of soil-remediation facilities....................... $ (600)
--------
MINORITY INTEREST
Increase in minority interest related to excess of proceeds
from sale over parent company investment in
soil-remediation facilities............................... $ (467)
--------
SHAREHOLDERS' INVESTMENT
Elimination of equity account and excess of proceeds from
sale over parent company investment in:
Soil-remediation facilities............................. $(13,933)
BAC Killam.............................................. (1,374)
--------
$(15,307)
--------
</TABLE>
The sales price of the Randers division consisted of a $538,000 promissory
note, secured by certain real estate. In addition, the acquirer assumed $776,000
of mortgage debt. Due to the fact that Thermo TerraTech received no
consideration at the time of sale, the sale of the real estate is being
accounted for under the deposit method. Under the deposit method, Thermo
TerraTech did not record the note
F-11
<PAGE>
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
receivable and continues to report the property that was sold as well as the
existing mortgage debt in the accompanying pro forma condensed balance sheet.
Cash received from the acquirer will be reported as a deposit on the contract.
As a result, there are no pro forma adjustments to the pro forma consolidated
condensed balance sheet as of April 1, 2000, for this sale.
Thermo TerraTech incurred losses in fiscal 2000 on the sale of the Randers
division and BAC Killam of $3.3 million and $2.1 million, respectively. Thermo
TerraTech expects to realize a gain on the sale of the soil-remediation
facilities of $1.1 million. These losses and gain are not included in the
accompanying pro forma consolidated condensed statement of operations.
F-12
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THERMO ELECTRON CORPORATION
TTT ACQUISITION CORPORATION
AND
THERMO TERRATECH INC.
DATED AS OF OCTOBER 19, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I THE MERGER............................................. A-2
1.1 The Merger.................................................. A-2
1.2 Effective Time; Closing..................................... A-2
1.3 Effect of the Merger........................................ A-2
1.4 Certificate of Incorporation; Bylaws........................ A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-2
1.7 Surrender of Certificates................................... A-4
1.8 No Further Ownership Rights in TerraTech Common Stock....... A-5
1.9 Lost, Stolen or Destroyed Certificates...................... A-5
1.10 Dividends................................................... A-5
1.11 Fractional Shares........................................... A-5
1.12 Closing of Transfer Books................................... A-6
1.13 Taking of Necessary Action; Further Action.................. A-6
1.14 Tax Treatment............................................... A-6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TERRATECH........... A-6
2.1 Organization of TerraTech................................... A-6
2.2 TerraTech Capital Structure................................. A-6
2.3 Authority................................................... A-7
2.4 Board Approval.............................................. A-7
2.5 Fairness Opinion............................................ A-7
2.6 Registration Statement; Proxy Statement/Prospectus.......... A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND
MERGER SUB........................................... A-8
3.1 Organization................................................ A-8
3.2 Authority................................................... A-8
3.3 Capitalization.............................................. A-9
3.4 Reports and Financial Statements............................ A-10
3.5 Merger Sub.................................................. A-10
3.6 Tax Treatment............................................... A-10
3.7 Information Provided to Investment Bankers.................. A-10
3.8 Litigation.................................................. A-10
3.9 Compliance with Agreements.................................. A-11
3.10 Registration Statement; Proxy Statement/Prospectus.......... A-11
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................... A-11
4.1 Conduct of Business by TerraTech............................ A-11
4.2 Conduct of Business by Thermo Electron...................... A-11
ARTICLE V ADDITIONAL AGREEMENTS.................................. A-12
5.1 Registration Statement; Other Filings....................... A-12
5.2 Meeting of TerraTech Stockholders........................... A-13
5.3 Access to Information....................................... A-13
5.4 Public Disclosure........................................... A-13
5.5 Legal Requirements.......................................... A-14
5.6 Notification of Certain Matters............................. A-14
5.7 Best Efforts and Further Assurances......................... A-14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
Stock Option and Employee Stock Purchase Plans; Reservation
5.8 of Shares................................................... A-14
5.9 Thermo Electron Form S-8.................................... A-15
5.10 Thermo Electron Form S-3.................................... A-15
5.11 Indemnification; Insurance.................................. A-15
5.12 Deferred Compensation Plan.................................. A-17
5.13 Compliance by Merger Sub.................................... A-17
5.14 Tax Treatment............................................... A-17
5.15 NYSE Listing................................................ A-17
ARTICLE VI CONDITIONS TO THE MERGER.............................. A-17
Conditions to Obligations of Each Party to Effect the
6.1 Merger...................................................... A-17
6.2 Additional Conditions to Obligations of TerraTech........... A-18
Additional Conditions to the Obligations of Thermo Electron
6.3 and Merger Sub.............................................. A-18
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................... A-19
7.1 Termination................................................. A-19
7.2 Notice of Termination; Effect of Termination................ A-20
7.3 Fees and Expenses........................................... A-20
7.4 Amendment................................................... A-20
7.5 Extension; Waiver........................................... A-20
ARTICLE VIII GENERAL PROVISIONS.................................. A-21
8.1 Non-Survival of Representations and Warranties.............. A-21
8.2 Notices..................................................... A-21
8.3 Counterparts................................................ A-21
8.4 Entire Agreement............................................ A-22
8.5 Severability................................................ A-22
8.6 Other Remedies; Specific Performance........................ A-22
8.7 Governing Law............................................... A-22
8.8 Assignment.................................................. A-22
8.9 Headings.................................................... A-22
</TABLE>
Exhibit A: Form of Tax Opinion
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of October 19,
1999 is by and among Thermo Electron Corporation, a Delaware corporation
("Thermo Electron"), TTT Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Thermo Electron ("Merger Sub"), and Thermo
TerraTech Inc., a Delaware corporation ("TerraTech").
RECITALS
A. Thermo Electron owns approximately 87% of the outstanding shares of
common stock, par value $.10 per share, of TerraTech (the "TerraTech Common
Stock"), and Thermo Electron desires to acquire all of the remaining outstanding
shares of TerraTech Common Stock.
B. Thermo Electron has formed the Merger Sub as a subsidiary with the intent
of causing it to merge with TerraTech, as described in this Agreement.
C. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), Thermo
Electron and TerraTech will enter into a business combination transaction
pursuant to which Merger Sub will merge with and into TerraTech (the "Merger").
D. The Board of Directors of Thermo Electron (i) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy
of Thermo Electron, and (ii) has approved this Agreement, the Merger and the
other transactions contemplated by this Agreement.
E. The Board of Directors of TerraTech, on the recommendation of a special
committee of the Board of Directors (the "Special Committee"), consisting of a
director of TerraTech who is not an officer or director of Thermo Electron or an
officer of TerraTech, (i) has determined that this Agreement, including the
Exchange Ratio (as defined below), and the transactions contemplated by this
Agreement, are fair to, and in the best interests of, the stockholders of
TerraTech (other than Thermo Electron), (ii) has approved and declared the
advisability of this Agreement, the Merger and the other transactions
contemplated by this Agreement and (iii) has resolved to recommend the approval
and adoption of this Agreement by the stockholders of TerraTech.
F. Adams, Harkness & Hill ("AH&H") has delivered to the Special Committee,
for its consideration, and for delivery to the stockholders of TerraTech, its
written opinion that, subject to the various assumptions and limitations set
forth therein, as of the date of such opinion the consideration to be received
by the stockholders of TerraTech (other than Thermo Electron) is fair to such
stockholders from a financial point of view.
G. The parties hereto intend that this transaction shall qualify for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
H. Thermo Electron, TerraTech and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
A-1
<PAGE>
ARTICLE I
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into
TerraTech, the separate corporate existence of Merger Sub shall cease and
TerraTech shall continue as the surviving corporation. TerraTech as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation."
1.2. EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the Surviving Corporation shall cause the Merger to be consummated by filing a
Certificate of Merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware in accordance with the relevant provisions of the DGCL
(the time of such filing, or such later time as may be agreed in writing by the
parties and specified in the Certificate of Merger, being the "Effective Time"
and the date on which the Effective Time occurs being the "Effective Date") as
soon as practicable on the Closing Date (as herein defined). Unless the context
otherwise requires, the term "Agreement" as used herein refers collectively to
this Agreement and the Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the executive offices of Thermo Electron at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date"). At the Closing, (i) TerraTech shall
deliver to Thermo Electron the various certificates and instruments required
under Article VI, (ii) Thermo Electron and Merger Sub shall deliver to TerraTech
the various certificates and instruments required under Article VI and
(iii) TerraTech shall execute and file the Certificate of Merger with the
Secretary of State of the State of Delaware, in accordance with the applicable
provisions of the DGCL.
1.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of TerraTech and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of TerraTech and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) Subject to the requirements of Section 5.11 hereof, at the Effective
Time, the Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation.
(b) Subject to the requirements of Section 5.11 hereof, the Bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be, at the
Effective Time, the Bylaws of the Surviving Corporation until thereafter
amended.
1.5. DIRECTORS AND OFFICERS. The directors of TerraTech immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
to serve until their respective successors are duly elected or appointed and
qualified. The officers of TerraTech immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, to serve until their
successors are duly elected or appointed or qualified.
1.6. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, TerraTech or the holders of
any of the following securities:
(a) EXCHANGE OF TERRATECH COMMON STOCK. Subject to the balance of this
Section 1.6, each share of TerraTech Common Stock issued and outstanding
immediately prior to the Effective Time will be automatically converted into the
right to receive 0.4 share (subject to adjustment pursuant to Section 1.6(g)
hereof, the "Exchange Ratio") of the common stock, $1.00 par value, of Thermo
A-2
<PAGE>
Electron (the "Thermo Common Stock"). As of the Effective Time, all such shares
of TerraTech Common Stock shall no longer be outstanding and shall be
automatically canceled and retired and shall cease to exist, and each holder of
a certificate representing any such shares of TerraTech Common Stock shall cease
to have any rights with respect thereto, except the right to receive the Merger
Consideration (as defined in Section 1.7(b)) upon surrender of the certificate
representing such share of TerraTech Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.9).
(b) STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN. All options to purchase
TerraTech Common Stock outstanding immediately prior to the Effective Time under
stock option plans maintained by TerraTech (including those plans adopted when
TerraTech was known as Thermo Process Systems Inc.), consisting of the Thermo
Process Systems Inc. Incentive Stock Option Plan, the Thermo Process
Systems Inc. Nonqualified Stock Option Plan, the Thermo Process Systems Inc.
Equity Incentive Plan and the Thermo Process Systems Inc. Directors Stock Option
Plan, each as amended (together, the "TerraTech Stock Option Plans"), shall be
converted into options to purchase Thermo Common Stock in accordance with
Section 5.8 hereof. All options to purchase shares of TerraTech Common Stock
under the Amended and Restated Thermo TerraTech Employees' Stock Purchase Plan
(the "TerraTech ESPP") shall be converted into options to purchase Thermo Common
Stock in accordance with Section 5.8 hereof.
(c) WARRANTS. All warrants to purchase TerraTech Common Stock outstanding
immediately prior to the Effective Time shall be converted at the Effective Time
into warrants to purchase Thermo Common Stock. The number of whole shares of
Thermo Common Stock for which each warrant will be exercisable (or will become
exercisable in accordance with its terms) and the per share exercise price for
the shares of Thermo Common Stock issuable upon exercise of such TerraTech
warrant will be determined in accordance with the terms of such warrants.
(d) CONVERTIBLE DEBENTURES. All TerraTech convertible debentures (the
"Convertible Debentures") issued pursuant to the Fiscal Agency Agreement dated
as of May 2, 1996 by and among TerraTech, Thermo Electron and Chase Manhattan
Bank (formerly Chemical Bank) as Fiscal Agent (the "Fiscal Agency Agreement"),
outstanding at the Effective Time shall remain the Convertible Debentures of
TerraTech, provided however, that in lieu of TerraTech Common Stock being
issuable upon conversion of such Convertible Debentures, after the Effective
Time, Thermo Common Stock shall be issuable upon conversion of such Convertible
Debentures in accordance with the terms of the Fiscal Agency Agreement. At the
Effective Time, the price at which the TerraTech Convertible Debentures then
outstanding will be convertible into Thermo Common Stock shall be adjusted in
accordance with the terms of the Fiscal Agency Agreement.
(e) CAPITAL STOCK OF MERGER SUB. Each share of common stock, par value $.01
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one validly issued, fully paid
and non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(f) TREASURY STOCK; STOCK HELD BY THERMO ELECTRON. Notwithstanding any other
provision of this Agreement, each share of TerraTech Common Stock issued and
outstanding and owned by Thermo Electron or any wholly owned subsidiary of
Thermo Electron, together with all treasury shares held by TerraTech immediately
prior to the Effective Time shall cease to be outstanding, and shall
automatically be cancelled and retired without payment of any consideration
therefor, cash or otherwise, and cease to exist.
(g) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into, or
exercisable or exchangeable for, TerraTech Common Stock or Thermo Common Stock,
as the case may be), recapitalization or other like change without receipt of
consideration with
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respect to either the TerraTech Common Stock or the Thermo Common Stock
occurring on or after the date hereof and prior to the Effective Time. The
Exchange Ratio shall also be subject to adjustment as follows:
(i) In the event the average of the closing prices per share of Thermo
Common Stock as reported in the consolidated transaction reporting system
for each of the 20 consecutive trading days ending on the fifth trading day
prior to the Effective Time (the "Pre-Closing Average Price") multiplied by
the Exchange Ratio is less than $7.25, then the Exchange Ratio shall be
adjusted to be equal to $7.25 divided by the Pre-Closing Average Price,
subject to the provisions of Section 7.1(h).
(ii) In the event the Pre-Closing Average Price multiplied by the
Exchange Ratio is greater than $9.25, then the Exchange Ratio shall be
adjusted to be equal to $9.25 divided by the Pre-Closing Average Price.
1.7. SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Thermo Electron shall
authorize Boston EquiServe to act as the exchange agent (the "Exchange Agent")
in the Merger. Immediately following the Effective Time, Thermo Electron shall
deposit with the Exchange Agent, for the benefit of the holders of shares of
TerraTech Common Stock, for exchange in accordance with the provisions of this
Article I, certificates representing the shares of Thermo Common Stock issuable
pursuant to this Agreement in exchange for outstanding shares of TerraTech
Common Stock. The Thermo Common Stock into which TerraTech Common Stock shall be
converted pursuant to the Merger shall be deemed to have been issued at the
Effective Time.
(b) EXCHANGE PROCEDURES. As soon as practicable after, and in no event more
than three business days after, the Effective Time, Thermo Electron shall cause
the Exchange Agent to mail to each holder of record (as of the Effective Time)
of a certificate (a "Certificate" or the "Certificates") representing TerraTech
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall otherwise
be in such form and have such other provisions as Thermo Electron may reasonably
specify and as are reasonably acceptable to TerraTech, with the approval of the
Special Committee) and (ii) instructions for effecting the exchange of the
Certificates for certificates representing shares of Thermo Common Stock, as
provided herein. Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a certificate
representing shares of Thermo Common Stock equal to the Exchange Ratio
multiplied by the number of shares of TerraTech Common Stock represented by such
Certificate (rounded down to the nearest whole share), (y) any dividends or
other distributions to which such holder is entitled pursuant to Section 1.10
and (z) a check issued pursuant to Section 1.11 hereof for any fractional share
of Thermo Common Stock (the consideration specified in clauses (x), (y) and
(z) being collectively referred to herein as the "Merger Consideration"), and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of shares of TerraTech Common Stock which is not
registered in the transfer records of TerraTech as of the Effective Time, the
Merger Consideration may be paid in accordance with this Article I to a
transferee if the Certificate evidencing such shares is presented to the
Exchange Agent, accompanied by all documents required by law to evidence and
effect such transfer pursuant to this Section. Until so surrendered, each
outstanding Certificate will be deemed from and after the Effective Time, for
all corporate purposes, to evidence only the right to receive shares of Thermo
Common Stock equal to the Exchange Ratio for each share of TerraTech Common
Stock represented on such Certificate, and the other Merger Consideration.
(c) TRANSFERS OF OWNERSHIP. If payment of the Exchange Ratio is to be made
to any person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it will be
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a condition of such payment that the Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such payment will have paid to Thermo Electron or any agent
designated by it any transfer or other taxes required by reason of payment to a
person other than the registered holder of the Certificate surrendered, or
established to the satisfaction of Thermo Electron or any agent designated by it
that such tax has been paid or is not payable.
(d) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Exchange Agent, Thermo Electron, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of
TerraTech Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) RESPONSIBILITY; TERM. During the term of its engagement, the Exchange
Agent shall be responsible for delivering certificates representing Thermo
Common Stock and the other Merger Consideration to the holders of properly
endorsed Certificates that are returned to the Exchange Agent. Promptly
following the date that is six months after the Effective Date, the Exchange
Agent shall, upon request by Thermo Electron, deliver to Thermo Electron all
cash, Certificates, certificates representing shares of Thermo Common Stock and
other documents in its possession relating to the transactions described in this
Agreement, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a Certificate formerly representing shares of TerraTech Common Stock
may surrender such Certificate to Thermo Electron and (subject to applicable
abandoned property, escheat and similar laws) receive in exchange therefor the
Merger Consideration represented by such Certificate, without any interest
thereon.
1.8. NO FURTHER OWNERSHIP RIGHTS IN TERRATECH COMMON STOCK. The Thermo
Common Stock and cash, if any, delivered to the holders of TerraTech Common
Stock upon the surrender of shares of TerraTech Common Stock in accordance with
the terms hereof shall be deemed to have been delivered in full satisfaction of
all rights pertaining to such shares of TerraTech Common Stock.
1.9. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall deliver the
certificates representing Thermo Common Stock and the other Merger Consideration
in respect of such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof; provided, however, that, as a
condition precedent to the payment thereof, the owner of such lost, stolen or
destroyed Certificates shall deliver a bond in such sum as Thermo Electron or
the Exchange Agent may reasonably direct as indemnity against any claim that may
be made against Thermo Electron or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed, unless Thermo
Electron waives such requirement in writing.
1.10. DIVIDENDS. No dividends or other distributions that are payable to the
holders of record of Thermo Common Stock as of a date on or after the Effective
Time shall be paid to the holders of TerraTech Common Stock entitled by reason
of the Merger to receive Thermo Common Stock until such holders surrender their
Certificates in accordance with Section 1.7(b) or provide an affidavit and
indemnity in accordance with Section 1.9. Upon such surrender, the Exchange
Agent or Thermo Electron (in the event that the Exchange Agent's term has
expired), shall pay or deliver to the persons in whose name the certificates
representing such Thermo Common Stock are issued any dividends or other
distributions that are payable to the holders of record of Thermo Common Stock
as of a date on or after the Effective Time and which were paid or delivered
between the Effective Time and the time of such surrender; provided that no such
person shall be entitled to receive any interest on such dividends or other
distributions.
1.11. FRACTIONAL SHARES. No certificates or scrip representing fractional
shares of Thermo Common Stock shall be issued to holders of TerraTech Common
Stock upon the surrender for exchange of Certificates, and such holders of
TerraTech Common Stock shall not be entitled to any voting rights, rights to
receive any dividends or distributions or other rights as a stockholder of
Thermo Electron with
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respect to any fractional shares of Thermo Common Stock that would otherwise be
issued to such holders of TerraTech Common Stock. In lieu of any fractional
shares of Thermo Common Stock that would otherwise be issued, each holder of
TerraTech Common Stock that would have been entitled to receive a fractional
share of Thermo Common Stock shall, upon proper surrender of such person's
Certificates, receive a cash payment (rounded to the nearest cent) equal to the
closing price per share of Thermo Common Stock as reported in the consolidated
transaction reporting system on the trading day immediately preceding the
Closing Date, multiplied by the fraction of a share that such holder of
TerraTech Common Stock would otherwise be entitled to receive.
1.12. CLOSING OF TRANSFER BOOKS. At the Effective Time, the stock transfer
books of TerraTech shall be closed and no transfer of TerraTech Common Stock
shall thereafter be made. If, after the Effective Time, Certificates are
presented to Thermo Electron, they shall be canceled and exchanged for the
Merger Consideration in accordance with Article I.
1.13. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of TerraTech and Merger Sub, the officers and directors of the
Surviving Corporation are fully authorized in the name of TerraTech and Merger
Sub or otherwise to take, and will take, all such lawful and necessary action,
so long as such action is consistent with this Agreement.
1.14 TAX TREATMENT. The Merger is intended to constitute a tax-free
reorganization under Section 368(a) of the Code. The parties hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Section 368(a) of
the Code and the regulations thereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TERRATECH
TerraTech represents and warrants to Thermo Electron and Merger Sub as
follows:
2.1. ORGANIZATION OF TERRATECH. TerraTech and each of its subsidiaries is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate or similar power to own, lease and operate its
property and to carry on its business as now being conducted and as proposed by
TerraTech to be conducted, and is duly qualified to do business and in good
standing as a foreign corporation or other legal entity in each jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect on
TerraTech. In this Agreement, the term "Material Adverse Effect" used in
reference to TerraTech means any event, change or effect, that is or is
reasonably likely to be, individually or in the aggregate with other events,
changes or effects, materially adverse to the financial condition, assets,
liabilities, results of operations or business of TerraTech and its
subsidiaries, taken as a whole.
2.2. TERRATECH CAPITAL STRUCTURE. The authorized capital stock of TerraTech
consists of 75,000,000 shares of Common Stock, par value $.10 per share, of
which there were 19,072,133 shares issued and outstanding as of October 2, 1999,
and 511,640 shares in treasury as of October 2, 1999. All outstanding shares of
TerraTech Common Stock are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of TerraTech or any agreement or document
to which TerraTech is a party or by which it is bound. As of October 2, 1999, an
aggregate of 2,038,550 shares of TerraTech Common Stock, net of exercises, were
reserved for issuance to employees, consultants and non-employee directors
pursuant to the TerraTech Stock Option Plans, under which options were
outstanding for an aggregate of 1,628,725 shares as of such date. As of
October 2, 1999, an aggregate of 700,500 shares of TerraTech Common Stock were
reserved for issuance upon the exercise of warrants and an aggregate of
7,034,592 shares of TerraTech Common Stock were reserved for issuance upon the
conversion of the Convertible Debentures. All shares of TerraTech Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and non-assessable.
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2.3. AUTHORITY.
(a) TerraTech has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of TerraTech, subject only to the adoption of this
Agreement by TerraTech's stockholders and the filing and recording of the
Certificate of Merger pursuant to the DGCL. Under the DGCL, TerraTech's
stockholders may adopt this Agreement by vote of the holders of a majority of
the outstanding shares of TerraTech Common Stock. This Agreement has been duly
executed and delivered by TerraTech, and assuming the due authorization,
execution and delivery by Thermo Electron and Merger Sub, constitutes the valid
and binding obligation of TerraTech, enforceable in accordance with its terms.
The execution and delivery of this Agreement by TerraTech do not, and the
performance of this Agreement by TerraTech will not, (i) conflict with or
violate the Certificate of Incorporation or Bylaws of TerraTech or (ii) subject
to obtaining the adoption by TerraTech's stockholders of this Agreement as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 2.3(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to TerraTech or any of its material subsidiaries
or by which its or their respective properties is bound, except, with respect to
clause (ii), for any such conflicts, violations, defaults or other occurrences
that would not have a Material Adverse Effect on TerraTech or the Surviving
Corporation.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to TerraTech in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Secretary of State of Delaware, (ii) the filing
by TerraTech and Thermo Electron of the Proxy Statement and the Registration
Statement (as defined in Section 5.1), respectively, with the U.S. Securities
and Exchange Commission ("SEC") in accordance with the Securities Act of 1933,
as amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.
2.4. BOARD APPROVAL. The Board of Directors of TerraTech, upon
recommendation of the Special Committee that this Agreement, including the
Exchange Ratio, is fair to, and in the best interests of, the stockholders of
TerraTech (other than Thermo Electron), has, as of the date of this Agreement,
unanimously (i) adopted a resolution approving this Agreement and declaring its
advisability, (ii) determined that the Merger is fair to, and in the best
interests of, TerraTech and its stockholders, and (iii) determined to recommend
that the stockholders of TerraTech approve this Agreement.
2.5. FAIRNESS OPINION. The Special Committee has received an opinion from
AH&H dated October 19, 1999 that, as of such date, the consideration to be
received by TerraTech's stockholders in the Merger is fair, from a financial
point of view, to TerraTech's stockholders other than Thermo Electron.
2.6 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by TerraTech for inclusion in the Registration Statement (including any
information incorporated by reference in the Registration Statement from other
filings made by TerraTech with the SEC) shall not, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein not misleading. Other than with
respect to the information supplied by Thermo Electron and/or Merger Sub, the
Proxy Statement shall not, on the date the Proxy Statement is first mailed to
stockholders, at the time of the TerraTech Stockholders' Meeting (as defined in
Section 5.1(b)) or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact
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required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading. The Proxy Statement will comply (other than with respect to
information relating to Thermo Electron and/or Merger Sub) as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THERMO ELECTRON AND MERGER SUB
Thermo Electron and Merger Sub, jointly and severally, represent and warrant
to TerraTech as follows:
3.1. ORGANIZATION. Thermo Electron is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, each has the corporate power to own, lease
and operate its property and to carry on its business as now being conducted and
as proposed to be conducted, and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on Thermo Electron. In this
Agreement, the term "Material Adverse Effect" used in reference to Thermo
Electron means any event, change or effect, that is or is reasonably likely to
be, individually or in the aggregate with other events, changes or effects,
materially adverse to the financial condition, assets, liabilities, results of
operations or business of Thermo Electron and its subsidiaries, taken as a
whole.
3.2. AUTHORITY.
(a) Each of Thermo Electron and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Thermo Electron and Merger Sub,
subject only to the filing and recording of the Certificate of Merger pursuant
to the DGCL. This Agreement has been duly executed and delivered by each of
Thermo Electron and Merger Sub and, assuming the due authorization, execution
and delivery of this Agreement by TerraTech, this Agreement constitutes the
valid and binding obligation of each of Thermo Electron and Merger Sub,
enforceable in accordance with its terms. The execution and delivery of this
Agreement by each of Thermo Electron and Merger Sub do not, and the performance
of this Agreement by each of Thermo Electron and Merger Sub will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of
Thermo Electron or the Certificate of Incorporation or Bylaws of Merger Sub or
of any material subsidiary, direct or indirect, of Thermo Electron (each, a
"Material Thermo Subsidiary"), (ii) subject to compliance with the requirements
set forth in Section 3.2(b) below, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Thermo Electron or any
Material Thermo Subsidiaries (including Merger Sub, but excluding TerraTech and
its wholly owned subsidiaries) or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair Thermo Electron's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Thermo
Electron or any Material Thermo Subsidiaries (including Merger Sub, but
excluding TerraTech and its wholly owned subsidiaries) pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Thermo Electron or any
Material Thermo Subsidiaries (including Merger Sub, but excluding TerraTech and
its wholly owned subsidiaries) is a party or by which Thermo Electron or any
Material Thermo Subsidiaries (including Merger Sub, but excluding TerraTech and
its wholly owned subsidiaries) or its or any of their respective properties are
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bound or affected, except, with respect to clauses (ii) and (iii), for any such
conflicts, violations, defaults or other occurrences that would not have a
Material Adverse Effect on Thermo Electron.
(b) All shares of Thermo Common Stock issuable in accordance with this
Agreement, and shares of Thermo Common Stock which will be subject to issuance
pursuant to the TerraTech Stock Option Plans, the TerraTech ESPP, the
Convertible Debentures and the warrants issued by TerraTech, each as assumed by
Thermo Electron pursuant to this Agreement will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Thermo Electron or any other agreement or document to which Thermo Electron
is a party or by which it is bound.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Thermo Electron or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the
Secretary of State of Delaware, (ii) the filing of the Proxy Statement and the
Registration Statement (as defined in Section 5.1) with the SEC in accordance
with the Securities Act and the Exchange Act, and (iii) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws.
3.3. CAPITALIZATION.
(a) The authorized capital stock of Thermo Electron consists of 350,000,000
shares of Thermo Common Stock, par value $1.00 per share, of which there were
158,236,781 shares issued and outstanding as of October 2, 1999, and 9,011,451
shares in treasury as of October 2, 1999, and 50,000 shares of preferred stock,
$100 par value per share, of which 40,000 shares have been designated Series B
Junior Participating Preferred Stock, none of which are issued and outstanding.
All of the outstanding shares of Thermo Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of Thermo
Electron or any agreement or document to which Thermo Electron is a party or by
which it is bound. As of October 2, 1999, an aggregate of 15,653,373 shares of
Thermo Common Stock, net of exercises, were reserved for issuance to employees,
consultants and non-employee directors pursuant to stock option plans maintained
by Thermo Electron, under which options are outstanding for an aggregate of
11,912,116 shares. As of October 2, 1999, an aggregate of 15,476,191 shares of
Thermo Common Stock were reserved for issuance upon the conversion of
convertible debentures issued by Thermo Electron. All shares of Thermo Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and non-assessable. There
are no bonds, debentures, notes or other indebtedness of Thermo Electron issued
and outstanding which have rights to vote in the election of directors of Thermo
Electron. Except as set forth in the Thermo Reports (as defined in Section 3.4)
filed prior to the date of this Agreement, there are no other material
outstanding options, warrants, equity securities, subscriptions, calls, rights,
commitments or agreements of any character to which Thermo Electron or any of
its subsidiaries is a party or by which it is bound, obligating Thermo Electron
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity securities of Thermo Electron or
obligating Thermo Electron to grant or enter into any such option, warrant,
equity security, call, right, commitment or agreement.
(b) Since July 3, 1999, there have been no material issuances of options,
warrants, equity securities, subscriptions, calls, rights, commitments or
agreements of any character to which Thermo Electron or any of its subsidiaries
is a party or by which it is bound, obligating Thermo Electron to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity securities of Thermo Electron or obligating Thermo
Electron to grant or enter into any such option, warrant, equity security, call,
right, commitment or agreement.
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(c) As of the date of this Agreement, no Stock Acquisition Date or other
event that would result in the occurrence of a Distribution Date has occurred
(as such terms are defined in the Rights Agreement dated January 19, 1996, as
amended, by and between Thermo Electron and BankBoston, N.A. (the "Rights
Agreement")), with respect to the rights to purchase a unit consisting of one
ten-thousandth of a share of Thermo Electron's Series B Junior Participating
Preferred Stock pursuant to the Rights Agreement.
3.4 REPORTS AND FINANCIAL STATEMENTS. Thermo Electron has filed all material
forms, reports and documents required to be filed by it with the SEC since
January 1, 1997. Thermo Electron has made available to TerraTech complete and
accurate copies, as amended or supplemented, of (a) its Annual Report on
Form 10-K for the fiscal year ended January 2, 1999 as filed with the SEC, and
(b) all other reports filed by Thermo Electron with the SEC under Sections 13 or
14 of the Exchange Act since January 2, 1999 (such reports are collectively
referred to herein as the "Thermo Reports"). No event has occurred since
July 3, 1999 which will be required to be reported by Thermo Electron on a
report required to be filed under Sections 13 or 14 of the Exchange Act. Without
limitation of the foregoing, since July 3, 1999, there has been no change in the
business, financial condition or results of operations of Thermo Electron that
has resulted or is reasonably likely to result in a Material Adverse Effect on
Thermo Electron. As of their respective dates, the Thermo Reports (i) complied
in all material respects with the requirements of the Exchange Act and the
applicable rules of the SEC thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of Thermo Electron
included in the Thermo Reports (in each case including the notes thereto)
(i) comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (ii) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto, and
in the case of quarterly financial statements, as permitted by Form 10-Q under
the Exchange Act), (iii) fairly present, in all material respects, the
consolidated financial condition, results of operation and cash flows of Thermo
Electron as of the respective dates thereof and for the periods referred to
therein, and (iv) are consistent with the books and records of Thermo Electron.
There are no liabilities of Thermo Electron which are not disclosed in the
Thermo Reports which would be reasonably likely to have a Material Adverse
Effect on Thermo Electron.
3.5 MERGER SUB. Since the date of its incorporation, Merger Sub has not
engaged in any activities other than in connection with or as contemplated by
this Agreement.
3.6 TAX TREATMENT. As of the Effective Time, all representations contained
in the Representation Letters delivered to Hale and Dorr LLP pursuant to
Section 6.1(d) shall be true, correct and complete in all material respects.
Stockholders of TerraTech are each third party beneficiaries of this
Section 3.6 and may seek relief for breach hereof in their own names.
3.7 INFORMATION PROVIDED TO INVESTMENT BANKERS. To the knowledge of Thermo
Electron, the information provided by Thermo Electron and TerraTech to AH&H in
connection with the Merger does not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. For purposes of the foregoing sentence, any
projections or forward-looking statements shall not be deemed to be statements
of material facts; however, the projections were prepared in good faith and
based on assumptions that were reasonable at the time such projections were
prepared, given the information known by management at such time. Furthermore,
it is recognized that such projections and forward-looking statements do not
constitute any warranty as to the future performance of Thermo Electron or
TerraTech and that actual results may vary from projected results.
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3.8 LITIGATION. Except as discussed in the Thermo Reports, there are no
suits, actions, arbitrations, demands, claims or proceedings pending, or to the
knowledge of Thermo Electron, threatened against Thermo Electron or any
subsidiary of Thermo Electron which, individually or in the aggregate, are
reasonably likely to have a Material Adverse Effect on Thermo Electron.
3.9 COMPLIANCE WITH AGREEMENTS. The treatment provided for herein with
respect to outstanding Convertible Debentures, options (both under the TerraTech
Stock Option Plans and the TerraTech ESPP) and warrants of TerraTech is in
compliance with the applicable agreements and instruments governing such
securities. No consent or approval of the holders of such instruments is
required in connection with the transactions contemplated by this Agreement.
3.10 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Other than with
respect to the information supplied by TerraTech, the Registration Statement
shall not, at the time the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements included therein not
misleading. The information supplied by Thermo Electron for inclusion in the
Proxy Statement (including any information incorporated by reference in the
Proxy Statement from other filings made by Thermo Electron with the SEC) shall
not, on the date the Proxy Statement is first mailed to stockholders, at the
time of the TerraTech Stockholders' Meeting or at the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading. The Proxy Statement will comply (with respect to information
relating to Thermo Electron) as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1. CONDUCT OF BUSINESS BY TERRATECH. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, TerraTech shall, except
for such actions which are contemplated by this Agreement or reasonably
appropriate in connection with the transactions contemplated by this Agreement,
and except as consented to by Thermo Electron, carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due, and use its commercially reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
and others with which it has business dealings.
4.2 CONDUCT OF BUSINESS BY THERMO ELECTRON. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Thermo Electron
(i) shall, except for such actions which are contemplated by this Agreement or
reasonably appropriate in connection with the transactions contemplated by this
Agreement, or which are undertaken in connection with the Merger or with the
reorganization of Thermo Electron and its subsidiaries as publicly announced or
as disclosed to AH&H prior to the date of this Agreement, carry on its business
materially in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted, pay its debts and taxes when due subject to good
faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings; and
(ii) shall not, and shall not permit any Material Thermo Subsidiary to, take any
action which would make any of the representations and warranties of Thermo
Electron contained herein untrue or cause Thermo Electron not to be in
compliance with any covenant set forth herein.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1. REGISTRATION STATEMENT; OTHER FILINGS. (a) As promptly as practicable
after the execution of this Agreement, TerraTech and Thermo Electron will
jointly prepare and file with the SEC a preliminary proxy statement (with
appropriate requests for confidential treatment) relating to the Merger and this
Agreement (such proxy statement, as amended or supplemented, the "Proxy
Statement"), and Thermo Electron will prepare and file with the SEC a
registration statement on Form S-4 (the "Registration Statement"), in which the
Proxy Statement shall be included as a prospectus. Thermo Electron will use
reasonable best efforts to cause the Registration Statement to be declared
effective under the Securities Act as soon as practicable after such filing, and
will take all actions required under applicable federal or state securities laws
in connection with the issuance of Thermo Common Stock in the Merger. Each party
will notify the other promptly upon the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Proxy Statement, the Registration
Statement or any other filing or for additional information and will supply the
other party with copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement or the Merger. Whenever any event occurs that is
required to be set forth in an amendment or supplement to the Registration
Statement or the Proxy Statement, the relevant party will promptly inform the
other party of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of TerraTech,
such amendment or supplement.
(b) The information supplied by TerraTech for inclusion in the Registration
Statement (including any information incorporated by reference in the
Registration Statement from other filings made by TerraTech with the SEC) will
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
supplied by TerraTech for inclusion in the Proxy Statement to be sent to the
stockholders of TerraTech in connection with the meeting of TerraTech's
stockholders to consider the adoption of this Agreement and approval of the
Merger (the "TerraTech Stockholders' Meeting") (including any information
incorporated by reference in the Proxy Statement from other filings made by
TerraTech with the SEC) will not, on the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to TerraTech
stockholders, at the time of the TerraTech Stockholders' Meeting and at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state any material fact necessary in
order to make the statements made therein not false or misleading in light of
the circumstances under which they were made, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the TerraTech Stockholders' Meeting which has
become false or misleading.
(c) The information supplied by Thermo Electron and Merger Sub for inclusion
in the Registration Statement (including any information incorporated by
reference in the Registration Statement from other filings made by Thermo
Electron with the SEC) will not, at the time the Registration Statement
(including any amendments or supplements thereto) is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The information supplied by Thermo Electron and Merger Sub for
inclusion in the Proxy Statement to be sent to the stockholders of TerraTech in
connection with the TerraTech Stockholders' Meeting (including any information
incorporated by reference in the Proxy Statement from other filings made by
Thermo Electron with the SEC) will not, on the date the Proxy
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Statement (or any amendment thereof or supplement thereto) is first mailed to
TerraTech stockholders, at the time of the TerraTech Stockholders' Meeting and
at the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or shall omit to state any material fact necessary
in order to make the statements made therein not false or misleading in light of
the circumstances under which they were made, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the TerraTech Stockholders' Meeting which has
become false or misleading.
(d) The Proxy Statement will include the recommendation of the Special
Committee in favor of approval of this Agreement (except that the Special
Committee may withdraw, modify or refrain from making such recommendation to the
extent that the Special Committee determines after consultation with outside
legal counsel that failure to do so would be inconsistent with the Special
Committee's fiduciary duties under applicable law).
(e) The Proxy Statement will include the recommendation of the Board of
Directors of TerraTech in favor of approval of this Agreement (except that the
Board of Directors of TerraTech may withdraw, modify or refrain from making such
recommendation to the extent that the Board determines after consultation with
outside legal counsel that failure to do so would be inconsistent with the
Board's fiduciary duties under applicable law).
(f) To the extent that the Special Committee or the Board withdraws,
modifies or refrains from making their respective recommendations pursuant to
Sections 5.1(d) or (e) hereof, the Proxy Statement will reflect such action.
5.2. MEETING OF TERRATECH STOCKHOLDERS. Promptly after the date hereof,
TerraTech will take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws to convene the TerraTech Stockholders'
Meeting to be held as promptly as practicable for the purpose of voting upon
this Agreement. Unless the Special Committee determines after consultation with
outside legal counsel that to do so would be inconsistent with the Board's or
the Special Committee's fiduciary duties under applicable law, TerraTech will
use its reasonable best efforts to solicit from its stockholders proxies in
favor of the approval of this Agreement and the Merger, and will take all other
action necessary or advisable to secure the vote or consent of its stockholders
required by the DGCL to obtain such approvals. Thermo Electron shall vote, or
cause to be voted, all of the TerraTech Common Stock then owned by it and any of
its subsidiaries in favor of the approval of this Agreement and the Merger.
5.3. ACCESS TO INFORMATION. Subject to applicable legal restrictions, each
of the parties hereto will afford the other (including, in the case of
TerraTech, the Special Committee) and each of their respective accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of each of them during the
period prior to the Effective Time to obtain all information concerning the
their respective businesses, including the status of their respective product
development efforts, properties, results of operations and personnel, as each of
them may reasonably request. Each of the parties hereto agrees that it will, and
will cause its representatives and agents to, keep all such information
confidential and will not, and will cause its representatives or agents not to,
use any information obtained pursuant to this Section 5.3 for any purpose
unrelated to the consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing, none of the parties hereto shall be
required to keep confidential any information (i) which is or becomes generally
available to the public, other than by wrongful disclosure by the disclosing
party in violation of this Agreement or (ii) which becomes available to the
disclosing party on a nonconfidential basis from a source other than the
nondisclosing party or any officer or director of such party.
5.4. PUBLIC DISCLOSURE. Thermo Electron and TerraTech will consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this
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Agreement and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange. Promptly upon the
execution hereof, the parties shall jointly make a press release with respect to
the transactions contemplated by this Agreement, in form reasonably satisfactory
to the Special Committee, and TerraTech shall, within five days after the
execution hereof, file with the SEC a Current Report on Form 8-K, which shall
attach as an exhibit this Agreement.
5.5. LEGAL REQUIREMENTS. Subject to the terms of this Agreement, each of
Thermo Electron, Merger Sub and TerraTech will take all reasonable actions
necessary or desirable to comply promptly with all legal requirements that may
be imposed on them with respect to the consummation of the transactions
contemplated by this Agreement (including furnishing all information required in
connection with approvals of or filings with any Governmental Entity, and
including using its reasonable best efforts to defend any litigation prompted
hereby) and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon any of
them or their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement.
5.6. NOTIFICATION OF CERTAIN MATTERS. Subject to the terms of this
Agreement, Thermo Electron and Merger Sub will give prompt notice to TerraTech,
and TerraTech will give prompt notice to Thermo Electron, of the occurrence, or
failure to occur, of any event, which occurrence or failure to occur would be
reasonably likely to cause (a) any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Effective Time, or (b) any material failure of
Thermo Electron and Merger Sub or TerraTech, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. From the date of this Agreement until the Effective Time, Thermo
Electron will give prompt notice to TerraTech (including, without limitation,
the Special Committee) of any written offers or indications of interest it
receives from a prospective purchaser of any material properties or assets of
TerraTech or its subsidiaries, which set forth a proposed purchase price greater
than $3 million or in which the book value of the assets being sold is greater
than $3 million, other than sales of assets and services in the ordinary course
of business. Notwithstanding the above, the delivery of any notice pursuant to
this section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the conditions to such party's obligation
to consummate the Merger.
5.7. BEST EFFORTS AND FURTHER ASSURANCES. Subject to the respective rights
and obligations of Thermo Electron and TerraTech under this Agreement, each of
the parties to this Agreement will use its reasonable best efforts to effectuate
the Merger and the other transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement, it being
understood that such efforts shall not include any obligation to settle any
litigation prompted hereby. Subject to the terms hereof, each party hereto, at
the reasonable request of another party hereto, will execute and deliver such
other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
the transactions contemplated hereby.
5.8. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS; RESERVATION OF SHARES.
(a) At the Effective Time, each outstanding option to purchase shares of
TerraTech Common Stock (each a "TerraTech Stock Option") under the TerraTech
Stock Option Plans, whether or not exercisable, will be assumed by Thermo
Electron. Each TerraTech Stock Option so assumed by Thermo Electron under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable TerraTech Stock Option Plan immediately
prior to the Effective Time (including, without limitation, any repurchase
rights), except that (i) each TerraTech Stock Option will be exercisable (or
will become exercisable in accordance with its terms) for that number of whole
shares of Thermo Common Stock equal to the product of the number of shares of
TerraTech Common
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Stock that were issuable upon exercise of such TerraTech Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
(ii) the per share exercise price for the shares of Thermo Common Stock issuable
upon exercise of such assumed TerraTech Stock Option will be equal to the
quotient determined by dividing the exercise price per share of TerraTech Common
Stock at which such TerraTech Stock Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
After the Effective Time, Thermo Electron will issue to each holder of an
outstanding TerraTech Stock Option a notice describing the foregoing assumption
of such TerraTech Stock Option by Thermo Electron.
(b) At the Effective Time, each outstanding option to purchase shares of
TerraTech Common Stock (each, a "TerraTech ESPP Stock Option") under the
TerraTech ESPP will be assumed by Thermo Electron. Each TerraTech ESPP Stock
Option so assumed by Thermo Electron will continue to have, and be subject to,
the same terms and conditions as are set forth in the TerraTech ESPP immediately
prior to the Effective Time except that (i) the assumed option shall be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Thermo Common Stock equal to the product of the number
of shares of TerraTech Common Stock that would have been issuable upon exercise
of such TerraTech ESPP Stock Option multiplied by the Exchange Ratio; (ii) the
purchase price per share of Thermo Common Stock shall be the lower of
(A) eighty-five percent (85%) of (x) the per-share Market Value of TerraTech
Common Stock on the Grant Date divided by (y) the Exchange Ratio, with the
resulting price rounded up to the nearest whole cent, and (B) eighty-five
percent (85%) of the Market Value of Thermo Common Stock as of the Exercise
Date; and (iii) the $25,000 limit under Section 9.2(i) of the TerraTech ESPP
shall be applied by taking into account Thermo Electron's assumption of the
TerraTech ESPP Stock Options in accordance with the Code and applicable
regulations. For purposes of this subsection, "Market Value," "Grant Date," and
"Exercise Date" shall have the meaning given them in the TerraTech ESPP.
(c) Thermo Electron will reserve sufficient shares of Thermo Common Stock
for issuance under this Section 5.8 and pursuant to conversion of the
Convertible Debentures and the exercise of warrants issued by TerraTech.
5.9. THERMO ELECTRON FORM S-8. Thermo Electron agrees to file a registration
statement on Form S-8 or, if possible, an amendment to Thermo Electron's then
effective registration statement on Form S-8, for the shares of Thermo Common
Stock issuable with respect to the assumed TerraTech Stock Options and the
assumed TerraTech ESPP Stock Options within five (5) business days of the
Effective Time, and shall keep such registration statement effective for so long
as any such options remain outstanding.
5.10. THERMO ELECTRON FORM S-3. Thermo Electron agrees to file, promptly
after the date of this Agreement, a registration statement on Form S-3 to cover
the shares of Thermo Common Stock issuable upon the exercise of the warrants
issued by TerraTech (the "Warrant Share S-3"), and shall keep such Warrant Share
S-3 effective until all of the shares of Thermo Common Stock covered thereby
have been sold pursuant thereto or until, by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect, the shares of Thermo Common
Stock covered thereby are no longer required to be registered for the public
sale thereof by the holders of such securities or the warrants have expired by
their terms.
5.11. INDEMNIFICATION; INSURANCE.
(a) The Certificate of Incorporation and Bylaws of the Surviving Corporation
will contain the provisions with respect to indemnification and elimination of
liability for monetary damages set forth in the Certificate of Incorporation and
Bylaws of TerraTech, which provisions will not be amended, repealed or otherwise
modified for a period of six (6) years from the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who, as of the
date hereof and at any time from the date hereof to the Effective Time, were
directors or officers of TerraTech, unless such modification is required by law.
The Surviving Corporation shall, and Thermo Electron will cause the Surviving
Corporation to, fulfill and honor in all respects the indemnification
obligations of TerraTech pursuant to the provisions of the Certificate of
Incorporation and the Bylaws of TerraTech as in effect on the date of this
Agreement.
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(b) For a period of six (6) years after the Effective Time, Thermo Electron
shall cause the Surviving Corporation to, either directly or through
participation in Thermo Electron's umbrella policy, maintain in effect a
directors' and officers' liability insurance policy covering those TerraTech
directors and officers currently covered by Thermo Electron's liability
insurance policy with coverage no less favorable in amount and scope than
existing coverage for such TerraTech directors and officers (which coverage may
be an endorsement extending the period in which claims may be made under such
existing policy); provided, however, that in no event shall the Surviving
Corporation be required to expend to maintain or procure insurance coverage
pursuant to this Section 5.11, directly or through participation in Thermo
Electron's policy, an amount per annum in excess of 175% of the current annual
premiums, as adjusted for inflation each year, allocable and payable by
TerraTech (the "Maximum Premium") with respect to such insurance, or, if the
cost of such insurance exceeds the Maximum Premium, the maximum amount of
coverage that can be purchased or maintained for the Maximum Premium.
(c) TerraTech shall, to the fullest extent permitted under applicable law
and regardless of whether the Merger becomes effective, indemnify and hold
harmless Polyvios Vintiadis ("Vintiadis") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in
Vintiadis' capacity as a director (including, without limitation, as a member of
the Special Committee) or fiduciary of TerraTech (including, without limitation,
in connection with the transactions contemplated by this Agreement) occurring
on, before or after the Effective Time (or, if this Agreement is terminated
without the Merger becoming effective, occurring on, before or after the date of
such termination), until the expiration of the statute of limitations relating
thereto (and shall pay any expenses in advance of the final disposition of such
action or proceeding to Vintiadis to the fullest extent permitted under
applicable law, upon receipt from Vintiadis of an undertaking (which need not be
secured or subject to a bond or other requirement) to repay any advanced
expenses if it shall ultimately be determined that Vintiadis is not entitled to
be indemnified against such expenses). If the Merger becomes effective, Thermo
Electron shall be jointly and severally responsible, to the fullest extent
permitted by applicable law (it being understood that applicable law may permit
Thermo Electron to indemnify or advance expenses to Vintiadis under
circumstances in which TerraTech could not do so), for the indemnification and
advancement of expenses obligations provided for in the first sentence of this
Section 5.11(c). If the Merger does not become effective, Thermo Electron shall
have the same responsibilities set forth in the immediately preceding sentence,
except that Thermo Electron shall have no responsibility for indemnifying or
advancing expenses to Vintiadis with respect to matters that do not arise out of
or pertain to the work of the Special Committee, this Agreement or the
transactions contemplated hereby. In the event of any claim, action, suit,
proceeding or investigation covered by this Section 5.11(c), (i) TerraTech,
Thermo Electron and the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by Vintiadis, promptly after
statements therefor are received, and (ii) TerraTech, Thermo Electron and the
Surviving Corporation shall cooperate in the defense of any such matter;
provided, however, that neither TerraTech nor Thermo Electron nor the Surviving
Corporation shall be liable for any settlement effected without Thermo
Electron's prior written consent (such consent not to be unreasonably withheld
or delayed); and provided, further, that, in the event any claim for
indemnification is asserted or made within the period prior to the expiration of
the applicable statute of limitations, all rights to indemnification in respect
of such claim shall continue until the disposition of such claim. In connection
with Thermo Electron or the Surviving Corporation making any payment or
advancing any funds pursuant to this Section 5.11(c), Thermo Electron or the
Surviving Corporation, as the case may be, shall be entitled to require
Vintiadis to use commercially reasonable efforts, at the cost and expense of
Thermo Electron and the Surviving Corporation, to cause Thermo Electron or the
Surviving Corporation, as the case may be, to be subrogated to Vintiadis' rights
under any insurance coverage maintained by the Surviving
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Corporation, Thermo Electron or any of their respective affiliates with respect
to the underlying subject matter of, and to the extent of, such payment or
advance.
(d) In the event TerraTech, Thermo Electron or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger, or (ii) transfers all or
substantially all of its properties or assets to any person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
TerraTech, Thermo Electron and the Surviving Corporation, as the case may be,
shall assume the obligations set forth in this Section 5.11.
(e) Heirs, representatives and estates of the officers and directors of
TerraTech (including, without limitation, Vintiadis) shall have the right to
enforce the obligations arising under this Section 5.11.
(f) The rights of the officers and directors of TerraTech (including,
without limitation, Vintiadis) under this Section 5.11 are in addition to any
rights of such persons under separate indemnification agreements any such
persons may have with TerraTech and/or Thermo Electron, under the Certificate of
Incorporation or Bylaws of TerraTech or Thermo Electron or otherwise.
5.12. DEFERRED COMPENSATION PLAN. Subject to obtaining the consents of the
affected participants, at the Effective Time, the TerraTech Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan") will
terminate, and TerraTech will distribute to each participant the sum in cash
equal to the balance of stock units credited to his or her deferred compensation
account under the Deferred Compensation Plan as of the Effective Time multiplied
by the Exchange Ratio.
5.13 COMPLIANCE BY MERGER SUB. Thermo Electron shall cause Merger Sub to
timely perform and comply with all of its obligations under or related to this
Agreement.
5.14 TAX TREATMENT. From and after the date of this Agreement until the
Effective Time, neither Thermo Electron nor Merger Sub will take, or permit any
of Thermo Electron's direct or indirect subsidiaries to take, any action that
would cause the Merger not to be a tax-free reorganization under Section 368(a)
of the Code. Notwithstanding anything in this Agreement to the contrary, this
Section 5.14 shall survive the Closing and shall apply without regard to any
disclosure made on behalf of Thermo Electron or Merger Sub. Stockholders of
TerraTech are each third party beneficiaries of this Section 5.14 and may seek
relief for breach hereof in their own names.
5.15 NYSE LISTING. Thermo Electron shall use its best efforts to cause all
shares of Thermo Common Stock issuable to stockholders of TerraTech, and all
shares of Thermo Common Stock which will be subject to issuance pursuant to the
TerraTech Stock Option Plans, the TerraTech ESPP, the Convertible Debentures and
the warrants issued by TerraTech, each as assumed by Thermo Electron pursuant to
this Agreement, to be authorized for listing on the New York Stock Exchange.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) NO ORDER. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) REGISTRATION STATEMENTS. The Registration Statement and the Warrant
Share S-3 shall have been declared effective by the SEC and no stop order
suspending the effectiveness of the Registration
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Statement or the Warrant Share S-3 shall have been issued and no proceedings for
that purpose shall have been initiated or threatened by the SEC.
(c) NYSE LISTING. The Thermo Common Stock issuable to holders of TerraTech
Common Stock and all shares of Thermo Common Stock which will be subject to
issuance pursuant to the TerraTech Stock Option Plans, the TerraTech ESPP, the
Convertible Debentures and the warrants issued by TerraTech, each as assumed by
Thermo Electron pursuant to this Agreement, shall have been authorized for
listing on the New York Stock Exchange.
(d) TAX OPINION. TerraTech and Thermo Electron shall have received an
opinion from Hale and Dorr LLP, dated the Closing Date, in substantially the
form attached to this Agreement, regarding certain tax matters relating to the
transactions contemplated under this Agreement, including that the Merger will
be treated for federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code, in form and substance reasonably
satisfactory to TerraTech (including the Special Committee) and Thermo Electron.
Such opinion shall be based upon factual representations (reasonably
satisfactory to TerraTech (including the Special Committee) and Thermo Electron)
from TerraTech and Thermo Electron contained in certain letters to be delivered
to Hale and Dorr LLP (the "Representation Letters").
(e) STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the requisite vote under the DGCL by the stockholders of TerraTech.
(f) RIGHTS AGREEMENT. No Stock Acquisition Date or other event that would
result in the occurrence of a Distribution Date shall have occurred (as such
terms are defined in the Rights Agreement), with respect to the rights to
purchase a unit consisting of one ten-thousandth of a share of Thermo Electron's
Series B Junior Participating Preferred Stock pursuant to the Rights Agreement.
6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF TERRATECH. The obligations of
TerraTech to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by TerraTech
(provided that the Special Committee shall have consented in writing to any such
waiver):
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Thermo Electron and Merger Sub contained in this Agreement shall be true and
correct in all material respects (other than those already qualified by a
materiality standard, which shall be true and correct in all respects) on and as
of the Effective Time, except for changes expressly contemplated by this
Agreement and except for those representations and warranties that address
matters only as of a particular date (which shall remain true and correct as of
such particular date), with the same force and effect as if made on and as of
the Effective Time; and TerraTech shall have received a certificate to such
effect signed on behalf of Thermo Electron by the President, Chief Executive
Officer or Vice President of Thermo Electron.
(b) AGREEMENTS AND COVENANTS. Thermo Electron and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and TerraTech shall have received a certificate to such
effect signed on behalf of Thermo Electron by the President, Chief Executive
Officer or Vice President of Thermo Electron.
(c) FAIRNESS OPINION. At the time of mailing of the Proxy Statement to the
stockholders of TerraTech and at the Effective Time, AHH shall have reaffirmed
orally the fairness opinion previously prepared and delivered by it to the
Special Committee and AHH shall not have withdrawn such opinion.
(d) STATE SECURITIES LAWS. Any and all necessary state securities approvals
for the issuance of Thermo Common Stock pursuant to this Agreement shall have
been obtained.
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<PAGE>
6.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THERMO ELECTRON AND MERGER
SUB. The obligations of Thermo Electron and Merger Sub to consummate and effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by Thermo Electron:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
TerraTech contained in this Agreement shall be true and correct in all material
respects (other than those already qualified by a materiality standard, which
shall be true and correct in all respects) on and as of the Effective Time,
except for changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date), with the same
force and effect as if made on and as of the Effective Time, except, in all such
cases, where the failure to be so true and correct would not have a Material
Adverse Effect on TerraTech; and Thermo Electron and Merger Sub shall have
received a certificate to such effect signed on behalf of TerraTech by the
President, Chief Executive Officer or Vice President of TerraTech.
(b) AGREEMENTS AND COVENANTS. TerraTech shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and Thermo Electron shall have received a certificate to such effect
signed on behalf of TerraTech by the President, Chief Executive Officer or Vice
President of TerraTech.
(c) NO WITHDRAWAL OF SPECIAL COMMITTEE RECOMMENDATION. The Special Committee
shall not have withdrawn its recommendation to the Board of Directors of
TerraTech as set forth in Section 2.4 hereof.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether before or after approval of this Agreement
by the stockholders of TerraTech:
(a) by mutual written consent duly authorized by the Boards of Directors of
Merger Sub and TerraTech (upon approval of the Special Committee);
(b) by either TerraTech (at the direction of the Special Committee) or
Merger Sub if the Merger shall not have been consummated by March 31, 2000;
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date if such action or failure to act constitutes a
breach of this Agreement;
(c) by either TerraTech (upon approval of the Special Committee) or Merger
Sub if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order, decree or ruling
or taken any other action (an "Order"), in any case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree or ruling is final and nonappealable;
(d) by either TerraTech (upon approval of the Special Committee) or Merger
Sub if the required approval of the stockholders of TerraTech contemplated by
this Agreement shall not have been obtained by reason of the failure to obtain
the required vote upon a vote taken at a meeting of stockholders duly convened
therefor or at any adjournment thereof (provided that the right to terminate
this Agreement under this Section 7.1(d) shall not be available to TerraTech
where the failure to obtain stockholder approval of TerraTech shall have been
caused by the action or failure to act of TerraTech in breach of this Agreement
and the right to terminate this Agreement under this Section 7.1(d) shall not be
available to Merger Sub where the failure to obtain the requisite vote by the
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<PAGE>
stockholders of TerraTech shall have been caused by the failure of Thermo
Electron or any direct or indirect subsidiary of Thermo Electron (whether or not
wholly-owned) to vote its shares of TerraTech Common Stock in favor of the
Merger and this Agreement);
(e) by TerraTech if the Special Committee determines after consultation with
outside legal counsel that failure to do so would be inconsistent with the
Board's or the Special Committee's fiduciary duties under applicable law;
(f) by TerraTech (upon approval of the Special Committee), upon a breach of
any representation, warranty, covenant or agreement on the part of Thermo
Electron or Merger Sub set forth in this Agreement, if (i) as a result of such
breach the conditions set forth in Section 6.2(a) or Section 6.2(b) would not be
satisfied as of the time of such breach and (ii) such breach shall not have been
cured by Thermo Electron or Merger Sub within ten (10) business days following
receipt by Thermo Electron of written notice of such breach from TerraTech;
(g) by Merger Sub, upon a breach of any representation, warranty, covenant
or agreement on the part of TerraTech set forth in this Agreement, if (i) as a
result of such breach the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach and
(ii) such breach shall not have been cured by TerraTech within ten
(10) business days following receipt by TerraTech of written notice of such
breach from Merger Sub; or
(h) by Merger Sub at the direction of Thermo Electron if, as a result of an
adjustment in the Exchange Ratio pursuant to Section 1.6(g) hereof, Thermo
Electron would be required to issue more than 1,800,000 shares of Thermo Common
Stock (exclusive of shares issuable upon the exercise of options or warrants or
the conversion of convertible debentures outstanding on the date of this
Agreement; and subject to adjustment for any stock split, reverse stock split,
stock dividend, recapitalization or other like change).
7.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice by the terminating party to the other parties hereto
(or, in the case of a termination pursuant to Section 7.1(f) or 7.1(g), the
expiration of the ten business day period referred to therein). In the event of
the termination of this Agreement as provided in Section 7.1, this Agreement
shall be of no further force or effect, except that (i) the confidentiality
obligations of each party hereto contained in Section 5.3, the obligations
contained in Section 5.11, and the provisions of Sections 7.2, 7.3 and 8.1 shall
survive any such termination and (ii) nothing herein shall relieve any party
from liability for any willful and material breach of this Agreement.
7.3. FEES AND EXPENSES. All fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
7.4. AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of the parties hereto; provided, however, that TerraTech may
not amend this Agreement without the approval of the Special Committee.
7.5. EXTENSION; WAIVER. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein; provided, however, that TerraTech may not take
any such actions without the approval of the Special Committee. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party.
A-20
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of TerraTech, Thermo Electron and Merger Sub contained in this
Agreement (other than those contained in Section 3.6) shall terminate at the
Effective Time, and only the covenants that by their terms, or as the context
requires, survive the Effective Time shall survive the Effective Time.
8.2. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Thermo Electron or Merger Sub, to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: President
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
with a copy (which shall not constitute notice to Thermo Electron or Merger
Sub) to:
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Attention: General Counsel
Telephone: (781) 622-1000
Facsimile: (781) 622-1283
(b) if to TerraTech, to:
Thermo TerraTech Inc.
85 First Avenue
Waltham, MA 02451
Attention: President
Telephone: (781) 370-1640
Facsimile: (781) 370-1615
with a copy (which shall not constitute notice to TerraTech) to:
Choate, Hall & Stewart
Exchange Place
53 State Street
Boston, MA 02109
Attention: William P. Gelnaw, Jr., Esq.
Telephone: (617) 248-5000
Facsimile: (617) 248-4000
8.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
A-21
<PAGE>
8.4. ENTIRE AGREEMENT. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein (a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, with the exception of the agreements relating to the Convertible
Debentures, the TerraTech ESPP, the TerraTech Stock Option Plans, the warrants
issued by TerraTech, the Deferred Compensation Plan, and any agreements relating
to indemnification of members of the Board; and (b) are not intended to confer
upon any other person any rights or remedies hereunder, except as set forth or
otherwise contemplated herein. Notwithstanding the foregoing, Section 5.11
hereof is intended to be for the benefit of, and may be enforced by, those
individuals who, as of the date hereof and at any time from the date hereof to
the Effective Time, were directors or officers of TerraTech.
8.5. SEVERABILITY. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.6. OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof, except to the extent that the DGCL applies.
8.8. ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties.
8.9 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
[The rest of this page intentionally left blank.]
A-22
<PAGE>
IN WITNESS WHEREOF, Thermo Electron, Merger Sub and TerraTech have caused
this Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
TTT ACQUISITION CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: PRESIDENT
THERMO TERRATECH INC.
By: /s/ KENNETH J. APICERNO
-----------------------------------------
Name: Kenneth J. Apicerno
Title: TREASURER
</TABLE>
A-23
<PAGE>
[Note: This document included for historic purposes only; the tax opinion has
been deleted from the merger agreement as a result of Amendment No. 1 to the
merger agreement, which is attached as Appendix A-1.]
H&D Draft of 10/18/99
[Hale and Dorr LLP letterhead]
October [ ], 1999
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02454
Thermo TerraTech Inc.
85 First Avenue
Waltham, MA 02451
Re: Merger Pursuant to Agreement and Plan of Merger by and Among
Thermo Electron Corporation, TT Acquisition Corporation, and Thermo
TerraTech Inc.
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of a
registration statement (the "Registration Statement") on Form S-4, which
includes the Joint Proxy Statement and Prospectus relating to the Agreement and
Plan of Merger dated as of October [ ], 1999 (the "Merger Agreement"), by and
among Thermo Electron Corporation, a Delaware corporation ("Thermo Electron"),
TT Acquisition Corporation, a Delaware corporation and wholly owned subsidiary
of Thermo Electron ("Merger Sub"), and Thermo TerraTech Inc., a Delaware
corporation ("TerraTech"). Pursuant to the Merger Agreement, Merger Sub will
merge with and into TerraTech (the "Merger"). Except as otherwise provided,
capitalized terms not defined herein have the meanings set forth in the Merger
Agreement and the exhibits thereto or in the letters delivered to Hale and Dorr
LLP by Thermo Electron and TerraTech containing certain representations of
Thermo Electron and TerraTech relevant to this opinion (the "Representation
Letters"). All section references, unless otherwise indicated, are to the United
States Internal Revenue Code of 1986, as amended (the "Code").
In our capacity as counsel to Thermo Electron in the Merger, and for
purposes of rendering this opinion, we have examined and relied upon the
Registration Statement, the Merger Agreement and the exhibits thereto, the
Representation Letters, and such other documents as we considered relevant to
our analysis. In our examination of documents, we have assumed the authenticity
of original documents, the accuracy of copies, the genuineness of signatures,
and the legal capacity of signatories.
We have assumed that all parties to the Merger Agreement and to any other
documents examined by us have acted, and will act, in accordance with the terms
of such Merger Agreement and documents and that the Merger will be consummated
at the Effective Time pursuant to the terms and conditions set forth in the
Merger Agreement without the waiver or modification of any such terms and
conditions. Furthermore, we have assumed that all representations contained in
the Merger Agreement, as well as those representations contained in the
Representation Letters, are, and at the Effective Time will be, true and
complete in all material respects, and that any representation made in any of
the documents referred to herein "to the best of the knowledge and belief" (or
similar qualification) of any person or party is correct without such
qualification. We have also assumed that as to all matters for which a person or
entity has represented that such person or entity is not a party to, does not
have, or
A-24
<PAGE>
is not aware of, any plan, intention, understanding, or agreement, there is no
such plan, intention, understanding, or agreement. We have not attempted to
verify independently such representations, but in the course of our
representation, nothing has come to our attention that would cause us to
question the accuracy thereof.
The conclusions expressed herein represent our judgment as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time, or at any
other time, or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you or your
shareholders of any developments after the Effective Time in the application or
interpretation of the income tax laws of the United States.
Our opinion represents our best judgment of how a court would decide if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income tax
consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger). We express
no opinion regarding the tax consequences of the Merger to shareholders of
TerraTech that are subject to special tax rules (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
persons, stockholders who own their stock as part of a hedge, appreciated
financial position, straddle or conversion transaction, stockholders who do not
own their stock as a capital asset and stockholders who have acquired their
stock upon the exercise of employee options or otherwise as compensation), and
we express no opinion regarding the tax consequences of the Merger arising in
connection with the ownership of options or warrants for TerraTech stock.
On the basis of, and subject to, the foregoing, and in reliance upon the
representations and assumptions described above, we are of the following
opinion:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a);
2. No gain or loss will be recognized by Thermo Electron, Merger Sub, or
TerraTech as a result of the Merger;
3. No gain or loss will be recognized by the shareholders of TerraTech
upon the exchange of TerraTech stock solely for shares of Thermo Electron
stock in the Merger;
4. Cash received by the shareholders of TerraTech in lieu of fractional
shares of Thermo Electron stock will be treated as received as a
distribution in redemption of such fractional shares, subject to the
provisions of Section 302, as if such fractional shares had been issued in
the Merger and then redeemed by Thermo Electron;
5. The tax basis of the shares of Thermo Electron stock received by the
shareholders of TerraTech in the Merger will be equal to the tax basis of
the shares of TerraTech stock exchanged therefor in the Merger, reduced by
any basis allocable to a fractional share of Thermo Electron stock treated
as sold or exchanged under Section 302; and
6. The holding period for the shares of Thermo Electron stock received
by the shareholders of TerraTech will include the holding period for the
shares of TerraTech stock exchanged therefor in the Merger, provided that
the shares of TerraTech stock are held as capital assets at the Effective
Time.
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<PAGE>
No opinion is expressed as to any federal income tax consequence of the
Merger except as specifically set forth herein, and this opinion may not be
relied upon except with respect to the consequences specifically discussed
herein.
This opinion is intended solely for the purpose of inclusion as an exhibit
to the Registration Statement. It may not be relied upon for any other purpose
or by any other person or entity, other than you and your shareholders, and may
not be made available to any other person or entity without our prior written
consent. We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name in the
Registration Statement in connection with references to this opinion and the tax
consequences of the Merger. In giving this consent, however, we do not hereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
HALE AND DORR LLP
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<PAGE>
APPENDIX A-1
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (the "Amendment")
hereby amends the Agreement and Plan of Merger dated as of October 19, 1999 (the
"Merger Agreement"), as set forth below. This Amendment is dated as of
April 12, 2000, and is by and among Thermo Electron Corporation, a Delaware
corporation ("Thermo Electron"), TTT Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Thermo Electron ("Merger Sub"), and
Thermo TerraTech Inc., a Delaware corporation ("TerraTech").
RECITALS
A. On November 9, 1999, Thermo Electron filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission (as amended, the
"Registration Statement") in order to register the shares of its common stock,
$1.00 par value per share, to be issued to the public stockholders of TerraTech
in the proposed merger with Merger Sub (the "Merger"), as contemplated by
Section 5.1 of the Merger Agreement.
B. Thermo Electron made, on January 31, 2000, a public announcement
concerning its reorganization plan, including plans for dispositions of several
businesses, including TerraTech, which has resulted in Thermo Electron restating
its previously issued financial statements for the 1997 and 1998 fiscal years to
reflect the effect of discontinued operations on such financial statements.
C. Thermo Electron completed the restatement of its financial statements in
connection with the filing of its Annual Report on Form 10-K with the Securities
and Exchange Commission, on March 22, 2000.
D. As a result of the restatement of Thermo Electron's financial statements,
the Registration Statement must be amended to incorporate by reference the
restated financial statements contained in the Annual Report on Form 10-K for
the year ended January 1, 2000.
E. As a result of the January 31, 2000 announcement concerning the
reorganization plan, Thermo Electron has been advised by its tax counsel that
the Merger may be a taxable transaction, rather than a tax-free reorganization
as originally contemplated by the parties to the Merger Agreement.
F. Thermo Electron, TerraTech and Merger Sub each desire, in light of the
foregoing, to amend the Merger Agreement as set forth below.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. Section 1.6(g)(i) of the Merger Agreement is hereby amended and restated
in its entirety to read as follows:
"(i) In the event the average of the closing prices per share of Thermo
Common Stock as reported in the consolidated transaction reporting system for
each of the 20 consecutive trading days ending on the fifth trading day prior to
the Effective Time (the "Pre-Closing Average Price") multiplied by the Exchange
Ratio is less than $7.50, then the Exchange Ratio shall be adjusted to be equal
to $7.50 divided by the Pre-Closing Average Price, subject to the provisions of
Section 7.1(h)."
A-1-1
<PAGE>
2. Section 1.14 of the Merger Agreement is hereby amended and restated in
its entirety to read as follows:
"1.14. Plan of Reorganization. The Merger is intended to constitute a
tax-free reorganization under Section 368(a) of the Code. To the extent
applicable, the parties hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Section 368(a) of the Code and the
regulations thereunder."
3. The words "Intentionally Deleted" are inserted in place of the current
text of Section 3.6 of the Merger Agreement.
4. The words "Intentionally Deleted" are inserted in place of the current
text of Section 5.14 of the Merger Agreement.
5. The words "Intentionally Deleted" are inserted in place of the current
text of Section 6.1(d) of the Merger Agreement.
6. Section 7.1(b) of the Merger Agreement is hereby amended and restated in
its entirety to read as follows:
"(b) by either TerraTech (at the direction of the Special Committee) or
Merger Sub if the Merger shall not have been consummated by July 31, 2000;
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date if such action or failure to act constitutes a
breach of this Agreement."
A-1-2
<PAGE>
IN WITNESS WHEREOF, Thermo Electron, Merger Sub and TerraTech have caused
this Amendment to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: Vice President and Chief Financial
Officer
TTT ACQUISITION CORPORATION
By: /s/ THEO MELAS-KYRIAZI
-----------------------------------------
Name: Theo Melas-Kyriazi
Title: President
THERMO TERRATECH INC.
By: /s/ JOHN P. APPLETON
-----------------------------------------
Name: John P. Appleton
Title: Chairman of the Board of Directors
</TABLE>
A-1-3
<PAGE>
APPENDIX A-2
AMENDMENT NO. 2 TO
AGREEMENT AND PLAN OF MERGER
This AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER (the "Amendment")
hereby further amends the Agreement and Plan of Merger dated as of October 19,
1999, as amended by Amendment No. 1 to Agreement and Plan of Merger dated as of
April 12, 2000 (the "Merger Agreement"), as set forth below. This Amendment is
dated as of July 28, 2000, and is by and among Thermo Electron Corporation, a
Delaware corporation ("Thermo Electron"), TTT Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Thermo Electron ("Merger
Sub"), and Thermo TerraTech Inc., a Delaware corporation ("TerraTech").
RECITALS
A. On November 9, 1999, Thermo Electron filed a Registration Statement on
Form S-4 with the Securities and Exchange Commission (as amended, the
"Registration Statement") in order to register the shares of its common stock,
$1.00 par value per share, to be issued to the public stockholders of TerraTech
in the proposed merger with Merger Sub (the "Merger"), as contemplated by
Section 5.1 of the Merger Agreement.
B. In response to comments from the Securities and Exchange Commission,
Thermo Electron and TerraTech have filed amendments to the Registration
Statement on November 30, 1999, April 28, 2000 and July 26, 2000.
C. As of the date of this Amendment, Thermo Electron and TerraTech are
working with the Securities and Exchange Commission to resolve the remaining
comments on the Registration Statement, but Thermo Electron and TerraTech expect
that such comments will not be resolved in time to allow the consummation of the
Merger to take place by July 31, 2000.
D. Thermo Electron, TerraTech and Merger Sub each desire, in light of the
foregoing, to amend the Merger Agreement as set forth below.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Section 7.1(b) of the Merger Agreement is hereby amended and restated in its
entirety to read as follows:
"(b) by either TerraTech (at the direction of the Special Committee) or
Merger Sub if the Merger shall not have been consummated by September 30, 2000;
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose action or failure to
act has been a principal cause of or resulted in the failure of the Merger to
occur on or before such date if such action or failure to act constitutes a
breach of this Agreement."
A-2-1
<PAGE>
IN WITNESS WHEREOF, Thermo Electron, Merger Sub and TerraTech have caused
this Amendment to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
----------------------------------------------
Name: Theo Melas-Kyriazi
Title: Vice President and Chief Financial
Officer
TTT ACQUISITION CORPORATION
By: /s/ THEO MELAS-KYRIAZI
----------------------------------------------
Name: Theo Melas-Kyriazi
Title: President
THERMO TERRATECH INC.
By: /s/ BRIAN D. HOLT
----------------------------------------------
Name: Brian D. Holt
Title: President and Chief Executive Officer
</TABLE>
A-2-2
<PAGE>
APPENDIX B
ADAMS, HARKNESS & HILL LETTERHEAD
October 19, 1999
Special Committee of the Board of Directors
Thermo TerraTech Inc.
81 Wyman Street
Waltham, MA 02254
Dear Sirs:
The Special Committee of the Board of Directors (the "Special Committee") of
Thermo TerraTech Inc. ("TTT" or the "Company") has requested our opinion (the
"Opinion"), as investment bankers, as to the fairness, from a financial point of
view, to the shareholders of the Company other than Thermo Electron Corporation
("Thermo Electron"), of the consideration to be received by such shareholders,
in the form of shares of the common stock, par value $1.00 per share, of Thermo
Electron ("Thermo Common Stock"), in connection with the proposed acquisition
(the "Transaction") of the Company by Thermo Electron, pursuant to an Agreement
and Plan of Merger to be dated as of October 19, 1999 (the "Merger Agreement"),
by and among Thermo Electron, TT Acquisition Corporation, a wholly-owned
subsidiary of Thermo Electron ("Merger Sub"), and the Company. Adams,
Harkness & Hill, Inc. ("AH&H"), as part of its investment banking activities, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In the Transaction and pursuant to the Merger Agreement, subject to Company
shareholder approval, each share of the Company's common stock, par value $.10
per share (the "Common Shares"), issued and outstanding immediately prior to the
effective date of the Transaction, will be converted into the right to receive
0.4 of a share of Thermo Common Stock at or subsequent to the effective date of
the Transaction (the "Exchange Ratio"), subject to adjustment as follows:
- If the average of the closing prices per share of the Thermo Common Stock
as reported in the consolidated transaction reporting system for each of
the 20 consecutive trading days ending on the fifth trading day prior to
the effective time of the Merger (the "Pre-Closing Average Price")
multiplied by the Exchange Ratio is less than $7.25, the Exchange Ratio
will be adjusted to become equal to a fraction, the numerator of which is
$7.25 and the denominator of which is the Pre-Closing Average Price;
PROVIDED, HOWEVER, that if the Exchange Ratio, as so adjusted, would
result in the aggregate issuance by Thermo Electron in the Transaction of
greater than 1,800,000 shares of Thermo Common Stock, then Thermo Electron
may elect to terminate the Merger Agreement.
- If the product of the Pre-Closing Average Price multiplied by the Exchange
Ratio is greater than $9.25, the Exchange Ratio will be adjusted to become
equal to a fraction, the numerator of which is $9.25 and the denominator
of which is the Pre-Closing Average Price.
In developing our Opinion, we have, among other activities: (i) reviewed the
Company's Annual Reports, Reports on Form 10-K and related financial information
for the three fiscal years ended April 3, 1999, and the Company's Report on
Form 10-Q and the related unaudited financial information for the three month
period ending July 3, 1999 (the "Public Historical Financial Information");
(ii) reviewed Thermo Electron's Annual Reports, Reports on Form 10-K and related
financial information for the three fiscal years ended January 2, 1999, and
Thermo Electron's Reports on Form 10-Q and the related unaudited financial
information for the three month periods ending
B-1
<PAGE>
April 3, 1999 and July 3, 1999; (iii) analyzed certain internal financial
statements and other internal financial and operating data and business plans
prepared by the management of the Company, including five-year financial budgets
(the "Budgets"); (iv) conducted due diligence discussions with members of senior
management of the Company and Thermo Electron, and discussed with members of
senior management of the Company and Thermo Electron their views regarding the
business and prospects of the Company and Thermo Electron and financial and
operating benefits arising from the Transaction; (v) reviewed the historical
market prices and trading activity for the Common Shares and compared them with
that of certain publicly traded companies we deemed to be relevant and
comparable to the Company; (vi) compared the results of operations of the
Company with those of certain companies we deemed to be relevant and comparable
to the Company; (vii) compared the financial terms of the Transaction with the
financial terms of certain other mergers and acquisitions we deemed to be
relevant and comparable to the Transaction; (viii) reviewed the Merger
Agreement; and (ix) reviewed such other financial studies and analyses and
performed such other investigations and took into account such other matters as
we deemed necessary, including our assessment of general economic, monetary,
market and industry conditions. In support of our assessment of environmental
industry conditions, we engaged and consulted Environmental Business
International, Inc. ("EBI"), a leading strategic consulting firm serving the
environmental services industry. EBI reviewed the Public Historical Financial
Information, the Budgets, and certain financial and industry analyses prepared
by AH&H, and provided to us its professional opinion that the Budgets had been
prepared on a reasonable basis, the analysis, procedures and industry
assessments performed by AH&H were sufficiently comprehensive, and the major
industry-related factors affecting TTT had been duly considered by AH&H.
Our Opinion as expressed herein is limited to the fairness, from a financial
point of view, of the proposed consideration and does not address the Company's
underlying business decision to engage in the Transaction. Our Opinion does not
constitute a recommendation to any shareholder of the Company as to how such
shareholder should vote on the Transaction. We are expressing no opinion as to
the value of Common Shares at the time of our analysis or at any time prior to
and including the effective date of the Transaction. In connection with our
review and in arriving at our Opinion, we have not independently verified any
information received from the Company, have relied on such information, and have
assumed that all such information is complete and accurate in all material
respects. With respect to any internal forecasts or budgets reviewed relating to
the prospects of the Company, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the Company's management as to the future financial performance and
cash requirements of the Company. Our Opinion is rendered on the basis of
securities market conditions prevailing as of the date hereof and on the
conditions and prospects, financial and otherwise, of the Company as known to us
on the date hereof. We have not conducted, nor have we received copies of, any
independent valuation or appraisal of any of the assets of the Company. In
addition, we have assumed, with your consent, that the terms set forth in the
executed Merger Agreement will not differ materially from the proposed terms
provided to us in the October 19, 1999 draft Merger Agreement.
AH&H also has been engaged by Special Committees of the Boards of Directors
of each of Randers Killam Group, Inc. ("RGI") and ThermoRetec Corporation
("Retec") to develop opinions as to the fairness to the holders of common stock
of RGI and Retec other than Thermo Electron and TTT, respectively, of the
consideration to be received by such holders in separate transactions involving
Thermo Electron.
It is understood that this letter is for the information of the Special
Committee and the Board of Directors of the Company and may not be used for any
other purpose without our prior written consent, except that this opinion may be
included in its entirety in any filing made by the Company
B-2
<PAGE>
with the Securities and Exchange Commission with respect to the transactions
contemplated by the Merger Agreement.
Based upon and subject to the foregoing, it is our opinion, as of the date
hereof, that the consideration to be received in the Transaction by the
shareholders of the Company other than Thermo Electron is fair, from a financial
point of view, to such shareholders.
Sincerely,
ADAMS, HARKNESS & HILL, INC.
By: /s/ James A. Simms
James A. Simms
Group Head, Mergers & Acquisitions
B-3
<PAGE>
APPENDIX C
ANNUAL REPORT ON FORM 10-K OF THERMO TERRATECH
FOR THE FISCAL YEAR ENDED APRIL 1, 2000
C-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------------------------
FORM 10-K
(mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended April 1, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-9549
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925807
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
at least the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of April 28, 2000, was approximately $16,872,000.
As of April 28, 2000, the Registrant had 18,956,855 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Fiscal 2000 Annual Report to Shareholders for the
year ended April 1, 2000, are incorporated by reference into Parts I and II.
The information required by Item III of Form 10-K will be filed as an amendment
to this Form 10-K no later than 120 days after April 1, 2000, and such
information is incorporated by reference from such filing.
<PAGE>
PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Thermo TerraTech Inc. (the Company or the Registrant) provides industrial
outsourcing services and manufacturing support encompassing a broad range of
specializations. The Company operates in four segments: environmental-
liability management, engineering and design, laboratory testing, and metal
treating.
Thermo Electron Corporation, the majority owner of the Company, has
announced a proposed reorganization involving certain of Thermo Electron's
subsidiaries, including the Company. Under this plan, the Company and its
subsidiaries, ThermoRetec Corporation and The Randers Killam Group Inc., would
be merged into Thermo Electron. As a result, all three companies would become
privately held subsidiaries of Thermo Electron. The mergers of ThermoRetec and
Killam were effective in June and May 2000, respectively. The public
shareholders of ThermoRetec and Killam received $7.00 and $4.50 per share,
respectively, in cash in exchange for their shares. The merger between the
Company and Thermo Electron is expected to be complete in the third quarter of
calendar 2000. The public shareholders of the Company are expected to receive
common stock in Thermo Electron in exchange for their shares. The number of
Thermo Electron shares to be issued to Thermo TerraTech minority shareholders
will be determined at the time of the merger transaction, according to the
following conditions: If during the 20 trading days immediately prior to the
effective date of the merger the average closing price of Thermo Electron common
stock is less than $18.75, Thermo TerraTech shareholders would receive common
stock worth the equivalent of $7.50 per share of Thermo TerraTech common stock.
However, Thermo Electron may elect to terminate the agreement if it would be
required to issue 1.8 million or more shares of Thermo Electron common stock. If
the average closing price of Thermo Electron common stock is between $18.75 and
$23.125, each share of Thermo TerraTech common stock would be exchanged for .4
shares of Thermo Electron common stock. If the average closing price of Thermo
Electron common stock is greater than $23.125, Thermo TerraTech shareholders
would receive Thermo Electron common stock worth the equivalent of $9.25 per
share of Thermo TerraTech common stock. The completion of this transaction is
subject to numerous conditions, as outlined in Note 15 to Consolidated Financial
Statements in the Registrant's Fiscal 2000* Annual Report to Shareholders, which
statements are incorporated herein by reference.
In May 1999, the Company announced the planned sale of several businesses
by its subsidiaries. In connection with these proposed sales, the Company
incurred pretax charges totaling approximately $59 million in fiscal 2000 and
expects to incur an additional $2 million in fiscal 2001. On January 31, 2000,
Thermo Electron announced that it plans to sell all of the businesses of the
Company. This action is part of a major reorganization plan under which Thermo
Electron will spin in, spin off, and sell various businesses to focus solely on
its core measurement and detection instruments business.
The Environmental-liability Management segment includes the Company's
ThermoRetec subsidiary, which is a national provider of environmental-liability
and resource-management services. Through a nationwide network of offices,
ThermoRetec historically offered these and related consulting services in four
areas: consulting and engineering, nuclear remediation, soil remediation, and
fluids recycling. In February 2000, ThermoRetec entered into a letter of intent
to sell five of its six remaining soil-recycling facilities. The transaction is
expected to be completed before the end of July 2000, although there can be no
assurance that ThermoRetec will complete this sale. In March 2000, ThermoRetec
sold its sixth soil-recycling facility. As of April 1, 2000, the Company owned
70% of ThermoRetec's outstanding common stock. As noted above, ThermoRetec has
become a privately held subsidiary, jointly owned by the Company and Thermo
Electron. The Company's majority-owned Thermo EuroTech N.V. subsidiary, located
in the Netherlands, specializes in converting "off-spec" and contaminated
petroleum fluids into
--------------------
* References to fiscal 2000, 1999, and 1998 herein are for the fiscal years
ended April 1, 2000, April 3, 1999, and April 4, 1998, respectively.
2
<PAGE>
useable oil products. Thermo EuroTech also provides in-plant waste management
and recycling services through its Ireland-based Green Sunrise Holdings Ltd.
subsidiary. In August 1999, Green Sunrise acquired the outstanding stock of
Dempsey Drums Limited, an Ireland-based service provider specializing in the
supply, disposal, and reconditioning of steel and plastic drums and other
specialized containers. On May 3, 2000, the Company entered into a letter of
intent to sell the outstanding stock of Green Sunrise. As of April 1, 2000, the
Company owned 88% of Thermo EuroTech's outstanding common stock.
The Engineering and Design segment includes the Company's Killam
subsidiary, which historically provided comprehensive engineering and
outsourcing services in four areas: water and wastewater treatment, process
engineering and construction, highway and bridge engineering, and infrastructure
engineering. In January 2000, Killam sold its Randers division, a process
engineering and construction business. In April 2000, Killam sold the assets of
its BAC Killam Inc. subsidiary, a highway and bridge engineering business. As of
April 1, 2000, the Company owned approximately 95% of Killam's outstanding
common stock. As noted above, Killam has become a privately held subsidiary,
jointly owned by the Company and Thermo Electron. This segment also includes the
Company's wholly owned Normandeau Associates Inc. subsidiary, which provides
consulting services that address natural resource management issues.
The Company's wholly owned Thermo Analytical Inc. subsidiary, which
represents the Laboratory Testing segment, operates analytical laboratories that
provide environmental- and pharmaceutical-testing services, primarily to
commercial clients throughout the U.S.
The Metal Treating segment performs metallurgical processing services
using thermal-treatment equipment at locations in California, Minnesota, and
Wisconsin. The Company sold the businesses comprising this segment in June 2000.
The Company was incorporated on May 30, 1986, as an indirect, wholly owned
subsidiary of Thermo Electron. As of April 1, 2000, Thermo Electron owned
16,605,286 shares of the Company's common stock, representing 88% of such stock
outstanding. Thermo Electron develops, manufactures, and sells measurement and
detection instruments used in virtually every industry to monitor, collect, and
analyze data that provide knowledge for the user. For example, Thermo Electron's
powerful analysis technologies help researchers sift through data to unlock the
mysteries of DNA or develop new drugs; allow manufacturers to fabricate
ever-smaller components required to carry greater amounts of information,
faster; or monitor and control industrial processes on-line to ensure that
critical quality standards are met efficiently.
FORWARD-LOOKING STATEMENTS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Annual Report on Form
10-K. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans," "expects,"
"seeks," "estimates," and similar expressions are intended to identify
forward-looking statements. There are a number of important factors that could
cause the results of the Company to differ materially from those indicated by
such forward-looking statements, including those detailed under the heading
"Forward-looking Statements" in the Registrant's Fiscal 2000 Annual Report to
Shareholders, which statements are incorporated herein by reference.
(b) FINANCIAL INFORMATION ABOUT SEGMENTS
Financial information concerning the Company's segments is summarized in
Note 13 to Consolidated Financial Statements in the Registrant's Fiscal 2000
Annual Report to Shareholders, which information is incorporated herein by
reference.
3
<PAGE>
(c) DESCRIPTION OF BUSINESS
(i) PRINCIPAL SERVICES AND PRODUCTS
ENVIRONMENTAL-LIABILITY MANAGEMENT
The Company provides environmental consulting and remediation construction
management to clients in the transportation, refining, chemical, wood-treating,
gas, and electric utility industries across the nation. The Company offers a
broad array of remedial solutions to help clients manage problems associated
with environmental compliance, resource management, and the remediation of
industrial sites contaminated with various wastes and residues. The Company
provides particular expertise in bioremediation and in managing wastes from
manufactured-gas plants, refineries, and railroad properties.
The Company also performs cleanups of hazardous waste sites for government
and industry as a prime construction contractor and completes predesigned
remedial action contracts at sites containing hazardous, toxic, and radioactive
wastes. Under contracts with federal and state governments, and other public and
private sector clients, the Company also provides project management and
construction services for the remediation of hazardous and nonhazardous wastes.
Most of this contract work is obtained through a bid process, with the job being
awarded to the best qualified bidder.
In addition, the Company helps public utilities, government institutions,
and Fortune 500 companies develop and implement management and computer-based
systems that aid in the collection and application of environmental and
resource-management data. By helping to establish or improve a customer's
environmental-compliance program, the Company's customized services promote and
support the integration of environmental-management functions with everyday
business activities. The Company's services help multinational companies
accurately estimate and control the cost of their environmental-compliance and
health and safety efforts. The Company also develops measurement systems that
track clients' progress toward their stated environmental performance goals.
The Company provides services to remove radioactive contaminants from
sand, gravel, and soil, as well as health physics services, radiochemistry
laboratory services, radiation dosimetry services, radiation-instrument
calibration and repair services, and radiation-source production. As part of its
radiation and nuclear/health physics services business, the Company provides
site surveys for radioactive materials and on-site samples, as well as analysis
in support of decontamination programs and dosimetry services to measure
personnel exposure. In addition, using its proprietary segmented-gate system
technology, the Company removes radioactive contaminants from sand, gravel, and
soil. A substantial part of the Company's health physics services has been
performed under the U.S. Department of Energy's remedial action programs.
The Company designs and operates facilities for the remediation of
nonhazardous soil. The Company's soil-recycling centers are environmentally
secure facilities for receiving, storing, and processing petroleum-contaminated
soils. Each site consists principally of a soil-remediation unit and a
soil-storage area. The Company currently provides soil-remediation services at
facilities in California, Oregon, Washington, Maryland, and New York. During
fiscal 1999, the Company announced plans to close two soil-recycling facilities,
of which one was closed in March 1999 and the other was sold in March 2000. In
addition, during fiscal 2000, ThermoRetec announced plans to sell three
additional soil-recycling facilities. In February 2000, ThermoRetec signed a
letter of intent to sell its five remaining soil-recycling facilities, including
the three announced in May 1999. The transaction is expected to be completed
before the end of July 2000, although there can be no assurance that ThermoRetec
will complete this sale.
The market for remediation of petroleum-contaminated soils, as with many
other waste markets, was created by environmental regulations. The market for
soil-remediation services has been driven largely by state programs to enforce
the Environmental Protection Agency's (EPA's) underground storage tank (UST)
regulations and to fund cleanups. UST compliance requirements and attendant
remediation costs are often beyond the financial capabilities of
4
<PAGE>
individuals and smaller companies. To address this problem, some states
established tax-supported trust funds to assist in the financing of UST
compliance and remediation. Many states have realized that the number of sites
requiring remediation and the costs of compliance are substantially higher than
were originally estimated. As a result, several states have significantly
reduced compliance requirements and altered regulatory approaches and standards
in order to reduce the costs of cleanup. More lenient regulatory standards,
reduced enforcement, and uncertainty with respect to such changes have already
resulted in lower levels of cleanup activity in most states where the Company
conducts business, which had a material adverse effect on the Company's business
in recent years. Although the Company expects this market to remain viable for
some time after April 1, 2000, there can be no assurance that this business will
not decline in future years.
The Company offers a full spectrum of environmental services related to
managing and recycling nonhazardous, liquid, and solid materials generated by
business and industry. The Company's client base is largely public retail and
industrial businesses, but also includes municipalities, public utilities,
railroads, the mining industry, and government agencies. The materials managed
by the Company for its customers primarily are used oils and oil-contaminated
waters, which are continuously generated as part of the customers' operations.
As such, the Company provides services for its customers on a recurring basis.
The Company processes the materials it collects into products for resale and/or
recycling, such as fuel, glycol, steel, and clean water. The Company has
expanded its services to include a variety of field technical services,
including on-site waste sampling and testing, emergency response, and tank
cleaning.
Thermo EuroTech specializes in processing "off-spec" mixtures of oil that
contain water, ash, and sediment into commercially tradable end products used in
blending. The end products of this process are commercial grade oils that can be
blended to make diesel fuels and marine fuels or be used as a feed material.
Thermo EuroTech's North Refinery facility has historically received a large
percentage of its oil feedstock from the former Soviet Union. North Refinery no
longer receives any oil from that nation, due to political and economic changes
that have made the transportation of waste oil difficult. To overcome this loss
of supply, Thermo EuroTech has taken steps to replace and diversify its
feedstock suppliers. In addition, Thermo EuroTech has applied to Dutch
authorities for licenses to broaden the variety of waste streams that could be
treated at North Refinery. North Refinery may experience future disruptions in
deliveries. Any disruptions in supply could have a material adverse effect on
the Company's results of operation. In addition, North Refinery has received a
one-year exemption from the environmental authorities in the Netherlands and the
United Kingdom allowing it to export refined oil, which would otherwise be
regulated as "waste" under the environmental regulations of those countries. If
North Refinery is unable after that time to qualify its exported oil as
non-waste quality oil, or if North Refinery is unable to extend the length of
its exemption, the Company's results of operations could be materially adversely
affected.
Thermo EuroTech also provides in-plant waste management and recycling
services through its Ireland-based Green Sunrise subsidiary. In August 1999,
Green Sunrise acquired the outstanding stock of Dempsey Drums Limited, an
Ireland-based service provider specializing in the supply, disposal, and
reconditioning of steel and plastic drums and other specialized containers. On
May 3, 2000, the Company entered into a letter of intent to sell the outstanding
stock of Green Sunrise.
During fiscal 2000, 1999, and 1998, the Company derived revenues of $166.2
million, $159.1 million, and $141.1 million, respectively, from
environmental-liability management services.
5
<PAGE>
ENGINEERING AND DESIGN
The Company historically provided comprehensive engineering and
outsourcing services in such areas as water and wastewater treatment, process
engineering and construction, highway and bridge engineering, and infrastructure
engineering. In January 2000, Killam sold its Randers division, a process
engineering and construction business. In April 2000, Killam sold the assets of
its BAC Killam Inc. subsidiary, a highway and bridge engineering business. A
substantial portion of the Company's engineering and design services sales are
made to existing customers on a repeat basis. Engineering and design services
are often performed as multiyear studies. In addition to federal, state, and
local governments, customers include public utilities, waste management
companies, oil refineries, mining companies, architectural and engineering
firms, and a variety of service companies involved with real estate
transactions.
The Company specializes in the design, planning, and construction
observation of municipal and privately owned water treatment plants, wastewater
treatment plants, and hazardous wastewater facilities. The Company provides
full-service contract operations to plant owners in the public and private
sectors. These services facilitate regulatory compliance; optimize day-to-day
plant operations; reduce costs; provide competent, experienced personnel; and
promote good community relations.
Until the January 2000 sale of the Randers division, the Company provided
design engineering, project management, and construction services for industrial
clients in the manufacturing, pharmaceutical, and chemical-processing
industries, principally in the Mid-West, Massachusetts, and West Virginia.
In addition, the Company provides a broad range of consulting services,
which address transportation planning and design, and transportation and
environmental consulting, professional engineering, and architectural services.
During fiscal 2000, 1999, and 1998, the Company derived revenues of $79.6
million, $91.8 million, and $84.6 million, respectively, from engineering and
design services.
LABORATORY TESTING
The Company provides comprehensive laboratory-based services for the
environmental and pharmaceutical industries. Analytical laboratory services
consist of a comprehensive range of analytical tests to detect and measure
organic contaminants and inorganic contaminants in samples of soil, water, air,
industrial wastes, and biological materials. The Company also provides testing
services for major pharmaceutical companies in support of new healthcare drug
development.
During fiscal 2000, 1999, and 1998, the Company derived revenues of $44.8
million, $40.5 million, and $37.5 million, respectively, from laboratory testing
services.
METAL TREATING
Prior to June 2000, the Company performed metallurgical processing
services using thermal-treatment equipment at locations in California,
Minnesota, and Wisconsin. Through its Holcroft Division, which was sold in
October 1997, the Company designed, manufactured, and installed
computer-controlled, custom-engineered, thermal-processing systems used to treat
primary metals and metal parts. The Company sold the remaining businesses
comprising this segment in June 2000.
During fiscal 2000, 1999, and 1998, the Company derived revenues of $17.2
million, $19.3 million, and $36.6 million, respectively, from metal treating
services and process systems.
6
<PAGE>
(ii) NEW PRODUCTS
The Company has made no commitments to new products that would require the
investment of a material amount of the Company's assets.
(iii)RAW MATERIALS
Since the Company's business is primarily service oriented, it does not
involve the processing of raw materials and is not dependent on fluctuations in
the supply or price of raw materials, except as described above. To date, the
Company has not experienced any difficulty in obtaining any of the materials or
components used in its operations and does not foresee any such difficulty in
the future. The Company has multiple sources for all of its significant raw
material needs.
Prior to fiscal 1996, a large percentage of oil feedstock at Thermo
EuroTech's North Refinery division came from the former Soviet Union. Thermo
EuroTech no longer receives any oil from that nation as a result of political
and economic changes that make transportation of waste oil difficult. To
overcome this loss of supply, Thermo EuroTech has taken steps to replace and
diversify its feedstock suppliers. However, no assurance can be given that it
will not experience future disruptions in deliveries.
(iv) PATENTS, LICENSES, AND TRADEMARKS
The Company currently owns or has rights under licenses to a number of
U.S. patents. Although the Company believes that patent protection provides it
with competitive advantages with respect to certain portions of its business and
will continue to seek patent protection when appropriate, the Company also
believes that its business depends primarily upon trade secrets and the
technical and marketing expertise of its personnel.
(v) SEASONAL INFLUENCES
A majority of the Company's businesses experience seasonal fluctuations. A
majority of the Company's soil-remediation sites, as well as the Company's
fluids-recycling sites, experience declines in revenues if severe weather
conditions occur. Site remediation work and certain environmental testing
services may decline in winter months as a result of severe weather conditions.
In Europe, Thermo EuroTech may experience a decline in the feedstock delivered
to and from its facilities during winter months due to frozen waterways.
(vi) WORKING CAPITAL REQUIREMENTS
In general, there are no special inventory requirements or credit terms
extended to customers that would have a material adverse effect on the Company's
working capital.
(vii)DEPENDENCY ON A SINGLE CUSTOMER
No single customer accounted for more than 10% of the Company's revenues
in any of the past three years.
7
<PAGE>
(viii) BACKLOG
The Company's backlog of firm orders at fiscal year-end 2000 and 1999 was:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
-------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Environmental-liability Management $ 46,671 $ 47,635
Engineering and Design 58,465 62,136
Laboratory Testing 3,611 2,517
Metal Treating 300 300
-------- --------
$109,047 $112,588
======== ========
</TABLE>
These amounts include the backlog of all of the Company's subsidiaries,
with the exception of soil-recycling, fluids-recycling, and in-plant waste
management and recycling services, which are provided on a current basis
pursuant to purchase orders. Included in the Company's backlog at fiscal
year-end 2000 and 1999 is the incomplete portion of contracts that are accounted
for using the percentage-of-completion method. The Company believes that
substantially all of the backlog at April 1, 2000, will be completed during
fiscal 2001. Certain of these orders are subject to cancellation by the customer
upon payment of a cancellation charge and all government contracts are subject
to termination at any time by the government without penalty.
The Engineering and Design segment backlog at fiscal year-end 2000
includes $17,298,000 at the Company's BAC Killam subsidiary, which was sold in
April 2000. In addition, the businesses comprising the Metal Treating segment
were sold in June 2000.
(ix) GOVERNMENT CONTRACTS
Approximately 8%, 6%, and 4% of the Company's revenues in fiscal 2000,
1999, and 1998, respectively, were derived from contracts or subcontracts with
the federal government that 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
Many of the Company's businesses are engaged in highly competitive,
regional markets, with competition coming from numerous small firms offering
limited services, as well as much larger firms that offer an array of services.
ENVIRONMENTAL-LIABILITY MANAGEMENT
In the market for consulting and engineering services, the Company
competes with numerous regional and local companies as well as a number of
national remediation contractors. The Company competes primarily on the basis of
value, with the vast majority of the contracts it seeks awarded on the basis of
scope, effectiveness, and cost. Other competitive factors for the Company's
consulting and engineering businesses include: reputation; experience; breadth
and quality of services offered; and technical, managerial, and business
proficiency.
The type of radiation and nuclear/health physics services offered by the
Company are also offered by many large national companies. The Company competes
primarily on the basis of its proprietary technology and price.
Competition in the soil-remediation business is intense. The Company's
principal competitors are landfills, including major landfill companies. The
Company also currently competes with companies offering a wide range of disposal
options, including other fixed-site, thermal-treatment facilities, operators of
mobile thermal-treatment
8
<PAGE>
facilities, bioremediation and vapor-extraction facilities, and, in certain
states, with asphalt plants and brick kilns that use the contaminated soil in
their production processes. Competition in the soil-remediation market has
always been highly localized, consisting mostly of single-site or single-unit
operators. Competitive conditions limit the prices charged by the Company in
each local market for soil-remediation services. Pricing is therefore a major
competitive factor for the Company. The Company believes competition and price
pressure will remain intense for the foreseeable future.
Competition in the fluids recycling market is highly fragmented and ranges
in size from small, under-capitalized private enterprises to larger national
public companies. At both ends of this spectrum, the industry continues to
consolidate and restructure. The Company competes primarily on the basis of
quality and price.
Thermo EuroTech faces competition for oil from other oil processors and
blenders and from a company with a similar distillation technology in Italy. The
market for blending oils is very large and oils such as Thermo EuroTech's end
products represent a very small percentage of the total market. Green Sunrise is
the leading integrated service provider in an emerging, still fragmented market.
The Company believes that no one competitor offers Green Sunrise's complete line
of services and no single firm is dominant in any of Green Sunrise's primary
service areas. Thermo EuroTech competes primarily on the basis of price.
ENGINEERING AND DESIGN
The Company's engineering and design businesses are engaged in highly
competitive markets in all of its service areas. These markets tend to be
regional. In its geographic service area, competition consists of small, one- to
three-person firms offering a limited scope of services, as well as much larger
firms that may be regional, national, or international in the scope of services
they offer. The principal competitive factors for the Company are: reputation;
experience; price; breadth and quality of services offered; and technical,
managerial, and business proficiency.
LABORATORY TESTING
Hundreds of independent analytical testing laboratories and consulting
firms compete for 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. The Company believes that
its competitive strength lies in the quality of its services.
METAL TREATING
The market for metal-treating services is typically regional and
competitive. All regions in which the Company had facilities contained numerous
competitors. In addition, in-house heat-treating facilities provided a major
source of competition. The Company competed in this segment on the basis of
services provided, turnaround time, and price. The Company sold the businesses
comprising this segment in June 2000.
(xi) ENVIRONMENTAL PROTECTION REGULATIONS
The Company believes that compliance by the Company with federal, state,
and local environmental protection regulations will not have a material adverse
effect on its capital expenditures, earnings, or competitive position.
(xii) NUMBER OF EMPLOYEES
As of April 1, 2000, the Company employed approximately 2,700 persons.
Approximately 300 of these persons were employed by the BAC Killam and Metal
Treating businesses, which were sold subsequent to year-end.
9
<PAGE>
(d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
The Company's sales in foreign locations are currently insignificant.
(e) EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Present Title (Fiscal Year First Became Executive Officer)
------------------- --- ---------------------------------------------------------
<S> <C> <C>
Brian D. Holt 50 President and Chief Executive Officer (2001)
Emil C. Herkert 62 Vice President (1996)
Jeffrey L. Powell 41 Vice President (1994)
Christine L. Leonard 35 Vice President, Finance and Administration (2001)
Theo Melas-Kyriazi 40 Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
(1999)
</TABLE>
Each executive officer serves until his successor is chosen or appointed
by the Board of Directors and qualified or until earlier resignation, death, or
removal. Mr. Holt was appointed President and Chief Executive Officer of the
Company in May 2000. Mr. Holt has been President and Chief Executive Officer of
Thermo Ecotek Corporation, another majority-owned subsidiary of Thermo Electron,
since February 1994 and is Chief Operating Officer, Energy and Environment, for
Thermo Electron, a position he has held since September 1998. Mr. Herkert has
served as President of Killam Associates, a subsidiary of Killam, since 1977 and
was appointed Chief Executive Officer of Randers Killam in May 1997. Mr. Powell
served as President of ThermoRetec and as its Chief Executive Officer from its
inception in 1993 and from May 1997, respectively, until April 1998, when he was
named Senior Vice President of ThermoRetec. Ms. Leonard has served as Controller
of the Company since August 1996 and was appointed Vice President, Finance and
Administration, in June 2000. Ms. Leonard was Controller of Thermo EuroTech from
July 1995 to August 1996. Mr. Melas-Kyriazi was appointed Chief Financial
Officer of the Company and Thermo Electron on January 1, 1999. He joined Thermo
Electron in 1986 as Assistant Treasurer, and became Treasurer in 1988. He was
named President and Chief Executive Officer of ThermoSpectra Corporation, a
subsidiary of Thermo Instrument Systems Inc., in 1994, a position he held until
becoming Vice President of Corporate Strategy for Thermo Electron in 1998. Mr.
Melas-Kyriazi remains a Vice President of Thermo Electron. Mr. Melas-Kyriazi is
a full-time employee of Thermo Electron, but devotes such time to the affairs of
the Company as the Company's needs reasonably require.
Item 2. PROPERTIES
The location and general character of the Company's principal properties
by segment as of April 1, 2000, are:
ENVIRONMENTAL-LIABILITY MANAGEMENT
The Company owns approximately 112,000 square feet of office, engineering,
laboratory, and production space, principally in Ireland, California, and the
Netherlands, and leases approximately 175,000 square feet of office,
engineering, laboratory, and production space pursuant to leases expiring in
fiscal 2001 through 2007, principally in Colorado, New Mexico, Pennsylvania,
Massachusetts, and Washington.
The Company also owns approximately 78 acres in Maryland, California, and
Oregon, from which it provides soil-remediation services. The Company leases
approximately 2 acres in New York pursuant to a lease expiring in fiscal 2005
and 5 acres in Washington on a month-to-month basis, from which it provides
soil-remediation services.
The Company leases approximately six acres in Arizona and one site in
Nevada, pursuant to leases expiring in fiscal 2003 and fiscal 2001,
respectively, upon which it has constructed fluids storage and processing
equipment.
10
<PAGE>
The Company occupies approximately 15 acres in Delfzijl, the Netherlands,
consisting of office space, distillation facilities, and oil storage tanks,
pursuant to a lease expiring in 2059. The lease is cancelable without penalty in
fiscal 2009.
ENGINEERING AND DESIGN
The Company owns approximately 65,000 square feet of office, engineering,
and laboratory space in New Jersey and Michigan, and leases approximately
160,000 square feet of office, engineering, and laboratory space pursuant to
leases expiring in fiscal 2001 through 2008, principally in Pennsylvania, New
Jersey, New Hampshire, Florida, and New York. Of these amounts, BAC Killam owned
approximately 9,000 square feet of office and engineering space in New Jersey
and leased approximately 26,000 square feet of office and engineering space,
primarily in New York. The Company sold the assets of BAC Killam on April 14,
2000.
LABORATORY TESTING
The Company owns approximately 185,000 square feet of office and
laboratory space in Pennsylvania, and leases approximately 7,000 square feet of
office and laboratory space in Michigan pursuant to a lease expiring in fiscal
2001.
METAL TREATING
Prior to the June 2000 sale of the businesses comprising this segment, the
Company owned approximately 140,000 square feet of office, laboratory, and
production space in Minnesota and Wisconsin, and leased approximately 330,000
square feet of office, laboratory, and production space in California pursuant
to leases expiring in fiscal 2005.
The Company believes that these facilities are in good condition and are
adequate for its present operations and that other suitable space is readily
available if any of such leases are not extended. With respect to leases
expiring in the near future, in the event the Company does not renew such
leases, the Company believes suitable alternate space is available for lease on
acceptable terms.
Item 3. LEGAL PROCEEDINGS
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
11
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information concerning the market and market price for the Registrant's
Common Stock, $.10 par value, and dividend policy are included under the
sections labeled "Common Stock Market Information" and "Dividend Policy" in the
Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
The information required under this item is included under the sections
labeled "Selected Financial Information" and "Dividend Policy" in the
Registrant's Fiscal 2000 Annual Report to Shareholders and is incorporated
herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required under this item is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Registrant's Fiscal 2000 Annual Report to Shareholders and is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Registrant's Consolidated Financial Statements as of April 1, 2000,
are included in the Registrant's Fiscal 2000 Annual Report to Shareholders and
are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information required by Items 10, 11, 12, and 13 of Form 10-K will be
filed as part of an amendment to this Form 10-K no later than 120 days after
April 1, 2000, the end of the Registrant's fiscal year covered by this Form
10-K.
12
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a,d) FINANCIAL STATEMENTS AND SCHEDULES
(1)The consolidated financial statements set forth in the list below are
filed as part of this Report.
(2)The consolidated financial statement schedule set forth in the list
below is filed as part of this Report.
(3)Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
LIST OF FINANCIAL STATEMENTS AND SCHEDULES REFERENCED IN THIS ITEM 14
Information incorporated by reference from Exhibit 13 filed herewith:
Consolidated Statement of Operations
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Comprehensive Income and Shareholders'
Investment
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Financial Statement Schedule filed herewith:
Schedule II: Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or not
required, or because the required information is shown either in the
financial statements or the notes thereto.
(b) REPORTS ON FORM 8-K
On February 11, 2000, the Company filed a Current Report on Form 8-K
dated as of January 28, 2000, with respect to the sale of the Randers
division of The Randers Killam Group Inc., a subsidiary of the Company.
On March 21, 2000, the Company filed a Current Report on Form 8-K dated
as of March 6, 2000, with respect to the sale of a soil-remediation
facility by ThermoRetec Corporation, a subsidiary of the Company.
(c) EXHIBITS
See Exhibit Index on the page immediately preceding exhibits.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized.
Date: June 23, 2000 THERMO TERRATECH INC.
By: /s/ Brian D. Holt
--------------------------------------
Brian D. Holt
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of June 23, 2000.
<TABLE>
<S> <C>
SIGNATURE TITLE
By: /s/ Brian D. Holt President, Chief Executive Officer, and Director
--------------------------
Brian D. Holt
By: /s/ Theo Melas-Kyriazi Vice President and Chief Financial Officer
--------------------------
Theo Melas-Kyriazi (Principal Financial and Accounting Officer)
By: /s/ John P. Appleton Chairman of the Board and Director
--------------------------
John P. Appleton
By: /s/ Donald E. Noble Director
--------------------------
Donald E. Noble
By: /s/ William A. Rainville Director
--------------------------
William A. Rainville
By: /s/ Polyvios C. Vintiadis Director
--------------------------
Polyvios C. Vintiadis
</TABLE>
14
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Thermo TerraTech Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Thermo TerraTech Inc.'s Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated May 18, 2000 (except with respect to the matters
discussed in Note 17, as to which the date is June 1, 2000). Our audits were
made for the purpose of forming an opinion on those statements taken as a whole.
The schedule listed in Item 14 on page 13 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the consolidated financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.
Arthur Andersen LLP
Boston, Massachusetts
May 18, 2000
15
<PAGE>
SCHEDULE II
THERMO TERRATECH INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Balance at Provision Accounts Balance
Beginning Charged to Accounts Written at End
Description of Year Expense Recovered Off Other (a) of Year
----------------------------------- ----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended April 1, 2000 $ 3,577 $ 715 $ (674) $(1,110) $ 187 $ 2,695
Year Ended April 3, 1999 $ 4,450 $ 2,085 $ (45) $(2,479) $ (434) $ 3,577
Year Ended April 4, 1998 $ 3,838 $ 1,141 $ -- $ (773) $ 244 $ 4,450
</TABLE>
<TABLE>
<CAPTION>
Balance at Provision Balance
Beginning Charged to Cash at End
Description of Year Expense (c) Payments Other (d) of Year
------------------------------------- ------------- -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ACCRUED RESTRUCTURING COSTS (B)
Year Ended April 1, 2000 $1,719 $ 6,219 $ (895) $ (1,136) $5,907
Year Ended April 3, 1999 $ -- $ 2,095 $ (376) $ -- $1,719
</TABLE>
(a) Includes allowances of businesses acquired during the year as described in
Note 2 to Consolidated Financial Statements in the Registrant's Fiscal 2000
Annual Report to Shareholders. The fiscal 1999 amount includes an acquired
company's reserves that were not required and were therefore reversed to
cost in excess of net assets of acquired companies.
(b) The nature of activity in this account is described in Note 11 to
Consolidated Financial Statements in the Registrant's Fiscal 2000 Annual
Report to Shareholders.
(c) Excludes provision of $50.8 million in fiscal 2000, primarily for
write-downs of cost in excess of net assets of acquired companies and fixed
assets, and $8.1 million in fiscal 1999, for fixed asset and intangible
asset write-downs.
(d) Includes reserves reversed due to sale of businesses and the effect of
currency translation.
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
2.1 Purchase and Sale Agreement executed October 6, 1997, by and
among Remediation Technologies, Inc., RETEC Thermal, Inc., TETRA
Thermal, Inc., and TETRA Technologies, Inc. (filed as Exhibit 2.1
to Thermo Remediation Inc.'s Current Report on Form 8-K dated
October 6, 1997 [File No. 1-12636] and incorporated herein by
reference).
2.2 Assignment and Assumption Agreement executed October 6, 1997, by
and among Remediation Technologies, Inc., RETEC Thermal, Inc.,
TETRA Thermal, Inc., and TETRA Technologies, Inc. (filed as
Exhibit 2.2 to Thermo Remediation Inc.'s Current Report on Form
8-K dated October 6, 1997 [File No. 1-12636] and incorporated
herein by reference).
2.3 Asset Purchase Agreement dated as of October 10, 1997, between
the Registrant and Holcroft L.L.C. (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated October 10, 1997
[File No. 1-9549] and incorporated herein by reference).
2.4 $2,218,000.00 Principal Promissory Note issued by Holcroft L.L.C.
to the Registrant (filed as Exhibit 2.2 to the Registrant's
Current Report on Form 8-K dated October 10, 1997 [File No.
1-9549] and incorporated herein by reference).
2.5 $663,117.82 Principal Promissory Note issued by Holcroft L.L.C.
to the Registrant (filed as Exhibit 2.3 to the Registrant's
Current Report on Form 8-K dated October 10, 1997 [File No.
1-9549] and incorporated herein by reference).
2.6 Subordination Agreement dated as of October 10, 1997, between the
Registrant and Comerica Bank (filed as Exhibit 2.4 to the
Registrant's Current Report on Form 8-K dated October 10, 1997
[File No. 1-9549] and incorporated herein by reference).
2.7 Stock Purchase and Sale Agreement dated May 12, 1997, by and
between the Registrant and Thomas R. Eurich, Michael J.
Krivitzky, Thomas J. McEnhill, and Bruce M. Bourdon (filed as
Exhibit (iv) to Amendment No. 3 to Schedule 13D filed by Thermo
Electron Corporation, Thermo Power Corporation, and the
Registrant on May 13, 1997, and incorporated herein by
reference).
2.8 Amendment No. 1 dated September 19, 1997, to Stock Purchase and
Sale Agreement dated May 12, 1997, by and between the Registrant
and Thomas R. Eurich, Michael J. Krivitzky, Thomas J. McEnhill,
and Bruce M. Bourdon (filed as Exhibit 2.5 to The Randers Group
Incorporated's Annual Report on Form 10-K for the fiscal year
ended April 4, 1998 [File No. 0-18095] and incorporated herein by
reference).
2.9 Reserved.
2.10 Stock Purchase Agreement entered on September 19, 1997, by and
between the Registrant and The Randers Group Incorporated (filed
as Exhibit (vii) to Amendment No. 4 to Schedule 13D filed by
Thermo Electron Corporation and the Registrant on October 3,
1997, and incorporated herein by reference).
2.11 Amendment No. 1 dated as of April 4, 1998, to Stock Purchase
Agreement entered on September 19, 1997, by and between the
Registrant and The Randers Group Incorporated (filed as Exhibit
2.8 to The Randers Killam Group Incorporated's Annual Report on
Form 10-K for the fiscal year ended April 4, 1998 [File No.
0-18095] and incorporated herein by reference).
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
2.12 Agreement by and among the Registrant, The Randers Group
Incorporated, Thomas R. Eurich, Michael J. Krivitzky, Thomas J.
McEnhill, Bruce M. Bourdon, and David A. Wiegerink (filed as
Exhibit 10 to The Randers Group Incorporated's Current Report on
Form 8-K dated October 3, 1997 [File No. 0-18095] and
incorporated herein by reference).
2.13 Agreement and Plan of Merger dated as of October 19, 1999, by and
among Thermo Electron Corporation, TTT Acquisition Corporation,
and the Registrant (filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K relating to events occurring on
October 19, 1999 [File No. 1-9549] and incorporated herein by
reference).
2.14 Asset Purchase Agreement by and among RGI Muskegon, Inc. (as
Buyer), Randers Engineering, Inc., Redeco, Inc., Viridian
Technology, Inc., and Randers Group Property Corporation (as
Sellers), and The Randers Killam Group Inc. (as Seller's Parent)
dated January 28, 2000 (filed as Exhibit 2.1 to The Randers
Killam Group Inc.'s Current Report on Form 8-K dated as of
January 28, 2000 [File No. 0-18095] and incorporated herein by
reference).
2.15 Amendment No. 1 to Agreement and Plan of Merger dated as of April
12, 2000, by and among Thermo Electron Corporation, TTT
Acquisition Corporation, and the Registrant (filed as Appendix
A-1 to Thermo Electron Corporation's Amendment No. 2 to its
Registration Statement on Form S-4 [Reg. No. 333-90661] and
incorporated herein by reference).
2.16 Asset Purchase Agreement dated March 6, 2000, by and among TPST
Soil Recyclers of California, Inc. and Nove Investments I, LLC
(filed as Exhibit 2.1 to ThermoRetec Corporation's Form 8-K dated
as of March 21, 2000 [File No. 1-12636] and incorporated herein
by reference).
2.17 Asset Purchase Agreement by and among BAC Killam, Inc. and The
Randers Killam Group Inc. (as Sellers) and Hatch Mott McDonald,
Inc. (as Buyer), dated as of March 31, 2000 (filed as Exhibit 2.1
to The Randers Killam Group Inc.'s Form 8-K dated as of April 14,
2000 [File No. 0-18095] and incorporated herein by reference).
2.18 Asset Purchase Agreement by and among the Registrant,
Metallurgical, Inc., Cal-Doran Metallurgical Services, Inc., and
Metal Treating Inc. (as Sellers) and Lindberg Corporation (as
Buyer), dated as of May 31, 2000 (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated as of June 1, 2000
[File No. 1-9549] and incorporated herein by reference).
3.1 Restated Certificate of Incorporation, as amended (filed as
Exhibit 99 to the Registrant's Registration Statement on Form S-2
[Reg. No. 333-02269] and incorporated herein by reference).
3.2 Bylaws of the Registrant (filed as Exhibit 3(b) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
April 2, 1988 [File No. 1-9549] and incorporated herein by
reference).
4.1 Fiscal Agency Agreement dated as of May 2, 1996, among the
Registrant, Thermo Electron Corporation, and Chemical Bank, as
Fiscal Agent (filed as Exhibit 4.2 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 30, 1996
[File No. 1-9549] and incorporated herein by reference).
The Registrant hereby agrees, pursuant to Item 601(b)(4)(iii) (A)
of Regulation S-K, to furnish to the Commission, upon request, a
copy of each other instrument with respect to other long-term
debt of the Company or its subsidiaries.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
10.1 Thermo Electron Corporate Charter as amended and restated
effective January 3, 1993 (filed as Exhibit 10(a) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
April 3, 1993 [File No. 1-9549] and incorporated herein by
reference).
10.2 Amended and Restated Corporate Services Agreement dated January
3, 1993, between Thermo Electron Corporation and the Registrant
(filed as Exhibit 10(b) to the Registrant's Annual Report on Form
10-K for the fiscal year ended April 3, 1993 [File No. 1-9549]
and incorporated herein by reference).
10.3 Agreement of Lease dated December 31, 1985, between Claridge
Properties Ltd. and Thermo Electron Corporation (filed as Exhibit
10(c) to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-6763] and incorporated herein by reference).
10.4 Assignment of Lease dated December 31, 1985, between Thermo
Electron Corporation and TMO, Inc. (filed as Exhibit 10(d) to the
Registrant's Registration Statement on Form S-1 [Reg.
No. 33-6763] and incorporated herein by reference).
10.5 Sublease dated March 30, 1986, between TMO, Inc. and
Holcroft/Loftus, Inc. (filed as Exhibit 10(e) to the Registrant's
Registration Statement on Form S-1 [Reg. No. 33-6763] and
incorporated herein by reference).
10.6 Lease Amending Agreement dated January 1, 1995, between Claridge
Properties Ltd., Thermo Electron Corporation, and TMO, Inc.
(filed as Exhibit 10.6 to the Registrant's Annual Report on Form
10-K for the fiscal year ended April 1, 1995 [File No. 1-9549]
and incorporated by reference).
10.7 Second Amendment to Sublease dated as of October 10, 1997,
between the Registrant and TMO, Inc. (filed as Exhibit 2.5 to the
Registrant's Current Report on Form 8-K dated October 10, 1997
[File No. 1-9549] and incorporated herein by reference).
10.8 Sublease dated as of October 10, 1997, between the Registrant and
Holcroft L.L.C. (filed as Exhibit 2.6 to the Registrant's Current
Report on Form 8-K dated October 10, 1997 [File No. 1-9549] and
incorporated herein by reference).
10.9 Exclusive License and Marketing Agreement dated March 22, 1990,
among TPS Technologies Inc., Holcroft Inc., and Thermo Soil
Recyclers Inc. (filed as Exhibit 10(q) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 31, 1990
[File No. 1-9549] and incorporated herein by reference).
10.10 Form of Indemnification Agreement with Directors and Officers
(filed as Exhibit 10(k) to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 30, 1991 [File No. 1-9549]
and incorporated herein by reference).
10.11 Development Agreement dated September 15, 1991, between Thermo
Electron Corporation and the Registrant (filed as Exhibit 10(l)
to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 28, 1991 [File No. 1-9549] and
incorporated herein by reference).
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
10.12 Amended and Restated Development Agreement dated January 2, 1992,
between Thermo Electron Corporation and the Registrant (filed as
Exhibit 10(m) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended March 28, 1992 [File No. 1-9549] and
incorporated herein by reference).
10.13 Asset Transfer Agreement dated as of October 1, 1993, among the
Registrant, TPS Technologies Inc., and Thermo Remediation Inc.
(filed as Exhibit 2.3 to Thermo Remediation Inc.'s Registration
Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein
by reference).
10.14 Exclusive License Agreement dated as of October 1, 1993, among
the Registrant, TPS Technologies Inc., and Thermo Remediation
Inc. (filed as Exhibit 2.4 to Thermo Remediation Inc.'s
Registration Statement on Form S-1 [Reg. No. 33-70544] and
incorporated herein by reference).
10.15 Non-Competition and Non-Disclosure Agreement dated as of October
1, 1993, among the Registrant, TPS Technologies Inc., and Thermo
Remediation Inc. (filed as Exhibit 2.5 to Thermo Remediation
Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and
incorporated herein by reference).
10.16 Tax Allocation Agreement dated as of June 1, 1992, between the
Registrant and Thermo Remediation Inc. (filed as Exhibit 10.3 to
Thermo Remediation Inc.'s Registration Statement on Form S-1
[Reg. No. 33-70544] and incorporated herein by reference).
10.17 Agreement of Partnership dated May 16, 1994, among Terra Tech
Labs Inc. (a wholly owned subsidiary of the Registrant) and
Eberline Analytical Corporation, Skinner & Sherman, Inc.,
TMA/NORCAL Inc., Normandeau Associates Inc., Bettigole Andrews &
Clark Inc., Fellows, Read & Associates Inc., and Thermo
Consulting Engineers Inc. (each a wholly owned subsidiary of
Thermo Instrument Systems Inc.; filed as Exhibit 1 to the
Registrant's Current Report on Form 8-K relating to the events
occurring on May 16, 1994 [File No. 1-9549] and incorporated
herein by reference).
10.18 Promissory Note dated May 16, 1994, issued by the Registrant to
Thermo Electron Corporation (filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K relating to the events
occurring on May 16, 1994 [File No. 1-9549] and incorporated
herein by reference).
10.19 Agreement of Dissolution of Partnership dated May 9, 1995, among
Thermo Terra Tech (the Partnership), Terra Tech Labs, Inc. (a
wholly owned subsidiary of the Registrant) and Eberline
Analytical Corporation, Skinner & Sherman, Inc., TMA/NORCAL Inc.,
Normandeau Associates Inc., Bettigole Andrews & Clark Inc.,
Fellows, Read & Associates Inc., and Thermo Consulting Engineers
Inc. (each a wholly owned subsidiary of Thermo Instrument Systems
Inc.; filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K relating to the events occurring on May 9, 1995 [File
No. 1-9549] and incorporated herein by reference).
10.20 Stock Purchase Agreement dated May 9, 1995, between the
Registrant and Thermo Instrument Systems Inc. (filed as Exhibit
2.2 to the Registrant's Current Report on Form 8-K relating to
the events occurring on May 9, 1995 [File No. 1-9549] and
incorporated herein by reference).
10.21 Note dated May 17, 1995, from the Registrant to Thermo Electron
Corporation (filed as Exhibit 2.3 to the Registrant's Current
Report on Form 8-K relating to the events occurring on May 9,
1995 [File No. 1-9549] and incorporated herein by reference).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
10.22 Stock Purchase and Note Issuance Agreement dated as of November
22, 1993, between the Registrant and Thermo Remediation Inc.
(filed as Exhibit 10.11 to Thermo Remediation Inc.'s Registration
Statement on Form S-1 [Reg. No. 33-70544] and incorporated herein
by reference).
10.23 $2,650,000 principal amount Subordinated Convertible Note dated
as of November 22, 1993, made by Thermo Remediation Inc., issued
to the Registrant (filed as Exhibit 10.12 to Thermo Remediation
Inc.'s Registration Statement on Form S-1 [Reg. No. 33-70544] and
incorporated herein by reference).
10.24 Stock Purchase and Sale Agreement made and entered into on
February 6, 1995, to be effective as of January 29, 1995, by and
between Nord Est S.A., the Registrant, and Emil C. Herkert,
Kenneth L. Zippler, Franklin O. Williamson, Jr., Fletcher N.
Platt, Jr., Eugene J. Destefano, Meint Olthof, and Stanley P.
Kaltnecker, Jr. (filed as Exhibit 1 to the Registrant's Current
Report on Form 8-K relating to the events occurring on February
6, 1995 [File No. 1-9549] and incorporated herein by reference).
10.25 Agreement and Plan of Merger dated as of June 28, 1995, by and
among the Registrant, Eberline Acquisition Inc., Thermo
Remediation Inc., and Eberline Holdings Inc. (filed as Appendix B
to Thermo Remediation Inc.'s Proxy Statement for the Annual
Meeting held on December 13, 1995 [File No. 1-12636] and
incorporated herein by reference).
10.26 $28,000,000 Secured Promissory Note dated as of January 29, 1995,
issued by the Registrant to Nord Est S.A. (filed as Exhibit 2 to
the Registrant's Current Report on Form 8-K relating to the
events occurring on February 6, 1995 [File No. 1-9549] and
incorporated herein by reference).
10.27 $38,000,000 Promissory Note dated as of February 21, 1995, issued
by the Registrant to Thermo Electron Corporation (filed as
Exhibit 3 to the Registrant's Current Report on Form 8-K relating
to the events occurring on February 6, 1995 [File No. 1-9549] and
incorporated herein by reference).
10.28 Asset Purchase Agreement by and among Thermo Analytical Inc. (as
Buyer); Lancaster Laboratories, Inc. and Clewmark Holdings (as
Sellers); and Earl H. Hess, Anita F. Hess, Kenneth E. Hess, J.
Wilson Hershey, and Carol D. Hess (as the principal owners of
Sellers) (filed as Exhibit 1 to the Registrant's Current Report
on Form 8-K relating to the events occurring on May 10, 1995
[File No. 1-9549] and incorporated herein by reference).
10.29 Agreement and Plan of Merger dated as of the first day of
December 1995, by and among Thermo Remediation Inc., TRI
Acquisition Inc., and Remediation Technologies, Inc. (filed as
Exhibit 2(a) to the Registrant's Current Report on Form 8-K
relating to the events occurring on December 8, 1995 [File No.
1-9549] and incorporated herein by reference).
10.30 Purchase and Sale Agreement dated as of December 20, 1994, by and
among TPS Technologies Inc., TPST Soil Recyclers of Maryland
Inc., Rafich Corporation, Harry Ratrie, John C. Cyphers, and J.
Thomas Hood (filed as Exhibit 1 to Thermo Remediation Inc.'s
Current Report on Form 8-K for the events occurring on December
21, 1994 [File No. 1-12636] and incorporated herein by
reference).
10.31 Stock Purchase Agreement entered into on March 29, 1995, by and
among Stalt Holding, B.V., Beheersmaatschappij J. Amerika N.V.,
A.J. Van Es, J.B. Van Es and D.A. Slager, and the Registrant
(filed as Exhibit 1 to the Registrant's Current Report on Form
8-K relating to the events occurring on March 29, 1995 [File No.
1-9549] and incorporated herein by reference).
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
10.32 Amended and Restated Thermo TerraTech Inc. - The Randers Group
Incorporated Nonqualified Stock Option Plan.
10.33 Incentive Stock Option Plan of the Registrant (filed as Exhibit
10(h) to the Registrant's Registration Statement on Form S-1
[Reg. No. 33-6763] and incorporated herein by reference).
(Maximum number of shares issuable in the aggregate under this
plan and the Registrant's Nonqualified Stock Option Plan 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.)
10.34 Amended and Restated Nonqualified Stock Option Plan of the
Registrant. (Maximum number of shares issuable in the aggregate
under this plan and the Registrant's Incentive Stock Option Plan
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.)
10.35 Amended and Restated Deferred Compensation Plan for Directors of
the Registrant.
10.36 Amended and Restated Equity Incentive Plan.
10.37 Amended and Restated Directors Stock Option Plan.
10.38 Amended and Restated Thermo TerraTech Inc. (formerly Thermo
Process Systems Inc.) - Thermo Remediation Inc. Nonqualified
Stock Option Plan.
In addition to the stock-based compensation plans of the
Registrant, the executive officers of the Registrant may be
granted awards under stock-based compensation plans of Thermo
Electron for services rendered to the Registrant or to such
affiliated corporations. The terms of such plans are
substantially the same as those of the Registrant's Equity
Incentive Plan.
10.39 Restated Stock Holdings Assistance Plan and Form of Executive
Loan (filed as Exhibit 10.42 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended March 29, 1997 [File No.
1-9549] and incorporated herein by reference).
10.40 Deferred Compensation Agreement dated September 16, 1996, between
Elson T. Killam Associates Inc. and Emil C. Herkert (filed as
Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 4, 1998 [File No. 1-9549] and
incorporated herein by reference).
10.41 Addendum dated 1990, to Deferred Compensation Agreement dated
September 16, 1986, between Elson T. Killam Associates Inc. and
Emil C. Herkert (filed as Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended July
4, 1998 [File No. 1-9549] and incorporated herein by reference).
10.42 Amendment No. 1, dated April 27, 1990, to Deferred Compensation
Agreement dated September 16, 1986, between Elson T. Killam
Associates Inc. and Emil C. Herkert (filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 4, 1998 [File No. 1-9549] and incorporated herein by
reference).
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------------------
<S> <C>
10.43 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between the Registrant and
Thermo Electron Corporation (filed as Exhibit 10.43 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
April 3, 1999 [File No. 1-9549] and incorporated herein by
reference).
10.44 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between ThermoRetec
Corporation and Thermo Electron Corporation (filed as Exhibit
10.17 to ThermoRetec Corporation's Annual Report on Form 10-K for
the fiscal year ended April 3, 1999 [File No. 1-12636] and
incorporated herein by reference).
10.45 Master Cash Management, Guarantee Reimbursement, and Loan
Agreement dated as of June 1, 1999, between The Randers Killam
Group Inc. and Thermo Electron Corporation (filed as Exhibit
10.18 to The Randers Killam Group Inc.'s Annual Report on Form
10-K for the fiscal year ended April 3, 1999 [File No. 0-18095]
and incorporated herein by reference).
10.46 Retention Agreement dated as of November 17, 1999, between Thermo
Electron Corporation and John P. Appleton.
10.47 Retention Agreement between the Registrant and Emil C. Herkert.
10.48 Retention Agreement between the Registrant and Jeffrey L. Powell.
13 Annual Report to Shareholders for the fiscal year ended April 1,
2000 (only those portions incorporated herein by reference).
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
23
<PAGE>
EXHIBIT 13
Thermo TerraTech Inc.
Consolidated Financial Statements
Fiscal 2000
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
------------------------------
April 1, April 3, April 4,
(In thousands except per share amounts) 2000 1999 1998
------------------------------------------------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
Revenues $307,329 $ 310,039 $298,786
-------- --------- --------
Costs and Operating Expenses:
Cost of revenues (Note 11) 243,382 247,610 245,111
Selling, general, and administrative expenses (Note 7) 44,891 46,224 41,941
Restructuring costs (Note 11) 56,981 10,217 -
-------- --------- --------
345,254 304,051 287,052
-------- --------- --------
Operating Income (Loss) (37,925) 5,988 11,734
Interest Income 2,810 2,185 4,163
Interest Expense (includes $243, $162, and $593 to parent company) (8,743) (8,981) (10,778)
Gain on Sale of Unconsolidated Subsidiary (Note 2) -- -- 3,012
Equity in Earnings of Unconsolidated Subsidiary -- -- 174
Other Income, Net -- -- 209
-------- --------- --------
Income (Loss) Before Provision for Income Taxes, Minority (43,858) (808) 8,514
Interest, and Extraordinary Item
Provision for Income Taxes (Notes 4 and 11) 2,522 1,786 5,146
Minority Interest (Income) Expense (3,054) (1,173) 95
-------- --------- --------
Income (Loss) Before Extraordinary Item (43,326) (1,421) 3,273
Extraordinary Item, Net of Provision for Income Taxes of $71 (Note 5) 107 -- --
-------- --------- --------
NET INCOME (LOSS) $(43,219) $ (1,421) $ 3,273
======== ========= ========
EARNINGS (LOSS) PER SHARE (Note 14)
Basic $ (2.27) $ (.07) $ .18
======== ======== =======
Diluted $ (2.27) $ (.07) $ .17
======== ======== =======
WEIGHTED AVERAGE SHARES (Note 14)
Basic 19,033 19,402 18,700
======== ========= ========
Diluted 19,033 19,402 18,978
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 1, April 3,
(In thousands) 2000 1999
----------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (includes $41,667 under repurchase $ 4,157 $ 43,013
agreements with parent company in fiscal 1999)
Advance to affiliate 47,748 -
Accounts receivable, less allowances of $2,695 and $3,577 51,537 58,933
Unbilled contract costs and fees 20,875 19,974
Inventories 2,001 1,869
Deferred tax asset (Note 4) 8,075 6,921
Other current assets 3,304 3,665
-------- --------
137,697 134,375
-------- --------
Property, Plant, and Equipment, at Cost, Net (Note 11) 69,956 91,514
-------- --------
Other Assets (Note 11) 8,971 15,949
-------- --------
Cost in Excess of Net Assets of Acquired Companies (Notes 2 and 11) 87,929 108,627
-------- --------
$304,553 $350,465
======== ========
</TABLE>
3
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET (CONTINUED)
<TABLE>
<CAPTION>
April 1, April 3,
(In thousands except share amounts) 2000 1999
----------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term obligations and current maturities of long-term $ 19,322 $ 17,618
obligations (includes borrowings from affiliate of
$8,965 and $9,228; Note 5)
Advance from affiliate 1,158 --
Subordinated convertible debentures (includes $4,300 of 37,950 --
related-party debt; Note 5)
Accounts payable 15,164 17,404
Accrued payroll and employee benefits 12,443 12,771
Accrued restructuring costs (Note 11) 5,907 1,719
Other accrued expenses 12,617 15,298
Due to parent company and affiliated companies 2,403 2,522
-------- --------
106,964 67,332
-------- --------
Deferred Income Taxes (Note 4) 1,451 3,538
-------- --------
Other Deferred Items 1,118 1,076
-------- --------
Long-term Obligations (Notes 5 and 10):
Subordinated convertible debentures (includes $1,659 and 116,637 156,799
$4,695 of related-party debt)
Other 1,476 1,818
-------- --------
118,113 158,617
-------- --------
Minority Interest 25,337 27,745
-------- --------
Commitments and Contingencies (Note 6)
Shareholders' Investment (Notes 3 and 8):
Common stock, $.10 par value, 75,000,000 shares authorized; 1,961 1,958
19,607,752 and 19,583,773 shares issued
Capital in excess of par value 71,220 70,633
Retained earnings (accumulated deficit) (17,321) 25,898
Treasury stock at cost, 653,647 and 543,319 shares (5,042) (4,130)
Deferred compensation (Note 3) (189) (252)
Accumulated other comprehensive items 941 (1,950)
-------- --------
51,570 92,157
-------- --------
$304,553 $350,465
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
------------------------------
April 1, April 3, April 4,
------------------------------
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- -------- ---------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(43,219) $ (1,421) $ 3,273
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 14,215 16,823 14,784
Noncash restructuring costs (Note 11) 50,762 8,122 --
Gain on sale of unconsolidated subsidiary (Note 2) -- -- (3,012)
Equity in earnings of unconsolidated subsidiary -- -- (174)
Minority interest (income) expense (3,054) (1,173) 95
Provision for losses on accounts receivable 715 2,085 1,141
Other noncash items 2,523 199 327
Change in deferred income taxes (3,328) 443 (1,583)
Gain on purchase of subordinated convertible debentures (Note 5) (107) -- --
Changes in current accounts, excluding the effects of acquisitions
and dispositions:
Accounts receivable 5,985 (643) (11,154)
Inventories and unbilled contract costs and fees (4,139) (2,026) (3,353)
Other current assets (446) (176) 1,715
Accounts payable (1,934) 55 5,507
Other current liabilities 4,793 7,653 (1,038)
-------- --------- -------
Net cash provided by operating activities 22,766 29,941 6,528
-------- --------- -------
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (Note 2) (2,016) (643) (12,746)
Advances to affiliate, net (46,590) -- --
Proceeds from maturities of available-for-sale investments -- 2,006 16,372
Proceeds from maturity of held-to-maturity investments -- 14,065 13,935
Purchases of property, plant, and equipment (13,265) (17,415) (18,460)
Proceeds from sale of businesses (Note 2) -- -- 19,722
Issuances of notes receivable -- -- (569)
Collection of long-term notes receivable 3,807 605 --
Purchases of other assets (859) (1,570) (1,993)
Other, net 1,418 474 2,464
-------- --------- -------
Net cash provided by (used in) investing activities $(57,505) $ (2,478) $18,725
-------- --------- -------
</TABLE>
5
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
<TABLE>
<CAPTION>
Year Ended
-------------------------------
April 1, April 3, April 4,
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Increase in short-term obligations to fund an acquisition (Note 2) $ 2,286 $ -- $ --
Repayment of notes payable (includes $38,000 to parent company (1,640) (14,748) (52,878)
in fiscal 1998)
Proceeds from issuance of Company and subsidiaries' common 1,028 58 1,148
stock (Note 9)
Repurchase of Company and subsidiaries' common stock and (5,857) (3,390) (7,355)
subordinated convertible debentures
Issuance of short-term obligations -- -- 6,171
Dividends paid by subsidiary to minority shareholders (409) (805) (751)
Other, net 295 (180) --
-------- --------- -------
Net cash used in financing activities (4,297) (19,065) (53,665)
-------- --------- -------
Exchange Rate Effect on Cash 180 (96) (49)
-------- --------- -------
Increase (Decrease) in Cash and Cash Equivalents (38,856) 8,302 (28,461)
Cash and Cash Equivalents at Beginning of Year 43,013 34,711 63,172
-------- --------- -------
Cash and Cash Equivalents at End of Year $ 4,157 $ 43,013 $34,711
======== ========= =======
</TABLE>
See Note 12 for supplemental cash flow information.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
Year Ended
--------------------------------
April 1, April 3, April 4,
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
COMPREHENSIVE INCOME
Net Income (Loss) $(43,219) $ (1,421) $ 3,273
-------- -------- -------
Other Comprehensive Items:
Foreign currency translation adjustment 986 147 (1,071)
Unrealized gains (losses) on available-for-sale investments -- 3 (10)
-------- -------- -------
986 150 (1,081)
-------- -------- -------
Minority Interest Income (Expense) 74 (284) 461
-------- -------- -------
$(42,159) $ (1,555) $ 2,653
======== ======== =======
SHAREHOLDERS' INVESTMENT
Common Stock, $.10 Par Value:
Balance at beginning of year $ 1,958 $ 1,958 $ 1,830
Issuance of stock under employees' and directors' stock plans 3 -- --
Conversions of subordinated convertible debentures -- -- 128
------- -------- -------
Balance at end of year 1,961 1,958 1,958
------- -------- -------
Capital in Excess of Par Value:
Balance at beginning of year 70,633 70,437 62,610
Activity under employees' and directors' stock plans (152) (130) (5,490)
Tax benefit related to employees' and directors' stock plans 50 181 655
Effect of outstanding put rights 1,271 (1,271) -
Conversions of subordinated convertible debentures (Note 5) -- -- 13,092
Effect of majority-owned subsidiaries' equity transactions (582) 1,416 (430)
------- -------- -------
Balance at end of year 71,220 70,633 70,437
------- -------- -------
Retained Earnings (Accumulated Deficit):
Balance at beginning of year 25,898 27,319 24,046
Net income (loss) (43,219) (1,421) 3,273
------- -------- -------
Balance at end of year (17,321) 25,898 27,319
------- -------- -------
Treasury Stock:
Balance at beginning of year (4,130) (484) (3,941)
Activity under employees' and directors' stock plans 653 411 6,637
Purchases of Company common stock (1,565) (4,057) (3,180)
------- -------- -------
Balance at end of year $(5,042) $ (4,130) $ (484)
------- -------- -------
</TABLE>
7
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND SHAREHOLDERS' INVESTMENT
(continued)
<TABLE>
<CAPTION>
Year Ended
--------------------------------
April 1, April 3, April 4,
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- ---------- ----------- ---------
<S> <C> <C> <C>
Deferred Compensation (Note 3):
Balance at beginning of year $ (252) $ -- $ --
Activity under employees' stock plans (45) (252) --
Amortization of deferred compensation 108 -- --
------- ------- -------
Balance at end of year (189) (252) --
------- ------- -------
Accumulated Other Comprehensive Items:
Balance at beginning of year (1,950) (2,100) (1,019)
Other comprehensive items 986 150 (1,081)
Write-off of cumulative foreign currency translation adjustment (Note 11) 1,905 -- --
------- ------- -------
Balance at end of year 941 (1,950) (2,100)
------- ------- -------
$51,570 $92,157 $97,130
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
8
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Thermo TerraTech Inc. (the Company) provides industrial outsourcing
services and manufacturing support encompassing a broad range of
specializations. The Company operates in four segments: environmental-liability
management, engineering and design, laboratory testing, and metal treating.
RELATIONSHIP WITH THERMO ELECTRON CORPORATION
The Company was incorporated on May 30, 1986, as an indirect, wholly owned
subsidiary of Thermo Electron Corporation. As of April 1, 2000, Thermo Electron
owned 16,605,286 shares of the Company's common stock, representing 88% of such
stock outstanding.
On October 19, 1999, the Company entered into a definitive agreement and
plan of merger with Thermo Electron, pursuant to which Thermo Electron would
acquire all of the outstanding shares of Company common stock held by
shareholders other than Thermo Electron in exchange for Thermo Electron common
stock (Note 15).
On January 31, 2000, Thermo Electron announced that it plans to sell all
of the businesses of the Company. This action is part of a major reorganization
plan under which Thermo Electron will spin in, spin off, and sell various
businesses to focus solely on its core measurement and detection instruments
business.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company;
its wholly owned subsidiaries; its majority-owned public subsidiaries,
ThermoRetec Corporation and The Randers Killam Group Inc.; and its
majority-owned, privately held Thermo EuroTech N.V. subsidiary. All material
intercompany accounts and transactions have been eliminated. The Company
accounted for its investment in a business in which it owned 50% using the
equity method. In October 1997, the Company sold this investment (Note 2).
FISCAL YEAR
The Company has adopted a fiscal year ending the Saturday nearest March
31. References to fiscal 2000, 1999, and 1998 are for the fiscal years ended
April 1, 2000, April 3, 1999, and April 4, 1998, respectively. Fiscal years 2000
and 1999 each included 52 weeks; fiscal 1998 included 53 weeks.
REVENUE RECOGNITION
For the majority of its operations, the Company recognizes revenues upon
completion of the services it renders. Revenues and profits on substantially all
contracts are recognized using the percentage-of-completion method. Revenues
recorded under the percentage-of-completion method were $112,388,000 in fiscal
2000, $109,798,000 in fiscal 1999, and $117,464,000 in fiscal 1998. The
percentage of completion is determined by relating either the actual costs or
actual labor incurred to date 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 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. Amounts billed in excess of revenues
recognized are included in other accrued expenses in the accompanying balance
sheet. Revenues from soil-remediation services are recognized as soil is
processed and the Company bills customers upon receipt of contaminated soil at
its remediation centers.
9
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARY
Equity in earnings of unconsolidated subsidiary in the accompanying
statement of operations represents the Company's proportionate share of income
from a 50% investment in RETEC/TETRA L.C., acquired in December 1995 through
ThermoRetec's acquisition of RETEC. In October 1997, ThermoRetec sold its 50%
limited-liability interest in RETEC/TETRA to TETRA Thermal, Inc. (Note 2).
STOCK-BASED COMPENSATION PLANS
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to shareholders' investment.
INCOME TAXES
The Company and Thermo Electron have a tax allocation agreement under
which the Company and certain of its subsidiaries, exclusive of foreign
operations, are included in Thermo Electron's consolidated federal and certain
state income tax returns. The agreement provides that in years in which the
Company has taxable income, it will pay to Thermo Electron amounts comparable to
the taxes the Company would have paid if it had filed separate tax returns. If
Thermo Electron's equity ownership of the Company were to drop below 80%, the
Company would be required to file its own federal income tax return.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities calculated
using enacted tax rates in effect for the year in which the differences are
expected to be reflected in the tax return.
EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share have been computed by dividing net income
(loss) by the weighted average number of shares outstanding during the year.
Except where the result would be antidilutive, diluted earnings (loss) per share
have been computed assuming the exercise of stock options and warrants, as well
as their related income tax effects. Diluted earnings (loss) per share for all
periods exclude the effect of assuming the conversion of convertible obligations
and the elimination of the related interest expense and the exercise of put
rights, because the result would be antidilutive.
CASH AND CASH EQUIVALENTS
The Company, along with other European-based subsidiaries of Thermo
Electron, participates in a cash management arrangement in the Netherlands with
a wholly owned subsidiary of Thermo Electron. Under this arrangement,
participants' balances are pooled for interest calculation purposes. Interest
under this arrangement is based on Euro market rates. The Company has access to
a $9,020,000 line of credit under this arrangement. Thermo Electron guarantees
all of the obligations of each participant in this arrangement. At fiscal
year-end 2000, the Company had $2,228,000 invested and $8,965,000 borrowed under
this arrangement (Note 5).
At fiscal year-end 1999, $40,625,000 of the Company's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Company in effect lent excess cash to Thermo Electron, which
Thermo Electron collateralized with investments principally consisting of
corporate notes, U.S. government-agency securities, commercial paper, money
market funds, and other marketable securities, in the amount of at least 103% of
such obligation. The Company's funds subject to the repurchase agreement were
readily convertible into cash by the Company. The repurchase agreement earned a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter. Effective June 1999, the Company adopted a
new cash management arrangement with Thermo Electron, described below, that
replaces the repurchase agreement. At fiscal year-end 1999, the Company had
$1,042,000 invested and $9,228,000 borrowed under a similar arrangement in the
Netherlands.
10
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
At fiscal year-end 2000 and 1999, the Company's cash equivalents also
included investments in a money market fund, which has an original maturity of
three months or less. Cash equivalents are carried at cost, which approximates
market value.
ADVANCE TO/FROM AFFILIATE
Effective June 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice.
In addition, under the new domestic cash management arrangement, amounts
borrowed from Thermo Electron for domestic cash management purposes bear
interest at the 30-day Dealer Commercial Paper Rate plus 150 basis points, set
at the beginning of each month. The Company had $1,158,000 of borrowings under
this arrangement at fiscal year-end 2000 (Note 5).
INVENTORIES
Inventories are stated at the lower of cost (on an average-cost basis) or
market value and include materials, labor, and overhead. The components of
inventories are:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
----------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Raw Materials and Supplies $ 239 $ 640
Work in Process and Finished Goods 1,762 1,229
------ ------
$2,001 $1,869
====== ======
</TABLE>
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 primarily using the straight-line method over the
estimated useful lives of the property as follows: buildings and improvements, 5
to 40 years; machinery and equipment, 2 to 12 years; and leasehold improvements,
the shorter of the term of the lease or the life of the asset. Soil-remediation
units, which accounted for 5% and 8% of the Company's machinery and equipment,
net, at fiscal year-end 2000 and 1999, respectively, are depreciated based on an
hourly rate that is computed by estimating total hours of operation for each
unit. Property, plant, and equipment consists of:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
----------------------------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Land $ 6,272 $ 7,741
Buildings 37,709 42,161
Machinery, Equipment, and Leasehold Improvements 92,286 101,317
-------- -------
136,267 151,219
Less: Accumulated Depreciation and Amortization 66,311 59,705
-------- -------
$ 69,956 $91,514
======== =======
</TABLE>
11
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
OTHER ASSETS
Other assets in the accompanying balance sheet includes the costs of
acquired technology and other specifically identifiable intangible assets that
are being amortized using the straight-line method over their estimated useful
lives, which range from 5 to 20 years. These assets were $2,680,000 and
$3,291,000, net of accumulated amortization of $7,382,000 and $6,771,000, at
fiscal year-end 2000 and 1999, respectively.
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over periods ranging from 20 to 40
years. Accumulated amortization was $19,365,000 and $16,725,000 at fiscal
year-end 2000 and 1999, respectively. The Company assesses the future useful
life of this asset and other long-lived assets whenever events or changes in
circumstances indicate that the current useful life has diminished (Note 11).
Such events or circumstances generally would include the occurrence of operating
losses or a significant decline in earnings associated with the acquired
business or asset. The Company considers the future undiscounted cash flows of
the acquired companies in assessing the recoverability of this asset. The
Company assesses cash flows before interest charges and when impairment is
indicated, writes the asset down to fair value. If quoted market values are not
available, the Company estimates fair value by calculating the present value of
future cash flows. If impairment has occurred, any excess of carrying value over
fair value is recorded as a loss.
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 in the
"Accumulated other comprehensive items" component of shareholders' investment.
In the accompanying fiscal 2000 statement of operations, a $1,905,000 write-off
of cumulative foreign currency translation loss is included in restructuring
costs (Note 11). Foreign currency transaction gains and losses are included in
the accompanying statement of operations and are not material for the three
years presented.
COMPREHENSIVE INCOME
Comprehensive income combines net income and "other comprehensive items,"
which represents certain amounts that are reported as components of
shareholders' investment in the accompanying balance sheet, including foreign
currency translation adjustments and unrealized net of tax gains and losses on
available-for-sale investments. At fiscal year-end 2000 and 1999, the balance of
accumulated other comprehensive items represents the Company's cumulative
translation adjustment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRESENTATION
Certain amounts in fiscal 1999 have been reclassified to conform to the
presentation in the fiscal 2000 financial statements.
12
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
In August 1999, a subsidiary of the Company acquired the outstanding stock
of Dempsey Drums Limited for $2,286,000 in cash and 1,605 shares of the
subsidiary's common stock valued at $384,000. Dempsey Drums, an Ireland-based
service provider, specializes in the supply, disposal, and reconditioning of
steel and plastic drums and other specialized containers.
During fiscal 1999, the Company, through ThermoRetec, acquired one company
for $576,000 in cash and paid an additional $67,000 for a post-closing
adjustment relating to a fiscal 1998 acquisition.
In May 1997, the Company purchased a controlling interest in The Randers
Group Incorporated, a publicly traded provider of design, engineering, project
management, and construction services for industrial clients in the
manufacturing, pharmaceutical, and chemical-processing industries. The Company
purchased 1,420,000 shares of Randers' common stock from certain members of
Randers' management, and 84,000 shares from Thermo Power Corporation, an
affiliate of the Company, at a price of $3.125 per share, for an aggregate cost
of $4,700,000. Following these transactions, the Company owned approximately
53.3% of Randers' outstanding common stock. In addition, Thermo Electron owned
approximately 8.9% of Randers' outstanding common stock.
Subsequently, in September 1997, the Company entered into a definitive
agreement to transfer The Killam Group Inc., its wholly owned engineering and
consulting businesses, to Randers in exchange for newly issued shares of
Randers' common stock. Effective April 4, 1998, the agreement was amended to
provide that the price for these businesses would equal $70,644,407, the book
value of the transferred businesses as of April 4, 1998. The number of new
shares of Randers' common stock issued to the Company equaled such book value
divided by $3.125, or 22,606,210 shares. In January 1999, the Randers
shareholders approved the listing of these shares on the American Stock Exchange
and an amendment to Randers' certificate of incorporation changing Randers' name
to The Randers Killam Group Inc. Upon such issuance, the Company and Thermo
Electron owned approximately 94.8% and 1.0%, respectively, of Randers Killam's
outstanding common stock. The Company sold the Randers division in January 2000,
as discussed in "Dispositions" below.
In addition, during fiscal 1998, ThermoRetec made three acquisitions for
an aggregate purchase price of $5,665,000 in cash and 459,613 shares of
ThermoRetec's common stock, valued at $2,850,000. In fiscal 1998, Thermo
EuroTech made an acquisition of 70% of the outstanding shares of a business for
$4,400,000 in cash and a commitment to issue 69,200 shares of Thermo EuroTech's
common stock valued at $275,000. As of April 1, 2000, these shares had not been
issued. In lieu of issuing these shares, the Company plans to pay the fair value
of the shares, which was approximately $240,000 as of April 1, 2000.
These acquisitions have been accounted for using the purchase method of
accounting, and their results have been included in the accompanying financial
statements from their respective dates of acquisition. The aggregate cost of
these acquisitions, excluding the Randers division, exceeded the estimated fair
value of the acquired net assets by $12,660,000. Allocation of the purchase
price for these acquisitions was based on estimates of the fair value of the net
assets acquired and, for Dempsey Drums, is subject to adjustment upon
finalization of the purchase price allocation. The Company has gathered no
information that indicates the final allocation will differ materially from the
preliminary estimates. Pro forma data is not presented since the acquisitions
were not material to the Company's results of operations.
DISPOSITIONS
In March 2000, ThermoRetec sold the assets of a soil-recycling facility
for $400,000 in cash, of which $200,000 was placed in escrow. The release of the
escrowed funds to TPST is contingent upon the satisfaction of certain
post-closing conditions, primarily the achievement of fuel efficiency targets
for certain equipment. If certain of the post-closing conditions are not
satisfied, some or all of the escrowed funds will be returned to the buyer. The
purchase price of the assets was determined by the parties in arms-length
negotiations. The Company recognized a nominal loss on the sale.
13
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. ACQUISITIONS AND DISPOSITIONS (CONTINUED)
In January 2000, the Company sold substantially all of the assets and
liabilities of the Randers division, exclusive of certain real estate, to a new
corporation formed by a former vice president and director of Randers Killam.
The aggregate sales price of $538,000 consists of a promissory note secured by
certain real estate. The promissory note is payable in monthly installments with
a final maturity in 2003 and bears interest at 8.0%. In addition, the acquirer
assumed $776,000 of mortgage debt. Due to the fact that the Company received no
cash consideration at the time of sale, the sale of the real estate is being
accounted for under the deposit method. Under the deposit method, the Company
did not record the note receivable and continues to report the property that was
sold as well as the existing mortgage debt in the accompanying balance sheet.
Future cash receipts from the acquirer will be reported as a deposit on the
contract. The Company incurred a $3,309,000 loss on the sale, which has been
included in restructuring costs in the accompanying fiscal 2000 statement of
operations (Note 11).
In October 1997, ThermoRetec sold its 50% limited-liability interest in
RETEC/TETRA L.C. to TETRA Thermal, Inc. for $8,825,000 in cash. The Company
realized a pretax gain of $3,012,000 on the sale, which is classified as "gain
on sale of unconsolidated subsidiary" in the accompanying statement of
operations.
In addition, in October 1997, the Company sold substantially all of the
assets of its Holcroft Division, its thermal-processing equipment business,
excluding certain accounts receivable, to Holcroft L.L.C., an affiliate of
Madison Capital Partners. The sale price for the transferred assets consisted of
$10,897,000 in cash, two promissory notes for principal amounts aggregating
$2,881,000, and the assumption by Holcroft L.L.C. of certain liabilities of the
Holcroft Division. After recording a post-closing purchase price adjustment, the
Company incurred a nominal loss on the sale. This business contributed
$17,330,000 and $893,000 to revenues and operating income, respectively, in
fiscal 1998.
3. EMPLOYEE BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
STOCK OPTION PLANS
The Company has stock-based compensation plans for its key employees,
directors, and others. Two of these plans permit the grant of nonqualified and
incentive stock options. A third plan 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. The option
recipients and the terms of options granted under these plans are determined by
the Board Committee. Generally, options granted to date are exercisable
immediately, but are subject to certain transfer restrictions and the right of
the Company to repurchase shares issued upon exercise of the options at the
exercise price, upon certain events. The restrictions and repurchase rights
generally lapse ratably over a one- to ten-year period, depending on the term of
the option, which may range from five to twelve years. Nonqualified stock
options may be granted at any price determined by the Board Committee, although
incentive stock options must be granted at not less than the fair market value
of the Company's stock on the date of grant. Generally, all options have been
granted at fair market value. The Company also has a directors' stock option
plan that provides for the grant of stock options to outside 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 three to
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
the stock-based compensation plans of Thermo Electron.
In November 1998, the Company's employees, excluding its officers and
directors, were offered the opportunity to exchange previously granted options
to purchase shares of Company common stock for an amount of options equal to
half of the number of options previously held, exercisable at a price equal to
the fair market value at the time of the exchange offer. Holders of options to
acquire 1,182,000 shares at a weighted average exercise price of $8.80 elected
14
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
to participate in this exchange and, as a result, received options to purchase
591,000 shares of Company common stock at $4.50 per share, which are included in
the fiscal 1999 grants in the table below. The other terms of the new options
are the same as the exchanged options except that the holders may not sell
shares purchased pursuant to such new options for six months from the exchange
date. The options exchanged were canceled by the Company.
In February and April 1999, the Company awarded 59,300 shares of
restricted Company common stock to certain key employees. The shares had an
aggregate value of $297,000 and vest three years from the date of award,
assuming continued employment, with certain exceptions. The Company has recorded
the fair value of the restricted stock as deferred compensation in the
accompanying balance sheet and is amortizing such amount over the vesting
period.
A summary of the Company's stock option activity is:
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ ------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
---------------------------------------------- -------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options Outstanding, Beginning of Year 1,757 $6.38 1,986 $8.87 2,558 $6.99
Granted -- -- 1,111 4.78 296 7.67
Exercised (92) 4.65 -- -- (696) 1.36
Forfeited (226) 7.05 (158) 8.28 (172) 9.35
Canceled due to exchange -- -- (1,182) 8.80 -- --
----- ------ ------
Options Outstanding, End of Year 1,439 $6.39 1,757 $6.38 1,986 $8.87
===== ===== ====== ===== ====== =====
Options Exercisable 1,439 $6.39 1,757 $6.38 1,986 $8.87
===== ===== ====== ===== ====== =====
Options Available for Grant 484 351 327
===== ====== ======
</TABLE>
A summary of the status of the Company's stock options at April 1, 2000,
is:
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
---------------------------------------------------
Number Weighted Weighted
of Average Average
Shares Remaining Exercise
Range of Exercise Prices (In thousands) Contractual Life Price
--------------------------------------------- -------------------- ------------------- ------------------
<S> <C> <C> <C>
$ 4.16 - $ 5.72 879 4.4 years $4.75
5.73 - 7.29 43 3.9 years 6.70
7.30 - 8.86 127 5.3 years 8.28
8.87 - 10.40 390 3.4 years 9.42
-----
$ 4.16 - $ 10.40 1,439 4.2 years $6.39
=====
</TABLE>
15
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
EMPLOYEE STOCK PURCHASE PROGRAM
Substantially all of the Company's full-time employees are eligible to
participate in an employee stock purchase program sponsored by the Company and
Thermo Electron. Prior to November 1, 1998, the applicable shares of common
stock could be purchased at the end of a 12-month period at 95% of the fair
market value at the beginning of the period and the shares purchased were
subject to a six-month resale restriction. Effective November 1, 1998, the
applicable shares of common stock may be purchased at 85% of the lower of the
fair market value at the beginning or end of the plan year, and the shares
purchased are subject to a one-year resale restriction. Shares are purchased
through payroll deductions of up to 10% of each participating employee's gross
wages. During fiscal 2000 and 1998, the Company issued 8,289 and 13,976,
respectively, of its common stock under this program. No shares were issued
under this program during fiscal 1999.
PRO FORMA STOCK-BASED COMPENSATION EXPENSE
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for its stock-based compensation plans. Had compensation cost for awards granted
after fiscal 1995 under the Company's stock-based compensation plans been
determined based on the fair value at the grant dates consistent with the method
set forth under SFAS No. 123, the effect on the Company's net income (loss) and
earnings (loss) per share would have been:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 2000 1999 1998
----------------------------------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
Net Income (Loss):
As reported $ (43,219) $ (1,421) $ 3,273
Pro forma (44,237) (3,172) 2,218
Basic Earnings (Loss) per Share:
As reported (2.27) (.07) .18
Pro forma (2.32) (.16) .12
Diluted Earnings (Loss) per Share:
As reported (2.27) (.07) .17
Pro forma (2.32) (.16) .12
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to April 2, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future years.
Pro forma compensation expense for options granted is reflected over the vesting
period; therefore, future pro forma compensation expense may be greater as
additional options are granted.
The weighted average fair value per share of options granted was $1.45 and
$2.27 in fiscal 1999 and 1998, respectively. No options were granted in fiscal
2000. The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1999 1998
----------------------------------- ----------- ---------
<S> <C> <C>
Volatility 28% 27%
Risk-free Interest Rate 4.9% 5.6%
Expected Life of Options 4.0 years 3.6 years
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option-pricing models require the input of
highly subjective assumptions, including expected stock price volatility.
Because the Company's employee stock
16
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. EMPLOYEE BENEFIT PLANS (CONTINUED)
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
401(K) SAVINGS PLAN
The majority of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to this
401(k) savings plan are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For this plan,
the Company contributed and charged to expense $651,000, $650,000, and $955,000
in fiscal 2000, 1999, and 1998, respectively.
OTHER RETIREMENT PLANS
Certain of the Company's subsidiaries offer other retirement plans in lieu
of participation in the Thermo Electron 401(k) savings plan. Company
contributions to these plans are based on formulas determined by the Company.
For these plans, the Company contributed and charged to expense $4,378,000,
$4,258,000, and $3,585,000 in fiscal 2000, 1999, and 1998, respectively.
4. INCOME TAXES
The components of income (loss) before provision for income taxes,
minority interest, and extraordinary item are:
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
--------------------------------------------------------------------- ----------- ------------ -----------
<S> <C> <C> <C>
Domestic $(22,143) $ 179 $ 8,812
Foreign (21,715) (987) (298)
-------- -------- --------
$(43,858) $ (808) $ 8,514
======== ======== ========
The components of the provision for income taxes are:
(In thousands) 2000 1999 1998
--------------------------------------------------------------------- ------------ ----------- -----------
Currently Payable (Prepaid):
Federal $ 2,760 $2,232 $ 2,688
State 1,990 1,415 1,330
Foreign 1,209 (78) (110)
------- ------ -------
5,959 3,569 3,908
------- ------ -------
Net Deferred (Prepaid):
Federal (2,997) (1,365) 1,035
State (440) (201) 203
Foreign -- (217) --
------- ------ -------
(3,437) (1,783) 1,238
------- ------ -------
$ 2,522 $1,786 $ 5,146
======= ====== =======
</TABLE>
17
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES (CONTINUED)
The Company and its majority-owned subsidiaries receive a tax deduction
upon exercise of nonqualified stock options by employees for the difference
between the exercise price and the market price of the underlying common stock
on the date of exercise. The provision for income taxes that is currently
payable does not reflect $207,000, $676,000, and $928,000 in fiscal 2000, 1999,
and 1998, respectively, of such benefits of the Company and its majority-owned
subsidiaries that have been allocated to capital in excess of par value,
directly or through the effect of majority-owned subsidiaries' equity
transactions.
The provision for income taxes in the accompanying statement of operations
differs from the provision calculated by applying the statutory federal income
tax rate of 34% to income (loss) before provision for income taxes, minority
interest, and extraordinary item due to:
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
--------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Provision (Benefit) for Income Taxes at Statutory Rate $(14,912) $ (275) $ 2,895
Differences Resulting From:
Amortization and write-off of cost in excess of net assets 7,561 898 739
of acquired companies
Unbenefited foreign loss 6,811 -- --
State income taxes, net of federal tax 1,023 801 1,012
Nondeductible expenses 163 90 64
Dividend from less than 80%-owned subsidiary - 122 118
Other, net 1,876 150 318
-------- ------- --------
$ 2,522 $ 1,786 $ 5,146
======== ======= ========
</TABLE>
Deferred tax asset and deferred income taxes in the accompanying balance
sheet consist of:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
--------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C>
Deferred Tax Asset:
Net operating loss and tax credit carryforward $10,343 $ 6,597
Reserves and accruals 5,939 3,519
Accrued compensation 1,328 2,315
Allowance for doubtful accounts 42 212
Other 766 179
------- -------
18,418 12,822
Less: Valuation allowance 10,343 4,814
------- -------
$ 8,075 $ 8,008
======= =======
Deferred Income Taxes:
Depreciation $ 1,351 $ 3,637
Other deferred items 100 (99)
------- -------
$ 1,451 $ 3,538
======= =======
</TABLE>
18
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INCOME TAXES (CONTINUED)
The valuation allowance relates to the uncertainty surrounding the
realization of the tax benefits attributable primarily to state and foreign
operating loss carryforwards. The valuation allowance increased in fiscal 2000
as a result of certain losses that arose during the year. Of the total fiscal
2000 valuation allowance, $168,000 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 Company has not recognized a deferred tax liability for the difference
between the book basis and tax basis of its investment in the common stock of
its domestic subsidiaries (such difference relates primarily to unremitted
earnings and gains on issuance of stock by subsidiaries) because the Company
does not expect this basis difference to become subject to tax at the parent
level. The Company believes it can implement certain tax strategies to recover
its investment in its domestic subsidiaries tax-free.
The net operating loss carryforward primarily consists of $22,750,000 of
foreign carryforwards, which do not expire, and $27,110,000 of state
carryforwards, substantially all of which expire in 2003.
5. SHORT- AND LONG-TERM OBLIGATIONS
SHORT-TERM OBLIGATIONS
At fiscal year-end 2000, the Company had borrowings of $8,965,000 under an
arrangement with a wholly owned subsidiary of Thermo Electron (Note 1). The
interest rate for these borrowings was 4.20%. At fiscal year-end 1999,
$9,228,000 was outstanding under a similar arrangement, bearing interest at
4.00%.
At fiscal year-end 2000, the Company had borrowings of $1,158,000 under an
arrangement with Thermo Electron (Note 1). The interest rate on these borrowings
was 6.35% at fiscal year-end 2000.
Thermo EuroTech has access to approximately $8,000,000 under a line of
credit denominated in Irish punts. At fiscal year-end 2000 and 1999, borrowings
were $7,905,000 and $6,705,000, respectively, bearing interest at 3.60%.
In addition, Thermo EuroTech has short-term borrowings outstanding of
$1,710,000 at fiscal year-end 2000, bearing interest at 8.00%.
19
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SHORT- AND LONG-TERM OBLIGATIONS (CONTINUED)
LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
(In thousands except per share amounts) 2000 1999
----------------------------------------------------------------------------------- ----------- ----------
<S> <C> <C>
4 5/8% Subordinated Convertible Debentures, Due 2003, Convertible at $111,850 $111,850
$15.90 per Share (includes $1,659 and $515 held by Thermo Electron)
4 7/8% Subordinated Convertible Debentures, Due May 2000, Convertible 37,950 37,950
into Shares of ThermoRetec at $17.92 per Share (includes $4,300 and
$4,180 held by Thermo Electron)
2 1/2% Subordinated Convertible Debentures, Due 2001, Convertible into 4,787 6,999
Shares of Thermo EuroTech (Delaware) Inc. at $5.25 per Share
6.25% Mortgage Loan, Payable in Monthly Installments of $9, With -- 1,063
Balloon Payment in May 1999
Mortgage Loan, Payable in Monthly Installments of $5, With Final 769 856
Payment in 2003 (a)
Other 1,449 1,584
-------- --------
156,805 160,302
Less: Current Maturities 38,692 1,685
-------- --------
$118,113 $158,617
======== ========
</TABLE>
(a) Bears interest at Prime Rate, which was 9.00% at April 1, 2000.
During fiscal 1999, the Company reorganized the capital structure of
Thermo EuroTech by offering shareholders the right to exchange their common
shares in Thermo EuroTech for 2 1/2% subordinated convertible debentures due
2001 (the Debentures) issued by a new wholly owned Delaware subsidiary of the
Company, known as Thermo EuroTech (Delaware) Inc. (TETD). As of October 31,
1998, when the exchange offer expired, 1,646,854 common shares had been
exchanged by Thermo EuroTech's shareholders for the Debentures having an
aggregate principal amount equal to $6,999,000. The reacquisition of these
shares was accounted for using the purchase method of accounting. Following the
transaction, TETD owned 78% of Thermo EuroTech's outstanding common shares. The
Debentures are guaranteed on a subordinated basis by Thermo Electron.
During fiscal 2000, the Company purchased $2,212,000 principal amount of
the 2 1/2% subordinated convertible debentures for $2,034,000 in cash, resulting
in an extraordinary gain of $107,000, net of taxes of $71,000.
The 4 5/8% and 4 7/8% subordinated convertible debentures are guaranteed
on a subordinated basis by Thermo Electron. The Company has agreed to reimburse
Thermo Electron in the event Thermo Electron is required to make a payment under
the guarantees. The 4 7/8% debentures were paid in cash in May 2000.
The annual requirements for long-term obligations as of April 1, 2000, are
$38,692,000 in fiscal 2001; $5,302,000 in fiscal 2002; $720,000 in fiscal 2003;
$111,961,000 in fiscal 2004; $90,000 in fiscal 2005; and $40,000 in fiscal 2006
and thereafter. Total requirements of long-term obligations are $156,805,000.
See Note 10 for information pertaining to the fair value of the Company's
long-term obligations.
20
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases land, office, operating facilities, and equipment under
operating leases expiring or cancelable at various dates through fiscal 2009.
The accompanying statement of operations includes expenses from operating leases
of $6,308,000, $6,273,000, and $5,822,000 in fiscal 2000, 1999, and 1998,
respectively. Future minimum payments due under noncancelable operating leases
at April 1, 2000, are $4,358,000 in fiscal 2001; $2,656,000 in fiscal 2002;
$1,508,000 in fiscal 2003; $952,000 in fiscal 2004; $514,000 in fiscal 2005;
$1,000,000 in fiscal 2006 and thereafter. Total future minimum lease payments
are $10,988,000. See Note 7 for an office and manufacturing facility leased from
Thermo Electron.
CONTINGENCIES
The Company is contingently liable with respect to lawsuits and other
matters that arose in the ordinary course of business. In the opinion of
management, these contingencies will not have a material adverse effect upon the
financial position of the Company or its results of operations.
7. RELATED-PARTY TRANSACTIONS
CORPORATE SERVICES AGREEMENT
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company currently pays Thermo Electron annually an amount equal to 0.8% of
the Company's revenues. In calendar 1997, the Company paid an amount equal to
1.0% of the Company's revenues. For these services, the Company was charged
$2,459,000, $2,480,000, and $2,845,000 in fiscal 2000, 1999, and 1998,
respectively. The fee is reviewed and adjusted annually by mutual agreement of
the parties. The corporate services agreement is renewed annually but can be
terminated upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron
Corporate Charter defines the relationship among Thermo Electron and its
majority-owned subsidiaries). Management believes that the service fee charged
by Thermo Electron is reasonable and that such fees are representative of the
expenses the Company would have incurred on a stand-alone basis. For additional
items such as employee benefit plans, insurance coverage, and other identifiable
costs, Thermo Electron charges the Company based upon costs attributable to the
Company. In fiscal 2000 and 1999, Thermo Electron billed the Company an
additional $7,000 and $157,000, respectively, for certain administrative
services required by the Company that were not covered by the corporate services
agreement.
DEVELOPMENT AGREEMENT
The Company and Thermo Electron entered into a development agreement under
which Thermo Electron agreed to fund up to $4,000,000 of the direct and indirect
costs of the Company's development of soil-remediation centers. As of October 2,
1993, all such funding under this agreement was completed. In exchange for this
funding, the Company granted Thermo Electron a royalty equal to approximately 3%
of net revenues from soil-remediation services performed at the centers
developed under the agreement. The royalty payments may cease if the amounts
paid by the Company yield a certain internal rate of return to Thermo Electron
on the funds advanced to the Company under the agreement. Two sites were
developed under this agreement. The Company paid royalties of $196,000,
$186,000, and $115,000 in fiscal 2000, 1999, and 1998, respectively, relating to
this agreement, which are included in selling, general, and administrative
expenses in the accompanying statement of operations.
21
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. RELATED-PARTY TRANSACTIONS (CONTINUED)
OPERATING LEASE
In addition to the operating leases discussed in Note 6, the Company
leases an office and operating facility from Thermo Electron. The accompanying
statement of operations includes expenses from this operating lease of $166,000
in fiscal 2000, 1999, and 1998. The future minimum payments due under the lease
as of April 1, 2000, are $166,000 in each of fiscal 2001 through 2006. Total
future minimum lease payments are $996,000. In June 2000, the Company sold the
business that was the lessee under this arrangement (Note 17). The buyer
purchased the building from Thermo Electron.
OTHER RELATED-PARTY TRANSACTIONS
The Company purchases and sells products and services in the ordinary
course of business with other companies affiliated with Thermo Electron. Sales
of services to such affiliated companies totaled $288,000, $379,000, and
$320,000 in fiscal 2000, 1999, and 1998, respectively. Purchases of products and
services from such affiliated companies total $641,000, $231,000, and $938,000
in fiscal 2000, 1999, and 1998, respectively.
CASH MANAGEMENT
The Company invests excess cash in arrangements with Thermo Electron as
discussed in Note 1.
SHORT- AND LONG-TERM OBLIGATIONS
See Note 5 for a description of short- and long-term obligations of the
Company held by Thermo Electron.
8. COMMON STOCK
At fiscal year-end 1998, 847,678 put rights were attached to certain
shares of Company common stock which were previously issued in connection with
an acquisition. The put rights obligated the Company, at the holders' option, to
purchase shares of the Company's common stock for $8.00 per share at any time
through January 2002. At the time a holder elected to tender shares, the Company
had the option to net cash settle the obligation in lieu of purchasing the
shares. During fiscal 2000 and 1999, the Company repurchased 423,854 and 423,824
shares of common stock, respectively, under such arrangements and settled the
put right obligation.
At April 1, 2000, the Company had 700,500 warrants outstanding to purchase
shares of its common stock, which are exercisable at prices ranging from $10.00
to $11.34 per share and expire in fiscal 2001. The warrants were issued in
fiscal 1992 and 1993 in connection with private placements completed by three of
ThermoRetec's soil-remediation subsidiaries.
At April 1, 2000, the Company had reserved 9,733,648 unissued shares of
its common stock for possible issuance under stock-based compensation plans,
conversion of the 4 5/8% subordinated convertible debentures, and exercise of
warrants.
9. TRANSACTIONS IN STOCK OF SUBSIDIARIES
Dividends declared by ThermoRetec were $1,356,000, $2,610,000, and
$2,504,000 in fiscal 2000, 1999, and 1998, respectively. Dividends declared by
ThermoRetec include $947,000, $1,798,000, and $1,736,000 in fiscal 2000, 1999,
and 1998, respectively, that were allocated to the Company. Dividends declared
in fiscal 2000 were paid in cash and in fiscal 1999 and 1998 were reinvested in
611,957 shares and 254,833 shares, respectively, of ThermoRetec's common stock
pursuant to ThermoRetec's Dividend Reinvestment Plan.
22
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. TRANSACTIONS IN STOCK OF SUBSIDIARIES (CONTINUED)
The Company's percentage ownership of its majority-owned subsidiaries at
year end was:
<TABLE>
<CAPTION>
2000 1999 1998
------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
ThermoRetec 70% 70% 69%
Randers Killam (a) 95% 95% 53%
Thermo EuroTech 88% 78% 56%
</TABLE>
(a) Upon issuance of 22,606,210 shares of Randers Killam common stock to the
Company, as described in Note 2, the Company owned approximately 95% of
Randers Killam's outstanding common stock.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, advance to affiliate, accounts receivable, short-term obligations
and current maturities of long-term obligations, accounts payable, due to parent
company and affiliated companies, and long-term obligations. The carrying
amounts of these financial instruments, with the exception of long-term
obligations, approximate fair value due to their short-term nature.
The fair value of long-term obligations was determined based on quoted
market prices and on borrowing rates available to the Company at the respective
year ends. The carrying amount and fair value of the Company's long-term
obligations are:
<TABLE>
<CAPTION>
2000 1999
-------------------- ---------------------
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
-------------------------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Subordinated Convertible Debentures $116,637 $102,097 $156,799 $ 139,587
Other 1,476 1,476 1,818 1,818
-------- -------- -------- ---------
$118,113 $103,573 $158,617 $ 141,405
======== ======== ======== =========
</TABLE>
11. RESTRUCTURING COSTS
FISCAL 2000 PLAN
In May 1999, the Company announced that its majority-owned subsidiaries
planned to sell several businesses. At the time of the decision, the businesses
that were to be sold were considered outside the future focus of the Company and
its subsidiaries because of low growth prospects, marginal profitability, or the
need to invest significant capital to achieve desired returns. The businesses
proposed to be sold include the used-oil processing operation of Thermo
EuroTech, N.V.; three soil-recycling facilities of ThermoRetec, in addition to
the sites previously announced, discussed below; and the Randers division, BAC
Killam Inc., and E3-Killam Inc. businesses of Randers Killam. The Randers Killam
businesses provide engineering and construction services, including
transportation planning and design. In connection with these actions, the
Company recorded $58,694,000 of restructuring and related costs during fiscal
2000, including restructuring costs of $56,981,000, a tax asset write-off of
$1,055,000, and an inventory provision of $658,000. In the accompanying
statement of operations, the tax write-off is included in provision for income
taxes and the inventory provision is included in cost of revenues. Restructuring
costs include a $21,113,000 write-down of cost in excess of net assets of
acquired companies to reduce the carrying value of the businesses
23
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. RESTRUCTURING COSTS (CONTINUED)
proposed to be sold to the estimated proceeds from their sale; a $19,997,000
write-down of fixed assets to their estimated disposal value; $2,985,000 for
ongoing lease costs for facilities that will be exited in connection with the
sale of certain businesses; $2,494,000 for estimated land reclamation costs;
$5,517,000 for losses, primarily on the sale of the Randers division (Note 2)
and BAC Killam (Note 17); a $1,905,000 charge for the cumulative foreign
currency translation loss adjustment related to Thermo EuroTech's used-oil
processing business; a $1,788,000 write-off of intangible assets related to
license acquisition costs at the used-oil processing business; $645,000 for
severance costs for 44 employees across all functions, 14 of whom were
terminated in fiscal 2000; a $442,000 write-off of other current assets
associated with the businesses to be sold; and $95,000 for retention bonuses
paid. The tax write-off represents a deferred tax asset that will not be
realized as a result of selling Thermo EuroTech's used-oil processing business.
The inventory provision also relates to exiting this business. The write-down of
fixed assets principally relates to special-purpose equipment in the used-oil
processing and soil-recycling businesses. The effects of these charges reduced
depreciation and amortization expense, thereby reducing the Company's pretax
operating loss by approximately $3,013,000 during fiscal 2000.
FISCAL 1999 PLAN
During fiscal 1999, the Company recorded $10,217,000 of restructuring
costs, which were accounted for in accordance with Emerging Issues Task Force
Pronouncement (EITF) 94-3. Of these restructuring costs, $9,176,000 was recorded
by ThermoRetec in connection with the closure of two soil-recycling facilities.
ThermoRetec took this action after a period of operating losses at the
facilities, which it believes arose from relaxed enforcement of state rules
concerning disposal of contaminated soils and the availability of alternative
disposal options to customers. The costs include a $6,238,000 write-down of
fixed assets to their estimated disposal value of $895,000 and a $1,884,000
write-off of intangible assets, including $715,000 of cost in excess of net
assets of acquired companies, as well as $1,054,000 for ongoing lease costs and
severance for 13 employees, 6 of whom were terminated in fiscal 1999 and none of
whom were terminated in fiscal 2000. ThermoRetec closed one soil-recycling
facility in March 1999 and sold the second soil-recycling facility in March
2000. The Company suspended depreciation on the assets written down following
the write-down. In addition, the Company recorded $1,041,000 of restructuring
costs for abandoned-facility payments relating to the consolidation of the
facilities of another business. The annual savings from the consolidation of
these facilities totals $0.2 million and such savings began in September 1998,
the date of abandonment.
All businesses announced for sale prior to the January 2000 decision by
Thermo Electron to sell all of the businesses of the Company reported aggregate
revenues and operating loss, prior to restructuring and related costs, of
$35,016,000 and $1,830,000, respectively, in fiscal 2000 and $54,369,000 and
$1,640,000, respectively, in fiscal 1999. The aggregate net assets to be sold of
$5,576,000 at April 1, 2000, include net assets of $2,284,000 in the Engineering
and Design segment and $3,292,000 in the Environmental-liability Management
segment. Although there can be no assurance concerning the timing of the
completion of the sale of any of these businesses, the Company expects that the
remaining sales will primarily occur in the first half of fiscal 2001.
24
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. RESTRUCTURING COSTS (CONTINUED)
Substantially all of the restructuring and related costs to date have been
noncash charges except for amounts recorded as accrued restructuring costs. A
summary of the changes in accrued restructuring costs, which the Company expects
to pay primarily over the first six months of fiscal 2001, is as follows:
<TABLE>
<CAPTION>
Facility-
closing Land
(In thousands) Severance Costs Reclamation Other Total
------------------------------------ ------------- ------------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Fiscal 1999 PLAN
BALANCE AT APRIL 4, 1998 $ -- $ -- $ -- $ -- $ --
Provision charged to expense 213 1,882 -- -- 2,095
Usage (101) (275) -- -- (376)
------ ------ ------ ------ ------
BALANCE AT APRIL 3, 1999 112 1,607 -- -- 1,719
Usage (78) (69) -- -- (147)
Reserves reversed due to (34) (665) -- -- (699)
sale of businesses ------ ------ ------ ------ ------
BALANCE AT APRIL 1, 2000 $ -- $ 873 $ -- $ -- $ 873
====== ====== ====== ====== ======
Fiscal 2000 PLAN
BALANCE AT APRIL 3, 1999 $ -- $ -- $ -- $ -- $ --
Provision charged to expense 645 2,985 2,494 95 6,219
Usage (239) (222) (192) (95) (748)
Currency translation -- (191) (246) -- (437)
------ ------ ------ ------ ------
BALANCE AT APRIL 1, 2000 $ 406 $2,572 $2,056 $ - $5,034
====== ====== ====== ====== ======
</TABLE>
The Company expects to incur additional restructuring costs of
approximately $2,100,000, primarily during the remainder of calendar 2000, for
severance, employee retention, and relocation expenses. Pursuant to the
requirements of EITF 94-3, these costs are not permitted as charges until they
are incurred.
In February 2000, ThermoRetec signed a letter of intent to sell its five
remaining soil-remediation facilities, including three facilities announced for
sale earlier in fiscal 2000. The transaction is expected to be completed before
the end of July 2000, although there can be no assurance that ThermoRetec will
complete this sale. Revenues and operating income before restructuring charges
of the five soil-remediation facilities that will be sold aggregated $23,376,000
and $3,432,000, respectively, in fiscal 2000, and $19,795,000 and $1,729,000,
respectively, in fiscal 1999.
25
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- ----------- ---------- ---------
<S> <C> <C> <C>
Cash Paid For:
Interest $ 7,942 $ 8,244 $ 10,363
Income taxes $ 4,440 $ 3,025 $ 4,041
Noncash Activities:
Fair value of assets of acquired companies $ 3,328 $ 643 $ 29,477
Cash paid for acquired companies (2,286) (643) (14,765)
Issuance of subsidiary common stock for acquired companies (384) -- (3,125)
--------- -------- --------
Liabilities assumed of acquired companies $ 658 $ -- $ 11,587
========= ======== ========
Issuance of subsidiary subordinated convertible debentures in $ -- $ 6,999 $ --
exchange for subsidiary common stock (Note 5)
Conversions of subordinated convertible debentures $ -- $ -- $ 13,220
Company common stock received in settlement of a note receivable $ -- $ 668 $ --
Notes receivable received upon sale of business (Note 2) $ -- $ -- $ 2,881
</TABLE>
13. BUSINESS SEGMENT INFORMATION
The Company organizes and manages its businesses by individual functional
operating entity. The Company has combined its operating entities into four
segments: Environmental-liability Management, Engineering and Design, Laboratory
Testing, and Metal Treating. In classifying entities into a particular segment,
the Company aggregates businesses with similar economic characteristics,
services, methods of providing services, customers, and regulatory environments.
The Environmental-liability Management segment is a national provider of
environmental-liability and resource-management services, offering these and
related consulting services in four areas: consulting and engineering, nuclear
remediation, soil remediation, and fluids recycling.
The Engineering and Design segment provides comprehensive engineering and
outsourcing services such as water and wastewater treatment; highway and bridge
engineering; infrastructure engineering; and, prior to the January 2000 sale of
the Randers division (Note 2), process engineering and construction. In
addition, this segment provides consulting services that address natural
resource management issues. In April 2000, the Company sold the assets of its
BAC Killam subsidiary, which performed the Company's highway and bridge
engineering services (Note 17).
The Laboratory Testing segment operates analytical laboratories that
provide environmental- and pharmaceutical-testing services.
The Metal Treating segment performs metallurgical processing services
using thermal-treatment equipment. Until the October 1997 sale of its equipment
division (Note 2), this segment also designed, manufactured, and installed
advanced custom-engineered, thermal-processing systems. In June 2000, the
Company sold the remaining businesses comprising this segment (Note 17).
26
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
--------------------------------------------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
Revenues:
Environmental-liability Management (a) $ 166,157 $159,094 $141,115
Engineering and Design (b) 79,638 91,839 84,566
Laboratory Testing (c) 44,759 40,523 37,485
Metal Treating 17,246 19,274 36,618
Intersegment sales elimination (d) (471) (691) (998)
--------- -------- --------
$ 307,329 $310,039 $298,786
========= ======== ========
Income (Loss) Before Provision for Income Taxes, Minority Interest, and
Extraordinary Item:
Environmental-liability Management (e) $ (30,218) $ (3,644) $ (454)
Engineering and Design (f) (13,271) 4,406 6,303
Laboratory Testing 6,553 5,206 4,363
Metal Treating 1,685 2,339 4,278
Corporate (g) (2,674) (2,319) (2,756)
--------- -------- --------
Total operating income (loss) (37,925) 5,988 11,734
Interest and other expense, net (5,933) (6,796) (3,220)
--------- -------- --------
$ (43,858) $ (808) $ 8,514
========= ======== ========
Total Assets:
Environmental-liability Management $ 149,234 $168,723 $166,925
Engineering and Design 88,935 106,301 102,394
Laboratory Testing 51,465 48,434 43,557
Metal Treating 12,898 11,509 12,795
Corporate (h) 2,021 15,498 34,855
--------- -------- --------
$ 304,553 $350,465 $360,526
========= ======== ========
Depreciation and Amortization:
Environmental-liability Management $ 7,128 $ 9,245 $ 7,672
Engineering and Design 2,306 3,117 3,003
Laboratory Testing 3,901 3,527 2,865
Metal Treating 872 834 1,007
Corporate 8 100 237
--------- -------- --------
$ 14,215 $ 16,823 $ 14,784
========= ======== ========
</TABLE>
27
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
(In thousands) 2000 1999 1998
------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Capital Expenditures:
Environmental-liability Management $ 5,161 $ 8,385 $ 8,916
Engineering and Design 1,355 1,632 1,759
Laboratory Testing 4,093 6,463 7,018
Metal Treating 2,656 1,053 764
Corporate -- (118) 3
------- ------- -------
$13,265 $17,415 $18,460
======= ======= =======
</TABLE>
(a) Includes intersegment sales of $7,000 and $82,000 in fiscal 1999 and 1998,
respectively.
(b) Includes intersegment sales of $27,000, $60,000, and $73,000 in fiscal 2000,
1999, and 1998, respectively.
(c) Includes intersegment sales of $444,000, $624,000, and $843,000 in fiscal
2000, 1999, and 1998, respectively.
(d) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(e) Includes restructuring and related costs of $38,368,000 and $9,176,000 in
fiscal 2000 and 1999, respectively (Note 11).
(f) Includes restructuring costs of $19,271,000 and $1,023,000 in fiscal 2000
and 1999 (Note 11).
(g) Primarily general and administrative expenses.
(h) Primarily cash, cash equivalents, and advance to affiliate.
14. EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share were calculated as follows:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 2000 1999 1998
------------------------------------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
BASIC
Net Income (Loss) $(43,219) $ (1,421) $ 3,273
-------- -------- -------
Weighted Average Shares 19,033 19,402 18,700
-------- -------- -------
Basic Earnings (Loss) per Share $ (2.27) $ (.07) $ .18
======== ======== =======
DILUTED
Net Income (Loss) $(43,219) $ (1,421) $ 3,273
Effect of Majority-owned Subsidiaries' Dilutive Securities - (2) (13)
-------- -------- -------
Income (Loss) Available to Common Shareholders, as Adjusted $(43,219) $ (1,423) $ 3,260
-------- -------- -------
Weighted Average Shares 19,033 19,402 18,700
Effect of Stock Options -- -- 278
-------- -------- -------
Weighted Average Shares, as Adjusted 19,033 19,402 18,978
-------- -------- -------
Diluted Earnings (Loss) per Share $ (2.27) $ (.07) $ .17
======== ======== =======
</TABLE>
Options to purchase 597,000, 1,980,000, and 1,156,000 shares of common
stock were not included in the computation of diluted earnings (loss) per share
for fiscal 2000, 1999, and 1998, respectively. Their effect would have been
antidilutive because the exercise price was greater than the average market
price for the common stock and, in fiscal 2000 and 1999, due to the Company's
net loss position. In addition, the computation of diluted earnings (loss)
28
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. EARNINGS (LOSS) PER SHARE (CONTINUED)
per share for each period excludes the effect of assuming the conversion of
convertible obligations because the effect would be antidilutive. The
calculation for each period excluded $111,850,000 principal amount of 4 5/8%
subordinated convertible debentures, convertible at $15.90 per share.
An extraordinary gain recorded by the Company decreased basic and diluted
loss per share by $.01 in fiscal 2000 (Note 5).
15. PROPOSED MERGER
On October 19, 1999, the Company entered into a definitive agreement and
plan of merger, as amended, with Thermo Electron, pursuant to which Thermo
Electron would acquire all of the outstanding shares of Company common stock
held by shareholders other than Thermo Electron in exchange for Thermo Electron
common stock worth between $7.50 and $9.25 per share of Company common stock.
The number of Thermo Electron shares to be issued to Thermo TerraTech minority
shareholders will be determined at the time of the merger transaction, according
to the following conditions: If during the 20 trading days immediately prior to
the effective date of the merger the average closing price of Thermo Electron
common stock is less than $18.75, Thermo TerraTech shareholders would receive
common stock worth the equivalent of $7.50 per share of Thermo TerraTech common
stock. However, Thermo Electron may elect to terminate the agreement if it would
be required to issue 1.8 million or more shares of Thermo Electron common stock.
If the average closing price of Thermo Electron common stock is between $18.75
and $23.125, each share of Thermo TerraTech common stock would be exchanged for
.4 shares of Thermo Electron common stock. If the average closing price of
Thermo Electron common stock is greater than $23.125, Thermo TerraTech
shareholders would receive Thermo Electron common stock worth the equivalent of
$9.25 per share of Thermo TerraTech common stock. At the same time, the
Company's two subsidiaries, ThermoRetec and Randers Killam, also entered into
merger agreements with Thermo Electron, pursuant to which all of the shares of
common stock of those companies held by stockholders other than the Company and
Thermo Electron would be acquired for $7.00 and $4.50 per share, respectively,
without interest, in cash. The mergers of ThermoRetec and Randers Killam were
completed effective June and May 2000, respectively. The Board of Directors of
the Company approved the merger agreement based on a recommendation by a special
committee of the Board of Directors, consisting of an independent director of
the Company. The completion of the Company's merger is subject to certain
conditions, including shareholder approval of the merger agreement and the
completion of review by the Securities and Exchange Commission of certain
required filings. Thermo Electron intends to vote all of its shares of common
stock of the Company in favor of approval of the merger agreement and,
therefore, approval of the merger agreement is assured. This merger is expected
to be completed in the third quarter of calendar 2000. Following the merger, the
Company's common stock would cease to be publicly traded.
29
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. UNAUDITED QUARTERLY INFORMATION
(In thousands except per share amounts)
<TABLE>
<CAPTION>
2000 First Second Third Fourth
---------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 75,908 $ 78,036 $ 80,846 $ 72,539
Gross Profit (a) 15,694 16,420 17,617 14,216
Income (Loss) Before Extraordinary Item (45,094) 1,207 86 475
Net Income (Loss) (b) (45,094) 1,207 182 486
Earnings (Loss) per Share:
Basic (2.37) .06 .01 .03
Diluted (2.37) .06 .01 .02
1999 First Second (c) Third Fourth
---------------------------------------------------------- ----------- ----------- ----------- -----------
Revenues $ 76,693 $ 77,177 $ 80,400 $ 75,769
Gross Profit 15,648 15,143 15,851 15,787
Net Income (Loss) 1,001 (3,696) 771 503
Basic and Diluted Earnings (Loss) per Share .05 (.19) .04 .03
</TABLE>
(a) Reflects a pretax charge of $658,000 for restructuring in the first quarter.
(b) Reflects pretax charges of $55,910,000, $120,000, $2,207,000, and $457,000
for restructuring and related costs in the first, second, third, and fourth
quarters, respectively.
(c) Reflects a pretax charge of $10,217,000 for restructuring costs.
17. SUBSEQUENT EVENTS
On April 14, 2000, BAC Killam sold all of its assets for $3,341,000, of
which approximately $1,374,000 was paid in cash at the closing. The balance
represents accounts receivable of BAC Killam that will be collected by the buyer
and be paid to the Company upon collection (less a five percent collection fee).
On June 1, 2000, the Company sold substantially all of the assets and
liabilities of its Metallurgical, Inc., Cal-Doran Metallurgical Services, Inc.,
and Metal Treating Inc. subsidiaries for $15,700,000 in cash, subject to
adjustment based on the difference between the net assets as of the closing date
of the sale and $8,323,000. The selling price includes $1,092,000 of real estate
leased by the businesses sold that was owned by Thermo Electron. The Company
agreed to indemnify the buyer for expenses incurred by the buyer in excess of
$1,000,000, but not to exceed $3,500,000, from certain potential environmental
liabilities. The Company has not recorded a liability in connection with this
indemnity because the amount that would likely be paid by the Company, if any,
cannot be reasonably estimated.
30
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Thermo TerraTech Inc.:
We have audited the accompanying consolidated balance sheet of Thermo
TerraTech Inc. (a Delaware corporation and an 88%-owned subsidiary of Thermo
Electron Corporation) and subsidiaries as of April 1, 2000, and April 3, 1999,
and the related consolidated statements of operations, cash flows, and
comprehensive income and shareholders' investment for each of the three years in
the period ended April 1, 2000. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
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
TerraTech Inc. and subsidiaries as of April 1, 2000, and April 3, 1999, and the
results of their operations and their cash flows for each of the three years in
the period ended April 1, 2000, in conformity with accounting principles
generally accepted in the United States.
Arthur Andersen LLP
Boston, Massachusetts May 18, 2000
(except with respect to the matters discussed
in Note 17, as to which the date is June 1, 2000)
31
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed immediately after this Management's
Discussion and Analysis of Financial Condition and Results of Operations under
the heading "Forward-looking Statements."
OVERVIEW
The Company provides industrial outsourcing services and manufacturing
support encompassing a broad range of specializations. The Company operates in
four segments: environmental-liability management, engineering and design,
laboratory testing, and metal treating.
ENVIRONMENTAL-LIABILITY MANAGEMENT
The Company's ThermoRetec Corporation subsidiary, jointly owned with
Thermo Electron Corporation, is a national provider of environmental-liability
and resource-management services. ThermoRetec offers these and related
consulting services in four areas: consulting and engineering, nuclear
remediation, soil remediation, and fluids recycling. In February 2000,
ThermoRetec signed a letter of intent to sell its remaining soil-recycling
facilities. The transaction is expected to be completed before the end of July
2000, although there can be no assurance that ThermoRetec will complete this
sale (Note 11). The Company's majority-owned Thermo EuroTech N.V. subsidiary,
located in the Netherlands, specializes in converting "off-spec" and
contaminated petroleum fluids into useable oil products. The Company intends to
exit this business, as discussed in the results of operations. Thermo EuroTech
also provides in-plant waste management and recycling services through its
Ireland-based Green Sunrise Holdings Ltd. subsidiary. In August 1999, Green
Sunrise acquired the outstanding stock of Dempsey Drums Limited, an
Ireland-based service provider specializing in the supply, disposal, and
reconditioning of steel and plastic drums and other specialized containers (Note
2).
ENGINEERING AND DESIGN
The Company's The Randers Killam Group Inc. subsidiary, jointly owned with
Thermo Electron Corporation, provides comprehensive engineering and outsourcing
services such as water and wastewater treatment, process engineering and
construction, highway and bridge engineering, and infrastructure engineering. In
January 2000, Randers Killam sold its Randers division, a process engineering
and construction business (Note 2). In April 2000, Randers Killam sold the
assets of its BAC Killam Inc. subsidiary, a highway and bridge engineering
business (Note 17). The Company's wholly owned Normandeau Associates Inc.
subsidiary provides consulting services that address natural resource management
issues.
LABORATORY TESTING
The Company's wholly owned Thermo Analytical Inc. subsidiary operates
analytical laboratories that provide environmental- and pharmaceutical-testing
services, primarily to commercial clients throughout the U.S.
METAL TREATING
The Company performs metallurgical processing services using
thermal-treatment equipment at locations in California, Minnesota, and
Wisconsin. The Company sold the businesses comprising this segment in June 2000
(Note 17).
On January 31, 2000, Thermo Electron Corporation, the majority owner of
the Company, announced that it plans to sell all of the businesses of the
Company.
32
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 2000 COMPARED WITH FISCAL 1999
Total revenues were $307.3 million in fiscal 2000, compared with $310.0
million in fiscal 1999. Revenues from the Environmental-liability Management
segment increased to $166.2 million in fiscal 2000 from $159.1 million in fiscal
1999. Excluding intrasegment sales, revenues at ThermoRetec increased to $152.8
million in fiscal 2000 from $141.6 million in fiscal 1999, primarily due to
higher revenues from a large remedial-construction contract that is expected to
continue through fiscal 2001. Revenues from Thermo EuroTech decreased $4.2
million to $13.3 million due to a decrease in sales of usable oil products and a
decrease in revenues relating to contracts to perform soil-remediation services
overseas and to process oil-based muds. These decreases were offset in part by
$1.6 million of revenues from Dempsey Drums, which was acquired in August 1999
(Note 2). Revenues from the Engineering and Design segment decreased to $79.6
million in fiscal 2000 from $91.8 million in fiscal 1999, primarily due to lower
contract revenue resulting in part from a recession in the chemical industry and
the sale of the Randers division in January 2000 (Note 2). Revenues from the
Laboratory Testing segment increased to $44.8 million in fiscal 2000 from $40.5
million in fiscal 1999, due to higher demand resulting from new industrial
customers. Revenues from the Metal Treating segment decreased to $17.2 million
in fiscal 2000 from $19.3 million in fiscal 1999, due to weakness in the
agricultural equipment and commercial aerospace industries. The Metal Treating
segment businesses were sold in June 2000 (Note 17).
The gross profit margin increased to 21% in fiscal 2000 from 20% in fiscal
1999. Excluding the effect of a $0.7 million write-off of inventory in the
Environmental-liability Management segment in fiscal 2000 (Note 11), the gross
profit margin increased primarily due to a $2.5 million reduction of
depreciation expense in fiscal 2000 as a result of certain write-offs in the
Environmental-liability Management and Engineering and Design segments (Note
11). The gross profit margin from the Engineering and Design segment increased
to 25% in fiscal 2000 from 23% in fiscal 1999, due to a decrease in low-margin
contract revenue.
Selling, general, and administrative expenses as a percentage of revenues
remained constant at 15% in fiscal 2000 and 1999.
In connection with the planned sale of businesses discussed in Note 11,
the Company recorded $57.0 million of restructuring costs in fiscal 2000. Of
these restructuring costs, $37.7 million was recorded by the
Environmental-liability Management segment and $19.3 million was recorded by the
Engineering and Design segment. These charges represent the excess of book value
of the businesses proposed to be sold over the estimated proceeds from their
sale, a write-down of fixed assets to their estimated disposal value, ongoing
lease obligations, land reclamation costs, losses on the sale of certain of
these businesses, a charge for a cumulative translation adjustment, write-offs
of intangible and other assets, and severance costs.
During fiscal 1999, the Company recorded $10.2 million of restructuring
costs (Note 11). Of these restructuring costs, $9.2 million was recorded by
ThermoRetec in the Environmental-liability Management segment in connection with
the closure of two soil-recycling facilities. ThermoRetec took this action after
a period of operating losses at the facilities, which it believes arose from
relaxed enforcement of state rules concerning disposal of contaminated soils and
the availability of alternative disposal options to customers. The costs include
a write-down of fixed assets to their estimated disposal value and a write-off
of intangible assets, including cost in excess of net assets of acquired
companies, as well as other closure costs. In addition, the Company recorded
$1.0 million of restructuring costs for abandoned-facility payments relating to
the consolidation of the facilities of another business.
Interest income increased to $2.8 million in fiscal 2000 from $2.2 million
in fiscal 1999, primarily as the result of higher average invested balances.
Interest expense decreased to $8.7 million in fiscal 2000 from $9.0 million in
fiscal 1999, primarily due to lower average debt balances as a result of
repurchases of subordinated convertible debentures and repayments of debt made
by the Company in fiscal 2000.
33
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 2000 COMPARED WITH FISCAL 1999 (CONTINUED)
The Company recorded income tax provisions of $2.5 million and $1.8
million in fiscal 2000 and 1999, respectively, on pretax losses in both periods,
primarily due to the effect of nondeductible amortization and write-off of cost
in excess of net assets of acquired companies and foreign losses for which a tax
benefit was not recorded. In addition, the tax provision recorded in fiscal 2000
includes a $1.1 million write-off of deferred tax assets (Note 11).
The Company recorded minority interest income of $3.1 million and $1.2
million in fiscal 2000 and 1999, respectively, primarily due to losses incurred
by the Company's majority-owned subsidiaries.
During fiscal 2000, the Company purchased $2.2 million principal amount of
2 1/2% subordinated convertible debentures, convertible into shares of Thermo
EuroTech (Delaware) Inc., for $2.0 million in cash, resulting in an
extraordinary gain of $107,000, net of taxes of $71,000 (Note 5).
FISCAL 1999 COMPARED WITH FISCAL 1998
Total revenues were $310.0 million in fiscal 1999, compared with $298.8
million in fiscal 1998. Metal Treating segment revenues decreased to $19.3
million in fiscal 1999 from $36.6 million in fiscal 1998, due to the sale of the
Company's thermal-processing equipment business in October 1997, which
contributed revenues of $17.3 million in fiscal 1998 (Note 2). Revenues from the
Environmental-liability Management segment increased 13% to $159.1 million in
fiscal 1999 from $141.1 million in fiscal 1998. Excluding intrasegment sales,
revenues at ThermoRetec increased to $141.6 million in fiscal 1999 from $127.1
million in fiscal 1998, primarily due to $8.6 million of higher revenues from
consulting and engineering services at RETEC and, to a lesser extent, the
inclusion of $6.2 million of revenues from businesses acquired in fiscal 1998.
Revenues from ThermoRetec's soil-remediation services increased $6.4 million in
fiscal 1999, resulting from higher volumes of soil processed. These increases
were offset in part by a decrease in revenues resulting from a decline in the
number of contracts in process at ThermoRetec's eastern United States
construction operations (formerly IEM Sealand). Revenues from Thermo EuroTech
increased $3.5 million to $17.5 million due to the inclusion for the full fiscal
1999 period of revenues from Green Sunrise, which was acquired in February 1998
and added incremental revenues of $6.4 million, offset in part by a decrease in
sales of useable oil products. Revenues from the Engineering and Design segment
increased to $91.8 million in fiscal 1999 from $84.6 million in fiscal 1998,
primarily due to increased revenues from two construction and labor management
contracts, which are expected to be completed by the end of the first quarter of
fiscal 2000. Engineering and Design segment revenues also increased $3.5 million
due to the inclusion for the full fiscal 1999 period of revenues from Randers,
acquired May 1997. Revenues from the Laboratory Testing segment increased to
$40.5 million in fiscal 1999 from $37.5 million in fiscal 1998 due to higher
demand.
The gross profit margin increased to 20% in fiscal 1999 from 18% in fiscal
1998. The gross profit margin from the Environmental-liability Management
segment increased to 16% in fiscal 1999 from 11% in fiscal 1998, primarily due
to a $2.3 million reduction in losses on certain remedial-construction
contracts, higher utilization of billable personnel at RETEC, a $1.6 million
increase in gross profit at the Company's soil-recycling sites primarily due to
higher volumes of soil processed, and $0.4 million of lower depreciation expense
following suspension of depreciation at two soil-recycling sites. To a lesser
extent, the gross profit margin from the Environmental-liability Management
segment increased due to higher margins at Thermo EuroTech as a result of the
inclusion of higher-margin revenues at Green Sunrise. The gross profit margin
was 40% at Green Sunrise in fiscal 1999. The gross profit margin from the
Engineering and Design segment decreased to 23% in fiscal 1999 from 25% in
fiscal 1998, primarily due to a change in the mix of contracts.
Selling, general, and administrative expenses as a percentage of revenues
increased slightly to 15% in fiscal 1999 from 14% in fiscal 1998, primarily due
to the absence of lower relative expenses at the Company's Metal Treating
segment due to the sale of the thermal-processing equipment business in fiscal
1998 and higher relative expenses at Green Sunrise, which was acquired in
February 1998. During fiscal 1999, the Metal Treating segment and Green Sunrise
had selling, general and administrative expenses as a percent of revenues of 9%
and 30%, respectively. In addition, selling, general, and administrative
expenses at the Environmental-liability Management segment increased due to a
$0.8 million increase in provision for uncollectible accounts and a $0.4 million
increase in administrative costs associated with ThermoRetec's name change.
34
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1999 COMPARED WITH FISCAL 1998 (CONTINUED)
During fiscal 1999, the Company recorded $10.2 million of restructuring
costs. Of these restructuring costs, $9.2 million was recorded by ThermoRetec in
the Environmental-liability Management segment in connection with the closure of
two soil-recycling facilities. ThermoRetec took this action after a period of
operating losses at the facilities, which it believes arose from relaxed
enforcement of state rules concerning disposal of contaminated soils and the
availability of alternative disposal options to customers. The costs include a
write-down of fixed assets to their estimated disposal value and a write-off of
intangible assets, including cost in excess of net assets of acquired companies,
as well as other closure costs. These facilities reported aggregated revenues
and operating losses of $2.2 million and $0.8 million, respectively, in fiscal
1998, and aggregated revenues and operating losses prior to the decision to
close the facilities of $1.8 million and $0.1 million, respectively, in fiscal
1999. In addition, the Company recorded $1.0 million of restructuring costs for
abandoned-facility payments relating to the consolidation of the facilities of
another business (Note 11). The annual savings from consolidating these
facilities total $0.2 million and such savings began in September 1998, the date
of abandonment.
Interest income decreased to $2.2 million in fiscal 1999 from $4.2 million
in fiscal 1998, primarily as a result of lower average invested balances.
Interest expense decreased to $9.0 million in fiscal 1999 from $10.8 million in
fiscal 1998, primarily due to the repayment of a note payable in February and
May 1998, the repayment of a promissory note to Thermo Electron Corporation, and
the conversion of the Company's 6 1/2% subordinated convertible debentures
during fiscal 1998, offset in part by increased borrowings at Thermo EuroTech
during fiscal 1999 and the issuance of $7.0 million principal amount of 2 1/2%
convertible subordinated debentures due 2001 (Note 5).
Equity in earnings of unconsolidated subsidiary in fiscal 1998 represented
ThermoRetec's proportionate share of income from a joint venture. Gain on sale
of unconsolidated subsidiary in fiscal 1998 resulted from ThermoRetec's sale of
its interest in this joint venture (Note 2).
The Company recorded income tax expense of $1.8 million in fiscal 1999 on
a pretax loss primarily due to the effect of nondeductible amortization and
write off of cost in excess of net assets of acquired companies. The effective
tax rate in fiscal 1998 was 60%. This rate exceeded the statutory federal income
tax rate primarily due to the impact of state income taxes and the nondeductible
amortization of cost in excess of net assets of acquired companies.
The Company recorded minority interest income of $1.2 million in fiscal
1999, compared with minority interest expense of $0.1 million in fiscal 1998,
primarily due to the effect of a net loss at ThermoRetec in fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $30.7 million at April 1, 2000, compared
with $67.0 million at April 3, 1999. Working capital decreased $38.0 million as
a result of the reclassification of subordinated convertible debentures due May
2000 to current liabilities. Cash and cash equivalents were $4.2 million at
April 1, 2000, compared with $43.0 million at April 3, 1999. In addition, as of
April 1, 2000, the Company had $47.7 million invested in an advance to
affiliate. Prior to the use of a new domestic cash management arrangement
between the Company and Thermo Electron Corporation, which became effective June
1999, amounts invested with Thermo Electron were included in cash and cash
equivalents. Of the total cash and cash equivalents at April 1, 2000, $3.9
million was held by the Company's majority-owned subsidiaries and the balance
was held by the Company and its wholly owned subsidiaries. The total $47.7
million advance to affiliate at April 1, 2000, was advanced by the Company's
majority-owned subsidiaries.
During fiscal 2000, $22.8 million of cash was provided by operating
activities. During this period, $4.8 million of cash was provided by an increase
in other current liabilities, primarily due to an increase in accrued
restructuring costs. The Company expects to pay the $5.9 million balance of
accrued restructuring costs primarily over the first six months of fiscal 2001.
A decrease in accounts receivable provided $6.0 million of cash, primarily at
ThermoRetec due to the timing of billings and, to a lesser extent, at the
Engineering and Design segment due to a decrease in revenues.
35
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
These decreases were offset in part by increased accounts receivable at the
Laboratory Testing segment, primarily as a result of increased laboratory
testing revenues. An increase in inventories and unbilled contract costs and
fees used $4.1 million of cash, primarily at ThermoRetec, due to the timing of
billings, offset in part by a decrease at the Engineering and Design segment due
to the effect of a decline in revenues.
Excluding advance to affiliate activity, the Company's investing
activities in fiscal 2000 primarily consisted of $3.8 million received from the
collection of long-term notes receivable, an acquisition, and capital additions.
In August 1999, a subsidiary of the Company acquired Dempsey Drums Limited for
$2.0 million in cash, net of cash acquired, and the issuance of shares of the
subsidiary's common stock valued at $0.4 million (Note 2). The Company expended
$13.3 million for purchases of property, plant, and equipment in fiscal 2000 and
expects to spend approximately $12 million for capital additions during fiscal
2001.
In January 2000, the Company sold substantially all of the assets and
liabilities of the Randers division in exchange for a $538,000 note receivable
due 2003 (Note 2). In March 2000, the Company sold the assets of a
soil-recycling facility for $400,000 in cash, of which $200,000 was placed in
escrow and has not yet been received (Note 2).
The Company's financing activities used cash of $4.3 million in fiscal
2000. During this period, the Company used cash of $3.8 million for the
repurchase of Company and subsidiary common stock, including Company stock
subject to certain put rights on shares issued in connection with an
acquisition. As of April 1, 2000, the Company has no further cash obligation
pursuant to put rights. In addition, the Company used $2.0 million for the
repurchase of subordinated convertible debentures and $1.6 million for the
repayment of debt (Note 5). These uses of cash were offset in part by $2.3
million borrowed to finance an acquisition (Note 2).
In April and June 2000, the Company sold two of its businesses for $16.0
million in cash, subject to a post-closing adjustment (Note 17). In May 2000,
ThermoRetec's $38.0 million principal amount 4 7/8% subordinated convertible
debentures matured. To finance a portion of the debt repayment, the Company
borrowed approximately $10 million under its domestic cash management
arrangement with Thermo Electron (Note 1).
The Company generally expects to have positive cash flow from its existing
operations. Thermo Electron has expressed its willingness to advance up to $15
million to the Company for short-term liquidity in the event that the need
arises. Accordingly, the Company believes that its existing resources and
potential borrowings from Thermo Electron are sufficient to meet the capital
requirements of its existing operations for at least the next 18 months.
MARKET RISK
The Company is exposed to market risk from changes in interest rates,
foreign currency exchange rates, and equity prices, which could affect its
future results of operations and financial condition. The Company manages its
exposure to these risks through its regular operating and financing activities.
FOREIGN CURRENCY EXCHANGE RATES
The Company generally views its investment in foreign subsidiaries with a
functional currency other than the Company's reporting currency as long-term.
The Company's investment in foreign subsidiaries is sensitive to fluctuations in
foreign currency exchange rates. The functional currencies of the Company's
foreign subsidiaries are principally denominated in Dutch guilders. The effect
of a change in foreign exchange rates on the Company's net investment in foreign
subsidiaries is reflected in the "Accumulated other comprehensive items"
component of shareholders' investment. A 10% appreciation in fiscal year-end
2000 functional currencies, relative to the U.S. dollar, would result in a $1.1
million reduction of shareholders' investment. A 10% depreciation in fiscal
year-end 1999 functional currencies, relative to the U.S. dollar, would result
in a $1.1 million reduction of shareholders' investment.
36
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARKET RISK (CONTINUED)
EQUITY PRICES
The Company's and its subsidiaries' subordinated convertible debentures
are sensitive to fluctuations in the price of Company or subsidiary common stock
into which the debentures are convertible. Changes in equity prices would result
in changes in the fair value of the Company's and its subsidiaries' subordinated
convertible debentures due to the difference between the current market price
and the market price at the date of issuance of the debentures. Upon the fiscal
2001 merger of the Company and Thermo Electron, the Company's subordinated
convertible debentures will be assumed by Thermo Electron. After the merger, the
Company's subordinated convertible debentures will be convertible into shares of
Thermo Electron common stock, rather than into the Company's common stock. A 10%
increase in fiscal year-end 1999 market equity prices would result in a negative
impact to the Company of $1.0 million on the fair value of its subordinated
convertible debentures.
INTEREST RATES
The Company's subordinated convertible debentures are sensitive to changes
in interest rates. Interest rate changes would result in a change in the fair
value of the Company's and its subsidiaries' subordinated convertible debentures
due to the difference between the market interest rate and the rate at the date
of issuance of the debentures. A 10% decrease in fiscal year-end 2000 and 1999
market interest rates would result in a negative impact to the Company of $2.2
million and $0.2 million, respectively, on the fair value of its subordinated
convertible debentures.
The Company's cash, cash equivalents, advance to affiliate, and
variable-rate short- and long-term obligations are sensitive to changes in
interest rates. Interest rate changes would result in a change in interest
income and expense due to the difference between the current interest rates on
cash, cash equivalents, advance to affiliate, and the variable-rate short- and
long-term obligations and the rate that these financial instruments may adjust
to in the future. A 10% decrease in fiscal year-end 2000 and 1999 interest rates
would result in a negative impact of $0.1 million and $0.1 million,
respectively, on the Company's net income.
YEAR 2000
As of the date of this report, the Company has completed its year 2000
initiatives which included: (i) testing and upgrading significant information
technology systems and facilities; (ii) assessing the year 2000 readiness of its
key suppliers, vendors, and customers; and (iii) developing contingency plans.
As a result of completing these initiatives, the Company believes that all
of its material information technology systems and critical non-information
technology systems are year 2000 compliant. In addition, the Company is not
aware of any significant supplier or vendor that has experienced material
disruption due to year 2000 issues. The Company has also developed a contingency
plan to allow its primary business operations to continue despite disruptions
due to year 2000 problems, if any, that might yet arise in the future. The costs
incurred to date by the Company in connection with the year 2000 issue have not
been material.
While the Company to date has been successful in minimizing negative
consequences arising from year 2000 issues, there can be no assurance that in
the future the Company's business operations or financial condition may not be
impacted by year 2000 problems, such as increased warranty claims, vendor and
supplier disruptions, or litigation relating to year 2000 issues.
37
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company wishes to caution readers that the
following important factors, among others, in some cases have affected, and in
the future could affect, the Company's actual results and could cause its actual
results in fiscal 2001 and beyond to differ materially from those expressed in
any forward-looking statements made by, or on behalf of, the Company.
DEPENDENCE ON ENVIRONMENTAL REGULATION. Federal, state, and local
environmental laws govern each of the markets in which the Company conducts
business, as well as many of the Company's operations. The markets for many of
the Company's services, including industrial-remediation services,
nuclear-remediation services, hazardous waste-remedial construction services,
soil-remediation services, waste-fluids recycling services, engineering and
design services, and laboratory services, and the standards governing most
aspects of the construction and operation of the Company's facilities, were
directly or indirectly created by, and depend on, the existence and enforcement
of those laws. These laws and regulations may change in the future, requiring
new technologies or stricter standards with which the Company must comply. In
addition, these laws and regulations could be made more lenient in the future,
thereby reducing the size of the markets addressed by the Company. Any such
change in federal, state, and local environmental laws and regulations may have
a material adverse effect on the Company's business.
Responsibility for establishing and enforcing certain federal policies,
such as the federal underground storage tank policy, has been delegated to the
states, which are not only required to establish regulatory programs, but are
also permitted to impose more stringent requirements than are otherwise required
by federal law. Certain states have adopted a "risk-based" approach to
prioritizing site cleanups and setting cleanup standards, which attempts to
balance the costs of remediation against the potential harm to human health and
the environment from leaving sites unremediated. Additional states may adopt
these policies, which could reduce the size of the potential market addressed by
the Company.
POTENTIAL ENVIRONMENTAL AND REGULATORY LIABILITY. The Company's operations
are subject to comprehensive laws and regulations related to the protection of
the environment. Among other things, these laws and regulations impose
requirements to control air, soil, and water pollution, and regulate health,
safety, zoning, land use, and the handling and transportation of hazardous and
nonhazardous materials. These laws and regulations also impose liability for
remediation and cleanup of environmental contamination, both on-site and
off-site, resulting from past and present operations. These requirements may
also be imposed as conditions to operating permits or licenses that are subject
to renewal, modification, or revocation. Laws and regulations may require the
Company to modify, supplement, replace, or curtail its operating methods,
facilities, or equipment at costs which may be substantial without any
corresponding increase in revenue. The Company is also potentially subject to
monetary fines, penalties, remediation, cleanup or stop orders, injunctions, or
orders to cease or suspend its practices. The outcome of any proceedings and
associated costs and expenses could have a material adverse impact on the
Company's business. In addition, the Company is subject to numerous laws and
regulations related to the protection of human health and safety. Such laws and
regulations may impose liability on the Company for exposure of its employees to
radiation or other hazardous contamination or failure to isolate and remove
radioactive or other hazardous contaminants from soil.
The Company attempts to operate its business to minimize its exposure to
environmental and other regulatory liabilities. Although no claims giving rise
to such liabilities have been asserted by the Company's customers or employees
to date, such claims could be asserted in the future against the Company.
UNCERTAINTY OF FUNDING. Remediation compliance requirements and related
costs are often beyond the financial capabilities of individuals and small
companies. To address this problem, some states have established tax-supported
trust funds to assist in the financing of compliance and site remediation. As a
consequence, in many of the states in which the Company markets its soil
remediation services, the majority, and in some cases virtually all, of the soil
remediated by the Company is paid for by large companies and/or these state
trust funds. Any substantial decrease in this funding could have a material
adverse effect on the Company's business and financial performance. Many states
have realized that the number of sites requiring remediation and the costs of
compliance are substantially higher than
38
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
were originally estimated. As a result, several states have relaxed enforcement
activities and others have reduced compliance requirements in order to reduce
the costs of cleanup. These factors have already resulted in lower levels of
cleanup activity in some states and have had a material adverse effect on the
Company's business. Continued de-emphasis on enforcement activities and/or
further reductions in compliance requirements will have an even more severe
adverse effect on the Company's business.
The Company depends on funding from the federal and state governments, and
their agencies and instrumentalities, for compensation for its services. For
example, ThermoRetec's nuclear-remediation business provides a large portion of
its services directly or indirectly to the U.S. Department of Energy (DOE) and
the Company's engineering and design businesses perform significant amounts of
services for state and municipal governments.
COMPETITION. The markets for many of the Company's services are regional
and are characterized by intense competition from numerous local competitors.
Some of the Company's competitors have greater technical and financial resources
than those of the Company. As a result, they may be able to adapt more quickly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the promotion and sale of their services than the
Company. Competition could increase if new companies enter the market or its
existing competitors expand their service lines. The Company's current
technology, technology under development, or ability to develop new technologies
may not be sufficient to enable it to compete effectively with its competitors.
SEASONAL INFLUENCES. A majority of the Company's businesses experience
seasonal fluctuations. A majority of the Company's soil-remediation sites, as
well as the Company's fluids-recycling sites, experience declines in revenues if
severe weather conditions occur. Site remediation work and certain environmental
testing services, such as the services provided by Lancaster Laboratories,
RETEC, Randers, and Thermo NUtech, may decline in winter months as a result of
severe weather conditions. In Europe, Thermo EuroTech may experience a decline
in the feedstock delivered to and from its facilities during winter months due
to frozen waterways.
POSSIBLE OBSOLESCENCE DUE TO TECHNOLOGICAL CHANGE. Technological
developments are expected to continue at a rapid pace in the environmental
services industry. The Company's technologies could be rendered obsolete or
uneconomical by technological advances by one or more companies that address the
Company's markets or by future entrants into the industry. The Company may not
have the resources to, or otherwise be successful in, developing responses to
technological advances by others.
DEPENDENCE OF THERMO EUROTECH ON AVAILABILITY OF WASTE OIL SUPPLIES AND
ABILITY TO EXPORT REFINED OIL. Thermo EuroTech's North Refinery facility has
historically received a large percentage of its oil feedstock from the former
Soviet Union. North Refinery no longer receives any oil from that nation, due to
political and economic changes that have made the transportation of waste oil
difficult. To overcome this loss of supply, North Refinery has taken steps to
replace and diversify its feedstock suppliers. North Refinery may experience
future disruptions in deliveries. Any disruptions in supply could have a
material adverse effect on the Company's results of operations. In addition,
North Refinery has received a one-year exemption from the environmental
authorities in The Netherlands and the United Kingdom allowing it to export
refined oil, which would otherwise be regulated as "waste" under the
environmental regulations of those countries. If North Refinery is unable after
that time to qualify its exported oil as non-waste quality oil, or if North
Refinery is unable to extend the length of its exemption, the Company's results
of operations could be materially adversely affected.
POTENTIAL PROFESSIONAL LIABILITY. The Company's business exposes it to
potential liability for the negligent performance of its services, and the
Company could face substantial liability to clients and third parties for
damages resulting from faulty designs or other professional services. The
Company currently maintains professional errors and omissions insurance, but
this insurance may not provide sufficient coverage in the event of a claim, and
the Company may not be able to maintain such coverage on acceptable terms, if at
all. A professional liability claim could result in a material adverse effect on
the Company's business, financial condition, and results of operations.
39
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
DEPENDENCE ON SALES TO GOVERNMENT ENTITIES. A significant portion of the
Company's revenues is derived from municipalities, state governments, and
government utility authorities. Any decreases in purchases by these entities,
including decreases resulting from shifts in priorities or overall budgeting
limitations, could have a material adverse effect on the Company's business,
financial condition, and results of operations. In addition, most of the
Company's contracts require the Company to perform specific services for a fixed
fee. Contracts with governmental entities often permit the purchaser to cancel
the agreement at any time. A significant overrun in the Company's expenses or
cancellation of a significant contract could also result in a material adverse
effect on the Company's business, financial condition, and results of
operations. The Company's contracts with governmental entities are also subject
to other risks, including contract suspensions; protests by disappointed bidders
of contract awards, which can result in the re-opening of the bidding process;
and changes in government policies or regulations.
RISKS ASSOCIATED WITH CASH MANAGEMENT ARRANGEMENT WITH THERMO ELECTRON.
The Company participates in a cash management arrangement with its parent
company, Thermo Electron. Under this cash management arrangement, the Company
lends its excess cash to Thermo Electron on an unsecured basis. The Company has
the contractual right to withdraw its funds invested in the cash management
arrangement upon 30 days' prior notice. Thermo Electron is contractually
required to maintain cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 50% of all funds invested under the cash
management arrangement by all Thermo Electron subsidiaries other than wholly
owned subsidiaries. The funds are held on an unsecured basis and therefore are
subject to the credit risk of Thermo Electron. The Company's ability to receive
its cash upon notice of withdrawal could be adversely affected if participants
in the cash management arrangement demand withdrawal of their funds in an
aggregate amount in excess of the 50% reserve required to be maintained by
Thermo Electron. In the event of a bankruptcy of Thermo Electron, the Company
would be treated as an unsecured creditor and its right to receive funds from
the bankruptcy estate would be subordinated to secure creditors and would be
treated on a pari passu basis with all other unsecured creditors. Further, all
cash withdrawn by the Company from the cash management arrangement within one
year before the bankruptcy would be subject to rescission. The inability of
Thermo Electron to return the Company's cash on a timely basis or at all could
have a material adverse effect on the Company's results of operations and
financial position.
40
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(In thousands except per share amounts) 2000 (a) 1999 (b) 1998 (c) 1997 (d) 1996
-------------------------------------------------- ---------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues $307,329 $310,039 $298,786 $278,503 $220,484
Income (Loss) Before Extraordinary Item (43,326) (1,421) 3,273 (162) 3,447
Net Income (Loss) (43,219) (1,421) 3,273 (162) 3,447
Earnings (Loss) per Share:
Basic (2.27) (.07) .18 (.01) .20
Diluted (2.27) (.07) .17 (.01) .18
BALANCE SHEET DATA
Working Capital $ 30,733 $ 67,043 $ 69,319 $ 77,315 $ 66,008
Total Assets 304,553 350,465 360,526 393,784 333,656
Long-term Obligations 118,113 158,617 153,144 165,186 155,384
Shareholders' Investment 51,570 92,157 97,130 83,526 85,870
</TABLE>
(a) Reflects a $58.7 million pretax charge for restructuring and related costs.
(b) Reflects a $10.2 million pretax charge for restructuring costs.
(c) Reflects a $3.0 million pretax gain from ThermoRetec's sale of its
investment in a joint venture.
(d) Reflects $7.8 million of restructuring costs and a loss $1.5 million
relating to the sale of the Company's J. Amerika division. Also reflects the
issuance of $115.0 million principal amount of 4 7/8% subordinated
convertible debentures, and a gain on issuance of stock by subsidiary of
$1.5 million.
41
<PAGE>
THERMO TERRATECH INC. 2000 FINANCIAL STATEMENTS
COMMON STOCK MARKET INFORMATION
The Company's common stock is traded on the American Stock Exchange under
the symbol TTT. The following table sets forth the high and low sales prices of
the Company's common stock for fiscal 2000 and 1999, as reported in the
consolidated transaction reporting system.
<TABLE>
<CAPTION>
Fiscal 2000 Fiscal 1999
Quarter High Low High Low
----------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
First $5 13/16 $3 7/8 $6 3/4 $4 1/2
Second 5 15/16 4 1/2 5 3 3/4
Third 6 13/16 5 1/4 4 5/8 3 15/16
Fourth 8 1/2 6 3/4 5 3/4 4 3/8
</TABLE>
As of April 28, 2000, the Company had 1,244 holders of record of its
common stock. This does not include holdings in street or nominee names. The
closing market price on the American Stock Exchange for the Company's common
stock on April 28, 2000, was $7 1/2 per share.
Common stock of the Company's ThermoRetec Corporation and The Randers
Killam Group Inc. subsidiaries were traded on the American Stock Exchange
(symbols THN and RGI, respectively) until June 6, 2000, and May 16, 2000,
respectively.
DIVIDEND POLICY
The Company has never paid cash dividends and does not expect to pay cash
dividends in the foreseeable future because its policy has been to use earnings
to finance expansion and growth. Payment of dividends will rest within the
discretion of the Company's Board of Directors and will depend upon, among other
factors, the Company's earnings, capital requirements, and financial condition.
42
<PAGE>
APPENDIX D
CURRENT REPORT ON FORM 8-K
DATED APRIL 14, 2000
D-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported):
April 14, 2000
----------------------------------------------------
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9549 04-2925807
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (781) 622-1000
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 2. DISPOSITION OF ASSETS
On April 14, 2000, BAC Killam, Inc. (the "Business"), an indirect
wholly owned subsidiary of The Randers Killam Group Inc., a majority-owned
subsidiary of Thermo TerraTech Inc. (the "Company"), sold all of its assets to
Hatch Mott McDonald, Inc. (the "Buyer"). The BAC Killam, Inc. subsidiary
provides both private and public sector clients with a broad range of consulting
services that address transportation planning and design.
The assets sold in the transaction include all tangible personal property
of the Business located at the Business's Buffalo, New York; Queensboro, New
York; and Milburn, New Jersey, offices; as well as all rights under certain
ongoing consulting contracts, and the rights to "Bettigole Andrews and Clark"
and "NH Bettigole" names used by the Business. The Buyer assumed all liabilities
and obligations under the assumed contracts that arise after the closing and all
liabilities and obligations relating to certain real property leases.
The purchase price for the assets was $3 million of which approximately
$1.4 million was paid in cash at the closing and of which the balance represents
accounts receivable of the Business that will be collected by the Buyer and be
paid to the Company upon collection (less a five percent collection fee). The
purchase price of the assets was determined by the parties in arms-length
negotiations.
2
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 7. FINANCIAL STATEMENTS, PRO FORMA CONDENSED FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements
Not applicable.
(b) Pro Forma Condensed Financial Statements
The following unaudited pro forma consolidated condensed statements of
operations set forth the results of operations for the fiscal year ended April
3, 1999, and the nine months ended January 1, 2000, as if the disposition by the
Company of BAC Killam had occurred at the beginning of fiscal 1999. The
unaudited pro forma consolidated condensed balance sheet sets forth the
financial position as of January 1, 2000, as if the disposition had occurred as
of that date.
The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the sale of
BAC Killam been consummated at the beginning of fiscal 1999. These statements
should be read in conjunction with the accompanying notes herein and the
historical consolidated financial statements and related notes of the Company
included in its Annual Report on Form 10-K, as amended, for the fiscal year
ended April 3, 1999, and Quarterly Report on Form 10-Q for the nine months ended
January 1, 2000.
3
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED APRIL 3, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
THERMO LESS: PRO FORMA
TERRATECH BAC KILLAM ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues $ 310,039 $ 12,158 $ - $ 297,881
---------- ---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 247,610 10,474 - 237,136
Selling, general, and administrative expenses 46,224 2,890 - 43,334
Restructuring costs 10,217 - - 10,217
---------- ---------- ---------- ----------
304,051 13,364 - 290,687
---------- ---------- ---------- ----------
Operating Income (Loss) 5,988 (1,206) - 7,194
Interest Income 2,185 9 75 2,251
Interest Expense (8,981) - - (8,981)
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes and Minority Interest (808) (1,197) 75 464
Income Tax (Provision) Benefit (1,786) 440 (26) (2,252)
Minority Interest Income 1,173 - (42) 1,131
---------- ---------- ---------- ----------
Net Loss $ (1,421) $ (757) $ 7 $ (657)
========== ========== ========== ==========
Basic and Diluted Loss per Share $ (.07) $ (.03)
========== =========
Basic and Diluted Weighted Average Shares 19,402 19,402
========== ==========
</TABLE>
4
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JANUARY 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THERMO LESS: PRO FORMA
TERRATECH BAC KILLAM ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Revenues $ 234,790 $ 8,598 $ - $ 226,192
---------- ---------- ---------- ----------
Costs and Operating Expenses:
Cost of revenues 185,059 6,679 - 178,380
Selling, general, and administrative expenses 34,439 1,368 - 33,071
Restructuring costs 56,524 9,569 - 46,955
---------- ---------- ---------- ----------
276,022 17,616 - 258,406
---------- ---------- ---------- ----------
Operating Loss (41,232) (9,018) - (32,214)
Interest Income 2,037 3 58 2,092
Interest Expense (6,678) - - (6,678)
---------- ---------- ---------- ----------
Loss Before Income Taxes, Minority Interest, and
Extraordinary Item (45,873) (9,015) 58 (36,800)
Income Tax (Provision) Benefit (1,244) 443 (20) (1,707)
Minority Interest Income 3,316 - (447) 2,869
---------- ---------- ---------- ----------
Loss Before Extraordinary Item (43,801) (8,572) (409) (35,638)
Extraordinary Item, Net of Income Tax Provision of
$64 96 - - 96
---------- ---------- ---------- ----------
Net Loss $ (43,705) $ (8,572) $ (409) $ (35,542)
========== ========== ========== ==========
Basic and Diluted Loss per Share $ (2.29) $ (1.86)
========== =========
Basic and Diluted Weighted Average Shares 19,066 19,066
========== ==========
</TABLE>
5
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF JANUARY 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THERMO LESS: PRO FORMA
TERRATECH BAC KILLAM ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,905 $ 200 $ 1,374 $ 6,079
Advance to affiliate 49,436 - - 49,436
Accounts receivable, net 52,330 1,598 - 50,732
Unbilled contract costs and fees 26,950 1,091 - 25,859
Inventory 2,452 - - 2,452
Deferred tax asset 6,668 - - 6,668
Other current assets 3,685 9 - 3,676
---------- ---------- ---------- ----------
146,426 2,898 1,374 144,902
---------- ---------- ---------- ----------
Property, Plant, and Equipment, at Cost, Net 70,357 443 - 69,914
---------- ---------- ---------- ----------
Other Assets 9,623 - - 9,623
---------- ---------- ---------- ----------
Cost in Excess of Net Assets of Acquired Companies 88,865 - - 88,865
---------- ---------- ---------- ----------
$ 315,271 $ 3,341 $ 1,374 $ 313,304
========== ========== ========== ==========
</TABLE>
6
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (CONTINUED)
AS OF JANUARY 1, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
THERMO LESS: PRO FORMA
TERRATECH BAC KILLAM ADJUSTMENTS PRO FORMA
--------- ---------- ----------- ---------
(In thousands)
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term obligations and current maturities
of long-term obligations $ 19,549 $ - $ - $ 19,549
Subordinated convertible debentures 37,950 - - 37,950
Accounts payable 20,939 - - 20,939
Accrued payroll and employee benefits 12,223 - - 12,223
Accrued restructuring costs 8,660 - - 8,660
Deferred revenue 4,169 - - 4,169
Other accrued expenses 13,347 - 100 13,447
Due to parent company and affiliated companies 2,140 - - 2,140
----------- ----------- ----------- -----------
118,977 - 100 119,077
----------- ----------- ----------- -----------
Deferred Income Taxes 685 - - 685
----------- ----------- ----------- -----------
Other Deferred Items 1,097 - - 1,097
----------- ----------- ----------- -----------
Long-term Obligations 118,241 - - 118,241
----------- ----------- ----------- -----------
Minority Interest 24,785 - (108) 24,677
----------- ----------- ----------- -----------
Shareholders' Investment:
Common stock 1,959 - - 1,959
Capital in excess of par value 70,993 - - 70,993
Accumulated deficit (17,807) - (1,959) (19,766)
Treasury stock at cost (3,846) - - (3,846)
Deferred compensation (216) - - (216)
Accumulated other comprehensive items 403 - - 403
Parent company investment - 3,341 3,341 -
----------- ----------- ----------- -----------
51,486 3,341 1,382 49,527
----------- ----------- ----------- -----------
$ 315,271 $ 3,341 $ 1,374 $ 313,304
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (In thousands except in text)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
APRIL 3, 1999 JANUARY 1, 2000
------------- ---------------
Debit (Credit)
<S> <C> <C>
INTEREST INCOME
Increase in interest income earned on the $1,374,000 of cash
paid to the Company by the acquirer, calculated using the
30-day Commercial Paper Composite Rate plus 50 basis points, or
5.46% in fiscal 1999 and 5.58% in the first nine months of
fiscal 2000 $ (75) $ (58)
----- -----
INCOME TAX PROVISION
Increase in the income tax provision as a result of an increase
in interest income calculated at an effective income tax rate
of 34% $ 26 $ 20
----- -----
MINORITY INTEREST INCOME
Decrease in minority interest income as a result of the sale of BAC
Killam $ 42 $ 447
----- -----
</TABLE>
NOTE 2 - PRO FORMA ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
JANUARY 1, 2000
---------------
DEBIT (CREDIT)
<S> <C>
CASH AND CASH EQUIVALENTS
Cash received for sale of assets of BAC Killam $ 1,374
--------
OTHER ACCRUED EXPENSES
Estimated accrued transaction costs, including legal fees and
other costs $ (100)
--------
MINORITY INTEREST
Decrease in minority interest related to excess of parent company
investment in BAC Killam over proceeds from sale $ 108
--------
SHAREHOLDERS' INVESTMENT
Elimination of BAC Killam equity account and excess of parent
company investment in BAC Killam over proceeds from sale $ (1,382)
--------
</TABLE>
8
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 7. FINANCIAL STATEMENTS, PRO FORMA CONDENSED FINANCIAL INFORMATION AND
EXHIBITS (continued)
(c) Exhibits
2.1 Asset Purchase Agreement by and among BAC Killam, Inc. and The
Randers Killam Group Inc. (as Sellers) and Hatch Mott
McDonald, Inc. (as Buyer), dated as of March 31, 2000 (filed
as Exhibit 2.1 to The Randers Killam Group Inc.'s Form 8-K
dated as of April 14, 2000 [File No. 0-18095] and incorporated
herein by reference).
9
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 28th day of April 2000.
THERMO TERRATECH INC.
/s/ Theo Melas-Kyriazi
--------------------------------------------
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
10
<PAGE>
Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement"), dated as of March 31, 2000, is
by and among BAC Killam, Inc., a New York corporation ("BAC"), The Randers
Killam Group Inc., a Delaware corporation ("Randers") (BAC and Randers sometimes
hereinafter referred to individually as a "Seller" and collectively as
"Sellers"), and Hatch Mott MacDonald, Inc., a Delaware corporation ("Buyer").
RECITALS:
WHEREAS, BAC is engaged in the business of designing, constructing,
inspecting, rehabilitating and resident engineering of bridges, highways,
railways, airports and transportation facilities, excluding environmental work
in connection with transportation facilities (the "Business");
WHEREAS, BAC has offices in Buffalo, New York; Queensboro, New York;
Millburn, New Jersey (collectively, the "Purchased Locations") and Toms River,
New Jersey (the "Excluded Location");
WHEREAS, BAC is presently engaging in the Business at the Purchased
Locations (the "Purchased Business") and the Excluded Location (the "Excluded
Business") and has current and on-going projects carried on from or at each of
the Purchased Locations (the "Purchased Projects") and the Excluded Location
(the "Excluded Projects"); and
WHEREAS, pursuant to this Agreement, Sellers will sell, and Buyer will
purchase, substantially all of the property and assets of Sellers which are used
in or associated with the Purchased Business, whether located at the Purchased
Locations or elsewhere, including, without limitation, all of the Purchased
Projects.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein the
parties hereto agree as follows:
<PAGE>
-2-
ARTICLE I
PURCHASE AND SALE
SECTION 1.01 SALE OF PURCHASED ASSETS. At the Closing and subject to all
other terms and conditions of this Agreement, Sellers agree to sell, assign,
transfer and convey to Buyer, and Buyer agrees to purchase from Sellers, good
and marketable title, free and clear of all liabilities, liens, pledges,
security interests, encumbrances, claims and other restrictions ("Liens"), all
of Sellers' right, title and interest in and to all of the property and assets
of Sellers used primarily in connection with the Purchased Business, including
all such property and assets located at the Purchased Locations and such other
property and assets located elsewhere which are primarily used to conduct the
Purchased Business and to perform the Purchased Projects, other than the
Excluded Assets (as defined in Section 1.02 hereof) (collectively the "Purchased
Assets"). The Purchased Assets include, but are not limited to the following:
(a) all tangible personal property of the Sellers located at the
Purchased Locations and all tangible personal property of the
Sellers located elsewhere that is primarily used by or in
connection with the Purchased Business;
(b) all intellectual property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect
thereto, and rights thereunder, remedies against infringements
thereof, and rights to protection of interests therein used
primarily in connection with the Purchased Business;
(c) all of Sellers' rights under agreements, contracts, indentures,
mortgages, instruments, security interests, guaranties, leases
(excluding leases for office equipment and automobiles),
subleases, and other similar agreements relating to the Purchased
Business, the Purchased Locations or the Purchased Projects (each
such Purchased Project listed on SCHEDULE 1.01(c) hereto) (each
such agreementsometimes may be referred to as a "Contract" or
collectively as "Contracts");
(d) all claims, refunds, causes of action, choses in action, rights
of recovery, rights to insurance proceeds, rights of set off, and
rights of recoupment of Sellers relating to the Purchased
Business, the Purchased Locations or the Purchased Projects;
(e) all franchises, approvals, permits, licenses (excluding any
license to practice engineering), orders, registrations,
certificates, variances, and similar rights of Sellers obtained
from governments and governmental agencies relating to the
Purchased Business, the Purchased Locations or the Purchased
Projects;
(f) copies of all books, records, ledgers, files, documents,
correspondence,
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lists, plats, architectural plans, drawings, specifications,
creative materials, advertising and promotional materials,
studies, reports, and other printed or written materials of
Sellers relating to the Purchased Projects (it being understood
and agreed that the Sellers shall retain the originals of all
such documents other than creative materials and advertising and
promotional materials);
(g) all goodwill associated with the Purchased Business; and
(h) all of the Sellers' rights to the "Bettigole, Andrews and Clark"
and "NH Bettigole" names, styles or logos and all variations
thereof.
SECTION 1.02 EXCLUDED ASSETS. Notwithstanding anything else
contained in this Agreement, the Purchased Assets do not include (a) fixtures,
free standing partitions, telephone systems, other than those telephone systems
at the Buffalo, New York office, whether located at the Purchased Locations or
otherwise; (b) any deposits, prepayments, refunds, or Tax refunds or credits
other than those, if any, reflected on the Closing Balance Sheet (as defined in
Section 1.05(a)); (c) the corporate charter of either Seller or any license to
practice engineering or any financial books and records of Sellers except as
specifically referred to in Section 1.01(f); (d) contracts, agreements,
understandings, and commitments relating to the Purchased Projects where
services for such Purchased Projects are completed or in respect of which no
further services are anticipated to be rendered as of or subsequent to the
Effective Date; (e) the Excluded Projects; (f) all property or assets located at
the Excluded Location or otherwise related to the items described in subsections
(d) and (e) above; (g) the Accounts Receivable (as hereinafter defined); (h) the
Supplementals (as hereinafter defined); and (i) all rights in and with respect
to the assets associated with any "employee welfare benefit plan" or "employee
pension benefit plan" (each as defined in the Employee Retirement Income
Security Act of 1974) (subsections (a) through (i) in this Section 1.02 are
referred to herein collectively as the "Excluded Assets").
SECTION 1.03 ASSUMED LIABILITIES.
(a) Subject to the terms and conditions of this Agreement, Buyer agrees to
assume, pay, perform and discharge in full when due, and Sellers agree to
transfer and assign to Buyer, any and all obligations of Sellers under or in
connection with the Real Property Leases and the Contracts and Purchased
Projects which arise after the Effective Date (such obligations are referred to
herein collectively as the "Assumed Liabilities"). Buyer's assumption of the
Assumed Liabilities shall be as set forth in the assumption agreement in the
form attached as EXHIBIT 1.03 hereto (the "Assumption Agreement"). Except as
provided in the foregoing sentences Buyer shall not assume, or in any way become
liable for, any liabilities or obligations of Sellers of any kind or nature,
whether accrued, absolute, contingent or otherwise, or whether due or to become
due, and whether known or unknown, arising out of events, transactions or facts
which occurred, arose or existed on or prior to the Effective Date, which
liabilities and obligations shall continue to be liabilities and obligations of
Sellers (the "Retained Liabilities"). The Retained Liabilities shall include,
without limitation, (i) any liability for Taxes (as hereinafter defined),
including any liability for Taxes resulting from the transactions contemplated
in this Agreement, (ii) any liability for trade accounts payable or notes
payable,
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(iii) any liability for employment matters (whether in connection with
or related to employee benefit matters, worker's compensation and occupational
safety and health matters, labor disputes, unfair labor practices, notice of
termination, severance, claims for overtime, back wages, vacation or minimum
wage or otherwise) except where such liability arises from the failure of Buyer
to make offers of employment to the Transferred Employees (as hereinafter
defined) in accordance with Section 7.02 hereof, (iv) any claim, liability or
obligation arising out of circumstances or occurrences or the operations of
Sellers with respect to the Purchased Business on or prior to the Effective Date
or with respect to the Excluded Business, (v) any liabilities or obligations
arising out of or relating to any act or omission of Sellers or breach of any
Contract or Purchased Project by Sellers on or prior to the Effective Date, and
(vi) any liability or obligation not expressly assumed hereunder. Sellers
covenant and agree to maintain its existing professional liability and errors
and omissions insurance coverage, as long as such coverage is available on
commercially reasonable terms, for a period of at least three years after the
Effective Date.
(b) Buyer hereby agrees to indemnify and hold Sellers harmless in
accordance with the provisions of Article VI hereof from and against any
liabilities and obligations of Buyer expressly assumed by Buyer pursuant to the
Assumption Agreement. Sellers hereby agree to indemnify and hold Buyer harmless
in accordance with the provisions of Article VI hereof from and against any
liabilities and obligations of Sellers not expressly assumed by Buyer pursuant
to the Assumption Agreement.
(c) Notwithstanding the foregoing, if the assignment and transfer of any of
the Assumed Liabilities would cause a breach thereof and if no required consent
to such assignment and transfer has been obtained from the third parties
involved, then, without limiting the effect of any representations and
warranties hereunder, such Assumed Liabilities shall not be assigned and
transferred to Buyer, and Buyer shall not assume any of the obligations and
liabilities with respect thereto, but, instead, Sellers shall continue to hold
its interests in and be obligated under and for such Assumed Liabilities, with
such Assumed Liabilities to be held by Sellers in trust for the benefit of
Buyer, with Buyer to second to Sellers such of the Transferred Employees in its
employ as may be necessary or desirable to carry out the relevant Purchased
Projects or Contracts, and with Sellers to receive in trust and remit as
promptly as possible to Buyer any money paid thereunder to Sellers and Sellers
shall cooperate in any reasonable arrangement or action requested by Buyer to
secure for Buyer all benefits under such Assumed Liabilities; provided however,
at and effective as of such time as any such required consent with respect to
such Assumed Liability shall be obtained, such Assumed Liability shall forthwith
be transferred and assigned to Buyer, and all related obligations and
liabilities of Sellers shall be simultaneously assumed by Buyer hereunder.
SECTION 1.04 PURCHASE PRICE. In consideration of the sale by Sellers to
Buyer of the Assets and Sellers' performance of this Agreement, Buyer shall pay
to Sellers the aggregate amount equal to $1,515,025, less the agreed adjustments
in respect of (a) the Cross Bay-Guy Brewer Project, (b) the Livingston Street,
Bergen County, Project, and (c) Monmouth County Bridges W-7, W-8 and W-9, in the
aggregate amount of $141,500, and shall assume the Assumed Liabilities. At the
Closing, Buyer shall pay the purchase price in the amount of $1,373,525 (the
"Purchase Price") to BAC by certified check or wire transfer of immediately
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available funds. The Purchase Price is subject to the post-closing adjustments
provided in Section 1.05 hereof.
SECTION 1.05 POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(a) CLOSING BALANCE SHEET. Within forty-five (45) days following the
Closing Date, the Sellers shall deliver to Buyer a balance sheet as at the
Effective Date (the "Closing Balance Sheet"), prepared by Seller or its
certified public accounting firm in accordance with generally accepted
accounting principals on a basis consistent with the Adjusted Balance Sheet (as
defined in Section 3.05 below) and including the agreed adjustments in respect
of the Cross Bay-Guy Brewer Project, the Livingston Street, Bergen County
Project and the Monmouth County Bridges W-7, W-8 and W-9. In the event that
Seller does not deliver the Closing Balance Sheet within said forty-five (45)
day period, Buyer may, at its option and at Sellers' expense, prepare and
deliver to Sellers a Closing Balance Sheet prepared as aforesaid.
(b) ADJUSTMENT. The Purchase Price shall be adjusted on a dollar-for-dollar
basis by the amount, if any, by which the amount for the entry described as
"Cash to be paid upon Closing" on the Closing Balance Sheet is less than or
greater than the Purchase Price ("Adjustment"). The Adjustment shall be paid by
or refunded to the Buyer as the case may be. Such payment shall be made in cash
within ten (10) days after final determination of the Adjustment. If such
payment is not made within such ten (10) day period, interest shall accrue on
the amount of the Adjustment remaining unpaid at the rate of twelve percent
(12%) per annum. The Adjustment shall not be subject to the Indemnification
Threshold provided in Section 6.04.
(c) DETERMINATION OF ADJUSTMENT. If Buyer does not object in writing to the
Adjustment proposed by the Sellers within thirty (30) days of receipt of the
proposed Adjustment, the proposed Adjustment shall become final and binding on
the parties. If Buyer does not agree with the proposed Adjustment, Buyer shall,
prior to the expiration of such thirty (30) day period, deliver to Seller a
written statement of the matters with respect to which there is disagreement. If
the parties fail to resolve the disagreement within thirty (30) days thereafter,
then the party who claims to be entitled to payment of the Adjustment from the
other party or parties may refer the items of disagreement to a nationally
recognized accounting firm that has not otherwise been engaged by Buyer or
Sellers within the preceding 12-month period (the "Accounting Firm"). The
parties will use their best efforts to cause the Accounting Firm to resolve all
items of disagreement within thirty (30) days after submission and the
Accounting Firm's determination will be final and binding on the parties. The
Accounting Firm shall reach its determination on the same basis as was used in
the Adjusted Balance Sheet. If the Accounting Firm determines that the
Adjustment proposed by Seller is not substantially correct, in the judgment of
the Accounting Firm, Seller shall bear the cost of such referral and
determination. If the Accounting Firm determines that the Adjustment proposed by
Seller is substantially correct, Buyer shall bear the cost of such referral and
determination.
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ARTICLE II
CLOSING
SECTION 2.01 CLOSING. The sale and purchase of the Purchased Assets and
assumption of the Assumed Liabilities referred to in Article I hereof shall be
consummated at a closing (the "Closing") to be held at the offices of BAC in
Millburn, New Jersey immediately upon the execution of this Agreement by the
parties, unless another date or place is agreed to in writing by Sellers and
Buyer (the "Closing Date") with effect from April 1, 2000 (the "Effective
Date").
SECTION 2.02 CLOSING DOCUMENTATION. At the Closing,
(a) Sellers will deliver to Buyer:
(i) a duly executed bill of sale and assignment agreement in
substantially the form of EXHIBIT 2.02(a)(i) and such other instruments as
Buyer shall reasonably request to effectively transfer to and vest in Buyer
good and marketable title to all of the Purchased Assets, free and clear of
all Liens;
(ii) a duly executed undertaking in substantially the form of Exhibit
2.01(a)(ii), with respect to the Premises located at Randers' Millburn, New
Jersey location; and
(iii) such other documents as Buyer may reasonably request.
(b) Buyer will deliver to Sellers:
(i) the funds constituting the Purchase Price as provided in Section
1.04 hereof;
(ii) the duly executed Assumption Agreement;
(iii) a duly executed undertaking in substantially the form of Exhibit
2.01(b)(iii), with respect to the Premises located at Randers' Millburn,
New Jersey location; and
(iv) such other documents as Sellers may reasonably request.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to Buyer as follows and
acknowledge that Buyer is relying on the accuracy of each such representation
and warranty in connection with the execution of this Agreement and the
completion of the transactions contemplated hereby:
SECTION 3.01 ORGANIZATION. Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all requisite power and authority, corporate and other,
and all necessary governmental approvals to own, lease and operate its
properties and to carry on the Purchased Business as now and heretofore
conducted.
SECTION 3.02 AUTHORITY RELATIVE TO AGREEMENT. Sellers have all necessary
power and authority, and have taken all necessary actions required, to execute
and deliver this Agreement and all other agreements, instruments and
certificates contemplated hereby (the "Related Agreements") and to consummate
the transactions contemplated hereby and thereby and to perform all obligations,
undertakings and agreements to be observed and performed hereunder and
thereunder. This Agreement and the Related Agreements have been duly executed
and delivered by Sellers and constitute legal, valid and binding obligations of
Sellers, enforceable against Sellers in accordance with their respective terms.
SECTION 3.03 NO VIOLATION. Neither the execution and delivery of this
Agreement and the Related Agreements by Sellers, nor the consummation of the
transactions contemplated hereby and thereby, will violate, conflict with or
result in a breach of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a material benefit under, or the
creation of any Lien on any of the Purchased Assets, pursuant to (i) any
provision of Sellers' charter documents, (ii) any provision of any agreement,
obligation, instrument, permit, or license to which either Seller is a party or
is otherwise bound, or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation.
SECTION 3.04 CONSENTS AND APPROVALS. Except as to any third party consents
and novations which may be required with respect to assignment of the Assumed
Liabilities (which Sellers shall use commercially reasonably efforts to obtain
or assist Buyer to obtain, as required by Section 7.06 of this Agreement), no
consent, approval, order or authorization of, or registration, declaration or
filing with any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by or with
respect to Sellers in connection with the execution and delivery of this
Agreement or the Related Agreements or the consummation by Sellers of the
transactions contemplated hereby and thereby.
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SECTION 3.05 ADJUSTED BALANCE SHEET. The unaudited adjusted balance sheet
of BAC as at December 31, 1999 attached hereto as SCHEDULE 3.05 ("Adjusted
Balance Sheet") is accurate and complete and presents fairly the financial
position of BAC as of such date, and, subject to the agreed adjustments, has
been prepared in conformity with generally accepted accounting principles
applied on a basis consistent with that of similar periods for preceding years.
December 31, 1999 is referred to herein as the "Adjusted Balance Sheet Date".
SECTION 3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Adjusted
Balance Sheet Date, Sellers have conducted the operations of the Purchased
Business in the ordinary and regular course, and in connection with the
Purchased Business Sellers have not: (i) allowed the Purchased Business to
undergo any change in its condition (financial or other), properties, assets,
liabilities, business, operations or prospects except changes in the ordinary
and usual course of its business and consistent with its past practice and which
have not been, either in any case or in the aggregate, materially adverse to it;
(ii) mortgaged, pledged or subjected to any Lien, any of the Purchased Assets;
(iii) acquired or disposed of any interest in any of the Purchased Assets except
the purchase of materials and supplies and the sale of inventory in the ordinary
and usual course of its business and consistent with its past practice; (iv)
suffered any damage, destruction or loss (whether or not covered by insurance)
which has an adverse effect on its condition (financial or other), business,
operations, prospects or the Purchased Assets; (v) amended or terminated any
Contract; (vi) experienced any labor difficulty or loss of employees or
customers; (vii) sold or granted or transferred to any party or parties any
contract or license, or granted an option to acquire a license, to use any
trademark, service mark, trade name, copyright, patent or any pending
application for any foregoing, or any of its trade secrets or know-how; (viii)
without limiting the generality of any of the foregoing, entered into any
transaction except in the ordinary and usual course of its business and
consistent with its past practice; or (ix) agreed to, permitted or suffered any
of the acts, transactions or other things described in this Section 3.06.
SECTION 3.07 TAXES. All federal, state and local taxes ("Taxes") due or to
become due by reason of the Purchased Assets or operation of the Purchased
Business by Sellers prior to the Closing Date have been or will be paid by
Sellers when due.
SECTION 3.08 REAL PROPERTY LEASES. All of the real property used in
connection with the Purchased Business is described in SCHEDULE 3.08 (the
"Premises"). Except with respect to the Premises located at Randers' Millburn,
New Jersey location, which are owned by Elson T. Killam Associates, Inc., a
wholly-owned subsidiary of Randers, the Premises are leased by Sellers pursuant
to the real property leases identified in SCHEDULE 3.08 ("Real Property
Leases"). The Real Property Leases are valid and binding agreements, enforceable
in accordance with their terms. Sellers have performed all obligations required
to be performed by it to date under the Real Property Leases and are not in
breach in any respect thereunder, and are not aware of any breach by any
landlord under the Real Property Leases, and there has been no event which, with
the giving of notice or the lapse of time or both, would become a breach under
the Real Property Leases. Sellers have not received any notice of default under
any of the Real Property Leases, and all rental and other payments due under
each of the Real Property Leases have been fully paid to date.
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SECTION 3.09 ENVIRONMENTAL COMPLIANCE. To Sellers' knowledge, Sellers are
not liable for clean up or response costs with respect to the emission,
discharge or release of any hazardous substance or for any other matter arising
under applicable environmental laws due to their lease or operation of all or a
portion of the Premises.
SECTION 3.10 TITLE TO AND CONDITION OF THE PURCHASED ASSETS. Sellers have
good and marketable title, subject to no Liens, to all of the Purchased Assets.
The tangible assets included in the Purchased Assets are, in all material
respects, in good condition and repair, reasonable wear and tear excepted, have
been well maintained, and conform with all applicable laws, ordinances and
regulations.
SECTION 3.11 PROPRIETARY RIGHTS. All of the patents, trademarks, service
marks, trade names, copyrights (including any pending applications for any of
the foregoing), inventions, trade secrets and any other intellectual or
intangible rights owned or used by Sellers in the Purchased Business which
constitute part of the Purchased Assets (collectively referred to as
"Proprietary Rights") are not subject to any outstanding licenses or Liens and
there are no pending or threatened challenges to any of the Proprietary Rights.
The Purchased Business as heretofore conducted does not infringe or constitute,
and has not infringed or constituted, an unlawful invasion of any rights of any
person and no notice of any infringement or invasion has been received by
Sellers with respect to the Proprietary Rights.
SECTION 3.12 CONTRACTS; NO DEFAULTS. All of the Contracts are listed in
SCHEDULE 3.12 and are valid, binding and in full force and effect and Sellers
are not in default or alleged to be in default thereunder and Sellers have no
knowledge that any other party thereto is in default. Nothing has occurred
which, with or without the passage of time or giving of notice or both, would
constitute a default by Sellers or any other party under any such Contract.
Sellers have no knowledge that any such Contract will be, and have not received
any notification that any such Contract is likely to be, terminated or canceled.
SECTION 3.13 LABOR MATTERS. With regard to the Purchased Business, Sellers
are not a party to any union, collective bargaining or other similar agreement
with any labor or employee union representing any of its employees. There are no
strikes, arbitrations, material grievances, other labor disputes or union
organizational drives pending or threatened between Sellers and any of the
employees involved in the Purchased Business. Sellers have paid or accrued in
full all wages, salaries, commissions, bonuses and other compensation (including
vacation benefits) for all services performed by the employees involved in the
Purchased Business prior to the Effective Date. To Sellers' knowledge, Sellers
are not liable for any arrears of wages or any payroll taxes or any penalties or
other damages for failure to comply with any applicable foreign, federal or
local laws, relating to the employment of labor in the Purchased Business. No
Transferred Employee will have a valid claim against Buyer due to the
termination of said Transferred Employee's employment by Sellers in connection
with the transactions contemplated by this Agreement or to the failure of
Sellers to make any payments to said Transferred Employee on account of such
termination.
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SECTION 3.14 LITIGATION AND CLAIMS. Except as set forth on SCHEDULE 3.14
hereto, there are no pending or threatened actions, suits, proceedings, claims,
investigations or notices by or against Sellers relating to the Purchased
Business or the Purchased Assets, whether or not covered by insurance, and there
is no outstanding order, notice, writ, injunction or decree of any court,
government or governmental agency against or affecting Sellers relating to the
Purchased Business. Except as set forth on SCHEDULE 3.14 hereto, there are no
incidents or occurrences (whether or not covered by insurance) of any kind which
either Seller believes are likely to give rise to material claims against either
of them, whether or not covered by insurance, relating to the Purchased
Business.
SECTION 3.15 COMPLIANCE WITH APPLICABLE LAWS. Sellers hold all permits,
licenses, variances, exemptions, orders and approvals of all governmental
entities which are required for the operation of the Purchased Business (the
"Permits"). Sellers are in compliance with the terms of the Permits. Sellers are
not in material violation of any law, ordinance or regulation of any
governmental entity.
SECTION 3.16 FINDERS' FEES. No person acting on behalf of Sellers, other
than the Environmental Financial Consulting Group, who will be remunerated by
the Sellers, has claims to, or is entitled to, under any contract or otherwise,
any payment as a broker, finder or intermediary in connection with the origin,
negotiation, execution or consummation of the transactions provided for in this
Agreement or the Related Agreements.
SECTION 3.17 GENERAL REPRESENTATION AND WARRANTY. Neither this Agreement
nor any Schedule or other documents and information furnished by or on behalf of
Sellers in connection with this Agreement or the Related Agreements contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements contained herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
SECTION 4.01 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and has
all requisite power and authority and all other necessary governmental approvals
to own, lease and operate its properties and to carry on its business as now and
heretofore being conducted.
SECTION 4.02 AUTHORITY RELATIVE TO AGREEMENT. Buyer has all necessary power
and authority, and has taken all necessary actions required, to execute and
deliver this Agreement and the Related Agreements and to consummate the
transactions contemplated hereby and thereby and perform all obligations,
undertakings and agreements to be observed and performed hereunder and
thereunder. This Agreement and the Related Agreements have been duly executed
and delivered by Buyer and constitute valid and binding obligations of Buyer,
enforceable against it in accordance with their respective terms.
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SECTION 4.03 NO VIOLATION. Neither the execution and delivery of this
Agreement and the Related Agreements nor the consummation of the transactions
contemplated hereby and thereby will result in any conflict with or violate (i)
any provision of the charter documents of Buyer, (ii) any provision of any
agreement, obligation, instrument, permit or license to which Buyer is bound or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Buyer or its properties or assets.
SECTION 4.04 CONSENTS AND APPROVALS. No consent, approval, order or
authorization of, or registration, declaration or filing with, any governmental
entity is required by Buyer in connection with the execution and delivery of
this Agreement and the Related Agreements by Buyer or the consummation by Buyer
of the transactions contemplated hereby and thereby, the failure to obtain which
would have a material adverse effect on Buyer or the transactions contemplated
hereby.
SECTION 4.05 FINDERS' FEES. No person acting on behalf of Buyer has claims
to, or is entitled to, under any contract or otherwise, any payment as a broker,
finder or intermediary in connection with the origin, negotiation, execution or
consummation of the transactions provided for in this Agreement or the Related
Agreements.
ARTICLE V
NON-COMPETITION AND NON-DISCLOSURE
SECTION 5.01 NON-COMPETITION AND NON-DISCLOSURE. Following the Effective
Date and for three (3) years thereafter (or for such shorter periods as are
specified below), Sellers jointly and severally agree not to:
(a) engage or become interested, directly or indirectly, through affiliates
or otherwise, as owner, employee, partner, through stock ownership (except
ownership of less than one percent (1%) of the number of shares outstanding of
any securities which are listed for trading on any securities exchange),
investment of capital, lending of money or property, rendering of services, or
otherwise, whether alone or in association with others, in the operation of any
business or enterprise in any way competitive to the Purchased Business anywhere
in New York or New Jersey or, for a period of one (1) year following the
Effective Date, Boston, Massachusetts and the area serviced by the Massachusetts
Bay Transit Authority ("MBTA"); solicit or accept orders for goods or services
competitive to those heretofore provided or sold by Sellers in the course of
conducting the Purchased Business in New York or New Jersey or, for a period of
one (1) year following the Effective Date, Boston, Massachusetts and the area
serviced by the MBTA; or induce or attempt to induce any customer of the
Purchased Business to reduce such customer's patronage of it or to direct such
customer's business to any competitor or the Purchased Business or of the Buyer
(for the purposes hereof, a customer includes any client of the Purchased
Business during the five year period preceding the Effective Date).
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(b) divulge, communicate, or utilize any confidential information of or
pertaining to the business or affairs of the Purchased Business or any of its
customers; and
(c) use the "BAC", "Bettigole, Andrews and Clark", "NH Bettigole" names,
styles or logos or any variation thereof, in any organization or enterprise or
business.
SECTION 5.02 EXCEPTIONS.
(a) Buyer acknowledges and agrees that after the Closing, the capital stock
or assets of one or both Sellers may be sold to one or more third parties (each
a "Subsequent Purchaser"), and Sellers do not currently know, and cannot
control, the identities or actions of any such Subsequent Purchasers.
Accordingly, Buyer agrees that neither the activities of any such Subsequent
Purchaser, nor the acquisition of the capital stock or assets of one or both of
the Sellers, shall be deemed to be a violation of the covenants set forth in
Section 5.01(a).
(b) Buyer acknowledges and agrees that after the Closing, Randers intends
to merge with and into BAC, such that BAC will be the surviving corporation and
that the surviving corporation will change its name to remove any reference to
"BAC" or any variation thereof. Prior to such merger and name change, however,
Buyer acknowledges and agrees that the Excluded Business has certain contracts
with third parties entered into under one or more of the names "BAC Killam" or
"Bettigole, Andrews and Clark." Accordingly, Buyer agrees that Sellers may
continue to use such names for the limited purpose of fulfilling such contracts
until such time as such merger and name change have been completed.
(c) Buyer acknowledges and agrees that Sellers frequently enter into joint
ventures, partnerships, subcontractor and similar relationships with third
parties, which third parties may engage in competition with the Purchased
Business. Accordingly, Buyer agrees that no such joint venture, partnership,
subcontractor or similar relationship shall be deemed to be a violation of the
covenants set forth in Section 5.01(a) unless the activities of the Sellers (not
taking into account the activities of its joint venturers, partners,
subcontractors or prime contractors) would violate such covenants. For greater
certainty, environmental work undertaken by Sellers in connection with the
Newark Airport MOTBY project to Brooklyn, New York in support of other
consultants shall be considered to be governed by this clause.
(d) Without limiting the generality of the foregoing, Sellers engagement in
(i) road resurfacing work conducted as a result of performing municipal
engineering projects, (ii) the Toms River Bridge project, and/or (iii) work
undertaken with or for the New York City Department of Environmental Protection,
shall not be deemed to be a violation of the covenants set forth in Section
5.01(a).
SECTION 5.03 EQUITABLE REMEDIES. Sellers specifically acknowledge and agree
that the remedy at law for any breach of any provision of this Article V
available to Buyer will be inadequate and that, in addition to any other relief
available to Buyer under this Agreement, shall be entitled to seek temporary and
permanent injunctive or other equitable relief without the necessity of proving
actual damage and without the necessity of posting a bond or other surety.
<PAGE>
-13-
SECTION 5.04 SEVERABILITY. If any provision of this Article V shall for any
reason be held to be excessively broad as to any activity or subject, it shall
be construed, by limiting and reducing it, to be enforceable to the extent
compatible with applicable law. If any provision in this Article V shall,
notwithstanding the preceding sentence, be held illegal or unenforceable, such
illegality or unenforceability shall not affect any other provision of this
Article V but this Agreement shall be construed as if such illegal or
unenforceable provision had never been contained herein.
SECTION 5.05 NO WAIVER. The rights and obligations of Buyer set forth in
this Article V are in addition to, and not in lieu of, all other rights and
obligations provided by applicable law.
SECTION 5.06 SURVIVAL. Except as otherwise set forth above with respect to
certain covenants, agreements and undertakings that shall survive the Closing
for a period of one (1) year after the Effective Date, the covenants, agreements
and undertakings of Sellers in this Article V and all rights of Buyer with
respect thereto shall survive the Closing for a period of three (3) years after
the Effective Date.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
SECTION 6.01 SURVIVAL. The representations and warranties, agreements and
obligations of the parties hereto in Articles III and IV shall survive the
Closing and shall continue thereafter without limitation except as provided in
Section 6.05 below.
SECTION 6.02 INDEMNIFICATION OF BUYER. Sellers hereby agree to indemnify
and hold Buyer harmless from and against any and all Buyer's Damages (as defined
in Section 6.06 below) arising out of, attributable to, resulting from, or
incurred with respect to (i) any breach of warranty or misrepresentation by or
on behalf of Sellers under this Agreement, or the breach or non-performance of
any covenant, agreement, or obligation to be performed by Sellers; (ii) any
misrepresentation in, or omission from, any certificate or instrument executed
and delivered or to be executed and delivered by or on behalf of Sellers in
connection with this Agreement; (iii) any error or omission of Sellers in the
operation of the Purchased Business or relating to work performed or services
rendered on the Purchased Projects on or prior to the Effective Date or on the
Excluded Projects at any time for which professional liability accrues under
Sellers' Professional Indemnity insurance policy; (iv) any act or omission of
Sellers in the operation of the Purchased Business or relating to work performed
or services rendered on the Purchased Projects on or prior to the Effective Date
or on the Excluded Projects at any time for which liability accrues for personal
injury or property damage; (v) any liability or obligation related to the
Purchased Assets or the Excluded Assets which arose on or prior to the Effective
Date; (vi) any liability or obligation of Sellers not expressly assumed under
this Agreement by Buyer, including without limitation any liability or
obligation of Sellers arising out of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), with respect to any employee welfare benefit plan
or employee pension benefit plan (as such terms are defined in ERISA),
<PAGE>
-14-
maintained by Sellers or any of their affiliates; (vii) any failure of Buyer or
Sellers to comply with any bulk sales act or similar statute in connection with
this Agreement; (viii) client audits relating to work performed or services
rendered on the Purchased Projects or the Excluded Projects on or prior to the
Effective Date; or (ix) any claim made against Buyer by any creditor or past
creditor of Sellers.
SECTION 6.03 INDEMNIFICATION OF SELLER. Buyer agrees to indemnify and hold
Seller harmless from and against any and all Sellers' Damages (as defined in
Section 6.06 below) arising out of, attributable to or incurred with respect to
(i) any breach of warranty or misrepresentation by or on behalf of Buyer under
this Agreement, or the breach or non-performance of any covenant or obligation
to be performed by Buyer; (ii) any misrepresentation in, or omission from, any
certificate or instrument executed and delivered or to be executed and delivered
by or on behalf of Buyer pursuant to this Agreement; (iii) any error or omission
of Buyer in the operation of the Purchased Business or relating to work
performed or services rendered on the Purchased Projects after the Effective
Date for which professional liability accrues under Buyer's Professional
Indemnity insurance policy; (iv) any act or omission of Buyer in the operation
of the Purchased Business or relating to work performed or services rendered on
the Purchased Projects after the Effective Date for which liability accrues for
personal injury or property damage; (v) client audits relating to work performed
or services rendered on the Purchased Projects after the Effective Date; or (vi)
the failure of Buyer to pay, discharge or perform any of the Assumed
Liabilities.
SECTION 6.04 LIMITATIONS; PROCEDURE. Subject to the remaining provisions of
this Section 6.04, notwithstanding anything to the contrary herein, any claim
under this Article VI by Buyer against Sellers for Buyer's Damages or by Sellers
against Buyer for Sellers' Damages shall be payable by Buyer or Sellers,
respectively, only in the event and to the extent that the accumulated amount of
Buyer's Damages or Sellers' Damages shall exceed in the aggregate the amount of
$40,000 (the "Indemnification Threshold"); and at such time as the aggregate
amount of Buyer's Damages or Sellers' Damages shall exceed the Indemnification
Threshold, Sellers or Buyer shall thereafter be liable on a dollar-for-dollar
basis for the full amount of all Buyer's Damages or Sellers' Damages,
respectively, including the Indemnification Threshold, it being the intention of
the parties (i) that the initial amount of Buyer's Damages or Sellers' Damages
excluded by reason of the Indemnification Threshold would not be recoverable
against Sellers or Buyer, respectively, until such time as the Indemnification
Threshold is reached and (ii) the aggregate amount of Buyer's Damages or
Sellers' Damages recoverable against Sellers or Buyer, respectively, shall be
limited to the Purchase Price, as adjusted, such that the aggregate amount of
Buyer's Damages or Sellers' Damages in excess of the Purchase Price, as
adjusted, shall not be recoverable against Sellers or Buyer, respectively, and
shall be borne by Buyer or Sellers; provided, however, that (i) the aggregate
amount of Buyer's Damages recoverable against Sellers by Buyer which arises out
of, is attributable to, results from or is incurred with respect to Sections
6.02(iii), (iv) and (viii) shall not be limited to the Purchase Price, and (ii)
the aggregate amount of Sellers' Damages recoverable against Buyer by Sellers
which arises out of, is attributable to, results from or is incurred with
respect to Section 6.03(iii), (iv) and (v) shall not be limited to the Purchase
Price.
<PAGE>
-15-
SECTION 6.05 DURATION. Neither party may assert a claim against the other
(or others) based upon a breach of the representations contained in Article III
(with respect to Sellers) or Article IV (with respect to Buyer) after the third
anniversary of the Effective Date unless such party shall have notified the
other (or others) in writing of such breach prior to the third anniversary of
the Effective Date; PROVIDED, HOWEVER, that (a) Seller's representations and
warranties contained in Section 3.07 of this Agreement shall survive and be
subject to Buyer's assertion of a claim against Seller until the expiration of
the applicable statute of limitations and (b) Seller's representations and
warranties contained in the first sentence of Section 3.10 of this Agreement
shall survive and be subject to Buyer's assertion of a claim against Seller
until the tenth anniversary of the Effective Date.
SECTION 6.06 DEFINITION OF DAMAGES. For purposes of this Agreement, the
Buyer's or Sellers' Damages, as the case may be, shall mean and include the full
amount of any liabilities, losses, debts, obligations, monetary damages, fines,
fees, penalties, deficiencies, expenses (including those related to client
audits and including amounts paid in settlement, interest obligations, court
costs, the reasonable costs of investigators, the reasonable fees and expenses
of attorneys, accountants, financial advisors or other experts, and other
reasonable expenses of litigation or administrative proceedings) incurred due to
the matter for which indemnification is sought, but any recovery shall be net of
any economic benefit to which the indemnified party is entitled due to such
liabilities, expenses, costs or loss, including, without limitation, (i) any tax
refund, reduction or benefit, (ii) any insurance proceeds to which the
indemnified party is entitled (including self-insured amounts) and (iii) any
warranty reimbursements. In no event shall any party be awarded punitive or
multiple damages.
SECTION 6.07 NONEXCLUSIVITY IN THE EVENT OF FRAUD. It is specifically
understood and agreed that, in the absence of fraud by any party hereto, in the
event a misrepresentation or breach of warranty or covenant is discovered by any
party after the Closing, such party's remedies shall be limited solely to the
indemnification set forth in this Article VI of this Agreement.
ARTICLE VII
POST CLOSING
COVENANTS OF THE PARTIES
SECTION 7.01 ACCOUNT AND SUPPLEMENTAL RECEIVABLES. Buyer covenants and
agrees that it shall, within fifteen (15) days after its receipt from time to
time of any of the (a) amounts in respect of the "Total Old Outstanding
Receivables" entry on the Adjusted Balance Sheet ("Accounts Receivable"), for
which the details of the relevant accounts are specified in EXHIBIT 7.01(a), or
(b) amounts in respect of Cross Bay - Guy Brewer accounts receivable, Cross Bay
- Guy Brewer work in progress and supplemental expenditures approved after the
Effective Date for services rendered and completed prior to the Effective Date,
as identified in the "Miscellaneous" entry on the Adjusted Balance Sheet
("Supplementals") for which the details of the relevant accounts are specified
in EXHIBIT 7.01(b), transfer to Sellers ninety-five percent (95%) of all amounts
received by Buyer as payment for Accounts Receivable and
<PAGE>
-16-
Supplementals. Sellers covenant and agree that they shall, within fifteen (15)
days after their receipt from time to time of any Accounts Receivable or
Supplemental, transfer to Buyer five percent (5%) of all amounts received by
Sellers as payment for Accounts Receivable and Supplementals. Buyer shall have
no obligation to seek collection of payment on any Accounts Receivable or
Supplementals; PROVIDED, HOWEVER, that Buyer, in addition to remitting payments
received as set forth above, shall use commercially reasonable efforts to
cooperate with Sellers in Sellers' efforts to prepare invoices and/or collect
Accounts Receivable and prepare Supplementals.
SECTION 7.02 TREATMENT OF EMPLOYEES. Upon the Closing, Sellers shall
terminate, as of the Effective Date, the employment of each of the employees of
Sellers who perform services for the Purchased Business, except for Mr. Fletcher
Platt and Mr. Jungmin Lee, who shall remain as employees of Sellers (the
"Transferred Employees"), and Buyer shall make employment offers to all such
Transferred Employees, such offers to be on terms and conditions, as a package,
which are substantially similar to those terms and conditions enjoyed by the
Transferred Employees immediately prior to their termination by Sellers. Buyer
shall have no liability to Sellers or any Transferred Employee or former
employee or dependent of any former employee of any Seller as a result of,
arising out of, or in connection with the termination of any such Terminated
Employee or former employee including, without limitation, liability for group
health plan continuation coverage pursuant to Sections 601 through 608 of ERISA
and Section 4980B(f) of the Code or applicable state law, severance payments,
accrued vacation, or failure to provide adequate notice of termination, and
Sellers shall indemnify, defend, and hold harmless Buyer from and against any
and all such liabilities except where such liability arises from the failure of
Buyer to make offers of employment to the Transferred Employees in accordance
with this Section 7.02, in which case Buyer shall indemnify, defend, and hold
harmless Sellers from and against any and all such liabilities. This Section
7.02 is not intended and shall not be construed to create any rights or remedies
in any person not a party to this Agreement other than Sellers and Buyer and no
person not a party to this Agreement shall assert any rights or remedies as a
third party beneficiary hereunder. Mr. Lee shall be transferred by Sellers to
the Buyer, on the same basis as described for Transferred Employees under this
Section 7.02 upon the issue of new visa documentation by the Immigration and
Naturalization Service (the "INS") reflecting his employment by the Buyer.
Provided that Mr. Lee's employment is not otherwise terminated, in the event
that the INS rejects the visa application in respect of Mr. Lee or if six (6)
months transpire from the Effective Date and the INS does not make a decision on
the visa application in respect of Mr. Lee within that period, Sellers shall
have no further obligation to maintain Mr. Lee's employment.
SECTION 7.03 NON-SOLICITATION OF EMPLOYEES. For a period of eighteen (18)
months after the Effective Date, Buyer and Sellers each agree not to, directly
or indirectly, employ or solicit any employee of the other; PROVIDED, HOWEVER,
that nothing herein shall prohibit Buyer from making employment offers to
Transferred Employees.
SECTION 7.04 POST-CLOSING SUPPORT.
(a) Following the Closing, Sellers shall make Mr. Fletcher Platt, Chairman
of the Board of BAC, available to Buyer to provide consulting and other
transitional services on all
<PAGE>
-17-
matters pertaining to the Purchased Business to facilitate the successful
transfer of the Purchased Business and the integration of the Transferred
Employees into the business of the Buyer, upon the request of Buyer, through at
least June 1, 2000. In consideration of Mr. Platt's services, Buyer shall pay to
Sellers a fee in the amount of $175 per hour of Mr. Platt's services. Following
the Closing, Sellers shall, if requested by Buyer, provide Buyer with various
transitional administrative services including, but not limited to, accounting,
invoicing, and human resource services, through at least June 1, 2000. Sellers
shall provide such administrative services for a fee to be determined in
accordance with the rate schedule attached as EXHIBIT 7.04 hereto.
(b) Following the Closing, Buyer shall make the Transferred Employees
available to Seller at reasonable times and upon reasonable notice, at such
commercial rates and upon such terms and conditions as may be standard for the
performance of similar work by Buyer at the relevant time, or as may be
specifically agreed otherwise by the parties, to assist Sellers in completing
the Excluded Projects.
SECTION 7.05 CLIENT AUDITS. Following the Closing, Sellers shall be
responsible for responding to all client audit inquiries, and all costs and
expenses associated therewith, relating to work performed or services rendered
on the Purchased Projects on or prior to the Effective Date and on the Excluded
Projects at any time, and Buyer shall be responsible for responding to all
client audit inquiries, and all costs and expenses associated therewith,
relating to work performed or services rendered on the Purchased Projects after
the Effective Date.
SECTION 7.06 REPRESENTATIONS OF ABILITIES. Following the Closing, Buyer
shall be entitled to represent itself to all others, including, but not limited
to, clients and prospective clients, as possessing all of the capabilities and
experience of the Purchased Business prior to the Effective Date, including
"Bettigole, Andrews and Clark" and "NH Bettigole."
SECTION 7.07 CONSENTS OF OTHERS. After the Closing, Sellers and Buyer shall
fully cooperate with one another and shall use commercially reasonable efforts
to obtain all consents and novations required to permit the consummation of the
assignment of the Contracts and the Real Property Leases to Buyer.
SECTION 7.08 FURTHER ASSURANCES. After the Closing, Sellers shall assist
and cooperate with Buyer in effecting a transition of ownership of the Purchased
Assets and the Purchased Business to Buyer without a material disruption of the
operations of the Purchased Business and in preserving the goodwill of the
customers of the Purchased Business and others having business relationships
therewith all for the benefit of Buyer. Subject to Sellers' right to destroy
documents and records from time to time in accordance with its records retention
policies, which policies provide for the destruction of documents following the
later of ten years from the date of completion of the project to which the
documents relate and the next audit following completion of the project to which
the documents relate, Sellers shall provide Buyer with access to the originals
of the items referred to in Section 1.01(f) at reasonable times and on
reasonable notice upon the reasonable request of Buyer.
<PAGE>
-18-
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Buyer, to
Hatch Mott MacDonald, Inc.
2800 Speakman Drive
Sheridan Science and Technology Park
Mississauga, Ontario, Canada L5K 2R7
Attention: John P. Tummers, Secretary
and
(b) If to Sellers, to
The Randers Killam Group Inc.
27 Bleeker Street
Millburn, New Jersey 07041
United States of America
Attention: Emil C. Herkert, President
with a copy to:
Morse, Barnes-Brown & Pendleton, P.C.
1601 Trapelo Road
Waltham, Massachusetts 02451
United States of America
Attention: Carl F. Barnes, Esq.
SECTION 8.02 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.03 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) and the Related
Agreements, (a) constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) are not intended to and shall not
be construed to create or confer upon any person
<PAGE>
-19-
other than the parties hereto any rights or remedies and no other person shall
assert any rights or remedies as a third party beneficiary hereunder.
SECTION 8.04 KNOWLEDGE. When used in this Agreement in reference to the
knowledge of the Sellers, the term "knowledge" refers to the actual knowledge of
the management of the Sellers following reasonable investigation.
SECTION 8.05 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the internal laws of the State of New Jersey without regard
to any principles of conflicts of law.
SECTION 8.06 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned or delegated by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, and any such purported assignment or
delegation shall be void, except that Buyer may assign or delegate, in its sole
discretion, any or all of its rights, interests and obligations hereunder to an
affiliate of Buyer; PROVIDED, HOWEVER, that Buyer guarantees the performance of
all obligations of such affiliate hereunder. Sellers acknowledge and agree that
Buyer may acquire the Purchased Assets through various existing or newly formed
affiliates of Buyer; PROVIDED, HOWEVER that Buyer guarantees the performance of
all obligations of such affiliates hereunder. Subject to the foregoing, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
SECTION 8.07 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect. Upon any such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner,
to the end that the transactions contemplated by this Agreement are consummated
to the extent possible.
SECTION 8.08 PUBLICITY. Buyer and Sellers shall promptly consult with each
other as to the form and substance thereof prior to the release or issuance of
the first press release or other public disclosure related to this Agreement or
any other transactions contemplated hereby. Sellers and Buyer agree not to
release or issue any such press release or other public disclosure without the
reasonable approval of the other party to the form and substance thereof, which
approval shall not be unreasonably withheld or delayed.
SECTION 8.09 EXPENSES. Buyer and Sellers shall each bear and pay all costs
and expenses respectively incurred by them in connection with this Agreement,
including, without limitation, fees and expenses of their own financial
consultants, accountants, and counsel and any costs and expenses relating to
this Agreement and the Related Agreements.
SECTION 8.10 CONSENT TO JURISDICTION. Any action, suit or proceeding
arising out of or relating to this Agreement or the Related Agreements may be
brought in either the New Jersey State Supreme Court or the United States
District Court having as a situs Bergen County
<PAGE>
-20-
in the State of New Jersey and Sellers and Buyer hereby irrevocably submits to
the exclusive jurisdiction of any of such courts for the purpose of any such
action, suit or proceeding.
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date first above written.
SELLERS:
BAC KILLAM, INC.
By: /s/ Emil C. Herkert
-------------------------------------------
Title: President
THE RANDERS KILLAM GROUP INC.
By: /s/ Emil C. Herkert
-------------------------------------------
Title: President
BUYER:
HATCH MOTT MACDONALD, INC.
By: /s/ Gordon A. Smith
-------------------------------------------
Title: President and C.E.O.
By: /s/ R. R. Nolan
-------------------------------------------
Title: Director
<PAGE>
APPENDIX E
CURRENT REPORT ON FORM 8-K
DATED JUNE 15, 2000
E-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported):
June 1, 2000
----------------------------------------------------
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-9549 04-2925807
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (781) 622-1000
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 2. Disposition of Assets
On June 1, 2000, Thermo TerraTech (the "Company") sold substantially all
of the assets and liabilities of its metal treating business (the "Metal
Treating Business"), which includes the Company's Metallurgical, Inc., Cal-Doran
Metallurgical Services, Inc., and Metal Treating Inc. subsidiaries, to Lindberg
Corporation (the "Buyer") for $15.7 million in cash, subject to adjustment as
described below. The purchase price includes $1.1 million of real estate leased
by the Metal Treating Business that was owned by Thermo Electron Corporation,
the Company's parent. The Asset Purchase Agreement provides that within 30 days
of the closing date of the sale, the Buyer will determine the net book value of
the Metal Treating Business as of the closing date. If the net book value,
including the real estate owned by Thermo Electron, is more than $8,323,000, the
purchase price will be increased dollar for dollar by the amount of the
increase. Alternatively, if the net book value is less than $8,323,000, the
purchase price will be reduced dollar for dollar by the amount of the shortfall.
The assets sold in the transaction include all contracts, accounts
receivable, inventories, prepaid expenses, fixed assets (plant and equipment),
and proprietary rights (including the "Cal-Doran National City," "Cal-Doran,"
"Metallurgical Services, Inc.," "Metal Treating Inc.," "Metallurgical
Incorporated," and "SCAT" tradenames) of the Metal Treating Business. The Buyer
assumed all operating liabilities of the Metal Treating Business including
liabilities and obligations under the purchased contracts and all liabilities
and obligations relating to the purchased real property.
The Buyer also assumed all environmental liabilities arising from the
Company's operation of the Metal Treating Business except for environmental
liabilities arising from or relating to certain sites and activities as
described in the Asset Purchase Agreement. In the event that after the closing,
the Buyer incurs greater than $1 million in expenses resulting from such
environmental liabilities, the Company has agreed to indemnify the Buyer for
reasonable environmental expenses in excess of $1,000,000, but not to exceed
$3,500,000. The Company's indemnity obligation pertains only to those
environmental liabilities arising from conditions identified by the Buyer
between June 1, 2000, and June 1, 2002. The Company has not recorded a liability
in connection with this indemnity because the amount that would likely be paid
by the Company, if any, cannot be reasonably estimated.
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 7. Financial Statements, Pro Forma Condensed Financial Information and
Exhibits
(a) Financial Statements
Not applicable.
(b) Pro Forma Condensed Financial Statements
The following unaudited pro forma consolidated condensed statements of
operations set forth the results of operations for the fiscal year ended April
3, 1999, and the nine months ended January 1, 2000, as if the disposition by the
Company of the Metal Treating Business had occurred at the beginning of fiscal
1999. The unaudited pro forma consolidated condensed balance sheet sets forth
the financial position as of January 1, 2000, as if the disposition had occurred
as of that date.
The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the sale of
the Metal Treating Business been consummated at the beginning of fiscal 1999.
These statements should be read in conjunction with the accompanying notes
herein and the historical consolidated financial statements and related notes of
the Company included in its Annual Report on Form 10-K, as amended, for the
fiscal year ended April 3, 1999, and Quarterly Report on Form 10-Q for the nine
months ended January 1, 2000.
2
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Fiscal Year Ended April 3, 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Thermo Less:
TerraTech Metal Treating Pro Forma
(In thousands except per share amounts)
Revenues $310,039 $ 19,274 $290,765
-------- -------- --------
Costs and Operating Expenses:
Cost of revenues 247,610 14,586 233,024
Selling, general, and administrative expenses 46,224 2,349 43,875
Restructuring costs 10,217 - 10,217
-------- -------- --------
304,051 16,935 287,116
-------- -------- --------
Operating Income 5,988 2,339 3,649
Interest Income 2,185 - 2,185
Interest Expense (8,981) - (8,981)
-------- -------- --------
Income (Loss) Before Income Taxes and Minority Interest (808) 2,339 (3,147)
Provision for Income Taxes (1,786) (902) (884)
Minority Interest Income 1,173 - 1,173
-------- -------- --------
Net Income (Loss) $ (1,421) $ 1,437 $ (2,858)
======== ======== ========
Basic and Diluted Loss per Share $ (.07) $ (.15)
======== ========
Basic and Diluted Weighted Average Shares 19,402 19,402
======== ========
3
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Nine Months Ended January 1, 2000
(Unaudited)
Thermo Less:
TerraTech Metal Treating Pro Forma
(In thousands except per share amounts)
Revenues $234,790 $ 12,551 $222,239
-------- -------- --------
Costs and Operating Expenses:
Cost of revenues 185,059 9,858 175,201
Selling, general, and administrative expenses 34,439 1,700 32,739
Restructuring costs 56,524 - 56,524
-------- -------- --------
276,022 11,558 264,464
-------- -------- --------
Operating Income (Loss) (41,232) 993 (42,225)
Interest Income 2,037 - 2,037
Interest Expense (6,678) - (6,678)
-------- -------- --------
Income (Loss) Before Income Taxes, Minority Interest, and (45,873) 993 (46,866)
Extraordinary Item
Provision for Income Taxes (1,244) (398) (846)
Minority Interest Income 3,316 - 3,316
-------- -------- --------
Income (Loss) Before Extraordinary Item (43,801) 595 (44,396)
Extraordinary Item, Net of Income Tax Provision of $64 96 - 96
-------- -------- --------
Net Income (Loss) $(43,705) $ 595 $(44,300)
======== ======== ========
Basic and Diluted Loss per Share $ (2.29) $ (2.32)
======== ========
Basic and Diluted Weighted Average Shares 19,066 19,066
======== ========
</TABLE>
4
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of January 1, 2000
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Thermo Less: Pro Forma
TerraTech Metal Treating Adjustments Pro Forma
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,905 $ - $ 14,608 $ 19,513
Advance to affiliate 49,436 - - 49,436
Accounts receivable, net 52,330 2,296 - 50,034
Unbilled contract costs and fees 26,950 - - 26,950
Inventories 2,452 15 - 2,437
Deferred tax asset 6,668 - - 6,668
Other current assets 3,685 568 - 3,117
-------- -------- -------- ---------
146,426 2,879 14,608 158,155
-------- -------- -------- ---------
Property, Plant, and Equipment, at 70,357 6,055 - 64,302
Cost, Net -------- -------- -------- ---------
Other Assets 9,623 - - 9,623
-------- -------- -------- ---------
Cost in Excess of Net Assets of 88,865 2,526 - 86,339
Acquired Companies -------- -------- -------- ---------
$315,271 $ 11,460 $ 14,608 $ 318,419
======== ======== ======== =========
5
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET (continued)
As of January 1, 2000
(Unaudited)
Thermo Less: Pro Forma
TerraTech Metal Treating Adjustments Pro Forma
(In thousands)
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Short-term obligations and current $ 19,549 $ - $ - $ 19,549
maturities of long-term obligations
Subordinated convertible debentures 37,950 - - 37,950
Accounts payable 20,939 300 - 20,639
Accrued payroll and employee benefits 12,223 602 - 11,621
Accrued restructuring costs 8,660 - - 8,660
Deferred revenue 4,169 - - 4,169
Other accrued expenses 13,347 298 800 13,849
Due to parent company and affiliated 2,140 - - 2,140
companies -------- -------- --------- --------
118,977 1,200 800 118,577
-------- -------- --------- --------
Deferred Income Taxes 685 - - 685
-------- -------- --------- --------
Other Deferred Items 1,097 - - 1,097
-------- -------- --------- --------
Long-term Obligations 118,241 - - 118,241
-------- -------- --------- --------
Minority Interest 24,785 - - 24,785
-------- -------- --------- --------
Shareholders' Investment:
Common stock 1,959 - - 1,959
Capital in excess of par value 70,993 - - 70,993
Accumulated deficit (17,807) - 3,548 (14,259)
Treasury stock at cost (3,846) - - (3,846)
Deferred compensation (216) - - (216)
Accumulated other comprehensive items 403 - - 403
Parent company investment - 10,260 10,260 -
-------- -------- --------- --------
51,486 10,260 13,808 55,034
-------- -------- --------- --------
$315,271 $ 11,460 $ 14,608 $318,419
======== ======== ========= ========
6
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Pro Forma Adjustments to Pro Forma Consolidated Condensed Balance Sheet
(In thousands)
January 1, 2000
Debit (Credit)
Cash and Cash Equivalents
Cash received for sale of net assets of the Metal Treating $ 14,608
Business (excluding proceeds received for certain fixed
assets owned by Thermo Electron) --------
Other Accrued Expenses
Estimated accrued transaction costs, including legal fees and other costs $ (800)
--------
Shareholders' Investment
Elimination of the Metal Treating Business equity account $(13,808)
and excess of proceeds from sale over parent company
investment in the Metal Treating Business --------
The Company recognized a gain of $3,548,000 on the sale of the Metal
Treating Business. This gain has not been included in the pro forma results of
operations.
7
<PAGE>
FORM 8-K
THERMO TERRATECH INC.
Item 7. Financial Statements, Pro Forma Condensed Financial Information and Exhibits (continued)
(c) Exhibits
2.1 Asset Purchase Agreement by and among Thermo TerraTech Inc.,
Metallurgical, Inc., Cal-Doran Metallurgical Services, Inc., and Metal
Treating Inc. (as Sellers) and Lindberg Corporation (as Buyer), dated
as of May 31, 2000.
</TABLE>
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 15th day of June 2000.
THERMO TERRATECH INC.
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
DATED MAY 31, 2000
among
THERMO TERRATECH INC.,
METALLURGICAL, INC.,
CAL-DORAN METALLURGICAL SERVICES, INC.
and
METAL TREATING INC.,
as the Sellers,
and
LINDBERG CORPORATION,
as the Purchaser
<PAGE>
TABLE OF CONTENTS
Page
1.0 Purchase and Sale of Assets............................................1
1.1 Purchased Assets.............................................1
1.2 Excluded Assets..............................................3
2.0 Purchase Price.........................................................4
2.1 Amount of the Purchase Price.................................4
2.2 Allocation of the Purchase Price Among the Purchased Assets..4
2.3 Assumed Liabilities..........................................5
2.4 Excluded Liabilities.........................................6
2.5 Adjustment of Purchase Price.................................7
3.0 Closing................................................................8
3.1 Time and Place of the Closing................................8
3.2 Procedure at the Closing.....................................8
3.3 Assignment to Subsidiaries...................................9
4.0 Representations and Warranties of the Sellers.........................10
4.1 Organization, Power and Authority of the Sellers............10
4.2 Financial Summaries.........................................10
4.3 Liabilities of the Business.................................11
4.4 Tax Matters.................................................11
4.5 Purchased Real Estate; Purchased Leasehold Premises.........11
4.6 Good Title to and Condition of the Purchased Assets.........13
4.7 Licenses and Permits........................................14
4.8 Proprietary Rights..........................................14
4.9 Adequacy of the Purchased Assets............................14
4.10 Insurance...................................................15
4.11 Litigation..................................................15
4.12 No Material Adverse Change..................................15
4.13 Absence of Certain Acts or Events...........................15
4.14 Compliance with Laws........................................16
4.15 Environmental Matters.......................................16
4.16 Employee Matters; Labor Relations...........................18
4.17 Employee Benefits...........................................19
4.18 Absence of Defaults.........................................21
4.19 Authority; Binding Obligation; and No Conflict..............21
4.20 Material Agreements, Contracts and Commitments..............22
i
<PAGE>
4.21 True and Complete Copies....................................22
4.22 Brokers.....................................................22
4.23 Recalls.....................................................22
4.24 Related Party Transactions..................................22
5.0 Representations and Warranties of the Purchaser.......................23
5.1 Organization, Power and Authority of the Purchaser..........23
5.2 Due Authorization; Binding Obligation.......................23
5.3 Brokers.....................................................24
5.4 Litigation..................................................24
5.5 Financing...................................................24
5.6 Solvency....................................................24
6.0 Additional Covenants of the Parties...................................24
6.1 All Commercially Reasonable Efforts.........................24
6.2 Conduct of Business Pending the Closing.....................24
6.3 Access to the Properties and Records of the Business........25
6.4 No Disclosure...............................................25
6.5 Bulk Sales Law..............................................26
6.6 Expenses....................................................26
6.7 Obligation to Notify........................................26
6.8 Exclusive Dealing...........................................26
6.9 Employee Matters............................................26
6.10 Title Opinions and Surveys..................................28
6.11 Noncompetition..............................................28
7.0 Conditions to the Obligations of the Purchaser........................29
7.1 Accuracy of the Sellers' Representations and
Warranties and Compliance by the Sellers with
Their Obligations...........................................29
7.2 Certified Resolutions.......................................30
7.3 Opinion of Counsel..........................................30
7.4 Receipt of Necessary Consents...............................30
7.5 No Adverse Order............................................30
7.6 No Material Adverse Change or Occurrence....................30
7.7 HSR Act Waiting Periods.....................................30
8.0 Conditions to Obligations of the Sellers..............................30
8.1 Accuracy of the Purchaser's Representations and Warranties
and Compliance by the Purchaser with
Its Obligations.............................................31
8.2 Opinion of Counsel..........................................31
8.3 Certified Resolutions.......................................31
8.4 No Adverse Order............................................31
8.5 HSR Act Waiting Periods.....................................31
ii
<PAGE>
9.0 Certain Actions After the Closing.....................................31
9.1 The Purchaser to Act as Agent for the Sellers;
Absence of Consents, Etc....................................31
9.2 Delivery of Property Received by the Sellers After Closing..32
9.3 Execution of Further Documents..............................32
9.4 National City Facility......................................32
9.5 WARN........................................................33
9.6 Multi-Employer Plan.........................................33
9.7 Delivery of Charter Amendments..............................34
10.0 Product and Service Warranty and Liability Claims; Cooperation in
Litigation............................................................35
11.0 Indemnification.......................................................35
11.1 Indemnification by the Sellers..............................35
11.2 Indemnification by the Purchaser............................36
11.3 Claims for Indemnification..................................36
11.4 Survival....................................................40
11.5 Limitations.................................................41
12.0 Miscellaneous.........................................................42
12.1 Brokers' Commission.........................................42
12.2 Amendment and Modification..................................42
12.3 Termination.................................................42
12.4 Binding Effect; Assignment..................................43
12.5 Entire Agreement............................................43
12.6 Headings....................................................44
12.7 Execution in Counterpart....................................44
12.8 Notices.....................................................44
12.9 Governing Law; Consent to Jurisdiction; Waiver of
Jury Right..................................................45
12.10 Limitation on Rights of Other Persons.......................45
12.11 Severability................................................46
12.12 Survival of Agreements......................................46
12.13 Certain Definitions.........................................46
iii
<PAGE>
EXHIBITS
Exhibit A - Allocation of Purchase Price (Section 2.2)
Exhibit B - Statement of Adjustment Amount (Section 2.5)
Exhibit C - Form of Deed (Section 3.2.2)
Exhibit D - Form of Bill of Sale (Section 3.2.2)
Exhibit E - Form of Assignment of Lease (Section 3.2.2)
Exhibit F - Form of Instrument of Assumption of Liabilities (Section
3.2.6)
Exhibit G - Form of Opinion of Sellers' Counsel (Section 7.3)
Exhibit H - Form of Opinion of Purchaser's Counsel (Section 8.2)
Exhibit I - Product and Service Liability Insurance Coverage (Section
10.0)
iv
<PAGE>
SECTIONS OF THE
DISCLOSURE SCHEDULE
Section 1.1.1 Purchased Real Estate
Section 1.1.6 Purchased Contracts
Section 1.1.8 Purchased Proprietary Rights
Section 1.1.9 Purchased Permits
Section 4.2 Financial Summaries
Section 4.4 Tax Matters
Section 4.5 Purchased Leasehold Premises
Section 4.6-A Assumed Liens; Operating Condition
Section 4.6-B Accounts Receivable
Section 4.6-C Holco Capitalization
Section 4.9 Adequacy of the Purchased Assets
Section 4.11 Litigation
Section 4.12 No Material Adverse Change
Section 4.13 Absence of Certain Events or Acts
Section 4.14 Compliance with Laws
Section 4.15 Environmental Matters
Section 4.16 Employee Matters; Labor Relations
Section 4.17 Employee Benefits
Section 4.18 Absence of Defaults
Section 4.19 Consents
Section 4.23 Recalls
Section 4.24 Related Party Transactions
Section 6.9.3 Collective Bargaining Agreements
v
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of this 31st day
of May, 2000 by and among THERMO TERRATECH INC., a Delaware corporation
("Terra"), METALLURGICAL, INC., a Minnesota corporation and wholly-owned
subsidiary of Terra ("MI"), CAL-DORAN METALLURGICAL SERVICES, INC., a California
corporation and wholly-owned subsidiary of MI ("Cal-Doran"), and METAL TREATING
INC., a Wisconsin corporation and wholly-owned subsidiary of Terra ("MTI" and
collectively with Terra, MI and Cal-Doran, the "Sellers"); and LINDBERG
CORPORATION, a Delaware corporation (the "Purchaser").
Recitals
The Sellers desire to sell, convey, transfer and assign to the Purchaser,
and the Purchaser desires to purchase from the Sellers, the assets, properties
and business of their Metallurgical Heat Treating Services Group (the
"Business") for a purchase price consisting of cash and the assumption by the
Purchaser of certain liabilities of the Sellers, all as herein provided and on
the terms and conditions hereinafter set forth. Initially capitalized terms not
expressly defined in the provisions in which they appear have the meanings
assigned to them in Section 12.13 or in the Section of this Agreement to which
Section 12.13 refers.
Covenants
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
1.0 PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. The Sellers agree to and will sell, convey, transfer,
assign and deliver to the Purchaser at the Closing, free and clear of all Liens
(except Permitted Liens and those which the Purchaser has expressly agreed in
Section 2.3 hereof to assume), on the terms and subject to the conditions set
forth in this Agreement, all of the properties, business and assets of the
Sellers used primarily in or essential to the operation of the Business of every
kind and description, real, personal and mixed, tangible and intangible,
wherever located (except those assets relating to the Business which are
specifically excluded from this sale by Section 1.2 hereof) as they shall exist
at the Closing Date (collectively, the "Purchased Assets"). Without limiting the
generality of the foregoing, the Purchased Assets shall include the following:
1.1.1 the land and buildings (and improvements thereto) comprising the
Business's heat treating and metallurgical facilities identified in Section
1.1.1 of the Disclosure Schedule (the "Purchased Real Estate").
<PAGE>
1.1.2 all of the interests of and the rights and benefits accruing to
the Sellers or the Business as lessee of the real property (the "Purchased
Leasehold Premises") identified in Section 4.5 of the Disclosure Schedule
(the "Purchased Leasehold Right");
1.1.3 all machinery, vehicles, equipment, tools, supplies, spare
parts, construction in progress, computer hardware, computer equipment,
computer software, furniture, fixtures and any other fixed assets owned by
the Sellers that are used primarily in or essential to the operation of the
Business (the "Purchased Fixed Assets");
1.1.4 all inventories of the Sellers (including, without limitation,
raw materials, work in process, finished products, spare parts, and
supplies, together with any of the foregoing, all inventory in transit or
storage) relating to the Business as of the Closing (the "Purchased
Inventory");
1.1.5 all receivables of the Sellers relating to the Business and
arising from sales in the Ordinary Course of Business as of January 1, 2000
as are included in the January 1, 2000 Statement, less such receivables as
are paid, plus such receivables as are created, in the Ordinary Course of
Business between January 1, 2000 and the Closing (the "Purchased
Receivables");
1.1.6 all of the interest of, and rights and benefits accruing to the
Sellers under: (i) all leases or rental agreements covering machinery,
vehicles, equipment, tools, supplies, spare parts, construction in
progress, computer hardware, computer equipment, computer software,
furniture, fixtures and any other fixed assets that are used primarily in
or essential to the operation of the Business; (ii) all contracts, sales
orders, purchase orders, guarantees, warranties, indemnities and other
agreements relating to the Business, the Purchased Assets or the Purchased
Leasehold Premises, including, without limitation, each of the agreements
specifically identified in Section 1.1.6 of the Disclosure Schedule; (iii)
all non-compete and confidentiality covenants entered into with current or
former employees of the Sellers to the extent they may be deemed to cover
or extend to the Business, the Purchased Assets or the Purchased Leasehold
Premises; and (iv) all agreements pertaining to the settlement of
litigation and the transfer of technology to the extent they may be deemed
to cover or extend to the Business, the Purchased Assets or the Purchased
Leasehold Premises; the items identified in Subsections (i)-(iv) shall be
collectively referred to throughout this Agreement as the "Purchased
Contracts"; any of the Purchased Contracts constituting a Material Contract
shall be identified as such in Section 1.1.6 of the Disclosure Schedule;
1.1.7 all operating data, files and records of the Sellers related to
the Business, including, without limitation, customer lists, financial
records, accounting ledgers, credit records, correspondence, budgets and
other similar items (the "Purchased Records"), but excluding stock ledgers
and minute books;
2
<PAGE>
1.1.8 all the Sellers' right, title and interest in and to the trade
names "Cal-Doran National City," "Cal-Doran," "Metallurgical Services,
Inc.," "Metal Treating Inc.," "Metallurgical Incorporated" and "SCAT", and
all other Proprietary Rights of the Sellers which primarily pertain or are
essential to the operation of the Business, including, without limitation,
all patents, patent applications, patent licenses, trademarks, trade names,
service marks and registrations and applications therefor, trade secrets,
technology, know-how, formulae, designs and drawings, computer software,
slogans, copyrights, processes and other similar intangible property and
rights, including, without limitation, those set forth in Section 1.1.8 of
the Disclosure Schedule (the "Purchased Proprietary Rights");
1.1.9 all of the rights and benefits accruing to the Sellers under the
official clearances, licenses, permits and registrations issued by federal,
state or local instrumentalities of government which are either identified
in Section 1.1.9 of the Disclosure Schedule or which primarily pertain or
are essential to the operation of the Business (the "Purchased Permits");
1.1.10 all prepaid and deferred items of the Sellers relating to the
Business, including, without limitation, prepaid rentals, utilities and
other expenses and unbilled sales;
1.1.11 all rights to causes of action, lawsuits, judgments, claims and
demands of any nature available to or being pursued with respect to the
Business or the ownership, use, function or value of any of the Purchased
Assets, whether arising by way of counterclaim or otherwise;
1.1.12 all the Sellers' right, title and interest in and to insurance
claims, related refunds and proceeds arising from or relating to the
Purchased Assets;
1.1.13 all the issued and outstanding shares of capital stock (the
"Purchased Shares") of Cal-Doran Real Estate, Inc., a Delaware corporation
("Holco"); and
1.1.14 all of the Sellers' right, title and interest in and to the
goodwill of the Sellers relating to the Business.
1.2 Excluded Assets. Notwithstanding Section 1.1, the Sellers are not
selling or assigning to the Purchaser, and the Purchased Assets shall not
include, any of the following:
1.2.1 the Cash Consideration and the Sellers' other rights under this
Agreement;
1.2.2 cash and cash equivalents, bank accounts, certificates of
deposit, treasury bills and other marketable securities of the Sellers;
3
<PAGE>
1.2.3 all real property, leasehold interests in real property,
equipment, machinery, vehicles, tools and other tangible personal property
(other than the Purchased Real Estate, the Purchased Leasehold Premises and
the Purchased Fixed Assets) of the Sellers;
1.2.4 all right, title and interest of the Sellers in any insurance
policies and all rights of the Sellers to insurance claims, related refunds
and proceeds arising from or relating to the Excluded Assets or the
Excluded Liabilities;
1.2.5 all refunds of taxes relating to all periods ending on or prior
to the Closing Date;
1.2.6 all actions, claims, causes of action, rights of recovery,
choses in action and rights of setoff of any kind arising before, on or
after the Closing Date relating to the Excluded Liabilities or to the items
set forth above in this Section 1.2; and
1.2.7 all assets of the Sellers that are not used primarily in, or are
not essential to, the Business.
2.0 PURCHASE PRICE
2.1 Amount of the Purchase Price. As consideration for the Purchased Assets
(the "Purchase Price"), the Purchaser agrees, subject to the terms, conditions
and limitations set forth in this Agreement:
2.1.1 to pay to or for the account of the Sellers, in the manner
specified in Section 3.2 hereof, $15,700,000 (the "Cash Consideration"),
plus or minus the Adjustment Amount. The "Adjustment Amount" shall be
determined following the Closing pursuant to Section 2.5 and shall equal
the difference between (i) the Business's net book value as of the Closing
Date as determined pursuant to Section 2.5 (the "Closing Net Book Value"),
and (ii) $8,323,000. If the Closing Net Book Value, as finally agreed to or
determined pursuant to Section 2.5, is greater than $8,323,000, the
Adjustment Amount will be added to the Cash Consideration portion of the
Purchase Price; if the Closing Net Book Value, as so agreed to or
determined, is less than $8,323,000, the Adjustment Amount will be
subtracted from the Cash Consideration portion of the Purchase Price; and
2.1.2 to assume and be responsible for, to the extent specifically
provided in Section 2.3 hereof, the Assumed Liabilities.
2.2 Allocation of the Purchase Price Among the Purchased Assets. The
parties will allocate the Purchase Price among each item or class of the
Purchased Assets as agreed by the parties hereto and as specifically set forth
in or determined pursuant to Exhibit A. Such allocation shall be subject to
adjustment to the extent that the Purchase Price is adjusted pursuant to Section
2.5. The Sellers and the Purchaser agree that they will prepare and file their
4
<PAGE>
respective federal and any state or local income tax returns based on such
allocation of the Purchase Price. The Sellers and the Purchaser agree that they
will prepare and file any notices or other filings required pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and that any
such notices or filings will be prepared based on such allocation of the
Purchase Price.
2.3 Assumed Liabilities.
2.3.1 Subject to Section 2.4, the Purchaser agrees to assume and to
pay, discharge and perform when lawfully due the following obligations and
liabilities of the Sellers which pertain to the Business, the Purchased
Assets or the Purchased Leasehold Premises (the "Assumed Liabilities"):
2.3.1.1 subject to Sections 2.3.2 and 6.9.3, all of the remaining
obligations of the Sellers under the Purchased Contracts, and the
collective bargaining agreements and union employee benefit plans
described in Section 6.9.3 of the Disclosure Schedule, arising or
incurred in respect of the period subsequent to the Closing Date;
2.3.1.2 property taxes, not yet due as of the Closing Date for
any period prior to the Closing Date, on or allocable to the Real
Estate, to the extent such property taxes are properly accrued as a
liability on the books of the Business in accordance with past
practice and GAAP and included in the calculation of the Closing Net
Book Value.
2.3.1.3 subject to the Sellers' indemnification obligations set
forth in Section 11.1(iv), all Environmental Liabilities arising from
or as a result of the operation of the Business prior to the Closing
Date; provided, however, that the Purchaser shall not assume any
Environmental Liabilities arising from or relating to (i) the Sellers'
National City, California facility and (ii) the transportation,
treatment, storage or disposal of any Contaminant, or arrangement for
such transportation, treatment, storage or disposal of any
Contaminant, by any of the Sellers, at or to a facility that was not
owned or leased by any of the Sellers.
2.3.1.4 all other operating liabilities properly reflected in the
January 1, 2000 Statement, less such amounts as were or are paid, plus
such amounts as were or are accrued, in the Ordinary Course of
Business between January 1, 2000 and the Closing Date to the extent
such operating liabilities are properly accrued in accordance with
past practice and GAAP as a liability on the books of the Business and
included in the calculation of the Closing Net Book Value;
5
<PAGE>
2.3.1.5 all debts, obligations and liabilities of the Business
which arise from the Purchaser's operation of the Business or the use
of the Purchased Assets after the Closing Date;
2.3.1.6 liabilities or obligations arising from any product or
service liability or warranty claim, to the extent provided in Article
10.0; and
2.3.1.7 liabilities for litigation, claims or disputes to the
extent not excluded by Section 2.4.8.
2.3.2 Nothing herein shall obligate the Purchaser to discharge any
liability or obligation under any Purchased Contract which is not
assignable without the consent of the other party or parties thereto unless
(i) such consent shall have been obtained, waived or acquiesced to, or (ii)
the Sellers shall have performed their obligations under Section 9.1.
2.4 Excluded Liabilities. Anything to the contrary in Section 2.3
notwithstanding, the liabilities assumed by the Purchaser shall exclude all
liabilities of the Sellers or the Business that are not Assumed Liabilities,
including, without limitation, the following liabilities, contracts, commitments
and other obligations (collectively, the "Excluded Liabilities"):
2.4.1 the Sellers' obligations and any liabilities arising under this
Agreement;
2.4.2 except as provided in Section 2.3.1.2, any obligation of the
Sellers for federal, state, local or foreign income or other tax liability
(including interest and penalties) arising from the operation of the
Business up to the Closing Date or arising out of the sale by the Sellers
of the Purchased Assets pursuant to this Agreement;
2.4.3 any obligation imposed by law for any transfer, sales or other
taxes, fees or levies imposed by any state or other governmental entity on
or arising out of the sale of the Purchased Assets pursuant to this
Agreement;
2.4.4 any obligation of the Sellers for expenses incurred in
connection with the sale of the Purchased Assets pursuant to this
Agreement, including, without limitation, the fees and expenses of its
counsel and independent auditors, and any brokers or financial advisors;
2.4.5 any contract, of the Sellers, the existence of which constitutes
or will constitute a breach of any representation or warranty of the
Sellers contained in or made pursuant to Article 4.0 of this Agreement;
2.4.6 any Environmental Liabilities not assumed by the Purchaser
pursuant to Section 2.3.1.3;
6
<PAGE>
2.4.7 liabilities or obligations arising from any product or service
liability or warranty claim to the extent provided in Article 10;
2.4.8 except as provided in Article 10 and Section 2.3.1.3, any
liabilities or obligations resulting from any litigation or other claim or
dispute, regardless of whether such litigation or other claim or dispute
commences before or after the Closing Date, arising from events occurring
on or prior to the Closing Date, provided that to the extent such
liabilities or obligations arise from events occurring on or prior to the
Closing Date as well as after the Closing, the Purchaser and the Sellers
shall share such responsibility equally or as otherwise provided in Section
6.9.4;
2.4.9 except to the extent properly accrued as a liability on the
books of the Business in accordance with past practice and GAAP and
included in the calculation of the Closing Net Book Value or as otherwise
provided in Section 6.9 or Section 9.5, any liabilities or obligations
(whether arising before or after the Closing Date) with respect to
employees of the Sellers or the Business, including, without limitation,
those employees who are, as of the Closing Date, retired or otherwise not
employed by the Business on an active, full-time basis; and
2.4.10 except to the extent properly accrued as a liability on the
books of the Business in accordance with past practice and GAAP and
included in the calculation of the Closing Net Book Value or as otherwise
provided in Section 6.9 or Section 9.6, any liability or obligation arising
under or in connection with any employee pension, benefit or welfare plan,
program, policy or arrangement maintained, contributed to, participated in
or terminated, at any time, by the Sellers.
2.5. Adjustment of Purchase Price
2.5.1 Not later than 30 days after the Closing Date, the Purchaser
shall prepare and deliver to the Sellers a Statement of Adjustment Amount,
in substantially the form attached to this Agreement as Exhibit B. The
Statement of Adjustment Amount shall set forth a reasonably detailed
calculation of the Adjustment Amount, including, without limitation, a
reasonable detail of the Closing Net Book Value as determined in accordance
with GAAP applied on a basis consistent with the Business's past practice
and the preparation of the January 1, 2000 Statement.
2.5.2 If within 30 days after the date the Statement of Adjustment
Amount is delivered to the Sellers, the Sellers give written notice to the
Purchaser setting forth in reasonable detail any objection of the Sellers
to the amounts or calculations set forth in the Statement of Adjustment
Amount, then the Purchaser and the Sellers shall use all commercially
reasonable efforts to reach agreement on all differences within the 30-day
period following the giving of such notice by the Sellers of their
objections. If the parties are unable to reach agreement within such 30-day
7
<PAGE>
period, the matter shall be submitted to the New York, New York office of
Arthur Andersen LLP, a firm of independent certified public accountants
(the "Arbitrator"). The Purchaser and the Sellers shall each be permitted
to present evidence to the Arbitrator. The Arbitrator shall not be
permitted to make any changes to the Closing Net Book Value except with
respect to items disputed by the Purchaser and the Sellers, and the
Arbitrator shall not be permitted to apply any accounting methodology
different from that employed by the Purchaser and the Sellers under Section
2.5.1. The decision of the Arbitrator shall be final and binding upon the
Purchaser and the Sellers absent fraud or manifest error. The Purchaser and
the Sellers shall share equally the charges of such Arbitrator. To the
extent that the Closing Net Book Value, as agreed upon by the Purchaser and
the Sellers or as determined by the Arbitrator pursuant to this Section
2.5.2, is more than $8,323,000, the Purchaser shall pay the Adjustment
Amount to the Sellers; and if the Closing Net Book Value, as so agreed or
determined, is less than $8,323,000, the Sellers shall pay the Adjustment
Amount to the Purchaser. The Adjustment Amount, as the case may be, shall
be paid, dollar for dollar, by wire transfer of immediately available
funds, within 10 days of the date on which the Adjustment Amount is agreed
upon or is finally determined by the Arbitrator as set forth above.
3.0 CLOSING
3.1 Time and Place of the Closing. The closing of the sale of the Purchased
Assets shall take place at Bell, Boyd & Lloyd, 70 West Madison, Suite 3300,
Chicago, Illinois at 10:00 A.M., local time, on June 2, 2000; provided, however,
that if any of the conditions to the obligations of the parties under this
Agreement has not been satisfied (or waived) by said date, then the closing
shall take place on a subsequent date, which shall be determined by the mutual
agreement of the Purchaser and the Sellers (unless this Agreement is earlier
terminated pursuant to Section 12.3 hereof). Throughout this Agreement, such
event is referred to as the "Closing" and such date and time are referred to as
the "Closing Date." The Closing shall be deemed effective on a
facility-by-facility basis for all purposes of this Agreement as of the end of
the second shift of operations at each respective facility of the Business on
the work day immediately preceding the Closing Date.
3.2 Procedure at the Closing. At the Closing, the parties agree to take the
following steps; upon their completion all such steps shall be deemed to have
occurred simultaneously:
3.2.1 The parties shall deliver the documents specified in Articles
7.0 and 8.0.
3.2.2 The Sellers shall deliver to the Purchaser deeds in
substantially the form attached hereto as Exhibit C, a bill of sale in
substantially the form attached hereto as Exhibit D, assignments of lease
in substantially the form attached hereto as Exhibit E, and such additional
instruments, in such form as in each case is reasonably satisfactory to the
Purchaser, as shall be sufficient to vest in the Purchaser good and
marketable title to the Purchased Assets, free and clear of all Liens other
than Permitted Liens.
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3.2.3 Terra shall cause Thermo Electron Corporation, a Delaware
corporation ("Electron"), to deliver to the Purchaser duly executed
certificates in valid form evidencing the Purchased Shares owned by
Electron, duly endorsed in blank or accompanied by duly executed stock
powers.
3.2.4 The Purchaser shall pay to the Sellers the Cash Consideration by
wire transfer of immediately available funds (to an account(s) as specified
by the Sellers no later than three business days prior to the Closing).
3.2.5 On or before the Closing Date, the Sellers shall pay, discharge
or perform in full all of the Excluded Liabilities that would result in a
Lien (other than a Permitted Lien) on the Purchased Assets and shall
terminate or cancel all contracts, agreements and commitments related to
the Purchased Assets to which any of the Sellers is a party that would
result in a Lien (other than a Permitted Lien) on the Purchased Assets,
except for the Purchased Contracts. The Sellers shall pay, discharge, or
perform in full all Excluded Liabilities not paid, discharged, performed,
or extinguished on or before the Closing Date, as they come due according
to their terms.
3.2.6 The Purchaser shall deliver to the Sellers an instrument of
assumption of liabilities in substantially the form attached hereto as
Exhibit F, and such additional instruments, in such form as in each case as
is satisfactory to the Sellers, as shall be sufficient to effect the
assumption by the Purchaser of the Assumed Liabilities.
3.2.7 The Purchaser and the Sellers shall execute and deliver a cross
receipt acknowledging receipt from the other, respectively, of the
Purchased Assets and the Cash Consideration.
3.3 Assignment to Subsidiaries. Pursuant to Section 12.4, the Purchaser may
at any time prior to the Closing elect to assign its rights under this
Agreement, including, without limitation the right to purchase the Purchased
Assets, to three of its wholly-owned subsidiaries. If the Purchaser so elects,
the Sellers will sell, convey, transfer, assign and deliver (i) the Purchased
Assets related to the Business's National City, California and Los Angeles,
California heat treating facilities (the "California Assets") to C-D Heat
Treating, Inc., a California corporation and wholly-owned subsidiary of the
Purchaser ("Sub One"); (ii) the Purchased Assets related to the Business's
Minneapolis, Minnesota heat treating facility (the "Minnesota Assets") to MI,
Inc., a Minnesota corporation and wholly-owned subsidiary of the Purchaser ("Sub
Two"); and (iii) the Purchased Assets related to the Business's Milwaukee,
Wisconsin heat treating facility (the "Wisconsin Assets") to MTI Heat Treating,
Inc., a Wisconsin corporation and wholly-owned subsidiary of the Purchaser ("Sub
Three"). Upon the effective date of such assignment, the Purchaser hereby
irrevocably and unconditionally guarantees each of Sub One's, Sub Two's and Sub
Three's performance of its obligations under this Agreement, and the parties
hereto agree to revise the Form of Deed, Form of Bill of Sale, Form of
Assignment of Lease and Form of Instrument of Assumption of Liabilities to
properly effect the transfers as specified above. The Purchaser, Sub One, Sub
Two and Sub Three may effect such election and assignment by executing and
delivering the assignment attached to the signature page of this Agreement.
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4.0 REPRESENTATIONS AND WARRANTIES OF THE SELLERS
In order to induce the Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereunder, except as set for in the
disclosure schedule attached hereto (the "Disclosure Schedule"), the Sellers,
jointly and severally, make the following representations and warranties. The
Disclosure Schedule shall be arranged in sections corresponding to the sections
contained in this Agreement and the disclosures in any section of the Disclosure
Schedule shall qualify (i) the corresponding section in this Article 4, and (ii)
other sections in this Article 4 to the extent (notwithstanding the absence of a
specific cross reference) it is clear from a reading of such disclosure that
such disclosure logically relates to such other sections.
4.1 Organiation, Power and Authority of the Sellers. Each of the Sellers is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full corporate power and
authority (i) to own or lease the Purchased Assets being transferred by it and
to conduct the Business as now being conducted, (ii) to enter into this
Agreement, each of the Ancillary Agreements to which it is a party and each of
the other documents and instruments to be executed and delivered by it pursuant
hereto and thereto, (iii) to sell, convey, transfer, assign and deliver the
Purchased Assets, and (iv) to carry out the other transactions and agreements
contemplated by this Agreement, each of the Ancillary Agreements to which it is
a party and each of the other documents and instruments to be executed and
delivered by it pursuant hereto and thereto.
4.2 Financial Summaries. Section 4.2 of the Disclosure Schedule contains:
4.2.1 an unaudited statement of income and operating expenses of the
Business for the nine-month period ended January 1, 2000 and for the year
ended April 1, 2000 ("Statement of Operations"); and
4.2.2 an unaudited statement of assets and liabilities of the Business
as at January 1, 2000 and April 1, 2000 ("Statement of Assets and
Liabilities").
The Statement of Operations and the Statement of Assets and Liabilities
(hereinafter sometimes referred to together as the "Financial Summaries")
present fairly the financial position and results of operations of the Business
as at the respective dates of and for the periods referred to in such Financial
Summaries, all in accordance with GAAP, consistently applied (but omit all
footnotes), and are based on books and records of the Sellers relating to the
Business which have been prepared on a consistent basis. The Statement of Assets
and Liabilities as at January 1, 2000 is referred to herein as the "January 1,
2000 Statement"; and the Statement of Assets and Liabilities as at April 1, 2000
is referred to herein as the "April 1, 2000 Statement."
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4.3 Liabilities of the Business. The Sellers have no liabilities or
obligations relating to the Business or the Purchased Assets except: (i) to the
extent reflected in the April 1, 2000 Statement; (ii) to the extent specifically
set forth herein or incorporated herein by express reference in the Disclosure
Schedule attached hereto; and (iii) current liabilities incurred in the Ordinary
Course of Business since the April 1, 2000 Statement.
4.4 Tax Matters. Except as set forth in Section 4.4 of the Disclosure
Schedule:
4.4.1 With respect to the Purchased Assets and the operation of the
Business, each of the Sellers has timely filed (or has had timely filed on
its behalf) all tax returns and reports required to be filed by it and any
corporation with which it files consolidated, combined or unitary returns,
including without limitation, all federal, state, local and foreign income
tax returns, all sales and use tax, gross receipts, property, payroll and
other tax returns, and has paid in full or made adequate provision by the
establishment of reserves for all such taxes and other charges which have
become due except for any failure to file any tax return or to make any
payment which would not reasonably be expected to have a Material Adverse
Effect. There is no tax deficiency proposed or threatened against any of
the Sellers with respect to or affecting the Business or the Purchased
Assets and there are no tax Liens upon any of the Purchased Assets except
for any Lien for current taxes not yet due and payable. The Sellers have
made all payments when due of estimated taxes with respect to the Purchased
Assets and the Business in amounts sufficient to avoid the imposition of
any penalty except for any failure to pay which would not reasonably be
expected to have a Material Adverse Effect.
4.4.2 All taxes and other assessments and levies with respect to the
Purchased Assets and the operation of the Business which the Sellers were
required by law to withhold or to collect have been duly withheld and
collected, and have been paid over to the proper governmental entity or are
being held by the Sellers for such payment except for any such tax
collections or withholdings as would not reasonably be expected to have a
Material Adverse Effect. There are no outstanding agreements or waivers
extending the statute of limitations applicable to any federal or state
income tax returns of the Sellers with respect to the Business for any
period.
4.5 Purchased Real Estate; Purchased Leasehold Premises
4.5.1 Section 4.5 of the Disclosure Schedule accurately and completely
sets forth with respect to every parcel of the Purchased Real Estate: (i)
the owner; (ii) the location, including address, thereof; (iii) the legal
description and approximate size thereof; and (iv) the nature and amount of
any mortgages, tax Liens or other Liens thereon (including without
limitation any environmental Liens but excluding Permitted Liens), and with
respect to the Purchased Leasehold Premises: (i) the landlord under such
lease; (ii) the location, including address, thereof; (iii) the approximate
size thereof; and (iv) the nature and amount of any mortgages, tax Liens or
other Liens thereon created by the Sellers or, to the Sellers' Knowledge,
affecting the Purchased Leasehold Right (excluding Permitted Liens).
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4.5.2 Each Seller has good and marketable title to each parcel of the
Purchased Real Estate of which Section 4.5 of the Disclosure Schedule
identifies it as the owner, free and clear of all Liens, except for (i)
Permitted Liens, (ii) Liens set forth in Section 4.5 of the Disclosure
Schedule, and (iii) such imperfections of title and encumbrances, if any,
as are not substantial in character, amount or extent and do not materially
detract from the value, or interfere with the present use of such
properties or otherwise impair the Business's operations in any material
respect and each Seller has a valid leasehold interest in each parcel of
Purchased Leasehold Premises of which Section 4.5 of the Disclosure
Schedule identifies it as a lessee of Purchased Leasehold Premises, free
and clear of all Liens created by the Sellers, except for (i) Permitted
Liens, (ii) Liens set forth in Section 4.5 of the Disclosure Schedule, and
(iii) Liens for real estate taxes not yet due and payable, and such
imperfections of title and encumbrances, if any, as are not substantial in
character, amount or extent and do not materially detract from the value,
or interfere with the present use, of such properties or otherwise impair
the Business's operations in any material respect.
4.5.3 The buildings located on the Purchased Real Estate and the
Purchased Leasehold Premises are each in operating condition, normal wear
and tear excepted, and are in the aggregate sufficient to satisfy the
Business's current, normal production levels.
4.5.4 Each parcel of the Purchased Real Estate: (i) has direct access
to public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current, normal
transportation requirements of the Business as presently conducted at such
parcel; and (ii) is served by all utilities, including but not limited to
water, electricity, natural gas, sewer and telephone, in such quantity and
quality as are sufficient to satisfy the current, normal production levels
and business activities of Business as presently conducted at such parcel;
and each parcel of the Purchased Leasehold Premises: (i) to the Knowledge
of the Sellers, has direct access to public roads or access to public roads
by means of a perpetual access easement, such access being sufficient to
satisfy the current normal transportation requirements of the Business as
presently conducted at such parcel; and (ii) is served by all utilities,
including but not limited to water, electricity, natural gas, sewer and
telephone, in such quantity and quality as are sufficient to satisfy the
current normal production levels and business activities of Business as
conducted at such parcel.
4.5.5 The Sellers have not received notice of: (i) any condemnation
proceeding with respect to or affecting any portion of the Purchased Real
Estate or the Purchased Leasehold Premises, and to the Sellers' Knowledge
no such proceeding is contemplated by any governmental authority; or (ii)
any special assessment which may affect the Purchased Real Estate or the
Purchased Leasehold Premises, and to the Sellers' Knowledge no such special
assessment is contemplated by any governmental authority.
4.5.6 The Sellers have a valid leasehold interest in the Purchased
Leasehold Premises as described in Section 4.5 of the Disclosure Schedule
hereof, free and clear of all Liens.
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4.5.7 The Sellers have previously delivered to the Purchaser a
complete and accurate copy of each lease agreement pertaining to the
Purchased Leasehold Premises, and each such lease has not been amended or
modified except to the extent that such amendments or modifications are
disclosed in such copy. Each lease is in full force and effect, and the
Sellers are not in default or breach thereunder. No event has occurred
which with the passage of time or the giving of notice or both would cause
a material breach of or default under any such lease on the part of any
Seller. The Sellers do not have any Knowledge of any breach or anticipated
breach by the other party to any such lease.
4.6 Good Title to and Condition of the Purchased Assets. The Sellers have
good and marketable title to all of the Purchased Assets, free and clear of all
Liens other than Permitted Liens, Liens which will be extinguished by the
Sellers prior to the Closing, and the Liens identified in Section 4.6-A of the
Disclosure Schedule which relate to the Assumed Liabilities. Except as set forth
in Section 4.6-A of the Disclosure Schedule, the Purchased Fixed Assets
currently in use or necessary for normal production and sales levels are, in all
material respects, in good operating condition, normal wear and tear excepted.
The Purchased Inventory consists of items of a quality and quantity usable and
saleable in the Ordinary Course of Business, except for obsolete items and items
of below-standard quality, all of which have been written off or written down to
the lower of cost or net realizable market value (determined according to GAAP)
in the April 1, 2000 Statement or on the accounting records of the Sellers as of
the Closing Date, as the case may be. The value at which the Purchased Inventory
is carried on the April 1, 2000 Statement reflects the normal inventory
valuation policies of the Sellers. All accounts receivable of the Business that
are reflected on the accounting records of the Business as of the Closing Date
(collectively, the "Accounts Receivable") represent or will represent valid
obligations arising from sales actually made or services actually performed in
the Ordinary Course of Business. Section 4.6-B of the Disclosure Schedule
contains an aging of all Accounts Receivable as of April 1, 2000. The
authorized, issued and outstanding capital stock of Holco is as set forth in
Section 4.6-C of the Disclosure Schedule. All of such capital stock of Holco is
owned by Electron, all voting rights in Holco are vested exclusively in such
capital stock, and all of such capital stock is validly authorized and issued,
fully paid and non-assessable. Except for this Agreement, there are no
outstanding warrants, options or rights of any kind to acquire from Electron or
Holco any shares of capital stock or securities of Holco of any kind, and there
are no voting rights, voting trusts, proxies or other agreements or
understandings affecting, or any pre-emptive rights with respect to the issuance
or sale of shares of capital stock of Holco and Holco does not have any
obligation to acquire any of its issued and outstanding shares of capital stock
or any other security issued by it from any holder thereof. Electron is the
lawful owner of all of the capital stock of Holco, including the Purchased
Shares, and has valid marketable title to the Purchased Shares, free and clear
of all Liens.
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4.7 Licenses and Permits. The Sellers possess all licenses, permits,
authorizations and other required governmental approvals required to operate the
Business, the failure to possess which would reasonably be expected to have a
Material Adverse Effect. All such licenses, approvals, permits and
authorizations are in full force and effect, the Sellers and the Business are in
compliance in all material respects with their requirements, and no proceeding
is pending or, to the Knowledge of the Sellers, threatened to revoke or amend
any of them.
4.8 Proprietary Rights
4.8.1 Section 1.1.8 of the Disclosure Schedule contains a complete
list of all Purchased Proprietary Rights owned or used by the Sellers which
primarily pertain or are essential to the Business, provided that trade
secrets, technology and know-how need not be described. The Purchased
Proprietary Rights conveyed by the Sellers to the Purchaser constitute all
the Proprietary Rights which primarily pertain or are essential to the
operation of the Business except those which the failure to possess would
not reasonably be expected to have a Material Adverse Effect.
4.8.2 The Sellers are the sole owners, legally and beneficially, and
have good and marketable title to the Purchased Proprietary Rights, free
and clear of any and all Liens, or, in the case of such Purchased
Proprietary Rights licensed from third parties, have sufficient rights to
use such Purchased Proprietary Rights to the extent necessary for the
conduct of the Business. Except as set forth in Section 1.1.8 of the
Disclosure Schedule, (i) the Sellers own all right, title and interest in
and to all of the Purchased Proprietary Rights or sufficient right of use,
(ii) there have been no written claims made against the Sellers for the
assertion of the invalidity, abuse, misuse, or unenforceability of any such
rights, and, to the Sellers' Knowledge, there are not grounds for the same,
(iii) the Sellers have not received a notice of conflict with or
infringement of the asserted Proprietary Rights of others within the last
five years, and (iv) to the Knowledge of the Sellers, the Sellers have not,
in the conduct of the Business, infringed upon or violated the Proprietary
Rights of any other party.
4.8.3 Upon the sale, assignment, transfer and conveyance by the
Sellers of the Purchased Proprietary Rights to the Purchaser hereunder, the
Purchaser will have good and marketable title to all such Purchased
Proprietary Rights, free and clear of all Liens.
4.9 Adequacy of the Purchased Assets. The Purchased Assets, together with
the Purchased Leasehold Premises, constitute, in the aggregate, all of the
assets and property necessary for the conduct of the Business in the manner in
which and to the extent to which it is currently being conducted. None of the
Sellers nor any of Terra and Terra's direct subsidiaries has any material direct
or indirect equity interest in any customer, supplier or competitor of the
Business or in any person from whom or to whom the Business leases real or
personal property, or in any person with whom any of the Sellers is doing
business. None of the Sellers is restricted by any agreement from carrying on
the Business anywhere in the world. Except as set forth in Section 4.9 of the
Disclosure Schedule, the Sellers have no Knowledge of any written or oral
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communication, fact, event or action which exists or has occurred within 90 days
prior to the date of this Agreement, stating that: (i) any current customer of
the Business which accounted for over 1% of the total net sales of the Business
for the year ended April 1, 2000 will terminate its business relationship with
the Business, or (ii) any current supplier to the Business of items essential to
the conduct of the Business, which items cannot be replaced by the Business at
comparable cost to the Business and the loss of which would reasonably be
expected to have a Material Adverse Effect, will terminate its business
relationship with the Business.
4.10 Insurance. The Purchased Assets and third-party claims are insured or
insured against to the extent and in the manner that is customary for companies
engaged in a business similar to the Business. The Sellers will maintain such
coverage in force up to the Closing Date. In the event that the Purchaser shall
become liable for or suffer any damage with respect to any matter which was
covered by insurance maintained by the Sellers on or prior to the Closing Date,
the Sellers agree that the Purchaser shall be and hereby is subrogated to any
rights of the Sellers under such insurance coverage, (or if such subrogation is
not permissible, to enforce such insurance policies on the Purchaser's behalf)
and, in addition, the Sellers agree to promptly remit to the Purchaser any
insurance proceeds which they may receive on account of any such liability or
damage.
4.11 Litigation. Except as set forth in Section 4.11 of the Disclosure
Schedule, there are no actions, suits, claims, governmental investigations or
arbitration proceedings pending or, to the Knowledge of the Sellers, threatened
against or affecting any of the Business, the Purchased Assets or the Purchased
Leasehold Premises.
4.12 No Material Adverse Change. Except as set forth in Section 4.12 of the
Disclosure Schedule, since April 1, 2000, there has not been (i) any change in
the business, assets, properties, condition, financial position, prospects
(financial or otherwise) results of operations or liabilities of the Business
other than changes occurring in the Ordinary Course of Business which in the
aggregate have not had a Material Adverse Effect, or (ii) to the Knowledge of
the Sellers, any threatened or prospective event or condition which would
reasonably be expected to have a Material Adverse Effect.
4.13 Absence of Certain Acts or Events. Except as disclosed in Section 4.13
of the Disclosure Schedule, since April 1, 2000, the Sellers have not: (i) paid
or committed to pay any bonus to any of the Business Employees, except in the
Ordinary Course of Business; (ii) materially increased or committed to
materially increase the rate of compensation or profit sharing of any of the
Business Employees; (iii) sold or transferred any of the assets of the Business,
except the sale of inventory in the Ordinary Course of Business; (iv) made or
obligated itself to make capital expenditures with respect to the Business,
except in the Ordinary Course of Business; (v) incurred any material obligations
or liabilities (including any indebtedness) or entered into any material
transaction with respect to the business and operations of the Business, except
for this Agreement and the transactions contemplated hereby; or (vi) suffered
any theft, damage, destruction or casualty loss with respect to the Business in
excess of $50,000.
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4.14 Compliance with Laws
4.14.1 Except as set forth in Section 4.14 of the Disclosure Schedule,
the Sellers are in compliance with all laws, regulations and orders
applicable to the operations of the Business or the Purchased Assets, the
noncompliance with which would be substantial in character or extent and
which would reasonably be expected to (i) materially interfere with the use
of the Purchased Assets or the Purchased Leasehold Premises, (ii) otherwise
have a Material Adverse Effect or (iii) result in the imposition of any
material penalty. None of the Sellers has received written notification of
any asserted past or present failure to comply with any such laws and, to
the Knowledge of the Sellers, no proceeding with respect to any such
violation is contemplated.
4.14.2 Neither any of the Sellers, nor, to the Sellers' knowledge, any
Business Employee, has made any payment of funds in connection with the
Business prohibited by law, and no funds have been set aside to be used in
connection with the Business for any payment prohibited by law.
4.15 Environmental Matters
4.15.1 Except as set forth in Section 4.15 of the Disclosure Schedule:
(i) neither the Business, the Purchased Assets, the Purchased Leasehold
Premises nor any other asset or real property of the Business has been
operated, or is currently being operated, in a manner that violates any
Environmental Law the violation of which would reasonably be expected to
have a Material Adverse Effect; (ii) the Sellers are in possession of all
Environmental Permits required under any Environmental Law for the
operation of the Business, the Purchased Assets or the Purchased Leasehold
Premises, and the Business, the Purchased Assets and the Purchased
Leasehold Premises are being operated in compliance with all of the
requirements and limitations included in such Environmental Permits; (iii)
none of the Sellers has received any notice from any governmental authority
that the Business, the Purchased Assets or the Purchased Leasehold Premises
is in violation of any Environmental Law or any Environmental Permit or
that any of the Sellers is responsible (or potentially responsible) for
Remedial Action at any location arising out of or relating to the Business,
the Purchased Assets or the Purchased Leasehold Premises; (iv) none of the
Sellers is the subject of any federal, state, local or private litigation
or administrative proceedings involving a demand for damages or other
potential liability with respect to violations of Environmental Laws by the
Business, the Purchased Assets or the Purchased Leasehold Premises; (v)
there has been no Release of any Contaminant in connection with the
Business at any property currently, or in the past, occupied by any of the
Sellers; (vi) none of the Sellers has buried, dumped, disposed of or
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spilled or Released any Contaminant in any amount that would reasonably be
expected to have a Material Adverse Effect, and no Contaminants are located
in the environment, at the Purchased Real Property or the Purchased
Leasehold Premises or any property currently, or in the past, occupied by
any of the Sellers in connection with the Business; (vii) none of the
Sellers has used any Underground Storage Tanks in connection with the
Business, the Purchased Assets or the Purchased Leasehold Premises, and, to
the Knowledge of the Sellers, there are not now nor have there been
Underground Storage Tanks at the Purchased Real Property or the Purchased
Leasehold Premises; (viii) to the Knowledge of the Sellers, none of the
Sellers has transported, stored, treated, recycled, reclaimed, disposed of
or arranged for any third parties to transport, store, treat, recycle,
reclaim or dispose of Contaminants generated by the Business, the Purchased
Assets or the Purchased Leasehold Premises to or at any location other than
a location lawfully permitted to receive such Contaminants, nor has any
Seller performed or arranged such transportation, storage, treatment,
recycling, reclamation or disposal in contravention of any applicable
Environmental Law, except where any such violation, failure or the absence
of such lawful permit would not reasonably be expected to have a Material
Adverse Effect; and (ix) none of the Sellers has transported or disposed
of, nor has any Seller arranged for any third parties to transport or
dispose of, any Contaminants from the Purchased Real Estate or the
Purchased Leasehold Premises to or at a location which, pursuant to CERCLA
or any similar state law, (a) has been placed on the National Priorities
List or its state equivalent, or (b) which, to the Sellers' Knowledge, the
Environmental Protection Agency or the relevant state authority has
proposed or is proposing to place on the National Priorities List or its
state equivalent.
4.15.2 For purposes of this Agreement: (i) "Environmental Law" means
any law, statute, regulation or order, consent decree or settlement
agreement which relates to or imposes liability or standards of conduct
concerning discharges, emissions, releases or threatened releases of
noises, odors or any pollutants, contaminants or hazardous or toxic waste,
substances or materials, into ambient air, water, or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, clean-up, transport or handling of
pollutants, contaminants, or hazardous waste, substances or materials,
including (but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, the
Resource Conservation and Recovery Act ("RCRA"), as amended, the Federal
Water Pollution Control Act, as amended, the Toxic Substances Control Act,
as amended, the Clean Air Act, as amended, any so-called "Super Lien" law,
the Occupational Safety and Health Act, as amended, the Safe Drinking
Water Act and any other similar federal, state or local statutes and
regulations promulgated pursuant to the above statutes; (ii)
"Environmental Permit" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable
Environmental Law; (iii) "Contaminant" means any hazardous substance
defined as such under CERCLA, any solid or hazardous waste under RCRA, and
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any petroleum or petroleum-derived substance or waste; (iv) "Release"
means release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the indoor or
outdoor environment or into or out of the Purchased Real Estate and
Purchased Leasehold Premises, including the movement of Contaminants to
the air, soil, surface water, groundwater or Property; (v) "Remedial
Action" means actions required under any Environmental Law to (A) clean
up, remove, treat or in any other way address Contaminants in the
environment; (B) prevent the Release or threat of Release or minimize the
further Release of any Contaminant; (C) perform pre-remedial studies and
investigations and post-remedial monitoring care; or (D) correct any
violation of Environmental Law; and (vi) "Underground Storage Tanks" shall
have the meaning given in RCRA and state law regulating tanks that store
Contaminants located partially or fully below the surface of the ground.
4.15.3 The Parties agree that the only representations and
warranties pertaining to Environmental Laws are those contained in this
Section 4.15. Without limiting the generality of the foregoing, the
Purchaser specifically agrees that the provisions of Sections 4.7, 4.11
and 4.14 do not relate to Environmental Laws.
4.16 Employee Matters; Labor Relations
4.16.1 Except as set forth in Section 4.16 of the Disclosure Schedule,
none of the employees of the Sellers whose services are primarily devoted
to matters pertaining to the Business (the "Business Employees") is covered
by employment contracts, except customary written and non-written
understandings or policies concerning employment which are terminable at
will without cost or other liability, nor are any such employees members of
any union or covered by union contracts. There is not pending or, to the
Sellers' Knowledge, threatened any labor dispute, strike or work stoppage
which would reasonably be expected to pertain to or affect the Business or
the Purchased Assets or which may interfere with their continued operation.
As may pertain to the Business Employees neither the Sellers nor any agent,
representative or employee of any of the Sellers has within the last 24
months committed any unfair labor practice as defined in the National Labor
Relations Act, as amended, and there is not now pending or, to the Sellers'
Knowledge, threatened any charge or complaint against any of the Sellers by
or with the National Labor Relations Board or any representative thereof.
There has been no strike, walkout or work stoppage involving any of the
Business Employees of the Sellers during the 24 months prior to the date
hereof.
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4.16.2 With respect to the Business Employees of the Sellers, the
Sellers are in compliance in all material respects with the Immigration
Reform and Control Act of 1986, as amended, and have complied in all
material respects with all applicable federal, state and local laws
relating to the employment of labor, including, without limitation, the
provisions thereof relating to wages, non-discriminatory hiring,
promotional and employment practices and procedures, collective bargaining
and payment of Social Security, unemployment compensation, worker's
compensation and similar taxes, and none of the Sellers is presently liable
to any person or governmental agency for any arrears of wages or subject to
any liabilities or penalties for failure to comply with any of the
foregoing laws. With respect to the Business Employees of the Sellers and
except as may be set forth in Section 4.16 of the Disclosure Schedule,
there are no outstanding charges or claims of a material nature against any
of the Sellers or any of its officers, directors, agents or employees
involving any alleged or actual violation of any provision of the National
Labor Relations Act, the Age Discrimination in Employment Act, Title VII of
the Civil Rights Act of 1964, as amended, or other federal, state or
municipal law concerning equal employment opportunities, equal pay
legislation or wage and hour obligations contained in the Fair Labor
Standards Act; nor, to the Knowledge of the Sellers, has there been any
threat of any such claim or charge.
4.16.3 To the Sellers' Knowledge, no Key Business Employee intends to
terminate his or her employment with the Business, nor do the Sellers
presently intend to terminate the employment of any of the foregoing.
4.17 Employee Benefits
4.17.1 None of the Sellers nor any of their ERISA Affiliates or
Sponsors, maintains or contributes to, or has any liability or contingent
liability, with respect to or on behalf of any of the Business Employees:
(i) any non-qualified deferred compensation or retirement plans or
arrangements; (ii) any qualified defined contribution retirement plans or
arrangements; (iii) any qualified defined benefit pension plan; (iv) any
other plan, program, agreement or arrangement under which former employees
of any of the Sellers or its beneficiaries are entitled, or current
employees of any of the Sellers will be entitled following termination of
employment, to medical, health, life insurance or other benefits other than
pursuant to benefit continuation rights granted by state or federal law; or
(v) any other employee benefit, health, welfare, medical, disability, life
insurance, stock, stock purchase or stock option plan, program, agreement,
arrangement or policy, except in each case as described in Section 4.17 of
the Disclosure Schedule. The plans described in Section 4.17 of the
Disclosure Schedule are referred to herein as the "Plans."
4.17.2 The administration of the Plans complies in all respects with
the applicable requirements of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and the Plans meet any applicable requirements for
favorable tax treatment under the Code in both form and operation. All of
the Plans have been maintained in compliance in all material respects in
both form and operation with the requirements of all applicable laws and
regulations including, but not limited to, the preparation and filing of
all required reports with respect to the Plans, the submission of such
reports to the appropriate governmental authorities, the timely preparation
and distribution of all required employee communications (including without
limitation any notice of plan amendment which is required prior to the
effectiveness of such amendments), the proper and timely purchase and
maintenance of required surety bonds and the proper and timely disposition
of all benefit claims. All required contributions pursuant to the Plans due
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at the time of Closing have been made or will be made prior to the Closing.
The costs of administering the Plans for which payment is due prior to the
Closing, including fees for the trustee and other service providers which
are customarily paid by the Sellers, have been paid or will be paid prior
to the Closing. There have been no prohibited transactions as defined in
Section 406 of ERISA or Section 4975 of the Code with respect to any of the
Plans or any parties in interest or disqualified persons with respect to
the Plans which would reasonably be expected to result in material
liability to the Business or any reduction or curtailment of accrued
benefits with respect to any of the Plans. There are no pending or
threatened claims (other than routine claims for benefits), lawsuits, or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the assets
of any of the trusts under any of the Plans which would reasonably be
expected to result in material liability to the Business. None of the
Sellers or any of their ERISA Affiliates has any plans, programs,
agreements or arrangements or other commitments to the Business Employees,
former Business Employees or their beneficiaries under which it has any
obligation to provide any retiree or other employee benefit payments which
are not adequately funded through a trust or other funding arrangement,
except for continuing medical coverage required by Section 4908B of the
Code or similar state laws.
4.17.3 The Sellers have furnished the Purchaser with true and complete
copies of: (i) the Plans and any related trusts or funding vehicles,
policies or contracts and the related summary plan descriptions with
respect to each Plan; (ii) the most recent determination letters received
from the Internal Revenue Service regarding the Plans and copies of any
pending applications, filings or notices with respect to any of the Plans
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation, the Department of Labor or any other governmental agency;
(iii) the latest financial statements and annual reports for each of the
Plans and related trusts or funding vehicles, policies or contracts as of
the end of the most recent plan year with respect to which the filing date
for such information has passed; (iv) the reports of the most recent
actuarial valuations of the Plans; and (v) copies of any material
communications or notices provided to employees or plan participants with
respect to the Plans along with information concerning the date and extent
of distribution of such communications.
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4.17.4 Each Plan which is an employee pension benefit plan intended to
qualify under Section 401(a) of the Code is the subject of a favorable
determination letter issued by the Internal Revenue Service ("IRS") with
respect to the qualified status of such plan under Section 401(a) of the
Code and the tax-exempt status of any trust which forms a part of such plan
under section 501(a) of the Code; all amendments to any such plan for which
the remedial amendment period (within the meaning of Section 401(b) of the
Code and applicable regulations) has expired are covered by a favorable IRS
determination letter; and no event has occurred which would reasonably be
expected to give rise to disqualification of any such plan under such
sections or to a tax under Section 511 of the Code.
4.17.5 There have been no acts or omissions by the Seller or any of
its ERISA Affiliates which have given rise to or may give rise to any
material fines, penalties, taxes or related charges under section 502 of
ERISA or Chapters 43, 47, 68 or 100 of the Code for which the Seller or any
of its ERISA Affiliates may be liable.
4.18 Absence of Defaults. Except as set forth in Section 4.18 of the
Disclosure Schedule, the Sellers are not in default in any material respect
under any contract, order, lease, commitment or agreement referred to in Section
1.1.6 of the Disclosure Schedule and, to the Sellers' Knowledge, no condition
exists which, with the giving of notice or passage of time or both, would
constitute a material default thereunder or constitute an event creating rights
of acceleration, termination or cancellation thereof. Except as set forth in
Section 4.18 of the Disclosure Schedule, to the Sellers' Knowledge, there are no
existing defaults by any third party under any contract, order, lease,
commitment or agreement referred to in Section 1.1.6 of the Disclosure Schedule
hereto and no condition exists which, with the giving of notice or passage of
time or both, would constitute a default thereunder or constitute an event
creating rights of acceleration, termination or cancellation thereof.
4.19 Authority; Binding Obligation; and No Conflict. The execution and
delivery by each of the Sellers of this Agreement, each of the Ancillary
Agreements to which it is a party and each of the other documents and
instruments required or contemplated by this Agreement or by such Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
of each of the Sellers. This Agreement constitutes, and, when executed and
delivered, by the Sellers pursuant hereto, each of the Ancillary Agreements and
other documents and instruments to be executed and delivered by each of the
Sellers pursuant to this Agreement, will constitute, the legal, valid and
binding obligation of each of the Sellers, enforceable against it in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws relating to or affecting the rights of creditors generally and by equitable
principles, including those limiting the availability of specific performance,
injunctive relief and other equitable remedies and those providing for equitable
defenses. Neither the execution and delivery by each of the Sellers of this
Agreement, any of the Ancillary Agreements or any of the other documents or
instruments to be executed and delivered by the Sellers pursuant to this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will: (i) conflict with or violate any provision of any of the Sellers'
charter or bylaws, or of any law, ordinance or regulation or any decree or order
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of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against any of the Sellers; (ii)
result in any breach of or default under any mortgage, contract, agreement,
indenture, will, trust or other instrument which is either binding upon or
enforceable against any of the Sellers which would reasonably be expected to
have a Material Adverse Effect; or (iii) violate any legally protected right of
any individual or entity or give to any individual or entity (including in each
case without limitation any shareholder of any of the Sellers) a right or claim
against the Purchaser or the Purchased Assets which would reasonably be expected
to have a Material Adverse Effect. Except as otherwise specifically provided
herein or in Section 4.19 of the Disclosure Schedule, including without
limitation the consents required under the HSR Act, no consent, approval,
authorization or action by, notice to, or filing with any governmental body or
any other Person is required to be made by the Sellers in connection with the
execution, delivery and performance of this Agreement, any of the Ancillary
Agreements or any other documents and instruments to be executed and delivered
by any of the Sellers pursuant hereto or thereto or the consummation by any of
the Sellers of the transactions contemplated hereby or thereby.
4.20 Material Agreements, Contracts and Commitments. Section 1.1.6 of the
Disclosure Schedule accurately and completely sets forth a true and complete
list of any Material Contract relating to the Business to which any of the
Sellers is a party or by which it is bound. In addition, copies of such Material
Contracts have been delivered to the Purchaser prior to the Closing Date.
4.21 True and Complete Copies. Copies of documents delivered and to be
delivered hereunder by the Sellers are and will be true and complete copies of
such documents.
4.22 Brokers. None of the Sellers has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
4.23 Recalls. Except as set forth in Section 4.23 of the Disclosure
Schedule, there has not been any product or service recall, or post sale warning
or similar action (collectively, "Recalls"), conducted with respect to any
product manufactured, shipped, delivered or sold, or service performed, by the
Business, or, to the Knowledge of the Sellers, any investigation or
consideration of, or decision made by, the Business concerning whether or not to
undertake any such Recalls.
4.24 Related Party Transactions. Section 4.24 of the Disclosure Schedule
contains a complete list of all contracts, agreements and understandings (oral
or written) between any of the Sellers, on the one hand and any Related Party,
on the other hand, which pertain to or affect the Business, the Purchased Assets
or the Purchased Leasehold Premises (the "Related Party Agreements"). Except as
set forth in Section 4.24 of the Disclosure Schedule, since April 1, 2000, there
have not been any payments or accruals of liability by any of the Sellers to one
or more Related Parties in an amount in excess of $50,000, individually or in
the aggregate, or any other transaction which is material to the Business
between any of the Sellers, on the one hand, and a Related Party, on the other
hand.
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5.0 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Purchaser makes the
following representations and warranties:
5.1 Organization, Power and Authority of the Purchaser. The Purchaser is a
corporation duly organized and validly existing under the laws of its state of
incorporation, with full corporate power and authority to (i) to enter into this
Agreement, each of the Ancillary Agreements to which it is a party and each of
the other documents and instruments to be executed and delivered by it pursuant
hereto and thereto, and (ii) to carry out the other transactions and agreements
contemplated by this Agreement, each of the Ancillary Agreements to which it is
a party and each of the other documents and instruments to be executed and
delivered by it pursuant hereto and thereto.
5.2. Due Authorization; Binding Obligation. The execution and delivery by
the Purchaser of this Agreement, each of the Ancillary Agreements to which it is
a party and each of the other documents and instruments required or contemplated
by this Agreement or by such Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action of the Purchaser. This Agreement
constitutes, and, when executed and delivered, by the Purchaser pursuant hereto,
each of the Ancillary Agreements and other documents and instruments to be
executed and delivered by the Purchaser pursuant to this Agreement, will
constitute, the legal, valid and binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and by equitable principles, including those limiting the
availability of specific performance, injunctive relief and other equitable
remedies and those providing for equitable defenses. Neither the execution and
delivery by the Purchaser of this Agreement, any of the Ancillary Agreements or
any of the other documents or instruments to be executed and delivered by the
Purchaser pursuant to this Agreement nor the consummation of the transactions
contemplated hereby or thereby will: (i) conflict with or violate any provision
of the Purchaser's certificate of incorporation or bylaws, or of any law,
ordinance or regulation or any decree or order of any court or administrative or
other governmental body which is either applicable to, binding upon or
enforceable against the Purchaser; or (ii) result in any material breach of or
default under any mortgage, contract, agreement, indenture, will, trust or other
instrument which is either binding upon or enforceable against the Purchaser
which would reasonably be expected to have a material adverse effect on the
Purchaser. Except as otherwise specifically provided herein, including without
limitation the consents required under the HSR Act, no consent, approval,
authorization or action by, notice to, or filing with any governmental body or
any other Person is required by the Purchaser in connection with the execution,
delivery and performance of this Agreement, any of the Ancillary Agreements or
any other documents and instruments to be executed and delivered by the
Purchaser pursuant hereto or thereto or the consummation by the Purchaser of the
transactions contemplated hereby or thereby.
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5.3 Brokers. The Purchaser has not employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement.
5.4 Litigation. There are no actions, suits, claims or legal,
administrative or arbitration proceedings pending against, or, to the
Purchaser's knowledge, threatened against, the Purchaser which would materially
adversely affect the Purchaser's performance under this Agreement or the
consummation of the transactions contemplated by this Agreement.
5.5 Financing. The Purchaser has, and at the Closing will have, sufficient
sources of financing in order to consummate the transactions contemplated by the
Agreement and to fulfill its obligations hereunder, including without limitation
payment to the Sellers of the Purchase Price at the Closing.
5.6 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement and the closing of any financing to be obtained
by the Purchaser or any of its Affiliates in order to effect the transactions
contemplated by this Agreement, the Purchaser shall be able to pay its debts as
they become due. Immediately after giving effect to the transactions
contemplated by this Agreement and the closing of any financing to be obtained
by the Purchaser or any of its Affiliates in order to effect the transactions
contemplated by this Agreement, the Purchaser shall have adequate capital to
carry on its business. No transfer of property is being made and no obligation
is being incurred in connection with the transactions contemplated by this
Agreement and the closing of any financing to be obtained by the Purchaser or
any of its Affiliates in order to effect the transactions contemplated by this
Agreement with the intent to hinder, delay or defraud either present or future
creditors of the Purchaser.
6.0 ADDITIONAL COVENANTS OF THE PARTIES
6.1. All Commercially Reasonable Efforts. Each party will use all
commercially reasonable efforts to cause to be satisfied as soon as practicable
and prior to the Closing Date all of the conditions to its respective
obligations to consummate the sale and purchase of the Purchased Assets. Each
party shall also execute prior to or after the Closing Date such other documents
or agreements and take such other actions as may be reasonably necessary or
desirable for the implementation of this Agreement and the consummation of the
transactions contemplated hereby.
6.2 Conduct of Business Pending the Closing. From and after the execution
and delivery of this Agreement and until the Closing Date, except as otherwise
provided by the prior written consent of the Purchaser:
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6.2.1 the Sellers will conduct the business and operations of the
Business in the manner in which the same have heretofore been conducted and
as described to the Purchaser, and it will use all commercially reasonable
efforts to (i) preserve the business organization of the Business intact,
(ii) keep available to the Purchaser the services of the employees and
agents of the Business, and (iii) preserve the relationships with the
customers of the Business, suppliers and others having dealings with the
Business;
6.2.2 the Sellers will maintain the Purchased Assets and all of the
other properties of the Business in customary repair, order and condition,
reasonable wear and use and damage by unavoidable casualty excepted, and
will maintain insurance of such types and in such amounts upon all of the
properties of the Business and with respect to the conduct of the
operations of the Business as are in effect on the date of this Agreement;
and
6.2.3 the Sellers will not (i) except as set forth in Section 4.13 of
the Disclosure Schedule pay any bonus or materially increase the rate of
compensation of any of the Business Employees other than in the Ordinary
Course of Business; (ii) sell or transfer any of the assets of the Business
other than inventory in the Ordinary Course of Business; (iii) make or
obligate itself to make capital expenditures with respect to the Business
in excess of $50,000; or (iv) with respect to the operations of the
Business, incur any material obligations or liabilities or enter into any
material transaction other than in the Ordinary Course of Business.
6.3 Access to the Properties and Records of the Business. From and after
the execution and delivery of this Agreement, the Sellers will afford to the
representatives of the Purchaser access, during normal business hours and upon
reasonable notice in a manner so as not to interfere with the normal operation
of the Business, to the premises of the Business sufficient to enable the
Purchaser to inspect the Purchased Assets, and the Sellers will furnish to such
representatives during such period all such information relating to the
foregoing investigation as the Purchaser may reasonably request (it being
acknowledged by the Purchaser that the Purchaser has completed its due diligence
investigation and that the purpose of this provision is not to permit further
due diligence); provided, however, that any furnishing of such information to
the Purchaser and any investigation by or Knowledge of the Purchaser shall not
affect the right of the Purchaser to rely on the representations and warranties
made by the Sellers in or pursuant to this Agreement.
6.4 No Disclosure. Neither the Purchaser or the Sellers will, prior to the
Closing Date, disclose the existence of or any term or condition of this
Agreement to any person or entity without the prior written consent of the
other, except that such disclosure may be made (i) to any person to whom such
disclosure is necessary in order to satisfy any of the conditions to the
consummation of the purchase of the Purchased Assets which are set forth in this
Agreement, and (ii) to the extent the party making such disclosure believes in
good faith that such disclosure is required by law (in which case, the Purchaser
or the Sellers will consult with the other prior to making such disclosure).
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6.5 Bulk Sales Law. The Purchaser waives compliance with the "bulk sales,"
"bulk transfers" and similar laws of any applicable state in connection with the
transactions contemplated by this Agreement. The Sellers agree to indemnify and
hold the Purchaser harmless against any and all claims, losses, damages,
liabilities (including tax liabilities), costs and expenses incurred by the
Purchaser or any of its Affiliates as a result of any failure to comply with any
such laws.
6.6 Expenses. The Purchaser, on the one hand, and the Sellers, on the other
hand, shall each bear its own respective expenses incurred in connection with
this Agreement and in connection with all obligations required to be performed
by each of them under this Agreement.
6.7 Obligation to Notify. Each of the Purchaser and the Sellers shall have
the continuing obligation until the Closing promptly to notify the other in
writing with respect to any matter hereafter arising or discovered which, if
existing or known at the date of this Agreement, would have been required to be
set forth or described in this Agreement or the Disclosure Schedule or other
attachments annexed hereto. No supplement or amendment of the Disclosure
Schedule made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement, provided that the Purchaser's
sole remedy in respect thereof shall be to terminate this Agreement pursuant to
Section 12.3.1.3, which termination must be initiated by the Purchaser within
five Business Days after the Purchaser receives the notice pursuant to this
Section 6.7, and, provided further, that such right to terminate shall be
subject to the Sellers' right to cure under Section 12.3.1.3.
6.8 Exclusive Dealing. The Sellers shall not and shall cause the Business
not to, prior to the Closing Date or the termination of this Agreement, directly
or indirectly, through any representative or otherwise solicit or entertain
offers from, negotiate with or in any manner encourage, discuss, accept or
consider any proposal of any other person relating to the acquisition of the
Purchased Assets or the Business or its assets, in whole or in part, whether
through direct purchase, merger, consolidation or other business combination
(other than sales of inventory in the Ordinary Course of Business).
6.9 Employee Matters
6.9.1 The Sellers shall use all commercially reasonable efforts to aid
the Purchaser in engaging those Business Employees whom the Purchaser
desires to engage after the Closing Date. Any Business Employees hired by
the Purchaser shall be subject to such terms and conditions of employment
as determined by the Purchaser in its sole discretion. The Purchaser shall
have no obligation to employ any of the persons currently employed by any
of the Sellers or to continue, or institute any replacement or substitution
for, any vacation, severance, incentive, bonus, profit sharing, pension or
other employee benefit plan or program of any of the Sellers.
6.9.2 Without limiting the generality of Section 2.4, the Sellers
shall be fully responsible for health-care and disability claims incurred
prior to the Closing Date with respect to the Business Employees, including
costs for employees hospitalized or on disability on the Closing Date. The
Sellers shall be responsible for COBRA liabilities and obligations, if any,
under Section 4980B of the Code and Sections 601-608 of ERISA with respect
to any individuals who incurred or incur a "qualifying event" (within the
meaning of Section 603 of ERISA) under an applicable employee benefit plan
of any of the Sellers prior to the Closing Date.
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6.9.3 The Purchaser agrees to assume the obligations of MI and
Cal-Doran under and be substituted for MI and Cal-Doran as a party to their
respective collective bargaining agreements listed in Section 6.9.3 of the
Disclosure Schedule; provided, however, that, the Purchaser's assumption of
the obligations of MI and Cal-Doran under such collective bargaining
agreements shall only be with respect to those liabilities and obligations
under the collective bargaining agreements that relate to periods on or
after the Closing Date.
6.9.4 Workers' compensation claims asserted by the Business Employees
against the Purchaser or the Sellers ("Workers' Compensation Claims") shall
be handled as follows:
(i) The Sellers will remain, from and after the Closing, fully
responsible for and will fully satisfy or cause to be
satisfied all Workers' Compensation Claims that arose out of
or resulted from any event occurring prior to the Closing
Date and that were first asserted by the claimants to a
supervising employee of the Purchaser or the Sellers on or
prior to the Closing Date.
(ii) The Purchaser will be responsible for all Workers'
Compensation Claims that arise out or result from any event
occurring entirely after the Closing Date and that are first
asserted by the claimants to a supervising employee of the
Purchaser after the Closing Date.
(iii)With respect to Workers' Compensation Claims arising out of
or resulting from, in whole or in part, any event occurring
on or prior to the Closing Date that are first asserted by
the claimants to a supervising employee of the Purchaser
after the Closing Date, the Sellers and the Purchaser will,
from and after the Closing, each remain responsible for and
will satisfy or cause to be satisfied such Workers'
Compensation Claims on a pro rata basis according to the
duration of the claimant's term of employment with the
Sellers and the Purchaser, respectively, determined as of
the date such Workers' Compensation Claim is first asserted.
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6.9.5 Notwithstanding anything contained in this Section 6.9, to the
extent any provisions of this Section 6.9, as related to employees governed
by the collective bargaining agreements set forth in Section 6.9.3 of the
Disclosure Schedule hereto, contradict or otherwise are inconsistent with
any terms, provisions or requirements under such collective bargaining
agreements, the Purchaser's obligations under this Section 6.9 shall be
deemed to be modified to the extent necessary to enable the Purchaser to
comply with the applicable provisions of any such collective bargaining
agreements with respect to the employees covered thereby, and any such
modification or deviation from the terms of this Section 6.9 as a result of
such actions by the Purchaser shall not be deemed a breach or violation of
this Agreement.
6.9.6 The Sellers agree to pay within five days after determination of
the final Closing Net Book Value, the amounts owing employees or former
employees of the Businesses under any bonus or other compensation plan
under which payments are due.
6.9.7 The Purchaser agrees that it or its designated successor will be
substituted as the Employer under the Metallurgical, Inc. Pension Plan.
6.10 Title Opinions and Surveys. With respect to each parcel of Purchased
Real Estate, the Purchaser, at its cost, is seeking to obtain title insurance
policies of a reasonably current date or binding commitments with extended
coverage over general exceptions to issue such policies in the name of the
Purchaser. Such policies or commitments shall be issued by a title insurance
company acceptable to the Purchaser in an amount equal to the fair market value
of such real property interest as reasonably determined by the Purchaser. Such
policies or commitments shall be subject to no Liens other than Permitted Liens
and shall specifically provide for insurance over all existing access routes to
each such parcel. In addition, the Purchaser shall, at its cost (except the
Sellers shall pay the additional approximately $8,000 charge for accelerated
service), obtain a current plat of survey of each parcel of such Purchased Real
Estate, in the form, within such time and with such certifications as required
as a condition to issuing the title opinions described above.
6.11 Noncompetition. As an inducement for the Purchaser to enter into this
Agreement and as additional consideration for the consideration to be paid to
the Sellers under this Agreement the Sellers agree that for a period of five
years after the Closing:
6.11.1 None of the Sellers will, directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, financing, or control of, be employed by,
associated with, or in any manner connected with, lend its name or any
similar name to, lend its credit to, or render services or advice to, any
business whose products or activities compete in whole or in part with the
products or activities of the Business as it is conducted on the date of
this Agreement, anywhere within North America; provided, however, that the
Sellers may purchase or otherwise acquire up to (but not more than) one
percent of any class of securities of any enterprise (but without otherwise
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participating in the activities of such enterprise) if such securities are
listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934. The
Sellers agree that this covenant is reasonable with respect to its
duration, geographical area, and scope.
6.11.2 None of the Sellers will, directly or indirectly, either for
itself or any other Person, (A) induce or attempt to induce any Business
Employee or other employee of the Purchaser to leave the employ of the
Purchaser, (B) in any way interfere with the relationship between the
Purchaser and any employee of the Purchaser, (C) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any employee
of the Purchaser unless such employee has been terminated by the Purchaser,
or (D) induce or attempt to induce any customer, supplier, licensee, or
business relation of the Purchaser to cease doing business with the
Purchaser, or in any way interfere with the relationship between any
customer, supplier, licensee, or business relation of the Purchaser.
6.11.3 None of the Sellers will, directly or indirectly, either for
itself or any other Person, solicit the business of any Person known to the
Sellers to be a customer of the Business, whether or not the Sellers had
direct contact with such Person, with respect to products or activities
which compete in whole or in part with the products or activities of the
Business as it is conducted on the date of this Agreement;
6.11.4 In the event of a breach by any of the Sellers of any covenant
set forth in this Section 6.11, the term of such covenant will be extended
by the period of the duration of such breach;
6.11.5 In addition to its right to damages and any other rights it may
have, the Purchaser will be entitled to obtain injunctive or other
equitable relief to restrain any breach or threatened breach or otherwise
to specifically enforce the provisions of this Section 6.11 of this
Agreement, it being agreed that money damages alone would be inadequate to
compensate the Purchaser and would be an inadequate remedy for such breach.
The rights and remedies of the Purchaser to this Agreement are cumulative
and not alternative.
7.0 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the Purchased Assets shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions:
7.1 Accuracy of the Sellers' Representations and Warranties and Compliance
by the Sellers with Their Obligations. The representations and warranties of the
Sellers contained in this Agreement shall have been true and correct in all
material respects at and as of the date hereof, and they shall be true and
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correct in all material respects at and as of the Closing Date with the same
force and effect as though made at and as of that time. The Sellers shall have
performed and complied in all material respects with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. The Sellers shall have delivered to the Purchaser a certificate,
dated as of the Closing Date and signed by an executive officer of each of the
Sellers, certifying that such representations and warranties are thus true and
correct in all material respects and that all such obligations have been thus
performed and complied with in all material respects.
7.2 Certified Resolutions. The Sellers shall have delivered to the
Purchaser copies of resolutions adopted by the board of directors and
stockholder of each of MI, Cal-Doran and MTI and the board of directors of each
of Electron and Terra authorizing the transactions contemplated by this
Agreement, certified in each case as of the Closing Date by a secretary or
assistant secretary.
7.3 Opinion of Counsel. The Purchaser shall have received an opinion dated
the Closing Date from Hale and Dorr LLP, counsel for the Sellers, in form and
substance as set forth in Exhibit G attached hereto.
7.4 Receipt of Necessary Consents. All required consents or approvals of
third parties necessary to convey to the Purchaser all of the Purchased Assets
as contemplated by this Agreement, the absence of which would reasonably be
expected to have a Material Adverse Effect, shall have been obtained and shown
by written evidence reasonably satisfactory to the Purchaser; provided, however,
that if the Sellers are unable to obtain any such consents or approvals on
reasonable commercial terms by the Closing Date, this condition shall be
satisfied if the Sellers, by acting as agent for the Purchaser or participating
in any other reasonable and lawful arrangement, are able to put the Purchaser in
the same financial position in all material respects as if such consents or
approvals had been obtained.
7.5 No Adverse Order. There shall not be any order of any court
restraining, prohibiting or invalidating the sale of the Purchased Assets to the
Purchaser or any other material transaction contemplated hereby, or which would
reasonably be expected to have a Material Adverse Effect.
7.6 No Material Adverse Change or Occurrence. From and after January 1,
2000 no event shall have occurred (or failed to occur) which would reasonably be
expected to have a Material Adverse Effect.
7.7 HSR Act Waiting Periods. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or otherwise been terminated.
8.0 CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to sell the Purchased Assets shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions:
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8.1 Accuracy of the Purchaser's Representations and Warranties and
Compliance by the Purchaser with Its Obligations. The representations and
warranties of the Purchaser contained in this Agreement shall have been true and
correct in all material respects at and as of the date hereof, and they shall be
true and correct in all material respects at and as of the Closing Date with the
same force and effect as though made at and as of that time. The Purchaser shall
have performed and complied in all material respects with all of its obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. The Purchaser shall have delivered to the Sellers a certificate,
dated as of the Closing Date and signed by an executive officer, certifying that
such representations and warranties are true and correct in all material
respects and that all such obligations have been thus performed and complied
with in all material respects.
8.2 Opinion of Counsel. The Sellers shall have received an opinion, dated
the Closing Date, from Bell, Boyd & Lloyd LLC, counsel for the Purchaser, in
form and substance as set forth in Exhibit H attached hereto.
8.3 Certified Resolutions. The Purchaser shall have delivered to the
Sellers a copy of a resolution adopted by its board of directors authorizing the
transactions contemplated by this Agreement, certified as of the Closing Date by
its secretary or assistant secretary.
8.4 No Adverse Order. There shall not be any order of any court
restraining, prohibiting or invalidating the sale of the Purchased Assets to the
Purchaser or any other material transaction contemplated hereby.
8.5 HSR Act Waiting Periods. All waiting periods applicable to this
Agreement and the transactions contemplated hereby under the HSR Act shall have
expired or otherwise been terminated.
9.0 CERTAIN ACTIONS AFTER THE CLOSING
9.1 The Purchaser to Act as Agent for the Sellers; Absence of Consents,
Etc.. This Agreement shall not constitute an agreement to assign any claim,
contract, license, lease, commitment, sales order or purchase order if any
attempted assignment of the same without the consent of the other parties
thereto would constitute a breach thereof or in any way affect the rights of the
Sellers or the Purchaser thereunder. If such consent is not obtained or if any
attempted assignment would be ineffective or would affect the Sellers' rights
thereunder so that the Purchaser would not in fact receive all such rights, then
the Purchaser shall act as the agent for the Sellers in order to obtain for the
Purchaser the benefits thereunder and put the Purchaser in the same financial
position had the assignment been made. Without limiting the generality of the
foregoing, the Sellers shall use all commercially reasonable efforts to (i)
obtain any such consent after the Closing Date until such time as the consent
has been obtained, (ii) provide or cause to be provided to the Purchaser the
benefits of any such agreement, lease, contract or other document or instrument
for which consent or waiver has not been obtained, (iii) cooperate in any
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arrangement, reasonable and lawful as to the Sellers and the Purchaser, designed
to provide such benefits to the Purchaser, (iv) enforce for the account of the
Purchaser, at the Purchaser's sole expense, any rights of the Sellers arising
from such agreement, lease, contract or other document or instrument for which
consent has not been obtained against the other parties, including, without
limitation, the right to elect to terminate in accordance with the terms thereof
on the advice of the Purchaser, and (v) the Sellers shall pay, defend, indemnify
and hold the Purchaser harmless from any and all expenses, losses, costs,
deficiencies, liabilities and damages (including related counsel fees and
expenses) suffered by the Purchaser as a result of any failure of the Sellers to
obtain such consent whether before or after the Closing Date. The Purchaser
shall use all commercially reasonable efforts to perform the obligations of the
Sellers arising under such agreement, lease, contract or other document or
instrument for which consent has not been obtained, to the extent that by reason
of the transactions consummated pursuant to this Agreement, the Purchaser has
control over the resources necessary to perform such obligations. Nothing in
this Section 9.1 shall be deemed (i) a waiver by the Purchaser of its rights to
have received on or before the Closing an effective assignment of all of the
Purchased Contracts, (ii) a waiver by the Purchaser of its rights to have each
condition to Closing set forth in Section 7.0 satisfied on the Closing Date or
(iii) to constitute an agreement to exclude from the Purchased Assets any
properties, assets or rights described under Section 1.1 or limit or affect the
Sellers' representations, warranties and covenants in this Agreement.
9.2 Delivery of Property Received by the Sellers After Closing. From and
after the Closing, the Purchaser shall have the right and authority to collect,
for the account of the Purchaser, all items which shall be transferred or are
intended to be transferred to the Purchaser as part of the Purchased Assets as
provided in this Agreement, and to endorse with the name of the Sellers, to the
extent reasonably necessary or required, any checks or drafts received on
account of any such items of the Purchased Assets. The Sellers agree that they
will transfer or deliver to the Purchaser, promptly after the receipt thereof,
any cash or other property which the Sellers receive after the Closing Date in
any respect of any claims, contracts, licenses, leases, commitments, purchase
orders, or any other items transferred or intended to be transferred to the
Purchaser as part of the Purchased Assets under this Agreement. Notwithstanding
the foregoing, in the event the Sellers make any payment to the Purchaser
pursuant to Article 11 hereof with respect to any Accounts Receivable which are
not collected by the Purchaser, the Purchaser shall assign to the Seller making
such payment all of the Purchaser's right, title and interest in such accounts
receivable.
9.3 Execution of Further Documents. From and after the Closing, upon the
reasonable request of the Purchaser, the Sellers shall execute, acknowledge and
deliver all such further acts, deeds, bills of sale, assignments, transfers,
conveyances, powers of attorney and assurances as may reasonably be required to
convey and transfer to and vest in the Purchaser and protect its right, title
and interest in all of the Purchased Assets, and as may be appropriate otherwise
to carry out the transactions contemplated by this Agreement.
9.4 National City Facility. The Sellers shall be fully responsible for
continuing and promptly completing remediation and/or corrective action of any
petroleum contamination at the National City, California facility, solely at the
Sellers' expense. Such remediation and/or corrective action shall: (i) be in
full compliance with all applicable Environmental Laws, and (ii) not
unreasonably interfere with the Purchaser's operation and use of the facility.
The Sellers shall promptly provide the Purchaser with copies of all
correspondence, reports or other documents received from any third party, and
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shall provide the Purchaser with a reasonable opportunity to review and comment
upon any correspondence, reports or other documents drafted by the Sellers or
their agents, before such correspondence, reports or other documents are
transmitted to third parties. The Sellers shall obtain a letter or other
document (including but not limited to a Certificate of Completion or No Further
Action Letter) from the California Regional Water Quality Control Board, San
Diego Region, or other controlling governmental authority (collectively "Board")
evidencing that the remediation and or corrective action has complied with Board
requirements.
9.5 WARN. The Purchaser agrees to provide any required notice under the
Worker Adjustment and Retraining Notification Act ("WARN") and any similar state
law and to otherwise comply with any such statute with respect to any "plant
closing" or "mass layoff" (as defined by WARN) or similar event affecting
employees of the Business and occurring on or after the Closing Date or arising
as a result of this Agreement (none of which are now contemplated by the
Purchaser), and to indemnify and hold harmless the Sellers and their Affiliates
from any liability arising from the Purchaser's failure to provide any such
notice or otherwise comply with any such law.
9.6 Multi-Employer Plan. If, solely as a result of any transfer of the
Purchased Assets from the Sellers to the Purchaser (or its assignees) pursuant
to the terms and conditions of this Agreement, (i) Cal-Doran ceases (A)
operations covered under any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) to which Cal-Doran contributes, is required to contribute
or has ever been required to and which covers current Business Employers (a
"Multiemployer Plan"), or (B) to have an obligation to contribute to a
Multiemployer Plan under circumstances that would cause the occurrence of a
complete or partial withdrawal by Cal-Doran from such Multiemployer Plan, and
(ii) such complete or partial withdrawal would result in a withdrawal liability
for the Sellers in excess of $10,000, then the following provisions shall apply
with respect to such Multiemployer Plan:
9.6.1 From and immediately after the Closing, the Purchaser shall be
obligated to contribute to the Multiemployer Plan with respect to the
operations for substantially the same number of contribution base units for
which Cal-Doran was obligated to contribute to the Multiemployer Plan with
respect to the operations immediately prior to the Closing;
9.6.2 The Purchaser shall provide to the Multiemployer Plan for a
period of five plan years of the Multiemployer Plan (individually, a "Plan
Year" and collectively, "Plan Years") commencing with the first Plan Year
beginning after the Closing, a bond issued by a corporate surety company
that is an acceptable surety for purposes of Section 412 of ERISA, an
amount held in escrow by a bank or similar financial institution
satisfactory to the Multiemployer Plan or (if permitted by the
Multiemployer Plan) a letter of credit issued by such a bank or
institution, in an amount equal to the greater of (A) the average annual
contribution required to have been made by the Seller with respect to the
operations under the Multiemployer Plan for the three Plan Years preceding
the Plan Year in which the Closing occurs, or (B) the annual contribution
that the Seller was required to have made with respect to the operations
under the Multiemployer Plan for the last Plan Year before the Plan Year in
which the Closing occurs, which bond or escrow shall be paid to the
Multiemployer Plan if the Purchaser withdraws from the Multiemployer Plan
or fails to make a contribution to the Multiemployer Plan when due, at any
time during the first five Plan Years beginning after the Closing; and
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9.6.3 If the Purchaser withdraws from the Multiemployer Plan in a
complete withdrawal or a partial withdrawal with respect to the operations
during such first five Plan Years and does not pay any withdrawal liability
resulting therefrom, the Seller shall be secondarily liable for any
withdrawal liability it would have had to the Multiemployer Plan with
respect to the operations covered under the Multiemployer Plan (but for
Section 4204 of ERISA) if the liability of the Purchaser with respect to
such Multiemployer Plan is not paid.
9.6.4 If the conditions set forth above are satisfied, this Section
9.6 is intended to meet the conditions established under Section 4204(a)(1)
of ERISA for relief from liability for a complete or partial withdrawal and
shall be interpreted and applied accordingly. The Purchaser and the Sellers
agree to cooperate to obtain the benefits of the variance under 29 C.F.R.
ss.4204.11, if available, or, if not, to seek an individual variance or
exemption under 29 C.F.R. ss.4202.21. If, however, such conditions set
forth above are not satisfied, this Section 9.6 is not intended to meet the
requirements under Section 4204(a)(1) of ERISA and the Sellers will remain
responsible for such complete or partial withdrawal liabilities or other
costs assessed against the Sellers as if such Section 4201(a)(1) election
had not been made.
The Purchaser agrees that it is obligated to make all contributions which may be
required to be made to the Multiemployer Plans from and immediately after the
Closing. As soon as practicable following the Closing, the Sellers agree to
obtain from the Multiemployer Plan an estimate of the withdrawal liability that
would be imposed on the Sellers by that Multiemployer Plan in the case of a
complete or partial withdrawal. The Sellers agree for a period of two years
following the Closing that if the Purchaser's annual contribution obligation to
any Multiemployer Plan in accordance with this Section 9.6 is improperly
calculated to include contributions or administrative expenses the Sellers were
required to make to the Multiemployer Plan prior to the Closing, the Sellers
will promptly indemnify the Purchaser in full for such cost and expense. The
Sellers further agree that if the Purchaser is subject at any time during such
two-year period to claims, demands, judgments, settlements or liability to third
parties for unpaid contributions and related expenses (including attorneys' fees
and expenses) that may be incurred by the Purchaser in connection with the
Multiemployer Plan as a result of acts or omissions which occurred prior to the
Closing, the Sellers shall indemnify and hold harmless the Purchaser from all
claims, demands, judgments, settlements, unpaid contributions, liability to
third parties and related expenses.
9.7 Delivery of Charter Amendments. The Sellers will deliver to the
Purchaser within five (5) business days after the Closing evidence of filings of
charter amendments changing the corporate names of MI, Cal-Doran and MTI to
names that do not contain the words "Cal-Doran National City," "Cal-Doran,"
"Metallurgical Services," "Metal Treating," "Metallurgical" or "SCAT."
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10.0 PRODUCT AND SERVICE WARRANTY AND LIABILITY CLAIMS; COOPERATION IN
LITIGATION
With respect to product or service warranty or liability claims asserted
against the Purchaser or the Sellers for products or services of the Business
(including, without limitation, any claims for consequential damages related to
any Cal-Doran Aero-Space Claim), (i) if the product was shipped or the service
performed before the Closing, and the claimed injury or product failure occurred
before the Closing, the Sellers shall be fully responsible, whether the claim is
made before or after the Closing, (ii) if the product was shipped or the service
performed before the Closing, and the claimed injury or product failure occurs
after the Closing, the Purchaser shall be fully responsible, except with respect
to a Cal-Doran Aero-Space Claim which shall be handled as provided below, and
(iii) if the product was shipped or the service performed after the Closing, the
Purchaser shall be fully responsible. If the product was shipped or the service
performed before the Closing by Cal-Doran, the claimed injury or product failure
occurs after the Closing, and the product or service relates to products or
services for aircraft, rocket or Space Shuttle parts (a "Cal-Doran Aero-Space
Claim"), the Purchaser shall be responsible if the Cal-Doran Aero-Space Claim is
insured. If such Cal-Doran Aero-Space Claim is not insured, the Purchaser, on
the one hand, and the Sellers, on the other hand, shall share the responsibility
equally; provided, however, that the Sellers' aggregate liability under this
Article 10.0 with respect to Cal-Doran Aero-Space Claims shall not exceed the
amount of the Closing Net Book Value. The term "insured" shall mean a claim for
which the Purchaser has or had insurance coverage under the insurance policies
identified on Exhibit I (without regard to retentions or self-insurance). The
Purchaser and the Sellers shall each cooperate with the other in the defense of
any such action and in the prosecution or defense of any other actions affecting
the Business to the extent reasonably so requested.
11.0 INDEMNIFICATION
11.1 Indemnification by the Sellers. The Sellers agree, jointly and
severally, that they will indemnify, defend and hold harmless the Purchaser in
respect of the aggregate of all indemnifiable damages of the Purchaser. For this
purpose, "indemnifiable damages" of the Purchaser means the aggregate of all out
of pocket expenses, losses, costs, liabilities and damages (including reasonable
related legal and engineering fees and expenses) incurred or suffered by the
Purchaser (i) resulting from any representation or warranty made by the Sellers
in or pursuant to Article 4 hereof that is inaccurate, (ii) resulting from any
default in the performance of any of the covenants or agreements made by the
Sellers in this Agreement, (iii) resulting from the failure of the Sellers to
pay, discharge or perform any liability or obligation of the Sellers which is
not expressly assumed by the Purchaser pursuant to this Agreement, including,
without limitation, the Excluded Liabilities, or resulting from any dispute
concerning any such liability or obligation, or (iv) resulting from the
Purchaser's assumption of Environmental Liabilities pursuant to Section 2.3.1.3
to the extent indemnifiable damages of the Purchaser resulting from such
assumption are greater than $1,000,000 but are less than $3,500,000. The
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Sellers' indemnity obligation set forth in Subsection (iv) shall pertain only to
those Environmental Liabilities, whenever incurred, arising from conditions
identified by the Purchaser in writing to the Sellers prior to the second
anniversary of the Closing Date. For the purpose of this Section 11.1, all
representations, warranties, covenants and agreements of the Sellers set forth
in this Agreement, except those set forth in Sections 4.5.2, 4.6, 4.7, 4.8.1,
4.9, 4.12, 4.13, 4.14.1 and 4.16.2, that are qualified as to materiality
(including, without limitation, by the word "material" in the phrase "Material
Adverse Effect") shall be deemed to be not so qualified. The right to payment of
indemnifiable damages or other remedy based on representations, warranties,
covenants or obligations will not be affected by any investigation conducted, or
any Knowledge acquired (or capable of being acquired) at any time, by the Person
seeking indemnification whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation.
Without limiting the generality of the foregoing with respect to the measurement
of indemnifiable damages, the Purchaser shall have the right to be put in the
same financial position as it would have been in had each of the representations
and warranties of the Sellers been true and correct and had each of the
covenants of the Sellers been performed in full.
11.2 Indemnification by the Purchaser. The Purchaser agrees to indemnify
and hold the Sellers harmless in respect of the aggregate of all indemnifiable
damages of the Sellers. For this purpose, "indemnifiable damages" of the Sellers
means the aggregate of all expenses, losses, costs, deficiencies, liabilities
and damages (including reasonable related counsel and engineering fees and
expenses) incurred or suffered by the Sellers (i) resulting from any
representation or warranty made by the Purchaser in or pursuant to Article 5
hereof that is inaccurate, (ii) resulting from any default in the performance of
any of the covenants or agreements made by the Purchaser in this Agreement,
(iii) resulting from the failure of the Purchaser to pay, discharge or perform
any of the Assumed Liabilities, or (iv) resulting from the Purchaser's failure
to satisfy Environmental Liabilities assumed by the Purchaser pursuant to
Section 2.3.1.3 to the extent indemnifiable damages of the Sellers are less than
$1,000,000 or are greater than $3,500,000. For the purpose of this Section 11.2,
all representations, warranties, covenants and agreements of the Purchaser set
forth in this Agreement that are qualified as to materiality shall be deemed not
so qualified. The right to payment of indemnifiable damages or other remedy
based on representations, warranties, covenants or obligations will not be
affected by any investigation conducted, or any Knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with any such representation, warranty, covenant or
obligation. Without limiting the generality of the foregoing with respect to the
measurement of indemnifiable damages, the Sellers shall have the right to be put
in the same financial position as it would have been in had each of the
representations and warranties of the Purchaser been true and correct and had
each of the covenants of the Purchaser been performed in full.
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11.3 Claims for Indemnification.
11.3.1 Third-Party Claims. All claims for indemnification made under
this Agreement resulting from, related to or arising out of a third-party
claim against an Indemnified Party (as defined below) shall be made in
accordance with the following procedures. A person entitled to
indemnification under this Article 11 (an "Indemnified Party") shall give
prompt written notification to the person from whom indemnification is
sought (the "Indemnifying Party") of the commencement of any action, suit
or proceeding relating to a third-party claim for which indemnification may
be sought or, if earlier, upon the assertion of any such claim by a third
party. Within 30 days after delivery of such notification, the Indemnifying
Party may, upon written notice thereof to the Indemnified Party, assume
control of the defense of such action, suit, proceeding or claim with
counsel reasonably satisfactory to the Indemnified Party. If the
Indemnifying Party does not assume control of such defense, the Indemnified
Party shall control such defense. The Party not controlling such defense
may participate therein at its own expense; provided that if the
Indemnifying Party assumes control of such defense and the Indemnified
Party reasonably concludes, based on advice from counsel, that the
Indemnifying Party and the Indemnified Party have conflicting interests
with respect to such action, suit, proceeding or claim, the reasonable fees
and expenses of counsel to the Indemnified Party solely in connection
therewith shall be considered "indemnifiable damages" for purposes of this
Agreement; provided, however, that in no event shall the Indemnifying Party
be responsible for the fees and expenses of more than one counsel for all
Indemnified Parties. The Party controlling such defense shall keep the
other Parties advised of the status of such action, suit, proceeding or
claim and the defense thereof and shall consider recommendations made by
the other Party with respect thereto. The Indemnified Party shall not agree
to any settlement of such action, suit, proceeding or claim without the
prior written consent of the Indemnifying Party. The Indemnifying Party
shall not agree to any settlement of such action, suit, proceeding or claim
that does not include a complete release of the Indemnified Party from all
liability with respect thereto or that imposes any liability or obligation
on the Indemnified Party without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, conditioned or
delayed.
11.3.2 Claims by the Purchaser Regarding Environmental Liabilities.
Any claims for indemnifiable damages made under Section 11.1 relating
primarily to Environmental Liabilities (an "Environmental Claim") shall be
treated as follows:
11.3.2.1 The Sellers' obligation to indemnify the Purchaser shall
only apply to the extent that the indemnifiable damages incurred by
the Purchaser are "Reasonable Environmental Expenses." For purposes of
this Agreement, indemnifiable damages shall be deemed "Reasonable
Environmental Expenses" to the extent such expenses or other costs are
incurred to perform activities (including without limitation a site
investigation and remediation or other cleanup or risk assessment
activities) which are required by any order or directive of any
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governmental agency or authority or which are reasonably necessary to
(i) determine and ensure the environmental condition giving rise to
such indemnifiable damages is, and cause such environmental condition
to be, in compliance with Environmental Law as in effect at the time
of such investigation or remedial or other cleanup or risk assessment
activities, and otherwise determine the degree, scope and extent of
the presence of a Contaminant or the occurrence of a Release, (ii)
comply with or to discharge a duty imposed under applicable
Environmental Law then in effect, or (iii) allow the Purchaser, in its
reasonable discretion, to respond to and abate the occurrence or
creation of an environmental condition (1) imminently and
substantially endangering human health or the environment, (2)
violating any Environmental Law, or (3) exceeding the industrial,
risk-based cleanup standards then applicable to such site under
Environmental Law. The Sellers shall not be required to indemnify the
Purchaser for any Reasonable Environmental Expenses to the extent that
such Reasonable Environmental Expenses are incurred as a result of a
change in the use of the site in question following the Closing to a
use to which increased cleanup standards or risk based assessments
apply. With respect to the remediation portion of any Reasonable
Environmental Expenses, the Sellers shall be liable for such portion
of Reasonable Environmental Expenses only to the extent the
remediation expenses or other costs incurred are required to remediate
the condition giving rise to the indemnifiable damages to levels that
will permit continued industrial uses at the site in question or to
the risk-based cleanup standards based on industrial use of such site
under applicable Environmental Law in effect as of the date of the
remediation.
11.3.2.2 The Purchaser shall notify the Sellers (i) promptly
after the Purchaser receives notice from any government authority or
any third party alleging any violation of any Environmental Law at any
of the Purchased Real Estate or Purchased Leasehold Premises, (ii)
promptly after the Purchaser has Knowledge of any Release, or
threatened Release at any of the Purchased Real Estate or Purchased
Leasehold Premises, and (iii) within thirty (30) days of the end of
each calendar quarter, all expenditures by the Purchaser of Reasonable
Environmental Expenses (which notice shall be accompanied by
reasonable detail regarding such expenditures). If the Purchaser
wishes to assert an Environmental Claim, the Purchaser shall provide
the Sellers' with a notice (an "Environmental Claim Notice") which
notice shall include documentation showing in reasonable detail the
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basis for the Purchaser's assertion that the proposed action and the
costs and expenses are Reasonable Environmental Expenses as
contemplated by Section 11.3.2.1. Notwithstanding any other provision
herein, the Purchaser shall only be required to give such prior notice
of an Environmental Claim as is reasonably practicable before
incurring any costs or expenses (1) pursuant to an order or directive
by a governmental agency or authority or (2) in order to prevent or
abate an imminent and substantial (A) endangerment to human health or
the environment from any environmental condition, Release, or
threatened Release at any of the Purchased Real Estate or Purchased
Leasehold Premises, or (B) violation of any Environmental Law. The
Purchaser shall provide, and cause its representatives to provide, the
Sellers and the Sellers' authorized representatives access to the
facility and the opportunity to review the subject of the
Environmental Claim and any studies, records, sampling data, cost
estimates and other related documents utilized by the Purchaser in
connection with establishing the Environmental Claim. Environmental
Claims shall otherwise be asserted in the manner set forth in Section
11.3.3, except that disputes shall be submitted only to arbitration,
in Boston, Massachusetts, to a single arbitrator selected by agreement
of the parties, or absent agreement, by the American Arbitration
Association, who shall be an attorney specializing in environmental
law for at least 10 years. The arbitration shall be in accordance with
the commercial arbitration rules of the American Arbitration
Association, with only such discovery as expressly authorized by the
arbitrator upon showing of substantial need by the party seeking
discovery. The arbitrator may hire an environmental engineering firm
as deemed necessary, but for costs not exceeding $10,000 unless the
parties otherwise agree. Disputes concerning substantially related
Environmental Claims shall, to the extent practicable, be submitted to
the same arbitrator. The arbitrator shall award the expenses of
arbitration (attorneys' and engineering fees, filing fees, costs and
related expenses) to the prevailing party. The results of arbitration
will be binding on the parties absent fraud or manifest error, and
judgment on the arbitrator's award may be entered in any court in
Massachusetts having jurisdiction.
11.3.2.3 For purposes of Section 11.3.2, the term "indemnifiable
damages" shall be deemed to include, in addition to those items
specified as such in Section 11.1, any cost or expense (including
related legal and engineering fees and expenses) related to any
investigation, pre-remedial studies and investigations or
post-remedial monitoring and care, and any required financial
assurance, as well as cost of clean-up, remedial, corrective,
restorative or response actions with respect to any Environmental
Claim.
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11.3.2.4 Upon the payment by the Sellers to the Purchaser for any
indemnifiable damages arising out of an Environmental Claim, the
Sellers shall be subrogated to all rights and causes of action which
the Purchaser may have against any third party relating to such
indemnifiable damages.
11.3.3 Procedure for Other Claims. An Indemnified Party wishing to
assert a claim for indemnification under this Article 11 which is not
subject to Section 11.3.1 or 11.3.2 shall deliver to the Indemnifying Party
a written notice (a "Claim Notice") which contains (i) a description and
the amount (the "Claimed Amount") of any indemnifiable damages incurred by
the Indemnified Party, (ii) a statement that the Indemnified Party is
entitled to indemnification under this Article 11 and a reasonable
explanation of the basis therefor, and (iii) a demand for payment in the
amount of such indemnifiable damages. Within 30 days after delivery of a
Claim Notice, the Indemnifying Party shall deliver to the Indemnified Party
a written response in which the Indemnifying Party shall: (i) agree that
the Indemnified Party is entitled to receive all of the Claimed Amount (in
which case such response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Claimed Amount, by check
or by wire transfer), (ii) agree that the Indemnified Party is entitled to
receive part, but not all, of the Claimed Amount (the "Agreed Amount") (in
which case such response shall be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of the Agreed Amount, by check
or by wire transfer), or (iii) contest that the Indemnified Party is
entitled to receive any of the Claimed Amount. If the Indemnifying Party in
such response contests the payment of all or part of the Claimed Amount,
the Indemnifying Party and the Indemnified Party shall use all commercially
reasonable efforts to resolve such dispute. If such dispute is not resolved
within 60 days following the delivery by the Indemnifying Party of such
response, the Indemnifying Party and the Indemnified Party shall each have
the right to submit such dispute to a court of competent jurisdiction.
11.4 Survival.
11.4.1 The representations and warranties of the Sellers and the
Purchaser set forth in this Agreement shall expire as follows: at the
Closing, Section 4.15; one year after the Closing, Sections 4.2, 4.3, 4.9,
4.10, 4.12, 4.13, 4.22, and 4.24; 18 months after the Closing, Sections
4.5, 4.6, 4.7, 4.8, 4.11, 4.14, 4.16, 4.17, 4.18, 4.19 and 4.20; three
years after the Closing 4.1, 4.21 and 4.23; and until expiration of any
applicable statutes of limitation, Section 4.4.
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11.4.2 Any valid claim that is properly asserted in writing pursuant
to Section 11.3 prior to the expiration as provided in this Article 11 of
the representation or warranty that is the basis for such claim shall
survive until such claim is finally resolved and satisfied.
11.5 Limitations
11.5.1 Except with respect to claims based on actual fraud, the rights
of the Indemnified Parties under this Article 11 shall be the sole and
exclusive remedies of the Indemnified Parties and their respective
Affiliates with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement or otherwise relating to the
transactions that are the subject of this Agreement, and the Purchaser
shall not be entitled to the remedy of rescission.
11.5.2 Notwithstanding anything to the contrary contained in this
Agreement, each of the following limitations shall apply to the indemnity
obligations set forth in this Article 11:
(i) the aggregate liability of the Sellers for the sum of all
indemnifiable damages under this Article 11 shall not exceed an amount
equal to the Closing Net Book Value;
(ii) except for claims for indemnifiable damages made pursuant to
subsections 11.1(ii), 11.1(iii), 11.1(iv), 11.2(ii), 11.2(iii), or
11.2(iv) which claims shall be excluded from this limitation, the
Sellers shall be liable under Section 11.1, and the Purchaser shall be
liable under Section 11.2, for only that portion of the aggregate
indemnifiable damages which exceeds $300,000 (it being understood that
the Sellers and the Purchaser shall not be liable, in any event, for
the first $300,000 of said indemnifiable damages); and
(iii) the amount of any indemnifiable damages for which
indemnification is provided under this Article 11 shall be calculated
net of any associated accruals or reserves reflected on the books of
Seller as of the Closing Date and included in the calculation of the
Closing Net Book Value.
11.5.3 In no event shall any Indemnifying Party be responsible and
liable for any indemnifiable damages or other amounts under this Article 11
that are consequential, in the nature of lost profits, diminution in value,
damage to reputation or the like, special or punitive or otherwise not
actual indemnifiable damages. The parties shall use all commercially
reasonable efforts to pursue all legal rights and remedies available in
order to minimize the indemnifiable damages for which indemnification is
provided under this Article.
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11.5.4 The Sellers shall not have any right of contribution against
the Business with respect to any breach by the Sellers of any of their
representations, warranties, covenants or agreements.
11.5.5 The amount of any indemnifiable damages for which
indemnification is provided under this Article 11 shall be reduced by any
related recoveries (net of tax consequences of such recoveries) to which
the Indemnified Party is entitled under insurance policies or other related
payments received or receivable from third parties and any tax benefits
actually received (net of any tax costs actually incurred) by the
Indemnified Party or any of its Affiliates or for which the Indemnified
Party or any of its Affiliates is eligible on account of the matter
resulting in such indemnifiable damages or the payment of such
indemnifiable damages; provided, that with respect to any such
indemnifiable damages as to which an Indemnified Party is entitled to, but
has not yet received, compensation under any insurance, the expiration
period with respect to such claim for indemnifiable damages shall be
tolled, and if (i) the Indemnified Party notifies the Indemnifying Party of
the submission of such claim to the insurer prior to the termination of the
expiration period for such claim for indemnifiable damages and (ii) such
compensation has been pursued in a commercially reasonable manner by the
Indemnified Party but has not been received within one year after the date
on which the claim for compensation is first submitted to the insurer or
the insurer's agent by the Indemnified Party, the Indemnified Party may
assert a claim with respect to such indemnifiable damages within 90 days
after the end of such one year period; provided further, that upon payment
of such indemnifiable damages by the Indemnifying Party, the Indemnified
Party shall assign the right to insurance compensation to the Indemnifying
Party.
12.0 MISCELLANEOUS
12.1 Brokers' Commission. The Purchaser will indemnify and hold harmless
the Sellers from the commission, fee or claim of any person, firm or corporation
employed or retained or claiming to be employed or retained by the Purchaser to
bring about, or to represent it in, the transactions contemplated hereby. The
Sellers will indemnify and hold harmless the Purchaser from the commission, fee
or claim of any person, firm or corporation employed or retained or claiming to
be employed or retained by the Sellers to bring about, or to represent them in,
the transactions contemplated hereby.
12.2 Amendment and Modification. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
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12.3 Termination
12.3.1 Anything to the contrary herein notwithstanding, this Agreement
may be terminated and the transactions contemplated hereby may be
abandoned:
12.3.1.1 by the mutual written consent of the parties hereto at
any time prior to the Closing Date;
12.3.1.2 by the Purchaser or the Sellers at any time prior to the
Closing Date if there is an order of any court or other governmental
body restraining, prohibiting or invalidating the sale of the
Purchased Assets to the Purchaser or any other material transaction
contemplated hereby, or, in the case of the Purchaser, which would
materially and adversely affect the right of the Purchaser to own,
operate or control the Purchased Assets;
12.3.1.3 by the Purchaser or the Sellers in the event of the
material breach by the other of any provisions of this Agreement,
which breach is not remedied by the breaching party within 30 days
after receipt of notice thereof from the terminating party;
12.3.1.4 by any party in the event that one or more conditions to
its closing has not been satisfied by the Closing Date or is not
capable of being satisfied; or
12.3.1.5 by any party if the Closing shall not have occurred on
or before June 30, 2000, unless the failure of the Closing to occur by
such date shall be due to the failure of the party seeking to
terminate the Agreement to perform or observe the covenants of such
party set forth in this Agreement.
If this Agreement is terminated pursuant to clauses 12.3.1.1 or 12.3.1.2 of this
Subsection 12.3, no party shall have any liability for any costs, expenses, loss
of anticipated profit or any further obligation for breach of warranty or
otherwise to any other party to this Agreement. Any termination of this
Agreement pursuant to clauses 12.3.1.3, 12.3.1.4 or 12.3.1.5 of this Subsection
12.3 shall be without prejudice to any other rights or remedies of the
respective parties.
12.4 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and legal representatives. No rights or obligations hereunder may
be assigned by the Purchaser or the Sellers without the prior written consent of
the other, provided that the Purchaser may assign its rights and obligations
hereunder to one or more wholly-owned direct or indirect subsidiaries of the
Purchaser without the Sellers' prior written consent if the Purchaser
irrevocably and unconditionally guarantees the performance of all the assignee's
obligations under this Agreement.
12.5 Entire Agreement. This Agreement, the Disclosure Schedule and the
Exhibits and the Confidentiality Agreement dated October 15, 1999 (which shall
survive in accordance with its terms) contain the entire agreement of the
parties hereto with respect to the purchase of the Purchased Assets and the
other transactions contemplated herein, and supersede all prior understandings
and agreements of the parties with respect to the subject matter hereof. Any
reference herein to this Agreement shall be deemed to include the Disclosure
Schedule and the Exhibits.
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12.6 Headings. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
12.7 Execution in Counterpart. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original.
12.8 Notices. Any notice, request, information or other document to be
given hereunder to the Purchaser or the Sellers shall be in writing and
delivered to the parties at the following addresses (or to such other address as
a party may have specified by notice to the other party pursuant to this
provision):
If to the Sellers, addressed to:
Thermo Electron Corporation
245 Winter Street, Suite 300
Waltham, Massachusetts 02451
Attention: James H. DaCosta
Telephone: (781) 622-1219
Fax: (781) 768-6655
E-mail: [email protected]
with a copy to each of:
Thermo Electron Corporation
245 Winter Street, Suite 300
Waltham, Massachusetts 02451
Attention: General Counsel
Telephone: (781) 622-1198
Fax: (781) 622-1283
E-mail: [email protected]
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Kenneth A. Hoxsie
Telephone: (617) 526-6000
Fax: (617) 526-5000
E-mail: [email protected]
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If to the Purchaser, addressed to:
Lindberg Corporation
6133 North River Road, Suite 700
Rosemont, Illinois 60018
Attention: Stephen S. Penley
Telephone: (847) 823-2021
Fax: (847) 823-0795
E-mail: [email protected]
with a copy to:
Bell, Boyd & Lloyd LLC
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: John H. Bitner
Telephone: (312) 807-4306
Fax: (312) 827-8048
E-mail: [email protected]
Any such notice shall be deemed given (i) when received by the party to whom
addressed, in the case of personal delivery; (ii) the next business day
following service by overnight mail or delivery service; (iii) the third
business day following the deposit in the U.S. mail, postage prepaid, registered
or certified mail, return receipt requested; or (iv) upon receipt (unless after
the close of business or not on a Business Day, in which case on the following
Business Day) of electronic facsimile or e-mail transmission, provided that a
copy of such facsimile or e-mail notice shall simultaneously be sent to the
address by certified or registered mail, return receipt requested.
12.9 Governing Law; Consent to Jurisdiction; Waiver of Jury Right. This
Agreement shall be governed by and construed in accordance with the internal
laws of the Commonwealth of Massachusetts applicable to contracts made and to be
performed therein without regard to the conflicts of laws principles thereof.
Each of the parties to this Agreement irrevocably consents to the exclusive
jurisdiction and venue (and waives any inconvenient forum objection) of the
state and federal courts located in the Commonwealth of Massachusetts for the
purposes of any court proceedings hereunder and to accept service of process by
any means specified in Section 12.8. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BROUGHT
HEREUNDER.
12.10 Limitation on Rights of Other Persons. Nothing expressed or implied
in this Agreement is intended or shall be construed to confer upon or give any
person, firm, corporation or entity other than the parties hereto any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby, except as herein otherwise provided.
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12.11 Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, illegal, inoperative or unenforceable, the
same shall not affect any other provision contained herein, or render the same
invalid, inoperative or unenforceable to any extent whatsoever.
12.12 Survival of Agreements. All the agreements of the parties contained
in Sections 6.3, 6.4, 6.5, 6.6, 6.9, 6.10 and 6.11, and all of Articles 9.0,
10.0, 11.0 and 12.0 shall survive the Closing and, as to Sections 6.3, 6.4 and
6.6 and all of Articles 11.0 and 12.0, the termination of this Agreement.
12.13 Certain Definitions. The following words, terms and expressions shall
have the following meanings for all purposes of this Agreement:
"Accounts Receivable" has the meaning assigned to it in Section 4.6.
"Adjustment Amount" has the meaning assigned to it in Section 2.1.1.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreed Amount" has the meaning assigned to it in Section 11.3.2.
"Agreement" means this Agreement, including the Disclosure Schedule and all
of the Exhibits.
"Ancillary Agreements" means the agreements which this Agreement
contemplates being entered into between the Purchaser and any of the Sellers at
or prior to Closing.
"April 1, 2000 Statement" has the meaning assigned to it in Section 4.2.
"Arbitrator" has the meaning assigned to it in Section 2.5.2.
"Assumed Liabilities" has the meaning assigned to it in Section 2.3.1.
"Business Day" means a day when commercial banks are open for conduct of
normal banking business in Chicago, Illinois and Boston, Massachusetts.
"Business Employees" has the meaning assigned to it in Section 4.16.1.
"Business" has the meaning assigned to it in the Recitals.
"Cal-Doran Aero-Space Claim" has the meaning assigned to it in Section 10.0
"Cal-Doran Metallurgical Services, Inc." has the meaning assigned to it in
the caption.
"California Assets" has the meaning assigned to it in Section 3.3.
"Cash Consideration" has the meaning assigned to it in Section 2.1.1.
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"CERCLA" has the meaning assigned to it in Section 4.15.2.
"Claimed Amount" has the meaning assigned to it in Section 11.3.3.
"Claim Notice" has the meaning assigned to it in Section 11.3.3.
"Closing" has the meaning assigned to it in Section 3.1.
"Closing Date" has the meaning assigned to it in Section 3.1.
"Closing Net Book Value" has the meaning assigned to it in Section 2.1.1.
"Code" has the meaning assigned to it in Section 2.2.
"Contaminant" has the meaning assigned to it Section 4.15.2.
"Disclosure Schedule" has the meaning assigned to it Section 4.0.
"Electron" has the meaning assigned to it in Section 3.2.3.
"Environmental Claim" has the meaning assigned to it in Section 11.3.2.2.
"Environmental Claim Notice" has the meaning assigned to it in Section
11.3.2.2.
"Environmental Law" has the meaning assigned to it in Section 4.15.2.
"Environmental Liabilities" are those liabilities or claims resulting from
(i) violations of any Environmental Law or Environmental Permits; (ii) any
notice from any governmental authority that the Business, the Purchased Assets
or the Purchased Leasehold Premises is in violation of any Environmental Law or
any Environmental Permit or that any of the Sellers or the Purchaser are
responsible (or potentially responsible) for Remedial Action at any location
arising out of or relating to the Business, the Purchased Assets or the
Purchased Leasehold Premises; (iii) any federal, state, local or private
litigation or administrative proceedings involving a demand for damages or other
potential liability with respect to violations of Environmental Laws by the
Business, the Purchased Assets or the Purchased Leasehold Premises; (iv) any
Release of any Contaminant at any property currently, or in the past, occupied
by any of the Sellers in connection with the Business or any other business
operated from or assets located at the Purchased Real Property or the Purchased
Leasehold Premises; (v) any Contaminants located at, or migrating from, the
Purchased Real Property or the Purchased Leasehold Premises or any property
currently, or in the past, occupied by any of the Sellers in connection with the
Business or any other business operated from or assets located at the Purchased
Real Property or the Purchased Leasehold Premises; (vi) any Underground Storage
Tanks used in connection with the Business, the Purchased Assets or the
Purchased Leasehold Premises; (vii) any transport, storage, treatment,
recycling, reclamation or disposal of Contaminants generated by the Business,
the Purchased Assets or the Purchased Leasehold Premises to or at any location
other than a location lawfully permitted to receive such Contaminants, or any
transportation, storage, treatment, recycling, reclamation or disposal in
contravention of any applicable Environmental Law.
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"Environmental Permit" has the meaning assigned to it in Section 4.15.2.
"ERISA" has the meaning assigned to it in Section 4.17.2.
"ERISA Affiliate" means, with respect to any person, any corporation, trade
or business which, together with such person, is a member of a controlled group
of corporations or a group of trades or businesses under common control within
the meaning of Section 414 of the Code.
"Excluded Liabilities" has the meaning assigned to it in Section 2.4.
"Exhibits" means the exhibits attached to this Agreement.
"Financial Summaries" means the financial statements (including the notes
thereto) of the Business referenced in Section 4.2 and constituting a part of
Section 4.2 of the Disclosure Schedule.
"GAAP" means United States generally accepted accounting principles,
applied on a basis consistent with the basis on which the Financial Summaries
and Statement of Adjustment Amount were prepared.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Holco" has the meaning assigned to it in Section 1.1.13.
"indemnifiable damages" has the meaning assigned to it in Section 11.
"Indemnified Party" has the meaning assigned to it in Section 11.3.1.
"Indemnifying Party" has the meaning assigned to it in Section 11.3.1.
"IRS" has the meaning assigned to it in Section 4.17.4.
"January 1, 2000 Statement" has the meaning assigned to it in Section 4.2.
"Key Business Employee"- means John Wielgosz.
"Knowledge" - an individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual has actual knowledge of such
fact or other matter. The Sellers will be deemed to have "Knowledge" of a
particular fact or other matter if any of the following individuals has
Knowledge thereof: (i) any director or executive officer of any of the Sellers,
(ii) any of the following other employees of the Sellers, namely James H.
DaCosta, Christine Leonard and Brian Holt, or (iii) any Key Business Employee.
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"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance in respect of such property or
asset. For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any property or asset which it has acquired or holds subject
to the interest of a vendor or lessor under any lease, conditional sale or
rental agreement, capital lease, hire - purchase or other title retention
agreement relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on or material
adverse change in, directly or indirectly, (i) the business, assets, property,
condition, financial position, results of operations or liabilities of the
Business, the Purchased Assets or the Purchased Leasehold Premises, or (ii) the
validity or enforceability of this Agreement or any of the Ancillary Agreements
or the ability of any Seller to perform its obligations under this Agreement or
consummate the transactions contemplated by this Agreement.
"Material Contract" means any agreement, contract or commitment which (i)
in the period of 12 months following Closing would reasonably be expected by any
of the Sellers to involve income or expenditure in excess of $100,000, (ii) at
Closing has in excess of 12 months of its term to run or (iii) would reasonably
be anticipated to have a Material Adverse Effect or a material positive effect
on the Business.
"Metallurgical, Inc." has the meaning assigned to it in the caption.
"Metal Treating Inc." has the meaning assigned to it in the caption.
"Minnesota Assets" has the meaning assigned to it in Section 3.3.
"Ordinary Course of Business" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Pension Plans" has the meaning assigned to it in Section 6.9.4.
"Permitted Liens"- means Liens for (i) taxes not yet due and payable or due
but not yet delinquent or being contested in good faith by appropriate
proceedings, (ii) Liens that do not affect the value or use of the Purchased
Assets, (iii) Liens, if any, relating to the Purchaser's financing to which the
assets are contemplated to be subject at the Closing, and (iv) Liens not
included in clauses (i) or (ii) above and relating to capitalized lease
financings or purchase money financings.
"Person" includes an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department, agency or other unit thereof.
"Plans" has the meaning assigned to it in Section 4.17.1.
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"Proprietary Rights" means collectively trademarks, trade names, service
marks, patents, patent applications, inventions, discoveries, licenses, copy
rights (in both published and unpublished works), mask works, process
technology, trade secrets and all applications therefor and registrations
thereof.
"Purchase Price" has the meaning assigned to it in Section 2.1.1.
"Purchased Assets" has the meaning assigned to it in Section 1.1.
"Purchased Contracts" has the meaning assigned to it in Section 1.1.6.
"Purchased Fixed Assets" has the meaning assigned to it in Section 1.1.3.
"Purchased Inventory" has the meaning assigned to it in Section 1.1.4.
"Purchased Leasehold Premises" has the meaning assigned to it in Section
1.1.2.
"Purchased Leasehold Right" has the meaning assigned to it in Section
1.1.2.
"Purchased Real Estate" has the meaning assigned to it in Section 1.1.1.
"Purchased Receivables" has the meaning assigned to it in Section 1.1.5.
"Purchased Records" has the meaning assigned to it in Section 1.1.7.
"Purchased Permits" has the meaning assigned to it in Section 1.1.9.
"Purchased Proprietary Rights" has the meaning assigned to it in Section
1.1.8.
"Purchased Shares" has the meaning assigned to it in Section 1.1.13.
"Purchaser" has the meaning assigned to it in the caption.
"Reasonable Environmental Expenses" has the meaning assigned to it in
Section 11.3.2.1.
"RCRA" has the meaning assigned to it in Section 4.15.2.
"Recalls" has the meaning assigned to it in Section 4.23.
"Related Party" means any director, executive officer or holder of 5% or
more of the capital stock of any of the Sellers, or any Affiliate of the
foregoing.
"Related Party Agreements" has the meaning assigned to it in Section 4.24.
"Release" has the meaning assigned to it in Section 4.15.2.
"Remedial Action" has the meaning assigned to it in Section 4.15.2.
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"Sellers" has the meaning assigned to it in the caption.
"Statement of Assets and Liabilities" has the meaning set forth in Section
4.2.2.
"Statement of Operations" has the meaning set forth in Section 4.2.1.
"Sub One" has the meaning assigned to it in Section 3.3.
"Sub Two" has the meaning assigned to it in Section 3.3.
"Sub Three" has the meaning assigned to it in Section 3.3.
"Subsidiary" means with respect to any Person (the "Owner") any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner of one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Seller.
"Terra" has the meaning assigned to it in the caption.
"Underground Storage Tanks" has the meaning assigned to it in Section
4.15.2.
"Wisconsin Assets" has the meaning assigned to it in Section 3.3.
[**SIGNATURES TO FOLLOW**]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LINDBERG CORPORATION THERMO TERRATECH INC.
By: /s/ Stephen S. Penley By: /s/ Brian D. Holt
Name: Stephen S. Penley Name: Brian D. Holt
Title: Executive Vice President Title: President
METALLURGICAL, INC.
By: /s/ John A. Wielgosz
Name: John A. Wielgosz
Title: President
CAL-DORAN METALLURGICAL SERVICES, INC.
By: /s/ William Preston
Name: William Preston
Title: President
METAL TREATING INC.
By: /s/ John A. Wielgosz
Name: John A. Wielgosz
Title: President
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<PAGE>
GUARANTY AND AGREEMENT
THERMO ELECTRON CORPORATION, a Delaware corporation and an Affiliate of
each of the Sellers, in order to induce the Purchaser to enter into this
Agreement, hereby irrevocably and unconditionally guarantees the performance and
payment of each of the Sellers of its obligations under Section 11 of this
Agreement, and agrees that the terms of Sections 6.11 and 12.9 of the Agreement
shall be binding on it to the same extent as if it were a Seller.
THERMO ELECTRON CORPORATION
By: /s/ Brian D. Holt
Name: Brian D. Holt
Title: Chief Operating Officer
53
<PAGE>
ASSIGNMENT OF
ASSET PURCHASE AGREEMENT
As more specifically provided in Section 3.3 of the Agreement, the
Purchaser hereby conveys, transfers and assigns, and Sub One, Sub Two and Sub
Three hereby assume and agree to perform, all the Purchaser's right, title,
interests and obligations under this Agreement.
LINDBERG CORPORATION C-D HEAT TREATING, INC.
By: /s/ Leo G. Thompson By: /s/ Leo G. Thompson
Name: Leo G. Thompson Name: Leo G. Thompson
Title: President Title: President
Date: June 2, 2000
MI, INC.
By: /s/ Leo G. Thompson
Name: Leo G. Thompson
Title: President
Date: June 2, 2000
MTI HEAT TREATING, INC.
By: /s/ Leo G. Thompson
Name: Leo G. Thompson
Title: President
Date: June 2, 2000
54
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and Thermo Electron's Certificate of
Incorporation and Bylaws limit the monetary liability of directors to Thermo
Electron and to its stockholders and provide for indemnification of Thermo
Electron's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of Thermo Electron and, with
respect to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. Thermo Electron also has
indemnification agreements with its directors and officers that provide for the
maximum indemnification allowed by law.
Thermo Electron has an insurance policy which insures its directors and
officers against certain liabilities which might be incurred in connection with
the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of October 19, 1999,
by and among Thermo Electron, Thermo TerraTech and TTT
Acquisition Corporation (included as Appendix A to the Proxy
Statement-Prospectus forming a part of this Registration
Statement and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of Thermo
Electron (filed as Exhibit 1 to Thermo Electron's Amendment
No. 3 to Registration Statement on Form 8-A/A [File
No. 1-8002] and incorporated herein by reference).
3.2 Bylaws of Thermo Electron (filed as Exhibit 3 to Thermo
Electron's Quarterly Report on Form 10-Q for the quarter
ended July 3, 1999 [File No. 1-8002] and incorporated herein
by reference).
4.1 Fiscal Agency Agreement dated as of January 3, 1996, between
the Registrant and Chemical Bank pertaining to the
Registrant's 4 1/4% Subordinated Convertible Debentures due
2003 (filed as Exhibit 4.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 30, 1995
[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 January 19, 1996, between
Thermo Electron Corporation and the First National Bank of
Boston, as Rights Agent, 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 filed on
January 26, 1996, as amended by Amendment No. 1 to
Registration Statement on Form 8-A/A filed on May 30, 1997
and incorporated herein by reference).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- -----------
<S> <C>
4.3 Amendment No. 1 to Rights Agreement, dated as of June 11,
1999, between Thermo Electron Corporation and BankBoston,
N.A. (formerly, The First National Bank of Boston), as
Rights Agent, which includes as Exhibit B the amended and
restated Form of Rights Certificate and as Exhibit C the
amended and restated Summary of Rights to Purchase Preferred
Stock (filed as Exhibit 2 to the Registrant's Amendment
No. 2 to Registration Statement on Form 8-A/A filed on
June 21, 1999 and incorporated herein by reference).
4.4 Indenture dated as of October 29, 1998, by and between the
Registrant and Bankers Trust Company, as Trustee, relating
to the issuance of senior debt securities by the Registrant
(filed as Exhibit 4.1 to the Registrant's Current Report on
Form 8-K dated October 29, 1998, filed with the Securities
and Exchange Commission on October 30, 1998, and
incorporated herein by reference).
4.5 First Supplemental Indenture dated as of October 29, 1998,
by and between the Registrant and Bankers Trust Company, as
Trustee, relating to the issuance by the Registrant of
$150,000,000 aggregate principal amount of its 7.625% Notes
due 2008 (filed as Exhibit 4.2 to the Registrant's Current
Report on Form 8-K dated October 29, 1998, filed with the
Securities and Exchange Commission on October 30, 1998, and
incorporated herein by reference).
5.1 Opinion and consent of Seth H. Hoogasian, Esq. as to the
validity of the Securities.*
8.1 Removed.
10.1 Form of Indemnification Agreement between the Registrant and
the directors and officers of its majority-owned
subsidiaries.*
10.2 Form of Amended and Restated Indemnification Agreement
between the Registrant and its directors and officers.*
23.1 Consent of Arthur Andersen LLP to the Registrant.
23.2 Consent of Arthur Andersen LLP to Thermo TerraTech Inc.
23.3 Consent of Seth H. Hoogasian, Esq. (included as part of
Exhibit 5.1).
23.4 Consent of Hale and Dorr LLP.*
23.5 Consent of Adams, Harkness & Hill, Inc.
23.6 Consent of Environmental Business International, Inc.
24.1 Power of Attorney (see signature pages to this Registration
Statement).
24.2 Certified Resolutions of the Registrant's Board of Directors
regarding Signatures by Power of Attorney.*
99.1 Form of Proxy of Thermo TerraTech Inc.*
</TABLE>
------------------------
* Previously filed.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) that, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) that, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(5) that before any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement, by
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form;
(6) that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(7) to respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within
one business day of receipt of such request,
II-3
<PAGE>
and to send the incorporated documents by first class mail or other equally
prompt means, including information contained in documents filed after the
effective date of this registration statement through the date of responding to
such request; and
(8) to supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in this registration statement when it
became effective.
Insofar as indemnification for liabilities under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 20 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. If a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Amendment No. 4 to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Waltham,
Commonwealth of Massachusetts, on August 11, 2000.
<TABLE>
<S> <C> <C>
THERMO ELECTRON CORPORATION
By: /s/ RICHARD F. SYRON
-----------------------------------------
Richard F. Syron
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
</TABLE>
POWER OF ATTORNEY AND SIGNATURES
Each of the undersigned Directors and Officers of Thermo Electron
Corporation hereby appoints Theo Melas-Kyriazi, Kenneth J. Apicerno, Seth H.
Hoogasian and Sandra L. Lambert, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 4 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ RICHARD F. SYRON Officer and Chairman
------------------------------------------- of the Board (Principal August 11, 2000
Richard F. Syron Executive Officer)
Chief Financial Officer
/s/ THEO MELAS-KYRIAZI (Principal Financial
------------------------------------------- Officer and Principal August 11, 2000
Theo Melas-Kyriazi Accounting Officer)
/s/ SAMUEL W. BODMAN*
------------------------------------------- Director August 11, 2000
Samuel W. Bodman
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ PETER O. CRISP*
------------------------------------------- Director August 11, 2000
Peter O. Crisp
------------------------------------------- Director August 11, 2000
Marijn Dekkers
/s/ ELIAS P. GYFTOPOULOS*
------------------------------------------- Director August 11, 2000
Elias P. Gyftopoulos
/s/ FRANK JUNGERS*
------------------------------------------- Director August 11, 2000
Frank Jungers
------------------------------------------- Director August 11, 2000
Jim P. Manzi
/s/ ROBERT A. MCCABE*
------------------------------------------- Director August 11, 2000
Robert A. McCabe
/s/ HUTHAM S. OLAYAN*
------------------------------------------- Director August 11, 2000
Hutham S. Olayan
/s/ ROBERT W. O'LEARY*
------------------------------------------- Director August 11, 2000
Robert W. O'Leary
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ THEO MELAS-KYRIAZI*
-----------------------------------------
Theo Melas-Kyriazi
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 19, 1999,
by and among Thermo Electron, Thermo TerraTech and TTT
Acquisition Corporation (included as Appendix A to the Proxy
Statement-Prospectus forming a part of this Registration
Statement and incorporated herein by reference).
3.1 Amended and Restated Certificate of Incorporation of Thermo
Electron (filed as Exhibit 1 to Thermo Electron's Amendment
No. 3 to Registration Statement on Form 8-A/A [File
No. 1-8002] and incorporated herein by reference).
3.2 Bylaws of Thermo Electron (filed as Exhibit 3 to Thermo
Electron's Quarterly Report on Form 10-Q for the quarter
ended July 3, 1999 [File No. 1-8002] and incorporated herein
by reference).
4.1 Fiscal Agency Agreement dated as of January 3, 1996, between
the Registrant and Chemical Bank pertaining to the
Registrant's 4 1/4% Subordinated Convertible Debentures due
2003 (filed as Exhibit 4.1 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 30, 1995
[File No. 1-8002] and incorporated herein by reference).
</TABLE>
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.
<TABLE>
<C> <S>
4.2 Rights Agreement, dated as of January 19, 1996, between
Thermo Electron Corporation and the First National Bank of
Boston, as Rights Agent, 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 filed on
January 26, 1996, as amended by Amendment No. 1 to
Registration Statement on Form 8-A/A filed on May 30, 1997
and incorporated herein by reference).
4.3 Amendment No. 1 to Rights Agreement, dated as of June 11,
1999, between Thermo Electron Corporation and BankBoston,
N.A. (formerly, The First National Bank of Boston), as
Rights Agent, which includes as Exhibit B the amended and
restated Form of Rights Certificate and as Exhibit C the
amended and restated Summary of Rights to Purchase Preferred
Stock (filed as Exhibit 2 to the Registrant's Amendment
No. 2 to Registration Statement on Form 8-A/A filed on
June 21, 1999 and incorporated herein by reference).
4.4 Indenture dated as of October 29, 1998, by and between the
Registrant and Bankers Trust Company, as Trustee, relating
to the issuance of senior debt securities by the Registrant
(filed as Exhibit 4.1 to the Registrant's Current Report on
Form 8-K dated October 29, 1998, filed with the Securities
and Exchange Commission on October 30, 1998, and
incorporated herein by reference).
4.5 First Supplemental Indenture dated as of October 29, 1998,
by and between the Registrant and Bankers Trust Company, as
Trustee, relating to the issuance by the Registrant of
$150,000,000 aggregate principal amount of its 7.625% Notes
due 2008 (filed as Exhibit 4.2 to the Registrant's Current
Report on Form 8-K dated October 29, 1998, filed with the
Securities and Exchange Commission on October 30, 1998, and
incorporated herein by reference).
5.1 Opinion and consent of Seth H. Hoogasian, Esq. as to the
validity of the Securities.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
8.1 Removed.
10.1 Form of Indemnification Agreement between the Registrant and
the directors and officers of its majority-owned
subsidiaries.*
10.2 Form of Amended and Restated Indemnification Agreement
between the Registrant and its directors and officers.*
23.1 Consent of Arthur Andersen LLP to the Registrant.
23.2 Consent of Arthur Andersen LLP to Thermo TerraTech Inc.
23.3 Consent of Seth H. Hoogasian, Esq. (included as part of
Exhibit 5.1).
23.4 Consent of Hale and Dorr LLP.*
23.5 Consent of Adams, Harkness & Hill, Inc.
23.6 Consent of Environmental Business International, Inc.
24.1 Power of Attorney (see signature pages to this Registration
Statement).
24.2 Certified Resolutions of the Registrant's Board of Directors
regarding Signatures by Power of Attorney*
99.1 Form of Proxy of Thermo TerraTech Inc.*
</TABLE>
------------------------
* Previously filed.
