<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
TREX MEDICAL CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[TREX MEDICAL CORPORATION LOGO]
37 Apple Ridge Road, Danbury, Connecticut 06810
February 5, 1999
Dear Stockholder:
The enclosed Notice calls the 1999 Annual Meeting of the Stockholders of
Trex Medical Corporation. I respectfully request all Stockholders to attend
this meeting, if possible.
Our Annual Report for the fiscal year ended October 3, 1998, is enclosed. I
hope you will read it carefully. Feel free to forward any questions you may
have if you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer and Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
/s/ William J. Webb
William J. Webb
President and Chief Executive
Officer
<PAGE>
[TREX MEDICAL CORPORATION LOGO]
37 Apple Ridge Road, Danbury, Connecticut 06810
February 5, 1999
To the Holders of the Common Stock of
TREX MEDICAL CORPORATION
NOTICE OF ANNUAL MEETING
The 1999 Annual Meeting of the Stockholders of Trex Medical Corporation (the
"Corporation") will be held on Thursday, March 11, 1999 at 10:00 a.m. at the
Westin Hotel, 70 Third Avenue, Waltham, Massachusetts. The purpose of the
meeting is to consider and take action upon the following matters:
1. Election of seven directors.
2. A proposal recommended by the board of directors to amend the
Corporation's equity incentive plan and to increase the shares
available for issuance under the plan by 500,000 shares.
3. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive
notice of and to vote at the meeting is January 20, 1999.
The by-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to you
by order of the board of directors.
Sandra L. Lambert
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Trex Medical
Corporation (the "Corporation") for use at the 1999 Annual Meeting of the
Stockholders (the "Meeting") to be held on Thursday, March 11, 1999 at 10:00
a.m. at the Westin Hotel, 70 Third Avenue, Waltham, Massachusetts 02454, and
any adjournment thereof. The mailing address of the executive offices of the
Corporation is 37 Apple Ridge Road, Danbury, Connecticut 06810. This proxy
statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about February 9, 1999.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
seven directors, constituting the entire board of directors as well as a
proposal to increase the number of shares for issuance under the Corporation's
equity incentive plan by 500,000 shares.
The representation in person or by proxy of a majority of the outstanding
shares of Common Stock of the Corporation, $.01 par value ("Common Stock"),
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you
plan to attend the Meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on
the proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors
for the management proposal, and as the individuals named as proxy holders on
the proxy deem advisable on all other matters as may properly come before the
Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election. For the management
proposal, the affirmative vote of a majority of shares present in person or
represented by proxy, and entitled to vote on the matter, is necessary for
approval. Withholding authority to vote for a nominee for director or an
instruction to abstain from voting on the management proposal, will be treated
as shares present and entitled to vote and, for purposes of determining the
outcome of the vote, will have the same effect as a vote against the nominee
or proposal. Broker "non-votes" will not be treated as shares present and
entitled to vote on a voting matter and will have no effect on the outcome of
the vote. A broker "non-vote" occurs when a nominee holding shares for a
beneficial holder does not have discretionary voting power and does not
receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the
secretary of the Corporation received prior to the Meeting, by executing and
returning a later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of January 20, 1999, consisted of
32,139,967 shares of Common Stock. Only Stockholders of record at the close of
business on January 20, 1999, are entitled to vote at the Meeting. Each share
is entitled to one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting, each to hold office until
his or her successor is chosen and qualified or until his or her earlier
resignation, death or removal.
1
<PAGE>
Nominees For Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its parent company,
ThermoTrex Corporation ("ThermoTrex"), a provider of medical products,
personal-care products and services, and advanced technology research, and
ThermoTrex's parent company, Thermo Electron Corporation ("Thermo Electron"),
a provider of diversified products and services for the biomedical,
instrument, and environmental markets, is reported under the caption "Stock
Ownership." All of the nominees are currently directors of the Corporation.
<TABLE>
<S> <C>
Elias P. Gyftopoulos.... Dr. Gyftopoulos, 71, has been a director of the Corporation
since November 1995. Dr. Gyftopoulos is Professor Emeritus of
the Massachusetts Institute of Technology, where he was the
Ford Professor of Mechanical Engineering and of Nuclear
Engineering for more than 20 years until his retirement in
1996. Dr. Gyftopoulos is also a director of Thermo BioAnalysis
Corporation, Thermo Cardiosystems Inc., Thermo Electron,
ThermoLase Corporation, ThermoRetec Corporation, ThermoSpectra
Corporation, Thermo Vision Corporation and Thermo Voltek Corp.
Hal Kirshner............ Mr. Kirshner, 57, has been a director of the Corporation since
its inception in October 1995. He was the chief executive
officer and president of the Corporation from October 1995
through December 13, 1998. Mr. Kirshner was also president of
the LORAD division of the Corporation from 1991 until 1997.
John T. Keiser.......... Mr. Keiser, 63, has been a director of the Corporation since
June 1997. He has been the chief operating officer, biomedical
and advanced technology, of Thermo Electron since September
1998, and a vice president from April 1997 until his
promotion. Mr. Keiser has been the president and chief
executive officer of Thermedics Inc., a majority-owned
subsidiary of Thermo Electron, since March 1998 and December
1998, respectively, and was a senior vice president of
Thermedics Inc. from 1994 until his promotion to president. He
has also been the president of Thermo Electron's wholly owned
biomedical group, a manufacturer of medical equipment and
instruments, since 1994. Mr. Keiser was president of the
Eberline Instrument, division of Thermo Instrument Systems
Inc., a majority-owned subsidiary of Thermo Electron, from
1985 to July 1994. The Eberline Instrument division
manufactures radiation detection and counting instrumentation
and radiation monitoring systems. Mr. Keiser is a director of
Metrika Systems Corporation, Thermedics Inc., Thermedics
Detection Inc., Thermo Cardiosystems Inc., ThermoLase
Corporation, Thermo Sentron Inc. and ThermoTrex Corporation.
James W. May, Jr. ...... Dr. May, 55, has been a director of the Corporation since
February 1996. He has been Professor of Surgery at Harvard
Medical School since 1994 and was Associate Clinical Professor
of Surgery for more than five years prior to that time. He has
also been Director of Plastic Surgery at Massachusetts General
Hospital since 1982.
Hutham S. Olayan........ Ms. Olayan, 44, has been a director of the Corporation since
February 1996. She has served since 1995 as president and a
director of Olayan America Corporation, a member of the Olayan
Group, and as president and a director of Competrol Real
Estate Limited, another member of the Olayan Group, until its
merger into Olayan America Corporation in 1997. The surviving
company is engaged in private investments, including real
estate, and advisory services. In addition, from 1985 to 1994,
Ms. Olayan served as president and a director of Crescent
Diversified Limited, another member of the Olayan Group
engaged in private investments. Ms. Olayan is also a director
of Thermo Electron.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Firooz Rufeh............ Mr. Rufeh, 61, has been a director of the Corporation since
its inception in October 1995. Mr. Rufeh served as the chief
executive officer of ThermoTrex from 1988 to February 1996,
and as the president of ThermoTrex from 1988 to February 1997.
Mr. Rufeh also served as a vice president of Thermo Electron
from 1986 until his retirement in February 1997.
Gary S. Weinstein....... Mr. Weinstein, 41, has been a director of the Corporation and
its chairman of the board since February 1996. He has also
served as chief executive officer of ThermoTrex and as a vice
president of Thermo Electron since February 1996. Mr.
Weinstein was a managing director of Lehman Brothers Inc. from
1992 until February 1996, serving from March 1995 until
leaving the firm as managing director and head of global
syndicate and equity capital markets. Mr. Weinstein joined
Lehman Brothers in 1988 and served in various positions,
including head of equities in Europe, head of equity new
issues in North and South America and head of global
convertible securities. Mr. Weinstein is also a director of
ThermoLase Corporation and ThermoTrex.
</TABLE>
Committees of the Board of Directors and Meetings
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are Ms. Olayan (Chairman), Dr. May and Dr.
Gyftopoulos. The audit committee reviews the scope of the audit with the
Corporation's independent public accountants and meets with them for the
purpose of reviewing the results of the audit subsequent to its completion.
The present members of the human resources committee are Dr. Gyftopoulos
(Chairman), Dr. May and Ms. Olayan. The human resources committee reviews the
performance of senior members of management, recommends executive compensation
and administers the Corporation's stock option and other stock-based
compensation plans. The Corporation does not have a nominating committee of
the board of directors. The board of directors met six times, the audit
committee met twice and the human resources committee met four times during
fiscal 1998. Each director attended at least 75% of all meetings of the board
of directors and committees on which he or she served held during fiscal 1998.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of Thermo Electron or of
any other companies affiliated with Thermo Electron (also referred to as
"outside directors") receive an annual retainer of $2,000 and a fee of $1,000
per day for attending regular meetings of the board of directors and $500 per
day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees
of the board of directors. Payment of outside directors' fees is made
quarterly. Mr. Kirshner, Mr. Keiser and Mr. Weinstein are all employees of
Thermo Electron and do not receive any cash compensation from the Corporation
for their services as directors. Directors are also reimbursed for out-of-
pocket expenses incurred in attending meetings.
Deferred Compensation Plan for Directors
Under the Deferred Compensation Plan for directors (the "Deferred
Compensation Plan"), a director has the right to defer receipt of his cash
fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change in control or proposed change
in control of the Corporation that is not approved by the board of directors,
deferred amounts become payable immediately. Either of the following is deemed
to be a change of control: (a) the acquisition, without the prior approval of
the board of directors, directly or indirectly, by any person of 50% or more
of the outstanding common stock or the outstanding common stock of ThermoTrex
or 25% or more of the outstanding common stock of Thermo Electron; or (b) the
failure of the persons serving on the board of directors immediately prior to
any contested election of directors or any exchange
3
<PAGE>
offer or tender offer for the Common Stock or the common stock of ThermoTrex
or Thermo Electron to constitute a majority of the board of directors at any
time within two years following any such event. Amounts deferred pursuant to
the Deferred Compensation Plan are valued at the end of each quarter as units
of common stock. When payable, amounts deferred may be disbursed solely in
shares of Common Stock accumulated under the Deferred Compensation Plan. A
total of 25,000 shares of Common Stock have been reserved for issuance under
the Deferred Compensation Plan. As of November 28, 1998, deferred units equal
to 2146.28 shares of Common Stock were accumulated under the Deferred
Compensation Plan.
Directors Stock Option Plan
The Corporation has adopted a directors stock option plan (the "Directors
Plan") providing for the grant of stock options to purchase shares of Common
Stock to outside directors as additional compensation for their service as
directors. The plan provides for the grant of stock options upon a director's
initial appointment and, beginning in 2000, awards options to purchase 1,000
shares annually to directors.
Under the Plan, each eligible director and each new outside director
initially joining the board of directors in 1996 was granted an option to
purchase 40,000 shares of Common Stock upon the later of the adoption of the
plan or the director's appointment or election. The size of the award to new
directors appointed to the board of directors after 1996 is reduced by 10,000
shares in each subsequent year. Directors initially joining the board of
directors after 1999 would not receive an option grant upon their appointment
or election to the board of directors, but would be eligible to participate in
the annual option awards described below. Options evidencing initial grants to
directors are presently exercisable; however, the shares acquired upon
exercise are subject to restrictions on transfer and the right of the
Corporation to repurchase such shares at the exercise price in the event the
director ceases to serve as a director of the Corporation or another Thermo
Electron company. In such event, the restrictions and repurchase rights shall
lapse or be deemed to have lapsed in annual installments of 10,000 shares per
year, starting with the first anniversary of the date of grant, provided the
director has continuously served as a director of the Corporation, Thermo
Electron or any subsidiary of Thermo Electron since the grant date. These
options expire on the fifth anniversary of the grant date, unless the director
dies, ceases to be an eligible director or otherwise ceases to serve as a
director of the Corporation, Thermo Electron or any subsidiary of Thermo
Electron prior to that date.
Commencing in 2000, eligible directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock, provided the Common Stock is
then publicly traded. The annual grant would be made at the close of business
on the date of each Annual Meeting of the Stockholders of the Corporation to
each outside director then holding office, commencing with the annual meeting
to be held in 2000. Options evidencing annual grants may be exercised at any
time from and after the six-month anniversary of the date of grant and prior
to the expiration of the option on the third anniversary of the date of grant.
Shares acquired upon exercise of the options would be subject to repurchase by
the Corporation at the exercise price if the recipient ceased to serve as a
director of the Corporation or any other Thermo Electron company prior to the
first anniversary of the date of grant for any reason other than death.
The exercise price for options granted under the Plan is the average of the
closing prices of the Common Stock as reported on the American Stock Exchange
(or other principal exchange on which the Common Stock is then traded) for the
five trading days immediately preceding and including the date of grant, or,
if the shares are not then traded, at the last price paid per share by third
parties in an arms-length transaction prior to the option grant. As of
November 28, 1998, options to purchase 120,000 shares of Common Stock had been
granted and were outstanding under the Director's Plan, no options had lapsed,
no options had been exercised, and options to purchase 80,000 shares of Common
Stock were reserved and available for grant.
Stock Ownership Policies for Directors
During fiscal 1996, the human resources committee of the board of directors
(the "Committee") established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000
4
<PAGE>
shares of Common Stock. Directors are requested to achieve this ownership
level within three years of their appointment. Directors who are also
executive officers of the Corporation are required to comply with a separate
stock holding policy established by the Committee in fiscal 1996, which is
described in the Committee Report on Executive Compensation--Stock Ownership
Policies.
In addition, the Committee adopted a policy requiring directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation--Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron and ThermoTrex, as of November 28,
1998, with respect to (i) each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director and nominee for director, (iii) each executive officer named in the
summary compensation table under the heading "Executive Compensation" and (iv)
all directors and current executive officers as a group.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock beneficially owned by Thermo Electron.
<TABLE>
<CAPTION>
Trex Medical ThermoTrex Thermo Electron
Name(1) Corporation (2) Corporation (3) Corporation (4)
- ------- --------------- --------------- ---------------
<S> <C> <C> <C>
Thermo Electron Corporation
(5)........................... 24,214,930 N/A N/A
John M. Brenna................. 51,500 0 10,000
Elias P. Gyftopoulos........... 41,000 6,000 71,704
John T. Keiser................. 20,000 0 292,508
Hal Kirshner (6)............... 276,750 83,321 42,048
James W. May, Jr. ............. 41,002 0 0
Hutham S. Olayan............... 46,173 6,000 28,262
Firooz Rufeh................... 40,000 52,645 88,185
Gary S. Weinstein.............. 315,000 110,000 210,612
All directors and current
executive officers as a group
(11 persons) ................. 1,244,425 271,882 1,177,444
</TABLE>
- --------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
of the Corporation and of the common stock of Thermo Electron and
ThermoTrex beneficially owned consist of shares owned by the indicated
person or by that person for the benefit of minor children, and all share
ownership includes sole voting and investment power.
(2) Shares of the Common Stock beneficially owned by each director and
executive officer and by all directors and current executive officers as a
group exclude 24,214,930 shares beneficially owned by Thermo Electron.
Shares of the Common Stock beneficially owned by Mr. Brenna, Dr.
Gyftopoulos, Mr. Keiser, Mr. Kirshner, Dr. May, Ms. Olayan, Mr. Rufeh, Mr.
Weinstein and all directors and current executive officers as a group
include 50,000, 40,000, 20,000, 158,250, 40,000, 40,000, 40,000, 300,000
and 1,098,250 shares, respectively, that such person or group has the
right to acquire within 60 days of November 28, 1998, through the exercise
of stock options. Shares beneficially owned by Ms. Olayan and Dr. May
include 1,173 and 972 full shares, respectively, that had been allocated
through November 28, 1998, to Ms. Olayan's and Dr. May's accounts
maintained under the Corporation's Deferred Compensation Plan for
Directors. Shares beneficially owned by Ms. Olayan do not include 350,000
shares owned by Crescent International Holdings Ltd. and 15,000 shares
owned by Crescent Growth Fund Ltd., both members of the Olayan Group.
Crescent
5
<PAGE>
International Holdings Ltd. and Crescent Growth Fund Ltd. are indirectly
controlled by Suliman S. Olayan, Ms. Olayan's father. Ms. Olayan disclaims
beneficial ownership of the shares owned by Crescent International Holdings
Ltd. and Crescent Growth Fund Ltd. As of November 28, 1998, no director or
current executive officer beneficially owned more than 1% of the Common
Stock outstanding as of November 28, 1998. All directors and current
executive officers as a group beneficially owned 3.67% of the Common Stock
outstanding as of such date.
(3) Shares of the common stock of ThermoTrex beneficially owned by Dr.
Gyftopoulos, Mr. Kirshner, Ms. Olayan, Mr. Rufeh, Mr. Weinstein and all
directors and current executive officers as a group include 6,000, 73,000,
6,000, 30,000, 100,000 and 225,000 shares, respectively, that such person
or group has the right to acquire within 60 days of November 28, 1998,
through the exercise of stock options. As of November 28, 1998, no
director or current executive officer beneficially owned more than 1% of
the common stock outstanding as of November 28, 1998; all directors and
current executive officers as a group beneficially owned 1.45% of the
common stock outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Brenna, Dr. Gyftopoulos, Mr. Keiser, Mr. Kirshner, Ms. Olayan, Mr. Rufeh,
Mr. Weinstein and all directors and current executive officers as a group
include 10,000, 9,125, 251,622, 39,550, 9,125, 73,123, 210,275, and
975,592 shares, respectively, that such person or group has the right to
acquire within 60 days of November 28, 1998, through the exercise of stock
options. Shares beneficially owned by all directors and current executive
officers as a group include 2,497 full shares allocated to their
respective accounts maintained pursuant to Thermo Electron's employee
stock ownership plan, of which the trustees, who have investment power
over its assets, were, as of November 28, 1998, executive officers of
Thermo Electron. Shares beneficially owned by Ms. Olayan and all directors
and current executive officers as a group include 16,887 full shares,
allocated through November 28, 1998, to Ms. Olayan's account maintained
pursuant to Thermo Electron's deferred compensation plan for directors.
Shares beneficially owned by Ms. Olayan do not include 6,050,000 shares
owned by Crescent Holding GmbH and 20,000 shares owned by Crescent Growth
Fund Ltd., both members of the Olayan Group. Crescent Holding GmbH and
Crescent Growth Fund Ltd. are indirectly controlled by Suliman S. Olayan,
Ms. Olayan's father. Ms. Olayan disclaims beneficial ownership of the
shares owned by Crescent Holding GmbH and Crescent Growth Fund Ltd. As of
November 28, 1998, no director or current executive officer beneficially
owned more than 1% of the outstanding Thermo Electron Common Stock; all
directors and current executive officers as a group beneficially owned
less than 1% of the Thermo Electron common stock outstanding as of
November 28, 1998.
(5) Thermo Electron beneficially owned 72.24% of the Common Stock outstanding
as of November 28, 1998, 70.28% of which is owned through ThermoTrex,
which is a majority-owned subsidiary of Thermo Electron. Shares
beneficially owned by Thermo Electron include 678,541 shares issuable upon
conversion of a 4.2% convertible debenture due in 2000. Thermo Electron's
address is 81 Wyman Street, Waltham, Massachusetts 02454-9046. As of
November 28, 1998, Thermo Electron had the power to elect all of the
members of the Corporation's board of directors.
(6) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998. He will continue
to serve as a director and consultant to the Corporation. See Executive
Compensation--Severance Agreement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to
such persons were complied with during fiscal 1998, except in the following
instances. Mr. Kirshner filed a Form 4 late, reporting two sales of shares of
Common Stock. Thermo Electron filed seven Forms 4 late, reporting a total of
28 transactions. including three open market purchases of shares of Common
Stock and 25 transactions associated with the grant, exercise and lapse of
options to purchase Common Stock granted to employees under its stock option
program.
6
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's chief
executive officer and four other most highly compensated executive officers
(the "named executive officers") for the last three fiscal years. The
Corporation has a fiscal year that is the 52- or 53- week period ending on the
Saturday nearest September 30.
The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Corporation's affairs
is provided to the Corporation under the Corporate Services Agreement between
the Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation (1) Long Term Compensation
------------------ -----------------------
Securities Underlying
Name and Principal Fiscal Bonus Options (No. of Shares All Other
Position Year Salary (2) and Company) (3) Compensation (4)
- ------------------ ------ --------- -------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hal Kirshner (7)........ 1998 $ 218,750 $100,000 8,250 (TXM) $ 5,625
Former Chief Executive
Officer 7,600 (TMO)
and President 2,000 (MKA)
2,000 (ONX)
20,000 (RGI)
2,000 (TDX)
1,000 (TISI)
30,000 (TLZ)
2,000 (TRIL)
1,500 (VIZ)
2,000 (TRCC)
1997 $ 197,500 $200,000 300 (TMO) $ 5,344
1996 $ 192,500 $200,000 150,000 (TXM) $ 9,958 (5)
150 (TMO)
2,000 (TBA)
2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
John M. Brenna (6)...... 1998 $ 134,875 n/a (2) -- -- $ 1,654
Vice President 1997 $ 128,750 $ 63,000 30,000 (TXM) --
10,000 (TMO) --
</TABLE>
- --------
(1) Annual compensation for executive officers generally is reviewed and
determined on a calendar year basis, even though the Corporation's fiscal
year ends in September. The salary data presented here has been adjusted
to reflect salary paid during the Corporation's fiscal year.
(2) The bonus amount represents the bonus paid for performance during the
calendar year in which the Corporation's fiscal year-end occurred. As of
the date hereof, bonuses have not yet been determined for calendar 1998.
The Committee expects to determine bonuses in March 1999 when audited
financial statements of the Corporation's parent company will be
available.
(3) In addition to receiving options to purchase Common Stock (designated in
the table as "TXM"), the named executive officers of the Corporation were
granted options to purchase shares of the common stock of Thermo Electron
and certain of its other subsidiaries as part of Thermo Electron's stock
option program. Options have been granted during the period covered by the
table to the named executive officers in the following Thermo Electron
companies: Thermo Electron (designated in the table as TMO), Metrika
Systems Corporation (designated in the table as MKA), ONIX Systems Inc.
(designated in the table as ONX), The Randers Killam Group Inc.
(designated in the table as RGI), Thermedics Detection Inc. (designated in
the
7
<PAGE>
table as TDX), Thermo BioAnalysis Corporation (designated in the table as
TBA), Thermo Fibergen Inc. (designated in the table as TFG), Thermo
Information Solutions Inc. (designated in the table as TISI), ThermoLase
Corporation (designated in the table as TLZ), ThermoLyte Corporation
(designated in the table as TLT), Thermo Optek Corporation (designated in
the table as TOC), ThermoQuest Corporation (designated in the table as
TMQ), Thermo Sentron Inc. (designated in the table as TSR), Thermo Trilogy
Corporation (designated in the table as TRIL), Thermo Vision Corporation
(designated in the table as VIZ) and Trex Communications Corporation
(designated in the table as TRCC).
(4) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) plan.
(5) In addition to a $5,344 matching contribution referred to in footnote (4),
this amount includes $4,614, representing the then market value of 115
shares of Thermo Electron Common Stock received by Mr. Kirshner in May
1996 at Thermo Electron's Annual Management Conference in recognition of
his managerial achievements.
(6) Mr. Brenna was appointed a vice president of the Corporation in December
1996.
(7) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998. He will continue
to serve as a director and consultant to the Corporation. See Executive
Compensation--Severance Agreement.
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options by the Corporation and other Thermo Electron companies made
during fiscal 1998 to the Corporation's chief executive officer and the other
named executive officers in their capacities as executive officers of the
Corporation. It has not been the Corporation's policy in the past to grant
stock appreciation rights, and no such rights were granted during fiscal 1998.
Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Price Appreciation for
Number of Securities Options Granted Option Term (2)
Underlying Options to Employees Exercise Price Expiration ----------------------
Name Granted (1) in Fiscal Year Per Share Date 5% 10%
- ---- --------------------- --------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Hal Kirshner(4)......... 8,250 (TXM) 1.93% $ 14.20 12/12/04 $ 47,685 $ 111,128
400 (TMO) 0.02% (3) $ 34.50 06/02/03 $ 3,812 $ 8,424
7,200 (TMO) 0.36% (3) $ 16.20 09/23/03 $ 32,256 $ 71,208
2,000 (MKA) 0.88% (3) $ 14.23 01/21/05 $ 11,580 $ 27,000
2,000 (ONX) 0.23% (3) $ 14.25 01/21/05 $ 11,600 $ 27,040
20,000 (RGI) 0.23% (3) $ 0.80 01/21/05 $ 6,600 $ 15,200
2,000 (TDX) 0.21% (3) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000 (TISI) 1.62% (3) $ 10.00 01/21/05 $ 4,070 $ 9,490
30,000 (TLZ) 2.87% (3) $ 7.69 03/05/03 $ 63,600 $ 140,700
2,000 (TRIL) 1.43% (3) $ 8.25 01/21/05 $ 6,720 $ 15,660
1,500 (VIZ) 0.35% (3) $ 7.25 01/21/05 $ 4,425 $ 10,320
2,000 (TRCC) 0.16% (3) $ 4.00 01/21/05 $ 3,260 $ 7,580
John M. Brenna.......... -- -- -- -- -- -- --
</TABLE>
- --------
(1) As part of Thermo Electron's stock option program, options have been
granted during fiscal 1998 to the named executive officers to purchase the
common stock of the Corporation (TXM), Thermo Electron (TMO), Metrika
Systems Corporation (MKA), ONIX Systems Inc. (ONX), The Randers Group
Incorporated (RGI), Thermedics Detection Inc. (TDX), Thermo Information
Solutions Inc. (TISI), ThermoLase Corporation (TLZ), Thermo Trilogy
Corporation (TRIL), Thermo Vision Corporation (VIZ) and Trex
Communications Corporation (TRCC). All of the options granted during the
fiscal year are immediately exercisable as of the end of the fiscal year
except for Thermo Information Solutions Inc., Thermo Trilogy Corporation
and Trex Communications Corporation, which are not exercisable until the
earlier of (i) 90 days after the effective date of the registration of the
Company's common stock under
8
<PAGE>
Section 12 of the Securities and Exchange Act of 1934 and (ii) nine years
after the grant date. The shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if the optionee
ceases to be employed by the Corporation or another Thermo Electron company.
For publicly traded companies, the repurchase rights generally lapse ratably
over a one- to five-year period, depending on the option term, which may
vary from five to seven years, provided that the optionee continues to be
employed by the Corporation or another Thermo Electron Company. For
companies that are not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. The granting
corporation may exercise its repurchase rights within six months after the
termination of the optionee's employment. The granting corporation may
permit the holders of such options to exercise options and to satisfy tax
withholding obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock of the
granting corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and, accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
(4) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998. He will continue to
serve as a director and consultant to the Corporation. See Executive
Compensation--Severance Agreement.
Stock Options Exercised During Fiscal 1998 and Fiscal Year-End Values
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options to purchase shares
of Thermo Electron companies held at the end of fiscal 1998 by the
Corporation's chief executive officer and the other named executive officers.
No stock appreciation rights were exercised or were outstanding during fiscal
1998.
Aggregated Option Exercises In Fiscal 1998 and Fiscal 1998 Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Unexercised
Shares Options at Fiscal Value of
Acquired Value Year-End Unexercised
on Realiized (Exercisable/ In- the- Money
Name Company Exercise (1) Unexercisable) (2) Options
- ---- ------- -------- ---------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hal Kirshner(5)......... Trex Medical -- -- 158,250 /0 $ 0/--
Thermo Electron 84,375 $2,366,550 39,550 /0(3) $ 0/--
Metrika Systems -- -- 2,000 /0 $ 0/--
ONIX Systems -- -- 2,000 /0 $ 0/--
Randers Killam Group -- -- 20,000 /0 $ 0/--
Thermedics Detection -- -- 2,000 /0 $ 0/--
Thermo BioAnalysis -- -- 2,000 /0 $ 1,250/--
Thermo Fibergen -- -- 2,000 /0 $ 0/--
Thermo Information Solutions -- -- 0 /1,000 --/0(4)
ThermoLase -- -- 66,400 /0 $ 131,950/--
ThermoLyte -- -- 0 /2,000 --/0(4)
Thermo Optek -- -- 6,000 /0 $ 0/--
ThermoQuest -- -- 6,000 /0 $ 0/--
Thermo Sentron -- -- 2,000 /0 $ 0/--
ThermoTrex -- -- 73,000 /0 $ 114,393/--
Thermo Trilogy -- -- 0 /2,000 --/0(4)
Thermo Vision -- -- 1,500 /0 $ 0/--
Trex Communications -- -- 0 /2,000 --/0(4)
John Brenna............. Trex Medical -- -- 50,000 /0 $ 0/--
Thermo Electron -- -- 10,000 /0 $ 0/--
</TABLE>
9
<PAGE>
- --------
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year are
immediately exercisable as of fiscal year-end, except options to purchase
shares of ThermoLyte Corporation, Thermo Information Solutions Inc.,
Thermo Trilogy Corporation and Trex Communications Corporation, which are
not exercisable until the earlier of (i) 90 days after the effective date
of the registration of that company's common stock under Section 12 of the
Securities Exchange Act of 1934 and (ii) nine years after the grant date.
In all cases, the shares acquired upon exercise of the options reported in
the table are subject to repurchase by the granting corporation at the
exercise price if the optionee ceases to be employed by such corporation
or another Thermo Electron company. The granting corporation may exercise
its repurchase rights within six months after the termination of the
optionee's employment. As to options to purchase 150,000 shares of the
Corporation granted to Mr. Kirshner, the repurchase rights are deemed to
lapse 10% on each of the first two anniversaries of the grant date and 20%
per year commencing on the seventh anniversary of the grant date. For
other publicly traded companies, the repurchase rights generally lapse
ratably over a five- to ten-year period, depending on the option term,
which may vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo Electron
company. For companies that are not publicly traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant date.
Certain options granted as part of Thermo Electron's stock option program
have three year terms, and the repurchase rights lapse in their entirety
on the second anniversary of the grant date.
(3) Options to purchase 22,500 shares of the common stock of Thermo Electron
granted to Mr. Kirshner are subject to the same terms described in
footnote (2), except that the repurchase rights of the granting
corporation generally do not lapse until the tenth anniversary of the
grant date. In the event of the employee's death or involuntary
termination prior to the tenth anniversary of the grant date, the
repurchase rights of the granting corporation shall be deemed to have
lapsed ratably over a five-year period commencing with the fifth
anniversary of the grant date.
(4) No public market existed for the shares as of October 31, 1998.
Accordingly, no value in excess of the exercise price has been attributed
to these options.
(5) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998. He will continue
to serve as a director and consultant to the Corporation.
Severance Agreements
Mr. Hal Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998 (the "Employment
Termination Date"). In connection with his resignation, the Corporation
entered into an agreement with Mr. Kirshner providing that in addition to
receiving his regular salary through the Employment Termination Date, Mr.
Kirshner will be paid a bonus for the 1998 calendar year in an amount equal to
$100,000. The agreement also provides for an ongoing consulting relationship
between Mr. Kirshner and the Corporation for the two year period from January
1, 1999 to December 31, 2000. For his consulting services, Mr. Kirshner will
be paid a fee at a rate of $225,000 per year, payable monthly in arrears. Mr.
Kirshner will continue to serve as a director of the Corporation.
Executive Employment Agreements
Mr. William J. Webb joined the Corporation as president and chief executive
officer in January 1999. In connection therewith, the Corporation entered into
an agreement with Mr. Webb providing for severance pay equal to one year
salary and bonus (with a minimum payment of $450,000), reimbursement of
relocation expenses (including broker's fee and assistance with down payment
on new residence), an interest free loan to purchase shares of Common Stock of
the Corporation in compliance with the Corporation's stock holding policy and
stock holding assistance plan. See Committee Report on Executive
Compensation--Stock Ownership Policies, and enhanced life insurance coverage.
10
<PAGE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines
established by the human resources committee of the board of directors of its
parent corporation, Thermo Electron. The executive compensation program
presently consists of annual base salary ("salary"), short-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of stock
options.
The Committee believes that the total compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the
mid-point of competitive salaries derived from market surveys and that short-
term and long-term incentive compensation should reflect the performance of
the Corporation and the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total
compensation for its executives is assessed by comparing it to market data
provided by its compensation consultant and by participating in annual
executive compensation surveys, primarily "Project 777", an executive
compensation survey prepared by Management Compensation Services, a division
of Hewitt Associates. The majority of firms represented in the Project 777
survey are included in the Standard & Poor's Index, but do not necessarily
correspond to the companies included in the Corporation's peer group index,
the Dow Jones Total Return Index for the Medical Supplies Industry Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by
comparing it to total compensation of other executives within the Thermo
Electron organization with comparable levels of responsibility for comparably
sized business units.
The Committee has changed its fiscal year to end on the Saturday nearest
September 30. Because the compensation practices of the Corporation are guided
by the policies of its parent corporation, Thermo Electron, the Committee
plans to continue to conduct cash compensation reviews on a calendar-year
basis in order to coincide with the compensation reviews conducted by the
human resources committee of the board of directors of Thermo Electron. Thermo
Electron operates on a fiscal year that ends on the Saturday nearest December
31.
The process for determining each of the elements of total compensation for
the Corporation's officers is outlined below.
Base Salary
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the Corporation's other named executive officers will
approach the mid-point of competitive data. The salary increases in calendar
1998 for the named executive officers generally reflect this practice of
gradual increases and moderation.
Cash Bonus
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having comparable sales and
complexity to the Corporation. The actual bonus awarded to an executive
officer may range from zero to three times the median potential bonus. The
value within the range (the bonus multiplier) is determined at the end of each
year by the Committee in its discretion. The Committee exercises its
discretion by evaluating each executive's performance using a methodology
developed by its parent corporation, Thermo
11
<PAGE>
Electron, and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns which are designed to
measure profitability and contributions to shareholder value, and are measures
of corporate and divisional performance that are evaluated using graphs
developed by Thermo Electron intended to reward performance that is perceived
as above average and to penalize performance that is perceived as below
average. Generally, the measures of operating returns used in the Committee's
determinations include return on net assets, growth in income, and return on
sales, and the Committee's determinations also included a subjective
evaluation of the contributions of each executive that are not captured by
operating measures but are considered important to the creation of long-term
value for the Stockholders. These measures of achievements are not financial
targets that are met, not met or exceeded. The relative weighting of the
operating measures and subjective evaluation varies depending on the
executive's role and responsibilities within the organization.
Stock Option Program
The primary goal of the Corporation is to excel in the creation of long-term
value for the Stockholders. The principal incentive tool used to achieve this
goal is the periodic award to key employees of options to purchase common
stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the
Stockholders. The emphasis on stock options also results in management's
compensation being closely linked to stock performance. In addition, because
they are subject to vesting periods of varying durations and to forfeiture if
the employee leaves the Corporation prematurely, stock options are an
incentive for key employees to remain with the Corporation long-term. The
Committee believes stock option awards in its parent companies, ThermoTrex and
Thermo Electron, and the other majority-owned subsidiaries of ThermoTrex and
Thermo Electron, are an important tool in providing incentives for performance
within the entire organization.
In determining awards, the Committee considers the average annual value of
all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option pricing model.)
Awards are reviewed annually in conjunction with the annual review of cash
compensation, and additional awards are made periodically as deemed
appropriate. The Committee considers total compensation of executives, actual
and anticipated contributions of each executive (which includes a subjective
assessment by the Committee of the value of the executive's future potential
within the organization), as well as the value of previously awarded options
as described above, in determining option awards.
Stock Ownership Policies
The Committee established a stock holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple was one times his base salary and reference
bonus for the calendar year. For all other officers, the multiple was one
times the officer's base salary. The Committee deemed it appropriate to permit
officers to achieve these ownership levels over a three-year period. The
policy was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee also
adopted a stock holding assistance plan under which the Corporation is
authorized to make interest-free loans to officers to enable them to purchase
shares of the Common Stock in the open market. The loans are required to be
repaid upon the earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise authorized by the Committee. No such loans are
currently outstanding under the plan.
The Committee also adopted a policy requiring its executive officers to hold
a certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options granted by the Corporation. Under
12
<PAGE>
this policy, executive officers are required to hold shares of Common Stock
equal to one-half of their net option exercises for a period of five years.
The net option exercise is determined by calculating the number of shares
acquired upon exercise of a stock option, after deducting the number of shares
that could have been traded to exercise the option and the number of shares
that could have been surrendered to satisfy tax withholding obligations
attributable to the exercise of the option.
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives
does not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based." Therefore,
the Committee does not believe any further action is necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine
the Corporation's compensation practices and the effect of Section 162(m).
1998 CEO Compensation
The salary of Mr. Hal Kirshner for fiscal 1998 was established in December
1997 using the same criteria as described above for all officers. Mr. Kirshner
resigned as president and chief executive officer of the Corporation on
December 13, 1998. As part of the severance agreement being negotiated in
connection with his resignation, the Committee will determine a bonus for Mr.
Kirshner for calendar 1998 using the same methodology as for other executive
officers as described above under Cash Bonus. No determination of bonus has
been made to date and the Committee is not expected to take any action until
March 1999, when the audited financial statements of the Corporation's parent
company will be available.
Prior to his resignation, awards to Mr. Kirshner of options to purchase
shares of the Corporation's Common Stock were reviewed annually and granted
periodically by the Committee using criteria similar to those described above
for all officers of the Corporation. Options to purchase 8,250 shares of the
Corporation's Common Stock were awarded to Mr. Kirshner in fiscal 1998.
Prior to his resignation, Mr. Kirshner also received awards to purchase
shares of the common stock of Thermo Electron or its other majority-owned
subsidiaries from time to time as part of Thermo Electron's stock option
program due to his position as a chief executive officer of a majority-owned
subsidiary of Thermo Electron. Mr. Kirshner was awarded options to purchase
2,000 shares of the common stock of Metrika Systems Corporation, 2,000 shares
of the common stock of ONIX Systems Inc., 20,000 shares of the common stock of
The Randers Killam Group Inc., 2,000 shares of the common stock of Thermedics
Detection Inc., 1,000 of the common stock of Thermo Information Solutions
Inc., 2,000 shares of the common stock of Thermo Trilogy Corporation, 1,500
shares of the common stock of Thermo Vision Corporation and 2,000 shares of
the common stock of Trex Communications Corporation under this program in
fiscal 1998. The award to purchase 400 shares of the common stock of Thermo
Electron granted to Mr. Kirshner in fiscal 1998 was made by the Thermo
Electron human resources committee under a program which awards options to
certain eligible employees annually based on the number of shares of the
common stock of Thermo Electron held by the employee, as an incentive to buy
and hold Thermo Electron shares. The stock option awards to Mr. Kirshner in
fiscal 1998 with respect to 30,000 shares of ThermoLase Corporation were
determined by the human resources committee of the granting company using an
analysis similar to that used by the Committee in awarding options to purchase
Common Stock, as described above under Stock Option Program.
Dr. Elias P. Gyftopoulos (Chairman)
Dr. James W. May Jr.
Ms. Hutham S. Olayan
13
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation include
in this proxy statement a line-graph presentation comparing cumulative, five-
year shareholder returns for the Corporation's Common Stock with a broad-based
market index and either a nationally recognized industry standard or an index
of peer companies selected by the Corporation. The Corporation's Common Stock
has been publicly traded only since June 26, 1996 and, as a result, the
following graph commences as of such date. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for the Medical Supplies Industry Group.
Comparison of Total Return Among Trex Medical Corporation,
the American Stock Exchange Market Value Index and the
Dow Jones Total Return Index for the Medical Supplies Industry Group
from June 26, 1996 to October 2, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
06/26/96 09/27/96 09/26/97 10/02/98
---------------------------------------------------------
<S> <C> <C> <C> <C>
TXM 100 145 107 75
---------------------------------------------------------
AMEX 100 99 120 106
---------------------------------------------------------
DJ MED 100 110 135 165
---------------------------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (TXM), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Medical Supplies Industry Group (DJ MDS) assumes the reinvestment of
dividends, although dividends have not been declared on the Corporation's
Common Stock. The American Stock Exchange Market Value Index tracks the
aggregate performance of equity securities of companies listed on the American
Stock Exchange. The Corporation's Common Stock is traded on the American Stock
Exchange under the ticker symbol "TXM."
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held majority-owned
subsidiaries, including the Corporation which was created by ThermoTrex. From
time to time, Thermo Electron and its subsidiaries will create other majority-
owned subsidiaries as part of its spinout strategy. (The Corporation and the
other Thermo Electron subsidiaries are referred to hereinafter as the "Thermo
Subsidiaries." )
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and
14
<PAGE>
each of the Thermo Subsidiaries, including the Corporation, have adopted the
Thermo Electron Corporate Charter (the "Charter") to define the relationships
and delineate the nature of such cooperation among themselves. The purpose of
the Charter is to ensure that (1) all of the companies and their shareholders
are treated consistently and fairly, (2) the scope and nature of the
cooperation among the companies, and each company's responsibilities, are
adequately defined, (3) each company has access to the combined resources and
financial, managerial and technological strengths of the others, and (4)
Thermo Electron and the Thermo Subsidiaries, in the aggregate, are able to
obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members,
coordinating the access of Thermo Electron and the Thermo Subsidiaries (the
"Thermo Group") to external financing sources, ensuring compliance with
external financial covenants and internal financial policies, assisting in the
formulation of long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also provide guarantees
of debt or other obligations of the Thermo Subsidiaries or may obtain external
financing at the parent level for the benefit of the Thermo Subsidiaries. In
certain instances, the Thermo Subsidiaries may provide credit support to, or
on behalf of, the consolidated entity or may obtain financing directly from
external financing sources. Under the Charter, Thermo Electron is responsible
for determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo Group, and for
apportioning such constraints within the Thermo Group. In addition, Thermo
Electron establishes certain internal policies and procedures applicable to
members of the Thermo Group. The cost of the services provided by Thermo
Electron to the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the Thermo
Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Corporation, may withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate
a subsidiary's participation in the Charter in the event the subsidiary ceases
to be controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A withdrawal from
the Charter automatically terminates the corporate services agreement and tax
allocation agreement (if any) in effect between the withdrawing company and
Thermo Electron. The withdrawal from participation does not terminate
outstanding commitments to third parties made by the withdrawing company, or
by Thermo Electron or other members of the Thermo Group, prior to the
withdrawal. In addition, a withdrawing company is required to continue to
comply with all policies and procedures applicable to the Thermo Group and to
provide certain administrative functions mandated by Thermo Electron so long
as the withdrawing company is controlled by or affiliated with Thermo
Electron.
Corporate Services Agreement
As provided in the Charter, Thermo Electron and the Corporation have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Corporation.
The Corporation was assessed an annual fee equal to 1% of the Corporation's
total revenues for these services in calendar 1997 and 0.8% of the
Corporation's total revenues in calendar 1998. The annual fee will be 0.8% of
the Corporation's total revenues in calendar 1999. The fee may be changed by
mutual agreement of the Corporation and Thermo Electron. During fiscal 1998,
Thermo Electron assessed the Corporation $1,112,000 in fees under the Services
Agreement. Management believes that the charges under the Services Agreement
are reasonable and that such fees are representative of the expenses the
Corporation would have incurred on a stand-alone basis. For additional items
such as employee benefit plans, insurance coverage
15
<PAGE>
and other identifiable costs, Thermo Electron charges the Corporation based
upon costs attributable to the Corporation. The Services Agreement
automatically renews for successive one-year terms, unless canceled by the
Corporation upon 30 days' prior notice. In addition, the Services Agreement
terminates automatically in the event the Corporation ceases to be a member of
the Thermo Group or ceases to be a participant in the Charter. In the event of
a termination of the Services Agreement, the Corporation will be required to
pay a termination fee equal to the fee that was paid by the Corporation for
services under the Services Agreement for the nine-month period prior to
termination. Following termination, Thermo Electron may provide certain
administrative services on an as-requested basis by the Corporation or as
required in order to meet the Corporation's obligations under Thermo
Electron's policies and procedures. Thermo Electron will charge the
Corporation a fee equal to the market rate for comparable services if such
services are provided to the Corporation following termination.
Miscellaneous
From time to time, the Corporation may transact business with other
companies in the Thermo Group. In fiscal 1998, such transactions included the
following.
In October 1995, the Corporation and ThermoTrex entered into a license
agreement under which the Corporation undertook to fund approximately
$6,000,000 of ThermoTrex's research and development efforts related to direct-
detection digital imaging technology in certain medical imaging fields.
ThermoTrex has granted the Corporation a license to use the developed
technology in the fields of mammography and general radiography. As of October
3, 1998, the Corporation had recorded expenses of approximately $6,000,000 to
ThermoTrex under this agreement. As a result of a reevaluation of limited
resources, the Corporation has elected to discontinue funding these efforts.
The Corporation has an arrangement with the Tecomet division of Thermo
Electron for the manufacture of the Corporation's proprietary HTC grid. Under
this arrangement Tecomet manufactures the grid for the Corporation pursuant to
written purchase orders. The Corporation owns the intellectual property rights
to the grid. During fiscal 1998, the Corporation purchased grids for an
aggregate purchase price of $486,000 under this arrangement. During fiscal
1998, the Corporation purchased additional grids from Tecomet for $311,000,
under other arrangements.
Under an arrangement with ThermoLase Corporation, a majority-owned
subsidiary of ThermoTrex, the Corporation manufactures the lasers used in
ThermoLase Corporation's hair-removal process. The Corporation manufactures
these lasers for ThermoLase pursuant to written purchase orders. During fiscal
1998, the Corporation sold laser systems to ThermoLase for an aggregate
purchase price of $2,902,000 under this arrangement.
Under an arrangement with Thermedics Detection Inc., a majority-owned
subsidiary of Thermedics Inc., a majority-owned subsidiary of Thermo Electron,
the Corporation manufactures an X-ray source that is used as a component in a
fill-measuring device produced by Thermedics Detection. The Corporation
manufactures these X-ray sources for Thermedics Detection pursuant to written
purchase orders. During fiscal 1998, Thermedics Detection purchased X-ray
source units from the Corporation for an aggregate purchase price of $406,000
under this arrangement.
As of October 3, 1998, the Corporation owed ThermoTrex $8,000,000 principal
amount pursuant to a 4.2% subordinated convertible note, due September 2000,
convertible into shares of the Corporation's common stock at $11.79 per share.
As of October 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $5,110,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services for accrued income taxes and for miscellaneous items, excluding the
debenture described above, net of amounts owed to the Corporation by Thermo
Electron and its other subsidiaries for products and services and
miscellaneous items. The largest amount of such net indebtedness owed by the
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<PAGE>
Corporation to Thermo Electron and its other subsidiaries since September 27,
1997 was $2,186,000. These amounts do not bear interest and are expected to be
paid in the normal course of business.
As of October 3, 1998, $34,054,000 of the Corporation's cash equivalents
were invested pursuant to a repurchase agreement with Thermo Electron. Under
this agreement, the Corporation in effect lends excess cash to Thermo
Electron, which Thermo Electron collateralizes with investments principally
consisting of corporate notes, United States government agency securities,
money market funds, commercial paper and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's funds subject to
the repurchase agreement are readily convertible into cash by the Corporation.
The repurchase agreement earns a rate based on the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each quarter.
Stock Holding Assistance Plan
In 1996, the Corporation adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Corporation 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 such employees to purchase the Common Stock in the open
market. No such loans are currently outstanding under the plan.
PROPOSAL 2
PROPOSAL TO INCREASE THE SHARES AVAILABLE FOR ISSUANCE UNDER THE CORPORATION'S
EQUITY INCENTIVE PLAN
The Board of Directors has approved an amendment to the Corporation's equity
incentive plan (the "Equity Incentive Plan") that would increase the number of
shares of Common Stock available for issuance under the Equity Incentive Plan
by 500,000 shares. The increase in shares is being recommended to the
Stockholders for their approval at the Meeting.
The Equity Incentive Plan was first approved by the Stockholders in 1997. As
of November 28, 1998, and before giving effect to the proposed increase,
options to purchase 1,440,113 shares of Common Stock were outstanding under
the Equity Incentive Plan, 72,337 options to purchase shares of Common Stock
had been exercised and options to purchase 397,800 shares had lapsed or been
cancelled. As of November 28, 1998, options to purchase 187,550 shares were
available for future grant under the Equity Incentive Plan.
The Board of Directors believed that the shares available for future grant
under the Equity Incentive Plan were not sufficient to fund the Corporation's
stock-based incentive program and increased the number of shares reserved for
future grant by 500,000 shares in December 1998, subject to Stockholder
approval. It has been the Committee's objective to award net options to
purchase up to 12% of the outstanding Common Stock over a five-year period.
The options outstanding and the shares remaining available for future grant
under the Equity Incentive Plan represent approximately 4.8 % of the
outstanding Common Stock as of October 3, 1998. After giving effect to the
increase, the options outstanding and shares available for future grant would
represent approximately 6.2% of the outstanding Common Stock. The Board of
Directors believes that it is in the Corporation's best interest to be able to
continue to grant stock-based incentives to its key employees, executive
officers and directors.
Summary of the Equity Incentive Plan
The following summary of the terms of the Equity Incentive Plan is qualified
in its entirety by reference to the plan.
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Administration; Eligible Participants
The Equity Incentive Plan is administered by the Board of Directors of the
Corporation (the "Board"). The Board has full power to select, from among the
persons eligible for awards, the individuals to whom awards will be granted,
to make any combination of awards to any participant, and to determine the
specific terms of each award, including terms and conditions relating to
events of merger, consolidation, dissolution and liquidation, change of
control, acceleration of vesting or lapse of restrictions, vesting,
forfeiture, other restrictions, dividends and interest on deferred amounts.
The Board also has the power to waive compliance by participants with the
terms and conditions of awards, to cancel awards with the consent of
participants and to accelerate the vesting or lapse of any restrictions of any
award. The Board does not have the authority under the Equity Incentive Plan
to reprice outstanding option awards or to grant stock appreciation rights.
The Board may delegate any or all of its responsibilities under the Equity
Incentive Plan to a committee appointed by the Board consisting of two or more
"non-employee" directors within the meaning of Rule 16b-3 (or any successor
rule) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Employees and directors of, and consultants to, the Corporation and its
subsidiaries, or other persons who are expected to make significant
contributions to the growth and success of the Corporation and its
subsidiaries, selected by the Board, are eligible to participate in the Equity
Incentive Plan. Approximately 336 persons are eligible to participate in the
existing plan of the Corporation.
Shares Subject to the Incentive Plan; Use of Proceeds
The number of shares of the Common Stock currently reserved for future
issuance under the Equity Incentive Plan, before giving effect to the proposed
increase, is 187,550 shares, and if the increase is approved, the number of
shares reserved for future issuance under the plan would increase to 687,550
shares. The number of shares reserved under the Equity Incentive Plan is
subject to adjustment for stock splits and similar events. Awards and shares
that are forfeited, reacquired by the Corporation, satisfied by a cash payment
by the Corporation or otherwise satisfied without the issuance of Common Stock
are not counted against the maximum number of reserved shares under the plan.
The proceeds received by the Corporation from transactions under the Equity
Incentive Plan will be used for the general purposes of the Corporation.
Shares issued under the Equity Incentive Plan may be authorized but unissued
shares, or shares reacquired by the Corporation and held in its treasury.
Types of Awards; Limitations on Awards
The Equity Incentive Plan permits the Board to grant a variety of stock and
stock-based awards in such form or in such combinations as may be approved by
the Board. Without limiting the foregoing, the types of awards may include
stock options, restricted and unrestricted shares, rights to receive cash or
shares on a deferred basis or based on performance, cash payments sufficient
to offset the federal, state and local ordinary income taxes of participants
resulting from transactions under the Equity Incentive Plan, and loans to
participants in connection with awards. The Board may not, however, grant in
excess of 5% of the outstanding shares of Common Stock (calculated as of the
beginning of a calendar year) to any recipient under any award or combination
of awards granted during a calendar year.
Stock Options
Awards under the Equity Incentive Plan may be in the form of stock options,
which entitle the recipient, on exercise, to purchase shares of Common Stock
at a specified exercise price. Stock options granted under the plan may be
either stock options that qualify as incentive stock options ("incentive stock
options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), or stock options that are not intended to meet
such requirements ("non-statutory options"). The exercise price of each option
is determined by the Board, but may not be less than 85% of the fair market
value per share of Common Stock on the date of grant.
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<PAGE>
The term of each option is fixed by the Board. The Board also determines at
what time each option may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Board. The Board may, in its discretion, provide that upon exercise of any
option, instead of receiving shares free from restrictions under the Equity
Incentive Plan, the option holder will receive shares of restricted stock or
deferred stock awards.
The exercise price of options granted under the Equity Incentive Plan must
be paid in full by check or other instrument acceptable to the Board or, if
the Board so determines, by delivery of shares of Common Stock held by the
option holder for at least six months (unless the Board expressly approves a
shorter period) and that have a fair market value on the exercise date equal
to the exercise price of the option, by delivery of a promissory note from the
option holder to the Corporation payable on terms acceptable to the Board, by
delivery of an unconditional and irrevocable undertaking by a broker to
deliver sufficient funds to the Corporation to pay the exercise price, or some
combination of these methods.
Incentive stock options must meet certain additional requirements in order
to qualify as incentive stock options under the Internal Revenue Code.
Incentive stock options may be granted only to employees of the Corporation
and its subsidiaries. The exercise price of an incentive stock option may not
be less than 100% of the fair market value of the shares on the date of grant.
An incentive stock option may not be granted under the Equity Incentive Plan
after the tenth anniversary of the date the Board adopted the Equity Incentive
Plan and the latest date on which an incentive stock option may be exercised
is ten years from the date of its grant. In addition, the Internal Revenue
Code limits the value of shares subject to incentive stock options that may
become exercisable annually by any option holder in a given year, and requires
a shorter exercise period and a higher minimum exercise price in the case of
Stockholders owning more than ten percent (10%) of the Corporation's Common
Stock.
Restricted Stock and Unrestricted Stock
The Board may also award shares of Common Stock subject to such conditions
and restrictions as it may determine ("restricted stock"). The purchase price
of shares of restricted stock shall be determined by the Board, but may not be
less than the par value of those shares. In addition, the Board may not grant
in excess of 10% of the shares reserved under the Equity Incentive Plan in the
form of restricted stock.
Generally, if a participant who holds shares of restricted stock fails to
satisfy such restrictions or other conditions as may be determined by the
Board (such as continuing employment for a given period) prior to the lapse or
waiver of the restrictions, the Corporation will have the right to require the
forfeiture or repurchase of the shares in exchange for an amount, if any,
determined by the Board as specifically set forth in the instrument evidencing
the award. The Board may at any time waive such restrictions or accelerate the
date or dates on which the restrictions will lapse. Prior to the lapse of
restrictions on shares of restricted stock, the recipient will have all the
rights of a Stockholder with respect to the shares, including voting and
dividend rights, subject only to the conditions and restrictions generally
applicable to restricted stock or specifically set forth in the instrument
evidencing the award.
The Board may also grant shares that are free from any restrictions under
the Equity Incentive Plan ("unrestricted stock"). Unrestricted stock may be
issued in recognition of services or in such other circumstances that the
Board deems to be in the best interests of the Corporation.
Deferred Stock
The Board may also make deferred stock awards under the Equity Incentive
Plan which entitle the recipient to receive shares of Common Stock in the
future. Delivery of Common Stock will take place on such date or dates and on
such conditions as the Board specifies. The Board may at any time accelerate
the date on which delivery of all or any part of the Common Stock will take
place or otherwise waive any restrictions on the award.
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Performance Awards
The Board may also grant performance awards entitling the recipient to
receive shares of Common Stock or cash in such combinations as it may
determine following the achievement of specified performance goals. Payment of
the performance award may be conditioned on achievement of individual or
Corporation performance goals over a fixed or determinable period or on such
other conditions as the Board shall determine.
Loans and Supplemental Grants
The Board may authorize a loan from the Corporation to a participant either
on or after the grant of an award to the participant. Loans, including
extensions, may be for any term specified by the Board, may be either secured
or unsecured, and may be with or without recourse against the participant in
the event of default. Each loan shall be subject to such terms and conditions
and shall bear such rate of interest, if any, as the Board shall determine. In
connection with any award, the Board may, at the time such award is made or at
a later date, provide for and make a cash payment to the participant in an
amount equal to (a) the amount of any federal, state and local income tax on
ordinary income for which the participant will be liable with respect to the
award, plus (b) an additional amount on a grossed-up basis necessary to make
him or her whole after payment of the amount described in (a).
Payment of Purchase Price
Except as otherwise provided in the Equity Incentive Plan, the purchase
price of Common Stock or other rights acquired or granted pursuant to such
plan shall be determined by the Board, provided that the purchase price of
Common Stock shall not be less than its par value. The Board may determine the
method of payment for Common Stock acquired pursuant to the Equity Incentive
Plan and may determine that all or any part of the purchase price has been
satisfied by past service rendered by the recipient of an award. The Board
may, upon the request of a participant, defer the date on which payment under
any award will be made.
Change in Control Provisions
Unless otherwise provided in the agreement evidencing an award, if there is
a "Change in Control" of the Corporation as defined in the Equity Incentive
Plan, any stock options that are not then exercisable and fully vested will
become fully exercisable and vested; the restrictions applicable to restricted
stock awards will lapse and shares issued pursuant to such awards will be free
of restrictions and fully vested; and deferral and other limitations and
conditions that related solely to the passage of time or continued employment
or other affiliation will be waived and removed but other conditions will
continue to apply unless otherwise provided in the instrument evidencing the
awards or by agreement between the participant and the Corporation. Generally,
a "Change of Control" occurs if (1) any person other than Thermo Electron or
ThermoTrex becomes the beneficial owner of 50% or more of the outstanding
Common Stock of the Corporation or the common stock of ThermoTrex, or any
person becomes the beneficial owner of 25% or more of the outstanding common
stock of Thermo Electron, without the prior approval of the Board, or the
board of directors of ThermoTrex or Thermo Electron, as the case may be, (2)
during any two-year period the individuals who constituted the Board or the
board of directors of ThermoTrex or Thermo Electron at the beginning of such
period no longer represent a majority of such board or (3) the Board or the
board of directors of ThermoTrex or Thermo Electron determines that any other
event constitutes an effective change in control of the Corporation.
Nature of Rights as Stockholder Under the Equity Incentive Plan
Except as specifically provided by the Equity Incentive Plan, the receipt of
an award will not give a participant rights as a Stockholder. The participant
will obtain such rights, subject to any limitations imposed by the plan or the
instrument evidencing the award, upon actual receipt of Common Stock.
Adjustments for Stock Dividends, etc.
The Board will make appropriate adjustments to the maximum number of shares
of Common Stock that may be delivered under the Equity Incentive Plan, and
under outstanding awards, to reflect stock dividends, stock
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splits and similar events. The Board may also make appropriate adjustments to
avoid distortions in the operation of the Equity Incentive Plan.
Amendment and Termination
The Equity Incentive Plan shall remain in full force and effect until
terminated by the Board. The Board may at any time or times amend or review
the Equity Incentive Plan or any outstanding award for any purpose which may
at the time be permitted by law, or may at any time terminate the plan as to
any further grants of awards. No amendment of the Equity Incentive Plan or any
outstanding award may adversely affect the rights of a participant as to any
previously granted award without his or her consent. Stockholder approval of
amendments shall be required only as is necessary to satisfy the then-
applicable requirements of Rule 16b-3 (or any successor rule), of stock
exchanges or of any federal tax law or regulation relating to incentive stock
options.
Stock Withholding
In the case of an award under which Common Stock may be delivered, the Board
may permit the participant or other appropriate person to elect to have the
Corporation hold back from the shares to be delivered, or to deliver to the
Corporation, shares of Common Stock having a value sufficient to satisfy any
federal, state and local withholding tax requirements.
Federal Income Tax Consequences
The following is a summary of the principal current federal income tax
consequences of transactions under the Equity Incentive Plan. It does not
describe all federal tax consequences under the Equity Incentive Plan, nor
does it describe state, local or foreign tax consequences.
Incentive Stock Options
No taxable income is realized by the optionee upon the grant or exercise of
an incentive stock option. However, the exercise of an incentive stock option
may result in alternative minimum tax liability for the optionee. If no
disposition of shares issued to an optionee pursuant to the exercise of an
incentive stock option is made by the optionee within the later of two years
from the date of grant or one year after the transfer of such shares to the
optionee, then upon the later sale of such shares, for federal income tax
purposes, any amount realized in excess of the exercise price will be taxed to
the optionee as a long-term capital gain and any loss sustained will be a
long-term capital loss, and no deduction will be allowed to the Corporation.
If the shares of Common Stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of the two- and one-year
holding periods described above, generally the optionee will realize ordinary
income in the year of disposition in an amount equal to the excess (if any) of
the fair market value of the shares at exercise (or, if less, the amount
realized on an arms-length sale of such shares) over the exercise price
thereof, and the Corporation will be entitled to deduct such amount. Any
further gain realized will be taxed as short- or long-term capital gain and
will not result in any deduction by the Corporation. Special rules will apply
where all or a portion of the exercise price of the incentive stock option is
paid by tendering shares of Common Stock.
If any incentive stock option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is treated as a
non-statutory stock option. Generally, an incentive stock option will not be
eligible for the tax treatment described above if it is exercised more than
three months following termination of employment (one year following
termination of employment by reason of permanent and total disability), except
in certain cases where the incentive stock option is exercised after the death
of an optionee.
Non-statutory Options
With respect to non-statutory stock options granted under the Equity
Incentive Plan, no income is realized by the optionee at the time the option
is granted. Generally, at exercise, ordinary income is realized by the
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optionee in an amount equal to the difference between the option price and the
fair market value of the shares on the date of exercise, and the Corporation
receives a tax deduction for the same amount, and at disposition, appreciation
or depreciation after the date of exercise is treated as either short- or
long-term capital gain or loss depending on how long the shares have been
held.
Restricted Stock
A recipient of restricted stock (stock subject to forfeiture provisions)
generally will be subject to tax at ordinary income rates on the fair market
value of the stock at the time the stock is either transferable or is no
longer subject to forfeiture, less any amount paid for such stock. A
restriction only as to the time stock can be resold is not a substantial risk
of forfeiture, and therefore is not considered restricted stock under this
provision of the Equity Incentive Plan. However, a recipient who so elects
under Section 83(b) of the Internal Revenue Code ("Section 83(b)") within 30
days of the date of issuance of the restricted stock will realize ordinary
income on the date of issuance equal to the fair market value of the shares of
restricted stock at that time (measured as if the shares were unrestricted and
could be sold immediately), minus any amount paid for such stock. If the
shares subject to such election are forfeited, the recipient will not be
entitled to any deduction, refund or ordinary loss for tax purposes with
respect to the forfeited shares. Upon sale of the shares after the forfeiture
period has expired, the appreciation or depreciation after the shares become
transferable or free from risk of forfeiture (or, if a Section 83(b) election
was made, since the shares were issued) will be treated as long- or short-term
capital gain or loss. The holding period to determine whether the recipient
has long- or short-term capital gain or loss begins when the forfeiture period
expires (or upon the earlier issuance of the shares, if the recipient elected
immediate recognition of income under Section 83(b)). If restricted stock is
received in connection with another award under the Equity Incentive Plan (for
example, upon exercise of an option), the income and the deduction, if any,
associated with such award may be deferred in accordance with the rules
described above for restricted stock.
Deferred Stock
The recipient of a deferred stock award will generally be subject to tax at
ordinary income rates on the fair market value of the stock on the date that
the stock is distributed to the participant. The capital gain or loss holding
period for such stock will also commence on such date. The Corporation
generally will be entitled to a deduction equal to the amount that is taxable
as ordinary income to the employee. If a right to deferred stock is received
under another award (for example, upon exercise of an option), the income and
deduction, if any, associated with such award may be deferred in accordance
with the rules described above for deferred stock.
Performance Awards
The recipient of a performance award will generally be subject to tax at
ordinary income rates on any cash received and the fair market value of any
Common Stock issued under the award, and the Corporation will generally be
entitled to a deduction equal to the amount of ordinary income realized by the
recipient. Any cash received under a performance award will be included in
income at the time of receipt. The fair market value of any Common Stock
received will also generally be included in income (and a corresponding
deduction will generally be available to the Corporation) at the time of
receipt. The capital gain or loss holding period for any Common Stock
distributed under a performance award will begin when the recipient recognizes
ordinary income in respect of that distribution.
Loans and Supplemental Grants
Generally speaking, bona fide loans made under the Equity Incentive Plan
will not result in taxable income to the recipient or in a deduction to the
Corporation. However, any such loan made at a rate of interest lower than
certain rates specified under the Internal Revenue Code may result in an
amount (measured, in general, by reference to the difference between the
actual rate and the specified rate) being included in the borrower's income
and deductible by the Corporation. Forgiveness of all or a portion of a loan
will also result in income to the
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borrower and a deduction for the Corporation. If outright cash grants are
given in order to facilitate the payment of award-related taxes, the grants
will be includable as ordinary income by the recipient at the time of receipt
and will in general be deductible by the Corporation.
New Plan Benefits
The following table set forth the number of shares of the Common Stock of
the Corporation that have been authorized to be granted as part of the
proposed increase in the number of shares under the Equity Incentive Plan to
the current chief executive officer, the other named executive officers, all
current executive officers as a group, all current directors who are not
executive officers as a group and all employees, including all current
officers who are not executive officers as a group.
<TABLE>
<CAPTION>
Number
Dollar of
Name and Position Value ($) Shares
----------------- ---------- -------
<S> <C> <C>
William J. Webb, President and Chief Executive Officer.. $1,892,250 225,000
Hal Kirshner, Former President and Chief Executive
Officer (2)............................................ -- --
John M. Brenna, Vice President, Sales................... -- --
Executive Group......................................... $1,892,250 225,000
Non-Executive Director Group............................ -- --
Non-Executive Officer Employee Group.................... -- --
</TABLE>
- --------
(1) Mr. Webb was appointed president and chief executive officer of the
Corporation in January 1999.
(2) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective as of December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998.
Recommendation
The Board of Directors believes that the amendment to the Equity Incentive
Plan will provide the Corporation with the ability to continue to provide
incentive compensation for employees and others who are expect to make
significant contributions to the future growth and success of the Corporation,
to reward such individuals for such contributions and to encourage such
individuals to take into account the long-term interests of the Corporation
and its Stockholders through ownership of the Corporation's Common Stock.
Accordingly, the Board of Directors believes that the proposal is in the best
interests of the Corporation and its Stockholders and recommends that the
Stockholders vote FOR the approval of the amendment to the Equity Incentive
Plan. If not otherwise specified, Proxies will be voted FOR approval of the
amendment of the Equity Incentive Plan.
Thermo Electron, through its majority-owned subsidiary ThermoTrex, which
beneficially owned of record approximately 72.24% of the outstanding voting
stock of the Corporation on November 28, 1998 has indicated its intention to
vote for the proposal.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since 1995. Representatives
of that firm are expected to be present at the Meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to questions. The board of directors has established an audit
committee, presently consisting of three outside directors, the purpose of
which is to review the scope and results of the audit.
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OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later
than October 8, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 of the Securities Exchange Act of 1934, as amended
(relating to proposals to be presented at the meeting but not included in the
Corporation's proxy statement and form of proxy), will be considered untimely,
and thus the Corporation's proxy may confer discretionary voting authority on
the persons named in the proxy with regard to such proposals, if received
after December 18, 1999.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit Proxies personally, by telephone or by telegram.
Brokers, nominees, custodians and fiduciaries are requested to forward
solicitation materials to obtain voting instructions from beneficial owners of
stock registered in their names, and the Corporation will reimburse such
parties for their reasonable charges and expenses in connection therewith.
Danbury, Connecticut
February 5, 1999
24
<PAGE>
FORM OF PROXY
TREX MEDICAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Theo Melas-Kyriazi, John T. Keiser and Gary
S. Weinstein, or any one of them in the absence of the others, as attorneys and
proxies of the undersigned, with full power of substitution, for and in the name
of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of Trex Medical Corporation, a Delaware corporation (the
"Company"), to be held on Thursday, March 11, 1999 at 10:00 a.m. at the Westin
Hotel, 70 Third Avenue, Waltham, Massachusetts and at any adjournment or
postponement thereof, and to vote all shares of common stock of the Company
standing in the name of the undersigned on January 20, 1999, with all of the
powers the undersigned would possess if personally present at such meeting.
(IMPORTANT -- TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
TREX MEDICAL CORPORATION
March 11, 1999
- --------------- Please Detach and Mail in the Envelope Provided ---------------
[X] Please mark your
votes as in this
example.
1. ELECTION OF FOR WITHHELD Nominees: Elias P. Gyftopoulos
DIRECTORS OF [_] [_] Hal Kirshner
THE COMPANY John T. Keiser
(see reverse). James W. May, Jr.
Hutham S. Olayan
FOR all nominees listed at right, Firooz Rufeh
except authority to vote withheld Gary S. Weinstein
for the following nominees (if any).
- -----------------------------------
FOR AGAINST ABSTAIN
2. Approve proposal to amend the Corporation's [_] [_] [_]
equity incentive plan to increase the shares
available for issuance under the plan by
500,000 shares.
3. In their discretion on such other matters as may properly come before the
meeting.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.
Copies of the Notice of Meeting and of the Proxy Statement have been received by
the undersigned.
SIGNATURE(S) DATE
---------------------------------- -----------------------
NOTE: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.
