SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------------------------
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-11827
TREX MEDICAL CORPORATION
(Exact name of Registrant as specified in its character)
Delaware 06-1439626
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37 Apple Ridge Road
Danbury, Connecticut 06810
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. X No _____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of October 29, 1999, was approximately $20,006,000.
As of October 29, 1999, the Registrant had 32,003,242 shares of Common Stock
outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended October 2, 1999, are incorporated by reference into Parts I and II.
Items 10, 11, 12 & 13 of Part III of the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 2, 1999 are hereby amended and restated in
their entirety as follows:
Part III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Set forth below are the names of the 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.
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Elias P. Gyftopoulos
Dr. Gyftopoulos, 72, 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 and ThermoRetec
Corporation.
- -------------------------------------------------------------------------------
Hal Kirshner
Mr. Kirshner, 58, 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.
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John T. Keiser
Mr. Keiser, 63, has been a director of the Corporation since
June 1997. He has been the chief operating officer,
biomedical, of Thermo Electron since September 1998 and was
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 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, 56, 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, 46, 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. Ms. Olayan is
also a director of Thermo Electron.
- -------------------------------------------------------------------------------
Firooz Rufeh
Mr. Rufeh, 62, has been a director of the Corporation since
its inception in October 1995. Mr. Rufeh presently serves as
a consultant to Thermo Electron. 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.
- -------------------------------------------------------------------------------
William J. Webb
Mr. Webb, 57, has been president, chief executive officer
and a director of the Corporation since January 1999. From
1997 until his appointment, Mr. Webb served as the executive
vice president, global sales and service, of Picker
International Inc., a manufacturer and marketer of
diagnostic imaging equipment. He served as the executive
vice president, sales and service for Picker International
Inc. from 1990 until 1997.
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<PAGE>
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 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"). 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, approves 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 seven times, the audit committee met three times and the human resources
committee met five times during fiscal 1999. Each director attended at least 75%
of all meetings of the board of directors and committees on which he or she
served that were held during fiscal 1999.
Compensation of Directors
Cash Compensation
Outside directors receive an annual retainer of $2,000 and a fee of $1,000
per meeting for attending regular meetings of the board of directors and $500
per meeting 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 directors' fees is made
quarterly. Mr. Keiser and Mr. Webb are both employees of Thermo Electron or its
subsidiaries and do not receive any cash compensation from the Corporation for
their services as directors. Mr. Kirshner, who is currently a consultant to the
Corporation, does not receive any cash compensation from the Corporation for his
services as a director during the term of his consulting agreement. See
"Executive Compensation - Severance Agreements." Directors are also reimbursed
for out-of-pocket expenses incurred in attending such meetings.
Deferred Compensation Plan
Under the Corporation's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of his
or her cash fees until he or she ceases to serve as a director, dies or retires
from his or her principal occupation. In the event of a change of control or
proposed change of control of the Corporation that is not approved by the board
of directors, deferred amounts become payable immediately. Any of the following
are deemed to be a change of control: (i) the acquisition by any person of 40%
or more of the outstanding common stock or voting securities of Thermo Electron;
(ii) the failure of the Thermo Electron board of directors to include a majority
of directors who are "continuing directors", which term is defined to include
directors who were members of Thermo Electron's board on July 1, 1999 or who
subsequent to that date were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
Amounts deferred pursuant to the Deferred Compensation Plan are valued at the
end of each quarter as units of the Corporation's 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
has been reserved for issuance under the Deferred Compensation Plan. As of
October 2, 1999, deferred units equal to approximately 5,980 shares of Common
Stock were accumulated under the Deferred Compensation Plan.
<PAGE>
Directors Stock Option Plan
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of Common Stock of
the Corporation to outside directors as additional compensation for their
service as directors. Under the Directors Plan, outside directors are
automatically granted options to purchase 1,000 shares of Common Stock annually.
The annual grant is 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. Options evidencing annual grants are immediately exercisable at
any time from and after the grant date of the option and prior to the earliest
to occur of (i) the expiration of the option on the third anniversary of the
grant date; (ii) two years after the director ceases to serve as a director of
the Corporation; or (iii) the date of dissolution or liquidation of the
Corporation. Shares acquired upon exercise of the options are subject to
repurchase by the Corporation at the exercise price if the recipient ceases to
serve as a director of the Corporation or another Thermo Electron company prior
to the first anniversary of the grant date.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the Common Stock as reported on the American
Stock Exchange (or other principal market 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 per share
paid by third parties in an arms-length transaction prior to the option grant.
As of October 2, 1999, options to purchase 120,000 shares of Common Stock had
been granted and were outstanding under the Directors Plan, no options had
lapsed or been exercised, and options to purchase 80,000 shares of Common Stock
were reserved and available for grant.
Stock Ownership Policies for Directors
The human resources committee of the board of directors (the "Committee")
has established a stock holding policy for directors. The stock holding policy
requires each director to hold a minimum of 1,000 shares of Common Stock.
Directors are requested to achieve this ownership within a three-year period.
The chief executive officer of the Corporation is required to comply with a
separate stock holding policy established by the Committee, which is described
below.
In addition, the Committee has a policy requiring directors 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 below.
Executive Officers
Reference is made to Item 1(e) of this Report for information regarding
the Executive Officers of the Registrant.
Item 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation during the last three fiscal
years for services to the Corporation in all capacities awarded to, earned by or
paid to the Corporation's chief executive officer, its former chief executive
officer and its executive officers whose total annual salary and bonus, as
determined in accordance with the rules of the Securities and Exchange
Commission, was greater than $100,000, and who were employed by the Corporation
as of the end of fiscal 1999. The table also includes information as to two
executives who were not serving as executive officers as of the end of fiscal
1999. These officers are together referred to as the "named executive officers."
<PAGE>
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. See Item 13 - Certain Relationships and Related
Transactions. Accordingly, the compensation for these individuals is not
reported in the following table.
<TABLE>
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Summary Compensation Table
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Annual Compensation Long Term Compensation
------------------- -----------------------
Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary (1) Bonus (2) Awards (3) Options Compensation (5)
- ------------------ ----- ---------- -------- ---------- ----------- ----------------
William J. Webb (6) 1999 $173,077 150,000 $247,500 (TXM) 400,00(TXM) $145,113 (7)
President and 40,000(TMO)
Chief Executive 70,000(TKN)
Officer
- --------------------------------------------------------------------------------------------------------------------------
Hal Kirshner (8) 1999 $ 68,365 N/A -- -- -- $169,100
Former President 1998 $218,750 $100,000 -- 8,250 (TXM) $5,625
and Chief 7,600 (TMO)
Executive Officer 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
- --------------------------------------------------------------------------------------------------------------------------
John M. Brenna (10) 1999 $139,587 N/A -- -- -- $7,200
Former Vice 1998 $134,875 $ 82,000 -- -- $1,654
President, 1997 $128,750 $ 63,000 30,000 (TXM)
Marketing 10,000 (TMO)
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Walter F. Schneider (11) 1999 $178,993 $200,000 $173,250 (TXM) 50,000 (TXM)
Former Senior 100 (TMO)
Vice President,
Operations
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Ira S. Miller (12) 1999 $100,384 $ 55,000 -- 100,000 (TXM) $131,952 (13)
Senior Vice
President, Sales &
Marketing
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Gerald R. Roda (14) 1999 $ 81,462 $ 30,000 -- 100,000 (TXM) $109,975 (15)
Senior Vice
President, Finance
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</TABLE>
(1) Annual compensation for executive officers is reviewed and determined on a
calendar year basis, even though the Corporation's fiscal year ends in
September.
(2) The bonus amount represents the bonus paid for performance during the
calendar year in which the Corporation's fiscal year-end occurred.
(3) In fiscal 1999, Mr. Webb and Mr. Schneider were awarded 44,000 and 30,800
shares, respectively, of restricted stock of the Corporation with a value
of $247,500 and $173,250, respectively, on the grant date. The restricted
stock awards vest 33%, 33% and 34% on June 18, 2000, 2001 and 2002,
respectively. Any dividends paid on restricted stock are entitled to be
retained by the recipient without regard to vesting. At the end of fiscal
1999, Mr. Webb and Mr. Schneider held 44,000 and 30,800 shares of
restricted stock, respectively, with an aggregate value of $167,750 and
$117,425, respectively.
<PAGE>
(4) Options granted by the Corporation are designated in the table as "TXM."
In addition, the named executive officers have also been granted options
to purchase the common stock of the following Thermo Electron companies
during the last three fiscal years as part of Thermo Electron's stock
option program: 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 table as TDX), Thermo Information Solutions Inc. (designated in the
table as TISI), ThermoLase Corporation (designated in the table as TLZ),
Thermo Trilogy Corporation (designated in the table as TRIL), ThermoTrex
Corporation (designated in the table as TKN), Thermo Vision Corporation
(designated in the table as VIZ) and Trex Communications Corporation
(designated in the table as TRCC).
(5) 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, except where otherwise noted.
(6) Mr. Webb was appointed president and chief executive officer of the
Corporation effective January 7, 1999. The salary reported for fiscal 1999
represents the amount paid for the fiscal year from the commencement of
his employment through October 2, 1999.
(7) Represents $4,803 attributable to an interest-free loan provided to Mr.
Webb pursuant to the Corporation's Stock Holding Assistance Plan (see Item
13 - Certain Relationships and Related Transactions - Stock Holding
Assistance Plan), the reimbursement by the Corporation of $80,310 in
expenses associated with Mr. Webb's relocation to Danbury, Connecticut,
and an additional $60,000 signing bonus paid by the Corporation to Mr.
Webb.
(8) Mr. Kirshner resigned as president and chief executive officer of the
Corporation effective December 13, 1998 and his employment with the
Corporation was terminated effective December 31, 1998. He continues to
serve as a director and consultant to the Corporation. See Item 11
Executive Compensation - Severance Agreement.
(9) In addition to a $350 matching contribution referred to in footnote (5),
this amount includes $168,750 paid by the Corporation for consulting
services performed by Mr. Kirshner pursuant to the terms of a consulting
agreement with the Corporation. See Item 11 - Executive Compensation
Severance Agreement.
(10) Mr. Brenna resigned as a vice president of the Corporation effective as of
June 18, 1999 and his employment with the Corporation was terminated
effective October 1, 1999. The salary reported for fiscal 1999 represents
the amount paid for the entire fiscal year.
(11) Mr. Schneider was appointed senior vice president, operations on March 5,
1999 and resigned effective October 15, 1999. The salary reported for
fiscal 1999 represents the amount paid for the entire fiscal year.
(12) Mr. Miller was appointed senior vice president, sales & marketing
effective March 15, 1999. The salary reported for fiscal 1999 represents
the amount paid for the fiscal year from the commencement of his
employment through October 2, 1999.
(13) Represents the reimbursement by the Corporation of $51,952 in expenses
associated with Mr. Miller's relocation to Danbury, Connecticut, and an
additional $80,000 signing bonus paid by the Corporation to Mr. Miller.
(14) Mr. Roda was appointed senior vice president, finance effective March 22,
1999. The salary reported for fiscal 1999 represents the amount paid for
the fiscal year from the commencement of his employment through October 2,
1999.
(15) Represents the reimbursement by the Corporation of $64,975 in expenses
associated with Mr. Roda's relocation to Danbury, Connecticut, and an
additional $45,000 signing bonus paid by the Corporation to Mr. Roda.
Stock Options Granted During Fiscal 1999
The following table sets forth information concerning individual grants of
stock options made during fiscal 1999 to the Corporation's named executive
officers. It has not been the Corporation's policy in the past to grant stock
appreciation rights, and no such rights were granted during fiscal 1999.
<PAGE>
<TABLE>
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Option Grants in Fiscal 1999
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Potential Realizable
Percent of Value at Assumed
Number of Securities Total Options Annual Rates of Stock
Underlying Options Granted to Exercise Price Appreciation for
Granted and Employees in Price Per Expiration Option Term (2)
Name Company (1) Fiscal Year Share Date 5% 10%
- ---------- -------- ---------- --------- -------- -------- ----------
William J. Webb 400,000 (TXM) 33.9% $8.41 01/07/06 $1,369,480 $3,191,480
40,000 (TMO) 0.8% (3) $17.09 01/21/06 $278,290 $648,544
70,000 (TKN) 17.7% $8.55 01/07/06 $243,650 $567,805
- -------------------------------------------------------------------------------
Hal Kirshner -- -- -- -- -- -- --
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John M. Brenna -- -- -- -- -- -- --
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Walter F. Schneider 50,000 (TXM) 4.2% $7.71 03/05/06 $156,940 $365,730
10,000 (TXM) 0.8% $17.40 10/28/08 $138,480 $372,087
100 (TMO) 0.002% (3) $14.81 09/22/04 $410 $904
5,000 (TMO) 0.1% (3) $18.08 09/24/09 $71,950 $193,314
- -------------------------------------------------------------------------------
Ira S. Miller 100,000 (TXM) 8.5% $6.55 03/15/06 $266,650 $621,410
- -------------------------------------------------------------------------------
Gerald R. Roda 100,000 (TXM) 8.5% $7.78 03/22/06 $316,720 $738,100
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</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year. In all cases, the shares
acquired upon exercise are subject to repurchase by the granting company
at the exercise price if the optionee ceases to be employed by, or ceases
to serve as a director of, such company or another Thermo Electron
company. The granting company may exercise its repurchase rights within
six months after the termination of the optionee's employment or the
cessation of directorship, as the case may be. The repurchase rights
generally lapse ratably over a one- to ten-year period, depending on the
option term, which may vary from five to twelve years, provided the
optionee continues to be employed by or serve as a director of the
granting company or another Thermo Electron company. The granting company
may permit the holder of 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. Please see footnote (4)
under Summary Compensation Table above for the company abbreviations used
in this table.
(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 company, the optionee's continued employment or service as a
director 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 companies other than the Corporation and, accordingly, are
reported as a percentage of total options granted to employees of Thermo
Electron and its subsidiaries.
<PAGE>
Stock Options Exercised During Fiscal 1999 and Fiscal Year-End Option Values
The following table reports certain information regarding stock option
exercises during fiscal 1999 and outstanding stock options held at the end of
fiscal 1999 by the Corporation's named executive officers. No stock appreciation
rights were exercised or were outstanding during fiscal 1999.
Aggregated Option Exercises In Fiscal 1999
And Fiscal 1999 Year-End Option Values
- --------------------------------------------------------------------------------
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Value of
Unexercised
Number of In-the-Money
Securities Options at
Underlying Fiscal at
Unexercised Options Fiscal Year-
Shares at Fiscal Year-End End
Acquired on Value (Exercisable/ (Exercisable
Name Company Exercise Realized Unexercisable) (1) Unexercisable)
- ---------- -------- -------- --------- ------------- ------------
William J. Webb TXM -- -- 400,000 /0 $0/--
TMO -- -- 40,000 /0 $0/--
TKN -- -- 70,000 /0 $0/--
- --------------------------------------------------------------------------------
Hal Kirshner -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
John M. Brenna TXM -- -- 50,000 /0 $0/--
TMO -- -- 10,000 /0 $0/--
- --------------------------------------------------------------------------------
Walter F. TXM -- -- 90,000 /0 $0/--
TMO -- -- 5,100 /0 $0/--
- --------------------------------------------------------------------------------
Ira S. Miller TXM -- -- 100,000 /0 $0/--
- --------------------------------------------------------------------------------
Gerald R. Roda TXM -- -- 100,000 /0 $0/--
- --------------------------------------------------------------------------------
</TABLE>
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of the end of the fiscal year. In all cases,
the shares acquired upon exercise of the options reported in the table are
subject to repurchase by the granting company at the exercise price if the
optionee ceases to be employed by, or ceases to serve as a director of,
such company or another Thermo Electron company. The granting company may
exercise its repurchase rights within six months after the termination of
the optionee's employment or the cessation of directorship, as the case
may be. The repurchase rights generally lapse ratably over a four- to
ten-year period, depending on the option term, which may vary from five to
twelve years, provided that the optionee continues to be employed by or
serve as a director of the granting company or another Thermo Electron
company. The granting company may permit the holder 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. Please see footnote (4) under Summary Compensation
Table above for the company abbreviations used in this table.
Severance Agreement
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
<PAGE>
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 a new residence), an interest free loan to purchase shares of
the 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. In addition, Mr. Webb is entitled to a minimum incentive compensation
award of $200,000 in each of calendar 1999 and 2000 payable quarterly in
arrears. Mr. Webb must be actively employed at the end of each calendar quarter
to receive such bonus payments.
Mr. Ira S. Miller joined the Corporation as senior vice president, sales
and marketing in March 1999. In connection therewith, the Corporation entered
into an agreement with Mr. Miller providing for severance pay equal to one year
salary and bonus, reimbursement for country club membership and reimbursement of
relocation expenses. In addition, Mr. Miller is entitled to a minimum incentive
compensation award of $110,000 for a one year period commencing April 1, 1999
payable quarterly in arrears. Mr. Miller must be actively employed at the end of
each calendar quarter to receive such incentive compensation awards.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive
officers and key employees of Thermo Electron and its subsidiaries that provide
severance benefits if there is a change in control of Thermo Electron and their
employment is terminated by Thermo Electron "without cause" or by the individual
"for good reason", as those terms are defined therein, within 18 months
thereafter. For purposes of these agreements, a change in control exists upon
(i) the acquisition by any person of 40% or more of the outstanding common stock
or voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to include a majority of directors who are "continuing
directors", which term is defined to include directors who were members of
Thermo Electron's board on the date of the agreement or who subsequent to the
date of the agreement were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
In 1999, Thermo Electron authorized an executive retention agreement with
Mr. Webb. This agreement provides that in the event Mr. Webb's employment is
terminated under the circumstances described above, he would be entitled to a
lump sum payment equal to the sum of (a) one times his highest annual base
salary in any 12 month period during the prior five-year period, plus (b) one
times his highest annual bonus in any 12 month period during the prior five-year
period. In addition, Mr. Webb would be provided benefits for a period of one
year after such termination substantially equivalent to the benefits package he
would have been otherwise entitled to receive if he was not terminated. Further,
all repurchase rights of Thermo Electron and its subsidiaries shall lapse in
their entirety with respect to all options that he holds in Thermo Electron and
its subsidiaries, including the Corporation, as of the date of the change in
control. Finally, Mr. Webb would be entitled to a cash payment equal to $15,000
to be used toward outplacement services.
Assuming that the severance benefits would have been payable as of
November 30, 1999, the lump sum salary and bonus payment under such agreement to
Mr. Webb would have been approximately $450,000. In the event that payments
under this agreement are deemed to be so called "excess parachute payments"
under the applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), Mr. Webb would be entitled to receive a gross-up
payment equal to the amount of any excise tax payable by him with respect to
such payment, plus the amount of all other additional taxes imposed on him,
attributable to the receipt of such gross-up payment.
<PAGE>
Stock Ownership Policies
The Corporation's compensation program is also designed to encourage
executives to own shares of the Corporation's Common Stock. The Committee
believes that encouraging executives to own and retain stock acquired through
its stock-based compensation program or otherwise provides additional incentive
for executive officers to follow strategies designed to maximize long-term value
to Stockholders.
The Committee established a stock holding policy for executive officers of
the Corporation that required executive officers to own a multiple of their
compensation in shares of Common Stock. For the chief executive officer, the
multiple is one times his base salary and reference bonus for the fiscal 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 has been amended to apply
only to the chief executive officer.
In order to assist executive officers in complying with this policy, the
Committee also adopted a stock holding assistance plan under which the
Corporation was authorized to make interest-free loans to executive officers to
enable them to purchase shares of Common Stock in the open market. This plan was
also amended to apply only to the chief executive officer. The loans are
required to be repaid upon the earlier of demand or the tenth anniversary of the
date of the loan, unless otherwise determined by the Committee. In 1999, Mr.
Webb received a loan in the principal amount of $250,000 under this plan, of
which the entire amount was outstanding as of October 2, 1999. See Item 13
Certain Relationships and Related Transactions - Stock Holding Assistance Plan.
The Committee also has established a policy requiring its executive
officers 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.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock,
as well as the common stock of ThermoTrex, the Corporation's parent company, and
of Thermo Electron, ThermoTrex's parent company, as of November 30, 1999, with
respect to (i) each director, (ii) each person who was known by the Corporation
to own beneficially more than 5% of the outstanding shares of Common Stock,
(iii) each executive officer named in the summary compensation table set forth
below under the heading "Executive Compensation" (the "named executive
officers") and (iv) all directors and current executive officers as a group. In
addition, the following table sets forth the beneficial ownership of Common
Stock, as of November 30, 1999, with respect to each person who was known by the
Corporation to own beneficially more than 5% of the outstanding shares of Common
Stock.
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.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trex Medical ThermoTrex Thermo Electron
Name (1) Corporation (2) Corporation (3) Corporation (4)
----------- ------------ --------- -----------
Thermo Electron Corporation (5)..... 25,800,230 N/A N/A
John M. Brenna...................... 51,500 0 10,000
Elias P. Gyftopoulos................ 41,550 0 76,041
John T. Keiser...................... 20,000 92,823 314,601
Hal Kirshner........................ 276,750 33,344 42,596
James W. May Jr..................... 42,676 0 0
Ira S. Miller....................... 100,000 0 0
Hutham S. Olayan.................... 47,783 0 33,988
Gerald R. Roda...................... 100,000 0 0
Firooz Rufeh........................ 40,000 31,000 74,703
Walter F. Schneider................. 11,000 0 1,600
William J. Webb..................... 485,200 70,000 40,000
All directors and current executive
officers as a group (13 persons).. 1,279,459 238,642 1,237,774
</TABLE>
(1) Except as reflected in the footnotes to this table, shares 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 Common Stock beneficially owned by Mr. Brenna, Dr. Gyftopoulos,
Mr. Keiser, Mr. Kirshner, Dr. May, Mr. Miller, Ms. Olayan, Mr. Roda, Mr.
Rufeh, Mr. Schneider, Mr. Webb, and all directors and current executive
officers as a group include 50,000, 40,000, 20,000, 158,250, 40,000,
100,000, 40,000, 100,000, 40,000, 11,000, 400,000, and 1,059,250 shares,
respectively, that such person or group has the right to acquire within 60
days of November 30, 1999, through the exercise of stock options. Shares
beneficially owned by Dr. Gyftopoulos, Dr. May, Ms. Olayan and all
directors and current executive officers as a group include 550, 2,646,
2,783, and 5,979 shares, respectively, allocated through October 2, 1999
to their respective accounts maintained pursuant to 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., a member of the Olayan Group which is indirectly controlled
by Suliman S. Olayan, Ms. Olayan's father. Ms. Olayan disclaims beneficial
ownership of the shares owned by Crescent International Holdings Ltd.
Except for Mr. Webb, who beneficially owned 1.5% of the Common Stock
outstanding as of November 30, 1999, no director or named executive
officer beneficially owned more than 1% of the Common Stock as of November
30, 1999; 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 ThermoTrex common stock beneficially owned by Mr. Keiser, Mr.
Kirshner, Mr. Rufeh, Mr. Webb, and all directors and current executive
officers as a group include 91,023, 23,023, 31,000, 70,000, and 222,605
shares, respectively, that such person or group has the right to acquire
within 60 days of November 30, 1999, through the exercise of stock
options. No director or named executive officer beneficially owned more
than 1% of the common stock of ThermoTrex as of November 30, 1999; all
directors and current executive officers as a group beneficially owned
1.06% of the common stock of ThermoTrex outstanding as of such date.
(4) Shares of Thermo Electron common stock beneficially owned by Mr. Brenna,
Dr. Gyftopoulos, Mr. Keiser, Mr. Kirshner, Ms. Olayan, Mr. Rufeh, Mr.
Schneider, Mr. Webb and all directors and current executive officers as a
group include 10,000, 12,442, 267,448, 40,098, 12,442, 74,703, 1,000,
40,000 and 1,030,289 shares, respectively, that such person or group has
the right to acquire within 60 days of November 30, 1999, through the
exercise of stock options. Shares beneficially owned by Dr. Gyftopoulos,
Ms. Olayan, and all directors and current executive officers as a group
include 1,020, 19,296, and 20,316 shares, respectively, allocated through
October 2, 1999, to their respective accounts
<PAGE>
maintained pursuant to Thermo Electron's Deferred Compensation Plan for
Directors. Shares beneficially owned by Ms. Olayan do not include 6,150,000
shares owned by Crescent Holding GmbH, a member of the Olayan Group which is
indirectly controlled by Suliman S. Olayan, Ms. Olayan's father. Ms Olayan
disclaims beneficial ownership of the shares owned by Crescent Holding GmbH. No
director or named executive officer beneficially owned more than 1% of Thermo
Electron's common stock outstanding as of such date; all directors and current
executive officers as a group beneficially owned less than 1% of the common
stock of Thermo Electron outstanding as of such date.
(5) Thermo Electron beneficially owned 79.16% of the Common Stock outstanding
as of November 30, 1999, of which 72.15% is owned through ThermoTrex, a
majority-owned subsidiary of Thermo Electron. Shares beneficially owned by
Thermo Electron include 678,541 shares issuable upon conversion of
$8,000,000 in principal amount of a 4.2% convertible debenture issued by
the Corporation and due in 2000. Thermo Electron's address is 81 Wyman
Street, Waltham, Massachusetts 02454-9046. As of November 30, 1999, Thermo
Electron, through ThermoTrex, had the power to elect all of the members of
the Corporation's board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), 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 1999, except
in the following instances: Mr. Ira S. Miller, an officer of the Corporation,
filed his Form 3 late. Thermo Electron filed a total of six late transactions
associated with the cancellation and grant of options to purchase Common Stock
granted to employees under its stock option program.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thermo Electron has, from time to time, caused certain subsidiaries to
sell minority interests to investors, resulting in several majority-owned,
private and publicly-held subsidiaries. ThermoTrex has created the Corporation
as a majority-owned, publicly-held subsidiary. The Corporation and such other
majority-owned Thermo Electron subsidiaries are hereinafter referred to 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 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 stockholders 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
<PAGE>
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 the Thermo Subsidiaries.
The Charter currently 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, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter 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.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including general legal advice and services, risk management, 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 0.8% of the Corporation's
revenues for these services in fiscal 1999. The annual fee will remain at 0.8%
of the Corporation's total revenues for fiscal 2000. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1999, Thermo Electron assessed the Corporation
$1,948,000 in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms of the
Services Agreement are fair to the Corporation. In 1999, the Corporation paid
Thermo Electron an additional $85,000 for certain administrative services
required by the Corporation that were not covered by the Services Agreement. 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.
From time to time, the Corporation may transact business with other
companies in the Thermo Group.
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 manufacturers the grid for the Corporation pursuant to
written purchase orders. The Corporation owns the intellectual property rights
to the grid. During fiscal 1999, the Corporation purchased grids for an
aggregate purchase price of $1,352,000 under this arrangement.
ThermoLase Corporation, a majority-owned subsidiary of ThermoTrex, engaged
the Corporation to design and manufacture the laser used in ThermoLase's
laser-based hair-removal system. During fiscal 1999 the Corporation recorded
$3,414,000 of revenue under this arrangement. As a result of ThermoLase exiting
the hair-removal business, the Corporation does not expect future sales to
ThermoLase.
<PAGE>
In October 1995, the Corporation and ThermoTrex entered into a license
agreement under which the Corporation undertook to fund approximately $6.0
million of ThermoTrex's research and development efforts related to
direct-detection digital imaging technology in certain medical imaging fields.
In fiscal 1998 and 1997, the Corporation recorded $2,200,000 and $2,000,000,
respectively, of expense under this agreement, which concluded in fiscal 1998.
In fiscal 1999, the Corporation paid $500,000 to ThermoTrex for certain research
and development efforts related to digital mammography technology.
As of October 2, 1999, 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, $34,054,000 of the corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the company in effect lent excess cash to Thermo Electron, which
Thermo Electron collateralized with investments principally consisting of
corporate notes, U.S. government agency securities, commercial paper, money
market funds, and other marketable securities, in the amount of at least 103% of
such obligation. The company's funds subject to the repurchase agreement were
readily convertible into cash by the company. The repurchase agreement earned a
rate based on the 90-day Commercial Paper Composite Rate plus 25 basis points,
set at the beginning of each quarter. Effective June 1999, the company adopted a
new cash management arrangement with Thermo Electron, described below, that
replaces the repurchase agreement.
As of October 2, 1999, $8,801,000 of the corporation's cash equivalents
were invested in a cash management arrangement with Thermo Electron, which was
effective June 1999. Under the cash management arrangement, the corporation
lends its excess cash to Thermo Electron and has the contractual right to
withdraw its invested funds upon 30 days' prior notice. Thermo Electron is
contractually required to maintain cash, cash equivalents, and/or immediately
available bank lines of credit equal to at least 50% of all the funds invested
under the arrangement by all Thermo Electron subsidiaries other than
wholly-owned subsidiaries. The corporation's funds invested in the cash
management arrangement earn a rate equal to the 30-day Dealer Commercial Paper
Rate as reported in The Wall Street Journal plus 50 basis points, set at the
beginning of each month.
Stock Holding Assistance Plan
The human resources committee of the Corporation's board of directors (the
"Committee") established a stock holding policy that required executive officers
of the Corporation to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with this policy,
the Committee also adopted a stock holding assistance plan under which the
Corporation may make interest-free loans to the executive officers to enable
them to purchase Common Stock in the open market. The stock holding policy and
the stock holding assistance plan were both subsequently amended to apply only
to the chief executive officer. In 1999, Mr. Webb received a loan in the
principal amount of $250,000 under the stock holding assistance plan to purchase
41,200 shares of Common Stock, of which the entire amount was outstanding as of
October 2, 1999. The loan to Mr. Webb is repayable upon the earlier of demand or
the tenth anniversary of the date of the loan, unless otherwise determined by
the Committee.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 on Form 10-K/A
to be signed by the undersigned, duly authorized.
TREX MEDICAL CORPORATION
By: / s / Sandra L. Lambert
--------------------------
Sandra L. Lambert
Secretary
