SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 1-14262
THERMOQUEST CORPORATION
(Exact name of Registrant as specified in its character)
Delaware 77-0407461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2215 Grand Avenue Parkway
Austin, Texas 78728-3812
(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 January 28, 2000, was approximately $58,388,000.
As of January 28, 2000, the Registrant had 50,397,707 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended January 1, 2000, are incorporated by reference into Parts I and II.
<PAGE>
Items 10, 11, 12 & 13 of Part III of the Registrant's Annual Report on Form 10-K
for the fiscal year ended January 1, 2000 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. Information
regarding their beneficial ownership of the Corporation's Common Stock and of
the common stock of its parent company, Thermo Instrument Systems Inc. ("Thermo
Instrument"), a manufacturer of measurement and detection instruments and Thermo
Instrument's parent company, Thermo Electron Corporation ("Thermo Electron"), a
provider of products and services in measurement instrumentation, medical
devices, power generation and resource recovery is reported in Item 12 -
"Security Ownership of Certain Beneficial Owners and Management."
- --------------------------------------------------------------------------------
Richard W. K. Chapman Dr. Chapman, 55, has been the chief executive officer,
president and a director of the Corporation since its
inception in June 1995. He served as president of
Finnigan Corporation ("Finnigan"), a subsidiary of the
Corporation, from 1992 to 1995, and as marketing
director of Finnigan from 1989 to 1995. He has been
senior vice president of Thermo Instrument since July
1998 and was a vice president of Thermo Instrument from
1992 until July 1998.
- --------------------------------------------------------------------------------
Frank Jungers Mr. Jungers, 74, has been a director of the Corporation
since January 1996. Mr. Jungers has been a self-employed
consultant on business and energy matters since 1977.
Mr. Jungers was employed by the Arabian American Oil
Company from 1974 through 1977 as chairman and chief
executive officer. Mr. Jungers is also a director of The
AES Corporation, Donaldson, Lufkin & Jenrette, Statia
Terminals Group N.V., Thermo Ecotek Corporation and
Thermo Electron.
- --------------------------------------------------------------------------------
Earl R. Lewis Mr. Lewis, 56, has been a director of the Corporation
since its inception in June 1995. Mr. Lewis has been
president and chief executive officer of Thermo
Instrument since March 1997 and January 1998,
respectively, and was chief operating officer of Thermo
Instrument from January 1996 to January 1998. Prior to
that time, he was executive vice president of Thermo
Instrument from January 1996 to March 1997, senior vice
president of Thermo Instrument from January 1994 to
January 1996, and vice president of Thermo Instrument
from March 1992 to January 1994. Mr. Lewis has been
chief operating officer, measurement and detection, of
Thermo Electron since September 1998. Prior to his
appointment as chief operating officer, measurement and
detection, Mr. Lewis served as senior vice president of
Thermo Electron from June 1998 to September 1998 and
vice president from September 1996 to June 1998. Mr.
Lewis served as chief executive officer of Thermo Optek
Corporation, a majority-owned subsidiary of Thermo
Instrument, that manufactures analytical instruments
that measure energy and light for purposes of materials
analysis, characterization and preparation, from its
inception in August 1995 to January 1998. Mr. Lewis is
also a director of FLIR Systems, Inc., Metrika Systems
Corporation, Spectra-Physics Lasers, Inc., SpectRx Inc.,
Thermo Instrument and Thermo Optek Corporation.
- --------------------------------------------------------------------------------
Anthony J. Pellegrino Mr. Pellegrino, 60, has been a director of the
Corporation since its inception in June 1995. Mr.
Pellegrino has been director of corporate development of
ThermoTrex Corporation, a Thermo Electron subsidiary
which, among other things, manufactures mammography and
needle-biopsy systems and supplies general x-ray
equipment, since March 1997 and was a senior vice
president of that company from July 1995 to March 1997.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
Michael E. Porter Dr. Porter, 51, has been a director of the Corporation
since November 1995. He has been the C. Roland
Christensen Professor of Business Administration at the
Harvard Business School since 1990. Dr. Porter is also a
director of Alpha-Beta Technologies Inc. and Parametric
Technologies Corporation.
- --------------------------------------------------------------------------------
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 ("outside directors"). The present members of the audit
committee are Dr. Porter (Chairman) and Mr. Jungers. 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 Mr.
Jungers (Chairman) and Dr. Porter. 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 five times, the audit committee met twice
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 served that were held during fiscal 1999, except for Mr.
Pellegrino who attended 60% of all meetings of the board of directors that were
held during fiscal 1999.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Outside directors receive an annual retainer of $4,000 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. Dr. Chapman, Mr. Lewis and Mr. Pellegrino are all employees of Thermo
Electron or its subsidiaries 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 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
cash fees until he ceases to serve as a director, dies or retires from his
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 Common Stock. When payable, amounts deferred may
be disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. As of January 1, 2000 a total of 75,000 shares of Common
Stock has been reserved for issuance under the Deferred Compensation Plan and
deferred units equal to approximately 5,517 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 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, commencing with the annual
meeting of the Stockholders to be held in 2000. 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 generally expire on the third 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 January 31, 2000, options to purchase 90,000 shares of Common Stock had
been granted to directors and were outstanding under the Directors Plan, no
options to purchase Common Stock had lapsed or been exercised, and options to
purchase 135,000 shares of Common Stock were available for future grant.
STOCK OWNERSHIP POLICY 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.
EXECUTIVE OFFICERS
Reference is made to Item 1(e) of this Annual Report on Form 10-K 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 and its executive
officers whose total annual salary and bonus, as determined in accordance with
the Securities and Exchange Commission, was greater that $100,000, and who were
employed by the Corporation as of the end of fiscal 1999. These executive
officers are together referred to as the "named executive officers."
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.
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SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------
Annual Compensation Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary Bonus Award (1) Options (2) Compensation (3)
- ------------------- ------ ------ ------ --------- ------------ ----------------
Richard W. K. Chapman 1999 $220,015 $175,000 $77,241 (TMQ) 500 (TMO) $24,805 (4)
President and 25,000 (THI)
Chief Executive Officer 1998 $190,000 $110,000 100,000 (TMQ) $19,488 (4)
8,298 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
24,999 (THI)
1,023 (TKN)
2,000 (TRIL)
1997 $180,000 $153,000 -- 300 (TMO) $42,782 (4)
- -------------------------------------------------------------------------------------------------------------------------
Lewis H. Rosenblum (5) 1999 $200,000 $100,000 -- 6,000 (TMQ) $18,015 (6)
Vice President --
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</TABLE>
(1) In fiscal 1999, Dr. Chapman was awarded 7,400 shares of restricted
Common Stock of the Corporation with a value of $77,241 on the grant
date. The restricted stock award vests 100% on the third anniversary of
the grant date. Any cash dividends paid on restricted shares are
entitled to be retained by the recipient without regard to vesting. Any
stock dividends paid on restricted shares are entitled to be retained
by the recipient subject to the same vesting restrictions as the
underlying stock. At the end of fiscal 1999, Dr. Chapman held 7,400
restricted shares with an aggregate value of $76,316.
(2) Options granted by the Corporation are designated in the table as
"TMQ." In addition, the named executive officers have also been granted
options to purchase 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 Instrument
Systems Inc. (designated in the table as THI), ThermoTrex Corporation
(designated in the table as TKN) and Thermo Trilogy Corporation
(designated in the table as TRIL).
(3) Represents the amount of matching contributions made on behalf of
executive officers participating in the 401(k) plan maintained by
Finnigan in the case of Dr. Chapman and the 401(k) plan maintained by
Forma Scientific Inc., a subsidiary of the Corporation, in the case of
Mr. Rosenblum.
(4) In addition to the matching contribution referred to in footnote (3),
such amounts include $14,805, $9,448 and $10,480, which represents the
amount of compensation attributable to interest-free loans provided to
Dr. Chapman pursuant to the Corporation's stock holding assistance plan
in fiscal 1999, 1998 and 1997, respectively. See Item 13 - "Certain
Relationships and Related Transactions - Stock Holding Assistance
Plan." The amount reported for 1997 for Dr. Chapman includes $28,147
for relocation expenses reimbursed to Dr. Chapman.
(5) Mr. Rosenblum was appointed a vice president of the Corporation on
February 10, 1999. The salary reported for fiscal 1999 represents
compensation for the entire fiscal year.
(6) In addition to the matching contribution referred to in footnote (3),
such amounts includes $15,615 which represents the amount of
compensation attributable to the pension plan maintained by Forma
Scientific Inc.
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 chief executive
officer and the other named executive officer. It has not been the
<PAGE>
Corporation's policy in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1999.
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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%
- ---- ----------- ------------ ----- ---- --- ----
Richard W. K. Chapman 500 (TMO) 0.02% (3) $14.81 09/22/04 $2,050 $4,521
25,000 (THI) 2.14% (3) $11.95 09/15/04 $82,540 $182,390
- -----------------------------------------------------------------------------------------------------------------------
Lewis H. Rosenblum 6,000 (TMQ) 1.65% $11.63 06/10/04 $19,280 $42,601
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options granted during fiscal 1999 were immediately
exercisable as of the end of fiscal 1999. Generally, 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
such company or any other Thermo Electron company. The granting company
may exercise its repurchase rights within six months after the
termination of the optionee's employment. The repurchase rights lapse
ratably over a one- to two year period with an option term of five
years, provided that the optionee continues to be employed by the
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 (2) under the 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 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.
STOCK OPTIONS EXERCISED DURING FISCAL 1999 AND FISCAL YEAR-END 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 chief executive officer and the other named
executive officer. No stock appreciation rights were exercised or were
outstanding during fiscal 1999.
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AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL 1999 YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Securities In-the-Money
Underlying Options at
Unexercised Options Fiscal Year
Shares at Fiscal Year-End -End
Acquired on Value (Exercisable/ (Exercisable/
Name Company (2) Exercise Realized (1) Unexercisable) (2) Unexercisable)
---- ----------- -------- ------------ ------------------ --------------
Richard W. K. Chapman (3) (TMQ) -- -- 325,000 /0 $87,300 /--
(TMO) 8,436 $40,957 80,646 /0 (4) $5,167 /--
(MKA) -- -- 7,500 /0 (5) $0 /--
(ONX) -- -- 7,500 /0 (5) $0 /--
(RGI) -- -- 4,000 /0 $1,000 /--
(TDX) -- -- 2,000 /0 $0 /--
(TBA) -- -- 30,000 /0 $251,250 /--
(TFG) -- -- 2,000 /0 $4,376 /--
(THI) -- -- 196,249 /0 $24,563 /--
(TLT) -- -- 0 /2,000 -- /$0 (6)
(TOC) -- -- 15,000 /0 $13,575 /--
(TSR) -- -- 2,000 /0 $1,000 /--
(TKN) -- -- 1,023 /0 $56 /--
(TRIL) -- -- 0 /2,000 -- /$0 (6)
(TXM) -- -- 4,000 /0 $0 /--
- --------------------------------------------------------------------------------------------------------------------
Lewis H. Rosenblum (TMQ) -- -- 37,500 /0 $12,222 /--
(TMO) -- -- 2,200 /0 $0 /--
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</TABLE>
(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 fiscal 1999 were
immediately exercisable as of the end of fiscal 1999, except options to
purchase the common stock of ThermoLyte Corporation and Thermo Trilogy
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 Exchange Act or (ii) nine years after the
grant date. Generally, 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
serve as a director of, such company or any other Thermo Electron
company. The granting company may exercise its repurchase rights within
six months after the termination of the optionee's employment or
cessation of directorship, as the case may be. For publicly-traded
companies, the repurchase rights generally lapse ratably over a one- to
ten-year period, depending on the option term, which may vary from
three to twelve years, provided that the optionee continues to be
employed by or serve as a director of 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 have three-year terms and the
repurchase rights lapse in their entirety on the second anniversary of
the grant date. 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 (2) under the Summary
Compensation Table above for the company abbreviations used in this
table in addition to the following company abbreviations: Thermo
BioAnalysis Corporation (designated in the table as TBA), Thermo
Fibergen Inc,. (designated in the table as TFG), ThermoLyte Corporation
(designated in the table as
<PAGE>
TLT), Thermo Optek Corporation (designated in the table as TOC), Thermo
Sentron Inc. (designated in the table as TSR) and Trex Medical
Corporation (designated in the table as TXM).
(3) Dr. Chapman also holds other unexercised options to purchase common
stock of Thermo Electron and its subsidiaries other than the
Corporation. These options are not reported here as they were granted
as compensation for service to other Thermo Electron companies in
capacities other than in his capacity as chief executive officer of the
Corporation.
(4) Options to purchase 45,000 shares of the common stock of Thermo
Electron granted to Dr. Chapman are subject to the same terms as
described in footnote (2), except that the repurchase rights of Thermo
Electron generally do not lapse until the tenth anniversary of the
grant date. In the event of his death or involuntary termination prior
to the tenth anniversary of the grant date, the repurchase rights of
Thermo Electron shall be deemed to have lapsed ratably over a five-year
period, commencing with the fifth anniversary of the grant date.
(5) Options to purchase 7,500 shares of the common stock of Metrika Systems
Corporation and 7,500 shares of the common stock of ONIX Systems Inc.
granted to Dr. Chapman are subject to the same terms as described in
footnote (2), except that the repurchase rights are deemed to lapse 20%
per year commencing on the fifth anniversary of the grant date.
(6) No public market for the shares underlying these options existed at
fiscal year-end. Accordingly, no value in excess of the exercise price
has been attributed to these options.
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 1998, Thermo Electron authorized an executive retention agreement
with Dr. Chapman. This agreement provides that in the event Dr. Chapman's
employment is terminated under circumstances described above, Dr. Chapman 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, Dr. Chapman 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 Dr.
Chapman holds in Thermo Electron and its subsidiaries, including the
Corporation, as of the date of the change in control. Finally, Dr. Chapman 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
January 1, 2000, the lump sum salary and bonus payment under such agreement to
Dr. Chapman would have been approximately $373,000. 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"), Dr. Chapman would be entitled to receive a
gross-up payment equal to the amount of any excise tax payable by him
<PAGE>
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.
STOCK OWNERSHIP POLICY
The Committee has established a stock holding policy for the chief
executive officer of the Corporation that requires him to own a multiple of his
compensation in shares of the Corporation's Common Stock. The multiple is one
times his base salary and reference bonus for the fiscal year in which
compliance is achieved. The chief executive officer has three years from the
adoption of the policy to achieve this ownership level.
In order to assist the chief executive officer 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 the chief executive
officer to enable him to purchase shares of Common Stock in the open market. Any
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. During 1996, Dr. Chapman received a loan in the principal amount of
$210,654 under this plan, of which amount $168,523 was outstanding as of January
1, 2000. See Item 13 - "Certain Relationships and Related Transactions."
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 Thermo Instrument, the Corporation's
parent company, and of Thermo Electron, Thermo Instrument's parent company, as
of January 31, 2000, with respect to (i) each director, (ii) each named
executive officer and (iii) all directors and current executive officers as a
group. In addition, the following table sets forth the beneficial ownership of
Common Stock, as of January 31, 2000, 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.
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ThermoQuest Thermo Instrument Thermo Electron
Name (1) Corporation (2) Systems Inc. (3) Corporation (4)
-------- --------------- ---------------- ---------------
Thermo Electron Corporation (5).............. 45,698,716 N/A N/A
Richard W. K. Chapman........................ 351,746 225,530 79,801
Frank Jungers................................ 48,650 26,412 171,021
Earl R. Lewis................................ 135,000 436,499 215,477
Anthony J. Pellegrino........................ 91,000 0 31,500
Michael E. Porter............................ 96,267 0 3,710
Lewis H. Rosenblum........................... 40,744 1,000 3,200
All directors and current executive
officers as a group (7 persons)............ 788,407 872,156 963,241
</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 Dr. Chapman, Mr. Jungers,
Mr. Lewis, Mr. Pellegrino, Dr. Porter, Mr. Rosenblum and all directors
and executive officers as a group include 325,000, 45,000, 125,000,
90,000, 90,000, 37,500 and 737,500 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31,
2000, through the exercise of stock options. Shares of Common Stock
owned by Mr. Jungers, Dr. Porter and all directors and current
executive officers as a group include 2,650, 2,867 and 5,517 shares
allocated through January 1, 2000, to their respective accounts
maintained pursuant to the Deferred Compensation Plan. Shares of Common
Stock beneficially owned by Mr. Rosenblum include 2,000 shares held by
a trust for the benefit of his mother. No director or named executive
officer beneficially owned more than 1% of the Common Stock outstanding
as of January 31, 2000; all directors and current executive officers as
a group beneficially owned 1.56% of the Common Stock outstanding as of
such date.
<PAGE>
(3) Shares of the common stock of Thermo Instrument beneficially owned by
Dr. Chapman, Mr. Jungers, Mr. Lewis and all directors and executive
officers as a group include 196,249, 11,443, 409,081 and 780,460
shares, respectively, that such person or group had the right to
acquire within 60 days of January 31, 2000, through the exercise of
stock options. Shares of the common stock of Thermo Instrument
beneficially owned by all directors and executive officers as a group
include 468 shares allocated through January 31, 2000, to their
respective accounts maintained pursuant to Thermo Electron's employee
stock ownership plan (the "ESOP"). Shares of the common stock of Thermo
Instrument owned by Mr. Jungers and all directors and current executive
officers as a group include 13,563 shares allocated through January 1,
2000, to Mr. Jungers' account maintained pursuant to the Thermo
Instrument Systems Inc. deferred compensation plan for directors.
Shares of the common stock of Thermo Instrument beneficially owned by
Mr. Lewis include 2,987 shares held by his spouse. No director or named
executive officer beneficially owned more than 1% of the Thermo
Instrument common stock outstanding as of January 31, 2000; all
directors and current executive officers as a group beneficially owned
less than 1% of such common stock outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Dr.
Chapman, Mr. Jungers, Mr. Lewis, Mr. Pellegrino, Mr. Rosenblum and all
directors and executive officers as a group include 76,428, 24,673,
212,278, 31,500, 2,200 and 731,440 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31,
2000, through the exercise of stock options. Shares of the common stock
of Thermo Electron beneficially owned by all directors and executive
officers as a group include 1,071 shares allocated to accounts
maintained pursuant to the ESOP. Shares of the common stock of Thermo
Electron owned by Mr. Jungers and all directors and executive officers
as a group include 80,427 shares allocated to Mr. Jungers' account
maintained pursuant to Thermo Electron's deferred compensation plan for
directors. No director or named executive officer beneficially owned
more than 1% of the Thermo Electron common stock outstanding as of
January 31, 2000; all directors and current executive officers as a
group beneficially owned less than 1% of such common stock outstanding
as of such date.
(5) As of January 31, 2000, Thermo Electron, primarily through its
majority-owned subsidiary Thermo Instrument, beneficially owned 90.67%
of the outstanding Common Stock. Shares of the Common Stock
beneficially owned by Thermo Electron Corporation include 18,181 shares
that Thermo Electron has the right to acquire within 60 days of January
31, 2000 through the conversion of $3000,000 principal amount of the
Corporation's 5% convertible debentures due 2000. Thermo Electron's
address is 81 Wyman Street, Waltham, Massachusetts 02454-9046.
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 instance. Thermo Electron filed one Form 4 late reporting a total of 9
transactions associated with the grant and lapse of options to purchase Common
Stock granted to employees under its stock option program.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 certain
legal advice and services, risk management, employee benefit administration, tax
advice and preparation of tax returns, centralized cash management and financial
and other services to 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 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 $3,455,000 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. During
fiscal 1999, the Corporation was billed an additional $41,000 by Thermo Electron
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
<PAGE>
Corporation ceases to be a member of the Thermo Group or ceases to be a
participant in the Thermo Electron Corporate 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.
The Corporation has entered into a Tax Allocation Agreement with Thermo
Electron which outlines the terms under which the Corporation is to be included
in Thermo Electron's consolidated Federal and state income tax returns. Under
current law, the Corporation will be included in such tax returns so long as
Thermo Electron owns at least 80% of the outstanding common stock of Thermo
Instrument and Thermo Instrument owns at least 80% of the outstanding Common
Stock of the Corporation. In years in which the Corporation has taxable income,
it will pay to Thermo Electron amounts comparable to the taxes the Corporation
would have paid if it had filed its own separate company tax returns. If Thermo
Instrument's equity ownership of the Corporation were to drop below 80%, the
company would file its own tax returns. In 1999, the Corporation was assessed
$18,250,000 by Thermo Electron under the Tax Allocation Agreement. As of January
1, 2000, the Corporation owed Thermo Electron $13,775,000 for amounts due under
the Tax Allocation Agreement.
The Corporation has entered into an arrangement with Thermo BioAnalysis
Corporation ("Thermo BioAnalysis") whereby the Corporation provides assembly
labor for Thermo BioAnalysis' CE products on a contract basis. Under this
arrangement, the Corporation assembles instruments as required by Thermo
BioAnalysis for a charge based on the sum of the Corporation's actual cost of
materials and the allocable portion of its labor, overhead and other indirect
expenses. For the fiscal year ended January 1, 2000, Thermo BioAnalysis paid the
Corporation approximately $74,000 under this arrangement.
The Corporation acts as a distributor of certain of Thermo BioAnalysis'
products, is the exclusive distributor of Thermo BioAnalysis' MALDI-TOF products
in Japan and is the exclusive distributor of Thermo BioAnalysis' CE products in
countries in which it maintains a direct sales force. The Corporation is
responsible for all installation and warranty labor obligations at its expense.
For the fiscal year ended January 1, 2000, the Corporation purchased $500,000 of
products from Thermo BioAnalysis under these arrangements.
The Corporation purchases and sells other products and/or services in
the ordinary course of business with other subsidiaries of Thermo Electron. In
1999, the Corporation sold a total of $2,951,000 of other products and/or
services to Thermo Electron subsidiaries and purchased a total of $9,554,000 of
other products and/or services from such companies.
The Corporation, along with other U.K.-based Thermo Electron companies,
participates in a notional pool arrangement in the U.K. with Barclays Bank,
which includes a $114,943,000 credit facility. The Corporation has access to
$243,000 under this credit facility. Under this arrangement, Barclays notionally
combines the positive and negative cash balances held by the participants to
calculate the net interest yield/expense for the group. The benefit derived from
this arrangement is then allocated based on balances attributable to the
respective participants. Thermo Electron guarantees all of the obligations of
each participant in this arrangement. As of January 1, 2000, the Corporation had
a positive cash balance of approximately $13,272,000 based on an exchange rate
of $1.6171/GBP 1.00. For 1999, the average annual interest rate earned on GBP
deposits by participants in this credit arrangement was approximately 5.44% and
the average annual interest rate paid on overdrafts was approximately 5.8025%.
The Corporation, along with other European-based subsidiaries of Thermo
Electron, participates in a cash management arrangement in the Netherlands with
a wholly owned subsidiary of Thermo Electron. Under this arrangement,
participants' balances are pooled for interest calculation purposes. Interest
under this arrangement is based on Euro market rates. The Corporation has access
to a $684,000 line of credit under this arrangement. Thermo Electron guarantees
all of the obligations of each participant in this arrangement. At year-end
1999, the Corporation had $382,000 invested under this arrangement.
At year-end 1998, $96,906,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lent excess cash to Thermo Electron, which
Thermo Electron collateralized with investments principally consisting of
corporate notes, U.S.
<PAGE>
government agency securities, commercial paper, money market funds and other
marketable securities, in the amount of at least 103% of such obligation. The
Corporation's funds subject to the repurchase agreement were readily convertible
into cash by the Corporation. 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 Corporation and Thermo Electron commenced use
of a new domestic cash management arrangement. Under the new arrangement,
amounts advanced to Thermo Electron by the Corporation for domestic cash
management purposes bear interest at the 30-day Dealer Commercial Paper Rate
plus 50 basis points, set at the beginning of each month. Thermo Electron is
contractually required to maintain cash, cash equivalents, and/or immediately
available bank lines of credit equal to at least 50% of all funds invested under
this cash management arrangement by all Thermo Electron subsidiaries other than
wholly owned subsidiaries. The Corporation has the contractual right to withdraw
its funds invested in the cash management arrangement upon 30 days' prior
notice. At year-end 1999, the Corporation had invested $124,683,000 under this
arrangement. In addition, certain of the Corporation's European-based
subsidiaries participate in a new cash management arrangement with a wholly
owned subsidiary of Thermo Electron on terms similar to the domestic cash
management arrangement. The Corporation has access to a $4,110,000 line of
credit under this arrangement. The Corporation had a positive cash balance of
$10,300,000 under this arrangement at year-end 1999. Interest under this
arrangement is calculated based on Euro market rates and was 3.95% on the
negative balance at year-end 1999.
As of January 1, 2000, the Corporation owed Thermo Electron and its
other subsidiaries an aggregate of $917,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, net of amounts owed to the Corporation by Thermo
Electron and its other subsidiaries for products, services and miscellaneous
items and excluding amounts owed to Thermo Electron under the Tax Allocation
Agreement. The largest amount of such net indebtedness owed by the Corporation
to Thermo Electron and its other subsidiaries since January 2, 1999 was
$1,469,000. These amounts do not bear interest and are expected to be paid in
the normal course of business.
THERMO ELECTRON CORPORATE REORGANIZATION
Thermo Electron has adopted a major reorganization plan under which,
among other things, it is acquiring the minority interest in most of its
subsidiaries that have minority investors. In furtherance of this plan, Thermo
Instrument expects to cause the Corporation to merge with a wholly-owned
subsidiary of Thermo Instrument and Thermo Electron in a "short-form" merger
under Delaware law on May 11, 2000. In the merger, each outstanding share of
Common Stock of the Corporation (other than shares owned by the wholly-owned
subsidiary, the Corporation and stockholders of the Corporation who properly
exercise appraisal rights under Delaware law) will be automatically converted
into the right to receive $17.00 in cash, without interest, and the Corporation
will become a private company.
Executive officers and directors of the Corporation who hold shares of
Common Stock in the Corporation will also receive $17.00 per share of Common
Stock on the same terms as all the other stockholders. See "Security Ownership
of Certain Beneficial Owners and Management."
In addition, certain executive officers and directors of the
Corporation hold options to acquire shares of Common Stock (See Item 12 -
"Security Ownership of Certain Beneficial Owners and Management"), which options
will be treated in the same manner as options held by other employees. In
general, all unvested options held by such persons will be assumed by Thermo
Electron and converted into options to acquire shares of Thermo Electron's
common stock. In the case of vested options held by such persons, the holders
will be given the opportunity to elect either to convert the options into vested
options for Thermo Electron common stock or to receive cash at the $17.00
transaction price less the applicable exercise price. Vested and unvested
options that are assumed by Thermo Electron will be converted as follows: The
number of shares of Thermo Electron common stock underlying each assumed option
will equal the number of shares of Common Stock underlying the option before the
transaction, multiplied by the "cash exchange ratio" described below, rounded
down to the nearest whole number of shares of Thermo Electron common stock. The
exercise price for each assumed option will be calculated by dividing the
exercise price of the option before the transaction by the "cash exchange ratio"
set forth below, rounded up to the nearest whole cent. The "cash exchange ratio"
is a fraction, the numerator of which is $17.00 and the denominator of which is
the closing price of Thermo Electron common stock on the day preceding the
effective date of the transaction.
<PAGE>
In addition to the ownership information that appears in the Item 12 -
"Security Ownership of Certain Beneficial Owners and Management" table, Mr.
Melas-Kyriazi (who is not a named executive officer of the Corporation for
purposes of Securities and Exchange Commission regulations, and whose ownership
information therefore does not appear in such table) holds options to purchase
25,000 shares of Common Stock.
Additionally, certain directors participate in the Deferred
Compensation Plan. See Item 12 - "Security Ownership of Certain Beneficial
Owners and Management." On the effective date of the proposed transaction, the
Deferred Compensation Plan will terminate and the participants will receive cash
in an amount equal to the balance of such participant's stock units credited to
his account under the Deferred Compensation Plan, multiplied by $17.00.
STOCK HOLDING ASSISTANCE PLAN
The human resources committee of the Corporation's board of directors
(the "Committee") established a stock holding policy that requires its chief
executive officer to acquire and hold a minimum number of shares of Common
Stock. In order to assist the chief executive officer in complying with the
policy, the Committee also adopted a stock holding assistance plan under which
the Corporation may make interest-free loans to the chief executive officer, to
enable him to purchase Common Stock in the open market. In 1996, Dr. Chapman
received a loan in the principal amount of $210,654 under this plan to purchase
15,000 shares of common stock of which amount $168,523 was outstanding as of
January 1, 2000. The loan 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.
THERMOQUEST CORPORATION
By: / s / Sandra L. Lambert
------------------------------
Sandra L. Lambert
Secretary
