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 1-11757
THERMO OPTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3283973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8E Forge Parkway
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
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. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of January 24, 1997, was
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approximately $38,563,000.
As of January 24, 1997, the Registrant had 48,450,000 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended December 28, 1996, are incorporated by
reference into Parts I and II.
Part III, Item 10. Directors and Executive Officers of
the Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and
Management.
Part III, Item 13. Certain Relationships and
Transactions.
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year,
is contained in the following Attachment A, which is included
herein and made a part of this Annual Report on Form 10-K.
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.
THERMO OPTEK CORPORATION
By: /s/ Sandra L. Lambert
-------------------------------
Sandra L. Lambert
Secretary
ATTACHMENT A
DIRECTORS
Set forth below are the names of the persons serving as
directors, their ages, their offices in the Corporation, if any,
their principal occupation or employment for the past five years,
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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
corporation, Thermo Instrument Systems Inc. ("Thermo Instrument"),
a manufacturer of analytical, environmental monitoring and
process control instrumentation, and Thermo Instrument's parent
corporation, Thermo Electron, a diversified high technology company,
Corporation ("Thermo Electron"), is reported under the caption
"Stock Ownership."
George N. Dr. Hatsopoulos, 70, has been chairman of
Hatsopoulos the board and a director of the Corporation
since its inception in August 1995. He has
served as chairman and chief executive
officer of Thermo Electron since he founded
that company in 1956 and as its president
from 1956 to January 1997. Dr. Hatsopoulos
is also a director of Photoelectron Corporation
Thermedics Inc., Thermo Ecotek Corporation,
Thermo Electron, Thermo Fibertek Inc., Thermo
Instrument, ThermoQuest Corporation and
ThermoTrex Corporation. Dr. Hatsopoulos is the
brother of John N. Hatsopoulos, the chief
financial officer and a vice president of
the Corporation.
Stephen R. Levy Mr. Levy, 56, has been a director of the
Corporation since November 1995. Since
November 1995, Mr. Levy has been president
of The Apogee Group, Inc., a company that
he founded that provides consulting
services in high technology. Mr. Levy
served as chairman of the board and chief
executive officer of BBN Corporation, a
high technology company, from 1983 to 1994
and was president and chief executive
officer of BBN Corporation from 1976 to
1983. He retired from BBN Corporation in
1995 and is currently its chairman
emeritus. He is also a director of BBN
Corporation and OneWave, Inc.
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Earl R. Lewis Mr. Lewis, 53, has been chief executive
officer and a director of the Corporation
since its inception in August 1995. He
also served as the corporation's president
from August 1995 to April 1997. Mr. Lewis
has been president and chief operating
officer of Thermo Instrument since March
1997 and January 1996, respectively, was
executive vice president of Thermo
Instrument from January 1996 to March 1997,
was a senior vice president of Thermo
Instrument from January 1994 to January
1996, and was a vice president of Thermo
Instrument from March 1992 to January 1994.
Mr. Lewis is a director of Thermo BioAnalysis
Corporation, ThermoQuest Corporation,
ThermoSpectra Corporation and Trex Medical
Corporation.
Robert A. McCabe Mr. McCabe, 62, has been a director of the
Corporation since March 1996. He has
served as president of Pilot Capital
Corporation, which is engaged in private
investments and provides acquisition
services, since 1987. Prior to that time,
Mr. McCabe was a managing director of
Lehman Brothers Inc., an investment banking
firm. Mr. McCabe is also a director of
Borg-Warner Security Corporation, Church &
Dwight Company and Thermo Electron.
Arvin H. Smith Mr. Smith, 67, has been a director of the
Corporation since its inception in August
1995. Mr. Smith has been the chairman of
the board and chief executive officer of
Thermo Instrument since March 1997 and
1986, respectively, and was president of
Thermo Instrument from 1986 to March 1997.
Mr. Smith also has been an executive vice
president of Thermo Electron since 1991 and
a senior vice president of Thermo Electron
from 1986 to 1991. Mr. Smith is also a
director of Thermo BioAnalysis Corporation,
Thermo Instrument, Thermo Power
Corporation, ThermoQuest Corporation and
ThermoSpectra Corporation.
Committees of the Board of Directors and Meetings
The Board of Directors has established an Audit Committee
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and a Human Resources Committee, each consisting solely of
outside directors. The present members of the Audit Committee are
Mr. Levy (Chairman) and Mr. McCabe. 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. Levy and Mr.
McCabe (Chairman). The Human Resources Committee reviews the
performance of senior members of management, recommends executive
compensation and administers the Corporation's stock option and
other stock-based compensation plans. The Corporation does not
have a nominating committee of the Board of Directors. The Board
of Directors met eight times, the Audit Committee met twice and
the Human Resources Committee met six times during fiscal 1996.
Each director attended at least 75% of all meetings of the Board
of Directors and committees on which he served held during fiscal
1996.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of
Thermo Electron or of any other companies affiliated with Thermo
Electron (also referred to as "outside directors") receive an
annual retainer of $4,000 and a fee of $1,000 per day for
attending regular meetings of the Board of Directors and $500 per
day for participating in meetings of the Board of Directors held
by means of conference telephone and for participating in certain
meetings of committees of the Board of Directors. Payment of
directors' fees is made quarterly. Dr. Hatsopoulos, Mr. Lewis
and Mr. Smith 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 Deferred Compensation Plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer
receipt of his cash fees until he ceases to serve as a director,
dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the
Corporation that is not approved by the Board of Directors,
deferred amounts become payable immediately. Either of the
following is deemed to be a change of control: (a) the
occurrence, without the prior approval of the Board of Directors,
of the acquisition, directly or indirectly, by any person of 50%
or more of the outstanding Common Stock or the outstanding common
stock of Thermo Instrument or 25% or more of the outstanding
common stock of Thermo Electron; or (b) the failure of the
persons serving on the Board of Directors immediately prior to
any contested election of directors or any exchange offer or
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tender offer for the Common Stock or the common stock of Thermo
Instrument or Thermo Electron to constitute a majority of the
Board of Directors at any time within two years following any
such event. Amounts deferred pursuant to the Deferred
Compensation Plan are valued at the end of each quarter as units
of 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 75,000 shares of
Common Stock have been reserved for issuance under the Deferred
Compensation Plan. As of March 1, 1997, deferred units equal to
556.47 shares of Common Stock were accumulated under the Deferred
Compensation Plan.
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. The Directors Plan provides for the grant of stock
options upon a director's initial appointment and, beginning in
2000, awards options to purchase 1,000 shares annually to outside
directors. A total of 225,000 shares of Common Stock have been
reserved for issuance under the Directors Plan.
Under the Directors Plan, each eligible director was granted
an option to purchase 45,000 shares upon the effective date of
the Corporation's initial public offering. In addition, each new
outside director who joined the Board of Directors during 1996
was granted an option to purchase 45,000 shares of Common Stock.
The size of awards to new directors appointed to the Board of
Directors after 1996 is reduced by 11,250 shares in each
subsequent year. Outside directors who join the Board of
Directors after 1999 would not receive an option grant upon their
appointment or election to the Board of Directors, but would be
eligible to participate in the annual option awards described
below. Options evidencing initial grants to directors are
exercisable six months after the date of grant. The shares
acquired upon exercise are subject to restrictions on transfer
and the right of the Corporation to repurchase such shares at the
exercise price in the event the director ceases to serve as a
director of the Corporation or any other Thermo Electron company.
The restrictions and repurchase rights lapse or are deemed to
have lapsed in equal annual installments of 11,250 shares per
year, starting with the first anniversary of the grant date,
provided the director has continuously served as a director of
the Corporation or any other Thermo Electron company since the
grant date. These options expire on the fifth anniversary of the
grant date, unless the director dies or otherwise ceases to serve
as a director of the Corporation or another Thermo Electron
company prior to that date.
Outside directors will also receive an annual grant of
options to purchase 1,000 shares of Common Stock, commencing with
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the Annual Meeting of the Stockholders to be held in 2000. The
annual grant will be made at the close of business on the date of
each Annual Meeting of the Stockholders of the Corporation to
each outside director then holding office. Options evidencing
annual grants may be exercised at any time from and after the
six-month anniversary of the grant date of the option and prior
to the expiration of the option on the third anniversary of the
grant date. Shares acquired upon exercise of the options would
be subject to repurchase by the Corporation at the exercise price
if the recipient ceased to serve as a director of the Corporation
or 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 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 March 1, 1997, options to purchase 135,000
shares of Common Stock were available for future grant under the
Directors Plan.
Stock Ownership Policies for Directors
During 1996, the Human Resources Committee of the Board of
Directors (the "Committee") established a stock holding policy
for directors. The stock holding policy requires each director
to hold a minimum of 1,000 shares of Common Stock. Directors are
requested to achieve this ownership level by the 1998 Annual
Meeting of Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a
separate stock holding policy established by the Committee in
1996.
In addition, the Committee adopted a policy requiring
directors to hold a certain number of shares of the Corporation's
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.
STOCK OWNERSHIP
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 March 1, 1997, with respect to
(i) each person who was known by the Corporation to own
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beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each executive officer named in
the summary compensation table under the heading "Executive
Compensation" and (iv) all directors and current executive
officers as a group.
While certain directors and executive officers of the
Corporation are also directors and executive officers of Thermo
Instrument or its subsidiaries other than the Corporation, all
such persons disclaim beneficial ownership of the shares of
common stock owned by Thermo Instrument.
<TABLE>
<CAPTION>
Thermo Thermo
Thermo Optek Instrument Electron
Name (1) Corporation Systems Inc. Corporation
(2) (3) (4)
<S> <C> <C> <C>
Thermo Instrument Systems Inc. 45,000,000 N/A N/A
George N. Hatsopoulos 110,000 143,314 3,512,279
Kristine A. Langdon 75,500 7,417 16,452
Stephen R. Levy 47,556 0 0
Earl R. Lewis 254,000 128,233 124,184
Robert A. McCabe 48,000 53,504 47,515
Robert J. Rosenthal 113,500 61,441 31,350
Arvin H. Smith 98,000 431,667 513,038
All directors and current
executive officers as a group
(9 persons) 872,556 925,472 4,916,584
</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 the Common Stock beneficially owned by Dr.
Hatsopoulos, Ms. Langdon, Mr. Levy, Mr. Lewis, Mr. McCabe, Dr.
Rosenthal, Mr. Smith and all directors and executive officers as
a group include 90,000, 75,000, 45,000, 225,000, 45,000, 112,500,
90,000 and 778,500 shares, respectively, that such person or
group has the right to acquire within 60 days of March 1, 1997,
through the exercise of stock options. Shares of the Common Stock
beneficially owned by Ms. Langdon include a total of 500 shares
held by her as custodian for two minor children. Shares of the
Common Stock beneficially owned by Mr. Lewis include 2,500 shares
owned by his spouse and a total of 2,000 shares owned by two
sons. No director or executive officer beneficially owned more
than 1% of the Common Stock outstanding as of March 1, 1997; all
directors and executive officers as a group beneficially owned
1.8% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially
owned by Dr. Hatsopoulos, Ms. Langdon, Mr. Lewis, Mr. McCabe, Dr.
Rosenthal, Mr. Smith and all directors and executive officers as
a group include 93,750, 7,124, 112,500, 10,995, 60,890, 234,375
and 600,529 shares, respectively, that such person or group had
the right to acquire within 60 days after March 1, 1997, through
the exercise of stock options. Shares of the common stock of
Thermo Instrument beneficially owned by Dr. Hatsopoulos, Mr.
Smith and all directors and executive officers as a group include
529, 530 and 1,984 shares, respectively, allocated through March
1, 1997, to their respective accounts maintained pursuant to
Thermo Electron's employee stock ownership plan, of which the
trustees, who have investment power over its assets, are
executive officers of Thermo Electron (the "ESOP"). Shares
beneficially owned by Dr. Hatsopoulos include 21,368 shares held
by his spouse and 50 shares allocated to the account of his
spouse maintained pursuant to the ESOP. Shares beneficially
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owned by Mr. Lewis include 2,390 shares held by Mr. Lewis'
spouse. The directors and executive officers of the Corporation
did not individually or as a group beneficially own more than 1%
of the common stock of Thermo Instrument outstanding as of March
1, 1997.
(4) The shares of the common stock of Thermo Electron shown in
the table reflect a three-for-two split of such stock distributed
in June 1996 in the form of a 50% stock dividend. Shares of the
common stock of Thermo Electron beneficially owned by Dr.
Hatsopoulos, Ms. Langdon, Mr. Lewis, Mr. McCabe, Dr. Rosenthal,
Mr. Smith and all directors and executive officers as a group
include 1,499,500, 15,750, 121,536, 9,375, 30,900, 222,411 and
2,426,731 shares, respectively, that such person or group has the
right to acquire within 60 days of March 1, 1997, through the
exercise of stock options. Shares of the common stock of Thermo
Electron beneficially owned by Dr. Hatsopoulos, Mr. Smith and all
directors and executive officers as a group include 2,164, 1,717
and 7,139 full shares, respectively, allocated to accounts
maintained pursuant to the ESOP. Shares of the common stock of
Thermo Electron beneficially owned by Mr. McCabe and all
directors and executive officers as a group include 34,725 full
shares allocated to Mr. McCabe's account under Thermo Electron's
deferred compensation plan for directors. Shares of the common
stock of Thermo Electron beneficially owned by Dr. Hatsopoulos
include 89,601 shares held by Dr. Hatsopoulos' spouse, 168,750
shares held by a QTIP trust of which Dr. Hatsopoulos' spouse is
the trustee, 39,937 shares held by a family trust of which Dr.
Hatsopoulos' spouse is the trustee, and 153 shares allocated to
the account of Dr. Hatsopoulos' spouse maintained pursuant to the
ESOP. Shares beneficially owned by Ms. Langdon include 310
shares held by her as custodian for two minor children. No
director or executive officer beneficially owned more than 1% of
the common stock of Thermo Electron outstanding as of March 1,
1997, except Dr. Hatsopoulos who beneficially owned 2.3% of such
stock; all directors and executive officers as a group
beneficially owned approximately 3.2% of the Thermo Electron
common stock outstanding as of such date.
(5) As of March 1, 1997, Thermo Instrument beneficially owned
93% of the outstanding Common Stock. Thermo Instrument's address
is 1275 Hammerwood Avenue, Sunnyvale, California 94089. As of
March 1, 1997, Thermo Instrument had the power to elect all of
the members of the Corporation's Board of Directors. Thermo
Instrument is a majority owned subsidiary of Thermo Electron, and
therefore Thermo Electron may be deemed a beneficial owner of the
shares of Common Stock beneficially owned by Thermo Instrument.
Thermo Electron disclaims beneficial ownership of these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as
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Thermo Instrument and its parent company, 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 1996, except in the following
instances. Mr. Stephen R. Levy, a director of the Corporation,
filed one Form 4 late reporting one transaction. Thermo
Instrument filed three Forms 4 late, reporting a total of three
transactions consisting of the lapse and cancellation of options
to purchase the Common Stock granted to its employees. Thermo
Electron filed six Forms 4 late, reporting a total of 21
transactions, including the three transactions described above
for Thermo Instrument, an additional 16 open market purchases of
Common Stock, one additional lapse and cancellation without
exercise of options granted to its employees to purchase the
Common Stock and one grant to employees of options to purchase
the Common Stock.
EXECUTIVE COMPENSATION
NOTE: All share amounts reported below have, in all cases, been
adjusted as applicable to reflect a three-for-two stock split
distributed in June 1996 with respect to the common stock of
Thermo Electron in the form of a 50% stock dividend.
Summary Compensation Table
The following table summarizes compensation for services to
the Corporation in all capacities awarded to, earned by or paid
to the Corporation's chief executive officer and its two other
most highly compensated executive officers for the last two
fiscal years. No other executive officer of the Corporation met
the definition of "highly compensated" within the meaning of the
Securities and Exchange Commission's executive compensation
disclosure rules.
The Corporation is required to appoint certain executive
officers and full-time employees of Thermo Electron as executive
officers of the Corporation, in accordance with the Thermo
Electron Corporate Charter. The compensation for these executive
officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's
affairs is provided to the Corporation under the Corporate
Services Agreement between the Corporation and Thermo Electron.
Accordingly, the compensation for these individuals is not
reported in the following table.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Annual Options (No. of
Name and Fiscal Compensation Shares All Other
Principal Position Year Salary Bonus and Company (1)Compensation
(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Earl R. Lewis (3) 1996 $72,000 $64,000 225,000 (TOC) $11,550 (4)
Chief Executive 2,000 (TFG)
Officer
2,000 (TLT)
2,000 (TSR)
1995 $123,250 $76,500 150 (TMO) $6,750
7,500 (TBA)
5,000 (TLZ)
Robert J. Rosenthal 1996 $135,000 $120,000 112,500 (TOC) $4,500
(5)
150 (TMO)
President and
Chief Operating 10,000 (TMQ)
Officer
1995 $119,945 $97,000 15,000 (TMO) $4,500
2,000 (TBA)
Kristine A. Langdon 1996 $100,000 $40,000 75,000 (TOC) $5,344
Vice President 5,000 (TMQ)
1995 $ 93,000 $35,000 -- $5,198
</TABLE>
(1) Options granted by the Corporation are designated in the
table as "TOC." In addition, the named executive officers have
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been granted options to purchase common stock of Thermo Electron
companies from time to time as part of Thermo Electron's stock
option program. Options have been granted to the named executive
officers during the last two fiscal years in the following Thermo
Electron companies: Thermo BioAnalysis Corporation (designated
in the table as TBA), Thermo Electron (designated in the table as
TMO) Thermo Fibergen Inc. (designated in the table as TFG),
ThermoLase Corporation (designated in the table as TLZ),
ThermoLyte Corporation (designated in the table as TLT),
ThermoQuest Corporation (designated in the table as TMQ) and
Thermo Sentron Inc. (designated in the table as TSR).
(2) Represents the amount of matching contributions made by the
individual's employer on behalf of named executive officers
participating in the Thermo Electron 401(k) plan or the Nicolet
Retirement Savings Plan.
(3) Mr. Lewis was appointed chief executive officer of the
Corporation in August 1995 and vice president of Thermo Electron
in September 1996. Mr. Lewis was also appointed chief operating
officer of Thermo Instrument effective January 1996, and as such,
is responsible for the day-to-day operations of Thermo
Instrument. A portion of Mr. Lewis' annual cash compensation
(salary and bonus) has been allocated to and paid by Thermo
Instrument and Thermo Electron in each of the last two fiscal
years for the time he devoted to his responsibilities to these
companies. The annual cash compensation (salary and bonus)
reported in the table for Mr. Lewis represents the amount paid by
the Corporation and all other sources for Mr. Lewis' services as
its chief executive officer. For calendar 1996 and 1995,
approximately 40% and 85%, respectively, of Mr. Lewis' salary and
bonus earned in all capacities throughout the Thermo Electron
organization was paid by the Corporation for his services as
chief executive officer.
(4) In addition to the matching contribution referred to in
footnote (2), such amount includes $4,800, which represents the
amount of compensation attributable to an interest-free loan
provided to Mr. Lewis pursuant to the Corporation's stock holding
assistance plan. See "Relationship with Affiliates - Stock
Holding Assistance Plan."
(5) Dr. Rosenthal was appointed president of the Corporation in
April 1997. He was appointed an executive vice president and
chief operating officer of the Corporation in December 1996.
Prior to that date, he was a senior vice president of the
Corporation.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options made during fiscal 1996 to the
Corporation's chief executive officer and the other named
executive officers. It has not been the Corporation's policy in
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the past to grant stock appreciation rights, and no such rights
were granted during fiscal 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation for
Underlying Granted to Price Expira- Option Term (2)
Options Employees in Per tion
Name Granted (1) Fiscal Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earl R. Lewis 225,000 (TOC) 12.1% $12.00 04/11/08 $2,148,750 $5,773,500
(3)
2,000 (TFG) 0.4% (4) $10.00 09/12/08 $ 15,920 $42,760
2,000 (TLT) 0.6% (4) $10.00 03/11/08 $ 15,920 $42,760
2,000 (TSR) 0.4% (4) $14.00 03/11/08 $ 22,280 $59,880
Robert J. 112,500 (TOC) 6.0% $12.00 04/11/08 $1,074,375 $2,886,750
Rosenthal
150 (TMO) 0.01% (4) $42.79 05/22/99 $ 1,011 $2,124
10,000 (TMQ) 0.4% (4) $13.00 02/08/08 $ 103,500 $278,000
Kristine A. 75,000 (TOC) 4.0% $12.00 04/11/08 $ 716,250 $1,924,500
Langdon
5,000 (TMQ) 0.2% (4) $13.00 02/08/08 $ 51,750 $ 139,000
</TABLE>
(1) All of the options granted during the fiscal year are
immediately exercisable as of the end of the fiscal year, except
options to purchase the common stock of ThermoLyte Corporation,
which are not exercisable until the earlier of (i) 90 days after
the effective date of the registration of that company's common
stock under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") and (ii) nine years after the grant date.
In all cases, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or another
Thermo Electron company. The granting corporation may exercise
its repurchase rights within six months after the termination of
the optionee's employment. For publicly traded companies, the
repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term, which may vary
from seven to twelve years, provided the optionee continues to be
employed by the Corporation or another Thermo Electron company.
For companies that are not publicly traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant
date. Certain options granted as part of Thermo Electron's stock
option program have three-year terms, and the repurchase rights
lapse in their entirety on the second anniversary of the grant
date. The granting corporation 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.
(2) The amounts shown on this table represent hypothetical gains
that could be achieved for the respective options if exercised at
the end of the option term. These gains are based on assumed
rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the
common stock of the granting corporation, the optionee's
continued employment through the option period and the date on
which the options are exercised.
(3) Mr. Lewis has been granted options to purchase shares of the
common stock of Thermo Electron and its subsidiaries other than
the Corporation. These options are not reported in the table as
they were granted as compensation for service to other Thermo
Electron companies in capacities other than Mr. Lewis' capacity
as chief executive officer of the Corporation.
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(4) 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 1996
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options held at the end of fiscal 1996 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1996
And Fiscal 1996 Year-End Option Values
Number of
Unexercised
Shares Options at Fiscal Value of
Acquired Year-End Unexercised
on Value (Exercisable/ In-the-Money
Name Company Exercise Realized Unexercisable) (1) Options
<S> <C> <C> <C> <C> <C>
Earl R. Lewis Thermo Optek -- -- 225,000 /0 $0/--
(2)
Thermo -- -- 2,000 /0 $ 1,500/--
Fibergen
ThermoLyte -- -- 0 /2,000 --/$0(5)
(5)
Thermo Sentron -- -- 2,000 /0 $0/--
Robert J. Thermo Optek -- -- 112,500 /0 $0/--
Rosenthal
Thermo -- -- 30,900 /0(3) $390,976/--
Electron
Thermo -- -- 2,000 /0 $6,250/--
BioAnalysis
Thermo -- -- 60,890 /0 $1,064,971/--
Instrument
ThermoQuest -- -- 10,000 /0 $0/--
ThermoSpectra -- -- 2,500 /0 $4,688/--
Kristine A. Therm Optek -- -- 75,000 /0 $0/--
Langdon (4)
ThermoQuest -- -- 5,000 /0 $0/--
ThermoSpectra -- -- 400/0 $750/--
</TABLE>
(1) All of the options reported outstanding at the end of the
fiscal year were immediately exercisable as of fiscal year-end,
except options to purchase the common stock of ThermoLyte
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 and
(ii) nine years after the grant date. In all cases, the shares
acquired upon exercise of the options reported in the table are
subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation
or another Thermo Electron company. The granting corporation may
exercise its repurchase rights within six months after the
termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a
five- to ten-year period, depending on the option term, which may
vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo
Electron company. For companies that are not publicly traded,
the repurchase rights generally lapse in their entirety on the
ninth anniversary of the grant date. Certain options granted as
a part of Thermo Electron's stock option program have three-year
terms, and the repurchase rights lapse in their entirety on the
second anniversary of the grant date. The granting corporation
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.
(2) Mr. Lewis also holds 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.
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<PAGE>
(3) Options to purchase 15,750 shares of the common stock of
Thermo Electron granted to Dr. Rosenthal are subject to the same
terms as described in footnote (1), except that the repurchase
rights of the granting corporation generally do not lapse until
the tenth anniversary of the grant date. In the event of the
employee's death or involuntary termination prior to the tenth
anniversary of the grant date, the repurchase rights of the
granting corporation shall be deemed to have lapsed ratably over
a five-year period, commencing with the fifth anniversary of the
grant date.
(4) Ms. Langdon became an employee of the Corporation on
April 1, 1994 and was named president of Thermo Vision
Corporation, a wholly owned subsidiary of the Corporation, in
January 1995. Prior to that date, she had been employed by
Thermo Electron, and had been granted options to purchase shares
of common stock of Thermo Electron and its subsidiaries other
than the Corporation as compensation for her service to Thermo
Electron. These options are not reported in the table as they
were granted as compensation for service to other Thermo Electron
companies and prior to her service to the Corporation.
(5) 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.
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority
interest in subsidiary companies to outside investors as an
important tool in its future development. As part of this
strategy, Thermo Electron and certain of its subsidiaries have
created several privately and publicly held subsidiaries, and
Thermo Instrument has created the Corporation as a publicly held,
majority-owned subsidiary. From time to time, Thermo Electron
and its subsidiaries will create other majority-owned
subsidiaries as part of its spinout strategy. (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 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,
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<PAGE>
are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role
and responsibilities of the management of each company, provides
for the sharing of group resources by the companies and provides
for centralized administrative, banking and credit services to be
performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by
members, coordinating the access of Thermo Electron and the
Thermo Subsidiaries (the "Thermo Group") to external financing
sources, ensuring compliance with external financial covenants
and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also
provide guarantees of debt or other obligations of the Thermo
Subsidiaries or may obtain external financing at the parent level
for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on
behalf of, the consolidated entity or may obtain financing
directly from external financing sources. Under the Charter,
Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by
external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo
Group, and for apportioning such constraints within the Thermo
Group. In addition, Thermo Electron establishes certain internal
policies and procedures applicable to members of the Thermo
Group. The cost of the services provided by Thermo Electron to
the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the
Thermo Subsidiaries.
The Charter presently provides that it shall continue in
effect so long as Thermo Electron and at least one Thermo
Subsidiary participate. The Charter may be amended at any time by
agreement of the participants. Any Thermo Subsidiary, including
the Corporation, 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.
However, 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.
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<PAGE>
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 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 1.0% of the Corporation's revenues for these services in
fiscal 1996. The fee is reviewed annually and may be changed by
mutual agreement of the Corporation and Thermo Electron. During
fiscal 1996, Thermo Electron assessed the Corporation $3,506,000
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.
For items such as employee benefit plans, insurance coverage and
other identifiable costs, Thermo Electron charges the Corporation
based on charges attributable to the Corporation. The Services
Agreement automatically renews for successive one-year terms,
unless canceled by the Corporation upon 30 days' prior notice. In
addition, the Services Agreement terminates automatically in the
event the Corporation ceases to be a member of the Thermo Group
or ceases to be a participant in the Charter. In the event of a
termination of the Services Agreement, the Corporation will be
required to pay a termination fee equal to the fee that was paid
by the Corporation for services under the Services Agreement for
the nine-month period prior to termination. Following
termination, Thermo Electron may provide certain administrative
services on an as-requested basis by the Corporation or as
required in order to meet the Corporation's obligations under
Thermo Electron's policies and procedures. Thermo Electron will
charge the Corporation a fee equal to the market rate for
comparable services if such services are provided to the
Corporation following termination.
The Corporation has entered into a Tax Allocation Agreement
with Thermo Electron which outlines the terms under which the
Corporation will 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 October 1995, Thermo Electron purchased $10,000,000
principal amount of the Corporation's 5% Convertible Subordinated
Debentures due 2000, at par and on terms identical to those
offered to unaffiliated investors.
From time to time, the Corporation may transact business
with other companies in the Thermo Group. During fiscal 1996,
these transactions included the following.
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<PAGE>
The Corporation leases office and manufacturing space to
ThermoSpectra Corporation ("ThermoSpectra"), a majority-owned
subsidiary of Thermo Instrument, and Nicolet Biomedical Inc.
("Nicolet Biomedical"), a wholly owned subsidiary of Thermo
Electron, pursuant to an arrangement whereby the Corporation
charges ThermoSpectra and Nicolet Biomedical their allocated
share of the occupancy expenses of the Corporation's principal
Wisconsin facility, based on the space ThermoSpectra and Nicolet
Biomedical utilize. The Corporation recorded operating lease
income of $913,000 in 1996 from these affiliates. These leases
are effective until December 31, 1998, but may be terminated by
ThermoSpectra and Nicolet Biomedical upon 30 days' prior notice
to the Corporation.
The Corporation purchases and sells products in the ordinary
course of business with other subsidiaries of Thermo Electron.
In 1996, the Corporation sold a total of $28,155,000 of products
to Thermo Electron subsidiaries and purchased a total of
$8,748,000 of products from such companies.
During 1996, the Corporation acquired various businesses
from Thermo Instrument. In April 1996, the Corporation acquired
the Mattson Instruments and Unicam Divisions of Analytical
Technology, Inc. for $36,558,000 in cash. In November 1996, the
Corporation acquired Applied Research Laboratories S.A., V.G.
Elemental and four related sales offices for an aggregate of
$55,196,000 in cash and the assumption of $16,593,000 in debt.
The purchase price paid by the Corporation is subject to a
post-closing adjustment to be negotiated with the former owner of
these businesses.
The Corporation's cash equivalents are invested in a
repurchase agreement with Thermo Electron, pursuant to which the
Corporation in effect lends cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting
of corporate notes, United States government agency securities,
money market funds, commercial paper, and other marketable
securities, in the amount of at least 103% of such obligation.
The Corporation's funds subject to the repurchase agreement will
be readily convertible into cash by the Corporation and have an
original maturity of three months or less. The repurchase
agreement earns a rate based on the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each
quarter.
Stock Holding Assistance Plan
During 1996, the Human Resources Committee
of the Corporation's Board of Directors (the "Committee")
established a stock holding policy for executive
officers of the Corporation. The stock
holding policy specifies an appropriate level of ownership of the
Corporation's Common Stock as a multiple of the officer's
compensation. For the chief executive officer, the multiple is
one times his base salary and reference bonus for the calendar
year. For all other officers, the multiple is one times the
15
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<PAGE>
officer's base salary. The Committee deemed it appropriate to
permit officers to achieve these ownership levels over a
three-year period.
In order to assist officers in complying with the policy,
the Committee also adopted a stock holding assistance plan under
which the Corporation is authorized to make interest-free loans
to officers to enable them to purchase shares of the Common Stock
in the open market. The loans are required to be repaid upon the
earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise authorized by the Committee. During 1996,
Mr. Lewis received a loan in the principal amount of $194,029.50
under this plan to purchase 15,000 shares of the Common Stock.
16
