<PAGE>
THERMO OPTEK CORPORATION
8 E. Forge Parkway
Franklin, Massachusetts 02038
April 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
Thermo Optek Corporation. I respectfully request that all Stockholders attend
this meeting, if possible.
Our Annual Report for the year ended January 3, 1998, is enclosed. I hope
you will read it carefully. Feel free to forward any questions you may have if
you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer & Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
ROBERT J. ROSENTHAL
President and Chief Executive Officer
<PAGE>
THERMO OPTEK CORPORATION
8 E. Forge Parkway
Franklin, Massachusetts 02038
April 23, 1998
To the Holders of the Common Stock of
THERMO OPTEK CORPORATION
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermo Optek Corporation
(the "Corporation") will be held on Monday, June 1, 1998 at 9:00 a.m. at The
Hyatt Regency Scottsdale Resort at Gainey Ranch, 7500 East Doubletree Ranch
Road, Scottsdale, Arizona, 85258. The purpose of the Meeting is to consider and
take action upon the following matters:
1. Election of six directors.
2. Such other business as may properly be brought before the Meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
Meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the Meeting is April 3, 1998.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
Meeting in order to constitute a quorum for the transaction of business. It is
important that your shares be represented at the Meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This Notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo Optek
Corporation (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Monday, June 1, 1998, at 9:00 a.m. at
The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona, and
any adjournment thereof. The mailing address of the executive office of the
Corporation is 8 E. Forge Parkway, Franklin, Massachusetts 02038. This proxy
statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about April 29, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
six directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $.01 par value ("Common Stock")
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. All signed
and returned proxies will be counted towards establishing a quorum for the
Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors,
and as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present and entitled to vote on
the election. Withholding authority to vote for a nominee for director will be
treated as shares present and entitled to vote and, for purposes of determining
the outcome of the vote, will have the same effect as a vote against the
proposal. With respect to the election of directors, broker "non-votes" will not
be treated as shares present and entitled to vote on a voting matter and will
have no effect on the outcome of the vote. A broker "non-vote" occurs when a
nominee holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Corporation received prior to the Meeting, by executing and returning a
later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of April 3, 1998, consisted of
49,574,273 shares of Common Stock. Only Stockholders of record at the close of
business on April 3, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
- PROPOSAL 1 -
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified or until his earlier resignation, death or
removal.
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NOMINEES FOR DIRECTORS
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors and
the names of other public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the Corporation's Common
Stock and of the common stock of its parent company, Thermo Instrument Systems
Inc. ("Thermo Instrument"), a manufacturer of analytical, environmental-
monitoring and process control instruments, and Thermo Instrument's parent
company, Thermo Electron Corporation ("Thermo Electron"), a provider of
diversified products and services for biomedical, instrument and environmental
markets, is reported under the caption "Stock Ownership." All of the nominees
are currently directors of the Corporation.
<TABLE>
<S> <C>
GEORGE N. HATSOPOULOS
Dr. Hatsopoulos, 71, has been 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 senior vice president
of the Corporation.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
STEPHEN R. LEVY Mr. Levy, 57, 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. He is also a director
of OneWave, Inc.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
EARL R. LEWIS Mr. Lewis, 54, 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 and chief executive officer from August 1995 to
April 1997 and January 1998, respectively. Mr. Lewis has been president
and chief executive officer of Thermo Instrument since March 1997 and
January 1998, respectively, was chief operating officer of Thermo
Instrument from January 1996 to January 1998, 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. He
has been a vice president of Thermo Electron since September 1996. Prior to
Mr. Lewis' appointment as chief executive officer of the Corporation, he
was the president of its predecssor, Thermo Jarrell Ash Corporation, for
more than five years prior to 1995. Mr. Lewis is a director of Metrika
Systems Corporation, ONIX Systems Inc., Thermo BioAnalysis Corporation,
Thermo Instrument, ThermoQuest Corporation, ThermoSpectra Corporation and
Thermo Vision Corporation.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
ROBERT A. MCCABE Mr. McCabe, 63, 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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
2
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<TABLE>
<S> <C>
ROBERT J. ROSENTHAL Dr. Robert J. Rosenthal, 41, has been a director of the Corporation since
January 1998. Dr. Rosenthal has served as the Corporation's president
since April 1997 and its chief executive officer since January 1998. He
also served as the Corporation's executive vice president and chief
operating officer from December 1996 to April 1997 and January 1998,
respectively. Prior to that date, he was a senior vice president of the
Corporation from August 1996 to December 1996 and president of Nicolet
Instrument Corporation, a wholly owned subsidiary of the Corporation from
January 1993 until December 1996.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
ARVIN H. SMITH Mr. Smith, 68, has been a director of the Corporation since its inception
in August 1995. Mr. Smith has been the chairman of the board of Thermo
Instrument since March 1997, and previously served as the chief executive
officer and president of Thermo Instrument from 1986 to January 1998, and
March 1997, respectively. Mr. Smith is also chairman of the board of
Thermo Power Corporation, a majority-owned subsidiary of Thermo Electron
that manufactures traffic control systems and industrial refrigeration
equipment. Mr. Smith has also 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 Metrika Systems Corporation,
ONIX Systems Inc., Thermo BioAnalysis Corporation, Thermo Instrument,
Thermo Power Corporation, ThermoQuest Corporation, ThermoSpectra
Corporation and Thermo Vision Corporation.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are 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,
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 three
times during fiscal 1997. Each director attended at least 75% of all meetings of
the board of directors and committees on which he served held during fiscal
1997.
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, Dr. Rosenthal 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 acquisition, without the prior approval of the board of
directors, directly or indirectly, by
3
<PAGE>
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 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, 1998,
deferred units equal to 2,021.01 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 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 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 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 March 1, 1998, options to purchase 90,000 shares had been granted and were
outstanding under the Directors Plan, no options had lapsed or been exercised,
and options to purchase 135,000 shares of Common Stock were available for future
grant.
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
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Stockholders. The chief executive officer of the Corporation is required to
comply with a separate stock holding policy established by the Committee in
1996, which is described in "Committee Report on Executive Compensation - Stock
Ownership Policies."
In addition, the Committee adopted a policy requiring directors to hold
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 and is described in "Committee Report
on Executive Compensation - Stock Ownership Policies."
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Instrument, the Corporation's parent company,
and of Thermo Electron, Thermo Instrument's parent company, as of March 1, 1998,
with respect to (i) each director, (ii) each executive officer named in the
summary compensation table under the heading "Executive Compensation" 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 March
1, 1998, 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.
<TABLE>
<CAPTION> Thermo Optek Thermo Instrument Thermo
Name(1) Corporation (2) Systems Inc.(3) Electron(4)
---- --------------- ----------------- -----------
<S> <C> <C> <C>
Thermo Electron Corporation(5) 45727011 N/A N/A
George N. Hatsopoulos 113,100 179,141 3,423,423
Kristine Stotz Langdon 75,500 6,223 16,452
Stephen R.Levy 48,288 0 0
Earl R. Lewis 253,000 203,726 84,037
Robert A. McCabe 163,732 57,965 48,515
Robert J. Rosenthal 128,500 76,790 41,350
Arvin H. Smith 98,000 539,583 519,038
All directors and current executive
officers as a group (10 persons) 976,540 1,275,989 4,984,554
</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 current executive officers as a group include 93,100, 75,000,
45,000, 225,000, 45,000, 112,500, 90,000 and 740,900 shares, respectively,
that such person or group has the right to acquire within 60 days of March
1, 1998, through the exercise of stock options. Shares beneficially owned
by Mr. Levy, Mr. McCabe and all directors and current executive officers as
a group include 1,288, 732 and 2,020 full shares, respectively, allocated
through March 1, 1998, to their respective accounts maintained under the
Corporation's Deferred Compensation Plan for directors. Shares of the
Common Stock beneficially owned by Mr. McCabe include 100,00 shares that
Mr. McCabe has the right to acquire within 60 days of March 1, 1998 through
the conversion of certain 5% convertible
5
<PAGE>
debentures of the Corporation due 2,000. Shares of the Common Stock
beneficially owned by Mr. Lewis include 2,500 shares owned by his spouse
and a total of 1,000 shares owned by two sons. Shares of the Common Stock
beneficially owned by Mr. McCabe include 5,000 shares held by a trust of
which he and member of his family are trustees. Shares of the Common Stock
benefically owned by Ms. Langdon include 500 shares held in custodial
accounts for the benefit of two minor children. No director or current
executive officer beneficially owned more than 1% of the Common Stock
outstanding as of March 1, 1998; all directors and executive officers as a
group beneficially owned 2.0% of the Common Stock outstanding as of such
date.
(3) The shares of the common stock of Thermo Instrument shown in the table
reflect a five-for-four split of such stock distributed in October 1997 in
the form of a 25% stock dividend. 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 current
executive officers as a group include 117,187, 5,858, 172,085, 13,737,
76,112, 292,968 and 795,526 shares, respectively, that such person or group
had the right to acquire within 60 days after March 1, 1998, 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
current executive officers as a group include 598, 663 and 2,417 shares,
respectively, allocated through March 1, 1998, 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 26,710 shares held by his spouse and 63
shares allocated to the account of his spouse maintained pursuant to the
ESOP. Shares beneficially owned by Mr. Lewis include 2,987 shares held by
Mr. Lewis' spouse. Shares beneficially owned by Ms. Langdon include 365
shares held by her in custodial accounts for the benefit of for two minor
children. The directors and current 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, 1998.
(4) 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 current executive officers as a group include
1,649,500, 15,750, 84,037, 10,375, 41,000, 228,411 and 2,792,631 shares,
respectively, that such person or group has the right to acquire within 60
days of March 1, 1998, 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 current executive officers as a group include
2,266, 1,717 and 7,445 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 current
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, 4,000 shares held by a second family
trust and 153 shares allocated to the account of Dr. Hatsopoulos' spouse
maintained pursuant to the ESOP. Shares beneficially owned by Dr.
Hatsopoulos also include 50,000 shares that a family trust, ow which Dr.
Hatsopoulos' spouse is the trustee, has the right to acquire within 60 days
of March 1, 1998, through the exercise of stock options. Shares of the
common stock of Thermo Electron owned by Ms. Langdon include 702 shares
held by her in custodial accounts for the benefit of 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, 1998, except Dr.
Hatsopoulos who beneficially owned 2.1 of such stock; all directors and
current executive officers as a group beneficially owned approximately 3.1%
of the Thermo Electron common stock outstanding as of such date.
(5) As of March 1, 1998, Thermo Electron, primarily through its majority-owned
subsidiary Thermo Instrument, beneficially owned 92.2% of the outstanding
Common Stock. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046. As of March 1, 1998, Thermo Electron had the
power to elect all of the members of the Corporation's board of directors.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo 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 1997,
except in the following instances. Thermo Electron filed six Forms 4 late,
reporting a total of 43 transactions, including 33 open market purchases of
shares of Common Stock, one open market sale of a convertible debenture and nine
transactions associated with the grant and lapse of options to purchase Common
Stock granted to employees under its stock option program and an additional one-
time repricing of convertible debentures and outstanding options to purchase
Common Stock granted to employees to reflect the distribution as a tax-free
spinoff of Thermo Vision Corporation in December 1997.
EXECUTIVE COMPENSATION
NOTE: All share amounts reported below have, in all cases, been adjusted as
applicable to reflect a five-for-four stock split distributed in October 1997
with respect to the common stock of Thermo Instrument in the form of a 25% 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 three 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.
7
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
SECURITIES UNDERLYING
NAME AND FISCAL ANNUAL COMPENSATION OPTIONS (NO. OF SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AND COMPANY) (1) COMPENSATION (2)
- ------------------ ------- ------ ----- --------------- ----------------
<S> <C> <C> <C> <C> <C>
EARL R. LEWIS 1997 $22,000 $25,000 -- -- $16,710 (4)
Chief Executive Officer (3) 1996 $72,000 $64,000 225,000 (TOC) $11,550 (4)
2,000 (TFG)
2,000 (TLT)
2,000 (TSR)
1995 $123,250 $76,500 150 (TMO) $6,750
7,500 (TBA)
5,000 (TLZ)
- -----------------------------------------------------------------------------------------------------------
ROBERT J. ROSENTHAL 1997 $148,500 $135,000 10,100 (TMO) $44,502 (6)
PRESIDENT AND CHIEF 1996 $135,000 $120,000 112,500 (TOC) $4,500
OPERATING OFFICER (5) 150 (TMO)
10,000 (TMQ)
1995 $119,945 $97,000 15,000 (TMO) $4,500
2,000 (TBA)
- ----------------------------------------------------------------------------------------------------------
KRISTINE STOTZ LANGDON 1997 $125,000 $57,500 35,000 (VIZ) $5,344
FORMER VICE PRESIDENT (7) 1996 $100,000 $40,000 75,000 (TOC) $5,344
5,000 (TMQ)
1995 $93,000 $35,000
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted by the Corporation are designated in the table as "TOC." In
addition, the named executive officers have 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 three fiscal years in the
following Thermo Electron companies: Thermo Electron (designated in the
table as TMO), Metrika Systems Corporation (designated in the table as MKA)
Thermo BioAnalysis Corporation (designated in the table as TBA), Thermo
Fibergen Inc. (designated in the table as TFG), Thermo Instrument
(designated in the table as THI), ThermoLase Corporation (designated in the
table as TLZ), ThermoLyte Corporation (designated in the table as TLT),
ThermoQuest Corporation (designated in the table as TMQ), Thermo Sentron
Inc. (designated in the table as TSR) and Thermo Vision Corporation
(designated in the table as VIZ).
(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 served in that position until January 1998, when he was
appointed chief executive officer of Thermo Instrument. He has also served
as vice president of Thermo Electron since September 1996, and as chief
operating officer of Thermo Instrument from January 1996 through January
1998. A portion of Mr. Lewis' annual cash compensation (salary and bonus)
has been paid by Thermo Instrument and Thermo Electron in each of the last
three 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 solely for Mr. Lewis' services as its chief executive
officer. For fiscal 1997, 1996 and 1995, approximately 10%, 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 its chief executive officer. In addition, Mr. Lewis has
been granted options to purchase shares of the common stock of Thermo
Electron and certain of its subsidiaries other than the Corporation from
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<PAGE>
time to time by Thermo Electron or such other subsidiaries. These options
are not reported in this table as they were granted as compensation for
service to other Thermo Electron companies in capacities other than in his
capacity as the chief executive officer of the Corporation.
(4) In addition to the matching contribution referred to in footnote (2), such
amount includes $9,585 and $4,800, respectively, which represents the
amount of compensation attributable in fiscal 1997 and 1996, respectively,
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 and
chief executive officer of the Corporation in January 1998.
(6) In addition to a $7,125 matching contribution referred to in footnote (4),
this amount includes $458 attributable to an interest-free loan to Dr.
Rosenthal pursuant to the Corporation's Stock Holding Assistance Plan (see
"Relationship with Affiliates Stock Holding Assistance Plan") and the
reimbursement by the Corporation of $36,919 in expenses associated with Dr.
Rosenthal's relocation to Franklin, Massachusetts.
(7) Ms. Langdon was appointed vice president of the Corporation at its
inception in October 1995. She resigned her position as vice president of
the Corporation in connection with the spinout of Thermo Vision Corporation
from the Corporation on December 15, 1997. Ms. Langdon is president and
chief executive officer of Thermo Vision Corporation.
STOCK OPTIONS GRANTED DURING FISCAL 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to the Corporation's then chief executive
officer and the other named executive officers. It has not been the
Corporation's policy in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1997.
OPTION GRANTS IN FISCAL 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK
NUMBER OF SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM (2)
NAME GRANTED (1) FISCAL YEAR SHARE DATE 5% 10%
- -------------------- -------------------- ------------- --------- ---------- --- ---
<S> <C> <C> <C> <C> <C> <C>
Earl R. Lewis (3) -- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
Robert J Rosenthal 100 (TMO) 0.01% (4) $34.20 6/3/00 $539 $1,132
10,000 (TMO) 0.70% (4) $39.39 9/24/09 $313,500 $842,300
- ------------------------------------------------------------------------------------------------------------------
Kristine Stotz Langdon 35,000 (VIZ) 12.20% (4) $7.50 12/5/04 $106,750 $249,200
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year. In all cases, the shares
acquired upon exercise are subject to repurchase by the granting
corporation at the exercise price if the optionee ceases to be employed by
such corporation or another Thermo Electron company. The granting
9
<PAGE>
corporation may exercise its repurchase rights within six months after the
termination of the optionee's employment. 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. 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 in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
granting corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) 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 in
his capacity as chief executive officer of the Corporation.
(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 1997 AND FISCAL YEAR-END VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options held at the end of
fiscal 1997 by the Corporation's then chief executive officer and the other
named executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL 1997 YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
UNEXERCISED
OPTIONS AT
FISCAL VALUE OF
SHARES YEAR-END UNEXERCISED
ACQUIRED ON VALUE (EXERCISABLE/ IN-THE-MONEY
NAME COMPANY EXERCISE REALIZED (1) UNEXERCISABLE) (2) OPTIONS
- ------------------- ------------------ ------------ --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Earl R. Lewis (3) Thermo Optek -- -- 225,000 /-- $1,075,500 /--
Thermo Fibergen -- -- 2,000 /-- $ 0 /--
ThermoLyte -- -- 0 /2,000 -- /$0 (4)
Thermo Sentron -- -- 2,000 /-- $ 0 /--
- ------------------------------------------------------------------------------------------------------------------------------
Robert J. Rosenthal Thermo Optek -- -- 112,500 /-- $ 537,750 /--
Thermo Electron -- -- 41,000 /-- (5) $ 597,133 /--
Thermo BioAnalysis -- -- 2,000 /-- $ 19,000 /--
Thermo Instrument -- -- 76,112 /-- $1,650,921 /--
ThermoQuest -- -- 10,000 /-- $ 50,000 /--
ThermoSpectra -- -- 2,500 /-- $ 158 /--
- ------------------------------------------------------------------------------------------------------------------------------
Kristine Stotz Langdon (6) Thermo Optek -- -- 75,000 /-- $ 358,500 /--
Thermo Electron -- -- 15,750 /-- $ 432,103 /--
ThermoQuest -- -- 5,000 /-- $ 25,000 /--
ThermoSpectra -- -- 400 /-- $ 25 /--
- ------------------------------------------------------------------------------------------------------------------------------
</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.
10
<PAGE>
(2) 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 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.
(3) Mr. Lewis 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) 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.
(5) 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 (2), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In
the event of the employee's death or involuntary termination prior to the
tenth anniversary of the grant date, the repurchase rights of the granting
corporation shall be deemed to have lapsed ratably over a five-year period,
commencing with the fifth anniversary of the grant date.
(6) Ms. Langdon became an employee of the Corporation on April 1, 1994 and was
named president of Thermo Vision Corporation, then a wholly owned
subsidiary of the Corporation, in January 1995. Prior to April 1, 1994,
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 services to Thermo
Electron. These options are not reported in the table as they were granted
as compensation for service to Thermo Electron companies other than the
Corporation.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines established
by the human resources committees of the board of directors of its parent
companies, Thermo Electron and Thermo Instrument. The executive compensation
program presently consists of annual base salary ("salary"), short-term
incentives in the form of annual cash bonuses, and long-term incentives in the
form of stock options (collectively referred to as "total compensation").
The Committee believes that the total compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the mid-
point of competitive salaries derived from market surveys and that short-term
and long-term incentive compensation should reflect the performance of the
Corporation and the contributions of each executive.
11
<PAGE>
ESTABLISHING COMPETITIVENESS
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total compensation
for its executives is assessed by comparing it to market data provided by
compensation consultants and by participating in annual executive compensation
surveys, primarily "Project 777," an executive compensation survey prepared by
Management Compensation Services, a division of Hewitt Associates. The majority
of firms represented in the Project 777 survey are included in the Standard &
Poor's 500 Index, but do not necessarily correspond to the companies included in
the Corporation's peer group index, the Dow Jones Total Return Index for the
Diversified Technology Industry Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by comparing
it to total compensation of other executives within the Thermo Electron
organization with comparable levels of responsibility for comparably sized
business units.
The process for determining each of these elements for the Corporation's
executive officers is outlined below. For its review of the compensation of
other officers of the Corporation, the Committee follows a substantially similar
process.
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the other named executive officers will approximate the
mid-point of competitive data. The salary increases in 1997 for the chief
executive officer and the other named executive officers generally reflect this
practice of gradual increases and moderation.
CASH BONUS
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having comparable sales and complexity
to the Corporation. The actual bonus awarded to an executive officer may range
from zero to three times the median potential bonus. The value within the range
(the bonus multiplier) is determined at the end of each year by the Committee in
its discretion. The Committee exercises its discretion by evaluating each
executive's performance using a methodology developed by its parent company,
Thermo Electron, and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns which are designed to
measure profitability and contributions to shareholder value and are measures of
corporate and divisional performance that are evaluated using graphs developed
by Thermo Electron intended to reward performance that is perceived as above
average and to penalize performance that is perceived as below average. The
measures of operating returns used in the Committee's determinations in fiscal
1997 measured return on net assets, growth in income, and return on sales, and
the Committee's determinations also included a subjective evaluation of the
contributions of each executive that are not captured by operating measures but
are considered important to the creation of long-term value for the
Stockholders. These measures of achievements are not financial targets that are
met, not met or exceeded. The relative weighting of the operating measures and
subjective evaluation varies among the executives, depending on their roles and
responsibilities within the organization.
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1997 performance in each instance exceeded the median
potential bonus.
12
<PAGE>
STOCK OPTION PROGRAM
The primary goal of the Corporation and its parent companies is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of options
to purchase common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the Stockholders.
The emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock option
awards in its parent companies, Thermo Electron and Thermo Instrument, and the
other majority-owned subsidiaries of Thermo Electron and Thermo Instrument, are
an important tool in providing incentives for performance within the entire
organization.
In determining awards, the Committee considers for each officer the annual
value of all options to purchase shares of the Corporation and other companies
within the Thermo Electron organization that vest in the next year and compares
the individual's total compensation using this value to competitive data. The
Committee uses a modified Black-Scholes option pricing model to determine the
value of an option award. In addition, the Committee considers the aggregate
amount of net awards to purchase shares of Common Stock granted to all employees
over the last five years to monitor the number of aggregate awards to all
employees. In reviewing the aggregate number of awards, the Committee considers
such factors as the size of the company, its stage of development, and its
growth strategy, as well as the aggregate awards and option practices of
comparably situated companies.
The Committee periodically awards options based on its assessment of the
total compensation of each executive, the actual and anticipated contributions
of each executive (which includes a subjective assessment by the Committee of
the value of the executive's future potential within the organization), as well
as the value of previously awarded options, as described above. The option
awards made to the named executive officers in fiscal 1997 with respect to the
common stock of Thermo Electron or the majority-owned subsidiaries of the
Corporation's parent company, Thermo Instrument, were made as part of Thermo
Electron's overall stock option program and were determined by the human
resources committee of the board of directors of the granting company using a
similar analysis.
STOCK OWNERSHIP POLICIES
The Committee established a stock holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of ownership of the Corporation's Common Stock.
For the chief executive officer, the multiple was one times his base salary and
reference bonus for the calendar year. For all other officers, the multiple was
one times the officer's base salary. The Committee deemed it appropriate to
permit officers to achieve these ownership levels over a three-year period. The
policy was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee
also adopted in 1996 a stock holding assistance plan under which the Corporation
was 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,
the Corporation's chief executive officer, received a loan in the principal
amount of $194,029.50 under this plan, of which amount $155,223.60 was
outstanding as of April 23, 1998. During 1997, Mr. Rosenthal, the Corporation's
chief operating officer, received a loan in the principal amount of $229,616.86
under this plan, of which amount $229,616.86 was outstanding as of April 23,
1998. This plan was also amended in 1998 to apply only to the chief executive
officer. See "Relationship with Affiliates Stock Holding Assistance Plan."
13
<PAGE>
The Committee also has adopted a policy requiring its executive officers to
hold shares of the Corporation's Common Stock acquired upon the exercise of
stock options granted by the Corporation. Under this policy, executive officers
are required to hold 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 options.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance-based" or is otherwise exempt under
Section 162(m). The annual compensation paid to individual executives does not
approach the $1 million threshold, and it is believed that stock incentive plans
of the Corporation qualify as "performance-based." Therefore, the Committee does
not believe any further action is necessary in order to comply with Section
162(m). From time to time, the Committee will reexamine the Corporation's
compensation practices and the effect of Section 162(m).
1997 CEO COMPENSATION
Cash compensation for Mr. Earl R. Lewis, who served as the Corporation's
chief executive officer during fiscal 1997, was reviewed by both the Committee
and the human resources committees of the boards of directors of Thermo Electron
and Thermo Instrument due to his responsibilities through the end of fiscal 1997
as the Corporation's chief executive officer, as the chief operating officer of
Thermo Instrument and as a vice president of Thermo Electron. Each committee
evaluated Mr. Lewis' performance and proposed compensation using a process
similar to that used for the other executive officers of the Corporation. At
the Thermo Instrument and Thermo Electron level, Mr. Lewis was evaluated on his
performance related to the Corporation, as well as other operating units of
Thermo Instrument and Thermo Electron for which he is responsible, weighted in
accordance with the amount of time and effort devoted to each operation. The
Corporation's Committee then reviewed the analysis and determinations of the
Thermo Electron committee, made an independent assessment of Mr. Lewis'
performance as it relates to the Corporation using criteria similar to that used
for the other executive officers of the Corporation, and then agreed to an
appropriate allocation of Mr. Lewis' compensation to be paid by the Corporation.
In December 1997, the Committee conducted its review of Mr. Lewis' proposed
salary for 1998 and bonus for 1997 performance. The Committee concurred in the
recommendation made by the Thermo Electron committee and agreed to an allocation
of 10% of Mr. Lewis' total cash compensation for 1997 to the Corporation, based
on his relative responsibilities at the Corporation, Thermo Instrument and
Thermo Electron. Mr. Lewis resigned as the Corporation's chief executive
officer at the beginning of fiscal 1998 in connection with his promotion as
chief executive officer of Thermo Instrument.
Awards to Mr. Lewis of options to purchase shares of the Corporation's
Common Stock were reviewed and determined periodically by the Committee using
criteria similar to that used for the other executive officers of the
Corporation. No award of options to purchase shares of the Corporation's Common
Stock were made to Mr. Lewis in fiscal 1997.
Robert A. McCabe (Chairman)
Stephen R. Levy
14
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a broad-
based market index and either a nationally recognized industry standard or an
index of peer companies selected by the Corporation. The Corporation's Common
Stock has been publicly traded only since June 7, 1996 and, as a result, the
following graph commences as of such date. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for the Diversified Technology Industry Group as of the
last trading day of the Corporation's fiscal year.
COMPARISON OF TOTAL RETURN AMONG THERMO OPTEK CORPORATION,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX AND THE DOW JONES TOTAL RETURN
INDEX FOR THE DIVERSIFIED TECHNOLOGY INDUSTRY GROUP FROM JUNE 7, 1996 TO
JANUARY 2, 1998
6/7/96 12/27/96 1/2/98
TOC 100 82 118
AMEX 100 97 118
DJ DTC 100 115 132
The total return for the Corporation's Common Stock (TOC), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Diversified Technology Industry Group (DJ DTC) assumes the reinvestment
of dividends, although dividends have not been declared on the Corporation's
Common Stock. The total return for the Corporation's Common Stock has been
adjusted for historical periods to reflect a special dividend of the shares of
Thermo Vision Corporation distributed as a tax-free spinoff in December 1997.
The adjustment has been made in the same manner as the adjustment to the
conversion price of the Corporation's outstanding debentures, by determining the
market capitalization of the Corporation prior to the spinoff using a 15-day
average stock price, and subtracting the market capitalization of the spinoff
entity, using its initial public offering price. The price adjustment yielded by
this methodology was 93.93%. The American Stock Exchange Market Value Index
tracks the aggregate performance of equity securities of companies listed on the
American Stock Exchange. The Corporation's Common Stock is traded on the
American Stock Exchange under the ticker symbol "TOC."
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 and other subsidiaries as publicly
held, majority-owned subsidiaries and privately held majority-owned
subsidiaries. From time to time, Thermo Electron and its subsidiaries will
create other majority-owned subsidiaries
15
<PAGE>
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, including the Corporation, have adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of long-
range planning and providing other banking and credit services. Pursuant to the
Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants 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. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Corporation. The
Corporation was assessed an annual fee equal to 1.0% of the Corporation's
revenues for these services in fiscal 1996 and 1997. The annual fee has been
reduced to 0.8% of the Corporation's total revenues for fiscal 1998. The fee is
reviewed annually and may be changed by mutual agreement of the Corporation and
Thermo Electron. During fiscal 1997, Thermo Electron assessed the Corporation
$4,669,000 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
16
<PAGE>
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 1997, the Corporation paid Thermo
Electron $10,700,000 under the Tax Allocation Agreement.
From time to time, the Corporation may transact business with other
companies in the Thermo Group.
In July 1997, the Corporation acquired the Spectronic Instruments Inc.
subsidiary ("Spectronic") of Thermo Instrument. Thermo Instrument acquired
Spectronic as part of its March 1997 acquisition of Life Sciences International
PLC ("Life Sciences"). The purchase price for Spectronic was approximately
$39.9 million, and consisted of: (i) $20.2 million in cash, (ii) 1,000 shares
of the Corporation's Common Stock and (iii) the assumption of $19.7 million of
debt payable to Thermo Instrument. The purchase price represents the sum of the
net tangible book value of Spectronic as of June 28, 1997, plus a percentage of
Thermo Instrument's total cost in excess of net assets acquired associated with
its acquisition of Life Sciences, based on the aggregate 1996 revenues of
Spectronic relative to Life Sciences' 1996 consolidated revenues. In December
1997, the Corporation was notified by Thermo Instrument that the Corporation
would receive an adjustment to the purchase price of $1,256,000 in the first
quarter of 1998 based on Thermo Instrument's final determination of the tangible
book value of Spectronic and a final determination of Thermo Instrument's total
cost in excess of net assets acquired associated with its acquisition of Life
Sciences.
In July 1997, the Corporation also acquired the VG Systems Limited
subsidiary ("VG Systems") of Thermo Instrument. Thermo Instrument acquired VG
Systems in March 1996 as part of its acquisition of a substantial portion of the
businesses constituting the Scientific Instruments Division of Fisons plc
("Fisons"), a wholly owned subsidiary of Rhone-Poulenc Rorer, Inc. ("RPR"). The
purchase price for VG Systems was approximately $45.5 million in cash. The
purchase price for these acquisitions was determined based on the net tangible
book value of VG Systems at March 29, 1996, and a pro rata allocation of Thermo
Instrument's total cost in excess of net assets acquired associated with its
acquisition of the Fisons businesses. In December 1997, Thermo Instrument and
RPR negotiated a post-closing adjustment to the aggregate purchase price for the
Fisons businesses that resulted in a refund to Thermo Instrument. The
Corporation's share of such refund was $7,257,000, of which amount $5,884,000
has been accounted for as a reduction in the goodwill associated with the
Corporation's acquisition of VG Systems and another Fisons entity in 1996.
To partially fund the acquisitions described above, in August 1997 the
Corporation borrowed $40 million from Thermo Electron pursuant to a promissory
note due August 1998 and bearing interest at the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each quarter. The
interest rate for the note outstanding at January 3, 1998 was 5.76%.
On December 15, 1997, the Corporation distributed 100% of the capital stock
of its Thermo Vision Corporation subsidiary ("Thermo Vision") in the form of a
dividend to the Corporation's shareholders. As a result of this distribution,
Thermo Vision became a publicly traded, majority owned subsidiary of Thermo
Instrument. In 1997, Thermo Vision borrowed $3,947,000 from the Corporation
pursuant to two promissory notes due February
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2000 and bearing interest at the 90-day Commercial Paper Composite Rate plus 25
basis points, set at the beginning of each quarter.
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 $906,000 in 1997 from these affiliates. These leases
are effective until December 31, 1998, but may be terminated by ThermoSpectra
and Nicolet Biomedical upon 90 days' and 30 days' prior notice, respectively, to
the Corporation.
The Corporation purchases and sells products and/or services in the
ordinary course of business with other subsidiaries of Thermo Electron. In
1997, the Corporation sold a total of $13,237,000 of products to Thermo Electron
subsidiaries and purchased a total of $8,007,000 of products and/or services
from such companies.
The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a $150 million
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank 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. In addition, funds on deposit under this arrangement provide
credit support for overdraft obligations of other participants. As of January
3, 1998, the Corporation had a positive cash balance of approximately
$1,421,000, based on an exchange rate of $1.65/(Pounds)1.00 as of January 3,
1998. For 1997, the average annual interest rate earned on GBP deposits by
participants in this credit arrangement was approximately 6.5% and the average
annual interest rate paid on overdrafts was approximately 7.2%.
The Corporation, along with certain other Thermo Subsidiaries, also
participates in a notional pool arrangement with ABN AMRO, which includes a $50
million credit facility. Only European-based Thermo Subsidiaries participate in
this arrangement. Under this arrangement the Bank 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. In addition, funds on deposit under this
arrangement provide credit support for overdraft obligations of other
participants. As of January 3, 1998, the Corporation had a negative cash
balance of approximately $3,751,000, based on an exchange rate of $0.495/NLG
1.00 as of January 3, 1998. For 1997, the average annual interest rate earned
on NLG deposits by participants in this credit arrangement was approximately
4.8% and the average annual interest rate paid on NLG overdrafts was
approximately 4.8%.
As of January 3, 1998, Thermo Electron and its other subsidiaries owed the
Corporation an aggregate of $413,000 for amounts due in connection with the
sales of products and services, and for miscellaneous items. The largest amount
of net indebtedness owed by Thermo Electron and its other subsidiaries to the
Corporation since December 29, 1996 was $5,057,000. These amounts do not bear
interest and are expected to be paid in the normal course of business.
As of January 3, 1998, $28,130,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement the Corporation in effect lends cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of U.S.
government agency securities, corporate notes, money market funds, commercial
paper, and other marketable securities, in the amount of at least 103% of such
obligation. The Corporation's funds subject to the repurchase agreement are
readily convertible into cash by the Corporation. The repurchase agreement
earns a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter.
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STOCK HOLDING ASSISTANCE PLAN
In 1996, the Corporation adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Corporation also adopted a stock holding assistance plan under which it may
make interest-free loans to certain key employees, including its executive
officers, to enable such employees to purchase the Common Stock in the open
market. 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, of
which amount $155,223.60 was outstanding as of the date of April 23, 1998.
During 1997, Dr. Rosenthal received a loan in the principal amount of
$229,616.86 under this plan to purchase 15,000 shares of the Common Stock, of
which amount $229,616.86 was outstanding as of the date of April 23, 1998 The
loans are repayable upon the earlier of demand or the fifth anniversary of the
date of the loan, unless otherwise authorized by the human resources committee
of the Corporation's board of directors. This policy and plan were amended in
1998 to apply only to the chief executive officer of the Corporation in the
future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1998. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1995.
Representatives of that firm are expected to be present at the Meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to questions. The board of directors has established an
audit committee, presently consisting of two outside directors, the purpose of
which is to review the scope and results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of the Stockholders of the Corporation must be received by the
Corporation for inclusion in the proxy statement and form of proxy relating to
that meeting no later than December 29, 1998.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally or by telephone, facsimile
transmission or telegram. Brokers, nominees, custodians and fiduciaries are
requested to forward solicitation materials to obtain voting instructions from
beneficial owners of stock registered in their names, and the Corporation will
reimburse such parties for their reasonable charges and expenses in connection
therewith.
Franklin, Massachusetts
April 23, 1998
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FORM OF PROXY
THERMO OPTEK CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 1, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John N. Hatsopoulos, Robert J. Rosenthal
and Melissa F. Riordan, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of Thermo Optek Corporation, a Delaware corporation
(the "Company"), to be held on Monday, June 1, 1998, at 9:00 a.m. at The Hyatt
Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona, and at any
adjournment or postponement thereof, and to vote all shares of common stock of
the Company standing in the name of the undersigned on April 3, 1998, with all
of the powers the undersigned would possess if personally present at such
meeting:
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
Please mark your
[ x ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [ ] WITHHELD [ ]
______________________________________
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any)
NOMINEES: George N. Hatsopoulos, Stephen R. Levy, Earl R. Lewis, Robert A.
McCabe, Robert J. Rosenthal and Arvin H. Smith.
2. In their discretion on such other matters as may properly come before the
Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET FORTH
ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS
GIVEN.
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
SIGNATURE(S)_______________________________________ DATE_________________
NOTE: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
