<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
THERMEDICS DETECTION INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THERMEDICS DETECTION INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
THERMEDICS DETECTION INC.
220 Mill Road
Chelmsford, Massachusetts 01824-4178
April 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
Thermedics Detection Inc. 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,
JAMES BARBOOKLES
President and Chief Executive Officer
<PAGE>
THERMEDICS DETECTION INC.
220 Mill Road
Chelmsford, Massachusetts 01824-4178
April 23, 1998
To the Holders of the Common Stock of
THERMEDICS DETECTION INC.
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermedics Detection Inc.
(the "Corporation") will be held on Monday, June 1, 1998, at 1:30 p.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 five directors.
2. A proposal recommended by the board of directors to adopt an employees'
stock purchase plan and to reserve 50,000 shares of the Corporation's
common stock for issuance thereunder.
3. Such other business as may properly be brought before the meeting and any
adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is 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
Clerk
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermedics
Detection Inc. (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Monday, June 1, 1998, at 1:30 p.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 220 Mill Road, Chelmsford, Massachusetts 01824-4178. 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
five directors, constituting the entire board of directors, as well as one other
matter: a proposal to adopt an employees' stock purchase plan and to reserve
50,000 shares of common stock of the Corporation, $.10 par value, ("Common
Stock") for issuance under the employees' stock purchase plan.
The representation in person or by proxy of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting is necessary to provide a
quorum for the transaction of business at the Meeting. Shares can only be voted
if the Stockholder is present in person or is represented by returning a
properly signed proxy. Each Stockholder's vote is very important. Whether or
not you plan to attend the Meeting in person, please sign and promptly return
the enclosed proxy card, which requires no postage if mailed in the United
States. All signed and returned proxies will be counted towards establishing a
quorum for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors,
for the management proposal and as the individuals named as proxy holders on the
proxy deem advisable on all other matters as may properly come before the
Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present and entitled to vote on
the election. For the management proposal to adopt the employees' stock purchase
plan, the affirmative vote of a majority of shares present in person or
represented by proxy, and entitled to vote on the matter, is necessary for
approval. Withholding authority to vote for a nominee for director or an
instruction to abstain from voting on the management proposal will be treated as
shares present and entitled to vote and, for purposes of determining the outcome
of the vote, will have the same effect as a vote against the nominee or the
proposal. With respect to the election of directors and the management proposal,
broker "non-votes" will not be treated as shares present and entitled to vote on
a voting matter and will have no effect on the outcome of the vote. A broker
"non-vote" occurs when a nominee holding shares for a beneficial holder does not
have discretionary voting power and does not receive voting instructions from
the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Clerk 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
13,355,459 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.
1
<PAGE>
- PROPOSAL 1 -
ELECTION OF DIRECTORS
Five 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.
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, Thermedics Inc.
("Thermedics"), a manufacturer of product quality-assurance systems, security
devices and biomedical products, and Thermedics' 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>
- ----------------------------------------------------------------------------------------------------------------
JAMES BARBOOKLES Mr. Barbookles, 49, has been a director of the Corporation, as well as its
president and chief executive officer, since November 14, 1997. He also
serves as the president and chief executive officer of Orion Research Inc.,
a manufacturer of electrochemical analysis instrumentation that is a wholly
owned subsidiary of Thermedics Inc., since March 1993 and 1995,
respectively. He was vice president, research and development and
engineering, of Orion from February 1989 to March 1993. Prior to joining
Orion, Mr. Barbookles served in a number of senior engineering and
operations management positions at a variety of technology-based companies.
- ----------------------------------------------------------------------------------------------------------------
MORTON COLLINS Mr. Collins, 62, has been a director of the Corporation since February
1997. Mr. Collins has been a general partner of DSV Partners III, a
venture capital limited partnership, since 1981 and a general partner of
DSV Management, Ltd. since 1982. Since 1985, DSV Management, Ltd. has been
a general partner of DSV Partners IV, a venture capital limited
partnership. Mr. Collins is also a director of Kopin Corporation, The
Liposome Company, Tandem Computers, Inc. and ThermoTrex Corporation.
- ----------------------------------------------------------------------------------------------------------------
JOHN T. KEISER Mr. Keiser, 62, has been a director of the Corporation since April 1997.
Mr. Keiser has been a vice president of Thermo Electron since April 1997.
Mr. Keiser has been the president of Thermedics since March 1998, and was
its senior vice president from 1994 through March 1998. He has also been
the president of Thermo Biomedical Inc., a wholly owned subsidiary of
Thermo Electron and manufacturer of medical equipment and instruments,
since 1994. Mr. Keiser was president of the Eberline Instrument division
of Thermo Instrument Systems Inc., a majority-owned subsidiary of Thermo
Electron, from 1985 to July 1994. The Eberline Instrument division
manufactures radiation detection and counting instrumentation and radiation
monitoring systems. Mr. Keiser is also a director of Metrika Systems
Corporation, Thermedics, Thermo Cardiosystems Inc. and Trex Medical
Corporation.
- ----------------------------------------------------------------------------------------------------------------
MATTHEW C. WEISMAN Mr. Weisman, 56, has been a director of the Corporation since May 1997.
Mr. Weisman has been president and chief executive officer of Cobey
Corporation, a consulting and private investment company, since 1983, and
was president of Car Wash Partners, Inc., a venture capital sponsored
consolidator of the conveyor car wash industry from 1996 to March 1998.
For the past five years, he has served as an adviser to several venture
capital firms and their portfolio companies. He is also a director of
Serologicals, Inc.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
JOHN W. WOOD JR. Mr. Wood, 54, has been chairman of the board and a director of the
Corporation since its inception in 1990. Mr. Wood also served as the
Corporation's chief executive officer from December 1995 until December
1996. Mr. Wood has been chairman of the board of Thermedics since March
1998, and was president and chief executive officer of Thermedics from 1984
through March 1998. Mr. Wood has been senior vice president of Thermo
Electron since December 1995 and, prior to that promotion, was a vice
president of Thermo Electron from September 1994 to December 1995. Mr.
Wood is also a director of Thermedics, Thermo Cardiosystems, Thermo Sentron
Inc. and Thermo Voltek Corp.
- ----------------------------------------------------------------------------------------------------------------
</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. Collins and Mr. Weisman (Chairman). 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. Collins (Chairman) and Mr. Weisman. 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 three times, the audit committee met once and the human resources committee
met four 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 $2,000 and a fee of $1,000
per day for attending regular meetings of the board of directors and $500 per
day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees of
the board of directors. Payment of directors' fees is made quarterly. Messrs.
Barbookles, Keiser and Wood 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 any person of 50% or more of the
outstanding Common Stock or the outstanding common stock of Thermedics 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 Thermedics or 25% or more of the outstanding common stock
of 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 25,000 shares of Common Stock have been reserved for issuance
under the Deferred Compensation Plan. As of March 1, 1998, deferred units equal
to 1,437.61 shares of Common Stock were accumulated under the Deferred
Compensation Plan.
3
<PAGE>
STOCK-BASED COMPENSATION
Directors of the Corporation are also eligible for the grant of stock
options under the Corporation's equity incentive plan. The equity incentive plan
is administered by the human resources committee of the board of directors,
which determines the form and terms of stock-based awards to be granted. To
date, only nonqualified stock options have been granted under this plan. In
1997, options to purchase 10,000 shares of the Common Stock were granted to each
of the non-executive directors of the Corporation at an exercise price of $15.00
per share. These options may be exercised at any time prior to the expiration of
the option on the seventh anniversary of the grant date. Shares acquired upon
exercise of the options are subject to restrictions on transfer and the right of
the Corporation to repurchase such shares at the exercise price if 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 20% 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.
STOCK OWNERSHIP POLICIES FOR DIRECTORS
During 1997, 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. The chief executive officer of the
Corporation is required to comply with a separate stock holding policy
established by the Committee in 1997, 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 Thermedics, the Corporation's parent company, and of
Thermo Electron, Thermedics' 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 Thermedics or its subsidiaries other than
the Corporation, all such persons disclaim beneficial ownership of the shares of
Common Stock owned by Thermedics.
<TABLE>
<CAPTION>
THERMO DETECTION THERMEDICS THERMO
NAME (1) INC. (2) INC.(3) ELECTRON (4)
------- ---------------- ----------- ------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 10,173,108 N/A N/A
James C. Barbookles 123,000 75,000 17,500
Morton Collins 25,755 0 0
David H. Fine 101,667 115,487 70,814
John T. Keiser 2,000 21,093 175,283
Jeffrey J. Langan 10,000 0 300
Matthew C. Weisman 20,682 0 0
John W. Wood Jr. 47,854 188,406 272,157
All directors and current executive
officers as a group (8 persons) 347,320 484,976 1,348,581
</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 Mr. Barbookles, Mr.
Collins, Dr. Fine, Mr. Keiser, Mr. Weisman, Mr. Wood and all directors and
current executive officers as a group include 105,000, 20,000, 91,667,
2,000, 20,000, 43,333, and 307,000 shares, respectively, that such person
or group has the right to
4
<PAGE>
acquire within 60 days of March 1, 1998, through the exercise of stock
options. Shares of the Common Stock beneficially owned by Mr. Collins, Mr.
Weisman and all directors and current executive officers as a group include
755, 682 and 1,437 full shares, respectively, allocated to their respective
accounts through March 1, 1998, maintained under the Corporation's Deferred
Compensation Plan for directors. No director or current executive officer
beneficially owned more than 1% of the Common Stock outstanding as of March
1, 1998; all directors and current executive officers as a group
beneficially owned 2.6% of the Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermedics beneficially owned by Mr.
Barbookles, Dr. Fine, Mr. Keiser, Mr. Wood and all directors and current
executive officers as a group include 75,000, 91,100, 17,300, 130,700 and
383,100 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 all directors and current executive
officers as a group include 3,031 full shares, 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 Mr. Wood include 2,600 shares held
in custodial accounts for the benefit of two minor children of which Mr.
Wood's spouse is the trustee. No director or current executive officer
beneficially owned more than 1% of the common stock of Thermedics
outstanding as of March 1, 1998; all directors and current executive
officers as a group beneficially owned 1.3% of such common stock
outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Barbookles, Dr. Fine, Mr. Keiser, Mr. Wood and all directors and current
executive officers as a group include 17,500, 53,012, 134,397, 230,458 and
1,140,839 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 all directors and current executive
officers as a group include 3,462 full shares, allocated through March 1,
1998 to their respective accounts maintained pursuant to the ESOP. No
director or current executive officer beneficially owned more than 1% of
the common stock of Thermo Electron outstanding as of March 1, 1998; all
directors and current executive officers as a group beneficially owned less
than 1% of the common stock of Thermo Electron as of such date.
(5) As of March 1, 1998, Thermo Electron Corporation beneficially owned
approximately 76.2% of the outstanding Common Stock, primarily through its
majority-owned subsidiary Thermedics. 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.
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 Thermedics 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. Mr. Morton Collins, a director of the Corporation,
filed a Form 4 late, reporting one purchase of Common Stock. Dr. David H. Fine,
an officer of the Corporation, filed a Form 4 late, reporting one sale of
subscription rights. Mr. John N. Hatsopoulos, a director and officer of the
Corporation, and Mr. Paul F. Kelleher, an officer of the Corporation, each filed
a Form 4 late reporting one purchase of Common Stock and an exercise of
subscription rights, respectively. Mr. John W. Wood Jr., a director of the
Corporation, filed a Form 4 late reporting an exercise of subscription rights.
Mr. Jeffrey J. Langan, a director and officer, filed a Form 4 late reporting an
exercise of subscription rights. Thermo Electron filed four Forms 4 late,
reporting a total of 24 transactions, including 17 open market purchases of
shares of Common Stock, six transactions associated with the grant, exercise and
lapse of options to purchase Common Stock granted to employees under its stock
option program and one transaction associated with the sale of subscription
rights.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's current
chief executive officer, former chief executive officer and other named
executive officer 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.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
NAME AND FISCAL ------------------- OPTIONS (NO. OF SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AND COMPANY (1) COMPENSATION (2)
------------------ ------ ------- -------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
James C. Barbookles (3) 1997 $21,251 $0 100,000 (TDX) $7,125
President and Chief Executive
Officer
- --------------------------------------------------------------------------------------------------------------
David H. Fine 1997 $134,000 $78,800 30,000 (TDX) $7,200
Senior Vice President 1,900 (TMO)
3,500 (TMD)
15,000 (TLZ)
1996 $128,000 $45,000 20,000 (TDX) $6,603
1,950 (TMO)
3,000 (TMD)
30,000 (TLZ)
7,500 (TSR)
1995 $124,000 $23,500 1,500 (TMO) $6,750
2,500 (TMD)
- --------------------------------------------------------------------------------------------------------------
Jeffrey Langan 1997 $153,085 $0 50,000 (TDX) $6,588 (6)
former CEO 20,100 (TMO)
15,000 (TMD)
10,000 (TCA)
20,000 (TLZ)
10,000 (TSR)
10,000 (TVL)
1996 $165,000 $100,000 50,000 (TDX)
15,000 (TMO)
75,000 (TMD)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
(1) In addition to receiving options to purchase the Common Stock (designated
in the table as TDX), the named executive officers were each granted
options to purchase the common stock of Thermo Electron and certain of its
other subsidiaries as part of Thermo Electron's stock option program.
Options have been granted during the last fiscal year in the following
Thermo Electron companies: Thermo Electron (designated in the table as
TMO), Thermedics (designated in the table as TMD), Thermo Cardiosystems
Inc. (designated in the table as TCA), ThermoLase Corporation (designated
in the table as TLZ), Thermo Sentron Inc. (designated in the table as TSR)
and Thermo Voltek Corp. (designated in the table as TVL).
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) plan.
(3) Mr. Barbookles has provided services in different capacities to the
Corporation and its parent company, Thermedics. Mr. Barbookles was
appointed president and chief executive officer of the Corporation on
November 14, 1997. Prior to his appointment to this position, Mr.
Barbookles was the president and chief executive officer of Orion Research
Inc., a wholly owned subsidiary of Thermedics, a position he continues to
hold. The annual cash compensation (salary and bonus) reported in the
table for Mr. Barbookles represents the amount paid by the Corporation and
all other sources for his services to the Corporation as president and
chief executive officer since November 14, 1997. Mr. Barbookles' bonus for
fiscal 1997 was paid entirely by Orion Research Inc. The options reported
in the table have been granted by the Corporation to Mr. Barbookles for his
services as the Corporation's chief executive officer. Prior to his
appointment as the Corporation's chief executive officer, Mr. Barbookles
was granted options to purchase the common stock of Thermo Electron and its
subsidiaries as compensation for his services to Orion Research Inc. These
options are not reported in the table.
(4) In addition to his services to the Corporation, Dr. Fine also served as
interim director of research for ThermoLase Corporation, an indirect
subsidiary of Thermo Electron, for portions of fiscal 1997 and 1996. For
1997 and 1996, 60% and 11%, respectively, of Dr. Fine's annual salary and
60% and 0%, respectively, of Dr. Fine's annual bonus was allocated to
ThermoLase Corporation. Salary and bonus reported in the table for Dr.
Fine for fiscal 1997 and 1996 include salary in the amounts of $80,400 and
$14,080, respectively, and bonus in the amounts of $47,280 and $0,
respectively, paid to Dr. Fine by ThermoLase Corporation for his services
to that company. Options to purchase shares of the common stock of
ThemoLase granted to Dr. Fine in fiscal 1997 and 1996 were awarded his
services to ThermoLase.
(5) Mr. Langan was appointed president of the Corporation on April 2, 1996 and
chief executive officer on December 27, 1996. He resigned from these
positions on November 10, 1997.
(6) In addition to a $5,215 matching contribution referred to in footnote (2),
this amount includes $1,373, representing the then market value of 45
shares of Thermo Electron common stock received by Mr. Langan in March 1997
at Thermo Electron's annual management conference in recognition of his
managerial achievements.
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 current chief
executive officer, former chief executive officer and other named executive
officer. 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.
7
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
- -----------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
NUMBER OF SECURITIES GRANTED TO EXERCISE OPTION TERM (2)
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME GRANTED (1) FISCAL YEAR SHARE DATE 5% 10%
---- -------------------- --------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
James C. Barbookles (3) 100,000 (TDX) 23.00% $9.78 12/16/04 $398,000 $928,000
- -----------------------------------------------------------------------------------------------------------------------
David H. Fine 30,000 (TDX)(5) 6.90% $11.99 5/23/09 $286,200 $769,200
1,900 (TMO) 0.10 (4) $34.20 6/3/00 $10,241 $21,508
3,500 (TMD) 1.10 (4) $19.03 3/20/00 $10,500 $22,050
15,000 (TLZ)(5) 2.90 (4) $13.65 3/5/09 $162,900 $437,850
- -----------------------------------------------------------------------------------------------------------------------
Jeffrey J. Langan 50,000 (TDX) 11.50% $11.99 5/23/09 $0 $0
20,000 (TMO) 1.40%(4) $34.20 6/3/09 $0 $0
100 (TMO) 0.01%(4) $34.20 6/3/00 $0 $0
15,000 (TMD) 4.70%(4) $19.03 3/20/09 $0 $0
10,000 (TCA) 1.20%(4) $21.21 7/22/09 $0 $0
20,000 (TLZ) 3.80%(4) $17.10 9/19/09 $0 $0
10,000 (TSR) 4.20%(4) $11.43 7/22/09 $0 $0
10,000 (TVL) 4.30%(4) $6.13 7/22/09 $0 $0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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
any other Thermo Electron company. The granting 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 that the optionee continues to be
employed by the Corporation or another Thermo Electron company. 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.
(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. Barbookles was appointed chief executive officer of the Corporation on
November 14, 1997, and prior to that time served as the president of a
wholly owned subsidiary of Thermedics. From time to time Mr. Barbookles
has been granted options to purchase the 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 his services to
Thermo Electron companies in capacities other than in his capacity as
president 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.
8
<PAGE>
(5) The options to purchase shares of the common stock of Thermedics Detection
Inc. and ThermoLase Corporation granted to Dr. Fine are subject to the same
terms as described in footnote (1), except that the repurchase rights are
deemed to lapse 20% per year commencing on the sixth anniversary of the
grant date.
STOCK OPTIONS EXERCISED DURING FISCAL 1997 AND FISCAL YEAR-END OPTION 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 current chief executive officer, former chief
executive officer and 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
SHARES OPTIONS AT FISCAL VALUE OF
ACQUIRED YEAR-END UNEXERCISED
ON VALUE (EXERCISABLE/ IN-THE-MONEY
NAME COMPANY EXERCISE REALIZED (1) UNEXERCISABLE) (2) OPTIONS
---- ------- -------- ------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
James C. Barbookles (3) Thermedics Detection -- -- 105,000 /0 $40,800 /--
- -----------------------------------------------------------------------------------------------------------------------
David H. Fine Thermedics Detection -- -- 91,667 /0 (4) $299,502 /--
Thermo Electron -- -- 56,537 /0 (5) $1,260,597 /--
Thermedics -- -- 91,100 /0 $463,683 /--
Thermo Cardiosystems 1,530 $42,037 0 /0 $0 /--
Thermo Ecotek 1,500 $16,875 0 /0 $0 /--
Thermo Fibertek -- -- 4,500 /0 $41,346 /--
ThermoLase -- -- 45,000 /0 (4) $0 /--
Thermo Sentron -- -- 7,500 /0 $0 /--
ThermoSpectra -- -- 1,000 /0 $63 /--
- -----------------------------------------------------------------------------------------------------------------------
Jeffrey J. Langan Thermedics Detection -- -- 100,000 /0 $9,400 /--
Thermo Electron -- -- 35,100 /0 $186,629 /--
Thermedics -- -- 90,000 /0 $0 /--
Thermo Cardiosystems -- -- 10,000 /0 $51,650 /--
ThermoLase -- -- 20,000 /0 $0 /--
Thermo Sentron -- -- 10,000 /0 $0 /--
Thermo Voltek -- -- 10,000 /0 $0 /--
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year are
immediately exercisable as of the end of the fiscal year. In all cases,
the shares acquired upon exercise of the options reported in the table are
subject to repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or any other Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. The repurchase
9
<PAGE>
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. 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. Barbookles also holds other unexercised options to purchase the common
stock of Thermo Electron and its subsidiaries. These options are not
reported here as they were granted as compensation for his services to
other Thermo Electron companies in capacities other than in his capacity as
chief executive officer of the Corporation.
(4) The options to purchase shares of the common stock of Thermedics Detection
Inc. and ThermoLase Corporation granted to Dr. Fine are subject to the same
terms described in footnote (2), except that the repurchase rights are
deemed to lapse 20% per year commencing on the sixth anniversary of the
grant date. The options to purchase shares of the common stock of
ThermoLase Corporation were granted to Dr. Fine as compensation for his
services to ThermoLase Corporation as that company's interim director of
research.
(5) Options to purchase 45,000 shares of the common stock of Thermo Electron
granted to Dr. Fine are subject to the same terms 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.
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 Thermedics. 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.
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.
10
<PAGE>
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 the
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 officer 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.
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
11
<PAGE>
stock option awards in its parent companies, Thermo Electron and Thermedics, and
the other majority-owned subsidiaries of Thermo Electron and Thermedics, 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 stock 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. Such discretionary option awards were made to the named executive
officers in 1997.
STOCK OWNERSHIP AND RETENTION POLICIES
The Corporation's compensation program is also designed to encourage
executives to own shares of the Corporation's Common Stock. The Committee
believes that encouraging executives to retain stock acquired through its stock
option program provides additional incentive for executive officers to follow
strategies designed to maximize long-term value to Stockholders.
There are several elements to the Corporation's stock retention program.
For example, the Committee annually awards stock options based upon an
executive's ownership of the Corporation's Common Stock and unexercised, vested
rights to acquire such stock during the prior year. These options awards are
independent of the award of stock options as an incentive for management
performance. In 1997, the Committee granted options to purchase Common Stock to
the named executive officers under this program. These options have three-year
terms and vest 100% on the second anniversary of the date of grant. Certain
awards to the named executive officers in 1997 to purchase shares of the common
stock of Thermo Electron and Thermedics were made by those companies under
similar programs that award options to certain eligible employees annually based
on the number of shares of the common stock of Thermo Electron or Thermedics
held by such employees as an incentive to buy and hold such company's shares.
The Committee established a stock holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple was one times his base salary and reference
bonus for the calendar year. For all other officers, the multiple was one times
the officer's base salary. The Committee deemed it appropriate to permit
officers to achieve these ownership levels over a three-year period. The policy
was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee
also adopted 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 grant
date, unless otherwise authorized by the Committee. During 1997, Mr. Barbookles,
the Corporation's president and chief executive officer, received loans in the
principal amount of $160,721 under this plan, the entire amount of which was
outstanding as of April 23, 1998. In 1998, Mr. Barbookles received a loan in the
principal amount of $21,476 under this plan, the entire amount of which 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."
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
12
<PAGE>
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
Mr. Barbookles was appointed the president and chief executive officer of
the Corporation on November 14, 1997. Prior to his appointment, he held the
position of president of Orion Research Inc., a wholly owned subsidiary of
Thermedics, a position he continues to hold. Mr. Barbookles' salary for fiscal
1997 was reviewed and determined by Thermedics at the beginning of 1997, using
criteria similar to those used for the other officers of the Corporation, and no
change in his salary was made upon his appointment as the Corporation's chief
executive officer.
The Committee awarded to Mr. Barbookles options to purchase 100,000 shares
of the Common Stock in fiscal 1997 in connection with his appointment as the
Corporation's chief executive officer. This award was determined in a manner
consistent with awards to other officers, as described above under the caption
"Stock Option Program."
Mr. Langan served as president and chief executive officer of the
Corporation until November 10, 1997. His salary was established using the same
criteria as are used for the salaries of the Corporation's other named executive
officers.
During Mr. Langan's tenure, the Committee awarded to him options to
purchase 50,000 shares of the Common Stock in fiscal 1997. This award was
determined in a manner consistent with awards to other officers, as described
above under the caption "Stock Option Program." The awards to Mr. Langan in
fiscal 1997 of options to purchase shares of the common stock of Thermo
Electron and of Thermedics and its majority-owned subsidiaries were made by the
human resources committees of the granting companies using an analysis similar
to that described for the Corporation.
Mr. Langan also received an award to purchase 100 shares of the common
stock of Thermo Electron in fiscal 1997 made by the human resources committee of
Thermo Electron under a program which awards options to certain eligible
employees annually based on the number of shares of the common stock of Thermo
Electron held by the employee, as an incentive to buy and hold Thermo Electron's
common stock.
Morton Collins (Chairman)
Matthew C. Weisman
13
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a broad-
based market index and either a nationally recognized industry standard or an
index of peer companies selected by the Corporation. The Corporation's Common
Stock has been publicly traded only since February 21, 1997 and, as a result,
the following graph commences as of such date. The Corporation has compared its
performance with the American Stock Exchange Composite 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 THERMEDICS DETECTION INC.,
THE AMERICAN STOCK EXCHANGE COMPOSITE INDEX AND THE DOW JONES TOTAL RETURN INDEX
FOR THE DIVERSIFIED TECHNOLOGY INDUSTRY GROUP FROM FEBRUARY 21, 1997 TO JANUARY
2, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
--------------------------------------
2/21/97 1/2/98
--------------------------------------
<S> <C> <C>
TDX 100 89
--------------------------------------
AMEX COMP 100 118
--------------------------------------
DJDTC 100 108
--------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (TDX), the American
Stock Exchange Composite Index (AMEX COMP.) 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 American Stock Exchange Composite 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 "TDX."
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
Thermedics Inc. has created the Corporation as a publicly held, majority-owned
Corporation. 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.")
14
<PAGE>
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 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 for 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
$579,000 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. In
addition, the Corporation uses data processing and contract administration
services of two majority-owned subsidiaries of Thermo Electron and is charged
based on actual usage. 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
15
<PAGE>
a member of the Thermo Group or ceases to be a participant in the Charter. In
the event of a termination of the Services Agreement, the Corporation will be
required to pay a termination fee equal to the fee that was paid by the
Corporation for services under the Services Agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may provide certain
administrative services on an as-requested basis by the Corporation or as
required in order to meet the Corporation's obligations under Thermo Electron's
policies and procedures. Thermo Electron will charge the Corporation a fee equal
to the market rate for comparable services if such services are provided to the
Corporation following termination.
From time to time, the Corporation may transact business with other
companies in the Thermo Group
In April 1998, the Corporation announced its intention to acquire Orion
Research Inc., a wholly owned subsidiary of Thermedics, in exchange for
5,961,225 shares of the Corporation's Common Stock. The closing of this
transaction is subject to the completion of a definitive agreement and the
receipt by the Corporation of shareholder approval to issue its shares in the
transaction. Due to the Corporation's majority ownership by Thermedics, the
outcome of this vote is assured. For accounting purposes, this acquisition will
be accounted for in a manner similar to a pooling of interests. The purchase
price was determined by applying the same methodology used by Thermedics at the
time of its acquisition of Orion. The number of shares to be issued was
calculated based on the average price of the Corporation's Common Stock for the
five-day period prior to and including the date the transaction was approved by
the Corporation's and Thermedics' respective boards of directors. This five-day
average is appropriate as it most closely represents the value of the
Corporation's Common Stock on the date the Corporation became obligated to
transfer such shares to Thermedics.
In January 1996, the Corporation acquired the assets of Moisture Systems
Corporation and certain affiliated companies for a total of $21.7 million in
cash, including repayment of approximately $0.7 million of indebtedness. In
connection with this acquisition, the Corporation borrowed $21.2 million from
Thermedics pursuant to a promissory note due March 1998, and bearing interest at
the 90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter. The Corporation repaid this note in March 1998.
Pursuant to a subcontract entered into in October 1993, the Corporation
performs research and development services for Thermo Coleman Corporation
("Thermo Coleman"), whose wholly owned subsidiary Coleman Research Corporation
is the prime contractor under a contract with the U.S. Department of Energy.
Thermo Coleman is a wholly owned subsidiary of Thermo Electron. Thermo Coleman
paid the Corporation $533,000 under this arrangement in fiscal 1997.
The Corporation purchases an X-ray source that is used as a component in
its InScan systems from Trex Medical Corporation, a publicly traded, majority-
owned subsidiary of ThermoTrex Corporation ("Thermo Trex"), which is itself a
publicly traded, majority-owned subsidiary of Thermo Electron. The Corporation
paid Trex Medical Corporation $47,965 for these products in fiscal 1997.
The Corporation entered into a funded research and development arrangement
with ThermoLase Corporation ("ThermoLase"), a publicly traded, majority-owned
subsidiary of ThermoTrex, in December 1997 to develop a cryogenic cooling device
for ThermoLase. ThermoLase agreed to purchase five prototype devices for an
aggregate purchase price of $270,000. The Corporation expects to complete the
prototype devices in the second quarter of 1998.
The Corporation has subleased approximately 8,000 square feet of space in
its Chelmsford, Massachusetts, facility to Thermo Cardiosystems Inc., a publicly
traded, majority-owned subsidiary of Thermedics ("Thermo Cardiosystems"), under
a two-year sublease agreement. Under this sublease, Thermo Cardiosystems paid
the Corporation base rent of $44,000 in fiscal 1997, together with an amount
equal to approximately $33,000, representing Thermo Cardiosystems' pro rata
allocation of the facility's aggregate operating costs, real estate taxes and
utilities.
Pursuant to an international distributorship agreement, the Corporation
appointed Arabian Business Machines Co. ("ABM") as its exclusive distributor of
the Corporation's security instruments in certain Middle Eastern countries. ABM
is a member of The Olayan Group. Ms. Hutham S. Olayan, a director of Thermo
Electron, is the president and a director of Olayan America Corporation, a
member of The Olayan Group, which is indirectly
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controlled by Suliman S. Olayan, Ms. Olayan's father. Revenues recorded under
this agreement totaled $480,000 in fiscal 1997.
On March 22, 1996, the Corporation completed a private placement of 300,000
shares of its Common Stock at a purchase price of $10.00 per share. On November
19, 1996, the Corporation completed an additional private placement of 383,500
shares of its Common Stock at a purchase price of $10.75 per share.
Substantially all of the shares sold in such private placements were purchased
by outside investors that are not affiliated with the Corporation, Thermedics or
Thermo Electron. Dr. Fine purchased 10,000 shares of Common Stock in the March
private placement and Mr. Langan purchased 10,000 shares of Common Stock in the
November private placement, at prices of $10.00 and $10.75 per share,
respectively.
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 positive cash
balance of approximately $1,312,893, based on an exchange rate of $0.495/NLG
1.00 as 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%.
At January 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $1,294,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services and for miscellaneous items, net of amounts owed to the Corporation by
Thermo Electron and its other subsidiaries for products, services and for
miscellaneous items. The largest amount of net indebtedness owed by the
Corporation to Thermo Electron and its other subsidiaries since December 29,
1996 was $1,294,000. These amounts do not bear interest and are expected to be
paid in the normal course of business.
As of January 3, 1998, $40,043,000 of the Corporation's cash equivalents
were invested pursuant to a repurchase agreement with Thermo Electron. Under
this agreement, the Corporation in effect lends excess cash to Thermo Electron,
which Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. The Corporation's funds subject to the repurchase agreement
are readily convertible into cash by the Corporation and have a 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
In 1997, 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 1997, Mr. James Barbookles, the Corporation's president and chief
executive officer, received loans in the principal amount of $160,721 under this
plan to purchase 15,900 shares, the entire amount of which was outstanding as of
April 23, 1998. In 1998, Mr. Barbookles received a loan in the principal amount
of $21,476 under this plan to purchase 2,100 shares, the entire amount of which
was outstanding as of April 23, 1998. These 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.
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-- PROPOSAL 2 --
PROPOSAL TO ADOPT AN EMPLOYEES' STOCK PURCHASE PLAN
The board of directors has approved an employees' stock purchase plan (the
"Stock Purchase Plan") and reserved 50,000 shares of the Corporation's Common
Stock for issuance thereunder, subject to Stockholder approval. The board of
directors is recommending that the Stockholders approve the Stock Purchase Plan
and the reservation of shares at this Meeting. The purpose of the Stock
Purchase Plan is to grant options to purchase shares of Common Stock of the
Corporation to eligible employees of the Corporation. The board of directors
believes that the Stock Purchase Plan is an important incentive in attracting
and retaining key personnel, and motivating individuals to contribute
significantly to the Corporation's future growth and success, and in aligning
the long-term interest of these individuals with those of the Corporation's
Stockholders. Accordingly, the board of directors acted to adopt the Stock
Purchase Plan subject to Stockholder approval.
SUMMARY OF THE STOCK PURCHASE PLAN
The full text of the Stock Purchase Plan is set forth in Attachment A to
this proxy statement. A description of the principal features of the Stock
Purchase Plan follows, but it is qualified in its entirety by reference to the
full text.
PARTICIPATION; ADMINISTRATION
All full-time employees and part-time employees working at least 20 hours
per week and who have been employed for at least six months by the Corporation
are eligible to participate in the Stock Purchase Plan, unless they own more
than 5% of the Common Stock of the Corporation. At the present time, only
employees of U.S.-based subsidiaries of the Corporation are eligible to
participate in the plan. For purposes of determining the term of employment,
employees are credited with years of continuous employment with Thermo Electron
or its other subsidiaries immediately prior to joining the Corporation. Options
to purchase shares of Common Stock of the Corporation may be granted from time
to time at the discretion of the board of directors, which also determines the
date upon which such options are exercisable. The number of employees
potentially eligible to participate in the Stock Purchase Plan is approximately
220 persons.
CONTRIBUTIONS
A participating employee may purchase stock only through payroll
deductions. Eligible employees are also permitted to participate in the Thermo
Electron employees' stock purchase plan, which has substantially the same terms
as the Stock Purchase Plan. The aggregate amount which may be contributed under
the Thermo Electron employees' stock purchase plan and the Corporation's Stock
Purchase Plan may not exceed 10% of the employee's gross salary or wages during
the year. The board of directors may fix the aggregate amount that may be
contributed to the Stock Purchase Plan each year in its discretion within such
limitation. Employees are allowed to decrease, but not increase, the
percentage of wages contributed once during the Stock Purchase Plan year. An
employee may suspend his or her contributions, but then is not permitted to
contribute again for the remainder of the Stock Purchase Plan year.
TERMS OF OPTIONS
The exercise price is fixed on the grant date and is 95% of the fair market
value for the Common Stock on such date. On the exercise date, participants may
elect to use their accumulated payroll deductions to purchase shares at the
exercise price. Participants must agree not to resell the shares so purchased
for a period of six months following the exercise date. The options are
nontransferable, and except in the case of death of the employee, may not be
exercised if the employee is not still employed by the Corporation at the
exercise date. If an employee dies, his or her beneficiary may withdraw the
accumulated payroll deduction or use such deductions to purchase shares on the
exercise date. A participant may elect to discontinue participation at any time
prior to the exercise date and to have his or her accumulated payroll deduction
refunded together with interest on such amount as fixed by the board of
directors from time to time.
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SHARES SUBJECT TO THE STOCK PURCHASE PLAN
The number of shares that are reserved for issuance under the Stock
Purchase Plan will be 50,000 shares of the Corporation's Common Stock, subject
to adjustment for stock splits and similar events. The proceeds received by the
Corporation from exercise under the Stock Purchase Plan will be used for the
general purposes of the Corporation. Shares issued under the Stock Purchase
Plan may be authorized but unissued or shares reacquired by the Corporation and
held in its treasury.
AMENDMENT AND TERMINATION
The Stock Purchase Plan shall remain in full force and effect until
suspended or discontinued by the board of directors. The board of directors may
at any time or times amend or review the Stock Purchase Plan for any purpose
which may at any time be permitted by law, or may at any time terminate the
Stock Purchase Plan, provided that no amendment that is not approved by the
Stockholders shall be effective if it would cause the Stock Purchase Plan to
fail to satisfy the requirements of Rule 16b-3 (or any successor rule) of the
Securities Exchange Act of 1934, as amended. No amendment of the Stock Purchase
Plan may adversely affect the rights of any recipient of any option previously
granted without such recipient's consent.
EFFECTIVE DATE OF THE STOCK PURCHASE PLAN
The Stock Purchase Plan will become effective as of November 1, 1998,
provided that it is approved by the Stockholders at this Meeting.
FEDERAL INCOME TAX ASPECTS
Federal income tax is not imposed upon an employee in the year an option is
granted or the year the shares are purchased pursuant to the exercise of the
option granted under the Stock Purchase Plan. Federal income tax generally is
imposed upon an employee when he or she sells or otherwise disposes of the
shares acquired pursuant to the Stock Purchase Plan. When an employee sells or
disposes of the shares, if such sale or disposition occurs more than two years
from the grant date and more than one year from the exercise date, then Federal
income tax assessed at ordinary rates will be imposed upon the amount by which
the fair market value of the shares on the date of grant or disposition,
whichever is less, exceeds the amount paid for the shares. In addition, the
difference between the amount received by the employee at the time of sale and
the employee's tax basis in the shares, which is equal to the amount paid on
exercise of the option plus the amount recognized as ordinary income, will be
recognized as a capital gain or loss. The Corporation will not be allowed a
deduction under these circumstances for Federal income tax purposes. If the
employee sells or disposes of the shares sooner than two years from the grant
date or one year from the exercise date, then the employee's entire gain (the
difference between the fair market value at disposition and the amount paid for
the shares) will be taxed as ordinary income, and the Corporation would be
entitled to a deduction equal to that amount.
The closing price per share on the American Stock Exchange of the Common
Stock on April 22, 1998 was $9.50.
RECOMMENDATION
The board of directors believes that adoption of the Stock Purchase Plan
and the reservation of shares thereunder is important for the Corporation to
attract and retain key employees and to be able to continue to offer them the
opportunity to participate in the ownership and growth of the Corporation
through an employees stock purchase plan. In addition, the board of directors
believes the Stock Purchase Plan is in the best interest of the Corporation and
its Stockholders and recommends that the Stockholders vote FOR the approval of
the Stock Purchase Plan and the reservation of 50,000 shares of Common Stock
thereunder. Thermo Electron, which beneficially owned through its majority-
owned subsidiary Thermedics approximately 76.2% of the outstanding voting stock
of the Corporation on April 3, 1998, has indicated its intention to vote for the
proposal.
The affirmative vote of a majority of the Common Stock present and entitled
to vote on this proposal is required to approve the adoption of the Stock
Purchase Plan and the reservation of 50,000 shares of Common Stock
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thereunder. The board of directors believes that the adoption of the Stock
Purchase Plan is in the best interest of the Corporation and its Stockholders
and recommends that you vote FOR approval of the Stock Purchase Plan and the
reservation of the shares. If not otherwise specified, proxies will be voted FOR
approval of this proposal.
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.
Chelmsford, Massachusetts
April 23, 1998
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ATTACHMENT A
THERMEDICS DETECTION INC.
EMPLOYEES' STOCK PURCHASE PLAN
1. DEFINITIONS. As used in this Employees' Stock Purchase Plan of Thermedics
-----------
Detection Inc., the following terms shall have the meanings respectively
assigned to them below:
(a) BASE COMPENSATION means annual or annualized base compensation, exclusive
of overtime, bonuses, contributions to employee benefit plans, or other
fringe benefits, sales commissions, moving expense reimbursements or other
special payments.
(b) BENEFICIARY means the person designated as beneficiary on the Participant's
Membership Agreement or, if no such beneficiary is named, the person to
whom the Option is transferred by will or under the applicable laws of
descent and distribution.
(c) BOARD means the board of directors of the Company.
(d) CODE means the Internal Revenue Code of 1986, as amended.
(e) COMPANY means Thermedics Detection Inc., a Massachusetts corporation.
(f) COMPANY STOCK means the common stock, $.01 par value, of the Company.
(g) ELIGIBLE EMPLOYEE means any U.S.-based employee of the Corporation who is
eligible under the provisions of Section 7 to receive an Option as of a
particular Grant Date.
(h) ENROLLMENT AGREEMENT means an agreement whereby a Participant authorizes
the Company to withhold payroll deductions from his or her Gross
Compensation.
(i) EXERCISE DATE means a date not more than one year after a Grant Date, as
determined by the Board, on which Options must be exercised by Eligible
Employees.
(j) GRANT DATE means a date specified by the Board on which Options are to be
granted to Eligible Employees.
(k) GROSS COMPENSATION means Base Compensation plus sales commissions, overtime
pay and cash bonuses.
(l) MARKET VALUE means, as of a particular date, the last sale price of the
Company Stock if such stock is reported on the American Stock Exchange, or
if not so reported, the average of bid and asked prices of the Company
Stock last quoted by NASDAQ in the over-the-counter market on such date, as
the case may be.
(m) OPTION means an option to purchase shares of Stock granted under the Plan.
(n) OPTION SHARES means shares of Stock purchasable under an Option, which
shares may not be transferred by the Participant until at least six months
after the Exercise Date.
(o) PARTICIPANT means an Eligible Employee to whom an Option is granted and
who authorizes the Company to withhold payroll deductions by completing an
Enrollment Agreement.
(p) PLAN means this Employees' Stock Purchase Plan of the Company, as amended
from time to time.
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(q) RELATED CORPORATION means any corporation which is a parent corporation of
the Company, as defined in Section 425(e) of the Code, and any corporation
controlled by that parent corporation or the Company.
(r) RULE 16B-3 means Rule 16b-3 and any successor rule promulgated under
Section 16 of the Securities Exchange Act of 1934, as amended.
(s) SECTION 423 means Section 423 of the Code.
2. PURPOSE OF THE PLAN. The Plan is intended to encourage ownership of
-------------------
Company Stock by employees of the Company and to provide additional
incentive for the employees to promote the success of the business of the
Company. It is intended that the Plan shall be an "employee stock purchase
plan" within the meaning of Section 423.
3. TERM OF THE PLAN. The Plan shall become effective on November 1, 1998. No
----------------
option shall be granted under the Plan after November 2, 2008.
4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board,
--------------------------
which annually shall determine whether to grant Options under the Plan,
shall specify which dates shall be Grant Dates and Exercise Dates, and shall
fix the respective maximum percentages of each Participant's Gross
Compensation which may be withheld for the purpose of purchasing shares of
Company Stock; provided, that, the maximum aggregate percentage of each
--------
Participant's Gross Compensation which may be withheld for the purpose of
purchasing shares of stock under this Plan and all other employees stock
purchase plans (as defined in Section 423(b) of the Code) administered by a
Related Corporation and in which Eligible Employees may participate shall
not exceed ten percent of the Participant's Gross Compensation. The Board
shall have authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms of
Options granted under the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan.
The Board may appoint a committee, consisting of "non-employee directors"
as defined in Rule 16b-3, to administer the Plan and may, in its sole and
absolute discretion, delegate any or all of the functions specified herein
regarding administration of the Plan to such committee.
5. TERMINATION AND AMENDMENT OF PLAN. The Board may terminate or amend the
---------------------------------
Plan at any time; provided, however, that no amendment, unless approved by
the holders of a majority of the issued and outstanding shares of Company
Stock shall be effective if it would cause the Plan to fail to satisfy the
requirements of Rule 16b-3. No termination of or amendment to the Plan may
adversely affect the rights of a Participant with respect to any Option
held by the Participant as of the date of such termination or amendment.
6. SHARES OF STOCK SUBJECT TO THE PLAN. No more than an aggregate of 50,000
-----------------------------------
shares of Company Stock may be issued or delivered pursuant to the exercise
of Options granted under the Plan, subject to adjustments made in accordance
with Section 9.8. Option Shares may be either shares of Company Stock which
are authorized but unissued or shares of Company Stock held by the Company
in its treasury. If an Option expires or terminates for any reason without
having been exercised in full, the unpurchased Option Shares shall become
available for other Options granted under the Plan. The Company shall, at
all times during which Options are outstanding, reserve and keep available
shares of Company Stock sufficient to satisfy such Options, and shall pay
all fees and expenses incurred by the Company in connection therewith. In
the event of any capital change in the outstanding Company Stock as
contemplated by Section 9.8, the number of shares of Company Stock reserved
and kept available by the Company shall be appropriately adjusted.
7. PERSONS ELIGIBLE TO RECEIVE OPTIONS. Each employee of the Company shall be
-----------------------------------
granted an Option on each Grant Date on which such employee meets all of the
following requirements:
(a) The employee has completed at least six months of continuous employment
for the Company or a Related Corporation. Employment shall include any
leave of absence for military service, illness or
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<PAGE>
other bona fide purpose which does not exceed the longer of 90 days or
the period during which the absent employee's reemployment rights are
guaranteed by statute or contract.
(b) The employee is customarily employed by the Company for more than 20
hours per week and for more than five months per calendar year.
(c) The employee will not, after grant of the Option, own stock possessing
five percent or more of the total combined voting power or value of all
classes of stock of the Company or of any Related Corporation. For
purposes of this paragraph (c), the rules of Section 425(d) of the Code
shall apply in determining the stock ownership of the employee, and
stock which the employee may purchase under outstanding options shall
be treated as stock owned by the employee.
(d) Upon grant of the Option, the employee's rights to purchase stock under
all employee stock purchase plans (as defined in Section 423(b) of the
Code) of the Company and its Related Corporations will not accrue at a
rate which exceeds $25,000 of fair market value of the Stock
(determined as of the Grant Date for such Option) for each calendar
year in which such Option is outstanding at any time. The accrual of
rights to purchase Stock shall be determined in accordance with Section
423(b) (8) of the Code.
8. DATES FOR GRANTING OPTIONS. Options shall be granted on each date
--------------------------
designated by the Board as a Grant Date.
9. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
9.1. GENERAL. All Options granted on a particular Grant Date shall comply
--------
with the terms and conditions set forth in Sections 9.3 through 9.12,
and each Option shall be identical except as to the number of shares of
Company Stock purchasable under the Option, which shall be determined in
accordance with Section 9.2.
9.2. NUMBER OF SHARES. The maximum number of shares of Company Stock which a
----------------
Participant shall be permitted to purchase shall be equal to the amount
of the Participant's Gross Compensation permitted to be withheld for
purchasing Company Stock during the period running from the Grant Date
to the Exercise Date, divided by the purchase price determined in
accordance with Section 9.3. The number of shares which a Participant is
permitted to purchase may be further limited by the amount of payroll
deductions actually withheld as of the Exercise Date.
9.3. PURCHASE PRICE. The purchase price of Option Shares shall be 95 percent
--------------
of the Market Value of Company Stock as of the Grant Date. If the Grant
Date shall fall on a Saturday, Sunday or other legal holiday, the Market
Value shall be determined as of the trading day immediately preceding
the Grant Date.
9.4. RESTRICTIONS ON TRANSFER. Options may not be transferred otherwise than
------------------------
by will or under the laws of descent and distribution, or pursuant to a
qualified domestic relations order. An Option may not be exercised by
anyone other than the Participant during the lifetime of the
Participant. Option Shares may not be sold or otherwise transferred by
the Participant until at least six months after the Exercise Date. The
Company shall have the right to place a legend on all stock certificates
representing Option Shares setting forth the restriction on
transferability of such shares.
9.5. EXPIRATION. Each Option shall expire at the close of business on the
-----------
Exercise Date or on such earlier date as may result from the operation
of Section 9.6.
9.6. TERMINATION OF EMPLOYMENT OF PARTICIPANT. If a Participant ceases for
----------------------------------------
any reason, voluntary or involuntary (other than death or retirement),
to be continuously employed by the Company or a Related Corporation, his
or her Option shall immediately expire, and the Participant's
accumulated payroll deductions shall be returned by the Company with
interest pursuant to Section 9.12. For purposes of this Section 9.6, a
Participant shall be deemed to be employed throughout any leave of
absence for military service, illness or other bona fide purpose which
does not exceed the longer of ninety days or the period during which the
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<PAGE>
Participant's reemployment rights are guaranteed by statute or by
contract. If the Participant does not return to active employment prior
to the termination of such period, his or her employment shall be deemed
to have ended on the 91st day of such leave of absence.
9.7 RETIREMENT OR DEATH OF PARTICIPANT. If a Participant retires or dies,
----------------------------------
the Participant or, in the case of death, his or her Beneficiary, shall
be entitled to withdraw the Participant's accumulated payroll deductions
with interest pursuant to Section 9.12, or to purchase shares on the
Exercise Date to the extent that the Participant would have been so
entitled had he or she continued to be employed by the Company. The
number of shares purchasable shall be limited by the amount of the
participant's accumulated payroll deductions as of the date of his or
her retirement or death. Accumulated payroll deductions shall be applied
by the Company toward the purchase of shares unless the Participant or
Beneficiary withdraws such funds prior to the Exercise Date.
9.8 CAPITAL CHANGES AFFECTING THE STOCK. In the event that, between the
-----------------------------------
Grant Date and the Exercise Date of an Option, a stock dividend is paid
or becomes payable in respect of Company Stock or there occurs a split-
up or contraction in the number of shares of Company Stock, the number
of shares for which the Option may thereafter be exercised and the price
to be paid for each such share shall be proportionately adjusted. In the
event that, after the Grant Date, there occurs a reclassification or
change of outstanding shares of Company Stock or a consolidation or
merger of the Company with or into another corporation or a sale or
conveyance, substantially as a whole, of the property of the Company,
the Participant shall be entitled on the Exercise Date to receive shares
of stock or other securities equivalent in kind and value to the shares
of stock he or she would have held if he or she had exercised the Option
in full immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and had continued to hold such
shares (together with all other shares and securities thereafter issued
in respect thereof) until the Exercise Date. In the event that there is
to occur a recapitalization involving an increase in the par value of
Company Stock which would result in a par value exceeding the exercise
price under an outstanding Option, the Company shall notify the
Participant of such proposed recapitalization immediately upon its being
recommended by the Board to the Company's shareholders, after which the
Participant shall have the right to exercise his or her Option prior to
such recapitalization; if the Participant fails to exercise the Option
prior to recapitalization, the exercise price under the Option shall be
appropriately adjusted. In the event that, after the Grant Date, there
occurs a dissolution or liquidation of the Company, except pursuant to a
transaction to which Section 425(a) of the Code applies, each Option to
purchase Company Stock shall terminate, but the Participant holding such
Option shall have the right to exercise his or her Option prior to such
dissolution or liquidation.
9.9. PAYROLL DEDUCTIONS. Any Eligible Employee, who wishes to authorize
------------------
payroll deductions for the purchase of Option Shares under the Plan,
must complete and return to the human resources department of the
Company prior to the Grant Date an Enrollment Agreement indicating the
total percentage (which shall be a full integer between one and the
maximum determined by the Board in accordance with Section 4 hereof) of
his or her Gross Compensation which is to be withheld each pay period.
Prior to the Exercise Date, the Participant shall be permitted to do
each of the following once during any plan year: (a) withdraw
accumulated payroll deductions, (b) discontinue payroll deductions, and
(c) decrease, but not increase, the percentages of Gross Compensation
withheld. The Participant may not recommence payroll deductions at any
time prior to the Exercise Date.
9.10. EXERCISE OF OPTIONS. On the Exercise Date the Participant shall be
-------------------
deemed to have exercised his or her Option to purchase the maximum
number of Option Shares purchasable by his or her accumulated payroll
deductions, provided that:
(a) The number of Option Shares of Company Stock purchasable shall not
exceed the number of shares the Participant is entitled to
purchase pursuant to Section 9.2.
(b) If the total number of Option Shares of Company Stock which all
Participants elect to purchase, together with any Option Shares of
Company Stock already purchased under the Plan, exceeds the total
number of shares of Company Stock which may be purchased under the
Plan pursuant to Section 6, the number of shares of Company Stock
which each Participant is permitted to purchase shall be decreased
pro rata based on the Participant's accumulated payroll deductions
--------
with respect to Company Stock in
4
<PAGE>
relation to all accumulated payroll deductions currently being
withheld under the Plan with respect to Company Stock.
(c) If the number of Option Shares purchasable includes a fraction,
such number shall be adjusted to the next smaller whole number and
the purchase price shall be adjusted accordingly.
(d) Notwithstanding the foregoing, a Participant may notify the
Company's human resources department at least 30 days prior to an
Exercise Date, by completing an Enrollment/Change Agreement, that
he or she elects not to exercise his or her Option and desires to
withdraw his or her accumulated payroll deductions withheld under
the Plan, as provided in Section 9.9.
9.11. DELIVERY OF STOCK. Within a reasonable time after the Exercise Date,
-----------------
the Company shall deliver or cause to be delivered to the Participant a
certificate or certificates for the number of shares purchased by the
Participant. If any law or applicable regulation of the Securities and
Exchange Commission or other body having jurisdiction in the premises
shall require that the Company or the Participant take any action in
connection with the shares being purchased under the Option, delivery
of the certificate or certificates for such shares shall be postponed
until the necessary action shall have been completed, which action
shall be taken by the Company at its own expense, without unreasonable
delay. The Participant shall have no rights as a shareholder in respect
of shares for which he or she has not received a certificate.
9.12. RETURN OF ACCUMULATED PAYROLL DEDUCTIONS. In the event that the
----------------------------------------
Participant or the Beneficiary is entitled to the return of accumulated
payroll deductions, whether by reason of voluntary withdrawal,
termination of employment, retirement, death, or in the event that
accumulated payroll deductions exceed the price of Option Shares
purchased, such amount, together with interest thereon at the rate fixed
by the Board of Directors (which rate for a particular plan year running
from Grant Date to Exercise Date shall be fixed annually by the Board of
Directors prior to the commencement of such period), shall be returned
within a reasonable time by the Company to the Participant or the
Beneficiary, as the case may be; provided, however, that interest shall
-------- -------
not be paid on any amount returned which is less than the purchase price
of one Option Share of Company Stock for which such payroll deductions
were withheld.
5
<PAGE>
FORM OF PROXY
THERMEDICS DETECTION INC.
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 James Barbookles, John N. Hatsopoulos
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 Thermedics Detection Inc., a Massachusetts
corporation (the "Company"), to be held on Monday, June 1, 1998, at 1:30 p.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: James C. Barbookles, Morton Collins, John T. Keiser, Matthew C.
Weisman and John W. Wood Jr.
<TABLE>
<S> <C> <C> <C>
2. Approve management proposal to adopt the
Corporation's employees' stock purchase plan and FOR AGAINST ABSTAIN
reserve 50,000 shares of the common stock for [ ] [ ] [ ]
issuance thereunder.
</TABLE>
3. In their discretion on such other matters as may properly come before the
Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET FORTH
ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS
GIVEN.
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
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.
