SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one) X Annual Report Pursuant to Section 13 or
-----
15(d) of the Securities Exchange Act of 1934
Transition Report Pursuant to Section 13 or
-----
15(d) of the Securities Exchange Act of 1934
Commission file number 1-12137
THERMO FIBERGEN INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-3311544
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Alfred Circle
Bedford, Massachusetts 01730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 275-3600
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
Common Stock, $.01 par value American Stock Exchange
Redemption Rights American Stock Exchange
Units American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to the filing requirements for at least the past 90 days. Yes
[ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference into Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of January 24, 1997, was approximately
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$42,291,000.
As of January 24, 1997, the Registrant had 14,715,000 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the
fiscal year ended December 28, 1996, are incorporated by reference
into Parts I and II.
Part III, Item 10. Directors and Executive Officers of
the Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and
Management.
Part III, Item 13. Certain Relationships and
Transactions.
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year, is
contained in the following Attachment A, which is included herein and
made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Amendment No. 1 on Form 10-K/A to be signed by the undersigned, duly
authorized.
THERMO FIBERGEN INC.
By: /s/ Sandra L. Lambert
-------------------------------
Sandra L. Lambert
Secretary
ATTACHMENT A
DIRECTORS
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Set forth below are the names of the persons serving as
directors, their ages, their offices in the Corporation, if any, their
principal occupation or employment for the past five years, the length
of their tenure as directors and the names of other public companies
in which such persons hold directorships. Information regarding their
beneficial ownership of the Corporation's Common Stock and of the
common stock of its parent company, Thermo Fibertek Inc. ("Thermo
Fibertek") , manufacturer of equipment for the paper and paper-recycling
industries, and Thermo Fibertek's parent company, Thermo Electron
Corporation ("Thermo Electron"), a diversified high technology company,
is reported under the caption "Stock Ownership."
Anne T. Barrett Ms. Barrett, 67, has been a director of the
Corporation since July 1996. Ms. Barrett
has been an independent consultant on
investor relations and communications
matters since her retirement from Thermo
Electron in November 1993. Prior to that
time, Ms. Barrett was director of corporate
communications for Thermo Electron for more
than five years.
Francis L. McKone Mr. McKone, 62, has been a director of the
Corporation since April 1997. Mr. McKone
has been the chief executive officer of
Albany International Corp., a worldwide
supplier of paper machine fabrics, since
February 1993. For more than five years
prior to 1993, Mr. McKone served as the
co-chief executive officer of Albany
International Corp. He is also a director
of Albank Financial Corporation
.
Yiannis A. Dr. Monovoukas, 36, has been president,
Monovoukas chief executive officer and a director of
the Corporation since its incorporation in
February 1996. Dr. Monovoukas was a
corporate business analyst with Thermo
Electron from July 1995 to February 1996.
From 1993 through June 1995, Dr. Monovoukas
was a graduate student at the Harvard
Business School. From 1990 until 1993 he
was a staff scientist/engineer with Raychem
Corporation, a materials science company,
which he joined upon completion of a Ph.D.
program in chemical engineering at Stanford
University.
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Jonathan W. Painter Mr. Painter, 38, has been treasurer and a
director of the Corporation since its
incorporation in February 1996. Mr.
Painter has been treasurer of Thermo
Electron since August 1994 and treasurer of
Thermo Fibertek since October 1994. Mr.
Painter had served as director of strategic
planning of Thermo Fibertek from February
1993 through August 1994. For five years
prior to that time, Mr. Painter was
associate general counsel of Thermo
Electron and its subsidiaries. Mr. Painter
is also a director of Thermo BioAnalysis
Corporation.
William A. Mr. Rainville, 55, has been chairman of the
Rainville board and a director of the Corporation
since its incorporation in February 1996.
Mr. Rainville has been president and chief
executive officer of Thermo Fibertek since
its inception in November 1991 and a
director of Thermo Fibertek since January
1992. From 1984 until January 1993, Mr.
Rainville was president and chief executive
officer of Thermo Web Systems Inc., a
subsidiary of Thermo Fibertek. He has been
a senior vice president of Thermo Electron
since March 1993 and was a vice president
from 1986 to 1993. Mr. Rainville is also a
director of Thermo Fibertek, Thermo Ecotek
Corporation, Thermo Remediation Inc. and
Thermo TerraTech Inc.
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. During 1996, the only member of these committees was Ms.
Barrett. The present members of the Audit Committee are Mr. McKone
(Chairman) and Ms. Barrett. 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 Ms. Barrett (Chairman) and Mr. McKone. The
Human Resources Committee reviews the performance of senior members of
management, recommends executive compensation and administers the
Corporation's stock option and other stock-based compensation plans.
The Corporation does not have a nominating committee of the Board of
Directors. The Board of Directors met one time and the Audit and Human
Resources Committees did not meet during fiscal 1996. Each director
attended at least 75% of all meetings of the Board of Directors and
committees on which he or she served held during fiscal 1996.
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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.
Dr. Monovoukas, Mr. Painter and Mr. Rainville are all employees of
Thermo Electron companies and do not receive any cash compensation
from the Corporation for their services as directors. Directors are
also reimbursed for out-of-pocket expenses incurred in attending such
meetings.
Deferred Compensation Plan
Under the Corporation's deferred compensation plan for directors
(the "Deferred Compensation Plan"), a director has the right to defer
receipt of his cash fees until he ceases to serve as a director, dies
or retires from his principal occupation. In the event of a change in
control or proposed change in control of the Corporation that is not
approved by the Board of Directors, deferred amounts become payable
immediately. Either of the following is deemed to be a change of
control: (a) the occurrence, without the prior approval of the Board
of Directors, of the acquisition, directly or indirectly, by any
person of 50% or more of the outstanding Common Stock or the
outstanding common stock of Thermo Fibertek or 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure of the
persons serving on the Board of Directors immediately prior to any
contested election of directors or any exchange offer or tender offer
for the Common Stock or the common stock of Thermo Fibertek or Thermo
Electron to constitute a majority of the Board of Directors at any
time within two years following any such event. Amounts deferred
pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of the Corporation's Common Stock. When payable,
amounts deferred may be disbursed solely in shares of Common Stock
accumulated under the Deferred Compensation Plan. A total of 25,000
shares of Common Stock have been reserved for issuance under the
Deferred Compensation Plan. As of March 1, 1997, no deferred units
equal shares of Common Stock were accumulated under the Deferred
Compensation Plan.
Directors Stock Option Plan
The Corporation's directors stock option plan (the "Directors
Plan") provides for the grant of stock options to purchase shares of
common stock of the Corporation to outside directors as additional
compensation for their service as directors. The Directors Plan
provides for the grant of stock options upon a director's initial
appointment and, beginning in 2000, awards options to purchase 1,000
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shares annually to outside directors. A total of 200,000 shares of
Common Stock have been reserved for issuance under the Directors Plan.
Under the Directors Plan, each outside director was granted an
option to purchase 20,000 shares of Common Stock upon the effective
date of the Corporation's initial public offering. The size of awards
to new directors appointed to the Board of Directors after 1996 is
reduced by 5,000 shares each year. Outside directors who join the
Board of Directors after 1999 would not receive an option grant upon
their appointment or election to the Board of Directors, but would be
eligible to participate in the annual option awards described below.
Options evidencing initial grants to directors are exercisable six
months after the date of grant. The shares acquired upon exercise are
subject to restrictions on transfer and the right of the Corporation
to repurchase such shares at the exercise price in the event the
director ceases to serve as a director of the Corporation or any other
Thermo Electron company. The restrictions and repurchase rights lapse
or are deemed to have lapsed in equal annual installments of 5,000
shares per year, starting with the first anniversary of the grant
date, provided the director has continuously served as a director of
the Corporation or any other Thermo Electron company since the grant
date. These options expire on the fifth anniversary of the grant
date, unless the director dies or otherwise ceases to serve as a
director of the Corporation or any other Thermo Electron company prior
to that date.
Outside directors will also receive an annual grant of options to
purchase 1,000 shares of Common Stock, commencing with the Annual
meeting of the Stockholders to be held in 2000. The annual grant will
be made at the close of business on the date of each Annual meeting of
the Stockholders of the Corporation to each outside director then
holding office. Options evidencing annual grants may be exercised at
any time from and after the six-month anniversary of the grant date of
the option and prior to the expiration of the option on the third
anniversary of the grant date. Shares acquired upon exercise of the
options would be subject to repurchase by the Corporation at the
exercise price if the recipient ceased to serve as a director of the
Corporation or any other Thermo Electron company prior to the first
anniversary of the grant date.
The exercise price for options granted under the Directors Plan
is the average of the closing prices of the common stock as reported
on the American Stock Exchange (or other principal market on which the
common stock is then traded) for the five trading days preceding and
including the date of grant, or, if the shares are not then traded, at
the last price per share paid by third parties in an arms-length
transaction prior to the option grant. As of March 1, 1997, options
to purchase 20,000 shares had been granted under the Directors Plan,
no options had lapsed, and options to purchase 180,000 shares of
Common Stock were available for grant under the Directors Plan.
Stock Ownership Policies for Directors
During 1997, the Human Resources Committee of the Board of
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Directors (the "Committee") established a stock holding policy for
directors. The stock holding policy requires each director to hold a
minimum of 1,000 shares of Common Stock. Directors are requested to
achieve this ownership level by the 1998 Annual meeting of
Stockholders. Directors who are also executive officers of the
Corporation are required to comply with a separate stock holding
policy established by the Committee in 1997.
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.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of Thermo Fibertek, the
Corporation's parent company, and of Thermo Electron, Thermo
Fibertek's parent company, as of March 1, 1997, with respect to (i)
each person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each director,
(iii) each executive officer named in the summary compensation table
under the heading "Executive Compensation" and (iv) all directors and
current executive officers as a group.
While certain directors and executive officers of the Corporation
are also directors and executive officers of Thermo Fibertek or its
subsidiaries other than the Corporation, all such persons disclaim
beneficial ownership of the shares of Common Stock owned by Thermo
Fibertek.
<TABLE>
<CAPTION>
Name Thermo Thermo Thermo
Fibergen Fibertek Electron
Inc. (2) Inc. (3) Corporation
(4)
<S> <C> <C> <C>
Thermo Fibertek Inc. (5) 10,000,000 N/A N/A
Anne T. Barrett 20,000 1,450 8,709
Francis L. McKone 0 0 0
Yiannis A. Monovoukas (6) 94,450 31,500 13,550
Jonathan W. Painter 20,000 103,515 33,271
William A. Rainville (6) 41,500 517,894 252,294
All directors and current
executive
officers as a group (7 200,950 859,014 979,590
persons)
</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 Ms. Barrett,Dr.
Monovoukas, Mr. Painter, Mr. Rainville and all directors and executive
officers as a group include 20,000, 80,000,20,000, 40,000 and 185,000
shares, respectively, that such person or group has the right to
acquire within 60 days of March 1, 1997, through the exercise of stock
options. No director or executive officer beneficially owned more
than 1% of the Common Stock outstanding as of March 1, 1997; all
directors and executive officers as a group beneficially owned 1.4% of
the Common Stock outstanding as of such date.
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(3)Shares of the common stock of Thermo Fibertek beneficially owned by
Dr. Monovoukas, Mr. Painter, Mr. Rainville and all directors and
executive officers as a group include 30,000, 103,500, 495,000 and
799,950 shares, respectively, that such person or group had the right
to acquire within 60 days after March 1, 1997, through the exercise of
stock options. Shares of the common stock of Thermo Instrument
beneficially owned by Ms. Barrett includes 1,450 shares held by a
trust of which Ms. Barrett and her spouse are the trustees. Shares of
the common stock of Thermo Fibertek beneficially owned by Mr. Painter
include 15 shares held by him as custodian for one minor child. No
director or executive officer beneficially owned more than 1% of the
common stock of Thermo Fibertek outstanding as of March 1, 1997, all
directors and executive officers as a group beneficially owned 1.4% of
the Thermo Fibertek common stock outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned
by Dr. Monovoukas, Mr. Painter, Mr. Rainville and all directors and
executive officers as a group include 11,325, 27,035, 205,648 and
771,267 shares, respectively, that such person or group has the right
to acquire within 60 days of March 1, 1997, through the exercise of
stock options. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Painter and all directors and executive
officers as a group include 488 and 3,746 full shares, respectively,
allocated to 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. Shares beneficially owned by Ms. Barrett include 6,010
shares held by a trust of which Ms. Barrett and her spouse are the
trustees. The directors and executive officers did not individually
or as a group beneficially own more than 1% of the Thermo Electron
common stock outstanding as of March 1, 1997.
(5) As of March 1, 1997, Thermo Fibertek beneficially owned
approximately 68% of the outstanding Common Stock. Thermo Fibertek's
address is 81 Wyman Street, Waltham, Massachusetts 02254. As of
March 1, 1997, Thermo Fibertek had the power to elect all of the
members of the Corporation's Board of Directors. Thermo Fibertek is a
majority-owned subsidiary of Thermo Electron and therefore, Thermo
Electron may be deemed a beneficial owner of the shares of Common
Stock beneficially owned by Thermo Fibertek. Thermo Electron
disclaims beneficial ownership of these shares.
(6) As of March 1, 1997, Mr. Monovoukas and Mr. Rainville also
beneficially owned 14,450 and 1,500 redemption rights, respectively,
issued by the Corporation. Each of these rights, issued in a public
offering in September 1996, permits the holder to sell one share of
the Common Stock back to the Corporation at certain periods in the
future at a price of $12.25 per share.
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
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of more than 10% of the Common Stock, such as Thermo Fibertek and its
parent company, Thermo Electron, to file with the Securities and
Exchange Commission initial reports of ownership and periodic reports
of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements
applicable to such persons were complied with during 1996, except in
the following instances. Thermo Fibertek filed two Forms 4 late,
reporting a total of three transactions consisting of the grant to
employees of options to purchase the Common Stock. Thermo Electron
also filed two Forms late, reporting a total of five transactions,
which included the three transactions described above for Thermo
Fibertek and an additional two transactions also consisting of the
grant to employees of options to purchase the Common Stock.
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 chief executive officer for the last two fiscal years.
No other executive officer of the Corporation met the definition of
"highly compensated" within the meaning of the Securities and Exchange
Commission's executive compensation disclosure rules.
The Corporation is required to appoint certain executive officers
and full-time employees of Thermo Electron as executive officers of
the Corporation, in accordance with the Thermo Electron Corporate
Charter. The compensation for these executive officers is determined
and paid entirely by Thermo Electron. The time and effort devoted by
these individuals to the Corporation's affairs is provided to the
Corporation under the Corporate Services Agreement between the
Corporation and Thermo Electron. Accordingly, the compensation for
these individuals is not reported in the following table.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Options All Other
Name and Fiscal Annual Compensation of Shares Compensation
Principal Position Year Salary Bonus and Company
(1)
<S> <C> <C> <C> <C>
Yiannis A. Monovoukas 1996 $100,000 $60,500 80,000(TFG) $0
President & Chief 75(TMO)
Executive Officer 2,000(TBA)
30,000(TFT)
2,000(TLT)
6,000(TOC)
4,000(TMQ)
2,000(TSR)
2,000(TXM)
1995 $ 39,583(2) -- 11,250(TMO) $0
</TABLE>
(1) Options granted by the Corporation are designated in the table as
"TFG." In addition, the named executive officer has also been granted
options to purchase the common stock of the following Thermo Electron
companies from time to time as part of Thermo Electron's stock option
program: Thermo BioAnalysis Corporation (designated in the table as
TBA), Thermo Electron (designated in the table as TMO), Thermo
Fibertek Inc. (designated in the table as TFT), ThermoLyte Corporation
(designated in the table as TLT), Thermo Optek Corporation (designated
in the table as TOC), ThermoQuest Corporation (designated in the table
as TMQ), Thermo Sentron Inc. (designated in the table as TSR) and
Trex Medical Corporation (designated in the table as TXM).
(2) Dr. Monovoukas was appointed president and chief executive
officer of the Corporation in February 1996. Prior to that time, he
served as a corporate business analyst for Thermo Electron since
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joining Thermo Electron in July 1995. Reported in the table under
"Salary" is the salary paid in 1995 to Dr. Monovoukas for his service
as a corporate business analyst of Thermo Electron, which was paid at
an annualized rate of $95,000. None of the bonus paid to Dr.
Monovoukas with respect to 1995 performance was attributable to his
service as president and chief executive officer of the Corporation.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning individual
grants of stock options made during fiscal 1996 to the Corporation's
chief executive officer. It has not been the Corporation's policy in
the past to grant stock appreciation rights, and no such rights were
granted during fiscal 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Potential
Realizable
Value at Assumed
Percent of Annual Rates of
Number of Total Stock
Securities Options Exercise Price Appreciation
Underlying Granted to Price for
Options Employees in Per Expiration Option Term (2)
Name (1) Granted (1) Fiscal Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Yiannis A. 80,000 (TFG) 39.0% $10.00 08/14/08 $636,800 $1,710,400
Monovoukas
75 (TMO) 0.005% (3) $42.79 05/22/99 $506 $1,062
2,000 (TBA) 0.2% (3) $10.00 03/11/08 $15,920 $42,760
30,000 (TFT) 19.6% (3) $14.32 02/16/08 $342,000 $918,600
2,000 (TLT) 0.6% (3) $10.00 03/11/08 $15,920 $42,760
6,000 (TOC) 0.2% (3) $12.00 04/09/08 $57,300 $153,960
4,000 (TMQ) 0.1% (3) $13.00 03/11/08 $41,400 $111,200
2,000 (TSR) 0.4% (3) $14.00 03/11/08 $22,280 $59,800
2,000 (TXM) 0.1% (3) $11.00 03/11/08 $13,840 $35,060
</TABLE>
(1) The options granted during the fiscal year are immediately
exercisable, except options to purchase the common stock of ThermoLyte
Corporation, which are not exercisable until the earlier of (i) 90
days after the effective date of the registration of that company's
common stock under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") and (ii) nine years after the grant date. In all
cases, the shares acquired upon exercise are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases
to be employed by such corporation or any other Thermo Electron
company. The granting corporation may exercise its repurchase rights
within six months after the termination of the optionee's employment.
For publicly traded companies, the repurchase rights generally lapse
ratably over a five- to ten-year period, depending on the option term,
which may vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo Electron
company. For companies that are not publicly traded, the repurchase
rights lapse in their entirety on the ninth anniversary of the grant
date. Certain options granted as part of Thermo Electron's stock
option program have three-year terms, and the repurchase rights lapse
in their entirety on the second anniversary of the grant date. The
granting corporation may permit the holder of options to exercise
options and to satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation.
(2) The amounts shown on this table represent hypothetical gains that
could be achieved for the respective options if exercised at the end
of the option term. These gains are based on assumed rates of stock
appreciation of 5% and 10% compounded annually from the date the
respective options were granted to their expiration date. The gains
shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.
Actual gains, if any, on stock option exercises will depend on the
future performance of the common stock of the granting corporation,
the optionee's continued employment through the option period and the
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date on which the options are exercised.
(3) These options were granted under stock option plans maintained by
Thermo Electron companies other than the Corporation and accordingly
are reported as a percentage of total options granted to employees of
Thermo Electron and its subsidiaries.
Stock Options Exercised During Fiscal 1996
The following table reports certain information regarding stock
option exercises during fiscal 1996 and outstanding stock options held
at the end of fiscal 1996 by the Corporation's chief executive
officer. No stock appreciation rights were exercised or were
outstanding during fiscal 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1996 And Fiscal 1996 Year-End Option Values
Number of
Unexercised
Options at
Shares Fiscal
Acquired Year-End Value of
on Value (Exercisable/ Unexercised
Name Company Exercise Realized Unexercisable) In-the-Money
(1) Options
<S> <C> <C> <C><C> <C> <C>
Yiannis A. Thermo Fibergen -- -- 80,000/0 $60,000/--
Monovoukas
Thermo Electron -- -- 11,325/0 $107,101/--
Thermo -- -- 2,000/0 $6,250/--
BioAnalysis
Thermo Fibertek -- -- 30,000/0 $0/--
ThermoLyte -- -- 0/2,000 --/$0(2)
Thermo Optek -- -- 6,000/0 $0/--
ThermoQuest -- -- 4,000/0 $0/--
Thermo Sentron -- -- 2,000/0 $0/--
Trex Medical -- -- 2,000/0 $3,250/--
</TABLE>
(1) All of the options reported outstanding at the end of the fiscal
year are immediately exercisable as of the fiscal year-end, except
options to purchase the common stock of ThermoLyte Corporation, which
are not exercisable until the earlier of (i) 90 days after the
effective date of the registration of that company's common stock
under Section 12 of the Exchange Act and (ii) nine years after the
grant date. In all cases, the shares acquired upon exercise of the
options reported in the table are subject to repurchase by the
granting corporation at the exercise price if the optionee ceases to
be employed by such corporation or any other Thermo Electron company.
The granting corporation may exercise its repurchase rights within six
months after the termination of the optionee's employment. For
publicly traded companies, the repurchase rights generally lapse
ratably over a five- to ten-year period, depending on the option term,
which may vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo Electron
company. For companies that are not publicly traded, the repurchase
rights lapse in their entirety on the ninth anniversary of the grant
date. Certain options granted as a part of Thermo Electron's stock
option program have three-year terms, and the repurchase rights lapse
in their entirety on the second anniversary of the grant date. The
granting corporation may permit the holder of such options to exercise
options and to satisfy tax withholding obligations by surrendering
shares equal in fair market value to the exercise price or withholding
obligation.
(2) No public market for the shares underlying these options existed
at fiscal year-end. Accordingly, no value in excess of the exercise
price has been attributed to these options.
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority
interest in subsidiary companies to outside investors as an important
tool in its future development. As part of this strategy, Thermo
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Electron and certain of its subsidiaries have created several
privately and publicly held subsidiaries, and Thermo Fibertek has
created the Corporation as a publicly held, majority-owned subsidiary.
From time to time, Thermo Electron and its subsidiaries will create
other majority-owned subsidiaries as part of its spinout strategy.
(The Corporation and such other majority-owned Thermo Electron
subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries recognize
that the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly,
Thermo Electron and each of the Thermo Subsidiaries have adopted the
Thermo Electron Corporate Charter (the "Charter") to define the
relationships and delineate the nature of such cooperation among
themselves. The purpose of the Charter is to ensure that (1) all of
the companies and their stockholders are treated consistently and
fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and
financial, managerial and technological strengths of the others, and
(4) Thermo Electron and the Thermo Subsidiaries, in the aggregate, 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
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so long as Thermo Electron and at least one Thermo Subsidiary
participate. The Charter may be amended at any time by agreement of
the participants. Any Thermo Subsidiary, including the Corporation,
can withdraw from participation in the Charter upon 30 days' prior
notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be
controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A
withdrawal from the Charter automatically terminates the corporate
services agreement and tax allocation agreement (if any) in effect
between the withdrawing company and Thermo Electron. The withdrawal
from participation does not terminate outstanding commitments to third
parties made by the withdrawing company, or by Thermo Electron or
other members of the Thermo Group, prior to the withdrawal. However, a
withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide
certain administrative functions mandated by Thermo Electron so long
as the withdrawing company is controlled by or affiliated with Thermo
Electron.
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. The fee is reviewed annually and may
be changed by mutual agreement of the Corporation and Thermo Electron.
During fiscal 1996, Thermo Electron assessed the Corporation $22,000
in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms
of the Services Agreement are fair to the Corporation. For items such
as employee benefit plans, insurance coverage and other identifiable
costs, Thermo Electron charges the Corporation based on charges
attributable to the Corporation. The Services Agreement automatically
renews for successive one-year terms, unless canceled by the
Corporation upon 30 days' prior notice. In addition, the Services
Agreement terminates automatically in the event the Corporation ceases
to be a member of the Thermo Group or ceases to be a participant in
the Charter. In the event of a termination of the Services Agreement,
the Corporation will be required to pay a termination fee equal to the
fee that was paid by the Corporation for services under the Services
Agreement for the nine-month period prior to termination. Following
termination, Thermo Electron may provide certain administrative
services on an as-requested basis by the Corporation or as required in
order to meet the Corporation's obligations under Thermo Electron's
policies and procedures. Thermo Electron will charge the Corporation a
fee equal to the market rate for comparable services if such services
are provided to the Corporation following termination.
From time to time, the Corporation may transact business with other
companies in the Thermo Group. In fiscal 1996, these transactions included
the following.
In July 1996, the Corporation entered into a supply and license
agreement with Thermo Fibertek in which Thermo Fibertek granted to the
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Corporation a worldwide, royalty-free license to use Thermo
Fibertek's proprietary fiber "scalping" technology in the pulp and
paper industries. The agreement has an initial term of eight years
and is subject to annual renewals thereafter, unless either party elects
not to renew the agreement. The Corporation's rights under the agreement
are exclusive for a period of at least five years and such exclusivity
will continue thereafter if the Corporation has purchased at least 35
scalping units from Thermo Fibertek within the first five years of the
license and at least five such units in each subsequent year. The
agreement also provides that Thermo Fibertek will be the exclusive
manufacturer of products based on the licensed technology. The purchase
price to be paid by the Corporation to Thermo Fibertek for these products
will be based on Thermo Fibertek's manufacturing cost plus a gross profit
margin of 55%. Thermo Fibertek has agreed not to sell these components or
any other technology or products proprietary to Thermo Fibertek for use in
competition with the Corporation in the pulp and paper industries.
As of December 28, 1996, $58,366,000 of the Corporation's
equivalents were invested in 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, United
States government agency securities, money market funds, commercial
paper and other marketable securities, in the amount of at least 103%
of such obligation. The Corporation's funds subject to the repurchase
agreement will be readily convertible into cash by the Corporation and
have an original maturity of three months or less. The repurchase
agreement earns a rate based on the 90-day Commercial Paper Composite
Rate plus 25 basis points, set at the beginning of each quarter.
Stock Holding Assistance Plan
During 1997, the Human Resources Committee of the Corporation's Board
of Directors (the "Committee") established a stock holding policy for
executive officers of the Corporation. The stock holding policy
specifies an appropriate level of ownership of the Corporation's
Common Stock as a multiple of the officer's compensation. For the
chief executive officer, the multiple is one times his base salary and
reference bonus for the calendar year. For all other officers, the
multiple is one times the officer's base salary. The Committee deemed
it appropriate to permit officers to achieve these ownership levels
over a three-year period.
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
these individuals to purchase Common Stock in the open market. Loans
will be repayable upon the earlier of demand or the fifth anniversary
of the date of the loan, unless otherwise authorized by the Human
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Resources Committee of the Corporation's Board of Directors. No such
loans were outstanding in 1996.
AA971130049
