<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 Section 240.14a-11(c) or Section 240.14a-12
THERMO FIBERGEN INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
THERMO FIBERGEN INC.
8 Alfred Circle
Bedford, Massachusetts 01730
April 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
Thermo Fibergen 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,
YIANNIS A. MONOVOUKAS
President and Chief Executive Officer
<PAGE>
THERMO FIBERGEN INC.
8 Alfred Circle
Bedford, Massachusetts 01730
April 23, 1998
To the Holders of the Common Stock of
THERMO FIBERGEN INC.
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermo Fibergen Inc. (the
"Corporation") will be held on Monday, June 1, 1998, at 8:15 a.m. at The Hyatt
Regency Scottsdale Resort at Gainey Ranch, 7500 East Doubletree Ranch Road,
Scottsdale, Arizona, 85258. The purpose of the meeting is to consider and take
action upon the following matters:
1. Election of six directors.
2. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is April 3, 1998.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your shares be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This Notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo
Fibergen Inc. (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Monday, June 1, 1998, at 8:15 a.m. at
The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona, and
any adjournment thereof. The mailing address of the executive office of the
Corporation is 8 Alfred Circle, Bedford, Massachusetts 01730. This proxy
statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about April 29, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
six directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $0.01 par value, ("Common Stock")
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. All signed
and returned proxies will be counted towards establishing a quorum for the
Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors and
as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present and entitled to vote on
the election. Withholding authority to vote for a nominee for director will be
treated as shares present and entitled to vote and, for purposes of determining
the outcome of the vote, will have the same effect as a vote against the
nominee. With respect to the election of directors, broker "non-votes" will not
be treated as shares present and entitled to vote on a voting matter and will
have no effect on the outcome of the vote. A broker "non-vote" occurs when a
nominee holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Corporation received prior to the Meeting, by executing and returning a
later dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of April 3, 1998, consisted of
14,709,898 shares of Common Stock. Only Stockholders of record at the close of
business on April 3, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
- PROPOSAL 1 -
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting, each to hold office until
his or her successor is chosen and qualified or until his or her 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
1
<PAGE>
their beneficial ownership of the Corporation's Common Stock and of the common
stock of its parent company, Thermo Fibertek Inc. ("Thermo Fibertek"), a
manufacturer of papermaking and paper-recycling equipment, and Thermo Fibertek's
parent company, Thermo Electron Corporation ("Thermo Electron"), a provider of
diversified products and services for biomedical, instrument and environmental
markets, is reported under the caption "Stock Ownership." All of the nominees
are currently directors of the Corporation.
<TABLE>
<S> <C>
ANNE T. BARRETT Ms. Barrett, 68, 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, 63, has been a director of the Corporation since April 1997. Mr.
McKone has been the president and co-chief executive officer of Albany
International Corp., a worldwide supplier of paper machine fabrics, since 1984.
In 1993 he became the president and chief executive officer of Albany
International Corp. He is also a director of Albank Financial Corporation and
Thermo Fibertek Inc.
- ---------------------------------------------------------------------------------------------------------------
YIANNIS A. MONOVOUKAS Dr. Monovoukas, 37, has been president, 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.
- ---------------------------------------------------------------------------------------------------------------
JONATHAN W. PAINTER Mr. Painter, 39, has been a director of the Corporation since its incorporation
in February 1996. Mr. Painter has been executive vice president, operations, of
Thermo Fibertek Corporation since September 1997, was treasurer of Thermo
Electron from August 1994 through June 1997 and was treasurer of Thermo Fibertek
from October 1994 through June 1997. 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. RAINVILLE Mr. Rainville, 56, has been chairman of the 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.
- ---------------------------------------------------------------------------------------------------------------
ROGER D. WELLINGTON Mr. Wellington, 71, has been a director of the Corporation since April 1998. Mr.
Wellington serves as the president and chief executive officer of Wellington
Consultants, Inc. and of Wellington Associates Inc., international business
consulting firms he founded in 1994 and 1989, respectively. Prior to 1989, Mr.
Wellington served as chairman of the board of Augat Inc., a manufacturer of
electromechanical components and systems, for more than five years. Prior to
1988, Mr. Wellington also served as the chief executive officer and president of
Augat Inc. for more than ten years. Mr. Wellington is also a director of
Photoelectron Corporation and Thermo Electron Corporation.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
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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. McKone (Chairman) and Mr. Wellington.
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, Mr. McKone and Mr. Wellington
(Chairman). The human resources committee reviews the performance of senior
members of management, approves executive compensation and administers the
Corporation's stock option and other stock-based compensation plans. The
Corporation does not have a nominating committee of the board of directors. The
board of directors met three times, the audit committee met twice and the human
resources committee met twice during fiscal 1997. 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 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. 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 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 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, 1998, deferred units equal to 53.36 shares of
Common Stock were accumulated under the Deferred Compensation Plan.
DIRECTORS STOCK OPTION PLAN
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of common stock of
the Corporation to outside directors as additional compensation for their
service as directors. The Directors Plan provides for the grant of stock
options upon a director's initial appointment and, beginning in 2000, awards
options to purchase 1,000 shares annually to outside directors. A total of
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
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<PAGE>
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 immediately preceding and including the date
of grant, or, if the shares are not then traded, at the last price per share
paid by third parties in an arms-length transaction prior to the option grant.
As of March 1, 1998, options to purchase 35,000 shares of Common Stock were
outstanding under the Directors Plan, no options had lapsed or been exercised,
and options to purchase 165,000 shares of Common Stock were available for future
grant.
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 Thermo Fibertek, the Corporation's parent company,
and of Thermo Electron, Thermo Fibertek's parent company, as of March 1, 1998,
with respect to (i) each director, (ii) each executive officer named in the
summary compensation table under the heading "Executive Compensation" and (iii)
all directors and current executive officers as a group. In addition, the
following table sets forth the beneficial ownership of Common Stock as of March
1, 1998, with respect to each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of Common Stock.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Fibertek or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Fibertek.
4
<PAGE>
<TABLE>
<CAPTION>
NAME (1) THERMO FIBERGEN (2) THERMO FIBERTEK (3) THERMO ELECTRON (4)
-------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 10,419,950 -- --
Anne T. Barrett 20,000 0 4,572
Francis L. McKone 15,053 0 0
Yiannis A. Monovoukas 94,450 31,500 13,950
Jonathan W. Painter 20,000 116,515 28,537
William A. Rainville 41,500 (6) 759,086 239,893
Roger D. Wellington 1,000 15,750 36,062
All directors and current executive
officers as a group (8 persons) 217,003 1,091,671 1,135,841
</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, Mr. McKone,
Dr. Monovoukas, Mr. Painter, Mr. Rainville, Mr. Wellington and all
directors and current executive officers as a group include 20,000, 15,000,
80,000, 20,000, 40,000, 1,000 and 201,000 shares, respectively, that such
person or group has the right to acquire within 60 days of March 1, 1998,
through the exercise of stock options. Shares beneficially owned by Mr.
McKone and by all directors and current executive officers as a group
include 53 full shares allocated through March 1, 1998, to Mr. McKone's
account maintained under the Corporation's Deferred Compensation Plan for
directors. No director or 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 1.5% of the Common
Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Fibertek beneficially owned by Dr.
Monovoukas, Mr. Painter, Mr. Rainville, Mr. Wellington and all directors
and current executive officers as a group include 30,000, 103,500, 735,000,
6,750 and 1,007,100 shares, respectively, that such person or group had the
right to acquire within 60 days after March 1, 1998, through the exercise
of stock options. Shares of the common stock of Thermo Fibertek
beneficially owned by Mr. Painter include 15 shares held in a custodial
account for the benefit of his minor child. Except for Mr. Rainville, who
beneficially owned 1.2% of the common stock of Thermo Fibertek outstanding
as of March 1, 1998, no director or executive officer beneficially owned
more than 1% of the common stock of Thermo Fibertek outstanding as of March
1, 1998; all directors and current executive officers as a group
beneficially owned 1.8% 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, Mr. Wellington and all directors
and current executive officers as a group include 11,725, 22,775, 178,674,
10,375 and 929,021 shares, respectively, that such person or group has the
right to acquire within 60 days of March 1, 1998, through the exercise of
stock options. Shares of the common stock of Thermo Electron beneficially
owned by Mr. Painter and all directors and current executive officers as a
group include 590 and 4,052 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 of the common stock of
Thermo Electron beneficially owned by Mr. Wellington and by all directors
and current executive officers as a group include 23,157 full shares
allocated through March 1, 1998 to Mr. Wellington's account maintained
under Thermo Electron's deferred compensation plan for directors. Shares
beneficially owned by Ms. Barrett include 3,010 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,
1998.
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<PAGE>
(5) As of March 1, 1998, Thermo Electron, through its majority-owned
subsidiary, Thermo Fibertek Inc., beneficially owned approximately 70.8% of
the outstanding Common Stock. Thermo Electron's address is 81 Wyman
Street, Waltham, Massachusetts 02254-9046. As of March 1, 1998, Thermo
Electron had the power to elect all of the members of the Corporation's
board of directors.
(6) As of March 1, 1998, Mr. Rainville also beneficially owned 1,500 redemption
rights 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 $12.75 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 of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during 1997, except in the following instances.
Thermo Electron filed three Forms 4 late, reporting a total of 15 transactions,
including 11 open market purchases of shares of Common Stock and four
transactions associated with the grant of options to purchase Common Stock to
employees under its stock option program.
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 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.
6
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
------------
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTIONS (NO. OF
NAME AND FISCAL ---------------------------- SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AND COMPANY) (1) COMPENSATION (2)
------------------ -------- --------------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Yiannis A. Monovoukas (3) 1997 $120,000 $64,000 400 (TMO) $5,344
President and 1996 $100,000 $60,500 80,000 (TFG) --
Chief Executive Officer 75 (TMO)
2,000 (TBA)
30,000 (TFT)
2,000 (TLT)
6,000 (TOC)
4,000 (TMQ)
2,000 (TSR)
2,000 (TXM)
1995 $ 39,583 -- 11,250 (TMO) --
</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
Electron (designated in the table as TMO), Thermo BioAnalysis Corporation
(designated in the table as TBA), 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) Represents the amount of matching contributions made by the individual's
employer on behalf of named executive officers participating in the Thermo
Electron 401(k) plan.
(3) 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 after joining Thermo Electron in July
1995. Reported in the table under "Salary" is the salary paid to Dr.
Monovoukas in 1995 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 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 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 1997.
7
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<TABLE>
<CAPTION>
STOCK OPTIONS GRANTED IN FISCAL 1997
- -----------------------------------------------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------
NAME GRANTED (1) FISCAL YEAR SHARE DATE 5% 10%
- ------ ------------- ------------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Yiannis A. Monovoukas 400 (TMO) 0.03% (3) $34.20 6/3/00 $2,156 $4,528
</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
applicable corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Corporation and accordingly are reported
as a percentage of total options granted to employees of Thermo Electron
and its subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 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 chief executive officer. No stock appreciation
rights were exercised or were outstanding during fiscal 1997.
8
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL 1997 YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF
UNEXERCISED
OPTIONS AT VALUE OF
FISCAL UNEXERCISED
ACQUIRED ON VALUE (EXERCISABLE/ IN-THE-MONEY
NAME COMPANY EXERCISE REALIZED (1) UNEXERCISABLE) (2) OPTIONS
------ ------- ----------- ------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
Yiannis A. Monovoukas Thermo Fibergen -- -- 80,000 /-- $ 0 /--
Thermo Electron -- -- 11,725 /-- $171,903 /--
Thermo BioAnalysis -- -- 2,000 /-- $ 19,000 /--
Thermo Fibertek -- -- 30,000 /-- $ 0 /--
ThermoLyte -- -- 0 /2,000 -- /$0 (3)
Thermo Optek -- -- 6,000 /-- $ 28,680 /--
ThermoQuest -- -- 4,000 /-- $ 20,000 /--
Thermo Sentron -- -- 2,000 /-- $ 0 /--
Trex Medical -- -- 2,000 /-- $ 6,250 /--
</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 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 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) 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.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines established
by the human resources committees of the board of directors of its parent
companies, Thermo Electron and Thermo Fibertek. The executive compensation
program presently consists of annual base salary ("salary"), short-term
incentives in the form of
9
<PAGE>
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
Paper Products Industry Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by comparing
it to total compensation of other executives within the Thermo Electron
organization with comparable levels of responsibility for comparably sized
business units.
The process for determining each of these elements for the Corporation's
executive officers is outlined below. For its review of the compensation of
other officers of the Corporation, the Committee follows a substantially similar
process.
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for executive
officers will approximate the mid-point of competitive data. The salary increase
in 1997 for the chief executive officer generally reflects 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 calendar
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
10
<PAGE>
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.
STOCK OPTION PROGRAM
The primary goal of the Corporation and its parent companies is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of options
to purchase common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the Stockholders.
The emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock option
awards in its parent companies, Thermo Electron and Thermo Fibertek, and the
other majority-owned subsidiaries of Thermo Electron and Thermo Fibertek, are an
important tool in providing incentives for performance within the entire
organization.
In determining awards, the Committee considers for each officer the annual
value of all options to purchase shares of the Corporation and other companies
within the Thermo Electron organization that vest in the next year and compares
the individual's total compensation using this value to competitive data. The
Committee uses a modified Black-Scholes option pricing model to determine the
value of an option award. In addition, the Committee considers the aggregate
amount of net awards to purchase shares of Common Stock granted to all employees
over the last five years to monitor the number of aggregate awards to all
employees. In reviewing the aggregate number of awards, the Committee considers
such factors as the size of the company, its stage of development, and its
growth strategy, as well as the aggregate awards and option practices of
comparably situated companies.
The Committee periodically awards options based on its assessment of the
total compensation of each executive, the actual and anticipated contributions
of each executive (which includes a subjective assessment by the Committee of
the value of the executive's future potential within the organization), as well
as the value of previously awarded options, as described above.
STOCK OWNERSHIP POLICIES
The Committee established a stock-holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of 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. This
policy was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee
also adopted in 1996 a stock holding assistance plan under which the Corporation
was authorized to make interest-free loans to officers to enable them to
purchase shares of the Common Stock in the open market. The loans are required
to be repaid upon the earlier of demand or the fifth anniversary of the date of
the loan, unless otherwise authorized by the Committee. No loans were
outstanding under this program in 1997. 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 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.
11
<PAGE>
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). 1996 CEO Compensation
1997 CEO COMPENSATION
The salary and bonus of Dr. Monovoukas are established using the same
criteria as described above for all officers. In determining Dr. Monovoukas'
compensation as reported, the Committee considered as part of its subjective
evaluation, among other things, his contributions in developing new product
opportunities, principally in connection with the Corporation's new catbox
filler product, and commercializing equipment and systems to recover materials
from papermaking sludge.
Awards to Dr. Monovoukas of options to purchase shares of the Corporation's
Common Stock are reviewed and determined periodically by the Committee using
criteria similar to those used for other executive officers of the Corporation
and described above under the caption "Stock Option Program." No award of
options to purchase shares of the Common Stock was made by the Committee to Dr.
Monovoukas in fiscal 1997.
In addition to stock option awards by the Committee, Dr. Monovoukas may
receive awards to purchase shares of the common stock of majority-owned
subsidiaries of Thermo Electron from time to time as part of Thermo Electron's
stock option program due to his position as a chief executive officer of a
majority-owned subsidiary of Thermo Electron. No stock option awards were made
to Dr. Monovoukas in fiscal 1997 under this stock option program. The award to
purchase shares of common stock of Thermo Electron granted to Dr. Monovoukas in
fiscal 1997 was made by the Thermo Electron human resources committee 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 shares.
Anne T. Barrett (Chairman)
Francis L. McKone
12
<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. Until November 1996, the
Common Stock was sold in units ("Units") consisting of one share of Common Stock
and one right to have the share of Common Stock redeemed by the Corporation at
certain periods in the future at a price of $12.75 per share (a "Redemption
Right"). Beginning in December 1996, the Common Stock and the Redemption Rights
began to trade separately. The Corporation's Units have been publicly traded
since September 13, 1996, and the Common Stock and the Redemption Rights have
been traded separately from each other since December 13, 1996. The following
graph approximates the price of the Common Stock in the absence of the
Redemption Rights by subtracting from the closing price of the Units on their
first day of trading the closing price of the Redemption Rights on their first
day of separate trading, December 13, 1996. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for the Paper Products Industry Group as of the last
trading day of the Corporation's fiscal year.
COMPARISON OF TOTAL RETURN AMONG THERMO FIBERGEN INC.,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX AND THE DOW JONES TOTAL RETURN
INDEX
FOR THE PAPER PRODUCTS INDUSTRY GROUP FROM SEPTEMBER 13, 1996 TO JANUARY 2, 1998
[CHART APPEARS HERE]
9/13/96 12/27/96 1/2/98
TFG 100 83 73
AMEX 100 102 124
DJ PAPER 100 97 108
The total return for the Corporation's Common Stock (TFG), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Paper Products Industry Group (DJ PAPER) assumes the reinvestment of
dividends, although dividends have not been declared on the Corporation's Common
Stock. The American Stock Exchange Market Value Index tracks the aggregate
performance of equity securities of companies listed on the American Stock
Exchange. The Corporation's Common Stock is traded on the American Stock
Exchange under the ticker symbol "TFG."
13
<PAGE>
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held subsidiaries, and
Thermo 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, 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
14
<PAGE>
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 $48,000 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.
During fiscal 1997, the Corporation purchased equipment for $92,000 from a
wholly owned subsidiary of Thermo Fibertek for use in its fiber-recovery
demonstration system.
During fiscal 1997, two wholly owned subsidiaries of Thermo Fibertek
performed certain laboratory and administrative services for the Corporation,
for which the Corporation paid $63,000 and $50,000, respectively.
In December 1997, the Corporation entered into a 10-year contract to build
and operate a fiber-recovery and water-clarification facility for a paper mill.
In connection with that contract, as of April 4, 1998, the Corporation had
purchased $174,129 of equipment from two wholly owned subsidiaries of Thermo
Fibertek and expected to purchase an additional $156,807 of equipment, parts and
service from such subsidiaries by the end of fiscal 1998.
As of January 3, 1998, $5,777,000 of the Corporation's cash 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. 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.
In July 1996, the Corporation entered into a supply and license agreement
with Thermo Fibertek in which Thermo Fibertek granted to the Corporation a
worldwide, royalty-free license to use Thermo Fibertek's proprietary fiber
"scalping" technology in the pulp and paper industry. The agreement has an
initial term of eight years and is subject to annual renewals thereafter. 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. No scalping units have been
purchased by the Corporation through the end of fiscal 1997. 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%.
At January 3, 1998, $115,000 was owed to the Corporation by Thermo Electron
and its other subsidiaries for taxes, net amounts owed to Thermo Electron and
its other subsidiaries for amounts due under the Corporate Services Agreement
and related administrative charges, for other products and 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 $1,764,000. These amounts do not bear interest and are expected to be
paid in the normal course of business.
15
<PAGE>
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 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
resources committee of the Corporation's board of directors. No such loans were
outstanding in 1997. This policy and plan were amended in 1998 to apply only to
the chief executive officer of the Corporation in the future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1998. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1996.
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.
Bedford, Massachusetts
April 23, 1998
16
<PAGE>
FORM OF PROXY
THERMO FIBERGEN 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 John N. Hatsopoulos, Yiannis A.
Monovoukas and Melissa F. Riordan, or any one of them in the absence of the
others, as attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of the Stockholders of Thermo Fibergen Inc., a
Delaware corporation (the "Company"), to be held on Monday, June 1, 1998, at
8:15 a.m. at The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale,
Arizona, and at any adjournment or postponement thereof, and to vote all shares
of common stock of the Company standing in the name of the undersigned on April
3, 1998, with all of the powers the undersigned would possess if personally
present at such meeting:
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
Please mark your
[ x ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [ ] WITHHELD [ ]
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any): ______________________________________
NOMINEES: Anne T. Barrett, Francis L. McKone, Yiannis A. Monovoukas, Jonathan
W. Painter, William A. Rainville and Roger D. Wellington.
2. In their discretion on such other matters as may properly come before the
Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET FORTH
ABOVE IF NO INSTRUCTION TO THE CONTRARY IS INDICATED OR IF NO INSTRUCTION IS
GIVEN.
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
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.
