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 1-9567
THERMEDICS INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2788806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
470 Wildwood Street, P.O. Box 2999
Woburn, Massachusetts 01888-1799
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to the filing requirements for at least
the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of January 24, 1997, was
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approximately $295,395,000.
As of January 24, 1997, the Registrant had 36,677,656 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.
THERMEDICS INC.
By: /s/ Sandra L. Lambert
-------------------------------
Sandra L. Lambert
Clerk
ATTACHMENT A
DIRECTORS
Set forth below are the names of the persons serving as
directors, their ages, their offices in the Corporation, if any,
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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 common
stock of the Corporation, its majority-owned subsidiaries, Thermo
Cardiosystems Inc., Thermedics Detection Inc., Thermo Sentron
Inc. and Thermo Voltek Corp., and of its parent company, Thermo
Electron Corporation ("Thermo Electron"), a diversified high
technology company, is reported under the caption "Stock
Ownership."
Peter O. Crisp Mr. Crisp, 64, has been a director of the
Corporation since 1983. Mr. Crisp has been a
general partner of Venrock Associates, a
venture capital investment firm, for more than
five years. Mr. Crisp is also a director of
American Superconductor Corporation, Evans &
Sutherland Computer Corporation, Long Island
Lighting Company, Thermo Electron, Thermo Power
Corporation, ThermoTrex Corporation, and United
States Trust Corporation.
Paul F. Ferrari Mr. Ferrari, 66, has been a director of the
Corporation since 1991. Since 1991, he has been
a consultant to various companies, including
Thermo Electron and its subsidiaries. Mr.
Ferrari was a vice president of Thermo Electron
from 1988 until his retirement at the end of
1990, its secretary from 1981 to 1990, and its
treasurer from 1967 to 1988. He served as the
Corporation's clerk from 1983 to 1990 and its
treasurer from 1983 to 1988. Mr. Ferrari is
also a director of General Scanning Inc.,
Signal Technology Corporation and ThermoTrex
Corporation.
George N. Dr. Hatsopoulos, 70, has been a director of the
Hatsopoulos Corporation since 1983. Dr. Hatsopoulos has
been the chairman of the board, president and
chief executive officer of Thermo Electron
since 1956. Dr. Hatsopoulos is also a director
of Photoelectron Corporation, Thermo Ecotek
Corporation, Thermo Electron, Thermo Fibertek
Inc., Thermo Instrument Systems Inc.,
ThermoQuest Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of
Mr. John N. Hatsopoulos, a director and the
chairman of the board, vice president and chief
financial officer of the corporation.
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John N. Mr. Hatsopoulos, 62, has been a director and
Hatsopoulos chairman of the board of the Corporation since
March 1995, and has served as the
Corporation's chief financial officer since
1988 and its vice president since 1986. He has
been the president and the chief financial
officer of Thermo Electron since January 1997
and 1988, respectively, and was an executive
vice president of Thermo Electron from 1986 to
January 1997. Mr. Hatsopoulos is also a
director of LOIS/USA Inc., Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo
Instrument Systems Inc., Thermo Power
Corporation, Thermo TerraTech Inc. and
ThermoTrex Corporation. Mr. Hatsopoulos is the
brother of Dr. George N. Hatsopoulos, a
director of the Corporation.
Robert C. Mr. Howard, 66, has been a director of the
Howard Corporation since 1983. Mr. Howard has been an
executive vice president of Thermo Electron
since 1986. He is also a director of Thermo
Power Corporation, ThermoLase Corporation,
ThermoTrex Corporation and Trex Medical
Corporation.
John T. Keiser Mr. Keiser, 60, has been a director of the
Corporation since April 1997. Mr. Keiser has
been a senior vice president of the Corporation
since 1994 and the president of the Thermo
Biomedical division of Thermo Electron since
1994, which manufacturers a variety of medical
equipment and instruments. Mr. Keiser was
president of the Eberline Instrument division
of Thermo Instrument Systems Inc., a
majority-owned subsidiary of Thermo Electron,
from 1985 to July 1994. The Eberline
Instrument division manufactures radiation
detection and counting instrumentation and
radiation monitoring systems. Mr. Keiser is
also a director of Thermo Cardiosystems Inc.
John W. Wood Mr. Wood, 53, has been a director of the
Jr. Corporation since 1984. Mr. Wood has been a
senior vice president of Thermo Electron since
December 1995, and, prior to that promotion,
was a vice president of Thermo Electron from
September 1994 to December 1995. Mr. Wood has
been president and chief executive officer of
the Corporation since 1984. Mr. Wood is also a
director of Thermedics Detection Inc., Thermo
Cardiosystems Inc., Thermo Sentron Inc. and
Thermo Voltek Corp.
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Nicholas T. Dr. Zervas, 68, has been a director of the
Zervas Corporation since 1987. Dr. Zervas has been
Chief of Neurosurgical Service, Massachusetts
General Hospital, since 1977. Dr. Zervas is
also a director of Thermo Cardiosystems Inc.,
ThermoLase Corporation and ThermoTrex
Corporation.
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. Ferrari (Chairman), Mr. Crisp and Dr. Zervas. The Audit
Committee reviews the scope of the audit with the Corporation's
independent public accountants and meets with them for the
purpose of reviewing the results of the audit subsequent to its
completion. The present members of the Human Resources Committee
are Mr. Crisp (Chairman) and Dr. Zervas. 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 ten times, the
Audit Committee met twice and the Human Resources Committee met
five times during fiscal 1996. Each director attended at least
75% of all meetings of the Board of Directors and Committees
which he served held during fiscal 1996.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of
Thermo Electron or of any other companies affiliated with Thermo
Electron (also referred to as "outside directors") receive an
annual retainer of $4,000 and a fee of $1,000 per day for
attending regular meetings of the Board of Directors and $500 per
day for participating in meetings of the Board of Directors held
by means of conference telephone and for participating in certain
meetings of committees of the Board of Directors. Payment of
directors' fees is made quarterly. Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Keiser and Mr. Wood are all employees of
Thermo Electron or its subsidiaries and do not receive any cash
compensation from the Corporation for their services as
directors. Directors are also reimbursed for out-of-pocket
expenses incurred in attending such meetings.
Deferred Compensation Plan
Under the Deferred Compensation Plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer
receipt of his cash fees until he ceases to serve as a director,
dies or retires from his principal occupation. In the event of a
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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 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure
of the persons serving 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
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 30,000 shares of Common Stock have
been reserved for issuance under the Deferred Compensation Plan.
As of March 1, 1997, deferred units equal to 17,494.92 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 and its
majority-owned subsidiaries to outside directors as additional
compensation for their service as directors. Under the Directors
Plan, outside directors are automatically granted options to
purchase 1,000 shares of the Common Stock annually. In addition,
the Directors Plan provides for the automatic grant every five
years of options to purchase 1,500 shares of the common stock of
a majority-owned subsidiary of the Corporation that is "spun out"
to outside investors.
Pursuant to the Directors Plan, outside directors receive an
annual grant of options to purchase 1,000 shares of Common Stock
at the close of business the date of each Annual Meeting of the
Stockholders of the Corporation. 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 the third anniversary of the grant
date. Shares acquired upon exercise of the options are subject
to repurchase by the Corporation at the exercise price if the
recipient ceases to serve as a director of the Corporation or any
other Thermo Electron company prior to the first anniversary of
the grant date.
In addition, under the Directors Plan, outside directors are
automatically granted every five years options to purchase 1,500
shares of common stock of each majority-owned subsidiary of the
Corporation that is "spun out" to outside investors. The grant
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occurs the close of business the date of the first Annual
Meeting of the Stockholders next following the subsidiary's
spinout, which is the first to occur of either an initial public
offering of the subsidiary's common stock or a sale of such stock
to third parties in an arms-length transaction, and also as of
the close of business the date of every fifth Annual Meeting of
the Stockholders of the Corporation that occurs thereafter during
the duration of the Plan. The options granted vest and become
exercisable the fourth anniversary of the date of grant, unless
prior to such date the subsidiary's common stock is registered
under Section 12 of the Securities Exchange Act of 1934, as
amended (''Section 12 Registration"). In the event that the
effective date of Section 12 Registration occurs before the
fourth anniversary of the grant date, the option will become
immediately exercisable and the shares acquired upon exercise
will be subject to restrictions 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. In the event
of Section 12 Registration, the restrictions and repurchase
rights shall lapse or be deemed to lapse at the rate of 25% per
year, starting with the first anniversary of the grant date.
These options expire after five years. Under this provision of
the Directors Plan, each outside director was granted options to
purchase 1,500 shares of common stock of each of Thermo Sentron
Inc. on May 20, 1996, the date of last year's Annual Meeting of
the Stockholders. In addition, under the Directors Plan, each
outside director will be granted options to purchase 1,500 shares
of common stock of Thermedics Detection Inc. on the date of this
year's Annual Meeting of the Stockholders.
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. An aggregate of 37,500 shares of Common Stock has
been reserved for issuance under the Directors Plan.
Stock Ownership Policies for Directors
During 1996, the Human Resources Committee of the Board of
Directors (the "Committee") established a stock holding policy
for directors. The stock holding policy requires each director
to hold a minimum of 1,000 shares of Common Stock. Directors are
requested to achieve this ownership level by the 1998 Annual
meeting of Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a
separate stock holding policy established by the Committee in
1996.
In addition, the Committee adopted a policy requiring
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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 Electron, the
Corporation's parent corporation, and of Thermedics Detection
Inc. ("Thermedics Detection") Thermo Cardiosystems Inc. ("Thermo
Cardiosystems"), Thermo Sentron Inc. ("Thermo Sentron") and
Thermo Voltek Corp. ("Thermo Voltek"), each a publicly traded
majority-owned subsidiary of the Corporation, 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
Electron or its subsidiaries other than the Corporation, all such
persons disclaim beneficial ownership of the shares of Common
Stock owned by Thermo Electron.
<TABLE>
Thermo Thermo
Electron ThermedicsCardio- Thermo Thermo
ThermedicsCorp Detection systems Sentron Voltek
Name Inc.(2) (3) Inc.(4) Inc.(5) Inc.(6) Corp.(7)
<S> <C> <C> <C> <C> <C> <C>
Thermo Electron 20,846,960N/A N/A N/A N/A N/A
Corporation (8)
Peter O. Crisp 46,186 98,904 1,500 24,750 2,500 2,250
Paul F. Ferrari 15,457 25,229 2,147 13,500 1,500 5,998
David H. Fine 110,568 72,086 71,667 2,630 7,500 0
George N. 63,546 3,512,279 0 11,599 17,000 0
Hatsopoulos
John N. 65,618 526,768 0 432 30,000 11,623
Hatsopoulos
Robert C. Howard 11,714 185,775 0 18,750 7,000 0
John T. Keiser 20,293 112,721 0 15,750 7,500 0
Jeffrey J. Langan 75,000 15,300 60,000 50 0 0
Victor L. Poirier 67,595 50,598 3,333 163,507 7,500 0
John W. Wood Jr. 175,347 263,199 23,333 40,332 33,000 93,071
Nicholas T. 26,269 0 2,550 47,024 1,500 2,250
Zervas
All directors and
current executive
officers as a 697,818 5,007,857 164,530 340,313 120,000 115,192
group (12
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 Mr. Crisp,
Mr. Ferrari, Dr. Fine, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos,
Mr. Howard, Mr. Keiser, Mr. Langan, Mr. Poirier, Mr. Slaughter,
Mr. Smith, Mr. Wood, Dr. Zervas and all directors and current
executive officers as a group include 9,050, 9,000, 87,600,
50,000, 50,000, 10,000, 16,500, 75,000, 26,500, 125,500, 8,650
and 486,800 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 beneficially owned by Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard and all directors
and executive officers as a group include 1,500, 1,602, 1,714 and
5,975 full shares, respectively, allocated through March 1, 1997,
to their respective accounts maintained pursuant to Thermo
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Electron's employee stock ownership plan (the "ESOP"), of which
the trustees, who have investment power over its assets, are
executive officers of Thermo Electron . Shares beneficially owned
by Mr. Crisp, Dr. Zervas and all directors and executive officers
as a group include 6,841, 7,119 and 13,960 full shares,
respectively, that had been allocated through March 1, 1997, to
their respective accounts maintained under the Corporation's
deferred compensation plan for directors. Shares beneficially
owned by Mr. Ferrari include 5,983 shares held in trust of which
he is the trustee. Shares beneficially owned by Dr. G.
Hatsopoulos include 562 shares held by Dr. G. Hatsopoulos' spouse
and 92 shares allocated to his spouse's account maintained
pursuant to the ESOP. Shares beneficially owned by Mr. Wood
include 2,600 shares heldby him as custodian for two minor
children. 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 1.9% of the Common Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock distributed in
June 1996 in the form of a 50% stock dividend. Shares of the
common stock of Thermo Electron beneficially owned by Mr. Crisp,
Dr. Fine, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard, Mr.
Keiser, Mr. Langan, Mr. Poirier, Mr. Slaughter, Mr. Wood and all
directors and executive officers as a group include 9,375,
54,637, 1,499,500, 429,685, 47,361, 81,297, 15,000, 45,450,
227,658 and 2,507,537 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 beneficially owned
by Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard, Mr. Keiser
and all directors and executive officers as a group include
2,164, 1,934, 3,040, 1,324 and 9,786 full shares, respectively,
allocated to their respective accounts maintained pursuant to the
ESOP. Shares beneficially owned by Mr. Crisp and all directors
and executive officers as a group include 44,885 full shares
allocated through March 1, 1997, to Mr. Crisp's account
maintained pursuant to Thermo Electron's deferred compensation
plan for directors. Shares beneficially owned by Mr. Ferrari
include 6,678 shares held in a trust of which Mr. Ferrari is a
trustee and 13,062 shares held in a trust of which his spouse is
a trustee. Shares beneficially owned by Dr. G. Hatsopoulos
include 89,601 shares held by his spouse, 168,750 shares held by
a QTIP trust of which his spouse is a trustee, 39,937 shares held
by a family trust of which his spouse is the trustee, and 153
shares allocated to his spouse's account maintained pursuant to
the ESOP. Shares beneficially owned by Mr. Langan include 300
shares held by his spouse. Except for Dr. Hatsopoulos, who
beneficially owned 2.3% of the Thermo Electron common stock
outstanding as of March 1, 1997, no director or executive officer
beneficially owned more than 1% of such common stock outstanding
as of such date; all directors and executive officers as a group
beneficially owned approximately 3.3% of the Thermo Electron
common stock outstanding as of March 1, 1997.
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4) Shares of the common stock of Thermedics Detection Inc.
beneficially owned by Mr. Crisp, Mr. Ferrari, Dr. Fine, Mr.
Langan, Mr. Poirier, Mr. Wood, Dr. Zervas and all directors and
executive officers as a group include 1,500, 1,500, 61,667,
50,000 3,333, 23,333, 1,500 and 142,833 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 beneficially owned by Mr. Ferrari include 599 shares held
in a trust of which he is the trustee. No director or executive
officer beneficially owned more than 1% of the Thermedics
Detection Inc. common stock outstanding as of March 1, 1997; all
directors and executive officers as a group beneficially owned
approximately 1.6% of such common stock outstanding as of such
date.
(5) Shares of the common stock of Thermo Cardiosystems
beneficially owned by Mr. Crisp, Mr. Ferrari, Dr. Fine, Mr.
Keiser, Mr. Poirier, Mr. Wood, Dr. Zervas and all directors and
executive officers as a group include 24,750, 2,250, 1,530,
15,750, 121,350, 33,450, 12,700 and 211,780 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
beneficially owned by Dr. Zervas and all directors and executive
officers as a group include 6,874 shares allocated through March
1, 1997, to Dr. Zervas' account maintained pursuant to Thermo
Cardiosystems' deferred compensation plan for directors. Shares
beneficially owned by Mr. Ferrari include 11,250 shares held in a
trust of which he is the trustee. Shares beneficially owned by
Mr. Wood include 1,122 shares held by him as custodian for two
minor children. Shares beneficially owned by Dr. Zervas include
19,000 shares held by his spouse. No director or executive
officer beneficially owned more than 1% of the Thermo
Cardiosystems common stock outstanding as of March 1, 1997; all
directors and executive officers as a group beneficially owned
approximately 3.4% of such common stock outstanding on such date.
(6) Shares of the common stock of Thermo Sentron Inc.
beneficially owned by Mr. Crisp, Mr. Ferrari, Dr. Fine, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard, Mr. Keiser, Mr.
Poirier, Mr. Wood, Dr. Zervas and all directors and executive
officers as a group include 2,500, 1,500, 7,500, 15,000, 15,000,
7,000, 7,500, 7,500, 30,000, 1,500 and 100,000 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 Thermo Sentron Inc. common stock outstanding
as of March 1, 1997; all directors and executive officers as a
group beneficially owned approximately 1.2% of such common stock
outstanding as of such date.
(7) Shares of the common stock of Thermo Voltek beneficially
owned by Mr. Crisp, Mr. Ferrari, Mr. J. Hatsopoulos, Mr. Wood,
Dr. Zervas and all directors and executive officers as a group
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include 2,250, 5,998, 7,498, 78,450, 2,250 and 96,446 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. The directors and executive officers as a group
beneficially owned 1.2% of the Thermo Voltek common stock
outstanding as of March 1, 1997.
(8) Thermo Electron beneficially owned approximately 57% of the
Common Stock outstanding as of March 1, 1997. Thermo Electron's
address is 81 Wyman Street, Waltham, Massachusetts 02254-9046.
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 1996, except
in the following instances. Thermo Electron filed seven Forms 4
late, reporting a total of 47 transactions, consisting of 34 open
market purchases of shares of the Common Stock, 10 transactions
associated with the exercise of options granted to employees to
purchase shares of the Common Stock, three grants of such options
to employees under Thermo Electron's stock option plans.
EXECUTIVE COMPENSATION
NOTE: All Thermo Electron share amounts reported below have, in
all cases, been adjusted as applicable to reflect a three-for-two
stock split effected in the form of a 50% stock dividend in June
1996 with respect to the common stock of Thermo Electron.
Summary Compensation Table
The following table summarizes compensation for services to
the Corporation in all capacities awarded to, earned by or paid
to the Corporation's chief executive officer and its four most
highly compensated executive officers for the last three fiscal
years.
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.
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<TABLE>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Options
(No. of
Shares)
Name and Fisc Annual Options (No. All Other
Principal -al Compensation of Shares and Compen-
Position Year Company (1) sation(2)
Salary Bonus
<S> <C> <C> <C> <C> <C> <C>
John W. Wood, 1996 $117,000$103,200 5,400 (TMD) $6,750
Jr. (3)
President and 30,000 (TSR)
Chief Executive 2,100 (TVL)
Officer
1995 $90,000 $80,000 4,900 (TMD) $6,750
3,450 (TCA)
900 (TVL)
1994 $107,250$82,550 5,400 (TMD) $6,639
John T. Keiser 1996 $14,500 $13,000 800 (TMD) $6,750
(4)
Senior Vice 3,750 (TMO)
President
7,500 (TSR)
20,000 (TXM)
1995 $13,700 $9,100 700 (TMD) $7,764
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10,950 (TMO)
1994 $6,500 $2,700 15,000 (TMD) $6,750
4,500 (TCA)
20,925 (TMO)
1,500 (THS)
Victor L. 1996 $150,000$164,500 4,000 (TMD) $6,750
Poirier
Senior Vice 900 (TMO)
President
4,500 (TCA)
2,000 (TBA)
2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
7,500 (TSR)
4,000 (TXM)
1995 $141,000$113,000 5,550 (TCA) $6,750
15,750 (TMO)
5,000 (TLZ)
1994 $135,000$66,000 23,175 (TMO) $6,322
500 (THS)
David H. Fine 1996 $128,000$45,000 3,000 (TMD) $6,603
Vice President 1,950 (TMO)
20,000 (TDX)
7,500 (TSR)
30,000 (TLZ)
1995 $124,000$23,500 2,500 (TMD) $6,750
1,500 (TMO)
PAGE
<PAGE>
1994 $114,500$67,500 4,100 (TMD) $4,463
46,800 (TMO)
1,000 (THS)
Jeffrey J. 1996 $165,000$100,000 75,000 (TMD) $4,463
Langan
Vice President 15,000 (TMO)
50,000 (TMX)
</TABLE>
(1) In addition to grants of options to purchase Common Stock of
the Corporation (designated in the table as TMD), executive
officers of the Corporation have been granted options to purchase
common stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option program.
Options have been granted during the last three fiscal years to
the chief executive officer and the other named executive
officers in the following Thermo Electron companies: Thermo
BioAnalysis Corporation (designated in the table as TBA), Thermo
Cardiosystems (designated in the table as TCA), Thermo Electron
(designated in the table as TMO), ThermoLase Corporation
(designated in the table as TLZ), ThermoSpectra Corporation
(designated in the table as THS) and Thermo Voltek Corp.
(designated in the table as TVL).
(2) Represents the amount of matching contributions made by the
individual's employer on behalf of executive officers
participating in the Thermo Electron 401(k) plan.
(3) Mr. Wood is a senior vice president of Thermo Electron and
the president and chief executive officer of Thermo Voltek, as
well as the president and chief executive officer of the
Corporation. A portion of Mr. Wood's annual cash compensation
(salary and bonus) has been allocated to and paid by Thermo
Electron in each of the last three fiscal years as compensation
for the services provided to Thermo Electron based on the time he
devoted to his responsibilities as a senior vice president of
Thermo Electron. The annual cash compensation (salary and bonus)
reported in the table for Mr. Wood represents the amount paid
from all sources, including the Corporation, for Mr. Wood's
services as chief executive officer of the Corporation. For
1996, 1995 and 1994, 60%, 50% and 65%, respectively, of Mr.
Wood's annual cash compensation (salary and bonus) was allocated
to the Corporation for his service as the Corporation's chief
executive officer. Mr. Wood was appointed a vice president of
Thermo Electron on September 2, 1994, and currently serves as a
senior vice president, and from time to time after that date has
been, and in the future may be, granted options to purchase
common stock of Thermo Electron and its subsidiaries other than
the Corporation. These options are not reported in the table as
they are granted as compensation for service to other Thermo
Electron companies in capacities other than in his capacity as
chief executive officer of the Corporation.
(4) Mr. Keiser was appointed a senior vice president of the
Corporation on July 28, 1994 and since July 1, 1994 has served as
the president of Thermo Biomedical Inc., a subsidiary of Thermo
Electron. Prior to July 1, 1994 he served as a vice president of
Thermo Instrument Systems Inc., another majority-owned subsidiary
of Thermo Electron. A portion of Mr. Keiser's annual cash
compensation (salary and bonus) has been allocated to and paid by
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Thermo Electron in each of the last three fiscal years as
compensation for the services provided to Thermo Electron based
on the time he devoted to his responsibilities as president of
Thermo Biomedical. The annual cash compensation (salary and
bonus) reported in the table for Mr. Keiser represents the amount
paid from all sources, including the Corporation, for Mr.
Keiser's services as a senior vice president of the Corporation.
For 1996, 1995 and 1994, 10%, 10% and 5%, respectively, of Mr.
Rainville's annual cash compensation (salary and bonus) was
allocated to the Corporation for his service as a senior vice
president of the Corporation. In addition, Mr. Keiser holds
options to purchase common stock of Thermo Electron and its
subsidiaries other than the Corporation granted prior to July 1,
1994. These options are not reported in the table as they were
granted as compensation for service other than as a senior vice
president of the Corporation.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options made during fiscal 1996 to the
Corporation's chief executive officer and the other named
executive officers. It has not been the Corporation's policy in
the past to grant stock appreciation rights, and no such rights
were granted during fiscal 1996.
<TABLE>
Option Grants in Fiscal 1996
Percent Potential Realiz-
Number of Sec- of Total Exer- able Value at
urities Options cise Assumed Annual
Underlying Granted Price Expira- Rates of Stock
Options in Fiscal Per tion Price Appreciation
Name Granted(1) Year Share Date for Option Term(2)
5% 10%
<S> <C> <C> <C> <C><C> <C> <C> <C>
John W. Wood, 5,400 (TMD) 3.1% $28.13 02/09/99$23,922 $50,274
Jr. (4)
30,000 (TSR) 5.8% (3)$14.00 03/01/08$334,200 $898,200
2,100 (TVL) 1.5% (3)$12.78 03/07/99$4,221 $8,883
John T. Keiser 800 (TMD) 0.5% $28.13 02/09/99$3,544 $7,448
3,750 (TMO) 0.2% (3)$42.79 05/22/99$25,275 $53,100
7,500 (TSR) 1.5% (3)$14.00 02/09/08$83,550 $224,550
20,000 (TXM) 1.0% (3)$11.00 03/11/08$175,000 $470,400
Victor L. 4,000 (TMD) 2.3% $28.13 02/09/99$17,720 $37,240
Poirier
900 (TMO) 0.1% (3)$42.79 05/22/99$6,066 $12,744
4,500 (TCA) 2.2% (3)$48.97 03/07/99$34,740 $72,945
2,000 (TBA) 0.2% (3)$10.00 03/11/08$15,920 $42,760
2,000 (TFG) 0.4% (3)$10.00 09/12/08$15,920 $42,760
6,000 (TOC) 0.2% (3)$12.00 04/09/08$57,300 $153,960
7,500 (TSR) 1.5% (3)$14.00 02/09/08$83,550 $224,550
2,000 (TLT) 0.6% (3)$10.00 03/11/08$15,920 $42,760
6,000 (TMQ) 0.2% (3)$13.00 03/11/08$62,100 $166,800
4,000 (TXM) 0.2% (3)$11.00 03/11/08$35,000 $94,080
PAGE
<PAGE>
David H. Fine 3,000 (TMD) 1.7% (3)$28.13 02/09/99$13,290 $27,930
1,950 (TMO) 0.1% (3)$42.79 05/22/99$13,143 $27,612
20,000 (TDX) 9.7% (3)$10.75 12/17/06$135,200 $342,600
7,500 (TSR) 1.5% (3)$14.00 02/09/08$83,550 $224,550
30,000 (TLZ) 7.4% (3)$23.55 09/12/08$562,200 $1,510,80
Jeffrey J. 75,000 (TMD) 42.7% (3)$28.13 04/02/03$858,750 $2,001,75
Langan
15,000 (TMO) 1.0% (3)$42.79 05/22/03$261,300 $609,000
50,000 (TDX) 24.2% (3)$10.00 04/02/03$314,500 $797,000
</TABLE>
(1) All of 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 the granting 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
granting 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 holders of
options to exercise options and to satisfy tax withholding
11
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<PAGE>
obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) The amounts shown in this table represent hypothetical gains
that could be achieved for the respective options if exercised at
the end of the option term. These gains are based on assumed
rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expense
associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the
common stock of the granting corporation, the optionee's
continued employment through the option period and the date on
which the options are exercised.
(3) 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.
(4) Mr. Wood was appointed a vice president of Thermo Electron
on September 2, 1994, and currently serves as a senior vice
president, and from time to time after that date has been, and in
the future may be, granted options to purchase common stock of
Thermo Electron and its subsidiaries other than the Corporation.
These options are not reported in the table as they are granted
as compensation for service to other Thermo Electron companies in
capacities other than in his capacity as chief executive officer
of the Corporation.
Stock Options Exercised During Fiscal 1996
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options held at the end of fiscal 1996 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
<TABLE>
Aggregated Option Exercises In Fiscal 1996 And Fiscal 1996 Year-End Option
Values
Name Company Shares Value Number of Value of
AcquiredRealized Unexercised Unexercised
on Options at In-the-Money
Exercise Fiscal Options
Year-End
(Exercisable
Unexercisable)
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
John W. Thermedics -- -- 125,500 /0 $580,037 /--
Wood, Jr.
Thermedics -- -- 0 /23,333 -- /$0(5)
Detection
Thermo 25,775 $1,314,963 33,450 /0 $766,358 /--
Cardio-
systems
Thermo -- -- 30,000 /0 $0 /--
Sentron
Thermo 8,623 $61,645 78,450 /0 $319,074 /--
Voltek
John T. Thermedics -- -- 16,500 /0 $83,099 /--
Keiser (3)
Thermo 13,500 $428,260 81,297 /0 $1,524,168 /--
Electron
Thermo -- -- 15,750 /0 $381,961 /--
Cardio-
systems
Thermo -- -- 6,000 /0 $70,500 /--
Ecotek
Thermo -- -- 6,750 /0 $40,500 /--
Fibertek
PAGE
<PAGE>
Thermo -- -- 56,250 /0 $910,969 /--
Instrument
Systems
Thermo -- -- 7,500 /0 $0 /--
Sentron
Thermo -- -- 1,500 /0 $2,813 /--
Spectra
ThermoTrex -- -- 1,800 /0 $43,515 /--
Trex -- -- 20,000 /0 $32,500 /--
Medical
Victor L. Thermedics 22,500 $418,500 26,500 /0 $254,513 /--
Poirier
Thermo -- -- 45,450 /0 (4) $662,176 /--
Electron
Thermedics -- -- 0 /3,333 -- /$0(5)
Detection
Thermo -- -- 2,000 /0 $6,250 /--
BioAnalysi
s
Thermo -- -- 121,350 /0 $2,189,993 /--
Cardio-
systems
Thermo -- -- 3,750 /0 $44,063 /--
Ecotek
Thermo -- -- 2,000 /0 $1,500 /--
Fibergen
Thermo -- -- 4,500 /0 $27,000 /--
Fibertek
Thermo -- -- 6,000 /0 $0 /--
Optek
Thermo -- -- 7,500 /0 $0 /--
Sentron
ThermoLase -- -- 5,000 /0 $0 /--
PAGE
<PAGE>
ThermoLyte -- -- 0 /2,000 -- /$0(5)
Thermo- -- -- 6,000 /0 $0 /--
Quest
Thermo- -- -- 500 /0 $938 /--
Spectra
ThermoTrex -- -- 360 /0 $8,703 /--
Trex -- -- 4,000 /0 $6,500 /--
Medical
David H. Thermedics -- -- 87,600 /0 $616,979 /--
Fine
Thermo 3,038 $114,098 54,637 /0 (4) $956,232 /--
Electron
Thermedics -- -- 0 / 6,667 -- /$0(5)
Detection
Thermo 2,445 $103,546 1,530 /0 $42,229 /--
Cardio-
systems
Thermo -- -- 1,500 /0 $17,625 /--
Ecotek
Thermo -- -- 4,500 /0 $27,000 /--
Fibertek
Thermo -- 7,500 /0 $0 /--
Sentron
Thermo -- 30,000 /0 (4) $0 /--
Lase
Thermo- -- -- 1,000 /0 $1,875 /--
Spectra
ThermoTrex 360 $17,838 -- /-- -- /$0(5)
Jeffrey J. Thermedics -- -- 75,000 /0 $0 /--
Langan
Thermo -- -- 15,000 /0 $0 /--
Electron
PAGE
<PAGE>
Thermedics -- -- 0 -- /$0(5)
Detection /50,000
</TABLE>
(1) All of the options reported outstanding at the end of the
fiscal year were immediately exercisable as of the end of the
fiscal year, except options to purchase the common stock of
ThermoLyte Corporation and Thermedics Detection Inc., which are
not exercisable until the earlier of (i) 90 days after the
effective date of the registration of the 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
12
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<PAGE>
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 whose shares 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.
(2) Mr. Wood was appointed a vice president of Thermo Electron
on September 2, 1994, currently serves as a senior vice
president, and holds options to purchase common stock of Thermo
Electron and its subsidiaries other than the Corporation granted
after that date. These options are not reported in the table as
they were granted as compensation for service to other Thermo
Electron companies other than in his capacity as chief executive
officer of the Corporation.
(3) Mr. Keiser was appointed a senior vice president of the
Corporation on July 28, 1994 and since July 1, 1994 has served as
the president of Thermo Biomedical Inc., a subsidiary of Thermo
Electron. Prior to July 1, 1994, he served as a vice president of
Thermo Instrument Systems Inc. and holds options to purchase
common stock of Thermo Electron and its subsidiaries other than
the Corporation granted prior to that date. These options are not
reported in the table as they were granted as compensation for
service other than as a senior vice president of the Corporation.
(4) Options to purchase 22,500 and 45,000 shares of the common
stock of Thermo Electron granted to Mr. Poirier and Mr. Fine,
respectively, are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting
corporation generally do not lapse until the tenth anniversary of
the grant date. In the event of the employee's death or
involuntary termination prior to the tenth anniversary of the
grant date, the repurchase rights of the granting corporation
shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.
(5) No public market existed for the shares underlying these
options as of December 28, 1996. Accordingly, no value in excess
of the exercise price has been attributed to these options.
Severance Agreements
In 1988, Thermo Electron entered into severance agreements
with several of its key employees, including key employees of the
13
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<PAGE>
Corporation and other majority-owned subsidiaries. These
agreements provide severance benefits if there is a change of
control of Thermo Electron that is not approved by the Board of
Directors of Thermo Electron and the employee's employment with
Thermo Electron or the majority-owned subsidiary is terminated,
for whatever reason, within one year thereafter. For purposes of
the agreement a change of control exists upon (i) the acquisition
of 50% or more of the outstanding common stock of Thermo Electron
by any person without the prior approval of the board of
directors of Thermo Electron, (ii) the failure of the board of
directors of Thermo Electron, within two years after any
contested election of directors or tender or exchange offer not
approved by the board of directors, to be constituted of a
majority of directors holding office prior to such event or (iii)
any other event that the board of directors of Thermo Electron
determines constitutes an effective change of control of Thermo
Electron. Each of the recipients of these agreements would
receive a lump-sum benefit at the time of a qualifying severance
equal to the highest total cash compensation paid to the employee
by Thermo Electron or the majority-owned subsidiary in any
12-month period during the three years preceding the severance
event. A qualifying severance exists (i) if the employment of the
executive officer is terminated for any reason within one year
after a change in control of Thermo Electron or (ii) a group of
directors of Thermo Electron consisting of directors of Thermo
Electron on the date of the severance agreement or, if an
election contest or tender or exchange offer for Thermo
Electron's common stock has occurred, the directors of Thermo
Electron immediately prior to such election contest or tender or
exchange offer, and any future directors who are nominated or
elected by such directors, determines that any other termination
of the executive officer's employment should be treated as a
qualifying severance. The benefits to be provided are limited so
that the payments would not constitute so-called "excess
parachute payments" under applicable provisions of the Internal
Revenue Code of 1986. Assuming that severance benefits would have
been payable under these agreements as of March 1, 1997, Mr. Wood
would have received approximately $367,000.
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. The
Corporation has created Thermedics Detection Inc., Thermo
Cardiosystems and Thermo Sentron Inc. as a publicly held
subsidiaries and the Corporation has acquired the majority
interest in a previously unaffiliated public company, Thermo
Voltek Corp. 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
14
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<PAGE>
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 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
15
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<PAGE>
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
calendar 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 $2,613,000
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.
As of December 28, 1996, $74,625,000 of the Corporation's
cash equivalents were invested in a repurchase agreement with
16
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<PAGE>
Thermo Electron. Under this agreement, the Corporation in effect
lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market
funds, commercial paper and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's
funds subject to the repurchase agreement are readily convertible
into cash by the Corporation and have a maturity of three months
or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
Thermo Electron owned approximately 55% of the Corporation's
outstanding Common Stock on December 28, 1996. Thermo Electron
intends for the foreseeable future to maintain at least 50%
ownership of the Corporation. This may require the purchase by
Thermo Electron of additional shares of the Corporation's Common
Stock from time to time as the number of outstanding shares
issued by the Corporation increases. These purchases may be made
either in the open market or directly from the Corporation.
The Corporation allocates a portion of the salary, bonus and
travel expenses of two executive officers of the Corporation to
Thermo Electron for the time such officers devote to Thermo
Electron in connection with certain management responsibilities
relating to Thermo Electron's other biomedical businesses. In
1996, the portion allocated to Thermo Electron was $707,000.
On January 22, 1996, the Corporation issued 1,688,161 shares
of its common stock to Thermo Electron in exchange for 315,199
shares of the common stock of the Corporation's Thermo Voltek
Corp. subsidiary ("Thermo Voltek") and 529,965 shares of the
common stock of the Corporation's Thermo Cardiosystems Inc.
subsidiary ("Thermo Cardiosystems"). The shares of common stock
of the Corporation, Thermo Voltek and Thermo Cardiosystems were
valued based upon the average closing sale price for each
company's shares on the American Stock Exchange for the five days
prior to the completion of the transaction.
From time to time the Corporation may transact business with
other companies in the Thermo Group. In fiscal 1996, these
transactions included the following.
X-ray sources used in certain products are manufactured for
the Corporation's Thermedics Detection Inc. subsidiary
("Thermedics Detection") by Trex Medical Corporation, a
subsidiary of Thermo Electron's ThermoTrex Corporation
subsidiary. During 1996, Thermedics Detection paid $162,000 to
Trex Medical Corporation for these x-ray sources. Thermo
Electron's Tecomet division provides metal fabrication services
in connection with the manufacture of the heart assist devices
sold by Thermo Cardiosystems and certain products sold by
Thermedics Detection. During 1995, the Corporation paid Tecomet
$2,977,115 for these services. Pursuant to a subcontract entered
17
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<PAGE>
into in October 1993, Thermedics Detection performs research and
development services for Coleman Research Corporation
("Coleman"), which is the prime contractor under a contract with
the U.S. Department of Energy. Coleman is a wholly owned
subsidiary of Thermo Electron and was acquired by Thermo Electron
in March 1995. Coleman paid Thermedics Detection $618,997 for
services rendered in 1996.
In connection with the acquisition by the Corporation of its
Thermo Sentron Inc. subsidiary ("Thermo Sentron"), Thermo Sentron
ceased to distribute a line of alloy analyzers. In January 1995,
this distributorship ("TN Technologies" or "TN") was transferred
to Thermo Instrument Systems Inc. ("Thermo Instrument"), a
publicly traded, majority-owned subsidiary of Thermo Electron,
for book value. Thermo Sentron acts as a distributor in Europe
for process measurement instruments manufactured by TN. In 1996,
Thermo Sentron purchased such products from TN for $563,000. In
1996, Thermo Sentron sold meters to TN pursuant to purchase
orders resulting in revenues of $114,000.
In 1996, Thermo Sentron received a ten percent (10%)
commission totaling $69,670 from Gamma-Metrics, a wholly owned
subsidiary of Metrika Systems Corporation, a majority-owned
subsidiary of Thermo Instrument, which Thermo Sentron earned in
connection with the sale by Gamma-Metrics of one of its CrossBelt
Analyzers to an Australian-based cement manufacturing company.
The Corporation sells products in the ordinary course of
business to Thermo Electron and its subsidiaries. In 1996, the
Corporation derived revenues of approximately $190,000 from these
sales.
In March and November 1996, Thermedics Detection completed
private placements of an aggregate of 683,500 shares of its
common stock primarily to outside investors. Dr. David H. Fine
and Mr. Jeffrey J. Langan, vice presidents of the Corporation,
each purchased 10,000 shares of the common stock Thermedics
Detection in the March private placement at a purchase price of
$10.00 per share, the same price paid by unaffiliated buyers.
Stock Holding Assistance Plan
During 1996, the Human Resources Committee of the 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.
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In order to assist officers in complying with the policy,
the Committee also adopted a stock holding assistance plan under
which the Corporation is authorized to make interest-free loans
to officers to enable them to purchase shares of the Common Stock
in the open market. The loans are required to be repaid upon the
earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise authorized by the Committee. No loans
were outstanding under this program in 1996.
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