<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Thermo Instrument Systems Inc.
(Name of Registrant as Specified In Its Charter)
Thermo Instrument Systems Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
(THERMO INSTRUMENT SYSTEMS INC. LOGO)
504 AIRPORT ROAD
P.O. BOX 2108
SANTA FE, NEW MEXICO 87504-2108
May 3, 1994
Dear Stockholder:
The enclosed Notice calls the 1994 Annual Meeting of the Stockholders of
Thermo Instrument Systems Inc. I respectfully request that all Stockholders
attend this Meeting, if possible.
Our Annual Report for the year ended January 1, 1994, is enclosed herewith.
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.
In addition, 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 appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
ARVIN H. SMITH
President and Chief Executive
Officer
<PAGE> 3
(THERMO INSTRUMENT SYSTEMS INC. LOGO)
504 AIRPORT ROAD
P.O. BOX 2108
SANTA FE, NEW MEXICO 87504-2108
May 3, 1994
To the Holders of the Common Stock of
THERMO INSTRUMENT SYSTEMS INC.
NOTICE OF ANNUAL MEETING
The 1994 Annual Meeting of the Stockholders (the "Meeting") of Thermo
Instrument Systems Inc. (the "Corporation") will be held on Monday, May 23,
1994, at 3:00 p.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina.
The purposes of the Meeting are to consider and take action upon the following
matters:
1. Election of ten 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 notice of and
to vote at the Meeting is March 28, 1994.
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> 4
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Thermo
Instrument Systems Inc. (the "Corporation") for use at the 1994 Annual Meeting
of the Stockholders (the "Meeting") to be held on Monday, May 23, 1994, at 3:00
p.m. at the Hyatt Regency Hotel, Hilton Head, South Carolina, and any
adjournment thereof. The mailing address of the executive office of the
Corporation is 504 Airport Road, Santa Fe, New Mexico 87504-2108. This Proxy
Statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about May 3, 1994.
VOTING PROCEDURES
The Board of Directors intends to present to the Meeting the election of
ten Directors, constituting the entire Board of Directors.
The representation in person or by proxy of a majority of the outstanding
shares 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. An abstention or withholding
authority to vote will be counted as present for determining whether the quorum
requirement is satisfied.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choices by marking the appropriate boxes 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 Director 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 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 nominees for
Directors. 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. Broker "non-votes" will not be
treated as shares present and entitled to vote and will have no effect on the
election of Directors.
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 March 28, 1994, consisted of
47,931,840 shares of Common Stock. Each share is entitled to one vote. Only
Stockholders of record at the close of business on March 28, 1994, are entitled
to vote at the Meeting.
<PAGE> 5
-- PROPOSAL 1 --
ELECTION OF DIRECTORS
Ten Directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified, or until his earlier resignation, death
or removal.
<TABLE>
NOMINEES FOR DIRECTORS
Set forth below are the names of the persons nominated to stand for
election 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, the names of other corporations in which such persons
hold directorships and certain other information. Information regarding their
beneficial ownership of the Corporation's Common Stock and of the common stock
of its parent corporation, Thermo Electron Corporation ("Thermo Electron"), is
reported under the caption "Stock Ownership." All of the nominees are currently
serving as Directors of the Corporation.
<S> <C>
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MARSHALL J. ARMSTRONG Mr. Armstrong, 58, has been a Director of the Corporation since
1990. Mr. Armstrong has been Chief Executive Officer since April
1991 and President since November 1992 of Thermo Power
Corporation. He has been a Vice President of Thermo Electron
since 1986. Mr. Armstrong is also a director of SatCon Technology
Corporation and Thermo Power Corporation.
- ----------------------------------------------------------------------------------------------
FRANK BORMAN Mr. Borman, 66, has been a Director of the Corporation since
1986. Mr. Borman is President and, since 1988, Chief Executive
Officer of Patlex Corporation, a patent licensing company. Mr.
Borman is also a director of American Superconductor Corporation,
Auto Finance Group, Inc., Outboard Marine Group and The Home
Depot, Inc.
- ----------------------------------------------------------------------------------------------
ELIAS P. GYFTOPOULOS Dr. Gyftopoulos, 66, has been a Director of the Corporation since
1986. Dr. Gyftopoulos has been the Ford Professor of Mechanical
and Nuclear Engineering at the Massachusetts Institute of
Technology for more than five years. Dr. Gyftopoulos is also a
director of Thermo Electron.
- ----------------------------------------------------------------------------------------------
GEORGE N. HATSOPOULOS Dr. Hatsopoulos, 67, has been a Director of the Corporation since
1986. 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 Bolt Beranek &
Newman, Inc., Thermedics Inc., Thermo Cardiosystems Inc., Thermo
Electron, Thermo Fibertek Inc., Thermo Power Corporation, Thermo
Process Systems Inc. and ThermoTrex Corporation. Dr. Hatsopoulos
is the brother of Mr. John N. Hatsopoulos, a Director, Vice
President and Chief Financial Officer of the Corporation.
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JOHN N. HATSOPOULOS Mr. Hatsopoulos, 60, has been a Director of the Corporation since
1986. Mr. Hatsopoulos has been a Vice President and Chief
Financial Officer of the Corporation since 1988, the Chief
Financial Officer of Thermo Electron since 1988 and an Executive
Vice President of Thermo Electron since 1986. Mr. Hatsopoulos is
also a director of Lehman Brothers Funds, Inc., Thermo Power
Corporation, Thermo Process Systems Inc., ThermoTrex Corporation
and Thermo Fibertek Inc. Mr. Hatsopoulos is the brother of Dr.
George N. Hatsopoulos, a Director of the Corporation.
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</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------
ROBERT C. HOWARD Mr. Howard, 63, has been a Director of the Corporation since
1986. Mr. Howard has been an Executive Vice President of Thermo
Electron since 1983. Mr. Howard is also a director of Thermedics
Inc., Thermo Cardiosystems Inc., Thermo Power Corporation and
ThermoTrex Corporation.
- ----------------------------------------------------------------------------------------------
FRANK JUNGERS Mr. Jungers, 67, has been a Director of the Corporation since
1990. Mr. Jungers has been a consultant on business and energy
matters since 1977. Mr. Jungers was Vice Chairman of Riedel
Environmental Technologies Inc. from July 1989 to October 1991
and was President of that company from January 1989 to July 1989.
Mr. Jungers was employed by the Arabian American Oil Company from
1974 through 1977 as Chairman and Chief Executive Officer. Mr.
Jungers is also a director of The AES Corporation,
Georgia-Pacific Corporation, Star Technologies Inc. and Thermo
Electron.
- ----------------------------------------------------------------------------------------------
ROBERT A. MCCABE Mr. McCabe, 59, has been a Director of the Corporation since
1986. Mr. McCabe has served as President of Pilot Capital
Corporation, which engages in private investments and provides
acquisition services, since 1987. Prior to that time, Mr. McCabe
was a Managing Director of Shearson Lehman Brothers Inc., an
investment banking firm. Mr. McCabe is also a director of
Borg-Warner Security Corporation, Church & Dwight Company,
Morrison-Knudsen Corporation, Neutrogena Corporation and Thermo
Electron.
- ----------------------------------------------------------------------------------------------
ARVIN H. SMITH Mr. Smith, 64, has been a Director and President and Chief
Executive Officer of the Corporation since 1986. Mr. Smith has
been an Executive Vice President of Thermo Electron since 1991
and, prior to that time, a Senior Vice President of that
corporation since 1986. Mr. Smith is also a director of
Thermedics Inc.
- ----------------------------------------------------------------------------------------------
POLYVIOS C. VINTIADIS Mr. Vintiadis, 57, has been a Director of the Corporation since
July 1993. Mr. Vintiadis has been the Chairman and Chief
Executive Officer of Towermarc Corporation, a real estate
development company, since 1984. Prior to joining Towermarc, Mr.
Vintiadis was a principal of Morgens, Waterfall & Vintiadis,
Inc., a financial services firm, with whom he still is
associated. For more than 20 years prior to that time, Mr.
Vintiadis was employed by Arthur D. Little & Company, Inc. Mr.
Vintiadis is also a director of Lamont Apparel, Inc., Savin
Corporation and Thermo Process Systems Inc.
- ----------------------------------------------------------------------------------------------
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee, an Audit
Committee and a Human Resources Committee. The present members of the Executive
Committee are Dr. G. Hatsopoulos (Chairman) and Mr. Borman, Mr. Howard, Mr.
Smith and Mr. Vintiadis. The Executive Committee is empowered to act when it is
impractical to call a meeting of the entire Board of Directors and with certain
exceptions has the powers of the Board of Directors. The Audit Committee
consists solely of non-employee Directors, and its present members are Mr.
McCabe (Chairman), Mr. Jungers and Mr. Vintiadis. The Audit Committee reviews
the scope of the audit with the Corporation's independent public accountants and
meets
3
<PAGE> 7
with them for the purpose of reviewing the results of the audit subsequent to
its completion. The Human Resources Committee consists solely of non-employee
Directors, and its present members are Mr. Jungers (Chairman), Mr. Borman and
Dr. Gyftopoulos. The Human Resources Committee reviews corporate organization,
reviews the performance of senior members of management and approves executive
compensation, and administers the Corporation's stock-based compensation plans.
The Board of Directors has no nominating committee. The Board of Directors met
twelve times, the Audit Committee met twice and the Human Resources Committee
met five times during fiscal 1993. No meetings of the Executive Committee were
held during fiscal 1993. Each Director attended at least 75% of all meetings of
the Board of Directors and applicable committees held during fiscal 1993, except
Mr. McCabe who attended 71% of such meetings.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Corporation or any other Thermo
Electron company 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. Directors
are also reimbursed for reasonable out-of-pocket expenses incurred in attending
such meetings. Mr. Armstrong, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard
and Mr. Smith are all employees of Thermo Electron companies and do not receive
any cash compensation from the Corporation for their services as Directors.
Under the Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), a Director has the right to defer receipt of his cash fees
until he ceases to serve as a Director, dies or retires from his principal
occupation. In the event of a change in control or proposed change in control of
the Corporation that is not approved by the Board of Directors, deferred amounts
become payable immediately. Amounts so deferred are valued on the date of
deferral as units of the Corporation's Common Stock and, when payable, may be
disbursed solely in shares of Common Stock. A total of 65,868 shares of Common
Stock is currently reserved for issuance under the Deferred Compensation Plan.
As of January 29, 1994, deferred units equal to 19,726.24 shares of Common Stock
were accumulated under the Deferred Compensation Plan for current Directors.
In 1991, the Company adopted a directors stock option plan (the "Directors
Stock Plan"). The Directors Stock Plan provides for the grant of stock options
to purchase shares of Common Stock to non-employee Directors as additional
compensation for their attendance at or participation in meetings of the Board
of Directors and its committees. Eligible Directors are granted options on a
quarterly basis according to the following formula: 200 shares for each meeting
of the Board of Directors held during the quarter and attended in person by the
recipient and 100 shares for each telephone meeting or committee meeting of the
Board of Directors held during the quarter in which the recipient participates.
The exercise price for options is determined by the average of the closing
prices of the Common Stock as reported on the American Stock Exchange for the
five trading days preceding the date of grant. Options are exercisable six
months after the date of grant and expire seven years from the date of grant.
However, the shares acquired upon exercise are subject to repurchase by the
Corporation at the exercise price if the recipient ceases to serve as a
Director, which repurchase rights lapse one year after the date of grant. An
aggregate of 73,950 shares of Common Stock is currently reserved for issuance
under the Directors Stock Plan. As of January 29, 1994, options to purchase
24,550 shares of Common Stock had been granted under the Directors Stock Plan at
an average exercise price of $21.87 per share, no shares of Common Stock had
been issued pursuant to the exercise of options and no options to purchase
shares of Common Stock had lapsed. Options to purchase 50,450 shares of Common
Stock were reserved and available for grant under the Directors Stock Plan as of
January 29, 1994.
4
<PAGE> 8
<TABLE>
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of the Common
Stock, as well as the common stock of Thermo Electron, as of January 29, 1994,
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 executive
officers as a group.
<CAPTION>
THERMO INSTRUMENT THERMO ELECTRON
NAME(1) SYSTEMS(2) CORPORATION(3)
- ------------------------------------------ ------------------- -----------------
<S> <C> <C>
Thermo Electron Corporation(4)............ 42,488,602 N/A
Marshall J. Armstrong..................... 24,765 80,971
Frank Borman.............................. 19,143 0
Elias P. Gyftopoulos...................... 21,412 28,920
George N. Hatsopoulos..................... 76,420 1,702,469
John N. Hatsopoulos....................... 63,413 234,884
Denis A. Helm............................. 89,042 46,507
Robert C. Howard.......................... 16,324 90,101
Frank Jungers............................. 23,173 104,557
John T. Keiser............................ 79,241 42,321
Earl R. Lewis............................. 72,373 52,563
Robert A. McCabe.......................... 27,565 18,451
Arvin H. Smith............................ 230,208 270,003
Polyvios C. Vintiadis..................... 216 0
All Directors and executive officers as a
group (16 persons)...................... 885,547 2,786,901
<FN>
- ---------------
* Less than 1%
(1) Shares of the Common Stock of the Corporation and of the common stock of
Thermo Electron beneficially owned include shares owned by the indicated
person, by that person's spouse, by that person and his spouse, and by that
person and his spouse (or either of them) for the benefit of minor children.
Except as reflected in the footnotes to this table, all share ownership
includes sole voting and investment power.
(2) Shares beneficially owned by Mr. Armstrong, Mr. Borman, Dr. Gyftopoulos, Dr.
G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Jungers, Mr. Keiser, Mr.
Lewis, Mr. McCabe, Mr. Smith and all Directors and executive officers as a
group include 24,450, 3,450, 4,050, 50,000, 50,000, 60,000, 3,600, 30,000,
60,000, 3,000, 125,000 and 544,622 shares, respectively, that such person or
members of the group had the right to acquire within 60 days of January 29,
1994 through the exercise of stock options. Shares beneficially owned by Mr.
Armstrong, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howard, Mr.
Keiser, Mr. Lewis, Mr. Smith and all Directors and executive officers as a
group include 203, 266, 267, 195, 252, 198, 176, 268 and 2,155 full shares,
respectively, allocated through January 29, 1994 to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan (the "ESOP"). Shares beneficially owned by Mr. Borman, Mr. Jungers, Mr.
McCabe, Mr. Vintiadis and all Directors and executive officers as a group
include 4,443, 5,608, 3,800, 216 and 14,067 shares, respectively, allocated
through January 29, 1994 to their respective accounts maintained pursuant to
the Deferred Compensation Plan for Directors. No Director or executive
officer beneficially
(Footnotes continued on following page)
</TABLE>
5
<PAGE> 9
[FN]
owned more than 1% of the Common Stock outstanding as of January 29, 1994;
all Directors and executive officers as a group beneficially owned 1.9% of
the Common Stock outstanding as of such date.
(3) Shares beneficially owned by Mr. Armstrong, Mr. Gyftopoulos, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Jungers, Mr.
Keiser, Mr. Lewis, Mr. McCabe, Mr. Smith and all Directors and executive
officers as a group included 57,800, 1,500, 738,544, 165,700, 28,150,
28,290, 1,500, 28,550, 49,300, 1,500, 163,900 and 1,343,720 shares,
respectively, that such person or members of the group had the right to
acquire within 60 days after January 29, 1994 through the exercise of stock
options. Shares beneficially owned by Mr. Armstrong, Dr. G. Hatsopoulos, Mr.
J. Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Keiser, Mr. Lewis, Mr. Smith and
all Directors and executive officers as a group include 919, 840, 670, 400,
1,161, 399, 266, 573 and 5,627 shares, respectively, allocated through
January 29, 1994 to their respective accounts maintained pursuant to the
ESOP. Shares beneficially owned by Mr. Armstrong, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Keiser, Mr. Lewis, Mr. Smith and all
Directors and executive officers as a group include 2,588, 4,404, 2,772,
1,597, 3,011, 1,841, 583, 2,434 and 21,044 shares, respectively, allocated
through January 29, 1994 to their respective accounts maintained pursuant to
Thermo Electron's 401(k) plan. Shares beneficially owned by Mr. Jungers, Mr.
McCabe and all Directors and executive officers as a group include 35,745,
15,433 and 51,178 shares, respectively, allocated through January 29, 1994
to their respective accounts maintained pursuant to Thermo Electron's
Deferred Compensation Plan for Directors. Except for Dr. G. Hatsopoulos, who
beneficially owned 3.6% of the Thermo Electron common stock outstanding as
of January 29, 1994, 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 5.6% of
the Thermo Electron stock outstanding as of January 29, 1994.
(4) Includes 4,945,854 shares into which $142,384,000 in principal amount of the
Corporation's senior convertible notes and subordinated convertible notes
issued to Thermo Electron may be converted. Thermo Electron owned 83% of the
Common Stock outstanding as of January 29, 1994. Thermo Electron's address
is 81 Wyman Street, Waltham, MA 02254-9046. As of March 28, 1994, Thermo
Electron had the power to elect all of the members of the Corporation's
Board of Directors. Thermo Electron and its subsidiaries develop,
manufacture and market environmental monitoring and analysis instruments,
biomedical products, including heart-assist devices and mammography systems,
papermaking and recycling equipment, alternative-energy systems, and other
specialized products. Thermo Electron and its subsidiaries also provide
metallurgical services and conduct advanced technology research and
development.
DISCLOSURE OF CERTAIN LATE FILINGS
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 the
Corporation's Directors and executive officers were complied with during 1993.
However, Thermo Electron failed on three occasions to timely report the
acquisition of derivative securities issued by the Corporation, and on one
occasion amended a previously filed report to correct a mathematical error of 10
shares in connection with the conversion of a derivative security issued by the
Corporation. All of these reports were corrected and filed in early January 1994
when the errors were discovered.
6
<PAGE> 10
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
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 three other most highly compensated executive officers for
the fiscal years ended January 1, 1994, January 2, 1993, and December 28, 1991.
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. (See "Relationship with Affiliates" below.)
Accordingly, the compensation for these individuals is not reported in the
following table.
<TABLE>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<CAPTION>
LONG TERM
COMPENSATION
--------------
SHARES
UNDERLYING
AWARDS OF
OPTIONS (NO. ALL
ANNUAL COMPENSATION OF OTHER
FISCAL --------------------- SHARES AND COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPANY)(1) SATION(2)
- ----------------------------------- ------ -------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Arvin H. Smith(3).................. 1993 $240,000 $304,000 125,000 (THI) $10,023
President and Chief Executive 1992 $223,000 $203,800 $ 8,891
Officer --
1991 $210,000 $188,000 -- $ 8,891
- ---------------------------------------------------------------------------------------------------
Denis A. Helm...................... 1993 $127,500 $120,000 60,000 (THI) $ 9,217
Senior Vice President 13,975 (TMO)
1992 $120,000 $ 80,000 7,425 (TMO) $10,410(4)
3,000 (TFT)
1991 $115,000 $ 80,000 1,650 (TMO) $ 7,875
2,100 (TKN)
- ---------------------------------------------------------------------------------------------------
Earl R. Lewis...................... 1993 $131,250 $100,000 60,000 (THI) $ 6,671
Senior Vice President 22,750 (TMO)
1992 $125,000 $ 68,000 14,250 (TMO) $ 8,247
3,000 (TFT)
1991 $120,000 $ 50,000 6,000 (TMO) $ 9,414
2,100 (TKN)
- ---------------------------------------------------------------------------------------------------
John T. Keiser..................... 1993 $125,000 $ 50,000 30,000 (THI) $ 6,317
Vice President 11,675 (TMO)
1992 $125,000 $ 25,000 7,125 (TMO) $ 7,855
3,000 (TFT)
1991 $120,000 $ 50,000 3,000 (TMO) $ 8,093
1,800 (TKN)
(Footnotes continued on following page)
</TABLE>
7
<PAGE> 11
[FN]
- ---------------
(1) Mr. Smith has served as an executive officer of Thermo Electron since 1986
and has been granted options to purchase common stock of Thermo Electron and
certain of its subsidiaries other than the Corporation from time to time by
Thermo Electron or such other subsidiaries. These options are not reported
in this table as they were granted as compensation for service to other
Thermo Electron companies in capacities other than his capacity as the chief
executive officer of the Corporation. In addition to the grant of options to
purchase common stock of the Corporation (designated in the table as THI),
Messrs. Helm, Lewis and Keiser have been granted options to purchase common
stock of the following Thermo Electron companies as part of Thermo
Electron's stock option program: Thermo Electron (designated in the table as
TMO), Thermo Fibertek Inc. (designated in the table as TFT) and ThermoTrex
Corporation (designated in the table as TKN). The number of shares
underlying awards of options has been adjusted as applicable to reflect
three-for-two stock splits effected in July 1993, October 1993 and October
1993 with respect to the common stock of the Corporation (THI), Thermo
Electron (TMO) and ThermoTrex Corporation (TKN), respectively.
(2) Represents the amount of matching contributions made on behalf of the
executive officers participating in the Thermo Electron 401(k) plan.
(3) Mr. Smith is an executive vice president and full-time employee of Thermo
Electron, but he devotes such time to the affairs of the Corporation as the
Corporation's needs reasonably require. The annual cash compensation and
other total compensation reported in the table for Mr. Smith has been
determined and paid by Thermo Electron. The Corporation is allocated a
percentage of Mr. Smith's annual cash compensation (salary and bonus) for
the time he devotes to the affairs of the Corporation. For 1991, the
Corporation was allocated 75% of Mr. Smith's annual cash compensation.
During 1992 and subsequent years, the Corporation was allocated 50% of Mr.
Smith's annual cash compensation, in recognition of Mr. Smith's increased
responsibilities as an executive vice president of Thermo Electron. The
amounts reported in the table represent the total amounts paid to Mr. Smith
by Thermo Electron, and not the amounts allocated to the Corporation.
(4) In addition to a matching contribution of $10,410 referred to in footnote
(2), this amount includes $4,088, representing the market value of 150
shares of Thermo Electron common stock received by Mr. Helm in May 1992 in
recognition of his managerial achievements, voted by managers of Thermo
Electron at its annual management conference.
STOCK OPTIONS GRANTED DURING FISCAL 1993
The following table sets forth information concerning individual grants of
stock options made during fiscal 1993 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 1993.
<TABLE>
OPTION GRANTS IN FISCAL 1993
- --------------------------------------------------------------------------------
<CAPTION>
NO. OF SHARES POTENTIAL REALIZABLE
UNDERLYING PERCENT VALUE AT ASSUMED
OPTIONS OF TOTAL ANNUAL RATES OF STOCK
GRANTED OPTIONS EXERCISE PRICE APPRECIATION FOR
(NO. OF SHARES GRANTED TO ALL PRICE OPTION TERM(2)
AND EMPLOYEES PER EXPIRATION ----------------------
NAME COMPANY)(1) IN 1993 SHARE(1) DATE 5% 10%
- --------------------- -------------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Arvin H. Smith(3).... 125,000 (THI) 12.5% $31.28 12/16/05 $3,111,798 $8,361,255
Denis A. Helm........ 60,000 (THI) 6.0% $31.28 12/16/05 $1,493,663 $4,013,402
1,875 (TMO) 0.2%(4) $37.07 4/3/00 $ 28,296 $ 65,942
2,100 (TMO) 0.2%(4) $35.40 3/9/98 $ 20,539 $ 45,385
10,000 (TMO) 0.9%(4) $41.38 12/14/05 $ 329,325 $ 884,882
(Table continued on the following page)
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
NO. OF SHARES POTENTIAL REALIZABLE
UNDERLYING PERCENT VALUE AT ASSUMED
OPTIONS OF TOTAL ANNUAL RATES OF STOCK
GRANTED OPTIONS EXERCISE PRICE APPRECIATION FOR
(NO. OF SHARES GRANTED TO ALL PRICE OPTION TERM(2)
AND EMPLOYEES PER EXPIRATION ----------------------
NAME COMPANY)(1) IN 1993 SHARE(1) DATE 5% 10%
- --------------------- -------------- -------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earl L. Lewis........ 60,000 (THI) 6.0% $31.28 12/16/05 $1,493,663 $4,013,402
3,750 (TMO) 0.3%(4) $37.07 4/3/00 $ 56,592 $ 131,884
3,000 (TMO) 0.3%(4) $37.07 4/3/03 $ 69,939 $ 177,240
3,000 (TMO) 0.3%(4) $39.40 7/03/00 $ 48,119 $ 112,138
10,000 (TMO) 0.9%(4) $41.38 12/14/05 $ 329,325 $ 884,882
John T. Keiser....... 30,000 (THI) 3.0% $31.28 12/16/05 $ 746,832 $2,006,701
1,875 (TMO) 0.2%(4) $37.07 4/3/00 $ 28,296 $ 65,942
1,800 (TMO) 0.2%(4) $35.40 3/9/98 $ 17,605 $ 38,902
8,000 (TMO) 0.7%(4) $41.38 12/14/05 $ 263,460 $ 707,905
<FN>
- ---------------
(1) The number of shares subject to option and exercise prices have been
adjusted as applicable to reflect three-for-two stock splits effected in
July 1993 and October 1993 with respect to the common stock of the
Corporation (designated in the table as THI) and Thermo Electron (designated
in the table as TMO), respectively. All of the options granted during the
fiscal year are immediately exercisable at the date of grant. However, 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 period ranging from five to ten years after the first
anniversary of the option grant date, depending on the term of the option,
provided that the optionee is employed by the Corporation or another Thermo
Electron company on each of such dates. The granting corporation may permit
the holders of all such options to exercise options and to satisfy tax
withholding obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) Amounts 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 price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. This table does not take into account any
appreciation in the price of the applicable common stock to date.
(3) Mr. Smith has served as an executive officer of Thermo Electron since 1986
and has been granted options to purchase common stock of Thermo Electron and
certain of its subsidiaries other than the Corporation. These options are
not reported in this table as they were granted as compensation for service
to other Thermo Electron companies in capacities other than his capacity as
the chief executive officer of the Corporation.
(4) These options were granted under stock option plans maintained by Thermo
Electron and accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron.
</TABLE>
9
<PAGE> 13
STOCK OPTIONS EXERCISED DURING FISCAL 1993 AND FISCAL YEAR-END VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1993 and outstanding stock options held at the end of
fiscal 1993 by the Corporation's chief executive officer and the other named
executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1993.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1993 AND FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------
<CAPTION>
NUMBER OF VALUE OF
SHARES UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED VALUE UNEXERCISED OPTIONS AT
NAME COMPANY ON EXERCISE(1) REALIZED OPTIONS(2) YEAR-END
- ---------------------- -------------------------- -------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Arvin H. Smith........ Thermo Instrument Systems -- -- 125,000 $449,375
Denis A. Helm......... Thermo Instrument Systems 15,442 $329,965 60,000 $215,700
Thermo Electron -- -- 30,250 $360,903
Thermo Energy Systems -- -- 4,000 --
Thermo Fibertek -- -- 3,000 $ 27,375
Thermo Power Corporation 2,192 $ 13,875 -- --
Thermo Process Systems 540 $ 3,472 -- --
ThermoTrex -- -- 2,100 $ 22,943
Earl R. Lewis......... Thermo Instrument Systems 900 $ 18,894 60,000 $215,700
Thermo Electron 2,700 $ 53,917 49,300 $512,579
Thermo Energy Systems -- -- 4,000 --
Thermo Fibertek 600 $ 4,350 2,400 $ 21,900
ThermoTrex 840 $ 9,562 1,260 $ 13,766
John T. Keiser........ Thermo Instrument Systems 41,999 $978,819 30,000 $107,850
Thermo Cardiosystems -- -- 7,500 $122,025
Thermo Electron -- -- 30,050 $417,776
Thermo Energy Systems -- -- 4,000 --
Thermo Fibertek -- -- 3,000 $ 27,375
Thermo Process Systems 540 $ 3,067 -- --
ThermoTrex -- -- 1,800 $ 19,665
<FN>
- ---------------
(1) As an executive officer of Thermo Electron, Mr. Smith also holds unexercised
options to purchase common stock of Thermo Electron and certain of its
subsidiaries other than the Corporation. These options are not reported here
as they were granted as compensation for service to other Thermo Electron
companies in capacities other than his capacity as the chief executive
officer of the Corporation. Messrs. Helm, Keiser and Lewis hold unexercised
options to purchase common stock of Thermo Electron and its subsidiaries
other than the Corporation under plans maintained by Thermo Electron.
(2) The number of shares have been adjusted as applicable to reflect the
following stock splits: three-for-two stock splits effected in October 1993
with respect to the common stock of Thermo Electron and ThermoTrex, and in
July 1993 with respect to the Corporation's Common Stock; and a two-for-one
stock split effected in November 1993 with respect to the common stock of
Thermo Cardiosystems. All of the options reported outstanding at the end of
the fiscal year are currently exercisable, except options to purchase common
stock of Thermo Energy Systems Corporation. Options to purchase Thermo
Energy Systems common stock are exercisable commencing 90 days after that
company's common stock becomes publicly traded. The shares acquired upon
exercise of the options reported in the table are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to be
employed by such corporation or any other Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. The repurchase rights
generally lapse ratably over a period ranging from five to ten years after
the first
</TABLE>
10
<PAGE> 14
anniversary of the option grant date, depending on the option term, provided
that the optionee is employed by the Corporation or another Thermo Electron
company on each of such dates.
SEVERANCE AGREEMENTS
Thermo Electron has entered into severance agreements with several of its
key employees, including key employees of the Corporation and other
majority-owned subsidiaries, that provide severance benefits if there is a
change of control of Thermo Electron (as defined in the agreements) 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. In 1983, Thermo Electron
entered into a severance agreement with Mr. Smith, which states the benefit to
be received as an initial percentage which was established by the Board of
Directors of Thermo Electron and was generally based upon his age and length of
service with Thermo Electron at the time. Benefits under this agreement are to
be paid over a five-year period. The benefit to be paid in the first year is
determined by applying this percentage to the employee's highest annual total
remuneration in any twelve-month period during the preceding three years. This
benefit is reduced 10% in each of the succeeding four years in which benefits
are paid. The initial percentage to be applied to Mr. Smith is 59.1%.
In 1988, Thermo Electron entered into severance agreements with several
other key employees, including two executive officers of the Corporation, Mr.
Helm and Mr. Keiser. Under these agreements, a lump-sum benefit at the time of a
qualifying severance would be paid to the employee by Thermo Electron or the
majority-owned subsidiary equal to the highest total cash compensation in any
twelve-month period during the three years preceding the severance event. A
qualifying severance exists if (i) 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 as of April 2,
1994, the payments thereunder to Mr. Smith, Mr. Helm and Mr. Keiser would have
been approximately $284,000 (with respect to the first year in which benefits
would be paid), $250,000 and $225,000, respectively.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Committee'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 its executives, the Committee follows guidelines
established by the human resources committee of its parent corporation, Thermo
Electron. The executive compensation program presently consists of annual base
salary, short-term incentives in the form of annual cash bonuses and long-term
incentives in the form of stock options.
The Committee believes that the 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 appropriate competitive norm
and
11
<PAGE> 15
that short-and long-term incentive compensation should reflect the performance
of the Corporation and the contributions of each executive.
External competitiveness is an important element of ensuring that the
Corporation can continue to attract and retain highly qualified executives. The
competitiveness of the Corporation's compensation for its executive officers is
assessed with respect to diversified industry data provided by national
compensation consulting firms through annual executive compensation surveys. The
market data are provided primarily by "Project 777," an executive compensation
survey prepared by Management Compensation Services, a division of Hewitt
Associates. The Committee compares executive compensation to the multi-industry
and the electrical/electronic industry segments in the Project 777 survey. These
segments contain a broad range of companies participating in the survey, and
include most of the companies included in the Corporation's performance peer
group. Comparing compensation to diversified industry surveys provides a
broad-based competitive perspective.
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 reflect the competitive norm for similar
positions in organizations of comparable sales and complexity to the
Corporation. Executive officer salaries are adjusted gradually over time and
only as necessary to meet this objective. Increases in base salary may be
further moderated by other considerations, such as the average increases awarded
to other employees of the Corporation. It is the Committee's intention, however,
that over time the base salaries for its executives will approximate the
competitive norm.
For 1993, salaries for the Corporation's executives were lower than the
competitive norm. The Committee believes this difference results from a
combination of relatively rapid growth in the Corporation's revenues, and its
practice of increasing salaries gradually and in moderation. The salary
increases in 1993 for executives reflect this practice of gradual increase and
moderation.
CASH BONUS
At the beginning of each year, the Committee establishes a median potential
bonus for each executive by reviewing market data on total cash compensation.
Specifically, the median potential bonus plus the salary of an executive officer
is approximately equal to the mid-point total compensation for a similar
position and level of responsibility in businesses having comparable sales and
complexity to the Corporation. At the end of each year, the bonus awarded to an
executive officer ranges 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 formulas established by the Committee that are a function of
operating returns and income improvement for the Corporation and the particular
unit for which the executive is primarily responsible, and by a subjective
evaluation of the contributions of the executive that are not captured by
short-term financial results and yet are considered by the Committee important
to the long-term creation of value for the Stockholders.
The bonuses for executive officers approved by the Committee with respect
to 1993 performance in each case exceeded the median potential bonus, reflecting
both the Corporation's performance and the individual contributions of its
executives.
12
<PAGE> 16
STOCK OPTION PROGRAM
The primary goal of the Corporation 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 stock option awards 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 interests to the interests of all the Stockholders. The emphasis on
stock options also results in management 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
corporation, Thermo Electron, and the other majority-owned subsidiaries of
Thermo Electron, are important in providing incentives for performance within
the entire consolidated group.
In determining awards, the Committee considers the average annual value of
all options to purchase shares of the Corporation, its majority-owned
subsidiaries, and other companies within the Thermo Electron group, that vest
over the following five years. (Values are established in accordance with the
Black-Scholes option pricing model.) This annual value is then added to the cash
compensation for the year to determine the total compensation of the executive
officer. As a guideline, the Committee intends to maintain the aggregate amount
of awards to all employees over a five-year period below 10% of the
Corporation's outstanding Common Stock, and considers the size of the company,
the percentage of its stock held by the public, its stage of development,
management objectives, and standards for awards of comparably situated
companies.
In December 1993, the Committee reviewed the total compensation for
executives, considered actual and anticipated contributions of each executive,
as well as the value of previously awarded options as described above, and
determined option awards accordingly. The option awards made with respect to the
common stock of the Corporation's parent, Thermo Electron, were determined by
the human resources committee of its board of directors using a similar analysis
as that used by the Committee.
1993 CEO COMPENSATION
Cash compensation for Mr. Arvin H. Smith is reviewed by both the Committee
and the human resources committee of the board of directors of Thermo Electron,
due to his responsibilities as both the Corporation's chief executive officer
and as an executive vice president of Thermo Electron, the Corporation's parent.
Each committee evaluates Mr. Smith's performance and proposed compensation using
a process similar to that used for the other executive officers of the
Corporation. At the Thermo Electron level, Mr. Smith is evaluated on his
performance related to the Corporation, as well as other operating units of
Thermo Electron for which he is responsible, weighted in accordance with the
amount of time and effort devoted to each operation. Approximately 50% of Mr.
Smith's bonus for 1993 performance was attributable to his responsibilities at
the Corporation. The Corporation's Committee then reviews the analysis and
determinations of the Thermo Electron committee, makes an independent assessment
of Mr. Smith's performance as it relates to the Corporation using criteria
similar to that used for the other executive officers of the Corporation, and
then agrees to an appropriate allocation of Mr. Smith's compensation to be paid
by the Corporation.
In December 1993, the Committee conducted its review of Mr. Smith's
proposed salary for 1994 and bonus for 1993 performance. The Committee concurred
in the recommendations made by the Thermo Electron committee and agreed to an
allocation of 50% of Mr. Smith's total cash compensation for 1993 to the
Corporation, based on his relative responsibilities at the Corporation and
Thermo Electron. The Committee
13
<PAGE> 17
believes that the total cash compensation for Mr. Smith for 1993 tends to be
below the competitive norm for a similarly sized company with performance
comparable to that of the Corporation, and prefers that a significant portion of
total compensation be awarded in the form of long-term incentive compensation,
such as stock options.
The Committee also approved stock option awards with respect to the
Corporation's Common Stock to Mr. Smith at the end of 1993. Based upon an
evaluation comparable to that described for all executive officers, and
considering Mr. Smith's actual and anticipated contributions to the Corporation,
the Committee approved the option awards reported.
Mr. Frank Jungers (Chairman)
Mr. Frank Borman
Dr. Elias P. Gyftopoulos
COMPARATIVE PERFORMANCE GRAPH
The SEC requires that the Corporation include in this Proxy Statement a
line-graph presentation comparing cumulative, five-year shareholder returns for
the Corporation's Common Stock with a broad-based market index and either a
nationally recognized industry standard or an index of peer companies selected
by the Corporation. The Corporation has compared its performance with the
American Stock Exchange Market Value Index and a peer group of instrument
companies comprised of Beckman Instruments Inc., Dionex Inc., Millipore Corp.,
Perkin-Elmer Corp. and Varian Associates Inc. Last year, the Corporation
included Hewlett-Packard Co. in its peer group, but it has subsequently
concluded that this is an inappropriate comparison because less than 5% of that
company's revenues relate to the analytical instrument market and its revenues
and performance predominantly relate to the computer industry. Accordingly, two
peer groups are presented in the graph, one including Dionex Inc. (the "Current
Peer Group") and the other including Hewlett-Packard Co. (the "Discontinued Peer
Group"). The Corporation changed its fiscal year-end from the Saturday nearest
June 30 to the Saturday nearest December 31 in 1989. Accordingly, the graph
presents data for July 1, 1988, June 30, 1989 and December 29, 1989, December
31, 1990, December 31, 1991, December 31, 1992, and December 31, 1993.
14
<PAGE> 18
<TABLE>
COMPARISON OF 1988-1993 CUMULATIVE TOTAL RETURN AMONG
THERMO INSTRUMENT SYSTEMS INC. (THI),
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX,
THE CORPORATION'S CURRENT PEER GROUP AND DISCONTINUED PEER GROUP
[PERFORMANCE GRAPH]
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
7/1/88 6/30/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
- ----------------------------------------------------------------------------------------------------------------------
THI 100 182 172 155 251 364 551
- ----------------------------------------------------------------------------------------------------------------------
AMEX 100 116 122 99 127 128 153
- ----------------------------------------------------------------------------------------------------------------------
Current Peer Group 100 87 81 90 109 128 148
- ----------------------------------------------------------------------------------------------------------------------
Discontinued Peer Group 100 94 86 66 109 134 154
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (THI), the American Stock
Exchange Market Value Index (AMEX) and peer group of instrument companies
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 "THI".
15
<PAGE> 19
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 has created the
Corporation, Thermedics Inc., Thermo Power Corporation, Thermo Process Systems
Inc., ThermoTrex Corporation and Thermo Fibertek Inc., all of which are publicly
held subsidiaries of Thermo Electron. Thermedics Inc. has created Thermo
Cardiosystems Inc. as a publicly held subsidiary and acquired the majority
interest in a previously unaffiliated public company, Thermo Voltek Corp. Thermo
Process Systems Inc. has created Thermo Remediation Inc. as a publicly held
subsidiary and has acquired Beheersmaatschappij J. Amerika N.V. as a privately
held, majority-owned subsidiary. ThermoTrex Corporation has created ThermoLase
Corporation as a privately held, majority-owned subsidiary. In addition, Thermo
Electron created Thermo Energy Systems Corporation, a privately held
majority-owned subsidiary, and other privately held majority-owned subsidiaries.
(The Corporation and the other 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 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 financial planning and providing other banking and credit services.
Pursuant to the Charter, Thermo Electron may also provide guarantees of debt
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 is also responsible for
ensuring that members comply with internal policies and procedures. 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.
16
<PAGE> 20
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. 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 for which
the Corporation pays an annual fee equal to 1.25% of the Corporation's revenues.
Prior to January 1993, the Corporation was assessed an annual fee equal to 1% of
the Corporation's revenues for these services. The fee may be changed by mutual
agreement of the Corporation and Thermo Electron. During fiscal 1992 and 1993,
Thermo Electron assessed the Corporation $4,232,000 and $7,302,000,
respectively, 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 directly 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 in the ordinary
course with other companies in the Thermo Group. All such transactions are on
terms comparable to those the Corporation would receive from unaffiliated
parties.
As of January 29, 1994, $157,710,066 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, government and agency securities, money market funds,
certificates of deposit, 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 interest at a
rate based on the Commercial Paper Composite Rate plus 25 basis points, set at
the beginning of each quarter.
17
<PAGE> 21
In October 1993, the Corporation issued and sold to Thermo Electron, at
par, a $140,000,000 principal amount 3 3/4% senior convertible note due 2000.
The note is convertible into shares of Common Stock at a conversion price of
$31.75 per share.
At the end of fiscal 1993, the Corporation was indebted to Thermo Electron
in an additional aggregate amount of $8,801,000, as follows: a $2,734,000
principal amount 7% subordinated convertible note, which is convertible into
shares of Common Stock at a conversion price of $4.44 and $6,067,000 as trade
payables.
In May 1993, the Corporation sold the biomedical instruments business of
its Nicolet Instrument Corporation subsidiary ("Nicolet Biomedical") to Thermo
Electron for approximately $67.9 million in cash. The purchase price was based
upon, among other things, an estimation of the value of Nicolet Biomedical
relative to the value of the entire business of Nicolet Instrument Corporation,
which was acquired by the Company in August 1992 for an aggregate amount of
approximately $179 million and was approved by the Corporation's Board of
Directors.
In January 1994, Thermo Electron entered into an Asset and Stock Purchase
Agreement (the "Agreement") with Baker Hughes Incorporated ("Baker Hughes") for
the acquisition of certain business operations of Baker Hughes (the "Acquired
Business Operations") for an aggregate purchase price of approximately
$137,000,000 (the "Total Purchase Price"). In March 1994, the Corporation was
assigned certain rights and assumed certain liabilities of Thermo Electron (the
"Assignment and Assumption") under the Agreement. Pursuant to the Assignment and
Assumption the Corporation acquired certain of the Acquired Business Operations
from Baker Hughes for approximately $93,000,000 and the assumption of certain
liabilities related to such operations. The price paid by the Corporation was
generally determined by pro rating the Total Purchase Price on the basis of
revenues of the respective portions of the Acquired Business Operations and was
approved by the Corporation's Board of Directors. In March 1994, Thermo Electron
also entered into a similar arrangement with another of its publicly held
subsidiaries pursuant to which that subsidiary acquired the remainder of the
Acquired Business Operations from Baker Hughes for the balance of the Total
Purchase Price and the assumption of certain liabilities related to such
operations.
In April 1994, the Corporation and Thermo Process Systems Inc. (another
majority owned subsidiary of Thermo Electron) agreed to form a joint venture
called Thermo Terra Tech. The Corporation will contribute its laboratory and
health physics, environmental consulting and consulting engineering businesses
to the joint venture. Thermo Process Systems Inc. will contribute approximately
$31 million in cash and marketable securities to the joint venture, as well as
its Terra Tech business, which provides analytical services to the petroleum
industry and to environmental firms. Subject to certain adjustments for the
first year of the joint venture's operations, the joint venture will be owned
51% by Thermo Process Systems Inc. and 49% by the Corporation.
Thermo Electron owned of record approximately 81% of the Corporation's
outstanding Common Stock on January 29, 1994. Thermo Electron intends for the
foreseeable future to maintain at least 80% 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 on the
open market or directly from the Corporation, at prevailing market rates.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen & Co. as independent
public accountants for fiscal 1994. Representatives of that firm are expected to
be present at the Meeting, will have the opportunity
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<PAGE> 22
to make a statement if they desire to do so and will be available to respond to
questions. Arthur Andersen & Co. has acted as independent public accountants for
the Corporation since 1986.
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 1995 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 January 2, 1995.
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, by telephone 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.
Santa Fe, New Mexico
May 3, 1994
(LOGO) This proxy statement is printed on recycled paper.
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<PAGE> 23
PROXY
THERMO INSTRUMENT SYSTEMS INC.
504 AIRPORT ROAD - SANTA FE, NEW MEXICO 87504-2108
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Arvin H. Smith, John N. Gyftopoulos and
Theo Melas-Kyriazi, and each of them, proxies of the undersigned, each with
power to appoint his substitute, and hereby authorizes them to represent and to
vote, as designated below, all the shares of Common Stock of Thermo Instrument
Systems Inc. held of record by the undersigned on March 28, 1994, at the Annual
Meeting of the Stockholders to be held at the Hyatt Regency Hotel, Hilton Head,
South Carolina, on Monday, May 23, 1994, at 3:00 p.m., and at any postponement
or adjournment thereof, as set forth on the reverse side hereof, and in their
discretion upon any other business that may properly come before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED, OR IF NO CHOICE IS SPECIFIED,
FOR THE ELECTION OF THE NOMINEES NAMED AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(IMPORTANT -- TO BE SIGNED AND DATED ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
- --------------------------------------------------------------------------------
<TABLE>
/ X / PLEASE MARK YOUR
VOTES AS IN
THIS EXAMPLE.
<S> <C>
FOR WITHHELD THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
all from all
nominees nominees
I. Election of Directors / / / / Nominees: Marshall J. Armstrong, Frank Borman,
Elias P. Gyftopoulos, George N. Gyftopoulos, John
N. Gyftopoulos, Robert C. Howard, Frank Jungers,
Robert A. McCabe, Arvin H. Smith
and Polyvios G. Vintiadis.
___For, except vote withheld from the following nominee(s):
__________________________________________________________
MARK HERE FOR ADDRESS CHANGE / /
AND NOTE CHANGE AT LEFT
SIGNATURE(S) ______________________________________________________ DATE ___________________________
(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.)
</TABLE>
