Thermo Instrument Systems Inc.
1275 Hammerwood Avenue
Sunnyvale, California 94089
April 19, 1996
Dear Stockholder:
The enclosed Notice calls the 1996 Annual Meeting of the
Stockholders of Thermo Instrument Systems Inc. I respectfully request
all Stockholders attend this Meeting, if possible.
Our Annual Report for the year ended December 30, 1995 is
enclosed. I hope you will read it carefully. Feel free to forward any
questions you may have if you are unable to be present at the Meeting.
Enclosed with this letter is a Proxy authorizing three officers of
the Corporation to vote your shares for you if you do not attend the
Meeting. Whether or not you are able to attend the Meeting, I urge you
to complete your Proxy and return it to our transfer agent, American
Stock Transfer and Trust Company, in the enclosed addressed,
postage-paid envelope, as a quorum of the Stockholders must be present
at the Meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this
Proxy.
Yours very truly,
ARVIN H. SMITH
President and
Chief Executive Officer
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Thermo Instrument Systems Inc.
1275 Hammerwood Avenue
Sunnyvale, California 94089
April 19, 1996
To the Holders of the Common Stock of
THERMO INSTRUMENT SYSTEMS INC.
NOTICE OF ANNUAL MEETING
The 1996 Annual Meeting of the Stockholders of Thermo Instrument
Systems Inc. (the "Corporation") will be held on Sunday, May 19, 1996,
at 6:30 p.m. at the Turnberry Isle Resort & Club, 19999 West Country
Club Drive, Aventura, Florida. The purposes of the Meeting are to
consider and take action upon the following matters:
1. Election of five Directors.
2. A proposal recommended by the Board of Directors to amend the
Corporation's Certificate of Incorporation to increase the
Corporation's authorized common stock, $.10 par value per share, from
125 million shares to 250 million shares.
3. Such other business as may properly be brought before the
Meeting and any adjournment thereof.
The transfer books of the Corporation will not be closed prior to
the Meeting, but, pursuant to appropriate action by the Board of
Directors, the record date for the determination of the Stockholders
entitled to notice of and vote at the Meeting is April 1, 1996.
The By-laws require that the holders of a majority of the stock
issued and outstanding and entitled to vote be present or represented
by proxy at the Meeting in order to constitute a quorum for the
transaction of business. It is important that your shares be
represented at the Meeting regardless of the number of shares you may
hold. Whether or not you are able to be present in person, please sign
and return promptly the enclosed Proxy in the accompanying envelope,
which requires no postage if mailed in the United States.
This Notice, the Proxy and Proxy Statement enclosed herewith are
sent to you by order of the Board of Directors.
SANDRA L. LAMBERT
Secretary
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PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of
Thermo Instrument Systems Inc. (the "Corporation") for use at the 1996
Annual Meeting of the Stockholders (the "Meeting") to be held on
Sunday, May 19, 1996, at 6:30 p.m. at the Turnberry Isle Resort & Club,
19999 West Country Club Drive, Aventura, Florida, and any adjournment
thereof. The mailing address of the executive office of the Corporation
is 1275 Hammerwood Avenue, Sunnyvale, California 94089. This Proxy
Statement and the enclosed Proxy were first furnished to Stockholders
of the Corporation on or about April 24, 1996.
VOTING PROCEDURES
The Board of Directors intends to present to the Meeting the
election of five Directors, constituting the entire Board of Directors,
as well as one other matter: a proposal to amend the Corporation's
Certificate of Incorporation to increase the Corporation's authorized
common stock, $.10 par value ("Common Stock"), from 125 million shares
to 250 million shares.
The representation in person or by proxy of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is
necessary to provide a quorum for the transaction of business at the
Meeting. Shares can only be voted if the Stockholder is present in
person or is represented by returning a properly signed Proxy. Each
Stockholder's vote is very important. Whether or not you plan to attend
the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a
quorum for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate
box on the proxy card. If your proxy card is signed and returned
without specifying choices, your shares will be voted for the
management nominees for Directors, for the management proposal, and as
the individuals named as proxy holders on the Proxy deem advisable on
all other matters as may properly come before the Meeting.
In order to be elected a Director, a nominee must receive the
affirmative vote of a majority of the shares of Common Stock present
and entitled to vote on the election. For the proposal to increase the
authorized Common Stock, the affirmative vote of a majority of the
Corporation's outstanding Common Stock entitled to vote on the matter
is necessary for approval. Withholding authority to vote for a nominee
for Director or an instruction to abstain from voting on a proposal
will be treated as shares present and entitled to vote and, for
purposes of determining the outcome of the vote, will have the same
effect as a vote against the nominee or a proposal. With respect to
the election of Directors, broker "non-votes" will not be treated as
shares present and entitled to vote on a voting matter and will have no
effect on the outcome of the vote. Broker "non-votes" on the proposal
to increase the authorized Common Stock will have the effect of a vote
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against the proposal. A broker "non-vote" occurs when a nominee
holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the
beneficial owner.
A Stockholder who returns a Proxy may revoke it at any time before
the Stockholder's shares are voted at the Meeting by written notice to
the Secretary of the Corporation received prior to the Meeting, by
executing and returning a later-dated Proxy or by voting by ballot at
the Meeting.
The outstanding stock of the Corporation entitled to vote
(excluding shares held in treasury by the Corporation) as of April 1,
1996 consisted of 92,796,931 shares of Common Stock, as adjusted to
reflect the five-for-four stock split effected in the form of a 25%
stock dividend in December 1995. Only Stockholders of record at the
close of business on April 1, 1996 are entitled to vote at the Meeting.
Each share is entitled to one vote.
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- PROPOSAL 1 -
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of Directors at five,
and five Directors are to be elected at the Meeting, constituting the
entire Board of Directors, each to hold office until his successor is
chosen and qualified or until his earlier resignation, death or
removal.
Nominees For Directors
Set forth below are the names of the persons nominated as
Directors, their ages, their offices in the Corporation, if any, their
principal occupation or employment for the past five years, the length
of their tenure as Directors and the names of other public companies in
which such persons hold directorships. Information regarding their
beneficial ownership of the Corporation's Common Stock, and the common
stock of its four majority-owned subsidiaries, Thermo BioAnalysis
Corporation, Thermo Optek Corporation, ThermoQuest Corporation and
ThermoSpectra Corporation, and its parent corporation, Thermo Electron
Corporation ("Thermo Electron"), is reported under the caption "Stock
Ownership." All of the nominees are currently Directors of the
Corporation. Mr. Marshall J. Armstrong, Dr. Elias P. Gyftopoulos, Mr.
Robert C. Howard, Mr. Frank Jungers and Mr. Robert A. McCabe, all
current directors of the Corporation, are not standing for reelection.
Frank Borman Col. Borman, 68, has been a Director of the
Corporation since 1986. Col. Borman is
president and, since 1988, chief executive
officer of Patlex Corporation, a patent
licensing company. Col. Borman is also a
director of American Superconductor
Corporation, Outboard Marine Group Inc. and
The Home Depot, Inc.
George N. Hatsopoulos Dr. Hatsopoulos, 69, 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 Ecotek Corporation,
Thermo Electron, Thermo Fibertek Inc.,
ThermoQuest Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother
of Mr. John N. Hatsopoulos, a Director and
Vice President and Chief Financial Officer of
the Corporation.
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John N. Hatsopoulos Mr. Hatsopoulos, 61, has been a Director of
the Corporation since 1986 and a Vice
President and Chief Financial Officer of the
Corporation since 1988. Mr. Hatsopoulos has
been the Chief Financial Officer of Thermo
Electron Corporation since 1988 and an
Executive Vice President of Thermo Electron
Corporation since 1986. Mr. Hatsopoulos is
also a director of Lehman Brothers Funds,
Inc., Thermedics Inc., Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo
Power Corporation, ThermoQuest Corporation,
Thermo Sentron Inc., Thermo TerraTech Inc.
and ThermoTrex Corporation. Mr. Hatsopoulos
is the brother of Dr. George N. Hatsopoulos,
Chairman of the Board and a Director of the
Corporation.
Arvin H. Smith Mr. Smith, 66, 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 a senior vice
president of that company from 1986 to 1991.
Mr. Smith is also a director of Thermedics
Inc., ThermoQuest Corporation and
ThermoSpectra Corporation.
Polyvios C. Vintiadis Mr. Vintiadis, 60, 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 remains 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 Thermo TerraTech Inc.
Committees of the Board of Directors and Meetings
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 Col.
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 outside 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
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accountants and meets with them for the purpose of reviewing the
results of the audit subsequent to its completion. The Human Resources
Committee consists solely of outside directors, and its present members
are Mr. Jungers (Chairman), Col. Borman and Dr. Gyftopoulos. 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 nine times, the Audit Committee
met twice and the Human Resources Committee met six times during fiscal
1995. No meetings of the Executive Committee were held during 1995.
Each Director attended at least 75% of all meetings of the Board of
Directors and Committees on which he served held during fiscal 1995.
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
$8,000 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. Of the
current Directors, 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. Directors are also
reimbursed for out-of-pocket expenses incurred in attending such
meetings.
Deferred Compensation Plan
Under the Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), a Director has the right to defer receipt of his
cash fees until he ceases to serve as a Director, dies or retires from
his principal occupation. In the event of a change in control or
proposed change in control of the Corporation that is not approved by
the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the
occurrence, without the prior approval of the Board of Directors, of
the acquisition, directly or indirectly, by any person of 50% or more
of the outstanding Common Stock or the outstanding common stock of
Thermo Electron; or (b) the failure of the persons serving on the Board
of Directors immediately prior to any contested election of directors
or any exchange offer or tender offer for the Common Stock or the
common stock of Thermo 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
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of 123,502 shares of Common Stock has been reserved for issuance under
the Deferred Compensation Plan. As of January 1, 1996, deferred units
equal to 30,784.52 shares of Common Stock were accumulated under the
Deferred Compensation Plan.
Directors Stock Option Plan
In 1991, the Corporation adopted a directors stock option plan
(the "Directors Plan"), which was amended in 1995. 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 on 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
on 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 occurs on the close
of business on 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 on 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 on 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 on
transfer and the right of the Corporation to repurchase such shares at
the exercise price in the event the Director ceases to serve as a
Director of the Corporation or any other Thermo Electron company. 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,
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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 BioAnalysis Corporation, at an exercise
price of $10 per share, and ThermoSpectra Corporation, at an exercise
price of $10 per share, on May 22, 1995, the date of last year's Annual
Meeting of the Stockholders. In addition, each outside Director
reelected at this year's Annual Meeting of the Stockholders will be
granted options to purchase 1,500 shares of common stock of ThermoQuest
Corporation.
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 140,625 shares
of Common Stock has been reserved for issuance under the Directors
Plan.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of Thermo Electron and Thermo
BioAnalysis Corporation ("Thermo BioAnalysis") and ThermoSpectra
Corporation ("ThermoSpectra"), each a majority-owned subsidiary of the
Corporation, as of January 1, 1996, 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. No Director or executive officer
beneficially owned any shares of Thermo Optek Corporation ("Thermo
Optek") or ThermoQuest Corporation ("ThermoQuest"), each a
majority-owned subsidiary of the Corporation, as of January 1, 1996.
The shares of Common Stock reported below have been adjusted as
applicable to reflect a five-for-four stock split effected in December
1995 in the form of a 25% stock dividend.
<TABLE>
<CAPTION>
Thermo Thermo Thermo Thermo
Instrument Electron BioAnalysis Spectra
Name Systems Corporation Corporation Corporation
Inc. (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Thermo Electron
Corporation (6) 86,728,929 N/A N/A N/A
Marshall J. Armstrong 16,254 108,204 0 2,500
Frank Borman 22,411 0 0 1,500
Richard W. K. Chapman 142,898 54,321 500 4,000
Elias P. Gyftopoulos 47,018 46,380 0 20,000
George N. Hatsopoulos 143,300 2,329,278 0 20,000
John N. Hatsopoulos 118,913 478,355 0 20,000
Denis A. Helm 165,270 106,088 0 4,000
Robert C. Howard 15,620 134,593 2,500 10,000
Barry S. Howe 99,959 55,297 2,000 4,000
Frank Jungers 52,374 162,836 4,000 5,500
Earl R. Lewis 128,578 106,273 0 55,000
Robert A. McCabe 39,804 30,677 0 1,500
Arvin H. Smith 431,653 363,578 9,000 20,000
Polyvios C. Vintiadis 7,391 0 0 1,500
All Directors and
current executive
officers as a group (15 1,456,434 4,091,075 18,000 174,500
perons)
</TABLE>
(1) Except as reflected in the footnotes to this table, shares of the
common stock of the Corporation, Thermo Electron, Thermo
BioAnalysis and ThermoSpectra beneficially owned consist of shares
owned by the indicated person or by that person for the benefit of
investmentdpower.nd all share ownership includes sole voting and
(2) Shares of the Common Stock beneficially owned by Col. Borman, Dr.
Chapman, Dr. Gyftopoulos, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos,
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Mr. Helm, Mr. Howe, Mr. Jungers, Mr. Lewis, Mr. McCabe, Mr. Smith,
Mr. Vintiadis and all Directors and executive officers as a group
include 12,590, 121,287, 14,465, 93,750, 93,750, 112,500, 89,062,
13,809, 112,500, 10,995, 234,375, 5,561 and 929,644 shares,
respectively, that such person or group has the right to acquire
within 60 days of January 1, 1996 through the exercise of stock
options. Shares beneficially owned by Mr. Armstrong, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Howe,
Mr. Lewis, Mr. Smith and all Directors and executive officers as a
group include 396, 515, 515, 380, 487, 263, 345, 516 and 3,800
full shares, respectively, allocated through January 1, 1996 to
their respective accounts maintained pursuant to Thermo Electron's
employee stock ownership plan, of which the trustees, who have
investment power over its assets, were as of January 1, 1996
executive officers of Thermo Electron (the "ESOP"). Shares
beneficially owned by Col. Borman, Mr. Jungers, Mr. McCabe, Mr.
Vintiadis and all Directors and executive officers as a group
include 9,821, 12,006, 7,126, 1,830 and 30,783 full shares,
respectively, allocated through January 1, 1996 to their
respective accounts maintained under the Corporation's Deferred
Compensation Plan for Directors. Shares beneficially owned by Dr.
G. Hatsopoulos include 21,368 shares held by Dr. G. Hatsopoulos'
spouse. Shares beneficially owned by Mr. Howe include 1,968
shares held in a trust of which Mr. Howe is the trustee. Shares
beneficially owned by Mr. Jungers include 543 shares held by Mr.
Jungers' spouse. Shares beneficially owned by Mr. Lewis include
2,390 shares held by Mr. Lewis' spouse. No Director or executive
officer beneficially owned more than 1% of the Common Stock
outstanding as of January 1, 1996; all Directors and executive
officers as a group beneficially owned 1.6% of the Common Stock
outstanding as of such date.
(3) Shares of the common stock of Thermo Electron shown in the table
reflect a three-for-two split of such stock effected in May 1995
in the form of a 50% stock dividend. Shares of the common stock of
Thermo Electron beneficially owned by Mr. Armstrong, Dr. Chapman,
Dr. Gyftopoulos, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm,
Mr. Howard, Mr. Howe, Mr. Jungers, Mr. Lewis, Mr. McCabe, Mr.
Smith and all Directors and executive officers as a group include
71,350, 53,423, 5,250, 1,102,200, 297,880, 74,148, 40,185, 47,860,
5,250, 103,750, 5,250, 182,775 and 2,054,446 shares, respectively,
that such person or group has the right to acquire within 60 days
of January 1, 1996 through the exercise of stock options. Shares
beneficially owned by Mr. Armstrong, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Howe, Mr. Lewis, Mr. Smith
and all Directors and executive officers as a group include 1,600,
1,481, 1,225, 821, 1,963, 463, 617, 1,081 and 10,070 full shares,
respectively, allocated through January 1, 1996 to their
respective accounts maintained pursuant to the ESOP. Shares
beneficially owned by Mr. Jungers, Mr. McCabe and all Directors
and executive officers as a group include 53,618, 23,150 and
76,768 full shares, respectively, allocated through January 1,
1996 to their respective accounts maintained pursuant to Thermo
Electron's deferred compensation plan for directors. Shares
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beneficially owned by Dr. G. Hatsopoulos include 59,734 shares
held by Dr. Hatsopoulos' spouse, 112,500 shares held by a QTIP
trust (the "Hatsopoulos QTIP Trust") of which Dr. G. Hatsopoulos'
spouse is a trustee, 870 shares held by a trust of which Dr. G.
Hatsopoulos is a trustee and 26,625 shares held by a family trust
of which Dr. G. Hatsopoulos' spouse is a trustee. Shares
beneficially owned by Mr. J. Hatsopoulos include 112,500 shares
held by the Hatsopoulos QTIP Trust of Mr. J. Hatsopoulos is a
trustee. Shares beneficially owned by Mr. Jungers include 61,218
shares held by a trust for Mr. Jungers and 3,000 shares held by
Mr. Jungers' spouse. Except for Dr. G. Hatsopoulos, who
beneficially owned 2.6% of the Thermo Electron common stock
outstanding as of January 1, 1996, 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 4.4% of the Thermo Electron common
stock outstanding as of January 1, 1996.
(4) No Director or executive officer, nor all Directors and executive
officers as a group, beneficially owned more than 1% of such
common stock outstanding as of January 1, 1996.
(5) Shares of the common stock of ThermoSpectra beneficially owned by
Mr. Armstrong, Col. Borman, Dr. Chapman, Dr. Gyftopoulos, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howard, Mr. Howe,
Mr. Jungers, Mr. Lewis, Mr. McCabe, Mr. Smith, Mr. Vintiadis and
all Directors and executive officers as a group include 2,500,
1,500, 4,000, 20,000, 20,000, 20,000, 4,000, 10,000, 4,000, 1,500,
50,000, 1,500, 20,000, 1,500 and 165,500 shares, respectively,
that such person or group has the right to acquire within 60 days
of January 1, 1996 through the exercise of stock options. No
Director or executive officer beneficially owned more than 1% of
the common stock of ThermoSpectra outstanding as of January 1,
1996; all Directors and executive officers as a group beneficially
owned 1.4% of such common stock outstanding as of such date.
(6) Shares of the Common Stock beneficially owned by Thermo Electron
include 8,269,344 shares which Thermo Electron has the right to
acquire within 60 days of January 1, 1996 pursuant to the
conversion of certain convertible notes of the Corporation held by
Thermo Electron. Thermo Electron beneficially owned 86% of the
Common Stock outstanding as of January 1, 1996. Thermo Electron's
address is 81 Wyman Street, Waltham, Massachusetts 02254-9046.
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 such persons were
complied with during 1995, except in the following instance. The Form
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4 for February 1995 of Thermo Electron reporting the acquisition of
540,600 shares of Common Stock was filed one day late on March 11,
1995.
EXECUTIVE COMPENSATION
NOTE: The shares reported below have, in all cases, been adjusted as
applicable to reflect a three-for-two stock split of the Common Stock
effected in April 1995, a five-for-four stock split of the Common Stock
effected in December 1995 and a three-for-two stock split of the common
stock of Thermo Electron effected in May 1995, each effected in the
form of a stock dividend.
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 other 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.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Long Term
Compensation (1) Compensation
Securities All Other
Name and Principal Underlying Compensation
Position Options (No. of
Fiscal Shares and
Year Salary Bonus Company)
<S> <C> <C> <C> <C> <C> <C>
1995 $262,000 $256,200 -- $6,750
Arvin H. Smith (3)
President and 1994 $255,000 $280,500 20,000 (THS) $6,750
Chief Executive Officer1993 $240,000 $304,000 234,375 (THI) $10,023
Earl R. Lewis (4) 1995 $145,000 $90,000 100 (TMO) $6,750
Executive Vice 7,500 (TLZ)
President and 5,000 (TBAN)
Chief Operating 1994 $140,000 $100,000 45,000 (TMO) $6,750
Officer 50,000 (THS)
1993 $131,250 $100,000 112,500 (THI) $6,671
29,625 (TMO)
Denis A. Helm 1995 $142,000 $81,000 2,900 (TMO) $6,750
Senior Vice 1994 $140,000 $90,000 33,300 (TMO) $6,750
President 4,000 (THS)
1993 $127,500 $120,000 112,500 (THI) $9,217
20,962 (TMO)
Richard W.K. Chapman (5) 1995 $159,500 $95,000 100 (TMO) $6,749
Vice President
1994 $155,000 100,000 28,125 (THI) $7,750
30,075 (TMO)
4,000 (THS)
Barry S. Howe (5) 1995 $134,000 $65,000 1,100 (TMO) $7,517
Vice President 5,000 (TLZ)
1994 $130,000 $45,000 15,750 (TMO) $3,750
4,000 (THS)
</TABLE>
(1) In addition to grants of options to purchase Common Stock of the
Corporation (designated in the table as THI), 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 Electron Corporation (designated
in the table as "TMO"), ThermoLase Corporation (designated in the
table as "TLZ"), Thermo BioAnalysis (designated in the table as
"TBAN") and ThermoSpectra (designated in the table as "THS").
(2) Represents the amount of matching contributions made on behalf of
the executive officers participating in the Thermo Electron 401(k)
plan or, in the case of Dr. Chapman, the 401(k) plan maintained by
Finnigan Corporation, a subsidiary of the Corporation.
(3) Mr. Smith is an executive vice president of Thermo Electron, as
well as the president and chief executive officer of the
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Corporation. Reported in the table under "Annual Compensation" and
"All Other Compensation" are total amounts paid to Mr. Smith for
his service in all capacities to Thermo Electron companies. The
Human Resources Committee of the Board of Directors of the
Corporation reviews total annual compensation to be paid to Mr.
Smith from all sources within the Thermo Electron organization and
approves the allocation of a percentage of annual compensation
(salary and bonus) for the time he devotes to the affairs of the
Corporation. For 1995, 1994 and 1993, 50%, 40% and 50%,
respectively, of Mr. Smith's annual compensation was allocated to
the Corporation. In addition, Mr. Smith has been granted options
to purchase common stock of Thermo Electron and certain of its
subsidiaries other than the Corporation and its subsidiaries,
Thermo BioAnalysis, Thermo Optek, ThermoQuest and ThermoSpectra,
from time to time by Thermo Electron or such other subsidiaries.
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.
(4) Mr. Lewis was promoted to executive vice president and chief
operating officer effective January 1, 1996. Prior to that date,
he served as a senior vice president of the Corporation.
(5) Mr. Chapman and Mr. Howe were first named executive officers of
the Corporation in January 1994.
Stock Options Granted During Fiscal 1995
The following table sets forth information concerning individual
grants of stock options made during fiscal 1995 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
1995.
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 the table as they were
granted as compensation for service to other Thermo Electron companies
in capacities other than his capacity as chief executive officer of the
Corporation. No options were granted to Mr. Smith by the Corporation
and its majority-owned subsidiaries in fiscal 1995.
<TABLE>
OPTION GRANTS In FISCAL 1995
<CAPTION>
Percent
of Total Potential
Options Realizable Value
Number of Granted at Assumed
Securities to Exercise Annual Rates of
Underlying Employees Price Expiration Stock Price
Name Options in Fiscal Per Date Appreciation for
Granted (1) Year Share Option Term
5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
Earl R. Lewis 100 (TMO) 0.01% $37.27 5/23/98 $587 $1,234
7,500 (TBAN 0.5% $22.75 11/28/07 $90,550 $243,250
5,000 (TLZ) 9.6% $10.00 9/21/07 $59,700 $160,350
Denis A. Helm 2,900 (TMO) 0.3% $37.27 5/23/98 $17,023 $35,786
Richard W.K. Chapman 100 (TMO) 0.01% $37.27 5/23/98 $587 $1,234
5,000 (TLZ) 0.5% $22.75 11/28/07 $90,550 $243,250
Barry S. Howe 1,100 (TMO) 0.1% $37.27 5/23/98 $6,457 $13,574
5,000 (TLZ) 0.5% $22.75 11/28/07 $90,550 $243,250
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant, except options to purchase the
common stock of Thermo BioAnalysis (designated in the table as
"TBAN"), which are not exercisable until that company's stock is
publicly traded. However, the shares acquired upon exercise are
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<PAGE>
subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation or
any other Thermo Electron company. The granting corporation may
exercise its repurchase rights within six months after the
termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a
ten-year period with a twelve-year option term, provided that the
optionee continues to be employed by the Corporation or another
Thermo Electron company. 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. For companies whose shares are not
publicly traded, the repurchase rights lapse in their entirety on
the
ninth anniversary of the grant date. The granting corporation may
permit the holders of options to exercise options and to satisfy
tax withholding obligations by surrendering shares equal in fair
market value to the exercise price or withholding obligation.
(2) These options were granted under stock option plans maintained by
Thermo Electron or its subsidiaries other than the Corporation and
accordingly are reported as a percentage of total options granted
to employees of Thermo Electron and its subsidiaries.
Stock Options Exercised During Fiscal 1995
The following table reports certain information regarding stock
option exercises during fiscal 1995 and outstanding stock options held
at the end of fiscal 1995 by the Corporation's chief executive officer
and the other named executive officers. No stock appreciation rights
were exercised or were outstanding during fiscal 1995.
<TABLE>
Aggregated Option Exercises In Fiscal 1995 And Fiscal 1995 Year-End Option Values
<CAPTION>
No. of Unexercised
Shares Options at Fiscal
Acquired Value Year-end
Name Company on Realized (Exercisable/
Exercise Unexercisable) (1)
<S> <C> <C> <C> <C> <C>
Arvin H. Smith (2) Thermo Instrument -- -- 234,375/0
Thermo Spectra -- -- 20,000/0
Earl R. Lewis Thermo Instrument -- -- 112,500/0
Thermo -- -- 0/7,500
BioAnalysis
Thermo Ecotek 4,000 $30,500 --
Thermo Electron 15,300 $242,121 103,750/0(4)
Thermo Fibertek 900 $6,150 1,800/0
ThermoLase -- -- 5,000/0
ThermoSpectra -- -- 50,000/0
ThermoTrex 420 $4,589 420/0
Denis A. Helm Thermo Instrument -- -- 112,500/0
Thermo Ecotek -- -- 4,000/0
Thermo Electron 4,275 $85,008 74,148/0(4)
Thermo Fibertek -- -- 4,500/0
ThermoSpectra -- -- 4,000/0
PAGE
<PAGE>
ThermoTrex -- -- 2,100/0
Richard W.K. Chapman Thermo Instrument 33,464 $515,973 121,287/0
Thermo Electron -- -- 53,423/0(4)
Thermo Fibertek -- -- 4,500/0
ThermoLase -- -- 5,000/0
ThermoSpectra -- -- 4,000/0
ThermoTrex -- -- 270/0
Barry S. Howe Thermo Instrument -- -- 86,062/0
Thermedics -- -- 4,000/0
Thermo Ecotek -- -- 7,500/0
Thermo Electron 4,254 $101,118 47,860/0(4)
Thermo Fibertek -- -- 10,500/0
Thermo Power -- -- 4,000/0
Thermo TerraTech -- -- 4,000/0
ThermoLase -- -- 5,000/0
ThermoSpectra -- -- 4,000/0
ThermoTrex -- -- 5,350/0
<PAGE>
Value of Unexercised
In-the-Money Options
<C>
$2,418,750/--
$112,500/--
$1,161,000/--
--/--(3)
--/--
$2,722,495/--
$32,400/--
$15,625/--
$281,250/--
$19,131/--
$1,161,000/--
$43,000/--
$1,928,327/--
$81,000/--
$22,500/--
$95,655/--
$1,383,951/--
$1,309,505/--
$81,000/--
$15,625/--
$22,500/--
$12,299/--
$1,037,803/--
$44,600/--
$71,625/--
$1,206,925/--
$159,420/--
$15,100/--
$10,380/--
$15,625/--
$22,500/--
$198,693/--
</TABLE>
(1) All of the options reported outstanding at the end of the fiscal
year were immediately exercisable as of fiscal year-end, except
options to purchase the common stock of Thermo BioAnalysis, which
are not exercisable until that company's stock is 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. 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. 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
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<PAGE>
anniversary of the grant date. For companies whose shares are not
publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The granting corporation
may permit the holders of options to exercise options and to
satisfy tax withholding obligations by surrendering shares equal
in fair market value to the exercise price or withholding
obligation.
(2) 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 and its
majority-owned subsidiaries. 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.
(3) No public market existed for the shares underlying these options
as of December 31, 1995. Accordingly, no value in excess of
exercise price has been attributed to these options.
(4) Options to purchase 45,000, 30,000, 30,000 and 15,000 shares of
the common stock of Thermo Electron granted to Mr. Lewis, Mr.
Helm, Dr. Chapman and Mr. Howe, 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.
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. 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 agreements, 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.
In 1983, Thermo Electron entered into a severance agreement with
Mr. Smith, which states the benefits to be received as an initial
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<PAGE>
percentage which was established by the Board of Directors of Thermo
Electron and was generally based upon Mr. Smith's age and length of
service with Thermo Electron at the time of severance. 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
Mr. Smith's highest annual total remuneration in any twelve-month
period during the preceding three years. The 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 Mr. Helm. 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 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 under
these agreements as of December 31, 1995, Mr. Smith and Mr. Helm would
have received approximately $316,000 (with respect to the first year in
which benefits would be paid) and $230,000, respectively.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive
officers are made by the Human Resources Committee of the Board of
Directors (the "Committee"). In reviewing and establishing total cash
compensation and stock-based compensation for executives, the Committee
follows guidelines established by the Human Resources Committee of the
Board of Directors of its parent corporation, Thermo Electron. The
executive compensation program presently consists of annual base salary
("salary"), short-term incentives in the form of annual cash bonuses,
and long-term incentives in the form of stock options.
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
14
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<PAGE>
approximate the mid-point of competitive salaries derived from market
surveys and that short-term and long-term incentive compensation should
reflect the performance of the Corporation and the contributions of
each executive.
External competitiveness is an important element of the
Committee's compensation policy. The competitiveness of the
Corporation's compensation for its executives is assessed by comparing
it to market data provided by its compensation consultant and by
participating in annual executive compensation surveys, primarily
"Project 777", an executive compensation survey prepared by Management
Compensation Services, a division of Hewitt Associates. The majority of
firms represented in the Project 777 survey are included in the
Standard & Poor's Index, but do not necessarily correspond to the
companies included in the Corporation's peer group.
Principles of internal equity are also central to the Committee's
compensation policies. Compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by
comparing it to compensation of other executives within the Thermo
Electron organization with comparable levels of responsibility for
comparably sized business units.
The process for determining each of these elements for the
Corporation's officers is outlined below.
Base Salary
Base salaries are intended to approximate the mid-point of
competitive salaries for similar organizations of comparable size and
complexity to the Corporation. Executive salaries are adjusted
gradually over time and only as necessary to meet this objective.
Increases in base salary may be moderated by other considerations, such
as geographic or regional market data, industry trends or internal
fairness within the Corporation and Thermo Electron. It is the
Committee's intention that over time the base salaries for the chief
executive officer and the other named executive officers will approach
the mid-point of competitive data. The salary increases in calendar
1995 for the chief executive officer and the other named executive
officers generally reflect this practice of gradual increases and
moderation.
Cash Bonus
The Committee establishes a median potential bonus for each
executive by using the market data on total cash compensation from the
same executive compensation surveys as used to determine salaries.
Specifically, the median potential bonus plus the salary of an
executive officer is approximately equal to the mid-point of
competitive total cash compensation for a similar position and level of
responsibility in businesses having comparable sales and complexity to
the Corporation. The actual bonus awarded to an executive officer may
range from zero to three times the median potential bonus. The value
within the range (the bonus multiplier) is determined at the end of
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<PAGE>
each year by the Committee in its discretion. The Committee exercises
its discretion by evaluating each executive's performance using a
methodology developed by its parent corporation, Thermo Electron, and
applied throughout the Thermo Electron organization. The methodology
incorporates measures of operating returns, designed to measure
profitability, contributions to shareholder value, and earnings growth,
and are measures of corporate and divisional performance that are
evaluated using graphs developed by Thermo Electron designed to reward
performance that is perceived as above average and to penalize
performance that is perceived as below average. The measures of
operating returns used in the Committee's determinations in calendar
1995 measured return on net assets, growth in income, cash flow and
growth in earnings per share, and the Committee's determinations also
included an evaluation of the contributions of each executive that are
not captured by operating measures but are considered important to the
creation of long-term value for the Stockholders. These measures of
achievements are not financial targets that are met, not met or
exceeded. The relative weighting of these achievements varies depending
on the executive's role and responsibilities within the organization.
The bonuses for named executive officers approved by the Committee
with respect to fiscal 1995 performance in each instance exceeded the
median potential bonus.
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 awards of stock options
to purchase the shares of both the Corporation and other companies
within the Thermo Electron group of companies accomplish many
objectives. The grant of options to key employees encourages equity
ownership in the Corporation, and closely aligns management's interests
to the interests of all the Stockholders. The emphasis on stock options
also results in management's compensation being closely linked to stock
performance. In addition, because they are subject to vesting periods
of varying durations and to forfeiture if the employee leaves the
Corporation prematurely, stock options are an incentive for key
employees to remain with the Corporation long-term. The Committee
believes stock option awards in the parent corporation, Thermo
Electron, and the other majority-owned subsidiaries of Thermo Electron,
are an important tool in providing incentives for performance within
the entire organization.
In determining awards, the Committee considers the average annual
value of all options to purchase shares of the Corporation and other
companies within the Thermo Electron organization that vest in the next
five years. (Values are established using a modified Black-Scholes
option pricing model.) As a guideline, the Committee strives to
maintain the aggregate amount of awards to purchase shares of Common
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<PAGE>
Stock to all employees over a five-year period below 10% of the
Corporation's outstanding Common Stock, although other factors such as
unusual transactions and acquisitions and standards for awards of
comparably situated companies may affect the number of awards granted.
Awards are not made annually in conjunction with the annual review
of cash compensation, but are made periodically. The Committee
considers total compensation of executives, actual and anticipated
contributions of each executive (which includes a subjective assessment
by the Committee of the value of the executive's future potential
within the organization), as well as the value of previously awarded
options as described above in determining option awards. The option
awards made with respect to the common stock of the Corporation's
parent, Thermo Electron and certain majority-owned subsidiaries of
Thermo Electron, were determined by the human resources committee of
the applicable board of directors using a similar analysis.
Policy on Deductibility of Compensation
The Committee has also considered the application of Section
162(m) of the Internal Revenue Code to the Corporation's compensation
practices. Section 162(m) limits the tax deduction available to public
companies for annual compensation paid to senior executives in excess
of $1 million unless the compensation qualifies as "performance based"
or is otherwise exempt under Section 162(m). The annual compensation
paid to individual executives does not approach the $1 million
threshold, and it is believed that the stock incentive plans of the
Corporation qualify as "performance based". Therefore, the Committee
does not believe any further action is necessary in order to comply
with Section 162(m). From time to time, the Committee will reexamine
the Corporation's compensation practices and the effect of Section
162(m).
1995 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 1995 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.
17
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In March 1996, the Committee conducted its review of Mr. Smith's
proposed salary for 1996 and bonus for 1995 performance. In addition to
the evaluation of Mr. Smith's performance as described above, the
Committee also considered the rate of return to Stockholders since the
Corporation's initial public offering in August 1986. The Corporation
achieved a compound annual return to Stockholders of 33% per year since
its initial public offering. In its deliberations, the Committee
considered Mr. Smith's leadership and contributions in achieving this
rate of return and in implementing a spinout strategy for the
Corporation and the formation of four majority-owned subsidiaries. The
Committee concurred in the bonus recommendation made by the Thermo
Electron committee and agreed to an allocation of 50% of Mr. Smith's
total cash compensation for 1995 to the Corporation, based on his
relative responsibilities at the Corporation and Thermo Electron. The
Committee believes that the total cash compensation for Mr. Smith for
1995 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.
Mr. Frank Jungers (Chairman)
Mr. Frank Borman
Dr. Elias P. Gyftopoulos
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<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the
Corporation include in this Proxy Statement a line-graph presentation
comparing cumulative, five-year shareholder returns for the
Corporation's Common Stock with a broad-based market index and either a
nationally recognized industry standard or an index of peer companies
selected by the Corporation. The Corporation 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., Emerson Electric Corp., Measurex Corp., Perkin-Elmer
Corp. and Varian Associates Inc. (the "Peer Group").
Comparison of 1990-1995 Total Return Among
Thermo Instrument Systems Inc.,
the American Stock Exchange Market Value Index, and the
Corporation's Peer Group.
GRAPH APPEARS HERE
12/31/90 12/31/91 12/31/9212/31/93 12/30/94 12/29/95
THI 100 162 235 355 323 515
AMEX 100 128 130 155 141 178
Peer 100 146 156 176 183 248
Group
The total return for the Corporation's Common Stock (THI), the
American Stock Exchange Market Value Index (AMEX), and the Peer Group
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."
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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. From time to time, Thermo Electron and
its subsidiaries will create other majority-owned subsidiaries as part
of its spinout strategy. (The Corporation and such other majority-owned
Thermo Electron subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries recognize that
the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly, Thermo
Electron and each of the Thermo Subsidiaries have adopted the Thermo
Electron Corporate Charter (the "Charter") to define the relationships
and delineate the nature of such cooperation among themselves. The
purpose of the Charter is to ensure that (1) all of the companies and
their stockholders are treated consistently and fairly, (2) the scope
and nature of the cooperation among the companies, and each company's
responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological
strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable
terms from outside parties.
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role and
responsibilities of the management of each company, provides for the
sharing of group resources by the companies and provides for
centralized administrative, banking and credit services to be performed
by Thermo Electron. The services provided by Thermo Electron include
collecting and managing cash generated by members, coordinating the
access of Thermo Electron and the Thermo Subsidiaries (the "Thermo
Group") to external financing sources, ensuring compliance with
external financial covenants and internal financial policies, assisting
in the formulation of long-range financial 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.
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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. The Corporation was
assessed an annual fee equal to 1.2% of the Corporation's revenues for
these services for calendar 1995. Beginning January 1, 1996, the fee
has been reduced to 1.0% of the Corporation's revenues. The fee is
reviewed annually and may be changed by mutual agreement of the
Corporation and Thermo Electron. During fiscal 1995, Thermo Electron
assessed the Corporation $9,392,000 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.
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On May 29, 1986, the Corporation entered into a Tax Allocation
Agreement with Thermo Electron (the "Tax Allocation Agreement"). Under
the Tax Allocation Agreement, in years in which the Corporation has
taxable income it will pay Thermo Electron amounts comparable to the
taxes it would have paid if it had filed its own separate company tax
returns. In years in which the Corporation incurs a loss, the
Corporation will receive amounts from Thermo Electron equivalent to the
amount of benefit that the Corporation would have received if it had
filed a separate return. In 1995, the Corporation paid Thermo Electron
$25,525,000 under the Tax Allocation Agreement. The Corporation
engages the Tecomet division of Thermo Electron for metal fabrication
services. During 1995, the Corporation paid $1,974,133 for such
services.
A subsidiary of the Corporation has an arrangement with ThermoTrex
Corporation ("ThermoTrex"), a publicly traded, majority-owned
subsidiary of Thermo Electron, whereby ThermoTrex provides certain
research and development services to the Corporation, and the
Corporation purchase flat screen x-ray sensitive detectors pursuant to
purchase orders. In 1995, the Corporation paid ThermoTrex $58,000 for
such products and services. The Corporation purchases printed circuit
boards and cable assemblies from another subsidiary of Thermo
Instrument pursuant to purchase orders. In 1995, the Corporation paid
this subsidiary $489,000 for such products.
Effective April 1995, the Corporation sold certain services
businesses to Thermo TerraTech Inc. (formerly known as Thermo Process
Systems Inc.) ("Thermo TerraTech"), another subsidiary of Thermo
Electron, for $34.3 million in cash. These businesses had been owned
and operated by the Corporation prior to April 1994, when they were
contributed by the Corporation to a joint venture between the
Corporation and Thermo TerraTech. In April 1995, the joint venture was
dissolved and these businesses were returned to the Corporation. The
terms of the purchase were determined by negotiation between the
management of Thermo TerraTech and the management of the Corporation,
and the purchase price paid by Thermo TerraTech was based on the book
value of the businesses purchased.
On March 15, 1995, Thermo BioAnalysis, a subsidiary of the
Corporation, completed a private placement primarily to outside
investors of minority investments in its common stock. Mr. Arvin H.
Smith, the president and chief executive officer of the Corporation,
purchased 9,000 shares of the common stock of Thermo BioAnalysis in
such private placement at a purchase price of $10.00 per share, the
same price paid by unaffiliated investors.
On August 3, 1995, ThermoQuest, a subsidiary of the Corporation,
completed a private placement primarily to outside investors of
$96,250,000 principal amount of 5% Convertible Subordinated Debentures
due 2000. Thermo Electron purchased $10,000,000 principal amount of
such Debentures in the private placement. On October 12, 1995, Thermo
Optek, a subsidiary of the Corporation, completed a private placement
primarily to outside investors of $96,250,000 principal amount of 5%
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Convertible Subordinated Debentures due 2000. Thermo Electron
purchased $10,000,000 principal amount of such Debentures in the
private placement. Thermo Electron paid the same price for these
Debentures as the outside investors.
As of December 30, 1995, $36,573,000 of the Corporation's cash
equivalents were invested in a repurchase agreement with Thermo
Electron. Under this agreement, the Corporation in effect lends excess
cash to Thermo Electron, which Thermo Electron collateralizes with
investments principally consisting of corporate notes, 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 85% of the Corporation's
outstanding Common Stock on January 1, 1996. 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 in the open market or
directly from the Corporation or through conversion of convertible
debentures owned by Thermo Electron.
As of December 30, 1995, the Corporation had outstanding
$140,000,000 of indebtedness to Thermo Electron, represented by a 3 /%
Senior Convertible Note due 2000.
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- PROPOSAL 2 -
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has determined that it is advisable to
increase the Corporation's authorized Common Stock from 125 million
shares to 250 million shares, and has voted to recommend that the
Stockholders adopt an amendment to the Corporation's Certificate of
Incorporation effecting the proposed increase.
As of January 1, 1996, approximately 92.6 million shares of Common
Stock were issued and outstanding (excluding treasury shares), after
giving effect to a five-for-four stock split of the Common Stock
effected in December 1995, and approximately an additional 20.4 million
shares were reserved for issuance upon the conversion of existing
securities and exercise of options granted under the Corporation's
various stock-based plans. Accordingly, a total of approximately 12
million shares of Common Stock are available for future issuance.
The Board of Directors believes it continues to be in the best
interest of the Corporation to have sufficient additional authorized
but unissued shares of Common Stock available in order to provide
flexibility for corporate action in the future. Management believes
that the availability of additional authorized shares for issuance from
time to time in the Board of Directors' discretion in connection with
possible acquisitions of other companies, future financings, investment
opportunities, stock splits or dividends or for other corporate
purposes is desirable in order to avoid repeated separate amendments to
the Corporation's Certificate of Incorporation and the delay and
expense incurred in holding special meetings of the Stockholders to
approve such amendments. There are at present no specific
understandings, arrangements or agreements with respect to any future
acquisitions that would require the Corporation to issue any new shares
of its Common Stock. The Board of Directors believes that the
currently available unissued shares do not provide sufficient
flexibility for corporate action in the future.
No further authorization by vote of the Stockholders will be
solicited for the issuance of the additional shares of Common Stock
proposed to be authorized, except as might be required by law,
regulatory authorities or rules of the American Stock Exchange or any
stock exchange on which the Corporation's shares may then be listed.
The issuance of additional shares of Common Stock may have a dilutive
effect on the Corporation's current Stockholders. The Stockholders of
the Corporation do not have any preemptive right to purchase or
subscribe for any part of any new or additional issuance of the
Corporation's securities.
Thermo Electron, which owned approximately 84% of the outstanding
voting stock of the Corporation on April 1, 1996, has sufficient votes
to approve the amendment and has indicated its intention to vote for
the approval of the amendment.
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______________________________________________________________________
The affirmative vote of a majority of the Common Stock outstanding
and entitled to vote at the Meeting is required to approve the
amendment to the Corporation's Certificate of Incorporation to effect
the proposed increase in the Corporation's authorized shares. The
Board of Directors considers this amendment to be advisable and in the
best interests of the Corporation and its Stockholders and recommends
that you vote FOR approval of the amendment. If not otherwise
specified, Proxies will be vote FOR approval of this amendment.
-----------------------------------------------------------------------
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as
independent public accountants for fiscal 1996. Arthur Andersen LLP has
acted as independent public accountants for the Corporation since 1986.
Representatives of that firm are expected to be present at the Meeting,
will have the opportunity to make a statement if they desire to do so
and will be available to respond to questions. The Board of Directors
has established an Audit Committee, presently consisting of three
outside Directors, the purpose of which is to review the scope and
results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that
will be presented for action at the Meeting. Should any such matters be
presented, the Proxies grant power to the proxy holders to vote shares
represented by the Proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1997
Annual Meeting of the Stockholders of the Corporation must be received
by the Corporation for inclusion in the Proxy Statement and form of
Proxy relating to that meeting no later than December 25, 1996.
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.
Sunnyvale, California
April 19, 1996
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FORM OF PROXY
THERMO INSTRUMENT SYSTEMS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 19, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Arvin H. Smith, John N.
Hatsopoulos and Jonathan W. Painter, or any one of them in the absence
of the others, as attorneys and proxies of the undersigned, with full
power of substitution, for and in the name of the undersigned, to
represent the undersigned at the Annual Meeting of the Stockholders of
Thermo Instrument Systems Inc., a Delaware corporation (the
"Company"), to be held on Sunday, May 19, 1996, at 6:30 p.m., and at
any adjournment or postponement thereof, and to vote all shares of
common stock of the Company standing in the name of the undersigned on
April 1, 1996, with all of the powers the undersigned would possess if
personally present at such meeting:
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
Please mark your
[ x ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (See Reverse).
FOR WITHHELD
[ ] [ ]
FOR all nominees listed at right, except
vote withheld for the following nominees
(if any):
Nominees:
Frank Borman
George N. Hatsopoulos
John N. Hatsopoulos
Arvin H. Smith
Polyvios C. Vintiadis
FOR AGAINST ABSTAIN
2. Approve amendment to the Certificate
of Incorporation to increase the [ ] [ ] [ ]
authorized common stock from 125
million to 250 million shares.
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<PAGE>
3. In their discrection on such other matters as may properly come
before the meeting.
The shares represented by this Proxy will be voted "FOR" the proposals
set forth above if no instruction to the contrary is indicated or if
no instruction is given.
Copies of the Notice of Meeting and of the Proxy Statement have been
received by the undersigned.
SIGNATURE(S)_______________________________________
DATE_________________
Note: This proxy should be dated, signed by the shareholder(s)
exactly as his or her name appears hereon, and returned
promptly in the enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If shares are held
PAGE
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S240.14a-11(c) or S240.14a-12
Thermo Instrument Systems Inc.
------------------------------
(Name of Registrant as Specified in Charter)
__________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $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 (Set forth the
amount on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ X] Fee paid previously with preliminary materials.
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<PAGE>
[ ] 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:
