Thermo Instrument Systems Inc.
1275 Hammerwood Ave.
Sunnyvale, California 94089
April ___, 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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<PAGE>
Thermo Instrument Systems Inc.
1275 Hammerwood Ave.
Sunnyvale, California 94089
April ___, 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
PAGE
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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 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 April ____, 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
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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 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 ______________ 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.
3
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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 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, Thermo
TerraTech Inc. 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.
4
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John N. Hatsopoulos Mr. Hatsopoulos, 62, 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
sinceer1988 Thando EanctExecutiveoraVice
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
brothertofn.Dr.r.GeorgeoN.ulHatsopoulos,
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
5
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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 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
Directors who are not employees of the Corporation, of
Thermo Electron or 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. 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. Payment of Directors' fees is made quarterly.
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
6
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<PAGE>
of each quarter as units of the Corporation's Common Stock. When
payable, amounts deferred may be disbursed solely in shares of
Common Stock accumulated under the Deferred Compensation Plan. A
total of 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.
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 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
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Corporation to repurchase such shares at the exercise price in
the event the Director ceases to serve as a Director of the
Corporation or any other Thermo Electron company. In the event
of Section 12 Registration, the restrictions and repurchase
rights shall lapse or be deemed to lapse at the rate of 25% per
year, starting with the first anniversary of the grant date.
These options expire after five years. Under this provision of
the Directors Plan, each outside Director was granted options to
purchase 1,500 shares of common stock of each of Thermo
BioAnalysis Corporation, at an exercise price of $10 per share,
and ThermoSpectra Corporation, at an exercise price of $___ 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 138,656 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
Instrument Electron BioAnalysis
Name Systems Inc. (2)Corporation (3) Corporation (4) C
<S> <C> <C> <C> <C
Thermo Electron
Corporation (6) 86,728,929 N/A N/A
Marshall J. Armstrong 16,254 72,950 0
Frank Borman 22,411 0 0
Richard W. K. Chapman 142,898 54,321 500
Elias P. Gyftopoulos 47,018 46,380 0
George N. Hatsopoulos 143,300 2,328,408 0
John N. Hatsopoulos 118,913 479,225 0
Denis A. Helm 165,270 106,088 0
Robert C. Howard 15,622 134,593 2,500
Barry S. Howe 99,962 55,297 2,000
Frank Jungers 52,374 162,836 4,000
Earl R. Lewis 128,578 106,273 0
Robert A. McCabe 39,804 30,677 0
Arvin H. Smith 431,653 363,578 9,000
Polyvios C. Vintiadis 7,391 0 0
All Directors and 1,456,439 3,943,321 18,000
current executive
officers as a group
</TABLE>
(1) Except as reflected in the footnotes to this table, shares
of the common stock of the Corporation, Thermo Electron,
ThermoBioAnalysis, Thermo Optek, ThermoQuest and
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ThermoSpectra beneficially owned consist of shares owned by
the indicated person or by that person for the benefit of
minor children, and all share ownership includes sole voting
and investment power.
(2) Shares of the Common Stock beneficially owned by Col.
Borman, Dr. Chapman, Dr. Gyftopoulos, Dr. G. Hatsopoulos,
Mr. J. Hatsopoulos, 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 (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. Helm include 1,053 shares each
held by Mr. Helm as custodian for his four sons. 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
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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 beneficially owned
by Dr. G. Hatsopoulos include 59,734 shares held by Dr.
Hatsopoulos' spouse, 112,500 shares held by a QTIP trust of
which Dr. G. Hatsopoulos' spouse 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 435 shares each held by family trusts
for the benefit of two of Mr. J. Hatsopoulos' children and
112,500 shares held by a 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, Mr. 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 8,269,334 shares which Thermo Electron has
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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
owned beneficially 86% of the Common Stock outstanding as of
January 1, 1996 (as computed according to the regulations of
the Securities and Exchange Commission). 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.
11
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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.
Summary Compensation Table
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long Term
(1) Compensation
Securities Underlying A
Nameand Principal Position Options (No. of Co
Shares and Company)
Fiscal (2)
Year Salary Bonus
<S> <C> <C> <C> <C> <C> <C>
Arvin H. Smith (3) 1995 $262,000 $256,200 --
President and Chief 1994 $255,000 $280,500 20,000 (THS)
Executive Officer
1993 $240,000 $304,000 234,375 (THI)
Earl R. Lewis (4) 1995 $145,000 $90,000 100 (TMO)
Executive Vice President 5,000 (TLZ)
and Chief Operating 7,500 (TBAN)
Officer 1994 $140,000 $100,000 45,000 (TMO)
50,000 (THS)
1993 $131,250 $100,000 112,500 (THI)
29,625 (TMO)
Denis A. Helm 1995 $142,000 $81,000 2,900 (TMO)
Senior Vice President 1994 $140,000 $90,000 33,300 (TMO)
PAGE
<PAGE>
4,000 (THS)
1993 $127,500 $120,000 112,500 (THI)
20,962 (TMO)
Richard W.K. Chapman (5) 1995 $159,500 $95,000 100 (TMO)
Vice President
1994 $155,000 100,000 28,125 (THI)
30,075 (TMO)
4,000 (THS)
Barry S. Howe (5) 1995 $134,000 $65,000 1,100 (TM0)
Vice President 5,000 (TLZ)
1994 $130,000 $45,000 15,750 (TMO)
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.
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<PAGE>
(3) Mr. Smith is an executive vice president of Thermo Electron,
as well as the president and chief executive officer of the
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. No options were granted to Mr. Smith in
fiscal 1995. 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. Options granted by
the Corporation and its majority-owned subsidiaries are reported
in the table.
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<PAGE>
Option Grants in Fiscal 1995
<TABLE>
OPTION GRANTS In FISCAL 1995
<CAPTION>
Percent of P
Total Options R
Number of SecuritiesGranted to A
Underlying Options Employees inExercise R
Granted (1) Fiscal Year Price Per ExpirationP
Name Share Date f
<S> <C> <C> <C> <C><C> <C> 5
Earl R. Lewis 100 (TMO) 0.01% $37.27 5/23/98 <
5,000 (TLZ) 0.5% $22.75 11/28/07
7,500 (TBAN) 9.6% $10.00 9/21/07
Denis A. Helm 2,900 (TMO) 0.3% $37.27 5/23/98
Richard W.K. Chapman 100 (TMO) 0.01% $37.27 5/23/98
5,000 (TLZ) 0.5% $22.75 11/28/07
Barry S. Howe 1,100 (TMO) 0.1% $37.27 5/23/98
5,000 (TLZ) 0.5% $22.75 11/28/07
</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 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.
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<PAGE>
Aggregated Option Exercises in Fiscal 1995 and Fiscal 1995
Year-end Option Values
<TABLE>
Aggregated Option Exercises In Fiscal 1995 And Fiscal 1995 Year-End Option Val
<CAPTION>
No. of Unexercise
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(4)
Thermo -- -- 0/7,500
BioAnalysis
Thermo Ecotek 4,000 $30,500 --
Thermo Electron 15,300 $242,121 103,750/0
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(4)
Thermo Ecotek -- -- 4,000/0
PAGE
<PAGE>
Thermo Electron 4,275 $85,008 74,148/0
Thermo Fibertek -- -- 4,500/0
ThermoSpectra -- -- 4,000/0
ThermoTrex -- -- 2,100/0
Richard W.K. Chapman Thermo Instrument 33,464 $515,973 121,287/0(4)
Thermo Electron -- -- 53,423/0
Thermo Fibertek -- -- 4,500/0
ThermoLase -- -- 5,000/0
ThermoSpectra -- -- 4,000/0
ThermoTrex -- -- 270/0
Barry S. Howe Thermo Instrument -- -- 86,062/0(4)
Thermedics -- -- 4,000/0
Thermo Ecotek -- -- 7,500/0
Thermo Electron 4,254 $101,118 47,860/0
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
</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 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.
(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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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". The annual cash 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.
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 Mr. Smith's
leadership and contributions in implementing a spinout strategy
for the Corporation and the formation of four majority-owned
subsidiaries. The Committee concurred in the bonus recommendation
20
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<PAGE>
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
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").
21
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<PAGE>
Comparison of 1990-1995 Total Return Among Thermo Instrument
Systems Inc.,
the American Stock Exchange Market Value Index, and the
Corporation's Peer Group.
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
THI 100
AMEX 100
Peer 100
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."
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
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time to time, Thermo Electron and its subsidiaries will create
other majority-owned subsidiaries as part of its spinout
strategy. (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 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.
The Charter presently provides that it shall continue in
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<PAGE>
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
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charge the Corporation a fee equal to the market rate for
comparable services if such services are provided to the
Corporation following termination.
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.
During 1995, the Corporation and its subsidiaries paid the
Tecomet division of Thermo Electron $1,974,133 for metal
fabrication services.
Effective April 1995, the Corporation and Thermo TerraTech
Inc. (formerly known as Thermo Process Systems Inc.) dissolved
their Thermo Terra Tech joint venture. Thermo TerraTech Inc.
then purchased the services businesses formerly operated by the
joint venture from the Corporation for $34.3 million in cash.
The Corporation previously owned 49% of the joint venture and
accounted for its interest in the joint venture using the equity
method.
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 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 5% Convertible
Subordinated Debentures due 2000. Thermo Electron purchased
$10,000,000 principal amount of such Debentures in the private
placement.
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
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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 ____% of the
outstanding voting stock of the Corporation on April 1, 1996, has
sufficient votes to approve the amendment and has indicated its
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intention to vote for the approval of the amendment.
________________________________________________________________
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 ___, 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.
Santa Fe, New Mexico
April ___, 1996
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement Confidential, for Use of
the Commission Only (as
Permitted by Rule
14a-6(e)(2))
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):
[ X ] $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:
Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
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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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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
