SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one) X Annual Report Pursuant to Section 13 or
-----
15(d) of the Securities Exchange Act of 1934
Transition Report Pursuant to Section 13 or
-----
15(d) of the Securities Exchange Act of 1934
Commission file number 1-9786
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1275 Hammerwood Avenue
Sunnyvale, California 94089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to the filing requirements for at least
the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of January 24, 1997, was
approximately $597,117,000.
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As of January 24, 1997, the Registrant had 96,931,388 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended December 28, 1996, are incorporated by
reference into Parts I and II.
Part III, Item 10. Directors and Executive Officers of
the Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and Management.
Part III, Item 13. Certain Relationships and
Transactions.
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year,
is contained in the following Attachment A, which is included
herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Amendment No. 1 on Form 10-K/A to be signed by the
undersigned, duly authorized.
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Sandra L. Lambert
-------------------------------
Sandra L. Lambert
Secretary
ATTACHMENT A
DIRECTORS
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Set forth below are the names of the persons serving 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
subsidiaries and its parent company, Thermo Electron Corporation
("Thermo Electron"), a diversified high technology company, is
reported under the caption "Stock Ownership."
Frank Borman Col. Borman, 69, has been a director of the
Corporation since 1986. Col. Borman has
been president and chief executive officer
of Patlex Corporation, a patent licensing
company, and a trustee of the National
Geographic Society, for at least five
years. Col. Borman is also a director of
American Superconductor Corporation,
Database Online Corporation, Outboard
Marine Group Inc. and The Home Depot, Inc.
George N. Dr. Hatsopoulos, 70, has been a director of
Hatsopoulos the Corporation since 1986. Dr.
Hatsopoulos has been the chairman and chief
executive officer of Thermo Electron since
he founded the company in 1956 and
president of Thermo Electron from 1956
until January 1997. He was also chairman
of the board of the Corporation from 1986
to March 1997. Dr. Hatsopoulos is also a
director of Photoelectron Corporation,
Thermedics Inc., Thermo Ecotek Corporation,
Thermo Electron, Thermo Fibertek Inc.,
Thermo Optek Corporation, ThermoQuest
Corporation and ThermoTrex Corporation. Dr.
Hatsopoulos is the brother of Mr. John N.
Hatsopoulos, a director and the chief
financial officer and a vice president of
the Corporation.
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John N. Hatsopoulos Mr. Hatsopoulos, 62, has been a director of
the Corporation since 1986 and chief
financial officer and a vice president of
the Corporation since 1988. Mr.
Hatsopoulos has been the president of
Thermo Electron since January 1997 and the
chief financial officer of Thermo Electron
since 1988. He was also an executive vice
president of Thermo Electron Corporation
from 1986 to January 1997. Mr. Hatsopoulos
is also a director of LOIS/USA Inc.,
Thermedics Inc., Thermo Ecotek Corporation,
Thermo Fibertek Inc., Thermo Power
Corporation, Thermo TerraTech Inc. and
ThermoTrex Corporation. Mr. Hatsopoulos is
the brother of Dr. George N. Hatsopoulos, a
director of the Corporation.
Arvin H. Smith Mr. Smith, 67, has been a director and
chief executive officer of the Corporation
since 1986, and chairman of the board
since March 1997. He was also president of
the Corporation from 1986 to March 1997.
Mr. Smith has been an executive vice
president of Thermo Electron since 1991 and
was a senior vice president of that company
from 1986 to 1991. Mr. Smith is also a
director of Thermo BioAnalysis Corporation,
Thermo Optek Corporation, Thermo Power
Corporation, ThermoQuest Corporation and
ThermoSpectra Corporation.
Polyvios C. Mr. Vintiadis, 61, has been a director of
Vintiadis 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 Audit Committee
and a Human Resources Committee. The Audit Committee consists
solely of outside directors, and its present members are Mr.
Vintiadis (Chairman), and Col. Borman. The Audit Committee
reviews the scope of the audit with the Corporation's independent
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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 Col. Borman, Mr. Jungers
(Chairman) and Mr. Vintiadis. 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 seven times during fiscal 1996. Each director attended at
least 75% of all meetings of the Board of Directors and
committees on which he served held during fiscal 1996, except Mr.
J. Hatsopoulos who attended two-thirds of such meetings. Mr. J.
Hatsopoulos is the chief financial officer of Thermo Electron and
each of its publicly held subsidiaries, and his responsibilities
require him to travel extensively on company business.
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. Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos 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 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure
of the persons serving on the Board of Directors immediately
prior to any contested election of directors or any exchange
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offer or tender offer for the Common Stock or the common stock of
Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event.
Amounts deferred pursuant to the Deferred Compensation Plan are
valued at the end of each quarter as units of the Corporation's
Common Stock. When payable, amounts deferred may be disbursed
solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. A total of 123,502 shares of Common Stock has
been reserved for issuance under the Deferred Compensation Plan.
As of March 1, 1997, deferred units equal to 44,699.82 shares of
Common Stock were accumulated under the Deferred Compensation
Plan.
Directors Stock Option Plan
The Corporation's directors stock option plan (the
"Directors Plan"), provides for the grant of stock options to
purchase shares of common stock of the Corporation and its
majority-owned subsidiaries to outside directors as additional
compensation for their service as directors. Under the Directors
Plan, outside directors are automatically granted options to
purchase 1,000 shares of the Common Stock annually. In addition,
the Directors Plan provides for the automatic grant every five
years of options to purchase 1,500 shares of the common stock of
a majority-owned subsidiary of the Corporation that is "spun out"
to outside investors.
Pursuant to the Directors Plan, outside directors receive an
annual grant of options to purchase 1,000 shares of Common Stock
at the close of business 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
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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, 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 ThermoQuest
Corporation, at an exercise price of $16.70 per share, on May 19,
1996, 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 Metrika Systems
Corporation and Thermo Optek 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. As of March 31, 1997, options to purchase 69,620
shares had been granted under the Directors Plan, options to
purchase 2,811 shares had been exercised, options to purchase
2,811 shares had lapsed, and an aggregate of 74,176 shares of
Common Stock was reserved for future grant under the Directors
Plan.
Stock Ownership Policies for Directors
During 1996, the Human Resources Committee of the Board of
Directors (the "Committee") established a stock holding policy
for directors. The stock holding policy requires each director
to hold a minimum of 1,000 shares of Common Stock. Directors are
requested to achieve this ownership level by the 1998 Annual
meeting of Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a
separate stock holding policy established by the Committee in
1996.
In addition, the Committee adopted a policy requiring
directors to hold shares of the Corporation's Common Stock equal
to one-half of their net option exercises over a period of five
years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to
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exercise the option and the number of shares that could have been
surrendered to satisfy tax withholding obligations attributable
to the exercise of the option. This policy is also applicable to
executive officers.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of
Common Stock, as well as the common stock of Thermo Electron and
each majority-owned subsidiary of the Corporation, as of March 1,
1997, with respect to (i) each person who was known by the
Corporation to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director, (iii) each executive
officer named in the summary compensation table under the heading
"Executive Compensation" and (iv) all directors and current
executive officers as a group.
While certain directors and executive officers of the
Corporation are also directors and executive officers of Thermo
Electron or its subsidiaries other than the Corporation, all such
persons disclaim beneficial ownership of the shares of Common
Stock owned by Thermo Electron.
<TABLE>
<CAPTION>
Thermo
Thermo Thermo Bio- Thermo Thermo- Thermo- Metrika
Instrument Electron Analysis Optek Quest Spectra Systems
Name (1) Systems Corp Corp Corp Corp Corp Corp
Inc.
(2) (3) (4) (5) (6) (7) (8)
<S> <C> <C> <C> <C> <C> <C> <C>
Thermo Electron 87,575,433 N/A N/A N/A N/A N/A N/A
Corporation (9)
Frank Borman 23,941 0 1,500 0 1,500 1,500 0
Richard W. K. 139,087 82,126 40,500 15,500 240,650 4,000 0
Chapman
George N. 143,314 3,512,279 15,000 110,000 90,000 20,000 0
Hatsopoulos
John N. Hatsopoulos 81,204 526,768 25,000 120,000 92,100 20,000 0
Denis A. Helm 161,729 164,378 15,000 15,200 10,000 4,000 2,000
Barry S. Howe 99,886 81,048 64,300 15,000 90,000 4,010 0
Earl R. Lewis 128,233 124,184 56,000 254,000 50,000 55,000 0
Arvin H. Smith 431,667 513,038 39,000 98,000 90,000 20,000 0
Polyvios C. 8,896 2,500 1,500 0 1,500 1,500 0
Vintiadis
All directors and
current executive
officers as a 1,236,649 5,151,319 263,800 633,700 671,750 135,010 2,000
group (10 persons)
</TABLE>
(1) Except as reflected in the footnotes to this table, shares
of the common stock 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. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Helm, Mr. Howe, Mr. Lewis, Mr. Smith, Mr. Vintiadis and all
directors and executive officers as a group include 13,590,
121,287, 93,750, 65,625, 112,500, 89,062, 112,500, 234,375, 6,561
and 864,250 shares, respectively, that such person or group has
the right to acquire within 60 days of March 1, 1997, through the
exercise of stock options. Shares beneficially owned by Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Smith and all directors and
executive officers as a group include 479, 529, 530 and 1,934
full shares, respectively, allocated through March 1, 1997, 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, are executive officers
of Thermo Electron (the "ESOP"). Shares beneficially owned by
Col. Borman, Mr. Vintiadis and all directors and executive
officers as a group include 10,351, 2,335 and 12,686 full shares,
respectively, allocated through March 1, 1997, 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 his spouse and 50
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shares allocated through March 1, 1997, to his spouse's account
maintained pursuant to the ESOP. Shares beneficially owned by
Mr. Helm include a total of 4,212 shares held in trust for the
benefit of minor children. 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. Lewis include 2,390
shares held by his spouse. No director or executive officer
beneficially owned more than 1% of the Common Stock outstanding
as of March 1, 1997; all directors and executive officers as a
group beneficially owned 1.3% 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 distributed in
June 1996 in the form of a 50% stock dividend. Shares of the
common stock of Thermo Electron beneficially owned by Dr.
Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr.
Howe, Mr. Lewis, Mr. Smith and all directors and executive
officers as a group include 80,284, 1,499,500, 429,685, 106,347,
73,287, 121,536, 222,411 and 2,630,624 shares, respectively, that
such person or group has the right to acquire within 60 days of
March 1, 1997, through the exercise of stock options. Shares
beneficially owned by Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Smith and all directors and executive officers as a group include
2,164, 1,934, 1,717 and 7,139 full shares, respectively,
allocated through March 1, 1997, to their respective accounts
maintained pursuant to the ESOP. Shares beneficially owned by
Dr. G. Hatsopoulos include 89,601 shares held by his spouse,
168,750 shares held by a QTIP trust of which his spouse is a
trustee, 39,937 shares held by a family trust of which his spouse
is a trustee, and 153 full shares allocated through March 1,
1997, to his spouse's account maintained pursuant to the ESOP.
Except for Dr. G. Hatsopoulos, who beneficially owned 2.3% of the
Thermo Electron common stock outstanding as of March 1, 1997, no
director or executive officer beneficially owned more than 1% of
such common stock outstanding as of such date; all directors and
executive officers as a group beneficially owned 3.4% of the
Thermo Electron common stock outstanding as of March 1, 1997.
(4) Shares of the common stock of Thermo BioAnalysis
Corporation, a majority-owned subsidiary of the Corporation
("Thermo BioAnalysis"), beneficially owned by Col. Borman, Dr.
Chapman, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr.
Howe, Mr. Lewis, Mr. Smith, Mr. Vintiadis and all directors and
executive officers as a group include 1,500, 30,000, 15,000,
15,000, 15,000, 50,000, 50,000, 20,000, 1,500 and 201,000 shares,
respectively, that such person or group has the right to acquire
within 60 days of March 1, 1997, through the exercise of stock
options. No director or executive officer beneficially owned
more than 1% of the common stock of Thermo BioAnalysis
outstanding as of March 1, 1997; all directors and executive
officers as a group beneficially owned 2.6% of such common stock
outstanding as of such date.
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(5) Shares of the common stock of Thermo Optek Corporation, a
majority-owned subsidiary of the Corporation ("Thermo Optek"),
beneficially owned by Dr. Chapman, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Helm, Mr. Howe, Mr. Lewis, Mr. Smith and all
directors and executive officers as a group include 15,000,
90,000, 90,000, 15,000, 15,000, 225,000, 90,000 and 546,000
shares, respectively, that such person or group has the right to
acquire within 60 days of March 1, 1997, through the exercise of
stock options. Shares beneficially owned by Mr. Lewis include
2,500 shares owned by his spouse and 2,000 shares owned by his
sons. No director or executive officer beneficially owned more
than 1% of the common stock of Thermo Optek outstanding as of
March 1, 1997; and directors and executive officers as a group
beneficially owned 1.3% of such common stock outstanding as of
such date.
(6) Shares of the common stock of ThermoQuest Corporation, a
majority-owned subsidiary of the Corporation ("ThermoQuest"),
beneficially owned by Col. Borman, Dr. Chapman, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howe, Mr. Lewis,
Mr. Smith, Mr. Vintiadis and all directors and executive officers
as a group include 1,500, 225,000, 90,000, 90,000, 10,000,
90,000, 50,000, 90,000, 1,500 and 654,000 shares, respectively,
that such person or group has the right to acquire within 60 days
of March 1, 1997, through the exercise of stock options. No
director or executive officer beneficially owned more than 1% of
the common stock of ThermoQuest outstanding as of March 1, 1997;
all directors and executive officers as a group beneficially
owned 1.4% of such common stock outstanding as of such date.
(7) Shares of the common stock of ThermoSpectra Corporation, a
majority-owned subsidiary of the Corporation ("ThermoSpectra"),
beneficially owned by Col. Borman, Dr. Chapman, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Helm, Mr. Howe, Mr. Lewis,
Mr. Smith, Mr. Vintiadis and all directors and executive officers
as a group include 1,500, 4,000, 20,000, 20,000, 4,000, 4,000,
50,000, 20,000, 1,500 and 130,000 shares, respectively, that such
person or group has the right to acquire within 60 days of March
1, 1997, through the exercise of stock options. No director or
executive officer beneficially owned more than 1% of the common
stock of ThermoSpectra outstanding as of March 1, 1997; all
Directors and executive officers as a group beneficially owned
1.1% of such common stock outstanding as of such date.
(8) The directors and executive officers of the Corporation did
not individually or as a group beneficially own more than 1% of
the common stock of Metrika Systems Corporation, a majority-owned
subsidiary of the Corporation, as of March 1, 1997.
(9) 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 March 1, 1997, through the
conversion of certain convertible notes of the Corporation held
by Thermo Electron. Thermo Electron beneficially owned
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approximately 83% of the Common Stock outstanding as of March 1,
1997. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as
Thermo Electron, to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of
changes in ownership of the Corporation's securities. Based upon
a review of such filings, all Section 16(a) filing requirements
applicable to such persons were complied with during 1996, except
in the following instance. Thermo Electron filed six Forms 4
late, by periods ranging from seven days to two and a half
months, reporting 48 transactions consisting of 42 open market
purchases and six transactions involving the exercise of employee
stock options.
EXECUTIVE COMPENSATION
NOTE: The shares reported below, in all cases, have been adjusted
as applicable to reflect a three-for-two stock split of the
common stock of Thermo Electron distributed in June 1996 in the
form of a 50% 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>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Name and Fiscal Annual Options (No. of
Compensation Shares All Other
Principal Position Year Salary Bonus and Company (1) Compensation
(2)
<S> <C> <C> <C> <C> <C>
Arvin H. Smith (3) 1996 $135,000 $130,000 20,000 (TBA) $6,750
Chairman and 90,000 (TOC)
Chief Executive 90,000 (TMQ)
Officer
1995 $131,000 $128,100 -- $6,750
1994 $102,000 $112,200 20,000 (THS) $6,750
Earl R. Lewis (4) 1996 $162,000 $144,000 42,500 (TBA) $11,550 (5)
President and 2,000 (TFG)
Chief Operating 2,000 (TLT)
Officer 225,000 (TOC)
2,000 (TSR)
50,000 (TMQ)
40,000 (TXM)
1995 $145,000 $90,000 150 (TMO) $6,750
7,500 (TBA)
5,000 (TLZ)
1994 $140,000 $100,000 67,500 (TMO) $6,750
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50,000 (THS)
Denis A. Helm 1996 $150,000 $86,400 3,900 (TMO) $6,681
Senior Vice 15,000 (TBA)
President 15,000 (TOC)
10,000 (TMQ)
1995 $142,000 $81,000 4,350 (TMO) $6,750
1994 $140,000 $90,000 49,950 (TMO) $6,750
4,000 (THS)
Richard W. K. 1996 $170,000 $125,000 150 (TMO) $7,021 (6)
Chapman
30,000 (TBA)
Vice President
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
225,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
1995 $159,500 $95,000 150 (TMO) $6,749
5,000 (TLZ)
1994 $155,000 $100,000 28,125 (THI) $7,750
45,112 (TMO)
4,000 (THS)
Barry S. Howe 1996 $145,000 $70,000 1,500 (TMO) $8,076 (7)
Vice President 50,000 (TBA)
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
90,000 (TMQ)
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2,000 (TSR)
4,000 (TXM)
1995 $134,000 $65,000 1,650 (TMO) $7,517
5,000 (TLZ)
1994 $130,000 $45,000 23,625 (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
9
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<PAGE>
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), Thermo
BioAnalysis (designated in the table as TBA) Thermo Fibergen Inc.
(designated in the table as TFG), ThermoLase Corporation
(designated in the table as TLZ), ThermoLyte Corporation
(designated in the table as TLT), Thermo Optek Corporation
(designated in the table as TOC), ThermoQuest Corporation
(designated in the table as TMQ), Thermo Sentron Inc. (designated
in the table as TSR), ThermoSpectra (designated in the table as
THS) and Trex Medical Corporation (designated in the table as
TXM).
(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 has been executive vice president of Thermo
Electron, as well as the president and chief executive officer of
the Corporation, for the last three fiscal years. A portion of
Mr. Smith's annual cash compensation (salary and bonus) has been
allocated and paid by Thermo Electron in each of the last three
fiscal years as compensation for the services provided to Thermo
Electron based on the time he devoted to his responsibilities as
an executive vice president of Thermo Electron. The annual cash
compensation (salary and bonus) reported in the table for Mr.
Smith represents the amount paid from all sources, including the
Corporation, for Mr. Smith's services as chief executive officer
of the Corporation. For 1996, 1995 and 1994, 50%, 50% and 40%,
respectively, of Mr. Smith's annual compensation (salary and
bonus) was allocated to the Corporation for his service as the
Corporation's chief executive officer. 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 majority-owned subsidiaries, from time to
time by Thermo Electron or such other subsidiaries. These options
are not reported in this table as they were granted as
compensation for service to other Thermo Electron companies in
capacities other than his capacity as the chief executive officer
of the Corporation.
(4) Mr. Lewis was promoted to president and chief operating
officer of the Corporation in March 1997. From January 1996 to
March 1997, he was executive vice president and chief operating
officer of the Corporation. Prior to January 1996, he served as
a senior vice president of the Corporation. A portion of Mr.
Lewis' annual cash compensation (salary and bonus) has been
allocated and paid by Thermo Electron in the last fiscal year as
compensation for the services provided to Thermo Electron based
on the time he devoted to his responsibilities as a vice
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president of Thermo Electron. The annual cash compensation
(salary and bonus) reported in the table for Mr. Lewis represents
the amount paid from all sources, including the Corporation,
solely for Mr. Lewis' services as chief operating officer of the
Corporation. For 1996, 90% of Mr. Lewis' annual compensation
(salary and bonus) was allocated to the Corporation for his
service as the Corporation's chief operating officer.
(5) In addition to the matching contribution referred to in
footnote (2), such amount includes $4,800, which represents the
amount of compensation attributable to an interest-free loan
provided to Mr. Lewis pursuant to the stock holding assistance
plan of Thermo Optek. See "Relationship with Affiliates - Stock
Holding Assistance Plans."
(6) In addition to the matching contribution referred to in
footnote (2), such amount includes $4,334, which represents the
amount of compensation attributable to interest-free loans
provided to Dr. Chapman pursuant to the stock holding assistance
plans of Thermo BioAnalysis and ThermoQuest. See "Relationship
with Affiliates - Stock Holding Assistance Plans."
(7) In addition to the matching contribution referred to in
footnote (2), such amount includes $1,444, which represents the
amount of compensation attributable to an interest-free loan
provided to Mr. Howe pursuant to the stock holding assistance
plan of Thermo BioAnalysis. See "Relationship with Affiliates -
Stock Holding Assistance Plans."
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options made during fiscal 1996 to the
Corporation's chief executive officer and the other named
executive officers. It has not been the Corporation's policy in
the past to grant stock appreciation rights, and no such rights
were granted during fiscal 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Potential Realizable
Percent Value at Assumed
of
Total Annual Rates of
Options Stock
Number of Granted Exercise Price Appreciation
Securities to for
Underlying Employees Price Expira- Option Term (2)
Options in Per tion
Name Granted (1) Fiscal Share Date 5% 10%
Year
<S> <C> <C> <C> <C> <C> <C>
Arvin H. Smith 20,000 (TBA) 2.4%(5) $10.00 01/31/08 $159,200 $427,600
(3)
90,000 (TOC) 2.9%(5) $12.00 04/11/08 $859,500 $2,309,400
90,000 (TMQ) 3.2%(5) $13.00 01/10/08 $931,500 $2,502,000
Earl R. Lewis (4) 42,500 (TBA) 5.2%(5) $12.00 06/21/08 $405,875 $1,090,550
2,000 (TFG) 0.4%(5) $10.00 09/12/08 $15,920 $42,760
2,000 (TLT) 0.6%(5) $10.00 03/11/08 $15,920 $42,760
225,000 (TOC) 7.2%(5) $12.00 04/11/08 $2,148,750 $5,773,500
50,000 (TMQ) 1.8%(5) $13.00 02/08/08 $517,500 $1,390,000
2,000 (TSR) 0.4%(5) $14.00 03/11/08 $22,280 $59,880
40,000 (TXM) 1.9%(5) $11.00 03/26/08 $350,000 $940,800
Denis A. Helm 3,900 (TMO) 0.3%(5) $42.79 05/22/99 $26,286 $55,224
15,000 (TBA) 1.8%(5) $10.00 01/31/08 $119,400 $320,700
15,000 (TOC) 0.5%(5) $12.00 04/11/08 $143,250 $384,900
10,000 (TMQ) 0.4%(5) $13.00 02/08/08 $103,500 $278,000
1
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<PAGE>
Richard W. K. 150 (TMO) 0.01%(5) $42.79 05/22/99 $1,011 $2,124
Chapman
30,000 (TBA) 3.7%(5) $10.00 01/31/08 $238,800 $641,400
2,000 (TFG) 0.4%(5) $10.00 09/12/08 $15,920 $42,760
2,000 (TLT) 0.6%(5) $10.00 03/11/08 $15,920 $42,760
15,000 (TOC) 0.5%(5) $12.00 04/11/08 $143,250 $384,900
225,000 (TMQ) 7.9%(5) $13.00 01/10/08 $2,328,750 $6,255,000
2,000 (TSR) 0.4%(5) $14.00 03/11/08 $22,280 $59,880
4,000 (TXM) 0.2%(5) $11.00 03/11/08 $35,000 $94,080
Barry S. Howe 1,500 (TMO) 0.1%(5) $42.79 05/22/99 $10,110 $21,240
50,000 (TBA) 6.1%(5) $10.00 01/31/08 $398,000 $1,069,000
2,000 (TFG) 0.4%(5) $10.00 09/12/08 $15,920 $42,760
2,000 (TLT) 0.6%(5) $10.00 03/11/08 $15,920 $42,760
15,000 (TOC) 0.5%(5) $12.00 04/11/08 $143,250 $384,900
90,000 (TMQ) 3.2%(5) $13.00 01/10/08 $931,500 $2,502,000
2,000 (TSR) 0.4%(5) $14.00 03/11/08 $22,280 $59,880
4,000 (TXM) 0.2%(5) $11.00 03/11/08 $35,000 $94,080
</TABLE>
(1) All of the options granted during the fiscal year are
immediately exercisable as of the end of the fiscal year, except
options to purchase the common stock of ThermoLyte Corporation,
which are not exercisable until the earlier of (i) 90 days after
the effective date of the registration of that company's common
stock under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") and (ii) nine years from the grant date. In
all cases, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or any
other Thermo Electron company. The granting corporation may
exercise its repurchase rights within six months after the
11
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<PAGE>
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. 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) The amounts shown on this table represent hypothetical gains
that could be achieved for the respective options if exercised at
the end of the option term. These gains are based on assumed
rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the
common stock of the granting corporation, the optionee's
continued employment through the option period and the date on
which the options are exercised.
(3) Mr. Smith has served as an executive officer of Thermo
Electron since 1986 and has been granted options to purchase
common stock of Thermo Electron and certain of its subsidiaries
other than the Corporation and its majority-owned subsidiaries.
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.
(4) Mr. Lewis has served as a vice president of Thermo Electron
since September 1996 and has been granted options to purchase
common stock of Thermo Electron after his appointment. These
options are not reported in the table as they were granted as
compensation for service to Thermo Electron in a capacity other
than his capacity as an executive officer of the Corporation.
(5) These options were granted under stock option plans
maintained by Thermo Electron companies other than the
Corporation and accordingly are reported as a percentage of total
options granted to employees of Thermo Electron and its
subsidiaries.
Stock Options Exercised During Fiscal 1996
12
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<PAGE>
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options held at the end of fiscal 1996 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1996 And
Fiscal 1996 Year-End Option Values
Number of
Unexercised
Options at
Shares Fiscal Value of
Acquired Year-End Unexercised
on Value (Exercisable/ In-the-Money
Name Company Exercise Realized Unexercisable) Options
(1)
<S> <C> <C> <C> <C> <C>
Arvin H. Smith Thermo -- -- 234,375/0 $3,795,703 /--
(2) Instrument
Systems
Thermo -- -- 20,000/0 $62,500 /--
BioAnalysis
Thermo Optek -- -- 90,000/0 $0 /--
ThermoQuest -- -- 90,000/0 $0 /--
ThermoSpectra -- -- 20,000/0 $37,500 /--
Earl R. Lewis Thermo -- -- 112,500/0 $1,821,938 /--
(5) Instrument
Systems
Thermo Electron 28,685 $688,261 126,937/0(4) $2,491,528 /--
Thermo -- -- 50,000/0 $71,251 /--
BioAnalysis
Thermo Fibergen -- -- 2,000/0 $1,500 /--
Thermo Fibertek 1,350 $15,525 1,350/0 $8,100 /--
1
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<PAGE>
ThermoLase -- -- 5,000/0 $0 /--
ThermoLyte -- -- 0/2,000 -- /$0(3)
Thermo Optek -- -- 225,000/0 $0 /--
ThermoQuest -- -- 50,000/0 $0 /--
Thermo Sentron -- -- 2,000/0 $0 /--
ThermoSpectra -- -- 50,000/0 $93,750 /--
Thermo Trex 420 $16,191 --/-- -- /--
Trex Medical -- -- 40,000/0 $65,000 /--
Denis A. Helm Thermo -- -- 112,500/0 $1,821,938 /--
Instrument
Systems
Thermo Electron 8,774 $262,275 106,347/0(4) $2,000,898 /--
Thermo -- -- 15,000/0 $46,875 /--
BioAnalysis
Thermo Ecotek -- -- 6,000/0 $70,500 /--
Thermo Fibertek -- -- 6,750/0 $40,500 /--
Thermo Optek -- -- 15,000/0 $0 /--
ThermoQuest -- -- 10,000/0 $0 /--
ThermoSpectra -- -- 4,000/0 $7,500 /--
Thermo Trex -- -- 2,100/0 $50,768 /--
Richard W. K. Thermo -- -- 121,287/0 $2,096,512 /--
Chapman Instrument
Systems
Thermo Electron -- -- 80,284/0(4) $1,556,517 /--
Thermo -- -- 30,000/0 $93,750 /--
BioAnalysis
Thermo Fibergen -- -- 2,000/0 $1,500 /--
Thermo Fibertek -- -- 6,750/0 $40,500 /--
ThermoLase -- -- 5,000/0 $0 /--
ThermoLyte -- -- 0/2,000 --/ /$0(3)
2
PAGE
<PAGE>
Thermo Optek -- -- 15,000/0 $0 /--
ThermoQuest -- -- 225,000/0 $0 /--
Thermo Sentron -- -- 2,000/0 $0 /--
ThermoSpectra -- -- 4,000/0 $7,500 /--
Thermo Trex -- -- 270/0 $6,528 /--
Trex Medical -- -- 4,000/0 $6,500 /--
Barry S. Howe Thermo -- -- 89,062/0 $1,561,042 /--
Instrument
Systems
Thermo Electron -- -- 73,287/0(4) $1,428,259 /--
Thermedics -- -- 4,000/0 $9,100 /--
Thermo -- -- 50,000/0 $156,250 /--
BioAnalysis
Thermo Ecotek 5,250 $48,127 6,000/0 $61,500 /--
Thermo Fibergen -- -- 2,000/0 $1,500 /--
Thermo Fibertek -- -- 15,750/0 $64,890 /--
ThermoLase -- -- 5,000/0 $0 /--
ThermoLyte -- -- 0/2,000 -- /$0(3)
Thermo Optek -- -- 15,000/0 $0 /--
Thermo Power -- -- 4,000/0 $0 /--
ThermoQuest -- -- 90,000/0 $0 /--
Thermo Sentron -- -- 2,000/0 $0 /--
ThermoSpectra -- -- 4,000/0 $7,500 /--
Thermo TerraTech -- -- 4,000/0 $3,880 /--
Thermo Trex 1,350 $55,755 4,000/0 $51,700 /--
Trex Medical -- -- 4,000/0 $6,500 /--
3
</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 ThermoLyte
Corporation, which are not exercisable until the earlier of (i)
90 days after the effective date of the registration of that
company's common stock under Section 12 of the Exchange Act and
(ii) nine years after the grant date. In all cases, the shares
acquired upon exercise of the options reported in the table are
subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation
or any other Thermo Electron company. The granting corporation
may exercise its repurchase rights within six months after the
termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a
five- to ten-year period, depending on the option term, which may
vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo
Electron company. 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) 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 28, 1996. Accordingly, no value in excess
of exercise price has been attributed to these options.
(4) Options to purchase 67,500, 45,000, 45,000 and 22,500 shares
of the common stock of Thermo Electron granted to Mr. Lewis, Mr.
13
PAGE
<PAGE>
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.
(5) Mr. Lewis has served as a vice president of Thermo Electron
since September 1996 and has been granted options to purchase
common stock of Thermo Electron after his appointment. These
options are not reported in the table as they were granted as
compensation for service to Thermo Electron in a capacity other
than his capacity as an executive officer of the Corporation.
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
14
PAGE
<PAGE>
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 28, 1996, Mr. Smith and Mr.
Helm would have received approximately $313,000 (with respect to
the first year in which benefits would be paid) and $235,000,
respectively.
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.
15
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<PAGE>
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role
and responsibilities of the management of each company, provides
for the sharing of group resources by the companies and provides
for centralized administrative, banking and credit services to be
performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by
members, coordinating the access of Thermo Electron and the
Thermo Subsidiaries (the "Thermo Group") to external financing
sources, ensuring compliance with external financial covenants
and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also
provide guarantees of debt or other obligations of the Thermo
Subsidiaries or may obtain external financing at the parent level
for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on
behalf of, the consolidated entity or may obtain financing
directly from external financing sources. Under the Charter,
Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by
external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo
Group, and for apportioning such constraints within the Thermo
Group. In addition, Thermo Electron establishes certain internal
policies and procedures applicable to members of the Thermo
Group. The cost of the services provided by Thermo Electron to
the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the
Thermo Subsidiaries.
The Charter presently provides that it shall continue in
effect so long as Thermo Electron and at least one Thermo
Subsidiary participate. The Charter may be amended at any time by
agreement of the participants. Any Thermo Subsidiary, including
the Corporation, can withdraw from participation in the Charter
upon 30 days' prior notice. In addition, Thermo Electron may
terminate a subsidiary's participation in the Charter in the
event the subsidiary ceases to be controlled by Thermo Electron
or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the
Charter automatically terminates the corporate services agreement
and tax allocation agreement (if any) in effect between the
withdrawing company and Thermo Electron. The withdrawal from
participation does not terminate outstanding commitments to third
parties made by the withdrawing company, or by Thermo Electron or
other members of the Thermo Group, prior to the withdrawal.
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.
16
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<PAGE>
As provided in the Charter, the Corporation and Thermo
Electron have entered into a Corporate Services Agreement (the
"Services Agreement") under which Thermo Electron's corporate
staff provides certain administrative services, including certain
legal advice and services, risk management, employee benefit
administration, tax advice and preparation of tax returns,
centralized cash management and financial and other services to
the Corporation. The Corporation was assessed an annual fee equal
to 1.0% of the Corporation's revenues for these services for
calendar 1996. The fee is reviewed annually and may be changed
by mutual agreement of the Corporation and Thermo Electron.
During fiscal 1996, Thermo Electron assessed the Corporation
$12.1 million 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.
The Corporation has 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 1996, the Corporation paid Thermo
Electron $18,600,000 under the Tax Allocation Agreement.
From time to time the Corporation may transact business with
other companies in the Thermo Group. During 1996, these
transactions included the following.
The Corporation engages the Tecomet division of Thermo
Electron for metal fabrication services. During 1996, the
Corporation paid approximately $1,304,000 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
17
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<PAGE>
provides certain research and development services to the
Corporation, and the Corporation purchases flat screen x-ray
sensitive detectors pursuant to purchase orders. In 1996, the
Corporation paid ThermoTrex $97,689 for such products and
services. In 1996, the Corporation purchased other products from
Thermo Electron and its wholly- and majority-owned subsidiaries
in the ordinary course of business for an aggregate of
approximately $864,000.
On December 16, 1996, Metrika Systems Corporation
("Metrika"), a subsidiary of the Corporation, completed a private
placement of its common stock primarily to outside investors.
Mr. Denis A. Helm, a senior vice president of the Corporation,
purchased 2,000 shares of the common stock of Metrika in such
private placement at a purchase price of $7.50 per share, the
same price paid by unaffiliated investors.
As of December 28, 1996, the Corporation had outstanding
$140,000,000 of indebtedness to Thermo Electron, represented by a
3 /% Senior Convertible Note due 2000. As of December 28, 1996,
the Corporation's Thermo Optek Corporation ("Thermo Optek") and
ThermoQuest Corporation ("ThermoQuest") subsidiaries each had
$10,000,000 of outstanding indebtedness to Thermo Electron
pursuant to Thermo Optek's 5% Convertible Subordinated Debentures
due 2000 and ThermoQuest's 5% Convertible Subordinated
Debentures, due 2000.
In connection with the 1996 acquisition of Kevex
Instruments and Kevex X-ray, ThermoSpectra Corporation
("ThermoSpectra"), a subsidiary of the Corporation, borrowed
$15,000,000 from Thermo Electron pursuant to a promissory note
due August 1998. In connection with the acquisition of Park
Scientific Instruments ThermoSpectra in March 1997, ThermoSpectra
borrowed $10,000,000 from Thermo Electron pursuant to a
promissory note due March 1999. These notes bear interest at the
90-day Commercial Paper Composite Rate plus 25 basis points, set
at the beginning of each quarter. The interest rate for the
notes outstanding in 1996 was 5.77%.
In March 1997 the Corporation borrowed $210,000,000 from
Thermo Electron to fund its acquisition of the shares of Life
Sciences International plc ("Life Sciences") pursuant to the
Corporation's offer for all of the outstanding shares of Life
Sciences. This obligation is evidenced by a promissory note due
March 26, 1999 and bearing interest at a rate equal to the
Commercial Paper Composite Rate plus 25 basis points.
Thermo Electron owned approximately 82% of the Corporation's
outstanding Common Stock on December 28, 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
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either in the open market or directly from the Corporation or
through conversion of convertible debentures owned by Thermo
Electron. In January 1996, the Corporation adopted a plan for
the sale of its shares to Thermo Electron at the request of
Thermo Electron to allow Thermo Electron to maintain 80%
ownership of the Corporation. The sale of shares pursuant to
such plan would be made at fair market value and would be subject
to approval of a committee of the Board of Directors formed for
that purpose.
As of December 28, 1996, approximately $459.1 million 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 90-day Commercial Paper Composite Rate plus
25 basis points, set at the beginning of each quarter.
Stock Holding Assistance Plan
During 1996, the Human Resources Committeeof the
Corporation's Board of Directors (the "Committee") established a
stock holding policy for executive officers of the Corporation.
The stock holding policy specifies an appropriate level of
ownership of the Corporation's Common Stock as a multiple of the
officer's compensation. For the chief executive officer, the
multiple is one times his base salary and reference bonus for the
calendar year. For all other officers, the multiple is one times
the officer's base salary. The Committee deemed it appropriate
to permit officers to achieve these ownership levels over a
three-year period.
In order to assist officers in complying with the policy,
the Committee also adopted a stock holding assistance plan under
which the Corporation is authorized to make interest-free loans
to officers to enable them to purchase shares of the Common Stock
in the open market. The loans are required to be repaid upon the
earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise authorized by the Committee. No loans
were outstanding under this plan in 1996.
Each of the Corporation's publicly traded, majority-owned
subsidiaries have adopted similar stock holding policies and
stock holding assistance plans, which are applicable to their
executive officers. Certain executive officers of the
Corporation are also the chief executive officers of these
subsidiaries and are required to comply with the subsidiary's
stock holding policies. Mr. Earl R. Lewis, the Corporation's
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president and chief operating officer, is also the chief
executive officer of Thermo Optek. Dr. Richard W.K. Chapman, a
vice president of the Corporation, is also the chief executive
officer of ThermoQuest and the chairman of the board of Thermo
BioAnalysis. Mr. Barry S. Howe, a vice president of the
Corporation, is also the chief executive officer of Thermo
BioAnalysis. In 1996, Mr. Lewis received a loan in the principal
amount of $194,029.50 under the Thermo Optek stock holding
assistance plan to purchase 15,000 shares of the common stock of
Thermo Optek. Dr. Chapman received loans in 1996 in the
principal amounts of $210,653.50 and $131,176.30 under the stock
holding assistance plans of ThermoQuest and Thermo BioAnalysis,
respectively, to purchase 15,000 shares of the common stock of
ThermoQuest and 10,000 shares of the common stock of Thermo
BioAnalysis. In 1996, Mr. Howe received a loan in the principal
amount of $164,375.52 under the stock holding assistance plan of
Thermo BioAnalysis to purchase 12,000 shares of Thermo
BioAnalysis. Each of these loans are repayable upon the earlier
of demand or the fifth anniversary of the date of the loan,
unless otherwise authorized by the human resources committee of
the board of directors of the applicable company.
AA971150001
