SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 character)
Delaware 04-2925809
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (781) 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
4% Convertible Subordinated Debentures due 2005 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. 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 28, 2000, was approximately $221,069,000.
As of January 28, 2000, the Registrant had 118,851,664 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended January 1, 2000, are incorporated by reference into Parts I and II.
<PAGE>
Items 10, 11, 12 and 13 of Part III of the Registrant's Annual Report on Form
10-K for the fiscal year ended January 1, 2000 are hereby amended and restated
in their entirety as follows:
Part III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
Set forth below are the names of the 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 and the common
stock of its subsidiaries and its parent company, Thermo Electron Corporation
("Thermo Electron"), a provider of products and services in measurement
instrumentation, medical devices, power generation and resource recovery is
reported in Item 12 - Security Ownership of Certain Beneficial Owners and
Management.
- --------------------------------------------------------------------------------
Earl R. Lewis Mr. Lewis, 56, has been a director and the chief
executive officer of The Corporation since January 1998,
and has been president of The Corporation since March
1997. He was chief operating officer of The Corporation
from January 1996 to January 1998. Prior to that time,
he was executive vice president of The Corporation from
January 1996 to March 1997 and senior vice president
from January 1994 to January 1996. Mr. Lewis has been
the chief operating officer, measurement and detection,
of Thermo Electron since September 1998. Prior to his
appointment as chief operating officer, Mr. Lewis served
as senior vice president of Thermo Electron from June
1998 to September 1998 and vice president from September
1996 to June 1998. Mr. Lewis served as chief executive
officer of Thermo Optek Corporation, a majority-owned
subsidiary of The Corporation that manufactures
analytical instruments that measure energy and light for
purposes of materials analysis, characterization and
preparation, from its inception in August 1995 to
January 1998. Mr. Lewis is a director of FLIR Systems
Inc., Metrika Systems Corporation, SpectRx Inc.,
Spectra-Physics Lasers, Inc., Thermo Optek Corporation
and ThermoQuest Corporation.
- --------------------------------------------------------------------------------
Polyvios C. Vintiadis Mr. Vintiadis, 64, 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. Mr. Vintiadis is also a director of
Spectra-Physics Lasers, Inc. and 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, each consisting solely of directors who are not employees
of the Corporation, of Thermo Electron or of any other companies affiliated with
Thermo Electron ("outside directors"). The sole member of the audit committee is
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 sole
member of the human resources committee is Mr. Vintiadis. The human resources
committee reviews the performance of senior members of management, approves
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 eight times, the
audit committee met twice and the human resources committee met six times during
fiscal 1999. Each director attended at least 75% of all meetings of the board of
directors and committees on which he served that were held during fiscal 1999.
<PAGE>
The board of directors established a special committee (the "Special
Committee") consisting solely of outside directors for the purpose of evaluating
the merits of the proposed exchange offer and merger with Thermo Electron
pursuant to which the Corporation would be taken private and either recommend,
reject or take no position with respect to the proposed exchange offer and
merger. See Item 13 - "Certain Relationships and Related Transactions." The
member of the Special Committee is Mr. Vintiadis.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Outside directors receive an annual retainer of $8,000 and a fee of
$1,000 per meeting for attending regular meetings of the board of directors and
$500 per meeting 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. Mr. Lewis is an employee of Thermo Electron or its subsidiaries and
does not receive any cash compensation from the Corporation for his services as
a director. Directors are also reimbursed for out-of-pocket expenses incurred in
attending such meetings.
In addition, the member of the Special Committee receives a quarterly
fee of $15,000 and a fee of $1,000 per day for attending regular meetings of the
Special Committee and $500 per day for participating in meetings of the Special
Committee held by means of conference telephone.
DEFERRED COMPENSATION PLAN
Under the Corporation's 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. Any of the following are deemed to
be a change of control: (i) the acquisition by any person of 40% or more of the
outstanding common stock or voting securities of Thermo Electron; (ii) the
failure of the Thermo Electron board of directors to include a majority of
directors who are "continuing directors", which term is defined to include
directors who were members of Thermo Electron's board on July 1, 1999 or who
subsequent to that date were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
Amounts deferred pursuant to the Deferred Compensation Plan are valued at the
end of each quarter as units of Common Stock. When payable, amounts deferred may
be disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. As of January 1, 2000, a total of 154,377 shares of Common
Stock has been reserved for issuance under the Deferred Compensation Plan and
deferred units equal to approximately 43,517 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 to
outside directors as additional compensation for their service as directors.
Under 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 are immediately exercisable at any time from and after the grant
date of the option and generally expire on the third anniversary of the grant
date.
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 immediately 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 January 31, 2000, options to purchase 45,848 shares of Common Stock were
outstanding under the Directors Plan, options to purchase 93,043 shares of
Common Stock had been granted, options to
<PAGE>
purchase 41,183 shares of Common Stock had been exercised, options to purchase
6,012 shares of Common Stock had lapsed, and options to purchase 88,750 shares
of Common Stock were reserved for future grant.
STOCK OWNERSHIP POLICY FOR DIRECTORS
The human resources committee of the board of directors (the
"Committee") has 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 within a
three-year period. The chief executive officer of the Corporation is required to
comply with a separate stock holding policy established by the Committee, which
is described below.
EXECUTIVE OFFICERS
Reference is made to Item 1(e) of this Annual Report on Form 10-K for
information regarding the Executive Officers of the Registrant.
Item 11 - EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation during the last three
fiscal years for services to the Corporation in all capacities awarded to,
earned by or paid to the Corporation's chief executive officer, and its
executive officers whose total annual salary and bonus, as determined in
accordance with the rules of the Securities and Exchange Commission, was greater
than $100,000, and who were employed by the Corporation as of the end of fiscal
1999. These officers are together referred to as the "named executive officers."
The Corporation is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Corporation,
in accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's affairs is
provided to the Corporation under the Corporate Services Agreement between the
Corporation and Thermo Electron. See Item 13 - "Relationship with Affiliates."
Accordingly, the compensation for these individuals is not reported in the
following table.
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SUMMARY COMPENSATION TABLE
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Long Term Compensation
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Annual Compensation Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary Bonus Award (1) Options (2) Compensation (3)
- ------------------- ------ ------ ------ --------- ------------ ----------------
Earl R. Lewis (4) 1999 $256,000 $204,000 $80,102 (THI) 150,000 (THI) $14,868 (5)
President and 1998 $224,000 $160,000 -- 33,333 (ONX) $15,939 (5)
Chief Executive Officer 1997 $198,000 $225,000 -- 79,166 (THI) $16,710 (5)
20,000 (MKA)
75,000 (TMQ)
- ---------------------------------------------------------------------------------------------------------------------
Richard W. K. Chapman (6) 1999 $220,015 $175,000 $77,241 (TMQ) (7) 25,000 (THI) $24,805 (8)
Senior Vice President 500 (TMO)
1998 $190,000 $110,000 -- 24,999 (THI) $26,873 (8)
8,299 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
100,000 (TMQ)
1,023 (TKN)
2,000 (TRIL)
1997 $180,000 $153,000 -- 300 (TMO) $22,309 (8)
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SUMMARY COMPENSATION TABLE
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Long Term Compensation
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Annual Compensation Restricted Securities
Name and Fiscal Stock Underlying All Other
Principal Position Year Salary Bonus Award (1) Options (2) Compensation (3)
- ------------------- ------ ------ ------ --------- ------------ ----------------
Denis A. Helm (6) 1999 $180,000 $150,000 $75,096 (THI) 50,000 (THI) $7,200
Executive Vice President 3,800 (TMO)
1998 $162,000 $ 85,000 -- 19,999 (THI) $7,200
11,598 (TMO)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,023 (TKN)
2,000 (TRIL)
1997 $155,000 $92,000 -- 3,700 (TMO) $7,125
25,000 (MKA)
- ---------------------------------------------------------------------------------------------------------------------
Barry S. Howe (6) 1999 $157,500 $175,000 $50,064 (THI) 25,000 (THI) $44,934 (9)
Vice President 900 (TMO)
1998 $157,500 $ 75,000 -- 165,658 (THI) $12,683 (9)
1,798 (TMO)
7,500 (MKA)
7,500 (ONX)
4,000 (RGI)
2,000 (TDX)
1,023 (TKN)
2,000 (TRIL)
1997 $150,000 $ 110,000 -- 1,100 (TMO) $14,923 (9)
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(1) In fiscal 1999, Mr. Lewis, Mr. Helm and Mr. Howe were awarded 4,800,
4,500 and 3,000 shares respectively, of restricted Common Stock of the
Corporation with a value of $80,102, $75,096 and $50,064, respectively,
on the grant date. The restricted stock awards vest 100% on the third
anniversary of the grant date. Any cash dividends paid on restricted
shares are entitled to be retained by the recipient without regard to
vesting. Any non-cash dividends paid on restricted shares are entitled
to be retained by the recipient subject to the same vesting
restrictions as the underlying stock. At the end of fiscal 1999, Mr.
Lewis, Mr. Helm and Mr. Howe held 4,800, 4,500 and 3,000 shares of
restricted stock, respectively, with an aggregate value of $53,400,
$50,063 and $33,375, respectively.
(2) Options granted by the Corporation are designated as "THI." In
addition, the named executive officers have also been granted options
to purchase common stock of the following Thermo Electron companies
during the last three fiscal years as part of Thermo Electron's stock
option program: Thermo Electron Corporation (designated in the table as
TMO), Metrika Systems Corporation (designated in the table as MKA),
ONIX Systems Inc. (designated in the table as ONX), The Randers Killam
Group Inc. (designated in the table as RGI), Thermedics Detection Inc.
(designated in the table as TDX), ThermoQuest Corporation (designated
in the table as TMQ), ThermoTrex Corporation (designated in the table
as TKN) and Thermo Trilogy Corporation (designated in the table as
TRIL).
(3) Includes 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.
(4) Mr. Lewis has served in various management capacities for the
Corporation and has served as an officer of Thermo Electron during the
three-year period reported. A portion of Mr. Lewis's annual cash
compensation (salary and bonus) has been paid by Thermo Electron in
each of the fiscal years reported as compensation for services provided
to Thermo Electron. The annual cash compensation (salary and bonus)
reported in the table for Mr. Lewis represents the amount paid by the
Corporation and its subsidiaries solely for Mr. Lewis's services as an
officer of the Corporation or its subsidiaries. For
<PAGE>
1999, 1998 and 1997, approximately 80%, 80% and 90% respectively, of
Mr. Lewis's annual cash compensation (salary and bonus) earned in all
capacities throughout the Thermo Electron organization was paid by the
Corporation and its subsidiaries for his services to the Corporation
and its subsidiaries. From time to time, Mr. Lewis has been, and in the
future may be, 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 this
table as they were granted as compensation for services to other Thermo
Electron companies in capacities other than in his capacity as an
executive officer of the Corporation.
(5) In addition to the matching contribution referred to in footnote (3),
such amount includes $7,668, $8,739 and $9,585, respectively, which
represents the amount of compensation in fiscal 1999, 1998 and 1997,
respectively, attributable to an interest-free loan provided to Mr.
Lewis pursuant to the stock holding assistance plan of Thermo Optek.
See Item 13 - "Certain Relationships and Related Transactions--Stock
Holding Assistance Plans."
(6) In fiscal 1999, 1998 and 1997, of the annual cash compensation reported
in the table, 100%, 90% and 90%, respectively, of Mr. Helm's annual
cash compensation (salary and bonus) was paid by the Corporation and
0%, 10% and 10%, respectively, of his cash compensation was paid by
Metrika Systems Corporation, a wholly owned subsidiary of the
Corporation that develops, manufactures, and markets on-line,
high-speed process-optimization systems for raw materials analysis and
finished materials quality control. All of Dr. Chapman's annual cash
compensation was paid by ThermoQuest Corporation, a majority owned
subsidiary of the Corporation that develops and distributes mass
spectrometers, liquid chromatographs, gas chromatographs, and
multi-instrument combinations of these products for the pharmaceutical,
environmental, and industrial marketplaces, where he serves as
president and chief executive officer. In 1999, 44% of Mr. Howe's
annual compensation was paid by ThermoSpectra Corporation, a wholly
owned subsidiary of the Corporation, that supplies precision imaging,
inspection, temperature control and test and measurement instruments,
where he served as president and chief executive officer until October
1999, and 56% was paid by Thermo Optek. In 1998, 48% of Mr. Howe's
annual cash compensation was paid by Thermo BioAnalysis Corporation, a
wholly owned subsidiary of the Corporation that develops, manufactures,
and supplies a broad range of products, including biomolecular
instruments and consumables, clinical laboratory equipment and
supplies, rapid, point-of-care diagnostic test kits, and laboratory
information-management systems that are used in biochemical research,
clinical diagnosis, and pharmaceutical production., where he served as
president and chief executive officer until March 1998, and 52% was
paid by ThermoSpectra Corporation. In 1997, all of Mr. Howe's
compensation was paid by Thermo BioAnalysis Corporation, where he
served as president and chief executive officer.
(7) In fiscal 1999, Dr. Chapman was awarded 7,400 shares of restricted
common stock of ThermoQuest Corporation with a value of $77,241 on the
grant date. The restricted stock award vests 100% on the third
anniversary of the grant date. Any cash dividends paid on restricted
shares are entitled to be retained by the recipient without regard to
vesting. Any non-cash dividends paid on restricted shares are entitled
to be retained by the recipient subject to the same vesting
restrictions as the underlying stock. At the end of fiscal 1999, Dr.
Chapman held 7,400 shares of restricted stock with an aggregate value
of $76,316.
(8) In addition to the matching contribution referred to in footnote (3),
such amount includes $14,805, $16,873 and $18,154, respectively, which
represents the amount of compensation in fiscal 1999, 1998 and 1997,
respectively, attributable to interest-free loans provided to Dr.
Chapman pursuant to the stock holding assistance plans of Thermo
BioAnalysis Corporation and ThermoQuest Corporation. See Item 13 -
"Certain Relationships and Related Transactions --Stock Holding
Assistance Plans."
(9) In addition to the matching contribution referred to in footnote (3),
such amount includes $13,184, $12,886 and $8,173, respectively, which
represents the amount of compensation in fiscal 1999, 1998 and 1997,
respectively, attributable to interest-free loans provided to Mr. Howe
pursuant to the stock holding assistance plans of ThermoSpectra and
Thermo BioAnalysis, See Item 13 - "Certain Relationships and Related
Transactions--Stock Holding Assistance Plans," and a payment of $25,000
made to Mr. Howe in fiscal 1999 in connection with his relocation to
Franklin, Massachusetts.
<PAGE>
STOCK OPTIONS GRANTED DURING FISCAL 1999
The following table sets forth information concerning individual grants
of stock options made during fiscal 1999 to the 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 1999.
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OPTION GRANTS IN FISCAL 1999
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Potential Realizable
Percent of Value at Assumed
Number of Securities Total Options Annual Rates of Stock
Underlying Options Granted to Exercise Price Appreciation for
Granted and Employees in Price Per Expiration Option Term (2)
Name Company (1) Fiscal Year Share Date 5% 10%
- ---- ----------- ------------ ----- ---- --- ----
Earl R. Lewis (3) 150,000 (THI) 12.83% $14.76 01/06/06 $901,320 $2,100,465
- -------------------------------------------------------------------------------------------------------------------
Richard W. K. Chapman 25,000 (THI) 2.14% $11.95 09/15/04 $82,540 $182,390
500 (TMO) 0.02% (4) $14.81 09/22/04 $2,050 $4,521
- -------------------------------------------------------------------------------------------------------------------
Denis A. Helm 50,000 (THI) 4.28% $11.95 09/15/04 $165,080 $364,780
3,800 (TMO) 0.13% (4) $14.81 09/22/04 $15,550 $34,358
- -------------------------------------------------------------------------------------------------------------------
Barry S. Howe 25,000 (THI) 2.14% $11.95 09/15/04 $82,540 $182,390
900 (TMO) 0.03% (4) $14.81 09/22/04 $3,680 $8,138
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(1) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year. Generally, the shares
acquired upon exercise are subject to repurchase by the granting
company at the exercise price if the optionee ceases to be employed by
such company or any other Thermo Electron company. The granting company
may exercise its repurchase rights within six months after the
termination of the optionee's employment. The repurchase rights
generally lapse ratably over a one- to five-year period, depending on
the option term, which may vary from five to seven years, provided that
the optionee continues to be employed by the granting company or
another Thermo Electron company. The granting company 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. Please see footnote (2) under
the Summary Compensation Table for the company abbreviations used in
this table.
(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 company, the
optionee's continued employment through the option period and the date
on which the options are exercised.
(3) Since September 1996, Mr. Lewis has served as an officer of Thermo
Electron, most recently as chief operating officer, measurement and
detection. From time to time since September 1996, he has been, and in
the future he may be, granted options to purchase common stock of
Thermo Electron and its other subsidiaries for service in his capacity
as an officer of Thermo Electron. These options are not reported in the
table as they were granted as compensation for service to these
companies in a capacity other than in his capacity as an executive
officer of the Corporation.
(4) 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
such companies.
STOCK OPTIONS EXERCISED DURING FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1999 and outstanding stock options held at the end of
fiscal 1999 by the named executive officers. No stock appreciation rights were
exercised or were outstanding during fiscal 1999.
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AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL 1999 YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised
Securities In-the-Money
Underlying Options at
Unexercised Options Fiscal Year
Shares at Fiscal Year-End -End
Acquired on Value (Exercisable/ (Exercisable/
Name Company (1) Exercise Realized (2) Unexercisable) (1) Unexercisable)
---- ----------- -------- ------------ ------------------ --------------
Earl R. Lewis (3) (THI) -- -- 409,081/0 (4) $282,375/--
(MKA) -- -- 20,000/0 $0/--
(ONX) -- -- 33,333/0 $0/--
(TBA) -- -- 50,000/0 $270,938/--
(TOC) -- -- 225,000/0 (5) $203,625/--
(TMQ) -- -- 125,000/0 $15,650/--
- ---------------------------------------------------------------------------------------------------------------------
Richard W. K. Chapman (THI) -- -- 196,249/0 $24,563/--
(TMO) 8,436 $40,957 80,646/0 (6) $5,167/--
(MKA) -- -- 7,500/0 (7) $0/--
(ONX) -- -- 7,500/0 (7) $0/--
(RGI) -- -- 4,000/0 $1,000/--
(TDX) -- -- 2,000/0 $0/--
(TBA) -- -- 30,000/0 $251,250/--
(TFG) -- -- 2,000/0 $4,376/--
(TFT) 6,750 $32,063 --/-- --/--
(TLZ) -- -- 5,000/0 $0/--
(TLT) -- -- 0/2,000 --/$0(8)
(TOC) -- -- 15,000/0 $13,575/--
(TMQ) -- -- 325,000/0 $87,300/--
(TSR) -- -- 2,000/0 $1,000/--
(TKN) -- -- 1,023/0 $56.27/--
(TRIL) -- -- 0/2,000 --/$0(8)
(TXM) -- -- 4,000/0 $0/--
- ---------------------------------------------------------------------------------------------------------------------
Denis A. Helm (THI) -- -- 216,250/0 $24,563/--
(TMO) 8,436 $43,066 103,034/0 (6) $16,608/--
(MKA) -- -- 25,000/0 $0/--
(ONX) -- -- 7,500/0 (7) $0/--
(RGI) -- -- 4,000/0 $1,000/--
(TDX) -- -- 2,000/0 $0/--
(TBA) -- -- 15,000/0 $125,625/--
(TFT) 6,750 $31,644 --/-- --/--
(TOC) -- -- 15,000/0 $13,575/--
(TMQ) -- -- 10,000/0 $0/--
(TKN) -- -- 1,023/0 $56/--
(TRIL) -- -- 0/2,000 --/$0(8)
- ---------------------------------------------------------------------------------------------------------------------
Barry S. Howe (THI) -- -- 273,155/0 $459,509/--
(TMO) 2,530 $3,643 66,671/0 (6) $16,428/--
(MKA) -- -- 7,500/0 (7) $0/--
(ONX) -- -- 7,500/0 (7) $0/--
(RGI) -- -- 4,000/0 $1,000/--
(TMD) -- -- 4,000/0 $0/--
(TDX) -- -- 2,000/0 $0/--
(TBA) 17,530 $152,444 35,000/0 $293,125/--
(TCK) -- -- 6,000/0 $0/--
(TFG) -- -- 2,000/0 $4,376/--
(TFT) 6,750 $31,644 9,000/0 $7,515/--
(TLZ) -- -- 5,000/0 $0/--
(TLT) -- -- 0/2,000 --/$0(8)
(TOC) -- -- 15,000/0 $ 13,575/--
(THP) 2,000 $5,800 --/-- --/--
(TMQ) -- -- 90,000/0 (9) $0/--
(TSR) -- -- 2,000/0 $1,000/--
(THS) 12,000 $65,200 --/-- $0/0
(TTT) -- -- 4,000/0 $0/--
<PAGE>
- ---------------------------------------------------------------------------------------------------------------------
Barry S. Howe (TKN) -- -- 5,023/0 $56/--
cont'd (TRIL) -- -- 0/2,000 --/$0(8)
(TXM) -- -- 4,000/0 $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 shares of the common stock of ThermoLyte Corporation and
Thermo Trilogy 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 or (ii)
nine years after the grant date. Generally, the shares acquired upon
exercise of the options reported in the table are subject to repurchase
by the granting company at the exercise price if the optionee ceases to
be employed by, or ceases to serve as a director of, such company or
any other Thermo Electron company. The granting company may exercise
its repurchase rights within six months after the termination of the
optionee's employment or the cessation of directorship, as the case may
be. For publicly-traded companies, the repurchase rights generally
lapse ratably over a one- to ten-year period, depending on the option
term, which may vary from three to twelve years, provided that the
optionee continues to be employed by or serve as a director of the
granting company or another Thermo Electron company. Certain options
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 company 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. Please see
footnote (2) under the Summary Compensation Table for the company
abbreviations used in this table as well as the following additional
company abbreviations: Thermedics Inc (designated in the table as TMD),
Thermo BioAnalysis Corporation (designated in the table as TBA), Thermo
Ecotek Corporation (designated in the table as TCK), Thermo Fibergen
Inc. (designated in the table as TFG), Thermo Fibertek Corporation
(designated in the table as TFT), ThermoLase Corporation (designated in
the table as TLZ), ThermoLyte Corporation (designated in the table as
TLT), Thermo Sentron Inc. (designated in the tabel as TSR),
ThermoSpectra Corporation (designated in the table as THS), Thermo
TerraTech Corporation (designated in the table as TTT) and Trex Medical
Corporation (designated in the table as TXM).
(2) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the
option because in many cases the shares are not sold on exercise but
continue to be held by the executive officer exercising the option. The
amounts shown represent the difference between the option exercise
price and the market price on the date of exercise, which is the amount
that would have been realized if the shares had been sold immediately
upon exercise.
(3) Since September 1996, Mr. Lewis has served as an officer of Thermo
Electron, most recently as chief operating officer, measurement and
detection. From time to time since September 1996, he has been, and in
the future he may be, granted options to purchase common stock of
Thermo Electron and its other subsidiaries for services in his capacity
as an officer of Thermo Electron. These options are not reported in the
table as they were granted as compensation for service to Thermo
Electron in a capacity other than in his capacity as an executive
officer of the Corporation.
(4) Options to purchase 62,500 shares of Common Stock granted to Mr. Lewis
are subject to the same terms as described in footnote (1) above,
except that the repurchase rights of the granting company 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
company shall be deemed to have lapsed ratably over a five year period
commencing with the fifth anniversary of the grant date.
(5) Options to purchase 100,000 shares of the common stock of Thermo Optek
granted to Mr. Lewis are subject to the same terms as described in
footnote (1) above, except that the repurchase rights lapse 20% per
year commencing on the sixth anniversary of the grant date.
(6) Options to purchase 45,000, 45,000 and 22,500 shares of the common
stock of Thermo Electron granted to Dr. Chapman, Mr. Helm and Mr. Howe,
respectively, are subject to the same terms as described in footnote
(1) above, except that the repurchase rights of the granting company
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
<PAGE>
company shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.
(7) Options to purchase 7,500 shares of common stock of Metrika Systems and
7,500 shares of common stock of ONIX Systems granted to each of Dr.
Chapman and Mr. Howe are subject to the same terms as described in
footnote (1) above, except that the repurchase rights lapse 20% per
year commencing on the fifth anniversary of the grant date. Options to
purchase 7,500 shares of common stock of ONIX Systems granted to Mr.
Helm are subject to the same terms as described in footnote (1) above,
except that the repurchase rights lapse 20% per year commencing on the
fifth anniversary of the grant date.
(8) No public market existed for the shares underlying these options as of
January 31, 2000. Accordingly, no value in excess of the exercise price
has been attributed to these options.
(9) Mr. Howe has two ThermoQuest options granted on January 10, 1996 that
have a 12-year term. The repurchase rights are deemed to lapse 100% on
the tenth anniversary for the first option for 40,000 shares. The
repurchase rights are deemed to lapse 18% on the first and second
anniversaries of the grant date and 8% annually starting the third
anniversary of the grant date for the second option for 50,000 shares.
EXECUTIVE RETENTION AGREEMENTS
Thermo Electron has entered into agreements with certain executive
officers and key employees of Thermo Electron and its subsidiaries that provide
severance benefits if there is a change in control of Thermo Electron and their
employment is terminated by Thermo Electron "without cause" or by the individual
for "good reason," as these terms are defined therein, within 18 months
thereafter. For purposes of these agreements, a change in control exists upon
(i) the acquisition by any person of 40% or more of the outstanding common stock
or voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to include a majority of directors who are "continuing
directors", which term is defined to include directors who were members of
Thermo Electron's board on the date of the agreement or who subsequent to the
date of the agreement were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement
with each of Mr. Earl R. Lewis, Dr. Richard W. K. Chapman, Mr. Denis A. Helm and
Mr. Barry S. Howe. These agreements provide that in the event the individual's
employment is terminated under the circumstances described above, the individual
would be entitled to a lump sum payment equal to the sum of (a) in the case of
Mr. Lewis, two times, and in the case of Messrs. Chapman, Helm and Howe, one
times, the individual's highest annual base salary in any 12 month period during
the prior five-year period, plus (b) in the case of Mr. Lewis, two times, and in
the case of Messrs. Chapman, Helm and Howe, one times, the individual's highest
annual bonus in any 12 month period during the prior five-year period. In
addition, the individual would be provided benefits for a period of, in the case
of Mr. Lewis, two years, and in the case of Messrs. Chapman, Helm and Howe one
year, after such termination, substantially equivalent to the benefits package
the individual would have been otherwise entitled to receive if the individual
was not terminated. Further, all repurchase rights of Thermo Electron and its
subsidiaries shall lapse in their entirety with respect to all options and
restricted stock that the individual holds in Thermo Electron and its
subsidiaries, including the Corporation, as of the date of the change in
control. Finally, the individual would be entitled to a cash payment equal to,
in the case of Mr. Lewis, $20,000, and in the case of Messrs. Chapman, Helm and
Howe $15,000, to be used toward outplacement services. These executive retention
agreements supersede and replace any and all prior severance arrangements that
these individuals had with Thermo Electron.
Assuming that the severance benefits would have been payable as of
January 1, 2000, the lump sum salary and bonus payment under such agreement to
Messrs. Lewis, Chapman, Helm and Howe would have been approximately $1,140,000,
$373,000, $272,000 and $280,000, respectively. In the event that payments under
<PAGE>
these agreements are deemed to be so called "excess parachute payments" under
the applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), the individuals would be entitled to receive a
gross-up payment equal to the amount of any excise tax payable by such
individual with respect to such payment, plus the amount of all other additional
taxes imposed on such individual attributable to the receipt of such gross-up
payment.
STOCK OWNERSHIP POLICY
The Committee has established a stock holding policy for the chief
executive officer of the Corporation that requires him to own a multiple of his
compensation in shares of the Corporation's Common Stock. The multiple is one
times his base salary and reference bonus for the fiscal year in which
compliance is achieved. The chief executive officer has three years from the
adoption of the policy to achieve this ownership level.
In order to assist the chief executive officer 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 the chief executive
officer to enable him to purchase shares of Common Stock in the open market. Any
loans are required to be repaid upon the earlier of demand or the tenth
anniversary of the date of the loan, unless otherwise determined by the
Committee. No loans were outstanding under this program in 1999. See Item 13 -
"Certain Relationships and Related Transactions - Stock Holding Assistance
Plan."
Similar stock holding policies and stock holding assistance plans have
been adopted by each of the Corporation's publicly-traded, majority-owned
subsidiaries. Certain executive officers of the Corporation who are chief
executive officers of these subsidiaries are required to comply with these stock
holding policies in lieu of the Corporation's stock holding policy and have
outstanding loans under such subsidiaries' stock holding assistance plans. See
Item 13 - "Certain Relationships and Related Transactions - Stock Holding
Assistance Plans."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of Thermo Electron, Thermo Instrument's
parent company, and each majority-owned subsidiary of the Corporation, as of
January 31, 2000, with respect to (i) each director, (ii) each executive officer
named in the summary compensation table set forth below under the heading
"Executive Compensation" ("named executive officers") and (iii) all directors
and current executive officers as a group. In addition, the following table sets
forth the beneficial ownership of Common Stock, as of January 31, 2000, with
respect to each person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock.
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 beneficially owned by Thermo Electron.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Thermo Thermo Thermo Thermo
Instrument Electron BioAnalysis Optek
Name(1) Systems Inc. (2) Corporation (3) Corporation (4) Corporation (5)
- ------- ------------------ --------------- --------------- ---------------
Thermo Electron Corporation(10)............... 114,606,480 N/A N/A N/A
Richard W. K. Chapman......................... 225,530 79,801 40,500 15,500
Denis A. Helm................................. 278,638 167,163 15,000 15,200
Barry S. Howe................................. 303,290 71,655 37,884 25,000
Earl R. Lewis................................. 436,499 215,477 72,500 252,000
Polyvios C. Vintiadis......................... 17,597 2,500 0 0
All directors and current executive
officers as a group (6 persons)............ 1,444,269 995,128 184,884 347,700
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Metrika
ThermoQuest Systems ONIX Spectra-Physics
Name(1) Corporation (6) Corporation (7) Systems Inc. (8) Lasers, Inc. (9)
- ------- --------------- --------------- ------------ --- ----------------
Thermo Electron Corporation(10)............... N/A N/A N/A N/A
Richard W. K. Chapman......................... 351,746 7,500 7,500 0
Denis A. Helm................................. 10,000 26,000 7,500 0
Barry S. Howe................................. 90,000 7,500 7,500 0
Earl R. Lewis................................. 135,000 20,000 35,333 0
Polyvios C. Vintiadis......................... 0 0 0 0
All directors and current executive
officers as a group (6 persons)............... 589,246 86,000 87,833 0
</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 Dr. Chapman, Mr. Helm,
Mr. Howe, Mr. Lewis, Mr. Vintiadis and all directors and current
executive officers as a group include 196,249, 216,250, 273,156,
409,081, 11,745 and 1,270,168 shares, respectively, that such person or
group had the right to acquire within 60 days of January 31, 2000,
through the exercise of stock options. Shares beneficially owned by all
directors and current executive officers as a group include 468 shares
allocated through January 31, 2000, to their respective accounts
maintained pursuant to Thermo Electron's employee stock ownership plan
(the "ESOP"). Shares beneficially owned by Mr. Vintiadis and all
directors and current executive officers as a group include 5,590
shares, allocated through January 1, 2000, to Mr. Vintiadis' account
maintained under the Deferred Compensation Plan. Shares beneficially
owned by Mr. Helm include a total of 5,264 shares held in custodial
accounts for the benefit of his minor children. Shares beneficially
owned by Mr. Howe include 374 shares held in custodial accounts for the
benefit of his minor children. Shares beneficially owned by Mr. Lewis
include 2,987 shares held by his spouse. No director or named executive
officer beneficially owned more than 1% of the Common Stock outstanding
as of January 31, 2000; all directors and current executive officers as
a group beneficially owned 1.21% of the Common Stock outstanding as of
such date.
(3) Shares of the common stock of Thermo Electron beneficially owned by Dr.
Chapman, Mr. Helm, Mr. Howe, Mr. Lewis and all directors and current
executive officers as a group include 76,428, 99,816, 64,141, 212,278
and 837,024 shares, respectively, that such person or group had the
right to acquire within 60 days of January 31, 2000, through the
exercise of stock options. Shares beneficially owned by all directors
and current executive officers as a group include 1,071 shares,
respectively, allocated through January 31, 2000, to their respective
accounts maintained pursuant to the ESOP. Shares beneficially owned by
Mr. Helm include 8,100 shares held in custodial accounts for the
benefit of his minor children. Shares beneficially owned by Mr. Howe
include 200 shares held in custodial accounts for the benefit of his
minor children. No director or named executive officer beneficially
owned more than 1% of the common stock of Thermo Electron outstanding
as of January 31, 2000; all directors and current executive officers as
a group beneficially owned less than 1% of such common stock
outstanding as of such date.
(4) Shares of the common stock of Thermo BioAnalysis Corporation ("Thermo
BioAnalysis"), beneficially owned by Dr. Chapman, Mr. Helm, Mr. Howe,
Mr. Lewis and all directors and current executive officers as a group
include 30,000, 15,000, 35,000, 50,000 and 149,000 shares,
respectively, that such person or group had the right to acquire within
60 days of January 31, 2000, through the exercise of stock options.
Shares beneficially owned by Mr. Howe include 600 shares held by Mr.
Howe in custodial accounts for the benefit of his minor children.
Shares beneficially owned by Mr. Lewis include 1000 shares held by his
spouse. No director or named executive officer beneficially owned more
than 1% of the common stock of Thermo BioAnalysis outstanding as of
January 31, 2000; all directors and current executive officers as a
group beneficially owned less than 1% of such common stock outstanding
as of such date.
(5) Shares of the common stock of Thermo Optek Corporation, a
majority-owned subsidiary of the Corporation ("Thermo Optek"),
beneficially owned by Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis
<PAGE>
and all directors and current executive officers as a group include
15,000, 15,000, 15,000, 225,000 and 310,000 shares, respectively, that
such person or group had the right to acquire within 60 days of January
31, 2000, through the exercise of stock options. Shares beneficially
owned by Mr. Lewis include 2,500 shares held by his spouse and 1,000
shares held by his son. No director or named executive officer
beneficially owned more than 1% of the common stock of Thermo Optek
outstanding as of January 31, 2000; all directors and current executive
officers as a group beneficially owned less than 1% 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
Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis and all directors and
current executive officers as a group include 325,000, 10,000, 90,000,
125,000 and 552,500 shares, respectively, that such person or group had
the right to acquire within 60 days of January 31, 2000, through the
exercise of stock options. No director or named executive officer
beneficially owned more than 1% of the common stock of ThermoQuest
outstanding as of January 31, 2000; all directors and current executive
officers as a group beneficially owned 1.16% of such common stock
outstanding as of such date.
(7) Shares of the common stock of Metrika Systems Corporation, a
majority-owned subsidiary of the Corporation ("Metrika Systems"),
beneficially owned by Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis and
all directors and current executive officers as a group include 7,500,
25,000, 7,500, 20,000 and 85,000 shares, respectively, that such person
or group had the right to acquire within 60 days of January 31, 2000,
through the exercise of stock options. No director or named executive
officer beneficially owned more than 1% of the common stock of Metrika
Systems outstanding as of January 31, 2000; all directors and current
executive officers as a group beneficially owned 1.16% of such common
stock outstanding as of such date.
(8) Shares of the common stock of ONIX Systems Inc., ("ONIX Systems"),
beneficially owned by Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis and
all directors and current executive officers as a group include 7,500,
7,500, 7,500, 33,333, and 85,833 shares, respectively, that each person
or group had the right to acquire within 60 days of January 31, 2000,
through the exercise of stock options. No director or named executive
officer owned more than 1% of the common stock of ONIX Systems
outstanding as of January 31, 2000; all directors and current executive
officers as a group beneficially owned less than 1% of such common
stock outstanding as of such date.
(9) The directors, named executive officers and current executive officers
did not individually or as a group beneficially own any of the
Spectra-Physics Lasers, Inc. common stock outstanding as of January 31,
2000.
(10) Shares beneficially owned by Thermo Electron include 10,334,620 shares
of Common Stock issuable upon the conversion of a 3 3/4% convertible
debenture due in 2000. Thermo Electron beneficially owned approximately
88.71% of the Common Stock outstanding as of January 31, 2000. Thermo
Electron's address is 81 Wyman Street, Waltham, Massachusetts
02454-9046.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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 1999, except in the following instance. Thermo Electron filed one
Form 4 late, reporting a total of 17 transactions, including two open market
purchases of shares of Common Stock and 15 transactions associated with the
cancellation and grant of options to purchase Common Stock granted to employees
under its stock option program.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 0.8% of the Corporation's revenues for these services in fiscal
<PAGE>
1999, excluding the revenues of Spectra-Physics Lasers, Inc., which does not
participate in the Services Agreement. The annual fee will remain at 0.8% of the
Corporation's revenues for fiscal 2000. The fee is reviewed annually and may be
changed by mutual agreement of the Corporation and Thermo Electron. During
fiscal 1999, Thermo Electron assessed the Corporation $15.7 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. In fiscal 1999, the Corporation was billed an
additional $125,000 by Thermo Electron for certain administrative services
required by the Corporation that were not covered by the Services Agreement. 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 Thermo subsidiary or ceases to be a participant in the Thermo Electron
Corporate 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 that outlines the terms under which the Corporation will be included in
Thermo Electron's consolidated Federal and state income tax returns. Under
current law, the Corporation will be included in such tax returns so long as
Thermo Electron owns at least 80% of the Corporation's outstanding Common Stock.
In years in which the Corporation has taxable income, it will pay to Thermo
Electron amounts comparable to the taxes the Corporation would have paid if it
had filed its own separate company tax returns. If Thermo Electron's equity
ownership of the Corporation were to drop below 80%, the Company would file its
own tax returns. In 1999, the Corporation paid Thermo Electron $34,800,000 under
the Tax Allocation Agreement. As of January 1, 2000, the Corporation owed Thermo
Electron $18,150,000 for amounts due under the Tax Allocation Agreement.
The Corporation purchases and sells products and/or services in the
ordinary course of business to Thermo Electron and Thermo Electron's other
subsidiaries. In 1999, the Corporation sold a total of $1,240,000 of products to
Thermo Electron and its other subsidiaries and purchased a total of $1,642,000
of products and/or services from such companies.
Thermo Optek leases office and manufacturing space to Nicolet
Biomedical Inc. ("Nicolet Biomedical"), a wholly owned subsidiary of Thermo
Electron, pursuant to an arrangement whereby Thermo Optek charges Nicolet
Biomedical its allocated share of the occupancy expenses of Thermo Optek's
principal Wisconsin facility, based on the space Nicolet Biomedical utilizes.
Thermo Optek recorded operating lease income of $714,000 in 1999 from Nicolet
Biomedical. This lease is effective until December 31, 2001 but may be
terminated by Nicolet Biomedical upon 30 days' prior notice to Thermo Optek.
As of January 1, 2000, the Corporation had outstanding $140,000,000 of
indebtedness to Thermo Electron, represented by a 3 3/4 % Senior Convertible
Note due 2000. In February 2000, Thermo Electron converted this Note into
10,334,620 shares of the Corporation's Common Stock at a conversion rate of
$13.55 per share.
As of January 1, 2000, Thermo Electron owned $8,455,000 principal
amount of Thermo Optek's 5% subordinated convertible debentures due 2000. The
debentures are convertible into shares of Thermo Optek common stock at $13.9446
per share.
In March 1999, the Corporation borrowed $200,000,000 from Thermo
Electron to partially fund its acquisition of Spectra-Physics AB ("SPAB")
pursuant to the Corporation's tender offer for all of the outstanding shares of
SPAB. In August 1999, the Corporation repaid $50,000,000 of the principal amount
outstanding under the promissory note and refinanced the balance of the note
through borrowings from Thermo Electron due February 2000. In February 2000,
Thermo Electron extended the note to August 2000. This note bears interest at a
rate equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal ("DCP Rate") plus 150 basis points provided the note shall be
reduced to the DCP Rate plus 50 basis points to the extent of any funds invested
by the Corporation's majority-owned subsidiaries in Thermo Electron's domestic
cash management arrangement. The rate at fiscal 1999 year end was 6.0%.
<PAGE>
ONIX Systems leases approximately 24,000 square feet of office and
manufacturing space in Winchester, England on a month-to-month basis from Thermo
Power. ONIX Systems pays Thermo Power rent in an amount that is approximately
equal to the pro rata share of Thermo Power's occupancy costs, including
utilities and taxes, which payments in 1999 were approximately $258,000.
In March 2000, Thermo Electron agreed to loan the Corporation up to
$400 million to finance the acquisitions by the Corporation of the minority
interests in certain of its majority-owned subsidiaries. The loan bears interest
at a rate equal to the 30-day Dealer Commercial Paper Rate (the "DCP Rate") plus
150 basis points, adjusted at the beginning of each fiscal month of the
Corporation. The interest rate will be reduced to the DCP Rate plus 50 basis
points to the extent of any funds invested by the Corporation's majority-owned
subsidiaries in Thermo Electron's cash management arrangement. As of April 29,
2000, approximately $103 million was outstanding under this loan arrangement.
The Corporation, along with other U.K.-based Thermo Electron companies,
participates in a notional pool arrangement in the U.K. with Barclays Bank,
which includes a $114,943,000 credit facility. The Corporation has access to
$60,200,000 under this credit facility. Under this arrangement, Barclays
notionally combines the positive and negative cash balances held by the
participants to calculate the net interest yield/expense for the group. The
benefit derived from this arrangement is then allocated based on balances
attributable to the respective participants. Thermo Electron guarantees all of
the obligations of each participant in this arrangement. As of January 1, 2000,
the Corporation had a positive cash balance of approximately $41,426,000 and a
negative cash balance of approximately $41,403,000 based on an exchange rate of
$1.6171/GBP 1.00. For 1999, the average annual interest rate earned on GBP
deposits by participants in this credit arrangement was approximately 5.44% and
the average annual interest rate paid on overdrafts was approximately 5.8025%.
At year-end 1998, $392,000,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lent excess cash to Thermo Electron, which
Thermo Electron collateralized with investments principally consisting of
corporate notes, U.S. government agency securities, commercial paper, money
market funds and other marketable securities, in the amount of at least 103% of
such obligation. The Corporation's funds subject to the repurchase agreement
were readily convertible into cash by the Corporation. The repurchase agreement
earned a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter.
Effective June 1999, the Corporation and Thermo Electron commenced use
of a new domestic cash management arrangement. Under the new arrangement,
amounts advanced to Thermo Electron by the Corporation for domestic cash
management purposes bear interest at the 30-day Dealer Commercial Paper Rate
plus 50 basis points, set at the beginning of each month. Thermo Electron is
contractually required to maintain cash, cash equivalents, and/or immediately
available bank lines of credit equal to at least 50% of all funds invested under
this cash management arrangement by all Thermo Electron subsidiaries other than
wholly owned subsidiaries. The Corporation has the contractual right to withdraw
its funds invested in the cash management arrangement upon 30 days' prior
notice. At year-end 1999, the Corporation had invested $256,522,000 under this
arrangement. In addition, certain of the Corporation's European-based
subsidiaries participate in a new cash management arrangement with a wholly
owned subsidiary of Thermo Electron on terms similar to the domestic cash
management arrangement. The Corporation has access to a $43,300,000 line of
credit under this arrangement, of which the Corporation had invested $20,767,000
and had borrowed $18,658,000 at year-end 1999. Interest under this arrangement
is calculated based on Euro market rates and was 3.25% on the positive balance
and 3.95% on the negative balance at year-end 1999.
The Corporation, along with certain other Thermo subsidiaries, has
entered into a cash management arrangement with ABN AMRO. Only European-based
Thermo Subsidiaries participate in this arrangement. The new arrangement with
ABN AMRO consists of a zero balance arrangement, which includes a $25,417,000
credit facility. The Corporation has access to $8,663,000 under this credit
facility. Funds borrowed by the Corporation under this arrangement pay interest
at a rate set by Thermo Finance B.V., a wholly-owned subsidiary of Thermo
Electron, at the beginning of each month, based on Netherlands market rates.
Funds invested by the Corporation under the arrangement earn a rate set by
Thermo Finance B.V. at the beginning of each month, based on Netherlands market
rates. Such invested funds are collateralized with investments principally
consisting of corporate notes, U.S. government-agency securities, commercial
paper, money market funds, and other marketable securities, in the amount of at
least 103% of such obligation. Thermo Electron guarantees all of the obligations
of each participant in this arrangement. As of January 1, 2000, the Corporation
had a positive cash
<PAGE>
balance of approximately $16,505 and a negative cash balance of approximately
$5,502,000, based on an exchange rate of $0.4554/NLG 1.00. As of January 1,
2000, the average annual interest rate earned on NLG deposits by participants in
this credit arrangement was approximately 3.19% and the average annual interest
rate paid on overdrafts was approximately 3.74%.
In connection with the acquisition of Park Scientific Instruments
Corporation in March 1997, ThermoSpectra borrowed $10,000,000 from Thermo
Electron pursuant to a promissory note that was paid in March 1999. In
connection with the acquisition of NESLAB Instruments, Inc. and its related
sales and service entity NESLAB Instruments Europa BV in the Netherlands, from
the Corporation in July 1997, ThermoSpectra borrowed $45,000,000 from Thermo
Electron, which was repaid in full in December 1999. To partially finance the
acquisition of Sierra Research and Technology Inc. in July 1997, ThermoSpectra
borrowed $5,000,000 from Thermo Electron which was repaid in full in July 1999.
These notes bore interest at the 90-day Commercial Paper Composite Rate plus 25
basis points, set at the beginning of each quarter.
At January 1, 2000, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $9,193,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, excluding loans described above and $18,150,000 due
to Thermo Electron under the Tax Allocation Agreement, net of amounts owed to
the Corporation by Thermo Electron and its other subsidiaries for products,
services and other miscellaneous items. The largest amount of such net
indebtedness owed by the Corporation to Thermo Electron and its other
subsidiaries since January 2, 1999 was $12,654,000. These amounts do not bear
interest and are expected to be paid in the normal course of business.
THERMO ELECTRON CORPORATE REORGANIZATION
Thermo Electron has adopted a major reorganization plan under which,
among other things, it is acquiring the minority interest in most of its
subsidiaries that have minority investors. As part of this plan, Thermo Electron
has acquired or intends to acquire the minority interest in the Corporation and
certain of its subsidiaries listed below. The consideration paid or to be paid
to the stockholders in each of these completed or proposed transactions is as
follows:
COMPLETED TRANSACTIONS
Subsidiary Per Share Cash Payment
- ----------- ----------------------
ThermoSpectra Corporation $16.00
Thermo Vision Corporation $7.00
ONIX Systems Inc. $9.00
Thermo BioAnalysis Corporation $28.00
PROPOSED TRANSACTIONS
Cash Transactions
- -----------------
Subsidiary Per Share Cash Payment
- ---------- ----------------------
Metrika Systems Corporation $9.00
ThermoQuest Corporation $17.00
Thermo Optek Corporation $15.00
Stock Transactions
- ------------------
Subsidiary Exchange Ratio*
- ---------- ---------------
Thermo Instrument Systems Inc. 0.85
*The Exchange Ratio represents the number of shares of common stock that will be
exchanged for each share of the Corporation's common stock.
<PAGE>
EXECUTIVE OFFICER AND DIRECTOR PARTICIPATION IN COMPLETED TRANSACTIONS
Executive officers and directors of the Corporation who held shares of
common stock in the subsidiaries listed above under "Completed Transactions"
received the same cash consideration per share of subsidiary stock as all other
stockholders of such subsidiaries.
In addition, the executive officers' and directors' options to acquire
shares of such subsidiaries' common stock, for which the granting corporation's
repurchase rights had not lapsed ("unvested options"), were automatically
assumed by either the Corporation or Thermo Electron, as applicable, and
converted into options to purchase shares of the Corporation's common stock or
Thermo Electron's common stock on the same terms as were applicable to all the
other holders of such subsidiary's options, as described below. In the case of
options to acquire shares of such subsidiaries' common stock, for which the
granting corporation's repurchase rights had lapsed ("vested options"), the
holders were given the opportunity to elect either to convert the options into
vested options to acquire shares of the Corporation's common stock or Thermo
Electron's common stock, as applicable, or to receive cash at the applicable
cash transaction price less the applicable exercise price, on the same terms as
were applicable to all the other holders of such subsidiary's options.
Vested and unvested options that were assumed by the Corporation or
Thermo Electron in these completed transactions generally were converted as
follows: The number of shares of the Corporation's common stock or Thermo
Electron's common stock underlying each assumed option equaled the number of
shares of subsidiary common stock underlying the option before the transaction,
multiplied by the applicable "cash exchange ratio" described below, rounded down
to the nearest whole number of shares of the Corporation's common stock or
Thermo Electron's common stock. The exercise price for each assumed option was
calculated by dividing the exercise price of the subsidiary stock option before
the transaction by the applicable "cash exchange ratio" described below, rounded
up to the nearest whole cent. The applicable "cash exchange ratio" for each
transaction was a fraction, the numerator of which was the cash price listed in
the chart at the beginning of this subsection (the "Chart") and the denominator
of which was the closing price of the Corporation's common stock or Thermo
Electron's common stock, as applicable, on the day preceding the effective date
of the transaction.
Additionally, certain directors participated in the deferred
compensation plans of the various subsidiaries. On the effective date of each of
the completed cash transactions listed above, each of the affected subsidiaries'
deferred compensation plans terminated and the participants received cash in an
amount equal to the balance of such participant's stock units credited to his or
her account under the respective deferred compensation plan, multiplied by the
cash price listed in the Chart. Any such stock units held by directors are
included in their stock ownership information described below.
In the ThermoSpectra Corporation transaction, Mr. Howe, Mr. Lewis and
Mr. Melas-Kyriazi (the Corporation's Chief Financial Officer, who is not a named
executive officer of the Corporation for purposes of Securities and Exchange
Commission regulations, and whose ownership information therefore does not
appear in the "Stock Ownership" table) received a cash payment of $16.00 per
share for 15,010, 5,000 and 13,600 shares of common stock of ThermoSpectra
Corporation held by such individuals, respectively. Additionally, Dr, Chapman,
Mr. Helm, Mr. Howe, Mr. Lewis, Mr. Melas-Kyriazi and Mr. Vintiadis held options
to acquire 4,000, 4,000, 92,000, 50,000, 64,200 and 1,500 shares of
ThermoSpectra Corporation common stock, respectively, that were converted into
options to acquire shares of common stock of Thermo Instrument Systems Inc., as
described above. Additionally, Mr. Howe elected to receive cash payments, as
described above, for options to purchase an additional 12,000 shares of
ThermoSpectra Corporation common stock, and received payments of $65,200, for
such options.
In the Thermo Vision Corporation transaction, Dr. Chapman, Mr. Helm and
Mr. Lewis received a cash payment of $7.00 per share for 70, 28 and 17,720
shares of common stock of Thermo Vision Corporation held by such individuals,
respectively. Additionally, Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis, Mr.
Melas-Kyriazi and Mr. Vintiadis held options to acquire 7,500, 7,500, 7,500,
25,000, 70,000, and 1,500 shares of Thermo Vision Corporation common stock,
respectively, that were converted into options to acquire shares of common stock
of Thermo Instrument Systems Inc., as described above.
In the ONIX Systems Inc. transaction, Mr. Lewis received a cash payment
of $9.00 per share for 2,000 shares of common stock of ONIX Systems Inc. held by
him. Additionally, Dr. Chapman, Mr. Helm, Mr. Howe, Mr. Lewis and Mr.
Melas-Kyriazi held options to acquire 7,500, 7,500, 7,500, 33,333 and 30,000
shares of
<PAGE>
ONIX Systems Inc. common stock, respectively, that were converted into options
to acquire shares of Thermo Electron common stock, as described above.
In the Thermo BioAnalysis Corporation transaction, Dr. Chapman, Mr.
Howe and Mr. Lewis received a cash payment of $28.00 per share for 10,500, 2,884
and 22,500 shares of common stock of Thermo BioAnalysis Corporation held by such
individuals, respectively. Additionally, Dr. Chapman, Mr. Helm, Mr. Howe, Mr.
Lewis and Mr. Melas-Kyriazi held options to acquire 18,000, 9,000, 30,000,
34,250 and 19,000 shares of Thermo BioAnalysis common stock, respectively, that
were converted into options to acquire shares of Thermo Electron common stock,
as described above. Additionally, Dr. Chapman, Mr. Helm, Mr. Howe and Mr. Lewis
elected to receive cash payments, as described above, for options to purchase an
additional 12,000, 6,000, 5,000 and 15,750 shares of Thermo BioAnalysis common
stock, respectively, and received a payment of $216,000, $108,000, $90,000 and
$258,000, respectively, for such options.
EXECUTIVE OFFICER AND DIRECTOR PARTICIPATION IN PROPOSED TRANSACTIONS
Executive officers and directors of the Corporation who hold shares of
common stock in the subsidiaries listed above under "Proposed Transactions" will
receive the same consideration per share of subsidiary stock as all other
stockholders of such subsidiaries. See Item 12 - "Security Ownership of Certain
Beneficial Owners and Management."
In addition, certain executive officers and directors of the
Corporation hold options to acquire shares of common stock of the subsidiaries
listed above (See Item 12 - "Security Ownership of Certain Beneficial Owners and
Management") which options will be treated in the same manner as options held by
other employees. In general, all unvested options held by such persons will be
assumed by Thermo Electron and converted into options to acquire shares of
Thermo Electron's common stock on the same terms as are applicable to all the
other holders of such subsidiary's options. In the case of vested options held
by such persons in subsidiaries that are the subject of proposed cash
transactions, the holders will be given the opportunity to elect either to
convert the options into vested options for Thermo Electron's common stock, as
described below, or to receive cash at the applicable cash transaction price
less the applicable exercise price. In the case of options held by such persons
in subsidiaries that are the subject of the proposed stock transaction, the
options will be converted into options for Thermo Electron's common stock, as
described below.
Vested and unvested options that are being assumed by Thermo Electron
in the proposed cash transactions referenced above generally will be converted
as follows: The number of shares of Thermo Electron's common stock underlying
each assumed option will equal the number of shares of subsidiary common stock
underlying the option before the transaction, multiplied by the applicable "cash
exchange ratio" described below, rounded down to the nearest whole number of
shares of Thermo Electron's common stock. The exercise price for each assumed
option will be calculated by dividing the exercise price of the subsidiary stock
option before the transaction by the applicable "cash exchange ratio" set forth
below, rounded up to the nearest whole cent. The applicable "cash exchange
ratio" for each transaction is a fraction, the numerator of which is the cash
price listed in the Chart and the denominator of which is the closing price of
Thermo Electron's common stock on the day preceding the effective date of the
transaction.
Vested and unvested options that are being assumed by Thermo Electron
in the proposed stock transaction referenced above will generally be converted
as follows: The number of shares of Thermo Electron's common stock underlying
each assumed option will equal the number of shares of subsidiary common stock
underlying the option before the transaction, multiplied by the applicable
exchange ratio set forth in the Chart, rounded down to the nearest whole number
of shares of Thermo Electron's common stock. The exercise price for each assumed
option will be calculated by dividing the exercise price of the subsidiary stock
option before the transaction by the applicable exchange ratio set forth in the
Chart, rounded up to the nearest whole cent.
In addition to the ownership information that appears in the Item 12 -
"Security Ownership of Certain Beneficial Owners and Management" table, Mr.
Melas-Kyriazi holds shares of, or options to purchase shares of, common stock of
the subsidiaries listed above under "Proposed Transactions" as follows. Mr.
Melas-Kyriazi owns 19,028 shares in the common stock of the Corporation. Mr.
Melas-Kyriazi owns options to purchase 25,000, 25,000, 40,000 and 163,687 shares
of Metrika Systems Corporation, ThermoQuest Corporation, Thermo Optek
Corporation and the Corporation, respectively.
Additionally, certain directors participate in the deferred
compensation plans of the various subsidiaries. See Item 12 - "Security
Ownership of Certain Beneficial Owners and Management." On the effective date of
each of the proposed cash transactions listed above, each of the affected
subsidiaries' deferred compensation
<PAGE>
plans will terminate and the participants will receive cash in an amount equal
to the balance of such participant's stock units credited to his or her account
under the respective deferred compensation plan, multiplied by the cash price
listed in the Chart. On the effective date of the proposed stock transaction
listed above, the Corporation's deferred compensation plan will be assumed by
Thermo Electron, and the stock units credited to each participant's account
under the deferred compensation plan will be converted into stock units for
Thermo Electron's common stock at the exchange ratio set forth in the Chart.
<PAGE>
STOCK HOLDING ASSISTANCE PLANS
The human resources committee of the Corporation's board of directors
(the "Committee") established a stock holding policy that requires its chief
executive officer to acquire and hold a minimum number of shares of Common
Stock. In order to assist the chief executive officer in complying with the
policy, the Committee also adopted a stock holding assistance plan under which
the Corporation may make interest-free loans to the chief executive officer, to
enable him to purchase Common Stock in the open market. Loans will be repayable
upon the earlier of demand or the tenth anniversary of the date of the loan,
unless otherwise determined by the Committee. No such loans were outstanding in
1999.
Each of the Corporation's publicly-traded, majority-owned subsidiaries
have adopted similar stock holding policies and stock holding assistance plans,
which were applicable to their executive officers prior to their amendment to
make them applicable only to their chief 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 president and chief executive
officer, was also the chief executive officer of Thermo Optek until January 4,
1998. Dr. Richard W. K. Chapman, a senior vice president of the Corporation, is
also the chief executive officer of ThermoQuest and was chairman of the board of
Thermo BioAnalysis until June 26, 1997. Mr. Barry S. Howe, a vice president of
the Corporation, was also the chief executive officer of Thermo BioAnalysis
until March 11, 1998 and is currently the chief executive officer of
ThermoSpectra. In 1996, Mr. Lewis received a loan in the principal amount of
$194,030 under the Thermo Optek stock holding assistance plan to purchase 15,000
shares of the common stock of Thermo Optek, of which amount $155,224 is still
outstanding. Dr. Chapman received loans in 1996 in the principal amounts of
$210,654 and $131,176, 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, of which amounts $168,523 and $131,176, respectively, are still
outstanding. In 1996, Mr. Howe received loans in the principal amount of
$164,376 under the stock holding assistance plan of Thermo BioAnalysis to
purchase 12,000 shares of Thermo BioAnalysis, of which amount $131,500 is still
outstanding. In 1998, Mr. Howe received a loan in the principal amount of
$141,992 to purchase 15,000 shares of ThermoSpectra, of which the entire is paid
in full. Each of these loans is repayable upon the earlier of demand or the
tenth anniversary of the date of the loan, unless otherwise determined by the
human resources committee of the board of directors of the applicable company.
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
