<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Thermo TerraTech, Inc.
(Name of Registrant as Specified In Its Charter)
Thermo TerraTech, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
[THERMO TERRATECH LOGO]
81 Wyman Street
Waltham, MA 02254-9046
August ___, 1996
Dear Stockholder:
The enclosed Notice calls the 1996 Annual Meeting of the Stockholders of
Thermo TerraTech Inc. I respectfully request all Stockholders attend this
meeting, if possible.
Our Annual Report for the year ended March 30, 1996 is enclosed. I hope
you will read it carefully. Feel free to forward any questions you may have if
you are unable to be present at the Meeting.
Enclosed with this letter is a Proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the Meeting.
Whether or not you are able to attend the Meeting, I urge you to complete your
Proxy and return it to our transfer agent, American Stock Transfer & Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the Meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this
Proxy.
Yours very truly,
JOHN P. APPLETON
President and Chief Executive Officer
<PAGE> 3
[THERMO TERRATECH LOGO HERE]
August ___, 1996
To the Holders of the Common Stock of
THERMO TERRATECH INC.
NOTICE OF ANNUAL MEETING
The 1996 Annual Meeting of the Stockholders of Thermo TerraTech Inc.
(the "Corporation") will be held on Wednesday, September 25, 1996, at 11:00 a.m.
at the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts. The purposes of the Meeting are to consider and take action upon
the following matters:
1. Election of six Directors.
2. A proposal recommended by the Board of Directors to amend the
Corporation's Certificate of Incorporation to increase the Corporation's
authorized common stock, $.10 par value per share, from 30 million shares to 75
million shares.
3. Such other business as may properly be brought before the
Meeting and any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
Meeting, but, pursuant to appropriate action by the Board of Directors, the
record date for the determination of the Stockholders entitled to notice of and
vote at the Meeting is August 5, 1996.
The By-laws require that the holders of a majority of the stock issued
and outstanding and entitled to vote be present or represented by proxy at the
Meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the Meeting regardless of the number
of shares you may hold. Whether or not you are able to be present in person,
please sign and return promptly the enclosed Proxy in the accompanying envelope,
which requires no postage if mailed in the United States.
This Notice, the Proxy and Proxy Statement enclosed herewith are sent to
you by order of the Board of Directors.
SANDRA L. LAMBERT
Secretary
<PAGE> 4
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of Thermo
TerraTech Inc. (the "Corporation") for use at the 1996 Annual Meeting of the
Stockholders (the "Meeting") to be held on Wednesday, September 25, 1996 at
11:00 a.m. at the offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts, and any adjournment thereof. The mailing address of the
executive office of the Corporation is 81 Wyman Street, Waltham, Massachusetts
02254. This Proxy Statement and the enclosed Proxy were first furnished to
Stockholders of the Corporation on or about August ___, 1996.
VOTING PROCEDURES
The Board of Directors intends to present to the Meeting the election of
six Directors, constituting the entire Board of Directors, as well as one other
matter: a proposal to amend the Corporation's Certificate of Incorporation to
increase the Corporation's authorized common stock, $.10 par value ("Common
Stock"), from 30 million shares to 75 million shares.
The representation in person or by proxy of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to provide a quorum for the transaction of business at the Meeting. Shares can
only be voted if the Stockholder is present in person or is represented by
returning a properly signed Proxy. Each Stockholder's vote is very important.
Whether or not you plan to attend the Meeting in person, please sign and
promptly return the enclosed proxy card, which requires no postage if mailed in
the United States. All signed and returned proxies will be counted towards
establishing a quorum for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for Directors,
for the management proposal and as the individuals named as proxy holders on the
Proxy deem advisable on all other matters as may properly come before the
Meeting.
In order to be elected a Director, a nominee must receive the
affirmative vote of a majority of the shares of Common Stock present and
entitled to vote on the election. For the proposal to increase the authorized
Common Stock, the affirmative vote of a majority of the Corporation's
outstanding Common Stock entitled to vote on the matter is necessary for
approval. Withholding authority to vote for a nominee for Director or an
instruction to abstain from voting on a proposal will be treated as shares
present and entitled to vote and, for purposes of determining the outcome of the
vote, will have the same effect as a vote against the nominee or a proposal.
With respect to the election of directors, broker "non-votes" will not be
treated as shares present and entitled to vote on a voting matter and will have
no effect on the outcome of the vote. Broker "non-votes" on the proposal to
increase the authorized Common Stock will have the effect of a vote against the
proposal. A broker "non-vote" occurs when a nominee holding shares for a
beneficial holder does not have discretionary voting power and does not receive
voting instructions from the beneficial owner.
A Stockholder who returns a Proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Corporation received prior to the Meeting, by executing and returning a
later-dated Proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding
shares held in treasury by the Corporation) as of August 5, 1996, consisted of
_________________ shares of Common Stock. Only Stockholders of record at the
close of business on August 5, 1996, are entitled to vote at the Meeting. Each
share is entitled to one vote.
1
<PAGE> 5
--PROPOSAL 1--
ELECTION OF DIRECTORS
Six Directors are to be elected at the Meeting, each to hold office
until his successor is chosen and qualified or until his earlier resignation,
death or removal.
NOMINEES FOR DIRECTORS
Set forth below are the names of the persons nominated as Directors,
their ages, their offices in the Corporation, if any, their principal occupation
or employment for the past five years, the length of their tenure as Directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its parent corporation,
Thermo Electron Corporation ("Thermo Electron"), and of its subsidiary, Thermo
Remediation Inc. ("Thermo Remediation") is reported under the caption "Stock
Ownership." All of the nominees are currently Directors of the Corporation.
- --------------------------------------------------------------------------------
JOHN P. APPLETON Dr. Appleton, 61, has been President, Chief
Executive Officer and a Director of the
Corporation since September 1993. Dr. Appleton has
been Chairman, Chief Executive Officer and a
Director of Thermo Remediation since September
1993 and has served as a Vice President of Thermo
Electron since 1975 in various managerial
capacities.
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JOHN N. HATSOPOULOS Mr. Hatsopoulos, 62, has been a Director of the
Corporation since 1986 and its Vice President and
Chief Financial Officer since 1988. He has been
the Chief Financial Officer of Thermo Electron
since 1988 and an Executive Vice President of
Thermo Electron since 1986. Mr. Hatsopoulos is
also a director of Lehman Brothers Funds, Inc.,
Thermedics Inc., Thermo Ecotek Corporation, Thermo
Fibertek Inc., Thermo Instrument Systems Inc.,
Thermo Power Corporation, Thermo Optek
Corporation, ThermoQuest Corporation, Thermo
Sentron Inc., Trex Medical Corporation and
ThermoTrex Corporation.
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DONALD E. NOBLE Mr. Noble, 81, has been a Director of the
Corporation since 1986 and served as Chairman of
the Board from 1992 to November 1994. From 1959 to
1980, Mr. Noble served as the chief executive
officer of Rubbermaid Incorporated, first with the
title of President and then as the Chairman of the
Board. Mr. Noble is also a director of Thermo
Electron, Thermo Fibertek Inc., Thermo Sentron
Inc. and Thermo Power Corporation.
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WILLIAM A. RAINVILLE Mr. Rainville, 54, has been a Director of the
Corporation since February 1993 and Chairman of
the Board since November 1994. Mr. Rainville has
been President and Chief Executive Officer of
Thermo Fibertek Inc. since its inception in 1991
and a director of that company since January 1992.
From 1984 until January 1993, Mr. Rainville was
the President and Chief Executive Officer of
Thermo Electron Web Systems Inc., a subsidiary of
Thermo Electron and the predecessor of Thermo
Fibertek Inc. He has been a Senior Vice President
of Thermo Electron since March 1993 and a Vice
President since 1986. Mr. Rainville is also a
director of Thermo Fibertek Inc. and Thermo
Remediation.
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2
<PAGE> 6
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PAUL E. TSONGAS Mr. Tsongas, 55, is a partner in the law firm of
Foley, Hoag & Eliot, Boston, Massachusetts. From
1988 to 1991, Mr. Tsongas was Chairman of the
Massachusetts Board of Regents of Higher
Education. From 1979 to 1985, he was a U.S.
Senator from Massachusetts. He is also a Director
of Boston Edison Corporation, Wang Laboratories
Inc., Thermo Fibertek Inc. and Thermo Power
Corporation.
- --------------------------------------------------------------------------------
POLYVIOS C. VINTIADIS Mr. Vintiadis, 60, has been a Director of the
Corporation since September 1992. Mr. Vintiadis
has been the Chairman and Chief Executive Officer
of Towermarc Corporation, a real estate
development company, since 1984. Prior to joining
Towermarc Corporation, 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 Instrument Systems Inc.
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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 outside Directors. The present
members of the Audit Committee are Mr. Vintiadis (Chairman) and Mr. Noble. 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 present members of
the Human Resources Committee are Mr. Noble (Chairman), Mr. Tsongas 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 plans. The Corporation does not have
a nominating committee of the Board of Directors. The Board of Directors met
seven 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. Hatsopoulos, who attended 71% of such meetings. Mr.
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 $4,000
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. Dr. Appleton, Mr. Hatsopoulos
and Mr. Rainville are all employees of Thermo Electron 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 FOR DIRECTORS. Under the Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his cash fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Corporation that is not
approved by the Board of Directors, deferred amounts become payable immediately.
Either of the following is deemed to be a change of control: (a) the occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo Electron; or (b) the failure of
the persons serving on the Board of Directors immediately prior to any contested
election of Directors or any exchange offer or tender offer for the Common Stock
or the common stock of Thermo Electron to constitute a majority of the Board of
Directors at any time within two years following any such event. Amounts
deferred pursuant to the Deferred Compensation Plan are valued at the end of
each quarter as units of the Corporation's Common Stock. When payable, amounts
deferred may be disbursed solely in shares of Common Stock accumulated under the
Deferred
3
<PAGE> 7
Compensation Plan. A total of 54,000 shares of Common Stock have been reserved
for issuance under the Deferred Compensation Plan. As of March 30, 1996,
deferred units equal to 21,040 full shares of Common Stock were accumulated for
current Directors under the Deferred Compensation Plan. 12,584 shares of Common
Stock were distributed under the Deferred Compensation Plan to Warren M.
Rohsenow, who resigned as a Director of the Corporation in December 1995.
DIRECTORS STOCK OPTION PLAN. The Corporation's Directors Stock Option
Plan, which was amended in 1995 (the "Directors Plan"), provides for the grant
of stock options to purchase shares of common stock of the Corporation and its
majority owned subsidiaries to outside Directors as additional compensation for
their service as Directors. Under the Directors Plan, outside Directors are
automatically granted options to purchase 1,000 shares of Common Stock annually
and, commencing in 1995, are also automatically granted every five years 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. A provision providing
for the automatic grant of options to purchase Common Stock on a quarterly basis
according to the following formula was eliminated in 1995: 200 shares for each
meeting of the Board of Directors held during the quarter and attended in person
by the recipient and 100 shares for each telephone meeting or committee meeting
of the Board of Directors held during the quarter in which the recipient
participated.
Pursuant to the Directors Plan, outside Directors receive an annual
grant of options to purchase 1,000 shares of Common Stock pursuant to the
Directors Plan 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. Options granted under
this provision before 1995 expired after seven years; commencing in 1995, the
option term was shortened to three years. Shares acquired upon exercise of the
options are subject to repurchase by the Corporation at the exercise price if
the recipient ceases to serve as a Director of the Corporation or any other
Thermo Electron company prior to the first anniversary of the grant date.
In addition, under the Directors Plan, outside Directors are
automatically granted every five years options to purchase 1,500 shares of
common stock of each majority-owned subsidiary of the Corporation that is "spun
out" to outside investors. The grant occurs on the close of business on the date
of the first Annual Meeting of the Stockholders next following the subsidiary's
spinout, which is the first to occur of either an initial public offering of the
subsidiary's common stock or a sale of such stock to third parties in an
arms-length transaction, and also as of the close of business on the date of
every fifth Annual Meeting of the Stockholders of the Corporation that occurs
thereafter during the duration of the Plan. The options granted vest and become
exercisable on the fourth anniversary of the date of grant, unless prior to such
date the subsidiary's common stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended ("Section 12 Registration"). In the
event that the effective date of Section 12 Registration occurs before the
fourth anniversary of the grant date, the option will become immediately
exercisable and the shares acquired upon exercise will be subject to
restrictions on transfer and the right of the Corporation to repurchase such
shares at the exercise price in the event the Director ceases to serve as a
Director of the Corporation or any other Thermo Electron company. In the event
of Section 12 Registration, the restrictions and repurchase rights shall lapse
or be deemed to lapse at the rate of 25% per year, starting with the first
anniversary of the grant date. These options expire after five years.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the common stock as reported on the American
Stock Exchange (or other principal market on which the common stock is then
traded) for the five trading days preceding and including the date of grant, or,
if the shares are not then traded, at the last price per share paid by third
parties in an arms-length transaction prior to the option grant. An aggregate of
75,000 shares of Common Stock has been reserved for issuance under the Directors
Plan.
4
<PAGE> 8
STOCK OWNERSHIP
<TABLE>
The following table sets forth the beneficial ownership of Common Stock,
as well as the common stock of Thermo Electron and Thermo Remediation, as of
July 1, 1996, with respect to (i) each person who was known by the Corporation
to own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each Director, (iii) each executive officer named in the summary compensation
table under the heading "Executive Compensation" and (iv) all Directors and
current executive officers as a group.
<CAPTION>
THERMO THERMO ELECTRON THERMO
NAME(1) TERRATECH INC.(2) CORPORATION(3) REMEDIATION INC.(4)
------- ----------------- -------------- -------------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) ........ 14,566,258 N/A N/A
John P. Appleton ....................... 216,942 143,266 63,000
John N. Hatsopoulos .................... 60,259 636,980 40,182
Donald E. Noble ........................ 47,595 53,480 10,500
Jeffrey L. Powell ...................... 82,968 43,042 111,000
William A. Rainville ................... 60,000 252,593 24,000
Bruce J. Taunt ......................... 44,688 11,852 18,000
Paul E. Tsongas ........................ 1,451 0 1,500
Polyvios C. Vintiadis .................. 8,420 0 1,500
All Directors and current executive
officers as a group (10 persons)(6) .. 783,422 1,324,916 286,682
<FN>
- ---------------
(1) Except as reflected in the footnotes to this table, shares 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 Common Stock beneficially owned by Dr. Appleton, Mr.
Hatsopoulos, Mr. Noble, Mr. Powell, Mr. Rainville, Mr. Taunt, Mr.
Tsongas, Mr. Vintiadis and all Directors and executive officers as a
group include 215,000, 40,000, 7,200, 63,000, 60,000, 42,000, 1,000,
5,300 and 688,500 shares, respectively, that such person or group has
the right to acquire within 60 days of July 1, 1996 through the exercise
of stock options. Shares beneficially owned by Mr. Hatsopoulos and all
Directors and executive officers as a group include 12,500 shares that
Mr. Hatsopoulos has the right to acquire within 60 days after July 1,
1996 through the exercise of a stock purchase warrant. Shares
beneficially owned by Dr. Appleton, Mr. Hatsopoulos, Mr. Powell, Mr.
Taunt and all Directors and executive officers as a group include 208,
217, 133, 53 and 816 full shares, respectively, allocated through July
1, 1996 to accounts maintained pursuant to Thermo Electron's Employee
Stock Ownership Plan, of which the trustees, who have investment power
over its assets, were as of July 1, 1996 executive officers of Thermo
Electron ("ESOP"). Shares beneficially owned by Mr. Noble, Mr. Tsongas
and Mr. Vintiadis and all Directors and executive officers as a group
include 17,355, 451, 3,120 and 20,926 full shares, respectively,
allocated through July 1, 1996 to their respective accounts maintained
under the Corporation's Deferred Compensation Plan for Directors. Shares
beneficially owned by Mr. Taunt include 160 shares held in a trust over
which Mr. Taunt has investment and voting control. Except for Dr.
Appleton, who beneficially owned approximately 1.2% of the Common Stock
outstanding as of July 1, 1996, no Director or executive officer
beneficially owned more than 1% of the Common Stock outstanding as of
July 1, 1996; all Directors and executive officers as a group
beneficially owned 4.2% of the Common Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron shown in the table reflect
a three-for-two split of such stock effected on June 5, 1996. Shares of
the common stock of Thermo Electron beneficially owned by Dr. Appleton,
Mr. Hatsopoulos, Mr. Noble, Mr. Powell, Mr. Rainville, Mr. Taunt and all
Directors and executive officers as a group include 104,357, 349,935,
8,875, 39,374, 205,648, 10,462 and 854,025 shares, respectively, that
such person or members of the group has the right to acquire within 60
days of July 1, 1996 through the exercise of stock options. Shares
beneficially owned by Dr. Appleton, Mr. Hatsopoulos, Mr. Powell, Mr.
Taunt and all Directors and executive officers as a group include 1,417,
1,838, 497, 166 and 5,146 full shares, respectively, allocated through
June 30, 1996 to accounts
</TABLE>
5
<PAGE> 9
maintained pursuant to the ESOP. Shares beneficially owned by Mr. Noble
and all Directors and executive officers as a group each include 41,190
shares allocated through July 1, 1996, to Mr. Noble's account maintained
pursuant to Thermo Electron's Deferred Compensation Plan for Directors.
Shares beneficially owned by Mr. Hatsopoulos include 168,750 shares held
by a QTIP trust of which Mr. Hatsopoulos is a trustee. 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 less than 1% of the Thermo Electron common
stock outstanding as of July 1, 1996.
(4) Shares beneficially owned by Dr. Appleton, Mr. Hatsopoulos, Mr. Noble,
Mr. Powell, Mr. Rainville, Mr. Taunt, Mr. Tsongas, Mr. Vintiadis and all
Directors and executive officers as a group include 63,000, 22,500,
6,000, 111,000, 22,500, 18,000, 1,500, 1,500 and 261,000 shares,
respectively, that such person or group has the right to acquire within
60 days after July 1, 1996 through the exercise of stock options. No
Director or executive officer beneficially owned more than 1% of the
common stock of Thermo Remediation outstanding as of July 1, 1996; all
Directors and executive officers as a group beneficially owned 2.2% of
such common stock outstanding as of such date.
(5) Thermo Electron owned 80.7% of the Common Stock outstanding as of July
1, 1996. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046.
(6) While certain Directors or executive officers of the Corporation are
also directors and/or executive officers of Thermo Electron or its
subsidiaries, all such persons disclaim beneficial ownership of the
shares of Common Stock of the Corporation owned by Thermo Electron and
the shares of common stock of Thermo Remediation owned by the
Corporation.
DISCLOSURE OF CERTAIN LATE FILINGS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during fiscal 1996, except in the following instance.
A Form 4 for March 1996 filed on behalf of Thermo Electron, reporting among
other matters the acquisition of 246,600 shares, was filed eight days late.
EXECUTIVE COMPENSATION
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 two other most highly compensated executive
officers for the last three fiscal years. No other executive officers of the
Corporation who held office during fiscal 1996 met the definition of "highly
compensated" within the meaning of the Securities and Exchange Commission's
executive compensation disclosure rules for such period.
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.
6
<PAGE> 10
<TABLE>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
SECURITIES UNDERLYING
AWARDS OF OPTIONS (NO. ALL OTHER
NAME AND FISCAL OF SHARES AND COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS COMPANY)(1) SATION(2)
------------------ ---- ------ ----- ----------- ---------
<S> <C> <C> <C> <C> <C>
John P. Appleton (3) 1996 $168,750 $100,000(3) -- $ 6,919
President and Chief Executive 1995 $146,250 $100,000(3) 30,000 (TTT) $11,171
Officer 1994 $ 75,533 $ 80,000(3) 185,000 (TTT) $11,115
63,000 (THN)
- ------------------------------------------------------------------------------------------------------------
Jeffrey L. Powell 1996 $116,000 $ 60,000 300 (TMO) $ 6,646
Vice President 2,000 (TBA)
2,000 (TSR)
5,000 (TLZ)
2,000 (TLT)
6,000 (TMQ)
4,000 (TXM)
1995 $108,000 $ 63,500 10,000 (TTT) $ 6,828
15,000 (THN)
22,725 (TMO)
1994 $101,600 $ 46,675(4) 13,000 (TTT) $ 4,484
96,000 (THN)
5,625 (TMO)
- ------------------------------------------------------------------------------------------------------------
Bruce J. Taunt(5) 1996 $ 95,000 $ 35,000 7,500 (TMO) $ 5,246
Vice President, Finance $ 91,000 $ 28,000 4,000 (TTT) $ 5,203
and Administration 1995 3,000 (THN)
- ------------------------------------------------------------------------------------------------------------
<FN>
(1) Options to purchase Common Stock of the Corporation awarded to executive officers are followed by
the designation "TTT". In addition, executive officers of the Corporation have been granted options
to purchase common stock of Thermo Electron and certain of its other subsidiaries as part of Thermo
Electron's stock option program. Options have been granted during the last three fiscal years to the
named executive officers in the following Thermo Electron companies: Thermo Electron (designated in
the table as TMO), Thermo Remediation (designated in the table as THN), Thermo BioAnalysis
Corporation (designated in the table as TBA), Thermo Sentron Inc. (designated in the table as TSR),
ThermoLase Corporation (designated in the table as TLZ), ThermoLyte Corporation (designated in the
table as TLT), ThermoQuest Corporation (designated in the table as TMQ), and Trex Medical
Corporation (designated in the table as TXM). The shares of common stock of Thermo Electron reflect
a three-for-two split of such stock effected on June 5, 1996 in the form of a 50% stock dividend.
Dr. Appleton has served as an officer of Thermo Electron since 1975 and has been granted options to
purchase shares of the common stock of Thermo Electron and certain of its subsidiaries other than
the Corporation from time to time by Thermo Electron or such other subsidiaries. These options are
not reported in this table as they were granted as compensation for service to other Thermo Electron
companies in capacities other than in his capacity as the president and chief executive officer of
the Corporation.
(2) Represents the amount of matching contributions made on behalf of the executive officers
participating in Thermo Electron's 401(k) plan.
(3) Dr. Appleton was appointed president and chief executive officer of the Corporation effective
September 1, 1993. Dr. Appleton is also a vice president of Thermo Electron. Reported in the table
under "Annual
</TABLE>
7
<PAGE> 11
Compensation" are the total amounts paid to Dr. Appleton for his service
in all capacities to Thermo Electron companies since September 1, 1993.
The Human Resources Committee of the Board of Directors of the
Corporation reviews total annual cash compensation to be paid to Dr.
Appleton from all sources within the Thermo Electron organization and
approves the allocation of a percentage of annual cash compensation
(salary and bonus) for the time he devotes to the affairs of the
Corporation. For fiscal 1996, 1995 and 1994, 70%, 85% and 100%,
respectively, of Dr. Appleton's reported cash compensation was allocated
to the Corporation. These percentages include the allocation of a
portion of Dr. Appleton's annual cash compensation attributable to the
management of the Thermo Terra Tech joint venture, which was acquired by
the Corporation in April 1995 in a transaction accounted for in a manner
similar to pooling of interests accounting. Bonuses paid to Dr. Appleton
reflect compensation decisions based on calendar year performance, in
accordance with Thermo Electron's compensation practices for its
officers.
(4) In fiscal 1994, the Corporation changed its compensation practices for
executive officers (other than the chief executive officer who continues
to be reviewed on a calendar year basis) to make compensation decisions
based on fiscal year performance rather than calendar year performance.
As a consequence, the bonus paid to Mr. Powell in fiscal 1994 related to
a 15-month period from January 3, 1993 through April 2, 1994.
(5) Mr. Taunt was appointed an executive officer of the Corporation on
November 1, 1994.
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.
Dr. Appleton has served as a vice president of Thermo Electron since
1975 and from time to time has been granted options to purchase common stock of
Thermo Electron and certain of its subsidiaries other than the Corporation and
Thermo Remediation. 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 in his capacity as the chief executive officer of the
Corporation. No options were granted to Dr. Appleton during fiscal 1996 in his
capacity as chief executive officer of the Corporation.
<TABLE>
OPTION GRANTS IN FISCAL 1996
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL OPTIONS VALUE AT ASSUMED
NUMBER OF SECURITIES GRANTED TO EXERCISE ANNUAL RATES OF STOCK
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED(1) FISCAL YEAR SHARE DATE OPTION TERM
---- ---------- ----------- ----- ---- -----------
(2) 5% 10%
----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey L. Powell 300 (TMO) 0.02% $24.85 5/23/98 $ 1,176 $ 2,469
2,000 (TBA) 0.4% $10.00 3/11/08 $15,920 $ 42,760
2,000 (TSR) 0.4% $14.00 3/11/08 $22,280 $ 59,880
5,000 (TLZ) 0.4% $22.75 11/28/07 $90,550 $243,250
2,000 (TLT) 0.6% $10.00 3/11/08 $15,920 $ 42,760
6,000 (TMQ) 0.2% $13.00 3/11/08 $62,100 $166,800
4,000 (TXM) 0.3% $11.00 3/11/08 $35,000 $ 94,080
- -----------------------------------------------------------------------------------------------------------------
Bruce J. Taunt 7,500 (TMO) 0.5% $30.27 9/22/02 $92,400 $215,400
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 12
(1) Options have been granted during fiscal 1996 to the named executive
officers to purchase the common stock of Thermo Electron (designated in
the table as TMO), Thermo Remediation (designated in the table as THN),
Thermo BioAnalysis Corporation (designated in the table as TBA), Thermo
Sentron Inc. (designated in the table as TSR), ThermoLase Corporation
(designated in the table as TLZ), ThermoLyte Corporation (designated in
the table as TLT), ThermoQuest Corporation (designated in the table as
TMQ), and Trex Medical Corporation (designated in the table as TXM). All
of the options granted during the fiscal year are immediately
exercisable at the date of grant, except options to purchase the common
stock of Thermo BioAnalysis Corporation and ThermoLyte Corporation,
which are not exercisable until that company's stock is publicly traded.
However, the shares acquired upon exercise are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to
be employed by such corporation or any other Thermo Electron company.
The granting corporation may exercise its repurchase rights within six
months after the termination of the optionee's employment. For publicly
traded companies, the repurchase rights generally lapse ratably over a
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. 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. The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock effected on June 5,
1996 in the form of a 50% stock dividend.
(2) These options were granted under stock option plans maintained by Thermo
Electron and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1996
<TABLE>
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.
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END OPTION VALUES
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY
SHARES YEAR-END OPTIONS
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE)(1) UNEXERCISABLE)
---- ------- -------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
John P. Appleton(2) Thermo TerraTech -- -- 215,000/0(3) $924,575/0
Thermo Remediation -- -- 63,000/0 $453,285/0
- ----------------------------------------------------------------------------------------------------------------
Jeffrey L. Powell Thermo TerraTech 10,800 $75,168 63,000/0(4) $342,535/--
Thermo Remediation -- -- 111,000/0 $731,145/--
Thermo BioAnalysis -- -- 0/2,000(6) $ 0/--
Thermo Electron -- -- 38,774/0(5) $868,001/--
Thermo Fibertek -- -- 4,500/0 $ 53,249/--
Thermo Sentron -- -- 2,000/0 $ 4,000/--
ThermoLase -- -- 5,000/0 $ 7,500/--
ThermoLyte -- -- 0/2,000(6) $ 0/--
ThermoQuest -- -- 6,000/0 $ 24,000/--
Trex Medical -- -- 4,000/0 $ 4,000/--
- ----------------------------------------------------------------------------------------------------------------
Bruce J. Taunt Thermo TerraTech -- -- 42,000/0(4) $244,210/0
Thermo Remediation -- -- 18,000/0 $116,010/0
Thermo Electron -- -- 10,312/0 $142,756/0
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 13
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant, except options to purchase the common
stock of Thermo BioAnalysis Corporation and ThermoLyte Corporation,
which are not exercisable until that company's stock is publicly traded.
However, the shares acquired upon exercise are subject to repurchase by
the granting corporation at the exercise price if the optionee ceases to
be employed by such corporation or any other Thermo Electron company.
The granting corporation may exercise its repurchase rights within six
months after the termination of the optionee's employment. For publicly
traded companies, the repurchase rights generally lapse ratably over a
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. For
companies whose shares are not publicly traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant date. The
shares of common stock of Thermo Electron shown in the table reflect a
three-for-two split of such stock effected on June 5, 1996 in the form
of a 50% stock dividend.
(2) Dr. Appleton has served as a vice president of Thermo Electron since
1975 and holds unexercised options to purchase common stock of Thermo
Electron and certain of its subsidiaries other than the Corporation and
Thermo Remediation. These options are not reported here as they were
granted as compensation for service to other Thermo Electron companies
in capacities other than in his capacity as the chief executive officer
of the Corporation.
(3) In addition to the terms described in footnote (1) above, 60,000 of the
shares acquired upon exercise of these options are restricted from
resale until Dr. Appleton's retirement.
(4) Of these options awarded to Mr. Powell and Mr. Taunt, options to
purchase 15,000 shares each are subject to the following terms in
addition to those described in footnote (1): In the event of the
optionee's voluntary resignation or discharge for cause prior to
February 8, 1998, all of the shares acquired upon exercise of these
options are subject to repurchase by the Corporation at the exercise
price. In addition, all shares acquired upon the exercise of these
options are subject to restrictions on resale until February 8, 1998.
(5) Options to purchase 22,500 shares of the common stock of Thermo Electron
granted to Mr. Powell 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.
(6) No public market existed for the shares underlying these options as of
March 29, 1996. Accordingly, no value in excess of exercise price has
been attributed to these options.
SEVERANCE AND OTHER AGREEMENTS
Thermo Electron has entered into severance agreements with several key
employees, including Dr. Appleton. 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 one of its majority-owned subsidiaries 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. The benefit under
these agreements is stated as an initial percentage which was established by the
Board of Directors of Thermo Electron in 1983 and was generally based upon the
employee's age and length of service with Thermo Electron at the time of
severance. Benefits are to be paid over a five-year period. The benefit to be
paid in the first year is determined by applying
10
<PAGE> 14
this percentage to the employee's highest annual total remuneration in any
12-month period during the preceding three years. This benefit is reduced by 10%
in each of the succeeding four years in which benefits are paid. The initial
percentage to be so applied to Dr. Appleton is 40.1%. Assuming severance
benefits would have been payable under such agreements as of July 1, 1996, Dr.
Appleton would have received approximately $108,250 in the first year thereof
from Thermo Electron.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Corporation's executive officers
are made by the Human Resources Committee of the Board of Directors (the
"Committee"). In reviewing and establishing total cash compensation and
stock-based compensation for executives, the Committee follows guidelines
established by the human resources committee of the board of directors of its
parent corporation, Thermo Electron. The executive compensation program
presently consists of annual base salary ("salary"), short-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of stock
options.
The Committee believes that the compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the
mid-point of competitive salaries derived from market surveys and that
short-term and long-term incentive compensation should reflect the performance
of the Corporation and the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's compensation for
its executives is assessed by comparing it to market data provided by its
compensation consultant and by participating in annual executive compensation
surveys, primarily "Project 777", an executive compensation survey prepared by
Management Compensation Services, a division of Hewitt Associates. The majority
of firms represented in the Project 777 survey are included in the Standard &
Poor's 500 Index, but do not necessarily correspond to the companies included in
the Corporation's peer group index.
Principles of internal equity are also central to the Committee's
compensation policies. Compensation considered for the Corporation's officers,
whether cash or stock-based incentives, is also evaluated by comparing it to
compensation of other executives within the Thermo Electron organization with
comparable levels of responsibility for comparably sized business units.
The process for determining each of these elements for the Corporation's
executive officers is outlined below.
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and its other named executive officers will approach the
mid-point of competitive data. The salary increases in fiscal 1995 for the chief
executive officer and the other named executive officers generally reflect this
practice of gradual increases and moderation.
CASH BONUS
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of
11
<PAGE> 15
competitive total cash compensation for a similar position and level of
responsibility in businesses having comparable sales and complexity to the
Corporation. The actual bonus awarded to an executive officer may range from
zero to three times the median potential bonus. The value within the range (the
bonus multiplier) is determined at the end of each year by the Committee in its
discretion. The Committee exercises its discretion by evaluating each
executive's performance using a methodology developed by its parent corporation,
Thermo Electron, and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns, designed to measure
profitability, contributions to shareholder value, and earnings growth, and are
measures of corporate and divisional performance that are evaluated using graphs
developed by Thermo Electron designed to reward performance that is perceived as
above average and to penalize performance that is perceived as below average.
The measures of operating returns used in the Committee's determinations in
fiscal 1995 measured return on net assets, growth in income, and growth in
earnings per share and the Committee's determinations also included an
evaluation of the contributions of each executive that are not captured by
operating measures but are considered important to the creation of long-term
value for the stockholders. These measures of achievements are not financial
targets that are met, not met or exceeded. The relative importance of these
factors varies depending on the executive's role and responsibilities within the
organization.
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1995 performance in each instance exceeded the median
potential bonus.
STOCK OPTION PROGRAM
The primary goal of the Corporation is to excel in the creation of
long-term value for the Stockholders. The principal incentive tool used to
achieve this goal is the periodic award to key employees of options to purchase
common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the Stockholders.
The emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock option
awards in its subsidiary, Thermo Remediation and its parent corporation, Thermo
Electron, and the other majority-owned subsidiaries of Thermo Electron, are an
important tool in providing incentives for performance within the entire
organization.
In determining awards, the Committee considers the average annual value
of all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option pricing model.) As a
guideline, the Committee strives to maintain the aggregate amount of awards to
all employees over a five-year period below 10% of the Corporation's outstanding
common stock, although other factors such as unusual transactions and
acquisitions and standards for awards of comparably situated companies may
affect the number of awards granted.
Awards are not made annually in conjunction with the annual review of
cash compensation, but are made periodically. The Committee considers total
compensation of executives, actual and anticipated contributions of each
executive (which includes a subjective assessment by the Committee of the value
of the executive's future potential within the organization), as well as the
value of previously awarded options as described above, in determining option
awards. The option awards made with respect to the common stock of the
Corporation's parent, Thermo Electron, and its subsidiaries, were determined by
the human resources committee of the board of directors of Thermo Electron using
a similar analysis.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Committee has also considered the application of Section 162(m) of
the Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for
12
<PAGE> 16
annual compensation paid to senior executive in excess of $1 million, unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives does
not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based". Therefore,
the Committee does not believe any further action is necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine the
Corporation's compensation practices and the effect of Section 162(m).
CEO COMPENSATION
Cash compensation for Dr. Appleton is reviewed by both the Committee and
the human resources committee of the board of directors of Thermo Electron (the
"Thermo Electron Committee"), due to his responsibilities as both the
Corporation's chief executive officer and as a vice president of Thermo
Electron. Each committee evaluates Dr. Appleton's performance and proposed
compensation using a process similar to that used for the other executive
officers of the Corporation. At the Thermo Electron level, Dr. Appleton is
evaluated on his performance related to the Corporation as well as other
operating units of Thermo Electron for which he is responsible, weighted in
accordance with the amount of time and effort devoted to each operation. The
Corporation's Committee then reviews the analysis and determinations of the
Thermo Electron committee, makes an independent assessment of Dr. Appleton's
performance as it relates to the Corporation using criteria similar to that used
for the other executive officers of the Corporation, and then agrees to an
appropriate allocation of Dr. Appleton's compensation to be paid by the
Corporation.
In December 1995, the Committee conducted its review of Dr. Appleton's
proposed salary for calendar 1996 and bonus for calendar 1995 performance. The
Committee concurred in the recommendations made by the Thermo Electron Committee
and agreed to an allocation of 70% of Dr. Appleton's total cash compensation for
calendar year 1995 and 1996 to the Corporation, based on his relative
responsibilities at the Corporation and Thermo Electron. The Committee believes
that the total cash compensation for Dr. Appleton for calendar 1995 tends to be
below the competitive norm for a similarly sized company with performance
comparable to that of the Corporation, and prefers that a significant portion of
total compensation be awarded in the form of long-term incentive compensation,
such as stock options.
Mr. Donald E. Noble (Chairman)
Mr. Paul E. Tsongas
Mr. Polyvios C. Vintiadis
13
<PAGE> 17
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this Proxy Statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a
broad-based market index and either a nationally recognized industry standard or
an index of peer companies selected by the Corporation. The Corporation has
compared its performance with the American Stock Exchange Market Value Index and
a peer group of companies consisting of Ecology & Environmental Inc.,
Groundwater Technology Inc., International Technology Inc., Safety Kleen Corp.
and Roy F. Weston Inc.
COMPARISON OF 1991-1996 TOTAL RETURN AMONG THERMO TERRATECH INC.,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX
AND THE CORPORATION'S PEER GROUP
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
3/28/91 3/27/92 4/1/93 3/31/94 3/31/95 3/29/96
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TTT 100 75 84 77 79
- --------------------------------------------------------------------------------
AMEX 100 110 118 123 129
- --------------------------------------------------------------------------------
PEER GROUP 100
- --------------------------------------------------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (TTT), the American
Stock Exchange Market Value Index (AMEX) and the Corporation's Peer Group (PEER
GROUP) assumes the reinvestment of dividends, although dividends have not been
declared on the Corporation's Common Stock. The American Stock Exchange Market
Value Index tracks the aggregate performance of equity securities of companies
listed on the American Stock Exchange ("AMEX"). The Corporation's Common Stock
is traded on the AMEX under the ticker symbol "TTT".
14
<PAGE> 18
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, the Corporation has created Thermo
Remediation as a majority-owned publicly held subsidiary. From time to time,
Thermo Electron and its subsidiaries will create other majority-owned
subsidiaries as part of its spinout strategy. (The Corporation and the other
Thermo Electron subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries".)
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries have adopted the Thermo Electron Corporate Charter (the
"Charter") to define the relationships and delineate the nature of such
cooperation among themselves. The purpose of the Charter is to ensure that (1)
all of the companies and their stockholders are treated consistently and fairly,
(2) the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological strengths
of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to
be followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range financial planning and providing other banking and credit services.
Pursuant to the Charter, Thermo Electron may also provide guarantees of debt or
other obligations of the Thermo Subsidiaries or may obtain external financing at
the parent level for the benefit of the Thermo Subsidiaries. In certain
instances, the Thermo Subsidiaries may provide credit support to, or on behalf
of, the consolidated entity or may obtain financing directly from external
financing sources. Under the Charter, Thermo Electron is responsible for
determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to borrowings
of Thermo Electron or other members of the Thermo Group, and for apportioning
such constraints within the Thermo Group. In addition, Thermo Electron
establishes certain internal policies and procedures applicable to members of
the Thermo Group. The cost of the services provided by Thermo Electron to the
Thermo Subsidiaries is covered under existing corporate services agreements
between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long
as Thermo Electron and at least one Thermo Subsidiary participate. The Charter
may be amended at any time by agreement of the participants. Any Thermo
Subsidiary, including the Corporation, can withdraw from participation in the
Charter upon 30 days' prior notice. In addition, Thermo Electron may terminate a
subsidiary's participation in the Charter in the event the subsidiary ceases to
be controlled by Thermo Electron or ceases to comply with the Charter or the
policies and procedures applicable to the Thermo Group. A withdrawal from the
Charter automatically terminates the corporate services agreement and tax
allocation agreement (if any) in effect between the withdrawing company and
Thermo Electron. The withdrawal from participation does not terminate
outstanding commitments to third parties made by the withdrawing company, or by
Thermo Electron or other members of the Thermo Group, prior to the withdrawal.
However, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management and certain financial and other services to the
Corporation. The Corporation was assessed an annual fee equal to 1.2% of the
Corporation's revenues for these services for calendar 1995. Beginning January
1, 1996, the fee has been reduced to 1.0% of the
15
<PAGE> 19
Corporation's revenues. 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 $2,577,000 in fees under the Services
Agreement. Management believes that the charges under the Services Agreement are
reasonable and that the terms of the Services Agreement are representative of
the expenses the Corporation would have incurred on a stand-alone basis. 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.
As of March 30, 1996, $29,552,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lends excess cash to Thermo Electron, which
Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. The Corporation's funds subject to the repurchase agreement
are readily convertible into cash by the Corporation and have a maturity of
three months or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
The Corporation leases or subleases two office and manufacturing
facilities from Thermo Electron. The total rental payments made to Thermo
Electron during fiscal year 1996 under these agreements was $486,000.
The Corporation and Thermo Electron entered into a development agreement
under which Thermo Electron agreed to fund up to $4,000,000 of the direct and
indirect costs of the Corporation's development of soil-remediation centers. In
exchange for this funding, the Corporation granted Thermo Electron a royalty
equal to approximately 3% of net revenues from soil-remediation services
performed at the centers developed under this agreement. The royalty payments
may cease if the amounts paid by the Corporation yield a certain internal rate
of return to Thermo Electron on the funds advanced to the Corporation under this
agreement. The Corporation paid Thermo Electron royalties of $332,000 in fiscal
1996.
The Corporation provides certain management and supervisory services
with respect to Thermo Electron's wholly-owned metal treating business. During
fiscal 1996, Thermo Electron paid the Corporation $150,000 to perform such
services.
As of March 30, 1996, the Corporation owed Thermo Electron an aggregate
of $88 million.
Thermo Electron owned approximately 80.7% of the Corporation's
outstanding Common Stock on July 1, 1996.
16
<PAGE> 20
-- PROPOSAL 2--
PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has determined that it is advisable to increase
the Corporation's authorized Common Stock from 30 million shares to 75 million
shares, and has voted to recommend that the Stockholders adopt an amendment to
the Corporation's Certificate of Incorporation effecting the proposed increase.
As of March 30, 1996, approximately 17.6 million shares of Common Stock
were issued and outstanding (excluding treasury shares) and approximately an
additional 5.9 million shares were reserved for issuance upon the conversion of
existing securities and exercise of options granted under the Corporation's
various stock-based compensation plans. Accordingly, a total of approximately
6.5 million shares of Common Stock were available for future issuance.
The Board of Directors believes it continues to be in the best interest
of the Corporation to have sufficient additional authorized but unissued shares
of Common Stock available in order to provide flexibility for corporate action
in the future. Management believes that the availability of additional
authorized shares for issuance from time to time in the Board of Directors'
discretion in connection with possible acquisitions of other companies, future
financings, investment opportunities, stock splits or dividends or for other
corporate purposes is desirable in order to avoid repeated separate amendments
to the Corporation's Certificate of Incorporation and the delay and expense
incurred in holding special meetings of the Stockholders to approve such
amendments. There are at present no specific understandings, arrangements or
agreements with respect to any future acquisitions that would require the
Corporation to issue any new shares of its Common Stock. The Board of Directors
believes that the currently available unissued shares do not provide sufficient
flexibility for corporate action in the future.
No further authorization by vote of the Stockholders will be solicited
for the issuance of the additional shares of Common Stock proposed to be
authorized, except as might be required by law, regulatory authorities or rules
of the American Stock Exchange or any stock exchange on which the Corporation's
shares may then be listed. The issuance of additional shares of Common Stock
could have the effect of diluting existing stockholder earnings per share, book
value per share and voting power. The Stockholders of the Corporation do not
have any preemptive right to purchase or subscribe for any part of any new or
additional issuance of the Corporation's securities.
Thermo Electron, which owned approximately ____% of the outstanding
voting stock of the Corporation on August 5, 1996, has sufficient votes to
approve the amendment and has indicated its intention to vote for the approval
of the amendment.
- --------------------------------------------------------------------------------
The affirmative vote of a majority of the Common Stock outstanding and
entitled to vote at the Meeting is required to approve the amendment to the
Corporation's Certificate of Incorporation to effect the proposed increase in
the Corporation's authorized shares. The Board of Directors considers this
amendment to be advisable and in the best interests of the Corporation and its
Stockholders and recommends that you vote FOR approval of the amendment. If not
otherwise specified, Proxies will be vote FOR approval of this amendment.
- --------------------------------------------------------------------------------
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1997. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1986.
Representatives of that firm are expected to be present at the Meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to questions. The Board of Directors has established an
Audit Committee, presently consisting of two outside Directors, the purpose of
which is to review the scope and results of the audit.
17
<PAGE> 21
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
Proxies grant power to the Proxy holders to vote shares represented by the
Proxies in the discretion of such Proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1997 Annual
Meeting of the Stockholders of the Corporation must be received by the
Corporation for inclusion in the Proxy Statement and form of Proxy relating to
that meeting no later than ____________, 1996.
SOLICITATION STATEMENT
The cost of this solicitation of Proxies will be borne by the
Corporation. Solicitation will be made primarily by mail, but regular employees
of the Corporation may solicit Proxies personally, by telephone or telegram.
Brokers, nominees, custodians and fiduciaries are requested to forward
solicitation materials to obtain voting instructions from beneficial owners of
stock registered in their names, and the Corporation will reimburse such parties
for their reasonable charges and expenses in connection therewith.
Waltham, Massachusetts
August ___, 1996
18
<PAGE> 22
FORM OF PROXY
THERMO TERRATECH INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John P. Appleton, John N. Hatsopoulos and
Jonathan W. Painter, or any one of them acting in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of Thermo TerraTech Inc., a Delaware corporation
(the "Company"), to be held on Wednesday, September 25, 1996, at 11:00 a.m., and
at any adjournment or postponement thereof, and to vote all shares of common
stock of the Company standing in the name of the undersigned on August 5, 1996,
with all of the powers the undersigned would possess if personally present at
such meeting:
(Continued and to be signed on reverse side.)
Please mark your
/ x / votes as in this
example.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
below if no instruction to the contrary is indicated or if no instruction is
given.
1. Election of Directors.
NOMINEES: John P. Appleton, John N. Hatsopoulos, Donald E. Noble, William A.
Rainville, Paul E. Tsongas, and Polyvios C. Vintiadis.
FOR / / WITHHELD / /
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any):
- -------------------------------------
FOR AGAINST ABSTAIN
2. Approve an amendment to the Certificate of / / / / / /
Incorporation of the Company to increase
the authorized common stock from 30
million shares to 75 million shares.
3. In their discretion on such other matters as may properly come before the
Meeting.
Copies of the Notice of Meeting and of the Proxy Statement have been
received by the undersigned.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE(S) DATE
------------------------------------------- ---------------------
(NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON, EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC. SHOULD SO INDICATE WHEN SIGNING, GIVING
FULL TITLE AS SUCH. IF SIGNER IS A CORPORATION, EXECUTE IN FULL CORPORATE
NAME BY AUTHORIZED OFFICER. IF MORE PERSONS, ALL SHOULD SIGN)
