<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
AMENDMENT NO. 2 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 1-12636
THERMO TERRATECH INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- -----------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of May 24, 1996, was approximately $41,619,000.
As of May 24, 1996, the Registrant had 17,647,504 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended March 30, 1996, are incorporated by reference into Parts I and II.
<PAGE> 2
THERMO TERRATECH INC.
AMENDMENT NO. 2 ON FORM 10K/A TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 30, 1996
PART III, ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
---------------------------------------------------
PART III, ITEM 11. EXECUTIVE COMPENSATION.
-----------------------
PART III, ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT.
-----------
PART III, ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS.
---------------------------------------
The information required under these items, originally to be incorporated
by reference from the Registrant's definitive proxy statement to be filed with
the Commission pursuant to Regulation 14A, not later than 120 days after the
close of the fiscal year, is contained in the following Attachment A, which is
included herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 on
Form 10-K/A to be signed by the undersigned, duly authorized.
THERMO TERRATECH INC.
By: /s/ Sandra L. Lambert
----------------------------------
Sandra L. Lambert
Secretary
<PAGE> 3
ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the persons nominated as Directors
of Thermo TerraTech Inc. (the "Corporation"), 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."
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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 Ecotek Corporation, Thermo
Fibertek Inc. and Thermo Remediation.
- --------------------------------------------------------------------------------
1
<PAGE> 4
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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
2
<PAGE> 5
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. Options to
purchase an aggregate of 55,300 shares of Common Stock were reserved and
available for grant under the Directors Plan as of July 1, 1996.
3
<PAGE> 6
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.
While certain Directors or executive officers of the Corporation are
also directors or executive officers of Thermo Remediation or Thermo Electron,
all such persons disclaim beneficial ownership of the shares of Common Stock
owned by Thermo Electron and the shares of the common stock of Thermo
Remediation owned by the Corporation.
<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 ........................ 47,882 53,724 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 ........................ 1,613 0 1,500
Polyvios C. Vintiadis .................. 8,707 0 1,500
All Directors and current executive
officers as a group (10 persons)(6) .. 784,158 1,325,160 286,682
<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 the Common Stock beneficially owned by each Director and
executive officer and by all Directors and executive officers as a group
exclude 14,566,258 shares beneficially owned by Thermo Electron, as to
which shares each Director and executive officer and all members of such
group disclaim beneficial ownership. 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 17,642, 613, 3,407 and 21,662 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>
4
<PAGE> 7
maintained pursuant to the ESOP. Shares beneficially owned by Mr. Noble
and all Directors and executive officers as a group each include 41,434
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.
5
<PAGE> 8
<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)
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<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>
6
<PAGE> 9
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>
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<PAGE> 10
(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/--
Thermo Remediation -- -- 63,000/0 $453,285/--
- ----------------------------------------------------------------------------------------------------------------
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/--
Thermo Remediation -- -- 18,000/0 $116,010/--
Thermo Electron -- -- 10,312/0 $142,756/--
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 11
(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
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<PAGE> 12
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.
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.
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<PAGE> 13
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 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 $100,000 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.
11
