<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934
Commission file number 1-12636
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. 1 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. 1 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 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
Fibertek Inc. and Thermo Remediation.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
1
<PAGE> 4
- -------------------------------------------------------------------------------
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 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.
2
<PAGE> 5
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.
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.
<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) . 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 or
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 4.4% 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.
</TABLE>
4
<PAGE> 7
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 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 approximately 3.95% 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 261,500 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 2.4% 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.
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
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<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
SECURITIES UNDERLYING
AWARDS OF OPTIONS ALL OTHER
NAME AND FISCAL (NO. 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 1995 $146,250 $100,000(3) 30,000 (TTT) $11,171
Chief Executive 1994 $ 75,533 $ 80,000(3) 185,000 (TTT) $11,115
Officer 63,000 (THN)
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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, 1995 $ 91,000 $ 28,000 4,000 (TTT) $ 5,203
Finance and 3,000 (THN)
Administration
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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.
</TABLE>
6
<PAGE> 9
(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
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.
7
<PAGE> 10
<TABLE>
OPTION GRANTS IN FISCAL 1996
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK
NUMBER OF SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM
NAME GRANTED(1) FISCAL YEAR SHARE DATE ----------------------
---- ---------- ----------- ----- ----
(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
- -----------------------------------------------------------------------------------------------------------
<FN>
(1) In addition to the grant of options to purchase Common Stock of the
Corporation (designated in the table as TTT), 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.
</TABLE>
STOCK OPTIONS EXERCISED DURING FISCAL 1996
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.
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<PAGE> 11
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
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 UNEXERCISBLE)(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
- ---------------------------------------------------------------------------------------------------------
<FN>
(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.
</TABLE>
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<PAGE> 12
(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 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
10
<PAGE> 13
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 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.
From time to time, the Corporation may transact business in the ordinary
course with other companies in the Thermo Group. All such transactions are on
terms comparable to those the Corporation would receive from unaffiliated
parties.
11
<PAGE> 14
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.
Effective April 2, 1995, the Corporation agreed to dissolve the Thermo
TerraTech joint venture with Thermo Instrument Systems Inc. ("THI"), another
subsidiary of Thermo Electron, and to purchase the businesses originally
contributed to the joint venture by THI and formerly operated by the joint
venture from THI for $34,267,000 in cash. The purchase price was based on the
Corporation's determination (as approved by its Board of Directors) of the fair
market value of the businesses, and the terms of the agreement for the purchase
were determined by arms' length negotiation among the parties. As a result of
this transaction, the Corporation increased its ownership in the businesses
operated by the joint venture from 51% to 100%. The Corporation borrowed the
purchase price from Thermo Electron through the issuance of a $35,000,000
promissory note that bears interest at the Commercial Paper Composite Rate as
announced from time to time by Merrill Lynch Capital Markets plus 25 basis
points and is due May 13, 1997.
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.
12
