ATTACHMENT A
DIRECTORS
Set forth below are the names of the persons serving as
directors, their ages, their offices in the Corporation, if any,
their principal occupation or employment for the past five years,
the length of their tenure as directors and the names of other
public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the
Corporation's Common Stock and 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, 62, 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. Mr. Hatsopoulos, 63, has been a Director of
the Corporation since 1986 and its Vice
Hatsopoulos President and Chief Financial Officer since
1988. Mr. Hatsopoulos has been the President
of Thermo Electron since January 1997 and its
Chief Financial Officer since 1988. Prior to
becoming President, he was an Executive Vice
President of Thermo Electron from 1986 to
January 1997. Mr. Hatsopoulos is also a
director of LOIS/USA Inc., Metrika Systems
Corporation, Thermedics Inc., Thermedics
Detection Inc., Thermo Ecotek Corporation,
Thermo Fibertek Inc., Thermo Instrument
Systems Inc., Thermo Power Corporation and
ThermoTrex Corporation.
Brian D. Holt Mr. Holt, 48, became a Director of the
Corporation in February, 1997. Mr. Holt has
been the President and Chief Executive Officer
of Thermo Ecotek Corporation since February
1994 and a Director of that company since
January 1995. For more than five years prior
to his appointment as an officer of the Thermo
Ecotek Corporation, he was President and Chief
Executive Officer of Pacific Generation
Company, a financier, builder, owner and
operator of independent power facilities. Mr.
Holt is also a director of KFX, Inc.
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Donald E. Noble Mr. Noble, 82, has been a Director of the
Corporation since 1986 and served as Chairman
of the Board from 1992 to November 1994. For
more than 20 years, from 1959 to 1980, Mr.
Noble served as the chief executive officer of
Rubbermaid Incorporated, first with the title
of President and then as Chairman of the
Board. Mr. Noble is also a director of Thermo
Electron, Thermo Fibertek Inc., Thermo Power
Corporation and Thermo Sentron Inc.
William A. Mr. Rainville, 55, has been a Director of the
Corporation since February 1993 and Chairman
Rainville of the Board since November 1994. Mr.
Rainville has been President and Chief
Executive Officer of Thermo Fibertek Inc., a
majority owned subsidiary of Thermo Electron
that develops and manufactures equipment and
products for the paper making and paper
recycling industries, since its inception in
1991, and a Senior Vice President of Thermo
Electron since March 1993 and a Vice President
of Thermo Electron from 1986 to 1993. From
1984 until January 1993, Mr. Rainville was the
President and Chief Executive Officer of
Thermo Electron Web Systems Inc., a subsidiary
of Thermo Fibertek Inc.. Mr. Rainville is
also a director of Thermo Ecotek Corporation,
Thermo Fibergen Inc., Thermo Fibertek Inc. and
Thermo Remediation.
Polyvios C. Mr. Vintiadis, 61 has been a Director of the
Vintiadis 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
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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) and Mr. Vintiadis. The Human Resources Committee
reviews the performance of senior members of management,
recommends executive compensation and administers the
Corporation's stock option and other stock-based compensation
plans. The Corporation does not have a nominating committee of
the Board of Directors. The Board of Directors met six times, the
Audit Committee met twice and the Human Resources Committee met
six times during fiscal 1997. Each director attended at least 75%
of all meetings of the Board of Directors and Committees on which
he served held during fiscal 1997, except Dr. Appleton and Mr.
Hatsopoulos, who each attended 67% of such meetings. Dr.
Appleton attended all of the meetings of the Board of Directors
held in person, but did not participate in two meetings held by
means of conference telephone due to scheduling difficulties
while he was traveling overseas on company business. 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 company 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
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following is deemed to be a change of control: (a) the
acquisition, without the prior approval of the Board of
Directors, directly or indirectly, by any person of 50% or more
of the outstanding Common Stock or 25% or more of the outstanding
common stock of Thermo Electron; or (b) the failure of the
persons serving on the Board of Directors immediately prior to
any contested election of directors or any exchange 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 41,416 shares of Common Stock have
been reserved for issuance under the Deferred Compensation Plan.
As of June 28, 1997, deferred units equal to 24,447 full shares
of Common Stock were accumulated for current directors under the
Deferred Compensation Plan.
Directors Stock Option Plan
The Corporation's Directors Stock Option Plan (the
"Directors Plan") provides for the grant of stock options to
purchase shares of Common Stock of the Corporation and its
majority owned subsidiaries to outside directors as additional
compensation for their service as directors. Under the Directors
Plan, outside directors are automatically granted options to
purchase 1,000 shares of Common Stock annually and 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.
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 expire 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
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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. As of June 28, 1997, options to purchase 22,700
shares of Common Stock had been granted under the Director's
Plan, of which 15,500 were outstanding, 1,400 had lapsed, and
5,800 had been exercised; and options to purchase 53,700
shares of Common Stock were reserved and available for grant under
the Director's Plan as of June 28, 1997.
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Stock Ownership Policies for Directors
During fiscal 1997, the Human Resources Committee of the
Board of Directors (the "Committee") established a stock holding
policy for directors. The stock holding policy requires each
director to hold a minimum of 1,000 shares of Common Stock.
Directors are requested to achieve this ownership level by the
1998 Annual Meeting of Stockholders. Directors who are also
executive officers of the Corporation are required to comply with
a separate stock holding policy established by the Committee in
fiscal 1997.
In addition, the Committee adopted a policy requiring
directors to hold shares of the Corporation's Common Stock equal
to one-half of their net option exercises over a period of five
years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to
exercise the option and the number of shares that could have been
surrendered to satisfy tax withholding obligations attributable
to the exercise of the option. This policy is also applicable to
executive officers.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of
Common Stock, as well as the common stock of Thermo Electron and
Thermo Remediation, as of June 28, 1997, with respect to (i) each
person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each
director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and
(iv) all directors and executive officers as a group.
While certain directors or executive officers of the
Corporation are also directors and 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.
Thermo Thermo Thermo
TerraTech Electron
Name (1) Inc. (2) Corporation Remediation
-------- -------- ----------- -----------
(3) Inc. (4)
--- --------
Thermo Electron 15,491,635 N/A N/A
Corporation (5)
John P. Appleton 216,989 144,749 63,000
John N. Hatsopoulos 62,306 632,768 42,182
Emil C. Herkert 250,000 39,600 2,000
Brian D. Holt 0 164,493 0
Donald E. Noble 49,934 55,198 10,500
Jeffrey L. Powell 82,835 41,287 111,000
William A. Rainville 60,000 249,292 24,000
Polyvios C. Vintiadis 11,030 2,500 1,500
All directors and
current executive
officers as a group
(9 persons) 744,240 1,465,381 269,182
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(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. Herkert, Mr. Noble, Mr. Powell, Mr.
Rainville, Mr. Vintiadis and all directors and executive officers
as a group include 215,000, 40,000, 187,500, 8,200, 63,000,
60,000, 6,300 and 585,000 shares, respectively, that such person
or group has the right to acquire within 60 days of June 28,
1997, through the exercise of stock options. Shares beneficially
owned by Dr. Appleton, Mr. Hatsopoulos and all directors and
executive officers as a group include 255, 265 and 771 full
shares, respectively, allocated through June 28, 1997, 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 June 28, 1997, executive officers of
Thermo Electron ("ESOP"). Shares beneficially owned by Mr.
Noble, Mr. Vintiadis and all directors and executive officers as
a group include 18,694, 4,730 and 23,424 full shares,
respectively, allocated through June 28, 1997, to their
respective accounts maintained under the Corporation's Deferred
Compensation Plan for directors. 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 June 28, 1996, through the exercise
of a stock purchase warrant. Except for Dr. Appleton, who
beneficially owned approximately 1.2% of the Common Stock
outstanding as of June 28, 1997, no director or executive officer
beneficially owned more than 1% of the Common Stock outstanding
as of June 28, 1997; all directors and executive officers as a
group beneficially owned 4.1% of the Common Stock outstanding as
of such date.
(3) Shares of the common stock of Thermo Electron beneficially
owned by Dr. Appleton, Mr. Hatsopoulos, Mr. Herkert, Mr. Holt,
Mr. Noble, Mr. Powell, Mr. Rainville and all directors and
executive officers as a group include 107,257, 535,685, 38,100,
164,000, 9,375, 35,012, 197,236 and 1,181,802 shares,
respectively, that such person or members of the group have the
right to acquire within 60 days of June 28, 1997, through the
exercise of stock options. Shares beneficially owned by Mr.
Hatsopoulos and all directors and executive officers as a group
include 1,934 and 3,258 full shares, respectively, allocated
through June 28, 1997, to accounts maintained pursuant to the
ESOP. Shares beneficially owned by Mr. Noble and all directors
and executive officers as a group each include 42,408 shares
allocated through June 28, 1997, to Mr. Noble's account
maintained pursuant to Thermo Electron's Deferred Compensation
Plan for directors. No director or executive
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beneficially owned more than 1% of such common stock outstanding
as of such date; all directors and executive officers as a group
beneficially owned 1% of the Thermo Electron common stock
outstanding as of June 28, 1997.
(4) Shares of Common Stock beneficially owned by Dr. Appleton,
Mr. Hatsopoulos, Mr. Noble, Mr. Powell, Mr. Rainville, Mr.
Vintiadis and all directors and executive officers as a group
include 63,000, 22,500, 6,000, 111,000, 22,500, 1,500 and 241,500
shares, respectively, that such person or group has the right to
acquire within 60 days after June 28, 1997, 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 June 28, 1997; all directors and executive
officers as a group beneficially owned 2.1% of such common stock
outstanding as of such date.
(5) Shares of Common Stock beneficially owned by Thermo Electron
include 459,677 shares that Thermo Electron and two of its
majority owned subsidiaries have the right to acquire within 60
days of June 28, 1997, through the conversion of certain
convertible notes of the Corporation held by Thermo Electron and
such subsidiaries. As of June 28, 1997, Thermo Electron
beneficially owned approximately 85.9% of the outstanding Common
Stock. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as
Thermo Electron, to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of
changes in ownership of the Corporation's securities. Based upon
a review of such filings, all Section 16(a) filing requirements
applicable to such persons were complied with during fiscal 1997,
except in the following instances. The Form 3 of Mr. Brian D.
Holt, a Director of the Corporation, was filed late. Thermo
Electron filed eight Forms 4 late, reporting a total of 34
transactions consisting of 28 open market purchases of Common
Stock and six transactions associated with the grant and lapse of
options to purchase Common Stock granted to employees under its
stock option program.
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 1997 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.
<TABLE>
Summary Compensation Table
Long Term
Compensation
------------
Securities
Fiscal Annual Compensation Underlying Options
Name and ------------------- (No. of Shares All Other
Principal Position Year Salary Bonus and Company) (1) Compensation (2)
- - ------------------ ---- ------ ----- ------------------- ------------
<S> <C> <C> <C> <C> <C>
John P. Appleton 1997 $128,625 $70,000 -- $6,919
(3)
President and 1996 $118,125 $70,000 -- $6,919
Chief Executive
Officer 1995 $124,313 $85,000 30,000 (TTT) $11,171
Jeffrey L. Powell 1997 $122,000 $40,000 600 (TMO) $7,023
Vice President 2,000 (TFG)
6,000 (TOC)
1996 $116,000 $60,000 300 (TMO) $6,646
2,000 (TBA)
5,000 (TLZ)
2,000 (TLT)
6,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
1995 $108,000 $63,500 10,000 (TTT) $6,828
15,000 (THN)
22,725 (TMO)
Emil C. Herkert 1997 $200,000 $100,000 300 (TMO) $4,189
(4)
</TABLE>
(1) In addition to grants of options to purchase Common Stock
of the Corporation (designated in the table as TTT), the named
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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 Remediation (designated in the table
as THN), Thermo Electron (designated in the table as TMO),
Thermo BioAnalysis Corporation (designated in the table as TBA),
Thermo Fibergen Inc. (designated in the table as TFG), ThermoLase
Corporation (designated in the table as TLZ), ThermoLyte
Corporation (designated in the table as TLT), Thermo Optek
Corporation (designated in the table as TOC), ThermoQuest
Corporation (designated in the table as TMQ), Thermo Sentron Inc.
(designated in the table as TSR), and Trex Medical Corporation
(designated in the table as TXM).
(2) Represents the amount of matching contributions made by the
individual's employer on behalf of the named 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. A portion
of Dr. Appleton's annual cash compensation (salary and bonus) has
been allocated to and paid by each of the Corporation, Thermo
Remediation and Thermo Electron over each of the past three
fiscal years as compensation for the services provided to these
companies based on the time he devoted to his responsibilities to
these companies. The annual cash compensation reported in the
table for Dr. Appleton represents the amount paid from all
sources, including the Corporation, solely for Dr. Appleton's
services as the president and chief executive officer of the
Corporation. For fiscal 1997, 1996 and 1995, approximately 70%,
70% and 85%, respectively, of Dr. Appleton's annual cash
compensation was paid by the Corporation for his services as its
president and chief executive officer. These percentages include
the allocation of a portion of Dr. Appleton's annual cash
compensation 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. 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 here as they were granted as compensation for
service to Thermo Electron companies in capacities other than in
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his capacity as the president and chief executive officer of the
Corporation.
(4) Mr. Herkert was appointed an executive officer of the
Corporation on May 8, 1996.
Stock Options Granted During Fiscal 1997
The following table sets forth information concerning
individual grants of stock options made during fiscal 1997 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 1997.
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 1997 in his capacity as
president and chief executive officer of the Corporation.
<TABLE>
Option Grants in Fiscal 1997
Potential Realizable
Number of Value at Assumed
Securities Percent of Annual Rates of Stock
Total Options Price Appreciation for
Underlying Granted to Exercise
Options Employees in Price Option Term
Per Expiration -----------
Name Granted (1) Fiscal Year (2) Share Date 5% 10%
---- ------- ---------------- ----- ---------- -- ---
<S> <C> <C> <C> <C>
Jeffrey L. Powell 600 (TMO) 0.06% (3) $42.79 05/22/99 $4,044 $8,496
2,000 (TFG) 0.4% (3) $10.00 09/12/08 $15,920 $42,760
6,000 (TOC) 0.2% (3) $12.00 04/09/08 $57,300 $153,960
Emil C. Herkert 300 (TMO) 0.03% (3) $42.79 05/22/99 $2,022 $4,248
</TABLE>
(1) As part of Thermo Electron's stock option program, options
have been granted during fiscal 1997 to the named executive
officers to purchase the common stock of Thermo Electron
(designated in the table as TMO), Thermo Fibergen Inc.
(designated in the table as TFG) and Thermo Optek Corporation
(designated in the table as TOC). All of the options granted
during the fiscal year are immediately exercisable at the date of
grant. In all cases, the shares acquired upon exercise are
subject to repurchase by the granting corporation at the exercise
price if the optionee ceases to be employed by such corporation
or any other Thermo Electron company. The granting corporation
may exercise its repurchase rights within six months after the
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. The granting corporation may permit the
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holders of options to exercise options and to satisfy tax
withholding obligations by surrendering shares equal in fair
market value to the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains
that could be achieved for the respective options if exercised at
the end of the option term. These gains are based on assumed
rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the
common stock of the applicable corporation, the optionee's
continued employment through the option period and the date on
which the options are exercised.
(3) All of the options reported in the table were granted under
stock option plans maintained by Thermo Electron or its
subsidiaries as part of Thermo Electron's compensation program
and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
Stock Options Exercised During Fiscal 1997 and Fiscal Year-End
Option Values
The following table reports certain information regarding
stock option exercises during fiscal 1997 and outstanding stock
options held at the end of fiscal 1997 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1997.
<TABLE>
Aggregated Option Exercises In Fiscal 1997 And Fiscal 1997 Year-End Option Values
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired Value (Exercisable/ In-the-Money
on
Name Company Exercise Realized Unexercisable) (1) Options
- - ---- ------- -------- -------- ------------------ -------
<S> <C> <C> <C> <C> <C>
John P. Thermo -- -- 215,000 /-- (3) $34,075 /--
Appleton (2) TerraTech
Thermo -- -- 63,000 /-- $12,285 /--
Remediation
Jeffrey L. Thermo -- -- 63,000 /-- (4) $74,785 /--
Powell TerraTech
Thermo 5,062 $126,955 34,312 /-- (5) $470,330 /--
Electron
Thermo -- -- 111,000 /-- $18,720 /--
Remediation
Thermo -- -- 2,000 /-- $0 /--
BioAnalysis
Thermo -- -- 2,000 /-- $0 /--
Fibergen
Thermo -- -- 4,500 /-- $32,625 /--
Fibertek
ThermoLase -- -- 5,000 /-- $0 /--
ThermoLyte -- -- -- /2,000 -- /$0 (6)
Thermo Optek -- -- 6,000 /-- $3,000 /--
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ThermoQuest -- -- 6,000 /-- $9,000 /--
Thermo -- -- 2,000 /-- $0 /--
Sentron
Trex Medical -- -- 4,000 /-- $2,500 /--
Emil C.
Herkert Thermo 62,500 $697,975 187,500 /-- $1,695,938 /--
TerraTech
Thermo -- -- 37,800 /-- (7) $286,763 /--
Electron
</TABLE>
(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 ThermoLyte Corporation, which are
not exercisable until the earlier of (i) 90 days after the
effective date of the registration of that company's common
stock under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") and (ii) nine years from the grant date. In
all cases, the shares acquired upon exercise are subject to
repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or any
other Thermo Electron company. The granting corporation may
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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.
(2) Dr. Appleton has served as a vice president 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 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, options to purchase
15,000 shares 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 lapse 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 28, 1997. Accordingly, no value in excess of
exercise price has been attributed to these options.
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(7) Options to purchase 22,500 shares of the common stock of
Thermo Electron granted to Mr. Herkert 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 fiscal 1997, the
Human Resources Committee of the Board of Directors accelerated
the vesting of 1,800 shares.
Severance 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 in 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 severance 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 in 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 is 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 March 29, 1997, Dr. Appleton would have received
approximately $119,906 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. F rom time to time,
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Thermo Electron and its subsidiaries will create other
majority-owned subsidiaries as part of its spinout strategy.
(The Corporation and the other majority-owned Thermo Electron
subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries".)
Thermo Electron and each of the Thermo Subsidiaries
recognize that the benefits and support that derive from their
mutual 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 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
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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 financial and other
services to the Corporation. The Corporation was assessed an
annual fee equal to 1.0% of the Corporation's revenues for these
services for fiscal 1997. The fee is reviewed annually and may
be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1997, Thermo Electron assessed the
Corporation $2,785,000 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
fair to the Corporation. For items such as employee benefit
plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Corporation based on charges attributable to
the Corporation. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Corporation
upon 30 days' prior notice. In addition, the Services Agreement
terminates automatically in the event the Corporation ceases to
be a member of the Thermo Group or ceases to be a participant in
the Charter. In the event of a termination of the Services
Agreement, the Corporation will be required to pay a termination
fee equal to the fee that was paid by the Corporation for
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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 29 , 1997, $59,781,000 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 three office and
manufacturing facilities from Thermo Electron. The total rental
payments made to Thermo Electron during fiscal year 1997 under
these agreements was $553,000.
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 $186,000 in fiscal 1997.
From time to time, the Corporation may transact business
with the other companies in the Thermo Group. In fiscal 1997,
these transactions included the Corporation's October 1996
acquisition of Metal Treating Inc., a provider of heat treating
services, from Thermo Electron in exchange for $1,600,000 in
cash.
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As of March 29, 1997, the Corporation owed Thermo Electron
an aggregate of $40,926,000.
Thermo Electron owned approximately 85.9%
Corporation's outstanding Common Stock on June 28, 1997.
Stock Holding Assistance Plan
In fiscal 1997, the Corporation adopted a stock holding
policy which requires its executive officers to acquire and hold
a minimum number of shares of Common Stock. In order to assist
the executive officers in complying with the policy, the
Corporation also adopted a stock holding assistance plan under
which it may make interest-free loans to certain key employees,
including its executive officers, to enable such employees to
purchase the Common Stock in the open market. Loans will be
repaid upon the earlier of demand or the fifth anniversary of the
date of the loan, unless otherwise authorized by the Human
Resources Committee of the Board of Directors. No such loans
were outstanding in fiscal 1997.
AA972050013
