<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Thermo TerraTech Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
THERMO TERRATECH INC.
81 Wyman Street
Waltham, Massachusetts 02454-9046
July 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
Thermo TerraTech Inc. I respectfully request all Stockholders to attend this
meeting, if possible.
Our Annual Report for the fiscal year ended April 4, 1998, is enclosed. I
hope you will read it carefully. Feel free to forward any questions you may
have if you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer & Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
JOHN P. APPLETON
President and Chief Executive Officer
<PAGE>
THERMO TERRATECH INC.
81 Wyman Street
Waltham, Massachusetts 02454-9046
July 23, 1998
To the Holders of the Common Stock of
THERMO TERRATECH INC.
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermo TerraTech Inc. (the
"Corporation") will be held on Tuesday, September 15, 1998, at 3:00 p.m. at the
offices of Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts.
The purpose of the meeting is to consider and take action upon the following
matters:
1. Election of six directors.
2. Such other business as may properly be brought before the meeting and any
adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is July 23, 1998.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the number
of shares you may hold. Whether or not you are able to be present in person,
please sign and return promptly the enclosed proxy in the accompanying envelope,
which requires no postage if mailed in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo
TerraTech Inc. (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Tuesday, September 15, 1998, at 3:00
p.m. at the offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts, and any adjournment thereof. The mailing address of the executive
office of the Corporation is 81 Wyman Street, Waltham, Massachusetts 02454-9046.
This proxy statement and the enclosed proxy were first furnished to Stockholders
of the Corporation on or about July 27, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
six directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of common stock of the Corporation, $.10 par value (the "Common Stock"),
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. All signed
and returned proxies will be counted towards establishing a quorum for the
Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted FOR the management nominees for directors and
as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a plurality of the shares of Common Stock present and entitled to vote
on the election. Withholding authority to vote for a nominee for director will
be treated as shares present and entitled to vote and, for purposes of
determining the outcome of the vote, will have the same effect as a vote against
the nominee. With respect to the election of directors, broker "non-votes" will
not be treated as shares present and entitled to vote on a voting matter and
will have no effect on the outcome of the vote. A broker "non-vote" occurs when
a nominee holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Corporation received prior to the Meeting, by executing and returning a
later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of July 23, 1998, consisted of
19,513,824 shares of Common Stock. Only Stockholders of record at the close of
business on July 23, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
1
<PAGE>
--PROPOSAL 1--
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified or until his earlier resignation, death or
removal.
Nominees for Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors and
the names of other public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the Corporation's Common
Stock and of the common stock of its parent corporation, Thermo Electron
Corporation ("Thermo Electron"), a provider of diversified products and services
for biomedical, instrument and environmental markets, and of its majority-owned
subsidiaries, Thermo Remediation Inc. ("Thermo Remediation") and The Randers
Group Incorporated ("Randers"), is reported under the caption "Stock Ownership."
All of the nominees are currently directors of the Corporation.
<TABLE>
<S> <C>
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John P. Appleton Dr. Appleton, 63, has been president, chief executive officer and a director of
the Corporation since September 1993. Dr. Appleton has been chairman of the
board of Thermo Remediation since September 1993 and was its chief executive
officer from September 1993 to May 1997. He has been chairman of the board of
Randers since November 1997. Dr. Appleton has served as a vice president of
Thermo Electron since 1975 in various managerial capacities. He is also a
director of Randers and Thermo Remediation.
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John N. Hatsopoulos Mr. Hatsopoulos, 64, has been a director of the Corporation since 1986, its
senior vice president since December 1997, its chief financial officer since
1988 and its vice president from 1988 to December 1997. 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., Thermedics Inc., Thermo Ecotek
Corporation, Thermo Electron, Thermo Fibertek Inc., Thermo Instrument Systems
Inc. and Thermo Power Corporation.
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Brian D. Holt Mr. Holt, 49, became a director of the Corporation in February 1997. Mr. Holt
has been the president and chief executive officer of Thermo Ecotek
Corporation, a majority-owned subsidiary of Thermo Electron involved in clean
combustion and engineered clean fuels, naturally derived biopesticides and
other environmentally sound technologies, 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 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. and Thermo Ecotek Corporation.
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Donald E. Noble Mr. Noble, 83, 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.
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</TABLE>
2
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<TABLE>
<S> <C>
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William A. Rainville Mr. Rainville, 56, has been a director of the Corporation since February 1993
and was chairman of the board from November 1994 through February 1997. 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, 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.
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Polyvios C. Vintiadis Mr. Vintiadis, 62, has been a director of the Corporation since September 1992
and chairman of the board since February 1997. 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. and The
Randers Group Incorporated.
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</TABLE>
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) 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 five times during fiscal 1998. Each director attended at least 75% of all
meetings of the board of directors and committees on which he served held during
fiscal 1998.
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. Beginning in January 1997, the non-employee chairman of
the board receives an additional meeting fee for his service equal to $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. Payment of outside directors' fees is made quarterly.
Dr. Appleton, Mr. Hatsopoulos, Mr. Holt and Mr. Rainville are all employees of
Thermo Electron or its subsidiaries 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.
3
<PAGE>
Deferred Compensation Plan for Directors
Under the Corporation's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of his
cash fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change in control or proposed change in
control of the Corporation that is not approved by the board of directors,
deferred amounts become payable immediately. Either of the 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 April 4, 1998, deferred units equal
to 25,933 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 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 immediately preceding and including the date
of grant, or, if the shares
4
<PAGE>
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 29, 1998, options
to purchase 24,700 shares of Common Stock had been granted under the Director's
Plan, of which 16,500 were outstanding, 2,400 had lapsed, and 5,800 had been
exercised; and options to purchase 52,700 shares of Common Stock were reserved
and available for grant under the Director's Plan as of June 29, 1998.
Discretionary Grants of Stock Options to Directors
In addition to stock options granted pursuant to the Directors Plan, the
Corporation may also make discretionary grants of stock options to directors.
Beginning in fiscal 1997, the non-employee chairman of the board has received
annually a discretionary grant of options to purchase an additional 1,000 shares
of Common Stock of the Corporation. The exercise price for discretionary option
grants is calculated in the same manner as for options granted pursuant to the
Director's Plan, and the grant is awarded at the first regular meeting of the
board of directors following the Annual Meeting of the Stockholders in
conjunction with the chairman's annual appointment as chairman of the board.
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 were 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, which is described in "Committee
Report on Executive Compensation - Stock Ownership Policies."
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 and is described in "Committee Report
on Executive Compensation - Stock Ownership Policies."
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron, Thermo Remediation and Randers, as
of May 30, 1998, with respect to (i) each person who was known by the
Corporation to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and (iv) all
directors and current executive officers as a group.
While certain directors or executive officers of the Corporation are also
directors and executive officers of Thermo Remediation, Randers, 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 and Randers owned by the Corporation.
<TABLE>
<CAPTION>
Thermo Thermo Thermo The Randers
TerraTech Electron Remediation Group
Name (1) Inc. (2) Corporation (3) Inc. (4) Incorporated (5)
-------- -------- --------------- -------- ----------------
No. of % of No. of % of No. of % of No. of % of
Shares Class Shares Class Shares Class Shares Class
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thermo Electron Corporation (6) 16,140,535 82.7 N/A N/A N/A
John P. Appleton 297,039 1.5 145,309 * 73,000 * 600,000 4.1
John N. Hatsopoulos 60,357 * 721,850 * 61,282 * 240,000 1.7
Emil C. Herkert 187,500 * 39,600 * 0 * 1,200,000 7.8
Brian D. Holt 0 * 164,691 * 0 * 20,000 *
Donald E. Noble 52,019 * 56,876 * 10,500 * 0 *
Jeffrey L. Powell 82,835 * 41,493 * 121,000 * 120,000 *
William A. Rainville 60,000 * 233,909 * 24,000 * 120,000 *
Polyvios C. Vintiadis 13,454 * 2,500 * 1,500 * 246,678 1.7
All directors and current executive
officers as a group (9 persons) 764,401 3.9 1,527,979 * 314,282 2.4 2,586,678 17.4
</TABLE>
* Reflects ownership of less than 1.0% of the Common Stock outstanding as of May
30, 1998.
(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.
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<PAGE>
(2) Shares of Common Stock beneficially owned by Dr. Appleton, Mr. Hatsopoulos,
Mr. Noble, Mr. Powell, Mr. Rainville, Mr. Vintiadis and all directors and
current executive officers as a group include 275,000, 40,000, 9,200,
63,000, 60,000, 7,300 and 459,500 shares, respectively, that such person or
group has the right to acquire within 60 days of May 30, 1998, through the
exercise of stock options. Shares beneficially owned by Dr. Appleton, Mr.
Hatsopoulos and all directors and current executive officers as a group
include 305, 315 and 923 full shares, respectively, allocated through May
30, 1998, 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 May 30, 1998, executive officers of Thermo Electron
("ESOP"). Shares beneficially owned by Mr. Noble, Mr. Vintiadis and all
directors and current executive officers as a group include 19,779, 6,154,
and 25,933 full shares, respectively, allocated through May 30, 1998, to
their respective accounts maintained under the Corporation's Deferred
Compensation Plan for Directors. Shares beneficially owned by Mr.
Hatsopoulos and all directors and current executive officers as a group
include 12,500 shares that Mr. Hatsopoulos has the right to acquire within
60 days after May 30, 1998, through the exercise of a stock purchase
warrant.
(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 current executive officers as a group
include 113,532, 657,635, 38,100, 164,000, 8,125, 34,712, 169,487 and
1,275,624 shares, respectively, that such person or members of the group
have the right to acquire within 60 days of May 30, 1998, through the
exercise of stock options. Shares beneficially owned by Dr. Appleton, Mr.
Hatsopoulos and all directors and current executive officers as a group
include 1,615, 2,036 and 5,077 full shares, respectively, allocated through
May 30, 1998, to accounts maintained pursuant to the ESOP. Shares
beneficially owned by Mr. Noble and all directors and current executive
officers as a group each include 43,086 shares allocated through May 30,
1998, to Mr. Noble's account maintained pursuant to Thermo Electron's
deferred compensation plan for directors.
(4) Shares of the common stock of Thermo Remediation beneficially owned by Dr.
Appleton, Mr. Hatsopoulos, Mr. Noble, Mr. Powell, Mr. Rainville, Mr.
Vintiadis and all directors and current 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 May 30, 1998, through the exercise of stock options.
(5) Shares of the common stock of The Randers Group Incorporated beneficially
owned by Dr. Appleton, Mr. Hatsopoulos, Mr. Herkert, Mr. Holt, Mr. Powell,
Mr. Rainville, Mr. Vintiadis and all directors and current executive
officers as a group include 600,000, 240,000 1,200,000, 20,000, 120,000,
120,000, 240,000 and 2,580,000 shares, respectively, that such person or
group has the right to acquire within 60 days after May 30, 1998, through
the exercise of stock options. Shares beneficially owned by Mr. Vintiadis
and all directors and current executive officers as a group each include
6,678 shares allocated through May 30, 1998 to Mr. Vintiadis's account
maintained pursuant to Randers' deferred compensation plan for directors.
(6) As of May 30, 1998, Thermo Electron beneficially owned approximately 82.7%
of the outstanding Common Stock. Thermo Electron's address is 81 Wyman
Street, Waltham, Massachusetts 02254-9046.
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. Thermo Electron filed four Forms 4 late, reporting a total of 23
transactions, including 18 open market purchases of shares of Common Stock, four
transactions associated with the grant and exercise of options to purchase
Common Stock granted to employees under its stock option program and one
conversion to Common Stock of the Corporation's 3.5% convertible debentures.
6
<PAGE>
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>
<CAPTION>
Summary Compensation Table
- -------------------------------------------------------------------------------------------------------------
Long Term
Compensation
------------
Annual Compensation Securities Underlying All Other
Name and Fiscal ------------------- Options (No. of Shares Compensation
Principal Position Year Salary Bonus and Company) (2) (3)
------------------ ------ ------ ----- ---------------- ---
<S> <C> <C> <C> <C> <C>
John P. Appleton (4) 1998 $136,500 $0 (1) 60,000 (TTT) $3,500
President and 600,000 (RGI)
Chief Executive Officer 1997 $128,625 $70,000 -- -- $6,919
1996 $118,125 $70,000 -- -- $6,919
- -------------------------------------------------------------------------------------------------------------
Emil C. Herkert (5) 1998 $244,186 $0 (1) 300 (TMO) $3,552
Vice President 2,000 (MKA)
2,000 (ONX)
1,200,000 (RGI)
2,000 (TDX)
1,000 (TISI)
2,000 (TRIL)
1,500 (VIZ)
2,000 (TRCC)
1997 $237,186 $100,000 300 (TMO) $4,189
- -------------------------------------------------------------------------------------------------------------
Jeffrey L. Powell 1998 $145,000 $0 (1) 700 (TMO) $9,372
Vice President 2,000 (MKA)
2,000 (ONX)
120,000 (RGI)
2,000 (TDX)
1,000 (TISI)
2,000 (TRIL)
1,500 (VIZ)
2,000 (TRCC)
1997 $122,000 $40,000 600 (TMO) $7,023
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)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
(1) Dr. Appleton, Mr. Herkert and Mr. Powell elected to forego their bonuses
for fiscal 1998 in light of the Corporation's operating and stock price
performance in fiscal 1998.
(2) In addition to grants of options to purchase Common Stock of the
Corporation (designated in the table as TTT), the named 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),
Metrika Systems Corporation (designated in the table as MKA), ONIX Systems
Inc. (designated in the table as ONX), The Randers Group Incorporated
(designated in the table as RGI), Thermedics Detection Inc. (designated in
the table as TDX), Thermo BioAnalysis Corporation (designated in the table
as TBA), Thermo Fibergen Inc. (designated in the table as TFG), Thermo
Information Solutions Inc. (designated in the table as TISI), 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), Thermo Trilogy
Corporation (designated in the table as TRIL), Thermo Vision Corporation
(designated in the table as VIZ), Trex Communications Corporation
(designated in the table as TRCC) and Trex Medical Corporation (designated
in the table as TXM).
(3) 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 or, in the case of Mr. Herkert, the Elson T. Killam
Savings and Investment Plan.
(4) 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 and, until 1997, served as the chief executive
officer of Thermo Remediation. 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 1998, 1997 and 1996,
approximately 70%, 70% and 70%, respectively, of Dr. Appleton's annual cash
compensation was paid by all sources including the Corporation for his
services as its president and chief executive officer. For fiscal 1998,
1997 and 1996, an additional 20%, 20% and 20%, respectively, of Dr.
Appleton's annual cash compensation was allocated to Thermo Remediation for
Dr. Appleton's service as its chief executive officer, and such amount is
not included in the table. Bonuses paid to Dr. Appleton in 1996 and 1997
reflect compensation decisions based on calendar year performance, in
accordance with Thermo Electron's compensation practices for its officers.
Bonuses granted to Dr. Appleton for periods after 1998 will reflect
compensation decisions based on fiscal year performance. 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 his capacity as the president and
chief executive officer of the Corporation.
(5) Mr. Herkert was appointed an executive officer of the Corporation on May 8,
1996.
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options made during fiscal 1998 to the Corporation's chief executive
officer and the other named executive officers. It has not been the
8
<PAGE>
Corporation's policy in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1998.
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.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1998
- ------------------------------------------------------------------------------------------------------------------------
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 (2) Share Date 5% 10%
---- ----------- --------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
John P. Appleton 60,000 (TTT) 20.41% $9.98 9/22/04 $243,600 $568,200
600,000 (RGI) 6.79% (3) $0.65 12/12/04 $156,000 $372,000
- ------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Powell 700 (TMO) 0.04% (3) $34.20 6/3/00 $3,773 $7,924
2,000 (MKA) 0.47% (3) $14.23 1/21/05 $11,580 $27,000
2,000 (ONX) 0.30% (3) $14.25 1/21/05 $11,600 $27,040
120,000 (RGI) 1.36% (3) $0.65 12/12/04 $31,200 $74,400
2,000 (TDX) 0.32% (3) $9.56 1/21/05 $7,780 $18,140
1,000 (TISI) 0.27% (3) $10.00 1/21/05 $4,070 $9,490
2,000 (TRIL) 0.99% (3) $8.25 1/21/05 $6,720 $15,660
1,500 (VIZ) 0.35% (3) $7.25 1/21/05 $4,425 $10,320
2,000 (TRCC) 0.37% (3) $4.00 1/21/05 $3,260 $7,580
- ------------------------------------------------------------------------------------------------------------------------
Emil C. Herkert 300 (TMO) 0.02% (3) $34.20 6/3/00 $1,617 $3,396
2,000 (MKA) 0.47% (3) $14.23 1/21/05 $11,580 $27,000
2,000 (ONX) 0.30% (3) $14.25 1/21/05 $11,600 $27,040
1,200,000 (RGI) 13.58% (3) $0.65 12/12/04 $312,000 $744,000
2,000 (TDX) 0.32% (3) $9.56 1/21/05 $7,780 $18,140
1,000 (TISI) 0.27% (3) $10.00 1/21/05 $4,070 $9,490
2,000 (TRIL) 0.99% (3) $8.25 1/21/05 $6,720 $15,660
1,500 (VIZ) 0.35% (3) $7.25 1/21/05 $4,425 $10,320
2,000 (TRCC) 0.37% (3) $4.00 1/21/05 $3,260 $7,580
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 1998 to the named executive officers to purchase the common
stock of Thermo Electron (designated in the table as TMO), Metrika Systems
Corporation (designated in the table as MKA), ONIX Systems Inc. (designated
in the table as ONX), The Randers Group Incorporated (designated in the
table as RGI), Thermedics Detection Inc. (designated in the table as TDX),
Thermo Information Solutions Inc. (designated in the table as TISI), Thermo
Trilogy Corporation (designated in the table as TRIL), Thermo Vision
Corporation (designated in the table as VIZ) and Trex Communications
Corporation (designated in the table as TRCC). 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 Information Solutions
Inc., Thermo Trilogy Corporation and Trex Communications 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 and Exchange Act of 1934 and (ii) six years from 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. For companies whose shares are not publicly traded, the
repurchase rights lapse in their entirety on the sixth anniversary of the
date of grant. Certain options have three-year terms and the repurchase
rights lapse in their entirety on the second 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.
(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) These options were granted under stock option plans maintained by Thermo
Electron or its subsidiaries other than the Corporation 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 1998 and Fiscal Year-End Option Values
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options held at the end of
fiscal 1998 by the Corporation's chief executive officer and the other named
executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1998.
9
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1998 And Fiscal 1998 Year-End Option Values
- ------------------------------------------------------------------------------------------------------------------------
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value (Exercisable/ In-the-Money
Name Company Exercise Realized (1) Unexercisable)(2) Options
---- ------- -------- ------------ ----------------- -------
<S> <C> <C> <C> <C> <C>
John P. Appleton Thermo TerraTech -- -- 275,000 /-- (4) $0 /--
(3) Randers Group Inc. -- -- 600,000 /-- $60,000 /--
- ------------------------------------------------------------------------------------------------------------------------
Jeffrey L. Powell Thermo TerraTech -- -- 63,000 $12,195 /--
Thermo Electron 300 $3,101 34,712 /-- (5) $756,846 /--
Metrika Systems -- -- 2,000 /-- $2,666 /--
ONIX Systems -- -- 2,000 /-- $0 /--
Randers Group Inc. -- -- 120,000 /-- $12,000 /--
Thermedics Detection -- -- 2,000 /-- $3,880 /--
Thermo BioAnalysis -- -- 2,000 /-- $23,250 /--
Thermo Fibergen -- -- 2,000 /-- $0 /--
Thermo Fibertek -- -- 4,500 /-- $40,784 /--
Thermo Information Solutions -- -- -- /1,000 -- /$0 (6)
ThermoLase -- -- 5,000 /-- $0 /--
ThermoLyte -- -- -- /2,000 -- /$0 (6)
Thermo Optek -- -- 6,000 /-- $39,180 /--
ThermoQuest -- -- 6,000 /-- $39,378 /--
Thermo Remediation -- -- 111,000 /-- $0 /--
Thermo Sentron -- -- 2,000 /-- $0 /--
Thermo Trilogy -- -- -- /2,000 -- /$0 (6)
Thermo Vision -- -- 1,500 /-- $188 /--
Trex Communications -- -- -- /2,000 -- /$0 (6)
Trex Medical -- -- 4,000 /-- $28,252 /--
- ------------------------------------------------------------------------------------------------------------------------
Emil C. Herkert Thermo TerraTech 187,500 $1,613,550 -- /-- -- /--
Thermo Electron -- -- 38,100 /-- (7) $607,591 /--
Metrika Systems -- -- 2,000 /-- $2,666 /--
ONIX Systems -- -- 2,000 /-- $0 /--
Randers Group Inc. -- -- 1,200,000 /-- $120,000 /--
Thermedics Detection -- -- 2,000 /-- $3,880 /--
Thermo Information Solutions -- -- -- /1,000 -- /$0 (6)
Thermo Trilogy -- -- -- /2,000 -- /$0 (6)
Thermo Vision -- -- 1,500 /-- $188 /--
Trex Communications -- -- -- /2,000 -- /$0 (6)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year are
immediately exercisable as of fiscal year-end, 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 and (ii) nine years from the grant date, and options to purchase
the common stock of Thermo Information Solutions Inc., Thermo Trilogy
Corporation and Trex Communications 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 and (ii) six 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 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. Certain options have
three-year terms and the repurchase rights lapse in their entirety on the
second anniversary of the grant date. For companies whose shares are not
publicly traded, the repurchase rights lapse in their entirety on the ninth
anniversary (in the case of ThermoLyte Corporation) or sixth anniversary
(in the case of Thermo Information Solutions Inc., Thermo Trilogy
Corporation, and Trex Communications Corporation) of the grant date.
(3) 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.
(4) In addition to the terms described in footnote (2) above, 60,000 of the
shares subject to option are, if acquired through exercise, restricted from
resale until Dr. Appleton's retirement.
(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
April 4, 1998. Accordingly, no value in excess of exercise price has been
attributed to these options.
(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 and 1998, the human resources committee of the board of
directors of Thermo Electron accelerated the vesting of 1,800 shares and
1,350 shares, respectively.
11
<PAGE>
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 April 4, 1998, Dr. Appleton would
have received approximately $119,906 in the first year thereof from Thermo
Electron.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines established
by the human resources committee of the board of directors of its parent
company, Thermo Electron. The executive compensation program presently consists
of annual base salary ("salary"), short-term incentives in the form of annual
cash bonuses, and long-term incentives in the form of stock options.
The Committee believes that the compensation of executive officers should
reflect the scope of their responsibilities, the success of the Corporation, and
the contributions of each executive to that success. In addition, the Committee
believes that base salaries should approximate the mid-point of competitive
salaries derived from market surveys and that short-term and long-term incentive
compensation should reflect the performance of the Corporation and the
contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total
compensation for its executives is assessed by comparing it to market data
provided by compensation consultants and by participating in annual executive
compensation surveys, primarily "Project 777," an executive compensation survey
prepared by Management Compensation Services, a division of Hewitt Associates.
The majority of firms represented in the Project 777 survey are included in the
Standard & Poor's 500 Index, but do not necessarily correspond to the companies
included in the Corporation's peer group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by comparing
it to compensation of other executives within the Thermo Electron organization
with comparable levels of responsibility for comparably sized business units.
The process for determining each of these elements for the Corporation's
executive officers is outlined below. For its review of the compensation of
other officers of the Corporation, the Committee follows a substantially similar
process.
12
<PAGE>
Base Salary
Base salaries are set to approximate the mid-point of competitive salaries
for similar organizations of comparable size and complexity to the Corporation.
Executive salaries are adjusted gradually over time and only as necessary to
meet this objective. Increases in base salary may be moderated by other
considerations, such as geographic or regional market data, industry trends or
internal fairness within the Corporation and Thermo Electron. It is the
Committee's intention that over time the base salaries for the chief executive
officer and the other named executive officers will approach the mid-point of
competitive data. The salary increases in fiscal 1998 for the chief executive
officer and the other named executive officers generally reflect this practice
of gradual increases and moderation.
Cash Bonus
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having comparable sales and complexity
to the Corporation. The actual bonus awarded to an executive officer may range
from zero to three times the median potential bonus. The value within the range
(the bonus multiplier) is determined at the end of each year by the Committee in
its discretion. The Committee exercises its discretion by evaluating each
executive's performance using a methodology developed by its parent corporation,
Thermo Electron, and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns which are designed to
measure profitability and contributions to shareholder value, and earnings
growth, and are measures of corporate and divisional performance that are
evaluated using graphs developed by Thermo Electron intended to reward
performance that is perceived as above average and to penalize performance that
is perceived as below average. The measures of operating returns used in the
Committee's determinations in fiscal 1998 measured return on net assets, growth
in income, and return on sales, and the Committee's determinations also included
a subjective evaluation of the contributions of each executive that are not
captured by operating measures but are considered important to the creation of
long-term value for the Stockholders. These measures of achievements are not
financial targets that are met, not met or exceeded. The relative weighting of
the operating measures and subjective evaluation varies among the executives,
depending on their roles and responsibilities with the organization.
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1998 performance in each instance were below the median
potential bonus, except in the case of one executive officer, due to the
measures of operating returns used by the Committee in its determinations, as
described above. However, each of the named executive officers elected to
forego his bonus for fiscal 1998 in light of the operating and stock price
performance of the Corporation and its subsidiaries.
Stock Option Program
The primary goal of the Corporation and its parent company is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of options
to purchase common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the Stockholders.
The emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock option
awards in its Thermo Remediation and Randers subsidiaries, its parent
corporation, Thermo Electron, and the other majority-owned subsidiaries of
Thermo Electron are important tools in providing incentives for performance
within the entire organization.
13
<PAGE>
In determining awards, the Committee considers for each officer the annual
value of all options to purchase shares of the Corporation and other companies
within the Thermo Electron organization that vest in the next year and compares
the individual's total compensation using this value to competitive data. The
Committee uses a modified Black-Scholes option pricing model to determine the
value of an option award. In addition, the Committee considers the aggregate
amount of net awards to purchase shares of Common Stock granted to all employees
over the last five years to monitor the aggregate number of awards to all
employees. In reviewing the aggregate number of awards, the Committee considers
such factors as the size of the company, its stage of development and its growth
strategy, as well as the aggregate awards and option practices of comparably
situated companies.
The Committee periodically awards stock options based on its assessment of
the total compensation of each executive, the actual and anticipated
contributions of each executive (which includes a subjective assessment by the
Committee of the value of the executive's future potential within the
organization), as well as the value of previously awarded options as described
above. The option awards made to named executive officers in fiscal 1998 with
respect to the common stock of certain of the Corporation's majority-owned
subsidiaries were determined by the human resources committee of the board of
directors of the granting company using a similar analysis. The option awards
made to the named executive officers in fiscal 1998 with respect to the common
stock of Thermo Electron were made by the Thermo Electron human resources
committee under a program that awards options to certain eligible employees
annually based on the number of shares of common stock of Thermo Electron held
by the employee as an incentive to buy and hold Thermo Electron shares. In
addition, the named executive officers received awards to purchase shares of the
common stock of certain majority-owned subsidiaries of Thermo Electron (other
than the Corporation and its subsidiaries) due to their positions as chief
executive officer of a majority-owned subsidiary of Thermo Electron.
Stock Ownership Policies
The Corporation's compensation program is also designed to encourage
executives to own shares of the Corporation's Common Stock. The Committee
believes that encouraging executives to retain stock acquired through its stock
option program provides an additional incentive for executive officers to follow
strategies designed to maximize long-term value to Stockholders.
The Committee established a stock holding policy for executive officers of
the Corporation in fiscal 1997 that required executive officers to own a
multiple of their compensation in shares of the Corporation's Common Stock. For
the chief executive officer, the multiple was one times his base salary and
reference bonus for the calendar year. For all other officers, the multiple was
one times the officer's base salary. The Committee deemed it appropriate to
permit officers to achieve these ownership levels over a three-year period. The
policy was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee
also adopted in fiscal 1997 a stock holding assistance plan under which the
Corporation was authorized to make interest-free loans to officers to enable
them to purchase shares of the Common Stock in the open market. The loans are
required to be repaid upon the earlier of demand or the fifth anniversary of the
grant date, unless otherwise authorized by the Committee. During fiscal 1998
and 1999, Dr. Appleton, the Corporation's president and chief executive officer,
received loans in the principal amount of $137,607 under this plan, the entire
amount of which was outstanding as of June 29, 1998. This plan was also amended
in 1998 to apply only to the chief executive officer. See "Relationship with
Affiliates - Stock Holding Assistance Plan."
The Committee also has adopted a policy requiring its executive officers to
hold shares of the Corporation's Common Stock acquired upon the exercise of
stock options granted by the Corporation. Under this policy, executive officers
are required to hold 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 options.
14
<PAGE>
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million, unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives does
not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based." Therefore,
the Committee does not believe any further action is necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine the
Corporation's compensation practices and the effect of Section 162(m).
CEO Compensation
Cash compensation for Dr. Appleton is reviewed by both the Committee and
the human resources committee of the board of directors of Thermo Electron, due
to his responsibilities as both the Corporation's chief executive officer and as
a vice president of Thermo Electron, the Corporation's parent company. Each
committee evaluates Dr. Appleton's performance and proposed compensation using a
process similar to that used for the other executive officers of the
Corporation. At the Thermo Electron level, Dr. Appleton is evaluated on his
performance related to the Corporation as well as other operating units of
Thermo Electron for which he is responsible, weighted in accordance with the
amount of time and effort devoted to each operation. The Corporation's
Committee then reviews the analysis and determinations of the Thermo Electron
committee, makes an independent assessment of Dr. Appleton's performance as it
relates to the Corporation using criteria similar to those used for the other
executive officers of the Corporation, and then agrees to an appropriate
allocation of Dr. Appleton's compensation to be paid by the Corporation.
In February 1998, the Committee conducted its review of Dr. Appleton's
proposed salary for fiscal 1998 and bonus for fiscal 1998 performance. The
Committee concurred in the recommendations made by the Thermo Electron committee
and agreed to an allocation of 70% of Dr. Appleton's total cash compensation for
calendar year 1997 and fiscal 1998 to the Corporation, based on his relative
responsibilities at the Corporation and Thermo Electron. However, Dr. Appleton
elected to forego his bonus in light of the Corporation's operating and stock
price performance in fiscal 1998.
The Committee awarded to Dr. Appleton options to purchase 60,000 shares of
Common Stock in fiscal 1998. This discretionary award was determined in a
manner consistent with awards to other officers, as described above under the
caption "Stock Option Program." Dr. Appleton was also awarded options to
purchase the common stock of the Corporation's majority-owned subsidiary, The
Randers Group Incorporated ("Randers"). This option award was granted in
connection with Dr. Appleton's position as a director of Randers by its human
resources committee and was determined in a manner consistent with the
methodology followed by the Corporation's human resources committee.
Mr. Donald E. Noble (Chairman)
Mr. Polyvios C. Vintiadis
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COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a broad-
based market index and either a nationally recognized industry standard or an
index of peer companies selected by the Corporation. The Corporation has
compared its performance with the American Stock Exchange Market Value Index
("AMEX") and a peer group of companies consisting of Ecology & Environmental
Inc., Fluor Daniel GTI, Inc. (formerly Groundwater Technology Inc.),
International Technology Inc., Safety Kleen Corp. and Roy F. Weston Inc.
Comparison of Total Return Among Thermo TerraTech Inc.,
the American Stock Exchange Market Value Index
and the Corporation's Peer Group from
April 1, 1993 through April 3, 1998
PERFORMANCE GRAPH TABLE
- --------------------------------------------------------------
4/1/93 3/31/94 3/31/95 3/29/96 3/27/97 4/3/98
- --------------------------------------------------------------
TTT 100 92 95 145 99 74
- --------------------------------------------------------------
AMEX 100 105 110 135 137 169
- --------------------------------------------------------------
PEER GROUP 100 68 78 68 69 128
- --------------------------------------------------------------
The total return for the Corporation's Common Stock (TTT), the American
Stock Exchange Market Value Index (AMEX) and the Corporation's Peer Group (PEER
GROUP) assumes the reinvestment of dividends, although dividends have not been
declared on the Corporation's Common Stock. The American Stock Exchange Market
Value Index tracks the aggregate performance of equity securities of companies
listed on the American Stock Exchange ("AMEX"). The Corporation's Common Stock
is traded on the AMEX under the ticker symbol "TTT."
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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
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 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
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<PAGE>
revenues for these services for calendar 1996 and 1997. The annual fee has been
reduced to 0.8% of the Corporation's total revenues for calendar 1998. The fee
is reviewed annually and may be changed by mutual agreement of the Corporation
and Thermo Electron. During fiscal 1998, Thermo Electron assessed the
Corporation $2,845,000 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 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 April 4, 1998, $29,583,000 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 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. The repurchase agreement earns a rate based on the
90-day Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
The Corporation leases an office and operating facility from Thermo
Electron. The total rental payments made to Thermo Electron during fiscal year
1998 under these agreements was $166,000.
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 $115,000 in fiscal
1998.
From time to time, the Corporation may transact business with the other
companies in the Thermo Group. In fiscal 1997, the Corporation's Thermo
Remediation Inc. subsidiary paid Thermo Coleman Corporation, a majority-owned
subsidiary of Thermo Electron, $86,000, for a Global Positioning System unit and
related services. In fiscal 1998, Thermo Remediation Inc. paid Thermo Coleman
Corporation $85,000 for upgrades to that unit and related services.
At April 4, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $2,341,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services, and for miscellaneous items, net of amounts owed to the Corporation by
Thermo Electron and its other subsidiaries for miscellaneous items. The largest
amount of net indebtedness owed by the Corporation to Thermo Electron and its
other subsidiaries since March 29, 1997 was $3,283,000. These amounts do not
bear interest and are expected to be paid in the normal course of business.
The Corporation's Thermo EuroTech N.V. subsidiary, along with certain other
Thermo Subsidiaries, participates in a notional pool arrangement with ABN AMRO,
which includes a $50 million credit facility. Only European-based Thermo
Subsidiaries participate in this arrangement. Under this arrangement the Bank
notionally combines the positive and negative cash balances held by the
participants to calculate the net interest yield/expense for the group. The
benefit derived from this arrangement is then allocated based on balances
attributable to the
18
<PAGE>
respective participants. Thermo Electron guarantees all of the obligations of
each participant in this arrangement. In addition, funds on deposit under this
arrangement provide credit support for overdraft obligations of other
participants. As of April 4, 1998, Thermo EuroTech N.V. had a negative cash
balance of approximately $6,041,000 based on an exchange rate of $0.4797/NLG1.00
as of April 4, 1998. For 1997, the average annual interest rate earned on NLG
deposits by participants in this credit arrangement was approximately 4.8% and
the average annual interest rate paid on NLG overdrafts was approximately 4.8%.
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. During fiscal 1998 and 1999, Dr. Appleton received loans in the
principal amount of $137,607 under this plan to purchase 20,000 shares, the
entire amount of which was outstanding as of June 29, 1998. The loan is
repayable 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
Corporation's board of directors. This policy and plan were amended in 1998 to
apply only to the chief executive officer of the Corporation in the future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1986.
Representatives of that firm are expected to be present at the Meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to questions. The board of directors has established an
audit committee, presently consisting of two outside directors, the purpose of
which is to review the scope and results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement
and form of proxy relating to the 1999 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later than
March 30, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 of the Securities Exchange Act of 1934, as amended
(relating to proposals to be presented at the meeting but not included in the
Corporation's proxy statement and form of proxy), will be considered untimely --
and thus the Corporation's proxy may confer discretionary voting authority on
the persons named in the proxy with regard to such proposals -- if received
after June 12, 1999.
19
<PAGE>
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally, by telephone or telegram. Brokers,
nominees, custodians and fiduciaries are requested to forward solicitation
materials to obtain voting instructions from beneficial owners of stock
registered in their names, and the Corporation will reimburse such parties for
their reasonable charges and expenses in connection therewith.
Waltham, Massachusetts
July 23, 1998
20
<PAGE>
FORM OF PROXY
THERMO TERRATECH INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
SEPTEMBER 15, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John P. Appleton, John N. Hatsopoulos and
Melissa F. Riordan, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of Thermo TerraTech Inc., a Delaware corporation
(the "Company"), to be held at the offices of Thermo Electron Corporation, 81
Wyman Street, Waltham, Massachusetts, on Tuesday, September 15, 1998, at 3:00
p.m., and at any adjournment or postponement thereof, and to vote all shares of
common stock of the Company standing in the name of the undersigned on July 23,
1998, with all of the powers the undersigned would possess if personally present
at such meeting:
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
Please mark
[ x ] votes as in this
example.
1. ELECTION OF DIRECTORS
FOR [ ] WITHHELD [ ]
______________________________________
FOR all nominees except as noted above
Nominees: John P. Appleton, John N. Hatsopoulos, Brian D. Holt, Donald E.
Noble, William A. Rainville and Polyvios C. Vintiadis
2. In their discretion on such other matters as may properly come before the
Meeting.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
PLEASE PROMPTLY DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE_______________________________________ DATE_________________
SIGNATURE_______________________________________ DATE_________________
(Note: Please sign exactly as your name appears hereon. Executors,
administrators, trustees, etc. should so indicate when signing, giving full
title as such. If signer is a corporation, execute in full corporate name by
authorized officer. If shares are held by joint tenants or as community
property, both holders should sign.)
