SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------------
AMENDMENT NO. 2 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the
-----
Securities Exchange Act of 1934 for the fiscal year ended
September 30, 1995
Transition Report Pursuant to Section 13 or 15(d) of the
----
Securities Exchange Act of 1934
Commission file number 1-10573
THERMO POWER CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2891371
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02254-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to the filing requirements for at least the past 90 days.
Yes X No
------- --------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference into Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant as of November 24, 1995, was approximately
$63,355,000.
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As of November 24, 1995, the Registrant had 12,432,545 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the
year ended September 30, 1995, are incorporated by reference into
Parts I and II.
Thermo Power Corporation
Amendment No. 2 on Form 10K/A to Annual Report on Form 10-K
for the fiscal year ended September 30, 1995
Part III, Item 10. Directors and Executive Officers of the
Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Part III, Item 13. Certain Relationships and Transactions.
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A,
not later than 120 days after the close of the fiscal year, and
contained in the Registrant's Amendment No. 1 on Form 10-K/A filed
with the Commission on January 29, 1996, is replaced in its entirety
with the information in the following Attachment A, which is included
herein and made a part of this Annual Report on Form 10-K.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Amendment No. 2 on Form 10-K/A to be signed by the undersigned, duly
authorized.
THERMO POWER CORPORATION
By: /s/ Seth H. Hoogasian
--------------------------------------
Seth H. Hoogasian
Assistant Clerk
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ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the persons presently 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, is reported
under the caption "Stock Ownership."
Marshall J. Armstrong Mr. Armstrong, 60, has been a Director and
Chairman of the Board of the Corporation
since December 1990 and Chief Executive
Officer since April 1991. He also served
as the Corporation's President from
November 1992 to April 1995. He has been
a Vice President of Thermo Electron since
1986. He is also a Director of SatCon
Technology Corporation and Thermo
Instrument Systems Inc.
Peter O. Crisp Mr. Crisp, 63, has been a Director of the
Corporation since 1985. Mr. Crisp has
been a General Partner of Venrock
Associates, a venture capital investment
firm, for more than five years. Mr. Crisp
is also a Director of American
Superconductor Corporation, Apple
Computer, Inc., Evans & Sutherland
Computer Corporation, Long Island Lighting
Company, Thermedics Inc., Thermo Electron,
ThermoTrex Corporation and United States
Trust Corporation.
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George N. Hatsopoulos Dr. Hatsopoulos, 69, has been a Director
of the Corporation since its inception.
Dr. Hatsopoulos has been the Chairman of
the Board, President and Chief Executive
Officer of Thermo Electron since 1956.
Dr. Hatsopoulos is also a director of
Bolt, Beranek & Newman, Inc., Thermedics
Inc., Thermo Ecotek Corporation, Thermo
Electron, Thermo Fibertek Inc., Thermo
Instrument Systems Inc., Thermo TerraTech
Inc. and ThermoTrex Corporation. Dr.
Hatsopoulos is the brother of Mr. John N.
Hatsopoulos, a Director and Vice President
and Chief Financial Officer of the
Corporation.
John N. Hatsopoulos Mr. Hatsopoulos, 61, has been a Director
of the Corporation since 1990 and its Vice
President and Chief Financial Officer
since 1988. Mr. Hatsopoulos has been the
Chief Financial Officer of Thermo Electron
since 1988 and an Executive Vice President
of Thermo Electron since 1986. Mr.
Hatsopoulos is also a director of Lehman
Brothers Funds, Inc., Thermedics Inc.,
Thermo Ecotek Corporation, Thermo Fibertek
Inc., Thermo Instrument Systems Inc.,
Thermo TerraTech Inc. and ThermoTrex
Corporation. Mr. John N. Hatsopoulos is
the brother of Dr. George N. Hatsopoulos,
currently a Director of the Corporation.
Robert C. Howard Mr. Howard, 65, has been a Director of the
Corporation since its inception. Mr.
Howard has been an Executive Vice
President of Thermo Electron since 1986.
He is also a Director of Thermedics Inc.,
Thermo Cardiosystems Inc., Thermo Ecotek
Corporation, Thermo Instruments Systems
Inc., ThermoLase Corporation and
ThermoTrex Corporation.
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Donald E. Noble Mr. Noble, 81, has been a Director of the
Corporation since 1990. 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.
and Thermo TerraTech Inc.
Paul E. Tsongas Mr. Tsongas, 54, has been a Director of
the Corporation since 1987. Mr. Tsongas is
a partner in the law firm of Foley, Hoag &
Eliot, Boston, Massachusetts. From 1988 to
1991, Mr. Tsongas was Chairman of the
Massachusetts Board of Regents of Higher
Education. From 1979 to 1985, he was a
U.S. Senator from Massachusetts. He is
also a Director of Boston Edison
Corporation, Wang Laboratories Inc.,
Thermo Fibertek Inc. and Thermo TerraTech
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. Noble
(Chairman) and Mr. Crisp. 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. Crisp (Chairman), Mr. Noble and Mr.
Tsongas. The Human Resources Committee reviews the performance of
senior members of management, recommends executive compensation and
administers the Corporation's stock option and other stock plans. The
Corporation does not have a nominating committee of the Board of
Directors. The Board of Directors met five times, the Audit Committee
met twice and the Human Resources Committee met four times during
fiscal 1995. Each Director attended at least 75% of all meetings of
the Board of Directors and Committees on which he served held during
the fiscal year.
Compensation of Directors
Effective January 1, 1995, Directors who are not employees of the
Corporation, of Thermo Electron or of any other companies affiliated
with Thermo Electron (also referred to as "outside Directors") receive
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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. Prior to January 1, 1995, the
annual retainer paid to outside Directors was $2,000. Payment of
outside Directors' fees is made quarterly. Mr. Armstrong, Mr. J.
Hatsopoulos and Mr. Howard 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 meetings.
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.
Amounts so deferred 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 25,000 shares of Common Stock
have been reserved for issuance under the Deferred Compensation Plan.
As of January 1, 1996, deferred units equal to 21,175.73 shares of
Common Stock were accumulated under the Deferred Compensation Plan.
The Board of Directors has recommended that the Stockholders approve
an increase of 25,000 shares in the number of shares reserved for
issuance under the Deferred Compensation Plan. See "Proposal 2 --
Proposal to Increase the Number of Shares Reserved for Issuance Under
the Deferred Compensation Plan for Directors."
In 1991, the Corporation adopted a directors stock option plan (the
"Directors Plan"), which was amended in 1995. The Directors Plan
provides for the grant of stock options to purchase shares of Common
Stock 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 the Common
Stock annually. In addition, the Directors Plan provides for the
automatic grant every five years of 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 at the close
of business on the date of each Annual Meeting of 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 on the third
anniversary of the grant date. Shares acquired upon exercise of the
options would be subject to repurchase by the Corporation at the
exercise price if the recipient ceased to serve as a Director of the
Corporation or any other Thermo Electron company prior to the first
anniversary of the grant date.
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In addition, under the Directors Plan, outside Directors are
automatically granted 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 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. 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 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 another 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. Under this
provision of the Directors Plan, each outside Director was granted
options to purchase 1,500 shares of common stock of ThermoLyte
Corporation at an exercise price of $10.00 per share on March 14,
1995, the date of last year's Annual Meeting of Stockholders.
The exercise price for options granted under the Directors Plan is
the average of the closing prices of the common stock as reported on
the American Stock Exchange (or other principal market on which the
common stock is then traded) for the five trading days preceding and
including the date of grant, or, if the shares are not then traded, at
the last price per share paid by third parties in an arms-length
transaction prior to the option grant. An aggregate of 25,000 shares
of Common Stock has been reserved for issuance under the Directors
Plan.
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STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of Thermo Electron and ThermoLyte
Corporation, a majority-owned subsidiary of the Corporation, as of
January 1, 1996, with respect to (i) each person who was known by the
Corporation to own beneficially more than 5% of the outstanding shares
of Common Stock, (ii) each Director, (iii) each executive officer
named in the summary compensation table under the heading "Executive
Compensation" and (iv) all Directors and current executive officers as
a group.
<TABLE>
<CAPTION>
Name (1) Thermo Power Thermo ThermoLyte
Corporation Electron Corporation
(2) Corporation
(3)
<S> <C> <C> <C>
Thermo Electron Corporation (5) 7,853,606 N/A
Marshall J. Armstrong 169,540 118,147 2,
J. Timothy Corcoran 138,564 47,148
Peter O. Crisp 32,151 64,434
George N. Hatsopoulos 54,282 2,328,408
John N. Hatsopoulos 45,953 366,725
Robert C. Howard 68,281 134,593 2,
Chester G. Janssens 89,324 47,831
Donald E. Noble 18,485 12,387 1,
Ravinder K. Sakhuja 66,531 113,829
Paul E. Tsongas 22,216 0 1,
All Directors and current
executive 722,697 3,348,697 7,
officers as a group (11 persons)
</TABLE>
(1) Except as reflected in the footnotes to this table, shares of
Common Stock of the Corporation and of the common stock of Thermo
Electron and ThermoLyte Corporation beneficially owned consist of
shares owned by the indicated person, and all share ownership
includes sole voting and investment power.
(2) Shares beneficially owned by Mr. Armstrong, Mr. Corcoran, Mr.
Crisp, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard, Mr.
Janssens, Mr. Noble, Dr. Sakhuja, Mr. Tsongas and all Directors
and executive officers as a group include 165,000, 135,500,
5,600, 40,000, 40,000, 40,000, 81,650, 6,200, 20,000, 4,800 and
547,750 shares, respectively, that such person or group has the
right to acquire within 60 days of January 1, 1996 through the
exercise of stock options. Shares beneficially owned by Mr.
Crisp, Mr. Noble, Mr. Tsongas and all Directors and executive
officers as a group include 8,458, 4,860, 7,856 and 21,174 full
shares, respectively, that had been allocated through January 1,
1996, to their respective accounts maintained under the
Corporation's Deferred Compensation Plan for Directors. Shares
beneficially owned by Mr. Armstrong include 1,120 shares held by
Mr. Armstrong's spouse and 1,000 shares held by Mr. Armstrong's
son. Shares beneficially owned by Dr. G. Hatsopoulos include 114
shares held by Dr. G. Hatsopoulos' spouse. Shares beneficially
owned by Mr. J. Hatsopoulos include 2,600 shares each held by Mr.
J. Hatsopoulos as custodian for the benefit of two of his
children. Shares beneficially owned by Mr. Tsongas include 2,078
shares each held by Mr. Tsongas as custodian for two of his minor
daughters. No Director or executive officer beneficially owned
more than 1% of the Common Stock outstanding as of January 1,
1996, other than Mr. Armstrong, who beneficially owned 1.3%, and
Mr. Corcoran, who beneficially owned 1.1%, of the Common Stock
outstanding as of such date; all Directors and executive officers
as a group beneficially owned 5.5% of the Common Stock
outstanding as of such date.
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(3) The shares of common stock of Thermo Electron shown in the table
reflect a three-for-two split of such stock effected in May 1995.
Shares beneficially owned by Mr. Armstrong, Mr. Corcoran, Mr.
Crisp, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard, Mr.
Janssens, Mr. Noble, Dr. Sakhuja and all Directors and executive
officers as a group include 71,350, 45,548, 5,250, 1,102,200,
297,880, 40,185, 17,099, 5,250, 48,150 and 1,698,037 shares,
respectively, that such person or group has the right to acquire
within 60 days of January 1, 1996 through the exercise of stock
options. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Armstrong, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Howard, Mr. Janssens, Dr. Sakhuja and all
Directors and executive officers as a group include 1,600, 1,481,
1,225, 1,963, 890, 889 and 8,867 full shares, respectively,
allocated to their respective accounts maintained pursuant to
Thermo Electron's Employee Stock Ownership Plan. Shares of the
common stock of Thermo Electron beneficially owned by Mr. Crisp,
Mr. Noble and all Directors and executive officers as a group
include 29,421, 4,860 and 34,281 full shares, respectively,
allocated through January 1, 1996 to their respective accounts
maintained pursuant to Thermo Electron's deferred compensation
plan for directors. Shares beneficially owned by Dr. G.
Hatsopoulos include 59,734 shares held by Dr. G. Hatsopoulos'
spouse, 112,500 shares held by a QTIP trust for the benefit of
Dr. G. Hatsopoulos' spouse and 26,625 shares held by a family
trust of which Dr. G. Hatsopoulos' spouse is trustee. Shares
beneficially owned by Mr. J. Hatsopoulos include 435 shares each
held by a family trust for two of Mr. J. Hatsopoulos' children.
As of January 1, 1996, no director or executive officer
beneficially owned more than 1% of Thermo Electron common stock
outstanding as of such date other than Dr. G. Hatsopoulos, who
beneficially owned 2.6% of such stock; all directors and
executive officers as a group beneficially owned approximately
3.6% of the Thermo Electron common stock outstanding as of
January 1, 1996.
(4) Shares beneficially owned by Mr. Crisp do not include 100,000
shares owned in the aggregate by entities affiliated with Venrock
Associates, of which Mr. Crisp is both a general and limited
partner and for which Mr. Crisp disclaims beneficial ownership.
Shares beneficially owned by Mr. Tsongas include 1,000 shares
owned by Mr. Tsongas' spouse. No Director or executive officer
beneficially owned more than 1% of the Common Stock outstanding
of ThermoLyte as of January 1, 1996; all Directors and executive
officers as a group beneficially owned less than 1% of the
outstanding common stock as of such date.
(5) Thermo Electron owned 63.1% of the Common Stock outstanding as of
January 1, 1996. Thermo Electron's address is 81 Wyman Street,
Waltham, Massachusetts 02254-9046. As of January 1, 1996, Thermo
Electron had the power to elect all of the members of the
Corporation's Board of Directors.
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Disclosure of Certain Late Filings
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors and executive officers and beneficial owners
of more than 10% of the Common Stock, such as Thermo Electron, to file
with 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 1995, except in the following instances. A Form 4 for
January 1995 filed on behalf of Thermo Electron was amended five days
after the original filing to include the acquisition of 50,200 shares
on the last day of the month, which were omitted from the original
filing. In addition, the Form 5 filings for fiscal 1995 of Mr. Donald
E. Noble and Mr. Peter O. Crisp, Directors of the Corporation, were
amended four days after the original filings to include the quarterly
acquisition of phantom stock units on July 1, 1995 pursuant to the
Corporation's deferred compensation plan for Directors, which had been
erroneously omitted from the original filings.
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EXECUTIVE COMPENSATION
Summary Compensation Table
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 three other most highly
compensated executive officers for the last three fiscal years (the
"named executive officers"). No other executive officer of the
Corporation met the definition of "highly compensated" within the
meaning of the Securities and Exchange Commission's executive
compensation disclosure rules.
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
<CAPTION>
Annual Compensation Long Term
(1) Compensation
Securities
Nameand Principal Position Underlying Options
(No. of Shares and
Fiscal Company)
Year Salary Bonus (2)
<S> <C> <C> <C> <C> <C> <C
Marshall J. Armstrong (4) 1995 $163,000 $100,000 --
Chief Executive Officer 1994 $154,500 $126,000 125,000 (THP)
1993 $145,750 $105,000 --
J. Timothy Corcoran (5) 1995 $145,507 $83,000 15,000 (THP)
President 30,400 (TMO)
1994 $129,000 $75,000 80,500 (THP)
3,900 (TMO)
1993 $102,263 $65,000 40,000 (THP)
11,248 (TMO)
Chester G. Janssens 1995 $145,125 $15,000 12,000 (THP)
Vice President; 2,400 (TMO)
President, Crusader 1994 $140,000 $35,000 29,650 (THP)
Engines Division 4,125 (TMO)
1993 $113,438 $20,000 2,700 (TMO)
Ravinder K. Sakhuja (6) 1995 $145,125 $40,000 4,200 (TMO)
Vice President; 1994 $140,250 $45,000 20,000 (THP)
President, 5,700 (TMO)
Tecogen Division 1993 $138,000 $30,000 5,625 (TMO)
</TABLE>
(1) Annual compensation for executive officers generally is reviewed
and determined on a calendar-year basis, even though the
Corporation's fiscal year ends in September. The salary data
presented here has been adjusted to reflect salary paid during
the Corporation's fiscal year, while the bonus represents the
bonus paid for performance during the calendar year in which the
Corporation's fiscal year-end occurred. Bonuses have not yet
been determined for calendar 1995; therefore, the bonus amounts
shown for fiscal 1995 are estimates.
(2) Mr. Armstrong has served as a vice president of Thermo Electron
since 1986 and has been granted options to purchase common stock
of Thermo Electron and its subsidiaries other than the
Corporation from time to time by Thermo Electron or its 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 his capacity as the chief
executive officer of the Corporation. Options granted by the
Corporation are designated in the table as "THP." During the past
three fiscal years, Mr. Corcoran, Mr. Janssens and Dr. Sakhuja
have been granted options to purchase common stock of Thermo
Electron Corporation (designated in the table as "TMO") as part
of Thermo Electron's stock option program.
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(3) Represents the amount of matching contributions made by the
individual's employer on behalf of executive officers
participating in the Thermo Electron 401(k) plan.
(4) Mr. Armstrong is a vice president and full-time employee of
Thermo Electron, but he devotes such time to the affairs of the
Corporation as the Corporation's needs reasonably require. The
annual cash compensation and other total compensation reported in
the table for Mr. Armstrong has been determined and paid by
Thermo Electron. The Corporation is allocated a percentage of Mr.
Armstrong's annual cash compensation (salary and bonus) for the
time he devotes to the affairs of the Corporation, which is
reviewed and approved by the Human Resources Committee of the
Board of Directors of the Corporation. For fiscal 1995, 1994 and
1993, the Corporation was allocated approximately 60%, 60% and
40%, respectively, of Mr. Armstrong's annual cash compensation.
(5) Mr. Corcoran was appointed president of the Corporation effective
April 1, 1995. Prior to that date, he served as a vice president
of the Corporation.
(6) On December 8, 1995, Dr. Sakhuja resigned his responsibilities as
a vice president of the Corporation. He continues to be employed
on a half-time basis by the Corporation and its parent
corporation, Thermo Electron. Dr. Sakhuja will be paid
approximately $73,250 per year under this arrangement, with the
Corporation responsible for the payment of 25% of this amount.
Stock Options Granted During Fiscal 1995
The following table sets forth information concerning individual
grants of stock options made by the Corporation and the other Thermo
Electron companies during fiscal 1995 to the 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
1995.
Mr. Armstrong has been granted options to purchase common stock of
Thermo Electron and certain of its subsidiaries from time to time as
compensation for service to other Thermo Electron companies in
capacities other than in his capacity as chief executive officer of
the Corporation. Accordingly, options granted by Thermo Electron
companies other than the Corporation and its subsidiaries have not
been reported in the table.
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<TABLE>
Option Grants In Fiscal 1995
<CAPTION>
Percent of Potenti
Total Value
Number of Options Annual
Securities Granted to Exercise Price Ap
Underlying OptionsEmployees inPrice Per Expiration Opt
Name Granted (1) Fiscal Year Share Date
<S> <C> <C> <C> <C> <C> <C> <C> 5%
J. Timothy Corcoran 15,000 (THP) 6.4% $8.95 12/15/06 $106,
30,000 (TMO) 2.0% (2) $30.07 11/28/06 $717,
400 (TMO) 0.03% (2) $37.27 05/23/98 $2,3
Chester G. Janssens 12,000 (THP) 5.2% $8.95 12/15/01 $43,6
2,400 (TMO) 0.2% (2) $37.27 05/23/98 $14,0
Ravinder K. Sakhuja 4,200 (TMO) 0.3% (2) $37.27 05/23/98 $24,6
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant. However, the shares acquired
upon exercise are subject to repurchase by the granting
corporation at the exercise price if the optionee ceases to be
employed by the 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. 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 granted as a part of Thermo
Electron's stock option program 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 such 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) These options were granted under stock option plans maintained by
Thermo Electron and accordingly are reported as a percentage of
total options granted to employees of Thermo Electron and its
public subsidiaries.
Stock Options Exercised During Fiscal 1995 and Fiscal Year-End Values
The following table reports certain information regarding stock
option exercises during fiscal 1995 and outstanding stock options of
the Thermo Electron companies held at the end of fiscal 1995 by the
named executive officers. No stock appreciation rights were exercised
or were outstanding during fiscal 1995.
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<TABLE>
Aggregated Option Exercises In Fiscal 1995 And Fiscal 1995 Year
Option Values
<CAPTION>
No. of Unexer
Shares Options at Fi
Acquired Value Year-end
Name Company on Realized (Exercisabl
Exercise Unexercisable
<S> <C> <C> <C> <C>
Marshall J. Armstrong (2) Thermo Power -- -- 165,000 /0<
J. Timothy Corcoran Thermo Power -- -- 135,500/0
Thermo Electron -- -- 45,548/0
Chester G. Janssens Thermo Power -- -- 81,650/0(
Thermo Ecotek -- -- 3,000/0
Thermo Electron 7,649 $158,077 17,099/0
Thermo Fibertek -- -- 3,000/0
ThermoTrex -- -- 900/0
Ravinder K. Sakhuja Thermo Power -- -- 20,000/0
Thermo Ecotek -- -- 3,500/0
Thermo Electron 6,975 $144,619 48,150/0
Thermo Fibertek -- -- 3,000/0
ThermoTrex -- -- 2,700/0
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250
200
150
100
50
09/28/90 09/27/91 09/26/92 10/1/93 09/30/94 9/29/9
(1) The shares of common stock shown in the table have been adjusted
to reflect the following stock splits: (i) a three-for-two split
effected by Thermo Electron in May 1995 and (ii) a three-for-two
split effected by Thermo Fibertek Inc. in September 1995. All of
the options reported outstanding at the end of the fiscal year
were immediately exercisable as of fiscal year-end. The shares
acquired upon exercise of the options reported in the table 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. 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
granted as a part of Thermo Electron's stock option program have
three-year terms, and the repurchase rights lapse in their
entirety on the second anniversary of the grant date.
(2) As an executive officer of Thermo Electron, Mr. Armstrong also
holds unexercised options to purchase common stock of Thermo
Electron and its subsidiaries other than the Corporation and
ThermoLyte. These options are not reported here as they were
granted as compensation for service to other Thermo Electron
companies in capacities other than his capacity as the chief
executive officer of the Corporation.
(3) Options to purchase 30,000 shares of the common stock of Thermo
Electron granted to Mr. Corcoran are subject the same terms
described in footnote (1), except that the repurchase rights of
Thermo Electron 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 Thermo Electron shall
be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.
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Severance Agreements
In 1988, Thermo Electron entered into severance agreements with
several of its key employees, including key employees of the
Corporation and other majority-owned subsidiaries. These agreements
provide severance benefits if there is a change of control of Thermo
Electron that is not approved by the Board of Directors of Thermo
Electron and the employee's employment with Thermo Electron or the
majority-owned subsidiary is terminated, for whatever reason, within
one year thereafter. For purposes of the agreement, a change of
control exists upon (i) the acquisition of 50% or more of the
outstanding common stock of Thermo Electron by any person without the
prior approval of the Board of Directors of Thermo Electron, (ii) the
failure of the Board of Directors of Thermo Electron, within two years
after any contested election of directors or tender or exchange offer
not approved by the Board of Directors, to be constituted of a
majority of directors holding office prior to such event or (iii) any
other event that the Board of Directors of Thermo Electron determines
constitutes an effective change of control of Thermo Electron. Each
of the recipients of these agreements would receive a lump-sum benefit
at the time of a qualifying severance (as defined below) equal to the
highest total cash compensation paid to the employee by Thermo
Electron or the majority-owned subsidiary in any 12-month period
during the three years preceding the qualifying severance. A
qualifying severance exists (i) if the employment of the executive
officer is terminated for any reason within one year after a change in
control of Thermo Electron or (ii) a group of directors of Thermo
Electron consisting of directors of Thermo Electron on the date of the
severance agreement or, if an election contest or tender or exchange
offer for Thermo Electron's common stock has occurred, the directors
of Thermo Electron immediately prior to such election contest or
tender or exchange offer, and any future directors who are nominated
or elected by such directors, determines that any other termination of
the executive officer's employment should be treated as a qualifying
severance. The benefits to be provided are limited so that the
payments would not constitute so-called "excess parachute payments"
under applicable provisions of the Internal Revenue Code of 1986.
Assuming that severance benefits would have been payable under these
agreements as of September 30, 1995, Mr. Armstrong and Dr. Sakhuja
would have received approximately $300,000 and $190,000, respectively.
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, Thermo
Electron and certain of its subsidiaries have created several
privately and publicly held subsidiaries. The Corporation has created
ThermoLyte Corporation ("ThermoLyte") as a majority-owned subsidiary.
From time to time, Thermo Electron and its subsidiaries will create
other majority-owned subsidiaries as part of its spinout strategy.
(The Corporation and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
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Thermo Electron and each of the Thermo Subsidiaries recognize that
the benefits and support that derive from their affiliation are
essential elements of their individual performance. Accordingly,
Thermo Electron and each of the Thermo Subsidiaries has adopted the
Thermo Electron Corporate Charter (the "Charter") to define the
relationships and delineate the nature of such cooperation among
themselves. The purpose of the Charter is to ensure that (1) all of
the companies and their stockholders are treated consistently and
fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately
defined, (3) each company has access to the combined resources and
financial, managerial and technological strengths of the others, and
(4) Thermo Electron and the Thermo Subsidiaries, in the aggregate, are
able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role and
responsibilities of the management of each company, provides for the
sharing of group resources by the companies and provides for
centralized administrative, banking and credit services to be
performed by Thermo Electron. The services provided by Thermo Electron
include collecting and managing cash generated by members,
coordinating the access of Thermo Electron and the Thermo Subsidiaries
(the "Thermo Group") to external financing sources, ensuring
compliance with external financial covenants and internal financial
policies, assisting in the formulation of long-range financial
planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt or
other obligations of the Thermo Subsidiaries or may obtain external
financing at the parent level for the benefit of the Thermo
Subsidiaries. In certain instances, the Thermo Subsidiaries may
provide credit support to, or on behalf of, the consolidated entity or
may obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that the
Thermo Group remains in compliance with all covenants imposed by
external financing sources, including covenants related to borrowings
of Thermo Electron or other members of the Thermo Group, and for
apportioning such constraints within the Thermo Group. In addition,
Thermo Electron establishes certain internal policies and procedures
applicable to members of the Thermo Group. The cost of the services
provided by Thermo Electron to the Thermo Subsidiaries is covered
under existing corporate services agreements between Thermo Electron
and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so
long as Thermo Electron and at least one Thermo Subsidiary
participate. The Charter may be amended at any time by agreement of
the participants. Any Thermo Subsidiary, including the Corporation,
can withdraw from participation in the Charter upon 30 days' prior
notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be
controlled by Thermo Electron or ceases to comply with the Charter or
the policies and procedures applicable to the Thermo Group. A
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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, 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 1.2% and 1.25% of the Corporation's
revenues for these services in calendar 1995 and for the two-year
period beginning calendar 1993, respectively. Beginning January 1,
1996, the fee has been reduced to 1% of the Corporation's revenues.
The fee is reviewed annually and may be changed by mutual agreement of
the Corporation and Thermo Electron. During fiscal 1995, Thermo
Electron assessed the Corporation $1,250,000 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.
The Corporation provides contract administration and other services
and data processing services, respectively, to one wholly-owned and
four majority-owned subsidiaries of Thermo Electron, which are charged
based on actual usage. For these services, the Corporation charged
$209,000 in fiscal 1995 to such subsidiaries.
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From time to time, the Corporation may transact business in the
ordinary course with other companies in the Thermo Group. All such
transactions are on terms comparable to those the Corporation would
receive from unaffiliated parties.
As of September 30, 1995, $22,381,000 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, government and
agency securities, money market funds, certificates of deposit 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.
Thermo Electron owned approximately 60.9% of the Corporation's
outstanding Common Stock on January 17, 1996. Thermo Electron intends
for the foreseeable future to maintain at least 50% ownership of the
Corporation. This may require the purchase by Thermo Electron of
additional shares of the Corporation's Common Stock from time to time
as the number of outstanding shares issued by the Corporation
increases. These and any other purchases may be made either on the
open market or directly from the Corporation.
The Corporation leases an office and laboratory facility from
Thermo Electron under an agreement expiring in September 1997. The
rental payments made to Thermo Electron, net of sublease income,
during fiscal 1995 were $170,000.
In March 1995, the Corporation's ThermoLyte subsidiary sold
1,845,000 units, each unit consisting of one share of ThermoLyte
common stock, $0.01 par value, and one redemption right at $10.00 per
unit. Venrock Associates, of which Mr. Peter O. Crisp, a Director of
the Corporation, is a general partner, purchased 100,000 units in the
offering. Holders of the common stock purchased in the offering will
have the option to require ThermoLyte to redeem in December 1998 or
1999 any or all of their shares at $10.00 per share. The redemption
rights are guaranteed on a subordinated basis by Thermo Electron. The
Corporation has agreed to reimburse Thermo Electron in the event
Thermo Electron is required to make a payment under the guarantee.
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