SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the
-----
Securities Exchange Act of 1934 for the fiscal year
ended September 28, 1996
___ 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 (I.R.S. Employer
incorporation or organization) Identification No.)
81 Wyman Street 02254-9046
Waltham, Massachusetts (Zip Code)
(Address of principal
executive officers)
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, $.01 par value American Stock Exchange
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ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
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
majority owned subsidiary, ThermoLyte Corporation, and of its
parent corporation, Thermo Electron, is reported under the
caption "Stock Ownership." All of the nominees are currently
Directors of the Corporation. Until his death on January 18,
1997, Mr. Paul E. Tsongas also served as a Director of the
Corporation.
Marshall J. Mr. Armstrong, 61, has been a Director of
Armstrong the Corporation since December 1990. He
also served as the Corporation's Chairman
from December 1990 to December 1996, its
Chief Executive Officer from April 1991 to
October 1996, and its 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 Sentron
Inc.
J. Timothy Corcoran Mr. Corcoran, 50, has been a Director of
the Corporation since October 1996, when
he was also named the Corporation's Chief
Executive Officer. He also serves as the
Corporation's President, a position he has
held since April 1995. From November 1992
to April 1995, Mr. Corcoran was a vice
president of the Corporation, and he has
been president of the Corporation's FES
Division since June 1990. Mr. Corcoran
also serves as the Chairman and Chief
Executive Officer of the Corporation's
majority owned subsidiary, ThermoLyte
Corporation, since December 1996 and
February 1995, respectively.
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Peter O. Crisp Mr. Crisp, 64, 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.
John N. Hatsopoulos Mr. Hatsopoulos, 62, has been a Director
of the Corporation since 1990 and its Vice
President and Chief Financial Officer
since 1988. Mr. Hatsopoulos has been the
President of Thermo Electron since January
1, 1997, and its Chief Financial Officer
since 1988. Prior to being named
President of Thermo Electron, Mr.
Hatsopoulos served as an Executive Vice
President, a position he had held since
1986. Mr. Hatsopoulos is also a director
of Thermedics Inc., Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo
Instrument Systems Inc., Thermo TerraTech
Inc. and ThermoTrex Corporation.
Robert C. Howard Mr. Howard, 66, has been a Director of the
Corporation since its inception. Mr.
Howard has been an Executive Vice
President of Thermo Electron from 1986
until his retirement in January 1997. He
is also a Director of Thermedics Inc.,
Thermo Cardiosystems Inc., Thermo Ecotek
Corporation, ThermoLase Corporation,
ThermoTrex Corporation and Trex Medical
Corporation.
Donald E. Noble Mr. Noble, 82, 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.,
Thermo Sentron Inc. and Thermo TerraTech
Inc.
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Arvin H. Smith Mr. Smith, 66, has been a Director of the
Corporation since December 1996. Mr.
Smith has been an Executive Vice President
of Thermo Electron since 1991 and a senior
vice president of that company from 1986
to 1991. He is also the president and the
chief executive officer of Thermo
Instrument Systems Inc., a majority owned
subsidiary of Thermo Electron, positions
he has held since 1986. Mr. Smith is also
a Director of Thermedics Inc., Thermo
BioAnalysis Corporation, Thermo Instrument
Systems Inc., Thermo Optek Corporation,
ThermoQuest Corporation and ThermoSpectra
Corporation.
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)
and Mr. Noble. 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
four times, the Audit Committee met twice and the Human
Resources Committee met four times during fiscal 1996. Each
Director attended at least 75% of all meetings of the Board of
Directors and Committees on which he served held during the
fiscal year, except Mr. J. Hatsopoulos. Mr. Hatsopoulos also
serves as the Chief Financial Officer of Thermo Electron and its
majority owned subsidiaries, including the Corporation, and his
duties require him to travel extensively on company business.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of
Thermo Electron or of any other companies affiliated with Thermo
Electron (also referred to as "outside Directors") receive an
annual retainer of $4,000 and a fee of $1,000 per day for
attending regular meetings of the Board of Directors and $500 per
day for participating in meetings of the Board of Directors held
by means of conference telephone and for participating in certain
meetings of committees of the Board of Directors. Payment of
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outside Directors' fees is made quarterly. Mr. Armstrong, Mr. J.
Hatsopoulos and Mr. Smith 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.
Deferred Compensation Plan for Directors
Under the Deferred Compensation Plan for Directors (the
"Deferred Compensation Plan"), a Director has the right to defer
receipt of his cash fees until he ceases to serve as a Director,
dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the
Corporation that is not approved by the Board of Directors,
deferred amounts become payable immediately. 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 50,000 shares of Common
Stock have been reserved for issuance under the Deferred
Compensation Plan. As of September 28, 1996, deferred units
equal to 22,763.75 shares of Common Stock were accumulated under
the Deferred Compensation Plan.
Directors Stock Option Plan
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.
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
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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.
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 December 28, 1996, with respect to (i) each
person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each
Director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and
(iv) all Directors and current executive officers as a group.
While certain Directors and executive officers of the
Corporation are also Directors and executive officers of Thermo
Electron or its subsidiaries other than the Corporation, all such
persons disclaim beneficial ownership of the shares of Common
Stock owned by Thermo Electron.
<TABLE>
<CAPTION>
Thermo
Thermo Power Electron ThermoLyte
Name (1) Corporation Corporation Corporation
(2) (3) (4)
<S> <C> <C> <C>
Thermo Electron Corporation 8,026,606 N/A N/A
(5)
Marshall J. Armstrong 168,540 166,524 2,500
J. Timothy Corcoran 139,634 63,774 0
Peter O. Crisp 33,719 98,696 100,000
John N. Hatsopoulos 40,753 556,768 0
Robert C. Howard 68,281 194,493 2,500
Chester G. Janssens 89,324 57,091 0
Donald E. Noble 20,030 54,453 1,000
Arvin H. Smith 7,969 513,038 0
All Directors and current 583,620 1,849,835 106,000
executive officers as a
group (10 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 of the Common Stock beneficially owned by each
Director and executive officer and by all Directors and
executive officers as a group exclude 8,026,606 shares
beneficially owned by Thermo Electron, as to which shares
each Director and executive officer and all members of such
group disclaim beneficial ownership. Shares beneficially
owned by Mr. Armstrong, Mr. Corcoran, Mr. Crisp, Mr. J.
Hatsopoulos, Mr. Howard, Mr. Noble and all Directors and
executive officers as a group include165,000, 135,500,
6,600, 40,000, 40,000, 81,650, 7,200 and 484,950 shares,
respectively, that such person or group has the right to
acquire within 60 days of December 28, 1996 through the
exercise of stock options. Shares beneficially owned by Mr.
Crisp, Mr. Noble and all Directors and executive officers
as a group include 9,026, 5,405 and 14,431 full shares,
respectively, that had been allocated through September 28,
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. No Director or
executive officer beneficially owned more than 1% of the
Common Stock outstanding as of December 28, 1996, other than
Mr. Armstrong, who beneficially owned 1.3%, and Mr.
Corcoran, who beneficially owned 1.1%, of the Common Stock
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outstanding as of such date; all Directors and executive
officers as a group beneficially owned 4.5% of the Common
Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock effected
in May 1996. Shares beneficially owned by Mr. Armstrong, Mr.
Corcoran, Mr. Crisp, Mr. J. Hatsopoulos, Mr. Howard, Mr.
Janssens, Mr. Noble, Mr. Smith and all Directors and
executive officers as a group include 111,374, 62,174,
9,375, 429,685, 47,361, 26,359, 9,375, 222,411 and 1,015,688
shares, respectively, that such person or group has the
right to acquire within 60 days of December 28, 1996 through
the exercise of stock options. Shares of the common stock of
Thermo Electron beneficially owned by Mr. Armstrong, Mr. J.
Hatsopoulos, Mr. Howard, Mr. Smith and all Directors and
executive officers as a group include 2,496, 1,934, 3,040,
1,717 and 10,511 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 44,677, 41,663 and 86,340 full shares,
respectively, allocated through September 28, 1996 to their
respective accounts maintained pursuant to Thermo Electron's
deferred compensation plan for directors. As of December
28, 1996, no director or executive officer beneficially
owned more than 1% of Thermo Electron common stock
outstanding as of such date; all directors and executive
officers as a group beneficially owned approximately 1.2% of
the Thermo Electron common stock outstanding as of December
28, 1996.
(4) Mr. Crisp is a general and limited parter of Venrock
Associates and, therefore, may be deemed to beneficially own
the shares owned in the aggregate by entities affiliated
with Venrock Associates (100,000 shares). Mr. Crisp
disclaims beneficial ownership of the 100,000 shares held in
the aggregate by entities affiliated with Venrock
Associates, except to the extent of his pecuniary interest
therein arising from his general and limited partnership
interests therein. No Director or executive officer
beneficially owned more than 1% of the Common Stock
outstanding of ThermoLyte as of December 28, 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 64.3% of the Common Stock outstanding
as of December 28, 1996. Thermo Electron's address is 81
Wyman Street, Waltham, Massachusetts 02254-9046. As of
December 28, 1996, Thermo Electron had the power to elect
all of the members of the Corporation's Board of Directors.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's Directors and executive officers and
beneficial owners of more than 10% of the Common Stock, such as
Thermo Electron, to file with Securities and Exchange Commission
initial reports of ownership and periodic reports of changes in
ownership of the Corporation's securities. Based upon a review
of such filings, all Section 16(a) filing requirements applicable
to such persons were complied with during fiscal 1996, except in
the following instances. Thermo Electron, the beneficial owner
of more than 10% of the Common Stock, filed its Form 4 for the
month of March 1996 eight days late and its Form 4 for the month
of September 1996 two and a half months late, reporting the
exercises of options to purchase 5,000 shares and 500 shares,
respectively, granted by Thermo Electron to employees under its
stock option program.
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 two 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>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Options
Name and (No. of All Other
Principal Fiscal Annual Compensation Shares and Compensation
Position Year (1) Company) (2) (3)
Salary Bonus
<S> <C> <C> <C> <C> <C> <C>
Marshall J. 1996 $171,000 $78,000 32,000(TLT) $6,750
Armstrong (4)
Former Chief 1995 $163,000 $100,000 -- $7,931
Executive 1994 $154,500 $126,000 (THP) $10,557
Officer 125,000
J. Timothy 1996 $159,010 $52,000 40,000(TLT) $6,750
Corcoran (5)
President and 600(TMO)
Chief Executive 2,000(TBA)
Officer
2,000(TFG)
6,000(TOC)
6,000(TMQ)
2,000(TSR)
4,000(TXM)
1995 $145,507 $85,000 15,000(THP) $6,750
45,600(TMO)
1994 $129,000 $75,000 80,500(THP) $6,643
5,850(TMO)
Chester G. 1996 $128,622 $0 3,750(TMO) $5,551
Janssens (6)
Vice President;
President, 3,000(TLT)
Crusader Engines 1995 $145,125 $15,000 12,000(THP) $7,365
Division 3,600(TMO)
1994 $140,000 $35,000 29,650(THP) $6,722
6,187(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
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calendar year in which the Corporation's fiscal year-end
occurred. Bonuses have not yet been determined for calendar
1996; therefore, the bonus amounts shown for fiscal 1996 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.
In addition to receiving options to purchase Common Stock
(designated in the table as "THP"), and the Corporation's
majority owned subsidiary ThermoLyte Corporation (designated
in the table as TLT), the named executive officers have been
granted options to purchase common stock of Thermo Electron
and certain of its other subsidiaries as part of Thermo
Electron's stock option program. Options have been granted
during the last three fiscal years to the named executive
officers in the following Thermo Electron companies: Thermo
Electron (designated in the table as TMO), Thermo
BioAnalysis Corporation (designated in the table as TBA),
Thermo Fibergen Inc. (designated in the table as TFG),
Thermo Optek Corporation (designated in the table as TOC),
ThermoQuest Corporation (designated in the table as TMQ),
Thermo Sentron Inc. (designated in the table as TSR), and
Trex Medical Corporation (designated in the table as TXM).
(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 served as the Corporation's chief executive
officer until October 1, 1996. He is also a vice president
and full-time employee of Thermo Electron, but during his
tenure as the Corporation's Chief Executive Officer he
devoted such time to the affairs of the Corporation as the
Corporation's needs reasonably required. 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 has been allocated a
percentage of Mr. Armstrong's annual cash compensation
(salary and bonus) for the time he devoted to the affairs of
the Corporation, which was reviewed and approved by the
Human Resources Committee of the Board of Directors of the
Corporation. For fiscal 1996, 1995 and 1994, the Corporation
was allocated approximately 35%, 60% and 60%, respectively,
of Mr. Armstrong's annual cash compensation.
(5) Mr. Corcoran was appointed president of the Corporation
effective April 1, 1995 and its chief executive officer
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effective as of October 1, 1996. Prior to April 1995, he
served as a vice president of the Corporation.
(6) On July 1, 1996, Mr. Janssens resigned his responsibilities
as a vice president of the Corporation. He continues to be
employed on a half-time basis by the Corporation. Mr.
Janssens will be paid approximately $75,000 per year under
this arrangement.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options made by the Corporation and
the other Thermo Electron companies during fiscal 1996 to the
named executive officers in their capacities as officers of the
Corporation. It has not been the Corporation's policy in the past
to grant stock appreciation rights, and no such rights were
granted during fiscal 1996.
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.
<TABLE>
<CAPTION>
Option Grants In Fiscal 1996
Percent
of
Total Potential
Options Realizable
Granted Value at Assumed
Number of to Annual Rates of
Securities Employees Exercise Stock Price
Underlying in Price Appreciation for
Options Fiscal Per Expira- Option Term (2)
Name Granted(1) Year Share tion
Date
5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marshall J. 30,000 (TLT) 9.3% $10.00 2/9/08 $238,800 $641,400
Armstrong 2,000 (TLT) 0.6% (3) $10.00 3/11/08 $15,920 $42,760
J. Timothy 40,000 (TLT) 12.4% $10.00 2/9/08 $318,400 $855,200
Corcoran 600 (TMO) 0.4% (3) $42.79 5/22/99 $4,044 $8,496
2,000 (TBA) 0.2% (3) $10.00 3/11/08 $15,920 $42,760
2,000 (TFG) 0.4% (3) $10.00 2/9/08 $15,920 $42,760
6,000 (TOC) 0.2% (3) $12.00 4/9/08 $57,300 $153,960
6,000 (TMQ) 0.2% (3) $13.00 3/11/08 $62,100 $166,800
2,000 (TSR) 0.4% (3) $14.00 3/11/08 $22,280 $59,880
4,000 (TXM) 0.2% (3) $11.00 3/11/08 $35,000 $94,080
PAGE
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Chester G. 3,000 (TLT) 0.9%(3) $10.00 2/9/99 $4,740 $9,930
Janssens 3,750 (TMO) 0.2%(3) $42.79 5/22/99 $25,275 $53,100
</TABLE>
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(1) All of the options granted during the fiscal year are
immediately exercisable as of the end of the fiscal year
except options to purchase shares of the Corporation's
majority owned subsidiary, ThermoLyte Corporation
(designated in the table as TLT), which are not exercisable
until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under
Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act") and (ii) nine years after 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 the
Corporation or another 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 that are not publicly traded, the
repurchase rights lapse in their entirety on the ninth
anniversary of the grant date. The options to purchase
shares of the common stock of ThermoLyte Corporation granted
to Mr. Janssens have three-year terms, and the repurchase
rights lapse in their entirety on the second anniversary of
the grant date. 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) 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 granting 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 and accordingly are reported
as a percentage of total options granted to employees of
Thermo Electron and its public subsidiaries.
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Stock Options Exercised During Fiscal 1996 and Fiscal Year-End
Values
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options of the Thermo Electron companies held at the end of
fiscal 1996 by the named executive officers. No stock
appreciation rights were exercised or were outstanding during
fiscal 1996.
<TABLE>
<CAPTION>
Aggregated Options Exercised in Fiscal 1996 and Fiscal 1996 Year-End Opti
No. of
Unexercised
Options at
Shares Fiscal Value of
Acquired Year-end Unexercised
on Value (Exercisable/ In-the-Money
Name Company Exercise Realized Unexercisable) Options
(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Marshall J. Thermo Power -- -- 165,000 /0 $50,000 /--
Armstrong (2)
ThermoLyte -- -- 0 /32,000 --/ $0(4)
J. Timothy Thermo Power -- 135,500 /0 $100,450 /--
Corcoran --
ThermoLyte -- -- 0 /40,000 --/ $0(4)
Thermo -- -- 62,174 /0 $1,292,716 /--
Electron (3)
Thermo -- -- 2,000 /0 $7,750 /--
BioAnalysis
Thermo -- -- 2,000 /0 $5,250 /--
Fibergen
Thermo Optek -- -- 6,000 /0 $18,000 /--
ThermoQuest -- -- 6,000 /0 $3,000 /--
Thermo -- -- 2,000 /0 $0 /--
Sentron
Trex Medical -- -- 4,000 /0 $37,000 /--
Chester G. Thermo Power -- -- 81,650 /0 $18,460 /--
Janssens
ThermoLyte -- -- 0 /3,000 --/ $0(4)
Thermo -- -- 4,500 /0 $50,252 /--
Ecotek
Thermo -- -- 4,500 /0 $45,563 /--
Fibertek
ThermoTrex -- -- 900 /0 $28,508 /--
</TABLE>
(1) The shares of common stock shown in the table have been
adjusted to reflect three-for-two stock splits: effected
by Thermo Electron in May 1996, by Thermo Ecotek in
October 1996 and by Thermo Fibertek in June 1996. All of
the options reported outstanding at the end of the fiscal
year were immediately exercisable as of fiscal year-end,
except the options to purchase shares of the common stock
of the Corporation's majority owned subsidiary, 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 Exchange
Act and (ii) nine years after the grant date. In all cases,
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. For companies whose shares are
not publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date. For
publicly traded companies, the repurchase rights generally
lapse ratably over a five- to ten-year period, depending on
the option term, which may vary from seven to twelve years,
provided that the optionee continues to be employed by the
Corporation or another Thermo Electron company. The
options to purchase common stock of ThermoLyte Corporation
granted to Mr. Janssens have a three-year term, and the
repurchase rights lapse in their entirety on the second
anniversary of the grant date. 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
11
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here as they were granted as compensation for services to
other Thermo Electron companies in capacities other than his
capacity as the chief executive officer of the Corporation.
(3) Options to purchase 45,000 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.
(4) No public market existed for the shares as of December 28,
1996. Accordingly, no value in excess of the exercise price
has been attributed to those options.
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,
12
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<PAGE>
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 28, 1996, Mr. Armstrong would
have received approximately $290,000.
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.")
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
13
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<PAGE>
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, 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% of the Corporation's revenues for these services in
calendar 1995. Beginning January 1, 1996, the fee was 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 1996, Thermo Electron assessed
the Corporation $1,262,000 in fees under the Services Agreement.
Management believes that the charges under the Services Agreement
14
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<PAGE>
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.
From time to time, the Corporation may transact business
with other companies in the Thermo Group. These transactions
included the following. During fiscal 1996, FES International
Limited, a subsidiary of Thermo Electron, purchased a total of
$104,000 of refrigeration systems from FES, a division of the
Corporation.
As of September 28, 1996, $28,399,000 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 64.3% of the
Corporation's outstanding Common Stock on December 28, 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
15
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<PAGE>
1997. The rental payments made to Thermo Electron, net of
sublease income, during fiscal 1996 were $170,000.
During fiscal 1996, the Corporation, through its ThermoLyte
Corporation subsidiary, acquired the thermoelectric cooling
module business of ThermoTrex Corporation, a majority owned
subsidiary of Thermo Electron, for $860,000 which was the net
book value of the business acquired. Messrs. Crisp, Hatsopoulos
and Howard, Directors of the Corporation are also directors of
ThermoTrex Corporation.
The Corporation provides contract administration and other
services and data processing services, respectively, to certain
companies affiliated with Thermo Electron, which are charged
based on actual usage. For these services, the Corporation
charged $167,000 in fiscal 1996 to such companies.
Stock Holding Assistance Plan
In 1996, 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. No such loans are currently
outstanding under the plan.
AA970240024
