<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
THERMO POWER CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[Thermo Power 45 First Avenue, Waltham, MA 02451
Corporation Logo]
February 5, 1999
Dear Stockholder:
The enclosed Notice calls the 1999 Annual Meeting of the Stockholders of
Thermo Power Corporation. I respectfully request all Stockholders to attend
this meeting, if possible.
Our Annual Report for the fiscal year ended October 3, 1998, is enclosed. I
hope you will read it carefully. Feel free to forward any questions you may
have if you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer and Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
/s/ J. Timothy Corcoran
J. Timothy Corcoran
President and Chief Executive
Officer
<PAGE>
[Thermo Power 45 First Avenue, Waltham, MA 02451
Corporation Logo]
February 5, 1999
To the Holders of the Common Stock of THERMO POWER CORPORATION
NOTICE OF ANNUAL MEETING
The 1999 Annual Meeting of the Stockholders of Thermo Power Corporation (the
"Corporation") will be held on Wednesday, March 10, 1999 at 10:00 a.m. at the
executive offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02454. The purpose of the meeting is to consider and take action
upon the following matters:
1. Election of eight directors.
2. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive
notice of and to vote at the meeting is January 20, 1999.
The by-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to you
by order of the board of directors.
Sandra L. Lambert
Clerk
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo Power
Corporation (the "Corporation") for use at the 1999 Annual Meeting of the
Stockholders (the "Meeting") to be held on Wednesday, March 10, 1999 at 10:00
a.m. at the executive offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts, 02454, and any adjournment thereof. The mailing
address of the executive offices of the Corporation is 45 First Avenue,
Waltham, Massachusetts 02451. This proxy statement and the enclosed proxy were
first furnished to Stockholders of the Corporation on or about February 9,
1999.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
eight directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $.10 par value ("Common
Stock"), entitled to vote at the Meeting is necessary to provide a quorum for
the transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you
plan to attend the Meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on
the proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors
and as the individuals named as proxy holders on the proxy deem advisable on
all other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election. Withholding
authority to vote for a nominee for director will be treated as shares present
and entitled to vote and, for purposes of determining the outcome of the vote,
will have the same effect as a vote against the nominee. Broker "non-votes"
will not be treated as shares present and entitled to vote on a voting matter
and will have no effect on the outcome of the vote. A broker "non-vote" occurs
when a nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting instructions from the
beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the clerk
of the Corporation received prior to the Meeting, by executing and returning a
later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of January 20, 1999, consisted of
11,830,163 shares of Common Stock. Only Stockholders of record at the close of
business on January 20, 1999, are entitled to vote at the Meeting. Each share
is entitled to one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
Eight directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified or until his earlier resignation, death
or removal.
1
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Nominees for Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its majority owned
subsidiary, ThermoLyte Corporation, and of its parent corporation, Thermo
Electron Corporation ("Thermo Electron"), a provider of diversified products
and services for the biomedical, instrument and environmental markets, is
reported under the caption "Stock Ownership." All of the nominees are
currently directors of the Corporation.
<TABLE>
<C> <S>
Marshall J. Armstrong.. Mr. Armstrong, 63, has been a director of 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. Mr. Armstrong has been senior vice
president, government affairs, of Thermo Electron
since March 1997 and was a vice president of Thermo
Electron from 1986 until his promotion. He is also a
director of SatCon Technology Corporation and Thermo
Sentron Inc.
Frank Borman........... Col. Borman, 70, has been a director of the
Corporation since January 1999. Col. Borman has been
president and chief executive officer of Patlex
Corporation, a patent licensing company, and a trustee
of the National Geographic Society, for over five
years. Col. Borman is also a director of American
Superconductor Corporation, Database Online
Corporation, The Home Depot, Inc. and Thermo
Instrument Systems Inc.
J. Timothy Corcoran.... Mr. Corcoran, 52, 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 served as president of the
Corporation's FES Division from June 1990 until June
1998.
Peter O. Crisp......... Mr. Crisp, 66, has been a director of the Corporation
since 1985. Mr. Crisp was a general partner of Venrock
Associates, a venture capital investment firm, for
over five years until his retirement in September
1997. Mr. Crisp is also a director of American
Superconductor Corporation, Evans & Sutherland
Computer Corporation, NovaCare Inc., Thermedics Inc.,
Thermo Electron, ThermoTrex Corporation and United
States Trust Corporation.
John N. Hatsopoulos.... Mr. Hatsopoulos, 64, has been a director of the
Corporation since 1990. He served as the chief
financial officer and senior vice president of the
Corporation from 1989 and 1997, respectively, until
his retirement at the end of 1998, and as a vice
president from 1989 until 1997. Mr. Hatsopoulos was
the president of Thermo Electron from 1997 to 1998 and
its chief financial officer from 1988 to 1998. Mr.
Hatsopoulos is also a director of LOIS/USA Inc.,
Thermedics Inc., Thermo Electron, Thermo Fibertek
Inc., Thermo Instrument Systems Inc., Thermo TerraTech
Inc. and US Liquids Inc.
Brian D. Holt.......... Mr. Holt, 50, has been a director and the chairman of
the Corporation since September 1998. He has been the
president and chief executive officer of Thermo Ecotek
Corporation since February 1994. He has been the chief
operating officer, environmental and energy, of Thermo
Electron since September 1998. From March 1996 to
September 1998, he was a vice president of Thermo
Electron. For more than five years prior to his
appointment as an officer of Thermo Ecotek
Corporation, he was president and chief executive
</TABLE>
2
<PAGE>
<TABLE>
<C> <S>
officer of Pacific Generation Company, a financier,
builder, owner and operator of independent power
facilities. Mr. Holt is also a director of KFx, Inc., The
Randers Killam Group Inc., Thermo Ecotek Corporation,
ThermoRetec Corporation and Thermo TerraTech Inc.
Donald E. Noble... Mr. Noble, 83, 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.
John J. Setnicka.. Mr. Setnicka, 65, has been a director of the Corporation
since December 1998. He has been the president of Excel
International Advisors, Inc., an export management company,
since June 1994. He was the chairman of Eveready Battery
Co.--Pan America from 1987 to 1992. Mr. Setnicka was
retired from 1992 until 1994.
</TABLE>
Committees of the Board of Directors and Meetings
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are Mr. Crisp (Chairman) and Mr. Noble. The
audit committee reviews the scope of the audit with the Corporation's
independent public accountants and meets with them for the purpose of
reviewing the results of the audit subsequent to its completion. The present
members of the human resources committee are Mr. Noble (Chairman) and Mr.
Crisp. The human resources committee reviews the performance of senior members
of management, recommends executive compensation and administers the
Corporation's stock option and other stock-based compensation plans. The
Corporation does not have a nominating committee of the board of directors.
The board of directors met six times, the audit committee met twice and the
human resources committee met five times during fiscal 1998. Each director
attended at least 75% of all meetings of the board of directors and committees
on which he served held during the fiscal year.
The board of directors has established a special committee (the "Special
Committee") consisting solely of outside directors for the purpose of
evaluating the merits and negotiating the terms of the proposed transaction
with Thermo Electron pursuant to which the Corporation would be taken private
and become a wholly owned subsidiary of Thermo Electron, considering such
alternatives as the Special Committee deems appropriate and making a
recommendation to the full board of directors on whether to approve any such
transaction. See Relationship with Affiliates. The present members of the
Special Committee are Col. Borman and Mr. Setnicka.
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 the audit
and human resources committees of the board of directors. Payment of outside
directors' fees is made quarterly. Mr. Armstrong, Mr. Corcoran, Mr. J.
Hatsopoulos and Mr. Holt 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.
In addition, members of the Special Committee receive a one time retainer of
$20,000 and a fee of $1,000 per day for attending regular meetings of the
Special Committee and $500 per day for participating in meetings of the
Special Committee held by means of conference telephone.
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
3
<PAGE>
occupation. In the event of a change in control or proposed change in control
of the Corporation that is not approved by the board of directors, deferred
amounts become payable immediately. Either of the following is deemed to be a
change of control: (a) the acquisition, without the prior approval of the
board of directors, directly or indirectly, by any person of 50% or more of
the outstanding Common Stock or 25% or more of the outstanding common stock of
Thermo Electron; or (b) the failure of the persons serving on the board of
directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the Common Stock or the common stock of
Thermo Electron to constitute a majority of the board of directors at any time
within two years following any such event. Amounts deferred pursuant to the
Deferred Compensation Plan are valued at the end of each quarter as units of
the Corporation's Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. A total of 50,000 shares of Common Stock have been reserved
for issuance under the Deferred Compensation Plan. As of November 28, 1998,
deferred units equal to 27,888.21 shares of Common Stock were accumulated
under the Deferred Compensation Plan.
Directors Stock Option Plan
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of Common Stock 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 the Stockholders of the Corporation.
Options evidencing annual grants may be exercised at any time from and after
the six-month anniversary of the grant date of the option and prior to the
expiration of the option 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 is "spun out" to outside investors.
The grant occurs at the close of business on the date of the first Annual
Meeting of the Stockholders next following the subsidiary's spinout, which is
the first to occur of either an initial public offering of the subsidiary's
common stock or a sale of such stock to third parties in an arms-length
transaction. 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 options 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. In fiscal 1995, the then outside
directors were each granted options to purchase 1,500 shares of the common
stock of ThermoLyte Corporation in connection with the spinout of that entity.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the common stock as reported on the American
Stock Exchange (or other principal market on which the common stock is then
traded) for the five trading days immediately preceding and including the date
of grant, or, if the shares are not then traded, at the last price per share
paid by third parties in an arms-length transaction prior to the option grant.
As of November 28, 1998, options to purchase 24,600 shares of Common Stock had
been granted, 15,400 were outstanding under the Directors Plan, options to
purchase 6,800 shares of Common Stock
4
<PAGE>
had lapsed, 2,400 options had been exercised, and options to purchase 7,200
shares of Common Stock were reserved and available for grant.
Stock Ownership Policies for Directors
During fiscal 1996, the human resources committee of the board of directors
(the "Committee") established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level within
three years of their appointment. Directors who are also executive officers of
the Corporation are required to comply with a separate stock holding policy
established by the Committee in fiscal 1996, which is described in the
Committee Report on Executive Compensation--Stock Ownership Policies.
In addition, the Committee adopted a policy requiring directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation--Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron and ThermoLyte Corporation
("ThermoLyte"), a majority-owned subsidiary of the Corporation, as of November
28, 1998, with respect to (i) each person who was known by the Corporation to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director, (iii) each executive officer named in the summary compensation
table under the caption "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 beneficially owned by Thermo Electron.
<TABLE>
<CAPTION>
Thermo
Thermo Power Electron ThermoLyte
Name(1) Corporation(2) Corporation(3) Corporation(4)
------- -------------- -------------- --------------
<S> <C> <C> <C>
Thermo Eletron Corporation (5).... 9,299,876 N/A N/A
Smallcap World Fund, Inc. (6)..... 620,000 0 0
Marshall J. Armstrong............. 168,540 135,580 2,500
Frank Borman...................... 0 0 0
J. Timothy Corcoran............... 161,031 72,824 0
Peter O. Crisp.................... 37,127 102,682 0
John N. Hatsopoulos............... 46,753 823,854 0
Brian D. Holt..................... 0 284,793 0
Donald E. Noble................... 23,894 59,234 1,000
John J. Setnicka.................. 1,000 0 0
All directors and current
executive officers as a group
(10 persons)..................... 465,703 1,963,092 3,500
</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 beneficially owned consist of shares owned by the indicated
person or by that person for the benefit of minor children, and all share
ownership includes sole voting and investment power.
5
<PAGE>
(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 9,299,876 shares beneficially owned by Thermo Electron. Shares
beneficially owned by Mr. Armstrong, Mr. Corcoran, Mr. Crisp, Mr.
Hatsopoulos, Mr. Noble and all directors and current executive officers as
a group include 165,000, 135,500, 6,600, 40,000, 7,200 and 374,300 shares,
respectively, that such person or group has the right to acquire within 60
days of November 28, 1998, through the exercise of stock options. Shares
beneficially owned by Mr. Crisp, Mr. Noble and all directors and current
executive officers as a group include 11,434, 7,869 and 19,303 full
shares, respectively, that had been allocated through November 28, 1998,
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. Shares
beneficially owned by Mr. Hatsopoulos include 1,000 shares owned by Mr.
Hatsopoulos' spouse. No director or current executive officer beneficially
owned more than 1% of the Common Stock outstanding as of November 28,
1998, other than Mr. Armstrong, who beneficially owned 1.41% and Mr.
Corcoran, who beneficially owned 1.35% of the Common Stock outstanding as
of such date; all directors and current executive officers as a group
beneficially owned 3.90% of the Common Stock outstanding as of such date.
(3) Shares beneficially owned by Mr. Armstrong, Mr. Corcoran, Mr. Crisp, Mr.
Hatsopoulos, Mr. Holt, Mr. Noble, and all directors and current executive
officers as a group include 76,650, 67,674, 9,125, 812,735, 284,100, 9,125
and 1,632,181 shares, respectively, that such person or group has the
right to acquire within 60 days of November 28, 1998, through the exercise
of stock options. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Armstrong, Mr. Hatsopoulos and all directors and
current executive officers as a group include 2,598, 2,036 and 7,131 full
shares, respectively, allocated to their respective accounts maintained
pursuant to Thermo Electron's employee stock ownership plan, of which the
trustees, who have investment power over its assets, were, as of November
28, 1998, executive officers of Thermo Electron. Shares of the common
stock of Thermo Electron beneficially owned by Mr. Crisp, Mr. Noble and
all directors and current executive officers as a group include 46,663,
44,444 and 91,107 full shares, respectively, allocated through November
28, 1998 to their respective accounts maintained pursuant to Thermo
Electron's deferred compensation plan for directors. Shares benefically
owned by Mr. Armstrong include 249 shares held by Mr. Armstrong's spouse.
As of November 28, 1998, no director or current 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 1.23% of the Thermo Electron common
stock outstanding as of November 28, 1998.
(4) No director or executive officer beneficially owned more than 1% of the
common stock of ThermoLyte outstanding as of November 28, 1998; all
directors and executive officers as a group beneficially owned less than
1% of the common stock outstanding as of such date.
(5) Thermo Electron owned 78.61% of the Common Stock outstanding as of
November 28, 1998. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02454-9046. As of November 28, 1998, Thermo Electron had the
power to elect all of the members of the Corporation's board of directors.
(6) Smallcap World Fund, Inc. owned 5.24% of the Common Stock outstanding as
of November 28, 1998. Smallcap World Fund's address is 333 Hope Street,
Los Angeles, California 90071.
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 1998, except in the following instances. Mr.
Crisp and Mr. Noble, each filed one transaction late consisting of the exempt
acquisition of stock units to their accounts pursuant to the Corporation's
deferred compensation plan for directors. Thermo Electron filed eight Forms 4
late, reporting a total of 85 transactions, including 80 open market purchases
of shares of common stock and five transactions associated with the grant,
exercise and lapse of options to purchase common stock granted to employees
under its stock option program.
6
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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 (the "named executive officer") for the last three fiscal
years. 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 has a
fiscal year that is the 52-or 53-week period ending on the Saturday nearest
September 30.
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.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
-----------------------
Annual Compensation (1)
-----------------------
Securities Underlying
Name and Principal Fiscal Options (No. of Shares All Other
Position Year Salary Bonus and Company (3) Compensation(4)
------------------ ------ ------------ ----------- ----------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Timothy Corcoran(5).. 1998 $ 176,374 n/a(2) 5,300 (TMO) $13,908(6)
President and Chief
Executive Officer
2,000 (MKA)
2,000 (ONX)
20,000 (RGI)
2,000 (TDX)
1,000 (TISI)
2,000 (TRIL)
1,500 (VIZ)
2,000 (TRCC)
1997 $ 168,003 $ 70,000 800 (TMO) $10,720(6)
1996 $ 159,010 $ 52,000 600 (TMO)
2,000 (TBA)
2,000 (TFG)
40,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
</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.
(2) The bonus amount represents the bonus paid for performance during the
calendar year in which the Corporation's fiscal year-end occurred. As of
the date hereof, bonuses have not yet been determined for calendar 1998.
(3) In addition to receiving options to purchase Common Stock of the
Corporation (designated in the table as THP), and the Corporation's
majority-owned subsidiary, ThermoLyte Corporation (designated in the table
7
<PAGE>
as TLT), the named executive officer has 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 in his capacity as an
officer of the Corporation. Options have been granted during the last three
fiscal years to the named executive officer in the following Thermo
Electron companies: Thermo Electron (designated in the table as TMO),
Metrika Systems Inc. (designated in the table as MKA), ONIX Systems Inc.
(designated in the table as ONX), The Randers Killam Group Inc. (designated
in the table as RGI), Thermedics Detection Inc. (designated in the table as
TDX), Thermo BioAnalysis Corporation (designated in the table as TBA),
Thermo Fibergen Inc. (designated in the table as TFG), Thermo Information
Solutions Inc. (designated in the table as TISI), Thermo Optek Corporation
(designated in the table as TOC), ThermoQuest Corporation (designated in
the table as TMQ), Thermo Sentron Inc. (designated in the table as TSR),
Thermo Trilogy Corporation (designated in the table as TRIL), Thermo Vision
Corporation (designated in the table as VIZ), Trex Communications
Corporation (designated in the table as TRCC) and Trex Medical Corporation
(designated in the table as TXM).
(4) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officer participating in the
Thermo Electron 401(k) plan.
(5) Mr. Corcoran was appointed president of the Corporation effective April 1,
1995 and its chief executive officer effective as of October 1, 1996.
Prior to April 1995, he served as a vice president of the Corporation.
(6) In addition to $7,125 and $7,200 which represent the amount of matching
contributions referred to in footnote (4), this amount includes $3,595 for
fiscal 1997 and $6,708 for fiscal 1998, of compensation attributable to an
interest-free loan provided to Mr. Corcoran pursuant to the Corporation's
Stock Holding Assistance Plan. See "Relationship with Affiliates--Stock
Holding Assistance Plan."
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options made by the Corporation and the other Thermo Electron companies
during fiscal 1998 to the named executive officer in his capacity as an
officer 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 1998.
Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Exercise Price Appreciation for
Number of Securities Granted to Price Option Term(2)
Underlying Options Employees in Per Expiration -----------------------
Name Granted (1) Fiscal Year Share Date 5% 10%
---- --------------------- ------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Timothy Corcoran..... 1,000 (TMO) 0.05%(3) $34.50 6/2/03 $ 9,530 $ 21,060
4,300 (TMO) 0.22%(3) $16.20 9/23/03 $ 19,264 $ 42,527
2,000 (MKA) 0.88%(3) $14.23 1/21/05 $ 11,580 $ 27,000
2,000 (ONX) 0.23%(3) $14.25 1/21/05 $ 11,600 $ 27,040
20,000 (RGI) 0.23%(3) $ 0.80 1/21/05 $ 6,600 $ 15,200
2,000 (TDX) 0.21%(3) $ 9.56 1/21/05 $ 7,780 $ 18,140
1,000 (TISI) 1.62%(3) $10.00 1/21/05 $ 4,070 $ 9,940
2,000 (TRIL) 1.43%(3) $ 8.25 1/21/05 $ 4,425 $ 15,660
1,500 (VIZ) 0.35%(3) $ 7.25 1/21/05 $ 7.25 $ 10,320
2,000 (TRCC) 0.16%(3) $ 4.00 1/21/05 $ 3,260 $ 7,580
</TABLE>
- --------
(1) As part of Thermo Electron's stock option program, options have been
granted during fiscal 1998 to the named executive officer to purchase the
common stock of Thermo Electron (designated in the table as TMO), Metrika
Systems Inc. (designated in the table as MKA), ONIX Systems Inc.
(designated in the table as ONX), The Randers Killam Group Inc.
(designated in the table as RGI), Thermedics Detection Inc.
8
<PAGE>
(designated in the table as TDX), Thermo Information Solutions Inc.
(designated in the table as TISI), Thermo Trilogy Corporation (designated
in the table as TRIL), Thermo Vision Corporation (designated in the table
as VIZ) and Trex Communications Corporation (designated in the table as
TRCC). The options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year except for Thermo Information
Solutions Inc., Thermo Trilogy Corporation and Trex Communications
Corporation, which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that company's common stock
under Section 12 of the Securities Exchange Act of 1934 and (ii) 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 one- to five-year period, depending on the option
term, which may vary from five to seven 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.
Certain options granted as part of Thermo Electron's stock options 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 holder of the option to exercise the option 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 in this table represent hypothetical gains that could be
achieved for the 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 option was granted to its 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 a stock option plan maintained by Thermo
Electron and, accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
9
<PAGE>
Stock Options Exercised During Fiscal 1998 and Fiscal Year-End Values
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options to purchase shares
of Thermo Electron companies held at the end of fiscal 1998 by the named
executive officer. No stock appreciation rights were exercised or were
outstanding during fiscal 1998.
Aggregated Option Exercises In Fiscal 1998 And Fiscal 1998 Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value (Exercisable/ In-the-Money
Name Company Exercise Realized(1) Unexercisable)(2) Options
---- ---------------------------- ----------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Timothy Corcoran..... Thermo Power -- -- 135,500 /0 $40,750 /--
Thermo Electron (3) 600 $9,765 67,674 /0 $ 2,759 /--
Metrika Systems -- -- 2,000 /0 $ 0 /--
ONIX Systems -- -- 2,000 /0 $ 0 /--
Randers Group -- -- 20,000 /0 $ 0 /--
Thermedics Detection -- -- 2,000 /0 $ 0 /--
Thermo BioAnalysis -- -- 2,000 /0 $ 1,250 /--
Thermo Fibergen -- -- 2,000 /0 $ 0 /--
Thermo Information Solutions -- -- 0 /1,000 -- /$0 (4)
ThermoLyte -- -- 0 /40,000 -- /$0 (4)
Thermo Optek -- -- 6,000 /0 $ 0 /--
ThermoQuest -- -- 6,000 /0 $ 0 /--
Thermo Sentron -- -- 2,000 /0 $ 0 /--
Thermo Trilogy -- -- 0 /2,000 -- $0 (4)
Thermo Vision -- -- 1,500 /0 $ 0 /--
Trex Communications -- -- 0 /2,000 -- /$0 (4)
Trex Medical -- -- 4,000 /0 $ 0 /0
</TABLE>
- --------
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year 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, as well as Thermo Information
Solutions Inc., Thermo Trilogy Corporation, and Trex Communications
Corporation, which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that company's common
stock under Section 12 of the Securities Exchange Act of 1934 and (ii)
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 one- to
ten-year period, depending on the option term, which may vary from three
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.
10
<PAGE>
(3) Options to purchase 45,000 shares of the common stock of Thermo Electron
granted to Mr. Corcoran are subject to 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 November 28, 1998.
Accordingly, no value in excess of the exercise price has been attributed
to those options.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive officers
and key employees of the Corporation that provide severance benefits if there
is a change in control of Thermo Electron and their employment is terminated
for any reason, other than for cause, within 18 months thereafter. For
purposes of these agreements, a change in control exists upon (i) the
acquisition by any person of 40% or more of the outstanding common stock or
voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to be constituted of a majority of directors who are
"continuing directors", which term is defined to include directors who were
members of Thermo Electron's board on the date of the agreement or who
subsequent to the date of the agreement were nominated or elected by a
majority of directors who were "continuing directors" at the time of such
nomination or election; (iii) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving Thermo
Electron or the sale or other disposition of all or substantially all of the
assets of Thermo Electron unless immediately after such transaction (a) all
holders of Thermo Electron common stock immediately prior to such transaction
own more than 60% of the outstanding voting securities of the resulting or
acquiring corporation in substantially the same proportions as their ownership
immediately prior to such transaction and (b) no person after the transaction
owns 40% or more of the outstanding voting securities of the resulting or
acquiring corporation; or (iv) approval by stockholders of a complete
liquidation or dissolution of Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement with J.
Timothy Corcoran. This agreement provides that in the event the individual's
employment is terminated within 18 months after a change in control, the
individual would be entitled to a lump sum payment equal to the sum of one
times, the individual's highest annual base salary in any 12 month period
during the prior 5 year period, plus one times the individual's highest annual
bonus in any 12 month period during the prior 5 year period. In addition, the
individual would be provided benefits for a period of one year, after such
termination substantially equivalent to the benefits package the individual
would have been otherwise entitled to receive if the individual was not
terminated. The individual would also be entitled to all other compensation
due to the individual from the Corporation through the date of termination.
Further, all options that the individual holds in Thermo Electron and its
subsidiaries, including the Corporation, would become fully vested as of the
date of the change in control. Finally, the individual would be entitled to a
cash payment equal to $15,000, to be used toward outplacement services. This
executive retention agreement supercedes and replaces any and all prior
severance arrangements which this individual had with Thermo Electron.
Assuming that the severance benefits would have been payable as of January
1, 1999, the lump sum salary and bonus payment under such agreement to Mr.
Corcoran, would have been approximately $269,000. In the event that payments
under this agreement are deemed to be so called "excess parachute payments"
under the applicable provisions of the Internal Revenue Code of 1986, as
amended, the individual would be entitled to receive a gross-up payment equal
to the amount of any excise tax payable by such individual with respect to
such payment plus the amount of all other additional taxes imposed on such
individual attributable to the receipt of such gross-up payment.
11
<PAGE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines
established by the human resources committee of the board of directors of its
parent corporation, Thermo Electron. The executive compensation program
presently consists of annual base salary ("salary"), short-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of stock
options.
The Committee believes that the total compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the
mid-point of competitive salaries derived from market surveys and that short-
term and long-term incentive compensation should reflect the performance of
the Corporation and the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total
compensation for its executives is assessed by comparing it to market data
provided by its compensation consultant and by participating in annual
executive compensation surveys, primarily "Project 777," an executive
compensation survey prepared by Management Compensation Services, a division
of Hewitt Associates. The majority of firms represented in the Project 777
survey are included in the Standard & Poor's Index, but do not necessarily
correspond to the companies included in the Corporation's peer group index,
the Dow Jones Total Return Index for the Industrial-Diversified Industry
Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by
comparing it to total compensation of other executives within the Thermo
Electron organization with comparable levels of responsibility for comparably
sized business units.
Because the compensation practices of the Corporation are guided by the
policies of its parent corporation, cash compensation reviews are conducted on
a calendar-year basis in order to coincide with the compensation reviews
conducted by the human resources committee of Thermo Electron. Thermo Electron
operates on a fiscal year that is the 52- or 53-week period that ends on the
Saturday nearest December 31.
The process for determining each of the elements of the total compensation
for the Corporation's officers is outlined below.
Base Salary
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for named executive
officers will approach the mid-point of competitive data.
Cash Bonus
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having
12
<PAGE>
comparable sales and complexity to the Corporation. The actual bonus awarded
to an executive officer may range from zero to three times the median
potential bonus. The value within the range (the bonus multiplier) is
determined at the end of each year by the Committee in its discretion. The
Committee exercises its discretion by evaluating each executive's performance
using a methodology developed by its parent corporation, Thermo Electron, and
applied throughout the Thermo Electron organization. The methodology
incorporates measures of operating returns which are designed to measure
profitability and contributions to shareholder value, and are measures of
corporate and divisional performance that are evaluated using graphs developed
by Thermo Electron intended to reward performance that is perceived as above
average and to penalize performance that is perceived as below average.
Generally, the measures of operating returns used in the Committee's
determinations include return on net assets, growth in income, and return on
sales, and the Committee's determination also included a subjective evaluation
of the contributions of each executive that are not captured by operating
measures but are considered important to the creation of long-term value for
the Stockholders. These measures of achievements are not financial targets
that are met, not met or exceeded. The relative weighting of the operating
measures and subjective evaluation varies depending on the executive's role
and responsibilities within the organization.
Stock Option Program
The primary goal of the Corporation is to excel in the creation of long-term
value for the Stockholders. The principal incentive tool used to achieve this
goal is the periodic award to key employees of options to purchase common
stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the
Stockholders. The emphasis on stock options also results in management's
compensation being closely linked to stock performance. In addition, because
they are subject to vesting periods of varying durations and to forfeiture if
the employee leaves the Corporation prematurely, stock options are an
incentive for key employees to remain with the Corporation long-term. The
Committee believes stock option awards in its parent corporation, Thermo
Electron, its subsidiary, ThermoLyte, and the other majority-owned
subsidiaries of Thermo Electron, are an important tool in providing incentives
for performance within the entire organization.
In determining awards, the Committee considers the average annual value of
all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option-pricing model.) Awards are
reviewed annually in conjunction with the annual review of cash compensation
and additional awards are made periodically as deemed appropriate. The
Committee considers total compensation of executives, actual and anticipated
contributions of each executive (which includes a subjective assessment by the
Committee of the value of the executive's future potential within the
organization), as well as the value of previously awarded options as described
above, in determining option awards.
Stock Ownership Policies
The Committee established a stock holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple was one times his base salary and reference
bonus for the calendar year. For all other officers, the multiple was one
times the officer's base salary. The Committee deemed it appropriate to permit
officers to achieve these ownership levels over a three-year period. The
policy was amended in 1998 to apply only to the chief executive officer.
In order to assist executive officers in complying with the policy, the
Committee also adopted a stock holding assistance plan under which the
Corporation is authorized to make interest-free loans to officers to enable
them to purchase shares of the Common Stock in the open market. The loans are
required to be repaid upon the
13
<PAGE>
earlier of demand or the fifth anniversary of the date of the loan, unless
otherwise authorized by the Committee. During 1997, Mr. Corcoran, the
Corporation's chief executive officer, received loans in the aggregate
principal amount of $118,756.25 under this program. As of the date hereof, the
entire loan amount remained outstanding. See "Relationship with Affiliates--
Stock Holding Assistance Plan."
The Committee also adopted a policy requiring its executive officers to hold
a certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options granted by the Corporation. Under this policy,
executive officers are required to hold shares of Common Stock equal to one-
half of their net option exercises over a period of five years. The net option
exercise is determined by calculating the number of shares acquired upon
exercise of a stock option, after deducting the number of shares that could
have been traded to exercise the option and the number of shares that could
have been surrendered to satisfy tax withholding obligations attributable to
the exercise of the option.
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives
does not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based." Therefore,
the Committee does not believe any further actions necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine
the Corporation's compensation practices and the effect of Section 162(m).
1998 CEO Compensation
The salary and bonus of Mr. J. Timothy Corcoran are established using the
same criteria as described above for all officers. The Committee approved a
salary increase for Mr. Corcoran effective January 1, 1999 reflecting its
compensation practice as described above under "Base Salary". No determination
of Mr. Corcoran's bonus for calendar 1998 performance has been made to date,
and the Committee is not expected to take any action until March 1999, when
the audited financial statements of the Corporation's parent company will be
available.
Awards to Mr. Corcoran of options to purchase shares of the Corporation's
Common Stock are reviewed annually and granted periodically as deemed
appropriate by the Committee using criteria similar to those described above
for all officers of the Corporation. No options to purchase shares of the
Corporation's Common Stock were awarded to Mr. Corcoran in fiscal 1998.
In addition to any stock option awards by the Committee, Mr. Corcoran may
receive awards to purchase shares of the common stock of Thermo Electron or
its other majority-owned subsidiaries from time to time as part of Thermo
Electron's stock option program due to his position as chief executive officer
of a majority-owned subsidiary of Thermo Electron. These awards are determined
using an analysis similar to that used by the Committee as described above
under "Stock Option Program." Options to purchase 2,000 shares of common stock
of Metrika Systems Inc., 2,000 shares of common stock of ONIX Systems Inc.,
20,000 shares of common stock of The Randers Killam Group Inc., 2,000 shares
of common stock of Thermedics Detection Inc., 1,000 shares of common stock of
Thermo Information Solutions Inc., 2,000 shares of common stock Thermo Trilogy
Corporation, 1,500 shares of common stock of Thermo Vision Corporation and
2,000 shares of common stock of Trex Communications Corporation were awarded
to Mr. Corcoran under this program in fiscal 1998. An award to purchase 1,000
shares of the common stock of Thermo Electron granted to Mr. Corcoran in
fiscal 1998 was made by the Thermo Electron human resources committee under a
program which awards options to certain eligible employees annually based on
the number of shares of the common stock of Thermo Electron held by the
employee, as an incentive to buy and hold Thermo Electron stock.
Mr. Donald E. Noble (Chairman)
Mr. Peter O. Crisp
14
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation include
in this proxy statement a line-graph presentation comparing cumulative, five-
year shareholder returns for the Corporation's Common Stock with a broad-based
market index and either a nationally recognized industry standard or an index
of peer companies selected by the Corporation. The Corporation has compared
its performance with the American Stock Exchange Market Value Index and the
Dow Jones Total Return Index for the Industrial-Diversified Industry Group.
Comparison of 1993-1998 Total Return Among Thermo Power Corporation,
the American Stock Exchange Market Value Index and the
Dow Jones Total Return Index for the Industrial-Diversified Industry Group
from October 1, 1993 to October 2, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/13/94 12/30/94 9/29/95 9/27/96 9/26/97 10/2/98
<S> <C> <C> <C> <C> <C> <C>
THP 100 89 155 93 84 88
AMEX 100 99 119 123 149 132
DJ IDD 100 101 122 154 212 191
</TABLE>
The total return for the Corporation's Common Stock (THP), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Industrial-Diversified Industry Group (DJIDD) assumes the reinvestment
of dividends, although dividends have not been declared on the Corporation's
Common Stock. The American Stock Exchange Market Value Index tracks the
aggregate performance of equity securities of companies listed on the American
Stock Exchange. The Corporation's Common Stock is traded on the American Stock
Exchange under the ticker symbol "THP."
RELATIONSHIP WITH AFFILIATES
The Thermo Electron Corporate Charter
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.")
15
<PAGE>
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 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. In addition, 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.
Corporate Services Agreement
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% of the Corporation's total
revenues for these services in calendar 1997 and 0.8% of the Corporation's
total revenues in calendar 1998. The annual fee will be 0.8% of the
Corporation's total revenues in calendar 1999. The fee is reviewed annually
and may be changed by mutual agreement of the Corporation and Thermo Electron.
During fiscal 1998, Thermo Electron assessed the Corporation $ 2,277,000 in
fees under the Services Agreement. Management believes that
16
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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.
Miscellaneous
From time to time, the Corporation may transact business with other
companies in the Thermo Group. During fiscal 1998 these transactions included
the following:
Thermo Electron announced a proposed reorganization involving certain of
Thermo Electron's subsidiaries, including the Corporation. As part of this
reorganization, Thermo Electron announced that the corporation may be taken
private and become a wholly owned subsidiary of Thermo Electron. It is
currently contemplated that the Corporation's shareholders would receive cash
in exchange for their shares of common stock of the Corporation. The
completion of this transaction is subject to numerous conditions, including
the establishment of the price; the approval of the Board of Directors of
Thermo Electron; the negotiation and execution of a definitive purchase and
sale or merger agreement; the receipt of a fairness opinion from an investment
banking firm that the transaction is fair to the Corporation shareholders
(other than Thermo Electron) from a financial point of view; the approval of
the Corporation's Board of Directors, including the special committee; and
clearance by the Securities and Exchange Commission of any necessary documents
regarding the proposed transaction.
In November 1997, the Corporation borrowed $160 million from Thermo Electron
pursuant to a promissory note due in November 1999 in order to finance a
portion of its acquisition of Peek plc ("Peek") for $166.7 million, including
related expenses. Such note bears interest at a rate equal to the 90-day
Commercial Paper Composite Rate as reported by Merrill Lynch Capital Markets,
plus 25 basis points and is adjusted quarterly. During fiscal 1998, the
Corporation recorded $8.1 million of interest expense relating to this
obligation.
Subsequent to the Corporation's acquisition of Peek, the Corporation sold
Peek's Measurement business to ONIX Systems Inc. ("ONIX Systems"), a majority-
owned subsidiary of Thermo Instrument Systems Inc., effective November 6,
1997, for $19.1 million. Thermo Instrument Systems Inc. is a majority-owned
subsidiary of Thermo Electron. The components of the sales price for the
Measurement business consist of the net tangible book value of the Measurement
business, cost in excess of net assets of acquired company, and the estimated
tax liability relating to the sale. The cost in excess of net assets of
acquired company was determined based upon a percentage of the Corporation's
total cost in excess of net assets of acquired company associated with its
acquisition of Peek, based on the 1997 revenues of the Measurement business
relative to Peek's total 1997 consolidated revenues. During the second quarter
of fiscal 1998, ONIX Systems paid the Corporation $19.1 million for the
Measurement business. In addition, the Corporation received $257,000 in
interest from ONIX Systems in connection with this receivable.
During fiscal 1998, the Corporation sublet office and manufacturing space in
the United Kingdom to ONIX Systems pursuant to an arrangement whereby the
Company charges ONIX Systems its allocated share of occupancy expenses. ONIX
Systems has indicated its intention to relocate its operations to a new
facility during fiscal 1999. Pursuant to this arrangement, the Corporation
recorded $166,000 in fiscal 1998 as a reduction in selling, general, and
administrative expenses.
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At fiscal year-end 1998, $11,459,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lends excess cash to Thermo Electron,
which Thermo Electron collateralizes with investments principally consisting
of corporate notes, U.S. government-agency securities, commercial paper, money
market funds and other marketable securities, in the amount of at least 103%
of such obligation. The Corporation's funds subject to the repurchase
agreement are readily convertible into cash by the Corporation. The repurchase
agreement earns a rate based on the 90-day Commercial Paper Composite Rate
plus 25 basis points, set at the beginning of each quarter.
The Corporation leases an office and laboratory facility from Thermo
Electron under an agreement expiring in 2002. Rental expense for fiscal 1998
relating to this lease with Thermo Electron was $326,000.
The Corporation provides contract administration and other services and data
processing services to certain companies affiliated with Thermo Electron,
which are charged based on actual usage. For these services, the Corporation
charged $127,000 in fiscal 1998 to such companies.
During fiscal 1998, the Corporation sold products totaling $66,000 in the
ordinary course of business to certain companies affiliated with Thermo
Electron.
At October 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $159,268,000 for borrowings relating to the Peek
acquisition, discussed above, for amounts due under the Corporate Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, net of amounts owed to the Corporation by Thermo
Electron and its other subsidiaries for miscellaneous items. The largest
amount of net indebtedness owed by the Corporation to Thermo Electron and its
other subsidiaries since September 27, 1997, was $163,045,000. With the
exception of the Peek borrowing described above, these amounts do not bear
interest and are expected to be paid in the normal course of business.
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. During 1997, Mr. Corcoran received loans in the aggregate principal
amount of $118,756.25 under this plan to purchase 18,000 shares. The loans to
Mr. Corcoran are to be repaid upon the earlier of demand or the fifth
anniversary of the date of the loan, unless otherwise authorized by the human
resources committee of the board of directors. As of the date hereof, the
entire loan amount remained outstanding. The policy and plan were amended in
1998 to apply only to the chief executive officer of the Corporation in the
future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since its inception in
1985. Representatives of that firm are expected to be present at the Meeting,
will have the opportunity to make a statement if they desire to do so and will
be available to respond to questions. The board of directors has established
an audit committee, presently consisting of two outside directors, the purpose
of which is to review the scope and results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
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STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later
than October 8, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 under the Securities Exchange Act of 1934, as amended
(relating to proposals to be presented at the meeting but not included in the
Corporation's proxy statement and form of proxy), will be considered untimely,
and thus the Corporation's proxy may confer discretionary voting authority on
the persons named in the proxy with regard to such proposals, if received
after December 18, 1999.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally, by telephone or by telegram.
Brokers, nominees, custodians and fiduciaries are requested to forward
solicitation materials to obtain voting instructions from beneficial owners of
stock registered in their names, and the Corporation will reimburse such
parties for their reasonable charges and expenses in connection therewith.
Waltham, Massachusetts
February 5, 1999
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FORM OF PROXY
THERMO POWER CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints J. Timothy Corcoran, Theo Melas-Kyriazi and
Brian D. Holt, or any one of them in the absence of the others, as attorneys and
proxies of the undersigned, with full power of substitution, for and in the name
of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of Thermo Power Corporation, a Massachusetts corporation (the
"Company"), to be held on Wednesday, March 10, 1999 at 10:00 a.m. at the offices
of Thermo Electron Corporation, 81 Wyman Street, Waltham, Massachusetts and at
any adjournment or postponement thereof, and to vote all shares of common stock
of the Company standing in the name of the undersigned on January 20, 1999, with
all of the powers the undersigned would possess if personally present at such
meeting.
(IMPORTANT -- TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
THERMO POWER CORPORATION
March 10, 1999
- --------------- Please Detach and Mail in the Envelope Provided ---------------
[X] Please mark your votes
as in this example.
1. ELECTION OF DIRECTORS OF FOR WITHHELD Nominees:
THE COMPANY (see reverse). [_] [_] Marshall J. Armstrong
Frank Borman
FOR all nominees listed at right, except authority J. Timothy Corcoran
to vote withheld for the following nominees (if any). Peter O. Crisp
John N. Hatsopoulos
- ---------------------------------------------------- Brian D. Holt
Donald E. Noble
John J. Setnicka
2. In their discretion on such other matters as may properly come before the
Meeting.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.
Copies of the Notice of Meeting and of the Proxy Statement have been received by
the undersigned.
SIGNATURE(S) DATE
---------------------------------- -----------------------
NOTE: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.
