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
Transition Report Pursuant to Section 13 or
-----
15(d) of the Securities Exchange Act of 1934
Commission file number 1-10114
THERMO CARDIOSYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3027040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
470 Wildwood Street, P.O. Box 2697
Woburn, Massachusetts 01888-2697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to the filing requirements for at least
the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of January 24, 1997, was
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approximately $457,813,000.
As of January 24, 1997, the Registrant had 36,901,560 shares of
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended December 28, 1996, are incorporated by
reference into Parts I and II.
Part III, Item 10. Directors and Executive Officers of
the Registrant.
Part III, Item 11. Executive Compensation.
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and
Management.
Part III, Item 13. Certain Relationships and
Transactions.
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year,
is contained in the following Attachment A, which is included
herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Amendment No. 1 on Form 10-K/A to be signed by the
undersigned, duly authorized.
THERMO CARDIOSYSTEMS INC.
By: /s/ Sandra L. Lambert
-------------------------------
Sandra L. Lambert
Clerk
ATTACHMENT A
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DIRECTORS
Set forth below are the names of the persons serving as
directors, their ages, their offices in the Corporation, if any,
their principal occupation or employment for the past five years,
the length of their tenure as directors and the names of other
public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its parent
company, Thermedics Inc. ("Thermedics"), a manufacturer of
inspection and measurement instrumentation and biomedical
products, and Thermedics' parent company, Thermo Electron
Corporation ("Thermo Electron"), a diversified high technology
company, is reported under the caption "Stock Ownership."
Walter J. Dr. Bornhorst, 56, has been a director of the
Bornhorst Corporation since 1988. Since 1994, Dr.
Bornhorst has been the chairman of Z
Corporation, a developer of rapid prototyping
equipment. From 1985 to 1992, Dr. Bornhorst
was senior vice president of Thermo Electron.
He is also a director of Thermo Fibertek Inc.
Elias P. Dr. Gyftopoulos, 69, has been a director of
Gyftopoulos the Corporation since September 1994. He is
Professor Emeritus of The Massachusetts
Institute of Technology, where he was the
Ford Professor of Mechanical Engineering and
of Nuclear Engineering for more than 20 years
prior to his retirement in 1996. Dr.
Gyftopoulos is also a director of Thermo
BioAnalysis Corporation, Thermo Electron,
ThermoLase Corporation, Thermo Remediation
Inc., ThermoSpectra Corporation and Trex
Medical Corporation.
John T. Keiser Mr. Keiser, 60, has been a director of the
Corporation since April 1997. Mr. Keiser has
been a senior vice president of the
Corporation since 1994 and the president of
the Thermo Biomedical division of Thermo
Electron since 1994, which manufactures a
variety of medical equipment and instruments.
Mr. Keiser was president of the Eberline
Instrument division of Thermo Instrument
Systems Inc., a majority-owned subsidiary of
Thermo Electron, from 1985 to July 1994. The
Eberline Instrument division manufactures
radiation detection and counting
instrumentation and radiation monitoring
systems. Mr. Keiser is also a director of
Thermedics.
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Leonard Laster Dr. Laster, 68, has been a director of the
Corporation since 1988. Dr. Laster has been
the Distinguished University Professor of
Medicine and Health Policy and Chancellor
Emeritus of the University of Massachusetts
Medical Center since 1990. Since 1992, Dr.
Laster has also been a consultant to the
Biomedical Research Foundation of Northwest
Louisiana.
Victor L. Poirier Mr. Poirier, 55, has been a director of the
Corporation since 1991. Mr. Poirier has been
president of the Corporation since 1990 and
chief executive officer of the Corporation
since 1991. Mr. Poirier has been a senior
vice president of Thermedics since 1985.
John W. Wood Jr. Mr. Wood, 53, has been a director of the
Corporation since 1988. Mr. Wood has been a
senior vice president of Thermo Electron
since November 1995 and, before his
promotion, was a vice president of Thermo
Electron since September 1994. Mr. Wood has
also been president and chief executive
officer of Thermedics since 1984. Mr. Wood is
also a director of Thermedics, Thermedics
Detection Inc., Thermo Sentron Inc. and
Thermo Voltek Corp.
Nicholas T. Zervas Dr. Zervas, 68, has been a director of the
Corporation since 1989. Dr. Zervas has been
Chief of Neurological Service, Massachusetts
General Hospital, since 1977. Dr. Zervas is
also a director of Thermedics, ThermoLase
Corporation and ThermoTrex 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
Dr. Laster (Chairman) and Dr. Zervas. 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 Dr. Zervas
(Chairman), Dr. Gyftopoulos and Dr. Laster. 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 seven 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
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committees on which he served held during fiscal 1996.
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 $2,000 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
directors' fees is made quarterly. Mr. Keiser, Mr. Poirier and
Mr. Wood are all employees of Thermo Electron companies and do
not receive any cash compensation from the Corporation for their
services as directors. Directors are also reimbursed for
out-of-pocket expenses incurred in attending such meetings.
Deferred Compensation Plan
Under the Deferred Compensation Plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer
receipt of his cash fees until he ceases to serve as a director,
dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the
Corporation that is not approved by the Board of Directors,
deferred amounts become payable immediately. Either of the
following is deemed to be a change of control: (a) the
occurrence, without the prior approval of the Board of Directors,
of the acquisition, directly or indirectly, by any person of 50%
or more of the outstanding Common Stock or the outstanding common
stock of Thermedics 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 Thermedics or
25% or more of the outstanding 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 140,625 shares of Common Stock have been reserved for
issuance under the Deferred Compensation Plan. As of March 1,
1997, deferred units equal to 8,859.03 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
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purchase shares of Common Stock of the Corporation 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 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 are subject to repurchase by the Corporation at the
exercise price if the recipient ceases to serve as a director of
the Corporation or any other Thermo Electron company prior to the
first anniversary of the grant date.
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. Options to purchase 75,000 shares of Common Stock
were reserved for issuance under the Directors Plan as of March
1, 1997.
Stock Ownership Policies for Directors
During 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 by the 1998 Annual
Meeting of Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a
separate stock holding policy established by the Committee in
1996.
In addition, the Committee adopted a policy requiring
directors to hold shares of the Corporation's Common Stock equal
to one-half of their net option exercises over a period of five
years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to
exercise the option and the number of shares that could have been
surrendered to satisfy tax withholding obligations attributable
to the exercise of the option. This policy is also applicable to
executive officers.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of
Common Stock, as well as the common stock of Thermedics, the
Corporation's parent company, and of Thermo Electron, Thermedics'
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parent company, as of March 1, 1997, with respect to (i) each
person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock, (ii) each
director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and
(iv) all directors and current executive officers as a group.
While certain directors and executive officers of the
Corporation are also directors and executive officers of
Thermedics or its subsidiaries other than the Corporation, all
such persons disclaim beneficial ownership of the shares of
Common Stock owned by Thermedics.
<TABLE>
<CAPTION>
Thermo Thermo
Cardiosystems Thermedics Electron
Name (1) Inc. (2) Inc. (3) Corporation
(4)
<S> <C> <C> <C>
Putnam Investments, Inc. 3,806,602 N/A N/A
(5)
Thermedics Inc. (6) 19,757,612 N/A N/A
Walter J. Bornhorst 19,900 0 9,415
Elias P. Gyftopoulos 14,500 4,500 71,070
John T. Keiser 15,750 20,293 111,397
Timothy J. Krauskopf 44,896 843 1,406
Leonard Laster 39,584 0 0
Victor L. Poirier 163,507 67,595 50,598
Betty A. 131,600 13,455 23,066
Silverstein-Russell
John W. Wood Jr. 40,332 175,347 263,199
Nicholas T. Zervas 47,024 26,269 0
All directors and current
executive
officers as a group 519,514 394,145 1,201,917
(11 persons)
</TABLE>
(1) Except as reflected in the footnotes to this table, shares
beneficially owned consist of shares owned by the indicated
person or by that person for the benefit of minor children and
all share ownership includes sole voting and investment power.
(2) The shares of Common Stock shown in the table reflect a
three-for-two split of such stock distributed in May 1996 in the
form of a 50% stock dividend. Shares of the Common Stock
beneficially owned by Dr. Bornhorst, Dr. Gyftopoulos, Mr. Keiser,
Mr. Krauskopf, Dr. Laster, Mr. Poirier, Ms. Silverstein-Russell,
Mr. Wood, Dr. Zervas and all directors and executive officers as
a group include 19,750, 14,500, 15,750, 42,000, 36,850, 121,350,
88,775, 33,450, 12,700 and 427,575 shares, respectively, that
such person or group has the right to acquire within 60 days of
March 1, 1997, through the exercise of stock options. Shares
beneficially owned by Dr. Laster, Dr. Zervas and all directors
and executive officers as a group include 1,984, 6,874 and 8,858
full shares, respectively, that had been allocated through March
1, 1997, to their respective accounts maintained under the
Corporation's deferred compensation plan for directors. Shares of
the Common Stock beneficially owned by Ms. Silverstein-Russell
includes 157 shares owned by her spouse and 13,500 shares her
spouse has the right to acquire within 60 days of March 1, 1997,
through the exercise of stock options. Shares of the Common
Stock beneficially owned by Mr. Wood include 1,122 shares held by
him as custodian for two minor children. No director or
executive officer beneficially owned more than 1% of the Common
Stock outstanding as of March 1, 1997; all directors and
executive officers as a group beneficially owned 1.5% of the
Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermedics beneficially owned
by Dr. Gyftopoulos, Mr. Keiser, Mr. Poirier, Ms.
Silverstein-Russell, Mr. Wood, Dr. Zervas and all directors and
executive officers as a group include 4,500, 16,500, 26,500,
12,000, 125,500, 8,650 and 274,650 shares, respectively, that
such person or group had the right to acquire within 60 days
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after March 1, 1997, through the exercise of stock options.
Shares of the common stock of Thermedics beneficially owned by
Mr. Krauskopf and all directors and executive officers as a group
include 843 and 5,318 shares, respectively, allocated through
March 1, 1997, to their respective accounts maintained pursuant
to Thermo Electron's employee stock ownership plan (the "ESOP"),
of which the trustees, who have investment power over its assets,
are executive officers of Thermo Electron. Shares beneficially
owned by Dr. Zervas and all directors and executive officers as a
group include 7,119 shares allocated through March 1, 1997, to
Dr. Zervas' account maintained pursuant to Thermedics' deferred
compensation plan for directors. Shares of common stock of
Thermedics beneficially owned by Mr. Wood include 2,600 shares
held by him as custodian for two minor children. No director or
executive officer beneficially owned more that 1% of the common
stock of Thermedics outstanding as of March 1, 1997; all
directors and executive officers as a group beneficially owned
1.1% of such common stock outstanding as of such date.
(4) The shares of the common stock of Thermo Electron shown in
the table reflect a three-for-two split of such stock distributed
in June 1996 in the form of a 50% stock dividend. Shares of the
common stock of Thermo Electron beneficially owned by Dr.
Gyftopoulos, Mr. Keiser, Mr. Poirier, Ms. Silverstein-Russell,
Mr. Wood and all directors and executive officers as a group
include 9,375, 81,297, 45,450, 20,287, 227,658 and 924,113
shares, respectively, that such person or group has the right to
acquire within 60 days of March 1, 1997, through the exercise of
stock options. Shares of the common stock of Thermo Electron
beneficially owned by Ms. Silverstein-Russell includes 168 shares
owned by her spouse. Shares of the common stock of Thermo
Electron beneficially owned by Mr. Krauskopf and all directors
and executive officers as a group include 849 and 7,147 full
shares, respectively, allocated through March 1, 1997 to their
respective accounts maintained pursuant to the ESOP. The
directors and executive officers did not individually or as a
group beneficially own more than 1% of the Thermo Electron common
stock outstanding as of March 1, 1997.
(5) Information regarding the number of shares of the Common
Stock beneficially owned by Putnam Investments, Inc. is based on
the most recent Schedule 13G of Putnam Investments, Inc. received
by the Corporation, which reported such ownership as of December
31, 1996. The address of Putnam Investments, Inc. is One Post
Office Square, Boston, Massachusetts 02109. As of December 31,
1996, Putnam Investments, Inc. beneficially owned 10.4% of the
outstanding Common Stock.
(6) As of March 1, 1997, Thermedics beneficially owned
approximately 53% of the outstanding Common Stock. Thermedics'
address is 470 Wildwood Street, P.O. Box 2999, Woburn,
Massachusetts 01888-2999. As of March 1, 1997, Thermedics had
the power to elect all of the members of the Corporation's Board
of Directors. Thermedics is a majority-owned subsidiary of
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Thermo Electron and therefore, Thermo Electron may be deemed a
beneficial owner of the shares of Common Stock beneficially owned
by Thermedics. Thermo Electron disclaims beneficial ownership of
these shares.
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
Thermedics and its parent company, Thermo Electron, to file with
the Securities and Exchange Commission initial reports of
ownership and periodic reports of changes in ownership of the
Corporation's securities. Based upon a review of such filings,
all Section 16(a) filing requirements applicable to such persons
were complied with during 1996, except in the following
instances. Thermedics filed two Forms 4 late reporting a total
of five transactions, consisting of four open market purchases of
Common Stock. Thermo Electron filed four Forms 4 late reporting
a total of 13 transactions, including the four transactions
described above for Thermedics, an additional four open market
purchases, seven transactions associated with the exercise of
options granted to employees as part of Thermo Electron's stock
option plan and two grants of such options.
EXECUTIVE COMPENSATION
NOTE: All share amounts reported below, in all cases, have been
adjusted as applicable to reflect three-for-two stock splits with
respect to the Corporation's Common Stock and the common stock of
Thermo Electron distributed in May 1996 and June 1996,
respectively, each in the form of a 50% stock dividend.
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 its two other
most highly compensated executive officers 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 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.
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<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Securities
Underlying
Annual Options (No. of
Name and Fiscal Compensation Shares All Other
Principal Position Year Salary Bonus and Company) Compensation
(1) (2)
<S> <C> <C> <C> <C> <C>
Victor L. Poirier 1996 $150,000 $164,500 4,500 (TCA) $6,750
President and 900 (TMO)
Chief Executive
Officer
4,000 (TMD)
2,000 (TBA)
2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
7,500 (TSR)
4,000 (TXM)
1995 $141,000 $113,000 5,500 (TCA) $6,750
15,750 (TMO)
5,000 (TLZ)
1994 $135,000 $66,000 23,175 (TMO) $6,322
500 (THS)
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Betty A. 1996 $110,000 $55,250 5,300 (TCA) $5,344
Silverstein-Russell
Senior Vice 8,100 (TMO)
President
4,000 (TXM)
1995 $103,000 $51,500 3,600 (TCA) $5,197
10,500 (TMO)
1994 $97,000 $24,000 -- $4,473
Timothy J. 1996 $85,000 $22,500 -- $4,320
Krauskopf (3)
Vice President,
Regulatory
Affairs
</TABLE>
(1) In addition to grants of options to purchase Common Stock of
the Corporation (designated in the table as TCA), the named
executive officers of the Corporation have been granted options
to purchase common stock of Thermo Electron and certain of its
other subsidiaries as part of Thermo Electron's stock option
program. Options have been granted during the last three fiscal
years in the following Thermo Electron companies: Thermedics
(designated in the table as TMD), Thermo BioAnalysis Corporation
(designated in the table as TBA), Thermo Electron (designated in
the table as TMO), Thermo Fibergen Inc. (designated in the table
as TFG), ThermoLase Corporation (designated in the table as TLZ),
Thermo Optek Corporation (designated in the table as TOC),
ThermoQuest Corporation (designated in the table as TMQ),
ThermoSpectra Corporation (designated in the table as THS) and
Trex Medical Corporation (designated in the table as TXM).
(2) Represents the amount of matching contributions made by the
individual's employer on behalf of executive officers
participating in the Thermo Electron 401(k) plan.
(3) Mr. Krauskopf did not meet the definition of "highly
compensated" within the meaning of the Securities and Exchange
Commission's executive compensation disclosure rules prior to
fiscal 1996.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options made during fiscal 1996 to the
Corporation's chief executive officer and the other named
executive officers. It has not been the Corporation's policy in
the past to grant stock appreciation rights, and no such rights
were granted during fiscal 1996.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
Potential
Realizable
Value at Assumed
Annual Rates of
Percent of Stock
Number of Total Price Appreciation
Securities Options for
Underlying Granted to Exercise Expira- Option Term (2)
Options Employees in Price Per tion
Name Granted (1) Fiscal Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Victor L. Poirier 4,500(TCA) 2.4% $48.97 03/07/99 $34,740 $72,945
4,000(TMD) 1.2% (3) $28.13 02/09/99 $17,720 $37,240
900(TMO) 0.1% (3) $42.79 05/22/99 $6,066 $12,744
2,000(TBA) 0.2% (3) $10.00 03/11/08 $15,920 $42,760
2,000(TFG) 0.4% (3) $10.00 09/12/08 $15,920 $42,760
6,000(TOC) 0.2% (3) $12.00 04/09/08 $57,300 $153,960
7,500(TSR) 1.5% (3) $14.00 02/09/08 $83,550 $224,550
2,000(TLT) 0.6% (3) $10.00 03/11/08 $15,920 $42,760
6,000(TMQ) 0.2% (3) $13.00 03/11/08 $62,100 $166,800
4,000(TXM) 0.2% (3) $11.00 03/11/08 $35,000 $94,080
Betty A 3,300(TCA) 1.7% $48.97 03/07/99 $25,476 $53,493
Silverstein-Russell
2,000(TCA) 1.1% $30.15 12/12/03 $24,540 $57,200
7,500(TMO) 0.5% (3) $37.98 03/11/08 $226,725 $609,150
600(TMO) -- (3) $42.79 05/22/99 $4,044 $8,496
4,000(TXM) 0.2% (3) $11.00 03/11/08 $35,000 $94,080
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Timothy J. -- -- -- -- -- --
Krauskopf
</TABLE>
(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 the common stock of ThermoLyte Corporation,
which are not exercisable until the earlier of (i) 90 days after
the effective date of the registration of that company's common
stock under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act") and (ii) nine years 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 such corporation or any
other Thermo Electron company. The granting corporation may
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exercise its repurchase rights within six months after the
termination of the optionee's employment. For publicly traded
companies, the repurchase rights 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. Certain options to purchase
shares of Thermo Electron common stock have three-year terms, and
the repurchase rights lapse in their entirety on the second
anniversary of the grant date. The granting corporation may
permit the holders of options to exercise options and to satisfy
tax withholding obligations by surrendering shares equal in fair
market value to the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains
that could be achieved for the respective options if exercised at
the end of the option term. These gains are based on assumed
rates of stock appreciation of 5% and 10% compounded annually
from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock
option exercises will depend on the future performance of the
common stock of the 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 companies other than the
Corporation and accordingly are reported as a percentage of total
options granted to employees of those companies.
Stock Options Exercised During Fiscal 1996
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options held at the end of fiscal 1996 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1996 And
Fiscal 1996 Year-End Option Values
Number of
Unexercised
Options at
Shares Fiscal Value of
Acquired Value Year-End Unexercised
on (Exercisable/ In-the-Money
Name Company Exercise Realized Unexercisable) Options
(1)
<S> <C> <C> <C> <C> <C>
Victor L. Thermo -- -- 121,350 /0 $2,189,993/--
Poirier CardioSystems
Thermo -- -- 45,450 /0 (2) $662,176/--
Electron
Thermedics 22,500 $418,500 26,500 /0 $254,513/--
Thermedics -- -- 0 /3,333 --/$0(3)
Detection
Thermo -- -- 2,000 /0 $6,250/--
BioAnalysis
Thermo Ecotek -- -- 3,750 /0 $44,063/--
Thermo -- -- 2,000 /0 $1,500/--
Fibergen
Thermo -- -- 4,500 /0 $27,000/--
Fibertek
ThermoLase -- -- 5,000 /0 $0/--
ThermoLyte -- -- 0 /2,000 --/$0(3)
Thermo Optek -- -- 6,000 /0 $0/--
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ThermoQuest -- -- 6,000 /0 $0/--
Thermo -- -- 7,500 /0 $0/--
Sentron
ThermoSpectra -- -- 500 /0 $938/--
Thermo Trex -- -- 360 /0 $8,703/--
Trex Medical -- -- 4,000 /0 $6,500/--
Betty A. Thermo 33,750 $1,535,288 88,775 /0 $1,728,442/--
Silverstein- Cardiosystems
Russell
Thermo -- -- 20,287 /0 $121,069/--
Electron
Thermedics -- -- 12,000 /0 $137,476/--
Trex Medical -- -- 4,000 /0 $6,500/--
Timothy J. Thermo 6,000 $260,940 42,000 /0 $774,780/--
Krauskopf Cardiosystems
</TABLE>
(1) All of the options reported outstanding at the end of the
fiscal year were immediately exercisable as of the end of the
fiscal year, except options to purchase the common stock of
ThermoLyte Corporation and Thermedics Detection Inc., which are
not exercisable until the earlier of (i) 90 days after the
effective date of the registration of the company's common stock
under Section 12 of the Exchange Act and (ii) nine years after
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the grant date. In all cases, the shares acquired upon exercise
are subject to repurchase by the granting corporation at the
exercise price if the optionee ceases to be employed by such
corporation or any other Thermo Electron company. The granting
corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For publicly
traded companies, the repurchase rights generally lapse ratably
over a five- to ten-year period, depending on the option term,
which may vary from seven to twelve years, provided that the
optionee continues to be employed by the Corporation or another
Thermo Electron company. For companies whose shares are not
publicly traded, the repurchase rights lapse in their entirety on
the ninth 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) Options to purchase 22,500 shares of the common stock of
Thermo Electron granted to Mr. Poirier are subject to the same
terms as described in footnote (1), except that the repurchase
rights of the granting corporation generally do not lapse until
the tenth anniversary of the grant date. In the event of the
employee's death or involuntary termination prior to the tenth
anniversary of the grant date, the repurchase rights of the
granting corporation shall be deemed to have lapsed ratably over
a five-year period, commencing with the fifth anniversary of the
grant date.
(3) No public market existed for the shares underlying these
options as of December 28, 1996. Accordingly, no value in excess
of exercise price has been attributed to these options.
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, and
Thermedics Inc. has created the Corporation as a publicly held,
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 such other majority-owned Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries
recognize that the benefits and support that derive from their
affiliation are essential elements of their individual
performance. Accordingly, Thermo Electron and each of the Thermo
Subsidiaries have adopted the Thermo Electron Corporate Charter
(the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the
Charter is to ensure that (1) all of the companies and their
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stockholders are treated consistently and fairly, (2) the scope
and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4)
Thermo Electron and the Thermo Subsidiaries, in the aggregate,
are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role
and responsibilities of the management of each company, provides
for the sharing of group resources by the companies and provides
for centralized administrative, banking and credit services to be
performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by
members, coordinating the access of Thermo Electron and the
Thermo Subsidiaries (the "Thermo Group") to external financing
sources, ensuring compliance with external financial covenants
and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit
services. Pursuant to the Charter, Thermo Electron may also
provide guarantees of debt or other obligations of the Thermo
Subsidiaries or may obtain external financing at the parent level
for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on
behalf of, the consolidated entity or may obtain financing
directly from external financing sources. Under the Charter,
Thermo Electron is responsible for determining that the Thermo
Group remains in compliance with all covenants imposed by
external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo
Group, and for apportioning such constraints within the Thermo
Group. In addition, Thermo Electron establishes certain internal
policies and procedures applicable to members of the Thermo
Group. The cost of the services provided by Thermo Electron to
the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the
Thermo Subsidiaries.
The Charter presently provides that it shall continue in
effect so long as Thermo Electron and at least one Thermo
Subsidiary participate. The Charter may be amended at any time by
agreement of the participants. Any Thermo Subsidiary, including
the Corporation, can withdraw from participation in the Charter
upon 30 days' prior notice. In addition, Thermo Electron may
terminate a subsidiary's participation in the Charter in the
event the subsidiary ceases to be controlled by Thermo Electron
or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the
Charter automatically terminates the corporate services agreement
and tax allocation agreement (if any) in effect between the
withdrawing company and Thermo Electron. The withdrawal from
participation does not terminate outstanding commitments to third
parties made by the withdrawing company, or by Thermo Electron or
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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 1.0% of the Corporation's revenues for these services
for calendar 1996. 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 $618,000 in fees under the Services Agreement.
Management believes that the charges under the Services Agreement
are reasonable and that the terms of the Services Agreement are
fair to the Corporation. For items such as employee benefit
plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Corporation based on charges attributable to
the Corporation. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Corporation
upon 30 days' prior notice. In addition, the Services Agreement
terminates automatically in the event the Corporation ceases to
be a member of the Thermo Group or ceases to be a participant in
the Charter. In the event of a termination of the Services
Agreement, the Corporation will be required to pay a termination
fee equal to the fee that was paid by the Corporation for
services under the Services Agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may
provide certain administrative services on an as-requested basis
by the Corporation or as required in order to meet the
Corporation's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge the Corporation a fee
equal to the market rate for comparable services if such services
are provided to the Corporation following termination.
The Corporation subleases office and research facilities
from Thermedics and pays to Thermedics a pro rata amount based on
the actual square footage occupied by the Corporation, at a rate
approximately equal to Thermedics' rent per square foot under its
prime lease. This sublease expires in 1999. The Corporation paid
approximately $116,000 to Thermedics in sublease payments during
1996. The Corporation also pays Thermedics for the
Corporation's portion of certain expenses shared with Thermedics
at the subleased facilities. In 1996, the Corporation paid
Thermedics $222,400 for such expenses.
As of December 28, 1996, $1,018,000 of the Corporation's
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cash equivalents were invested in a repurchase agreement with
Thermo Electron. Under this agreement, the Corporation in effect
lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market
funds, commercial paper and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's
funds subject to the repurchase agreement are readily convertible
into cash by the Corporation and have a maturity of three months
or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
Thermedics beneficially owned approximately 54% of the
Corporation's outstanding Common Stock on December 28, 1996.
Thermedics intends for the foreseeable future to maintain at
least 50% ownership of the Corporation. This may require the
purchase by Thermedics 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 purchases may
be made either in the open market or directly from the
Corporation.
Thermo Electron's Tecomet division provides metal
fabrication services in connection with the manufacture of the
heart assist devices sold by the Corporation. During 1996, the
Corporation paid Tecomet $2,891,541 for these services.
Stock Holding Assistance Plan
During 1996, the Human Resources Committee of the
Corporation's Board of Directors (the"Committee") established a
stock holding policy for executive officers of the Corporation.
The stock holding policy specifies an appropriate level of
ownership of the Corporation's Common Stock as a multiple of the
officer's compensation. For the chief executive officer, the
multiple is one times his base salary and reference bonus for the
calendar year. For all other officers, the multiple is 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.
In order to assist 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 to the
Corporation upon the earlier of demand or the fifth anniversary
of the date of the loan, unless otherwise authorized by the
Committee. No such loans are currently outstanding under the
plan.
AA971150003
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