<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 2 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X
___ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 28, 1996
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-13572
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 04-3072335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 370-1500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange 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 approximately $67,238,430.
As of January 24, 1997, the Registrant had 25,013,860 shares of Common Stock
outstanding.
<PAGE>
Thermo Ecotek Corporation Amendment No. 2
on Form 10K/A to Annual Report on Form 10-K
for the fiscal year ended September 28, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Fiscal 1996 Annual Report to Shareholders for the
year ended September 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.
--------------------------------------
Items 10, 11, 12 and 13 of Part III of the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 28, 1996 are hereby amended and
restated in their entirety as 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. 2 on
Form 10-K/A to be signed by the undersigned, duly authorized representative.
THERMO ECOTEK CORPORATION
By:
------------------------
Jonathan W. Painter
Treasurer
<PAGE>
ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the persons nominated as Directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as
A-1
<PAGE>
Directors and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its parent corporation,
Thermo Electron Corporation ("Thermo Electron"), is reported under the caption
"Stock Ownership." All of the nominees are currently Directors of the
Corporation.
- --------------------------------------------------------------------------------
JERRY P. DAVIS Mr. Davis, 63, has been a Director of the
Corporation since its inception in 1989. He also
served as the Chairman of the Board of the
Corporation from February 1994 to January 1997,
and as the Corporation's President and Chief
Executive Officer from 1989 until February 1994.
Mr. Davis was a Vice President of Thermo Electron
from January 1986 through December 1996.
- --------------------------------------------------------------------------------
GEORGE N. HATSOPOULOS Dr. Hatsopoulos, 70, has been a Director of the
Corporation since its inception in 1989. Dr.
Hatsopoulos has been the Chairman of the Board and
Chief Executive Officer of Thermo Electron since
1956. He also served as the President of Thermo
Electron from 1956 until January 1997. Dr.
Hatsopoulos is also a director of Thermedics Inc.,
Thermo Electron, Thermo Fibertek Inc., Thermo
Instrument Systems Inc., Thermo Optek Corporation,
ThermoQuest Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of
Mr. John N. Hatsopoulos, a Director, Vice
President and Chief Financial Officer of the
Corporation.
- --------------------------------------------------------------------------------
JOHN N. HATSOPOULOS Mr. Hatsopoulos, 62, has been a Director of the
Corporation since 1990 and its Vice President and
Chief Financial Officer since its inception in
1989. Mr. Hatsopoulos has been the President of
Thermo Electron since January 1, 1997, and its
Chief Financial Officer since 1988. Prior to his
appointment as President of Thermo Electron, he
served as an Executive Vice President since 1986.
Mr. Hatsopoulos is also a director of Thermedics
Inc., Thermo Fibergen Inc., Thermo Fibertek Inc.,
Thermo Instrument Systems Inc., Thermo TerraTech
Inc. and ThermoTrex Corporation. Mr. Hatsopoulos
is the brother of Dr. George N. Hatsopoulos, a
Director of the Corporation.
- --------------------------------------------------------------------------------
BRIAN D. HOLT Mr. Holt, 48, has been a Director of the
Corporation since January 1995, and President and
Chief Executive Officer of the Corporation since
February 1994. For more than five years prior to
his appointment as an officer of the Corporation,
he was President and Chief Executive Officer of
Pacific Generation Company, a financier, builder,
owner and operator of independent power
facilities. Mr. Holt is also a director of KFX
Inc.
- --------------------------------------------------------------------------------
FRANK JUNGERS Mr. Jungers, 70, has been a Director the
Corporation since its inception in 1989 and its
Chairman of the Board effective as of January 1,
1997. Mr. Jungers has been a consultant on
business and energy matters since 1977. Mr.
Jungers was employed by the Arabian American Oil
Company from 1974 through 1977 as Chairman and
Chief Executive Officer. Mr. Jungers is also a
director of The AES Corporation, Donaldson, Lufkin
& Jenrette, Georgia-Pacific Corporation, Thermo
Electron and ThermoQuest Corporation.
- --------------------------------------------------------------------------------
WILLIAM A. RAINVILLE Mr. Rainville, 54, has been a Director of the
Corporation since November 1995. He has been
President and Chief Executive Officer of Thermo
Fibertek Inc., a majority owned subsidiary of
Thermo Electron that develops and manufactures
equipment and products for the paper making and
paper recycling industries, since its inception in
1991, and a Senior Vice President of Thermo
Electron since March 1993 and a Vice President of
Thermo Electron from 1986 to 1993. From 1984 until
January 1993, Mr. Rainville was the President and
Chief Executive Officer of Thermo Electron Web
Systems Inc., a subsidiary of Thermo Fibertek Inc.
Mr. Rainville is also a director of Thermo Fibergen
Inc., Thermo Fibertek Inc., Thermo Remediation Inc.
and Thermo TerraTech Inc.
- --------------------------------------------------------------------------------
A-2
<PAGE>
- --------------------------------------------------------------------------------
SUSAN F. TIERNEY Dr. Tierney, 45, has been a Director of the
Corporation since March 1996. Dr. Tierney is a
Managing Consultant with the Economics Research
Group. From March 1993 to May 1993, Dr. Tierney
was a consultant for the U.S. Department of
Energy, and from May 1993 to July 1995, she served
as Assistant Secretary for Policy for the U.S.
Department of Energy. Prior to that appointment,
Dr. Tierney served as Secretary of Environmental
Affairs for the Commonwealth of Massachusetts from
1988 to January 1991.
- --------------------------------------------------------------------------------
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. Tierney (Chairman) and Mr. Jungers. 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. Jungers (Chairman) and Dr. Tierney. The
Human Resources Committee reviews the performance of senior members of
management, recommends executive compensation and administers the Corporation's
stock option and other stock plans. The Corporation does not have a nominating
committee of the Board of Directors. The Board of Directors met six times, the
Audit Committee met three times and the Human Resources Committee met four
times, during fiscal 1996. Each Director attended at least 75% of all meetings
of the Board of Directors and Committees on which he or she served held during
fiscal 1996.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Directors who are not employees of the Corporation, of Thermo Electron or
any other companies affiliated with Thermo Electron (also referred to as
"outside Directors") receive an annual retainer of $4,000 and a fee of $1,000
per day for attending regular meetings of the Board of Directors and $500 per
day for participating in meetings of the Board of Directors held by means of
conference telephone and for participating in certain meetings of committees of
the Board of Directors. Payment of outside Directors' fees is made quarterly.
Mr. Davis, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Holt and Mr. Rainville
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 such meetings.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Under the Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), a Director has the right to defer receipt of his or her
cash fees until he or she ceases to serve as a Director, dies or retires from
his or her principal occupation. In the event of a change in control or proposed
change in control of the Corporation that is not approved by the Board of
Directors, deferred amounts become payable immediately. Amounts so deferred are
valued on the date of deferral as units of the Corporation's Common Stock. When
payable, amounts deferred may be disbursed solely in shares of Common Stock
accumulated under the Deferred Compensation Plan. A total of 25,000 shares of
Common Stock have been reserved for issuance under the Deferred Compensation
Plan. As of December 28, 1996, 666.08 deferred units were accumulated under the
Deferred Compensation Plan.
DIRECTORS STOCK OPTION PLAN
The Corporation has adopted a directors stock option plan (the "Directors
Plan"), amended in 1994, providing for the grant of stock options to purchase
shares of Common Stock to outside Directors as additional compensation for their
services as directors. The Directors Plan provides for the grant of stock
options upon an outside Director's initial appointment and awards options to
purchase 1,000 shares annually to outside Directors.
Under the Directors Plan, an outside Director who was appointed prior to
December 31, 1994 automatically was granted an option to purchase 36,000 shares
of Common Stock upon his or her initial appointment as a Director. These
options are presently exercisable and expire on the seventh anniversary of the
A-3
<PAGE>
date of grant. However, the shares acquired upon exercise 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,
which repurchase right lapses ratably over a five-year period. Pursuant to the
amendments adopted in 1994, the size of this initial grant was reduced and
eventually discontinued effective as of January 1, 1997. Under this provision of
the amended plan, Ms. Tierney was granted an option to purchase 7,200 shares of
Common Stock upon her election as a Director in March 1996. This option is
presently exercisable and expires on the fifth anniversary of the date of grant.
Shares acquired upon exercise of this option 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, which
repurchase right lapses in its entirety on the first anniversary of the grant
date.
In addition, under the Directors Plan, outside Directors receive an annual
grant of options to purchase 1,000 shares of Common Stock commencing with the
1996 Annual Meeting of Stockholders. The annual grant is made at the close of
business on the date of the Annual Meeting of Stockholders to each outside
Director then holding office. 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 ceased 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 for the five trading days preceding and including the date of
grant. An aggregate of 225,000 shares of Common Stock has been reserved for
issuance under the Directors Plan.
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 by the
1998 Annual Meeting of Stockholders. Directors who are also executive officers
of the Corporation are required to comply with a separate stock holding policy
established by the Committee in fiscal 1996. 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 executive officers, the multiple is one times the officers' base
salary. The Committee deemed it appropriate to permit officers to achieve these
ownership levels over a three-year period.
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. Under this policy, the 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.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron, as of December 28, 1996, with
respect to (i) each person who was known by the Corporation to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) each Director and
all nominees for Director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and (iv) all
Directors and executive officers as a group.
While certain Directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron.
A-4
<PAGE>
<TABLE>
<CAPTION>
THERMO ECOTEK THERMO ELECTRON
NAME (1) CORPORATION (2) CORPORATION (3)
-------- --------------- ---------------
<S> <C> <C>
Thermo
Electron Corporation (4)......... 20,459,515 N/A
Brian D. Chatlosh....................... 41,250 20,594
Jerry P. Davis.......................... 212,970 86,621
Floyd M. Gent........................... 63,079 30,522
George N. Hatsopoulos................... 25,575 3,538,079
John N. Hatsopoulos..................... 35,569 556,768
Brian D. Holt........................... 150,000 164,591
Frank Jungers........................... 41,850 245,854
Robert P. Nordstrom..................... 79,180 25,638
Parimal S. Patel....................... 155,815 54,538
William A. Rainville.................... 6,000 253,006
Susan F. Tierney........................ 9,366 0
All Directors and current executive
officers as a group (14 persons)........ 945,551 5,149,511
</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 beneficially
owned consist of shares owned by the indicated person, 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 stock
split distributed in October 1996 in the form of a 50% stock dividend.
Shares of the Common Stock beneficially owned by each Director and
executive officer and by all Directors and executive officers as a group
exclude 20,459,515 shares beneficially owned by Thermo Electron, as to
which shares each Director and executive officer and all members of such
group disclaim beneficial ownership. Shares beneficially owned by Mr.
Chatlosh, Mr. Davis, Mr. Gent, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Holt, Mr. Jungers, Mr. Nordstrom, Mr. Patel, Mr. Rainville, Dr. Tierney
and all Directors and executive officers as a group include 41,250,
180,000, 60,000, 15,000, 13,257, 150,000, 37,500, 72,000, 135,000, 6,000,
8,700 and 839,907 shares, respectively, that such person or group has the
right to acquire within 60 days of December 28, 1996 through the exercise
of stock options. Shares of the Common Stock beneficially owned by Dr.
Tierney and all Directors and executive officers as a group include 666
full shares allocated through December 28, 1996, to Dr. Tierney's account
maintained pursuant to the Corporation's deferred compensation plan for
directors. Shares beneficially owned by Mr. Jungers include 300 shares
held by Mr. Jungers' spouse. No Director or executive officer beneficially
owned more than 1% of the Common Stock outstanding as of December 28, 1996;
all Directors and executive officers as a group beneficially owned 3.7% of
the Common Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron shown in the table reflect a
three-for-two split of such stock distributed in June 1996 in the form of a
50% stock dividend. Shares beneficially owned by Mr. Chatlosh, Mr. Davis,
Mr. Gent, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Holt, Mr. Jungers,
Mr. Nordstrom, Mr. Patel, Mr. Rainville and all Directors and executive
officers as a group include 19,650, 31,724, 30,000, 1,499,500, 429,685,
163,900, 9,375, 19,275, 27,224, 205,648 and 2,557,105 shares, respectively,
that such person or group has the right to acquire within 60 days of
December 28, 1996 through the exercise of stock options. Shares of the
common stock of Thermo Electron beneficially owned by Mr. Davis, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos and all Directors and executive officers as
a group include 1,614, 2,164, 1,934 and 7,189 full shares, respectively,
allocated to accounts maintained pursuant to Thermo Electron's employee
stock ownership plan, of which the trustees, who have investment power over
its asets were, as of December 28, 1996, executive officers of Thermo
Electron. Shares of the common stock of Thermo Electron beneficially owned
by Mr. Jungers and all Directors and executive officers as a group include
80,427 full shares allocated through December 28, 1996, to Mr. Junger's
account maintained pursuant to Thermo Electron's deferred compensation plan
for directors. Shares beneficially owned by Dr. G. Hatsopoulos include
89,601 shares held by Dr. G. Hatsopoulos' spouse, 168,750 shares held by a
QTIP Trust of which
A-5
<PAGE>
Dr. G. Hatsopoulos' spouse is the trustee and 39,937 shares held by a
family trust of which Dr. G. Hatsopoulos' spouse is the trustee, and 153
shares allocated to the account of G. Hatsopoulos' spouse maintained
pursuant to Thermo Electron's employee stock ownership plan. Shares
beneficially owned by Dr. G. Hatsopoulos also include 50,000 and 10,800
shares that a family trust, of which Dr. G. Hatsopoulos' spouse is the
trustee, and Dr. G. Hatsopoulos' spouse, respectively, has the right to
acquire within 60 days of December 28, 1996 through the exercise of stock
options. Shares beneficially owned by Mr. Jungers include 91,827 shares
held by a trust for Mr. Jungers and 4,500 shares held by Mr. Jungers'
spouse. As of December 28, 1996, no director or executive officer
beneficially owned more than 1% of the Thermo Electron common stock
outstanding as of December 28, 1996, other then Dr. G. Hatsopoulos, who
beneficially owned 2.3% of such common stock; all directors and executive
officers as a group beneficially owned approximately 3.4% of the Thermo
Electron common stock outstanding as of December 28, 1996.
(4) Thermo Electron owned 82% of the Common Stock outstanding as of December
28, 1996. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046. As of December 28, 1996, Thermo Electron had the
power to elect all of the members of the Corporation's Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
person were complied with during fiscal 1996, except in the following instances.
As reported in last year's proxy statement, the Form 3 for Mr. William A.
Rainville, a Director of the Corporation, originally due on December 8, 1995,
was filed 22 days late. In addition, Thermo Electron, the Corporation's parent
company, filed five Forms 4 late, by periods ranging from eight to 74 days,
reporting 31 open market purchases and eight transactions involving the exercise
of employee stock options.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's chief
executive officer and four other most highly compensated executive officers (the
"named executive officers") for the last full fiscal year from October 1, 1995
to September 28, 1996 ("fiscal 1996"), for the nine-month period from January 1,
1995 to September 30, 1995 ("fiscal 1995"), reflecting a change in the
Corporation's fiscal year-end to the 52 or 53 week period ending on the Saturday
nearest September 30, and for the preceding full fiscal year from January 2,
1994 to December 31, 1994 ("fiscal 1994").
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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Summary Compensation Table
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<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
SECURITIES
UNDERLYING
OPTIONS
NAME AND PRINCIPAL FISCAL ANNUAL COMPENSATION (NO. OF SHARES AND ALL OTHER
POSITION YEAR SALARY BONUS COMPANY) (3) COMPENSATION (4)
-------- ---- ------ ----- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Brian D. Holt (5) 1996 $153,400 $106,400 (2) 150 (TMO) $360
Chief Executive Officer and President 2,000 (TBA)
2,000 (TFG)
5,000 (TLZ)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
1995 $109,200 (1) $72,000 15,000 (TMO) --
1994 $128,333 $64,000 150,000 (TCK) --
123,750 (TMO)
- -----------------------------------------------------------------------------------------------------------------------
Parimal S. Patel 1996 $167,000 $61,400 (2) 17,850 (TMO) $6,750
Executive Vice President, 1995 $125,250 (1) $85,000 2,850 (TMO) $6,750
Project Finance 1994 $161,000 $67,000 3,150 (TMO) $6,750
- -----------------------------------------------------------------------------------------------------------------------
Floyd M. Gent (6) 1996 $130,000 $47,000 (2) 7,500 (TMO) $7,866
Vice President, Asset Management 1995 $97,500 (1) $44,000 -- --
- -----------------------------------------------------------------------------------------------------------------------
Robert P. Nordstrom (7) 1996 $113,375 $36,500 (2) 15,900 (TMO) 6,310
Vice President, Business
Development-Asia
- -----------------------------------------------------------------------------------------------------------------------
Brian Chatlosh (8) 1996 $107,625 $37,000 (2) 15,000 (TCK) $5,526
Vice President, Business Development 15,150 (TMO)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annual compensation for executive officers is reviewed and determined on a
calendar year basis, even though the Corporation's fiscal year ends in
September. The Corporation changed its fiscal year-end to September from
December in 1995, and as a consequence, the salary data for fiscal 1995
reflects salary paid during the nine-month period from January 1, 1995 to
September 30, 1995. Salary data for subsequent fiscal years has been
adjusted to reflect salary paid during the Corporation's full 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. Bonuses
have not yet been determined for calendar 1996; therefore, the bonus
amounts shown for fiscal 1996 are estimates.
(3) The shares of Common Stock of the Corporation and common stock of Thermo
Electron shown in the table reflect three-for-two stock splits distributed
in October 1996 and June 1996, respectively, each in the form of a 50%
stock dividend. Mr. Holt was appointed a Vice President of Thermo Electron
in March 1996 and has been granted options to purchase common stock of
Thermo Electron since that date. These options are not reported in the
table as they were granted for service in a capacity other than in his
capacity as the chief
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<PAGE>
executive officer of the Corporation. In addition to receiving options to
purchase Common Stock of the Corporation (designated in the table as TCK),
the named executive officers, including Mr. Holt, have been granted options
to purchase common stock of Thermo Electron Corporation and certain of its
other subsidiaries as part of Thermo Electron's stock option program in
their capacities as officers of the Corporation. Options have been granted
during the period covered by the table to the named executive officers in
the following Thermo Electron companies: Thermo Electron (designated in the
table as TMO), Thermo BioAnalysis Corporation (designated in the table as
TBA), Thermo Fibergen Inc. (designated in the table as TFG), ThermoLase
Corporation (designated in the table as TLZ), ThermoLyte Corporation
(designated in the table as TLT), Thermo Optek Corporation (designated in
the table as TOC), ThermoQuest Corporation (designated in the table as
TMQ), Thermo Sentron Inc. (designated in the table as TSR) 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 executive officers participating in the Thermo
Electron 401(k) plan.
(5) Mr. Holt was appointed Chief Executive Officer in February 1994 and Vice
President of Thermo Electron in March 1996. Mr. Holt has also been
responsible for certain operations of Thermo Electron since the
commencement of his employment in February 1994, and a portion of his
annual cash compensation (salary and bonus) has been allocated to and paid
by Thermo Electron in each of the last three fiscal years for the time he
devoted to these responsibilities. The annual cash compensation (salary
and bonus) reported in the table for Mr. Holt represents the amount paid by
the Corporation and all other sources for Mr. Holt's services as its chief
executive officer. For each of calendar 1996, 1995, 1994, approximately
80% of Mr. Holt's salary earned in all capacities throughout the Thermo
Electron organization was paid by the Corporation for his services as chief
executive officer. For calendar 1996, 1995 and 1994, approximately 46%,
80% and 80%, respectively, of Mr. Holt's total bonus earned in all
capacities throughout the Thermo Electron organization was paid by the
Corporation for his performance as the Corporation's chief executive
officer.
(6) Mr. Gent did not meet the definition of "highly compensated" within the
meaning of the Securities and Exchange Commission's executive compensation
disclosure rules in fiscal 1994. The bonus reported in the table for
fiscal 1996 represents the bonus paid by the Corporation for service by Mr.
Gent in his capacity as an officer of the Corporation.
(7) Mr. Nordstrom was appointed Vice President, Business Development - Asia
effective as of January 1, 1996.
(8) Mr. Chatlosh was appointed Vice President, Business Development effective
as of January 1, 1996. The bonus reported in the table for fiscal 1996
represents the bonus paid by the Corporation for service by Mr. Chatlosh in
his capacity as an officer of the Corporation.
STOCK OPTIONS GRANTED DURING FISCAL 1996
The following table sets forth information concerning individual grants of
stock options by the Corporation and other Thermo Electron companies made
during fiscal 1996 to the named executive officers. It has not been the
Corporation's policy in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1996.
Mr. Holt has been granted options to purchase common stock of Thermo
Electron since March 1996 as compensation for service to other Thermo Electron
companies in capacities other than in his capacity as chief executive officer of
the Corporation. Accordingly, such options have not been reported in the table.
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<PAGE>
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS POTENTIAL REALIZABLE
NUMBER OF GRANTED TO EXERCISE VALUE AT ASSUMED
SECURITIES EMPLOYEES PRICE ANNUAL RATES OF STOCK
UNDERLYING OPTIONS IN FISCAL PER EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED (1) YEAR SHARE DATE OPTION TERM (2)
---- ----------- ---- ----- ---- ---------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
Brian D. Holt........ 150 (TMO) 0.01% (3) $42.79 5/22/99 $1,011 $2,124
2,000 (TBA) 0.2% (3) $10.00 3/11/08 $15,920 $42,760
2,000 (TFG) 0.4% (3) $10.00 9/12/08 $15,920 $42,760
5,000 (TLZ) 1.1% (3) $22.75 11/28/07 $90,550 $243,250
2,000 (TLT) 0.6% (3) $10.00 3/11/08 $15,920 $42,760
6,000 (TOC) 0.2% (3) $12.00 4/9/08 $57,300 $153,960
6,000 (TMQ) 0.2% (3) $13.00 3/11/08 $62,100 $166,800
2,000 (TSR) 0.4% (3) $14.00 3/11/08 $22,280 $59,880
4,000 (TXM) 0.2% (3) $11.00 3/11/08 $35,000 $94,080
- ---------------------------------------------------------------------------------------------------------
Parimal S. Patel..... 15,000 (TMO) 0.9% (3) $32.60 11/28/07 $389,100 $1,045,650
2,850 (TMO) 0.2% (3) $42.79 5/22/99 $19,209 $40,356
- ---------------------------------------------------------------------------------------------------------
Floyd M. Gent........ 7,500 (TMO) 0.5% (3) $32.60 11/28/02 $99,525 $231,975
- ---------------------------------------------------------------------------------------------------------
Robert P. 15,000 (TMO) 0.9% (3) $32.60 11/28/07 $389,100 $1,045,650
Nordstrom............ 900 (TMO) 0.1% (3) $42.79 5/22/99 $6,066 $12,744
- ---------------------------------------------------------------------------------------------------------
Brian Chatlosh....... 15,000 (TCK) 5.0% $10.18 11/28/07 $121,500 $326,550
15,000 (TMO) 0.9% (3) $32.60 11/28/02 $389,100 $1,045,650
150 (TMO) 0.0% (3) $42.79 5/22/99 $1,011 $2,124
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant, except options to purchase shares of
ThermoLyte Corporation (designated in the table as TLT), which are not
exercisable until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act") and (ii) nine years
after the grant date. In all cases, the shares acquired upon exercise are
subject to repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by the Corporation or another Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally
lapse ratably over a five-to-ten-year period, depending on the option term,
which may vary from seven to twelve years, provided 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 option program have three-year
terms, and the repurchase rights lapse in their entirety on the second
anniversary of the grant date. The granting corporation may permit the
holders of such options to exercise options and to satisfy tax withholding
obligations by surrendering shares equal in fair market value to the
exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions
A-9
<PAGE>
for taxes or other expenses associated with the exercise. Actual gains, if
any, on stock option exercises will depend on the future performance of the
common stock of the granting corporation, the optionee's continued
employment through the option period and the date on which the options are
exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its public subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1996 AND FISCAL YEAR-END VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1996 and outstanding stock options to purchase shares of
Thermo Electron companies held at the end of fiscal 1996 by the named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1996.
Aggregated Option Exercises In Fiscal 1996 And Fiscal 1996 Year-End Option
Values
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NO. OF UNEXERCISED
SHARES OPTIONS AT FISCAL VALUE OF
ACQUIRED YEAR-END UNEXERCISED
ON VALUE (EXERCISABLE/ IN-THE-MONEY
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE) (1) OPTIONS
---- ------- -------- -------- ------------------ -------
<S> <C> <C> <C> <C> <C>
Brian D. Holt (2) Thermo Ecotek -- -- 150,000 /0 $1,400,550 /--
Thermo Electron -- -- 138,900 /0 (3) $2,718,545 /--
Thermo BioAnalysis -- -- 2,000 /0 $7,750 /--
Thermo Fibergen -- -- 2,000 /0 $5,250 /--
ThermoLase -- -- 5,000 /0 $3,125 /--
ThermoLyte -- -- 0/ 2,000 --/0 (4)
Thermo Optek -- -- 6,000 /0 $18,000 /--
ThermoQuest -- -- 6,000 /0 $3,000 /--
Thermo Sentron -- -- 2,000 /0 $0 /--
Trex Medical -- -- 4,000 /0 $37,000 /--
- --------------------------------------------------------------------------------------------------------
Parimal S. Patel Thermo Ecotek 52,500 $586,268 135,000 /0 $1,451,296 /--
Thermo Electron -- -- 27,224 /0 (3) $318,294 /--
Thermo Fibertek -- -- 2,700 /0 $27,338 /--
ThermoTrex -- -- 1,080 /0 $34,209 /--
- --------------------------------------------------------------------------------------------------------
Floyd M. Gent Thermo Ecotek -- -- 75,000 /0 $550,020 /--
Thermo Electron -- -- 30,000 /0 $515,626 /--
- --------------------------------------------------------------------------------------------------------
Robert P. Nordstrom Thermo Ecotek 30,000 $335,010 72,000 /0 $714,024 /--
Thermo Electron -- -- 19,275 /0 (3) $199,802 /--
Thermo Fibertek -- -- 4,500 /0 $45,563 /--
- --------------------------------------------------------------------------------------------------------
Brian Chatlosh Thermo Ecotek -- -- 41,250 /0 $321,064 /--
Thermo Electron -- -- 19,650 /0 $208,088 /--
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares of common stock shown in the table have been adjusted to reflect
three-for-two stock splits, each in the form of a 50% stock dividend,
distributed by the Corporation in October 1996, by Thermo Electron in June
1996, and by Thermo Fibertek Inc. in June 1996. All of the options
reported outstanding at the end of the fiscal year are immediately
exercisable as of fiscal year-end, except options to purchase shares of
ThermoLyte Corporation (designated in the table as TLT), which are not
exercisable until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under Section 12 of the
Exchange Act and (ii) nine years after the grant date. In all cases, the
shares acquired
A-10
<PAGE>
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 another Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally
lapse ratably over a five- to ten-year period, depending on the option
term, which may vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo Electron
company. For companies that are not publicly traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant date. Certain
options granted as part of Thermo Electron's stock option program have
three-year terms, and the repurchase rights lapse in their entirety on the
second anniversary of the grant date.
(2) As a Vice President of Thermo Electron, Mr. Holt also holds unexercised
options to purchase common stock of Thermo Electron and its subsidiaries
other than the Corporation. These options are not reported in the table as
they were granted as compensation for service to other Thermo Electron
companies in capacities other than his capacity as the chief executive
officer of the Corporation.
(3) Options to purchase 67,500, 15,000 and 15,000 shares of the common stock of
Thermo Electron granted to Mr. Holt, Mr. Patel and Mr. Nordstrom,
respectively, are subject to the same terms 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.
(4) No public market existed for the shares as of December 28, 1996.
Accordingly, no value in excess of the exercise price has been attributed
to those options.
A-11
<PAGE>
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,
including the Corporation. From time to time, Thermo Electron and its
subsidiaries will create other majority-owned subsidiaries as part of its
spinout strategy. (The Corporation and the other Thermo Electron subsidiaries
are hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries has adopted the Thermo Electron Corporate Charter (the
"Charter") to define the relationships and delineate the nature of such
cooperation among themselves. The purpose of the Charter is to ensure that (1)
all of the companies and their stockholders are treated consistently and fairly,
(2) the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological strengths
of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of long-
range financial planning and providing other banking and credit services.
Pursuant to the Charter, Thermo Electron may also provide guarantees of debt or
other obligations of the Thermo Subsidiaries or may obtain external financing at
the parent level for the benefit of the Thermo Subsidiaries. In certain
instances, the Thermo Subsidiaries may provide credit support to, or on behalf
of, the consolidated entity or may obtain financing directly from external
financing sources. Under the Charter, Thermo Electron is responsible for
determining that the Thermo Group remains in compliance with all covenants
imposed by external financing sources, including covenants related to borrowings
of Thermo Electron or other members of the Thermo Group, and for apportioning
such constraints within the Thermo Group. In addition, Thermo Electron
establishes certain internal policies and procedures applicable to members of
the Thermo Group. The cost of the services provided by Thermo Electron to the
Thermo Subsidiaries is covered under existing corporate services agreements
between Thermo Electron and each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Corporation, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. However,
a withdrawing company is required to continue to comply with all policies and
procedures applicable to the Thermo Group and to provide certain administrative
functions mandated by Thermo Electron so long as the withdrawing company is
controlled by or affiliated with Thermo Electron.
A-12
<PAGE>
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 1.2% and 1.25% of the
Corporation's revenues for these services in fiscal 1995 and in periods prior to
fiscal 1995, respectively. Beginning January 1, 1996, the fee has been reduced
to 1% of the Corporation's revenues. The fee is reviewed annually and may be
changed by mutual agreement of the Corporation and Thermo Electron. During
fiscal 1996, Thermo Electron assessed the Corporation $1,570,000 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.
MISCELLANEOUS
The Corporation leased its office facilities from Thermo Electron under an
agreement which terminated December 1, 1996. The Corporation paid annual rent
under that agreement equal to (i) Thermo Electron's cost per square foot of
operating the building, multiplied by (ii) the number of square feet occupied by
the Corporation. Under the lease, the Company made a payment to Thermo Electron
of $177,000 in fiscal 1996.
Thermo Electron currently owns approximately 83% of the outstanding shares
of Common Stock. Thermo Electron intends for the foreseeable future to maintain
at least 80% ownership of the Corporation. This may require the purchase by
Thermo Electron of additional shares of Common Stock from time to time as the
number of outstanding shares issued by the Corporation increases. These and
other purchases may be made either on the open market, through conversion of
convertible debentures held by Thermo Electron or directly from the Corporation.
As of September 28, 1996, $53,250,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lends excess cash to Thermo Electron, which
Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least
103% of such obligations. The Corporation's funds subject to the repurchase
agreement are readily convertible into cash by the Corporation and have an
original maturity of three months or less. The repurchase agreement earns a
rate based on the Commercial Paper Composite Rate plus 25 basis points, reset
quarterly.
As of December 28, 1996, the Corporation had outstanding indebtedness to
Thermo Electron of $68.5 million, pursuant to 4% subordinated convertible
debentures due 2001, which are convertible into the Corporation's Common Stock
at $6.33 per share.
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
A-13
<PAGE>
interest-free loans to certain key employees, including its executive officers,
to enable such employees to purchase the Common Stock in the open market. No
such loans are currently outstanding under the plan.
A-14
