<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THERMO ECOTEK CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THERMO ECOTEK CORPORATION
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE>
THERMO ECOTEK CORPORATION
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
January 21, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
Thermo Ecotek Corporation. I respectfully request all Stockholders to attend
this meeting, if possible.
Our Annual Report for the fiscal year ended September 27, 1997, is
enclosed. I hope you will read it carefully. Feel free to forward any questions
you may have if you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer and Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
BRIAN D. HOLT
President and Chief Executive Officer
<PAGE>
THERMO ECOTEK CORPORATION
245 Winter Street, Suite 300
Waltham, Massachusetts 02154
January 21, 1998
To the Holders of the Common Stock of
THERMO ECOTEK CORPORATION
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermo Ecotek Corporation
(the "Corporation") will be held on Tuesday, March 10, 1998, at 10:00 a.m. at
the executive offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02254. The purpose of the meeting is to consider and take action
upon the following matters:
1. Election of seven directors.
2. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is January 14, 1998.
The by-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the number
of shares you may hold. Whether or not you are able to be present in person,
please sign and return promptly the enclosed proxy in the accompanying envelope,
which requires no postage if mailed in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo Ecotek
Corporation (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Tuesday, March 10, 1998, at 10:00
a.m. at the executive offices of Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02254, and any adjournment thereof. The mailing address
of the executive offices of the Corporation is 245 Winter Street, Suite 300,
Waltham, Massachusetts 02154. This proxy statement and the enclosed proxy were
first furnished to Stockholders of the Corporation on or about January 23, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
seven directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $.10 par value ("Common Stock"),
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. All
signed and returned proxies will be counted towards establishing a quorum for
the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors,
and as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election. Withholding authority
to vote for a nominee for director will be treated as shares present and
entitled to vote and, for purposes of determining the outcome of the vote, will
have the same effect as a vote against the nominee. Broker "non-votes" will not
be treated as shares present and entitled to vote on a voting matter and will
have no effect on the outcome of the vote. A broker "non-vote" occurs when a
nominee holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the secretary
of the Corporation received prior to the Meeting, by executing and returning a
later-dated proxy, or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of January 14, 1998, consisted of
24,893,894 shares of Common Stock. Only Stockholders of record at the close of
business on January 14, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
--PROPOSAL 1--
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting, each to hold office until
his or her successor is chosen and qualified or until his or her earlier
resignation, death or removal.
1
<PAGE>
Nominees for Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors and
the names of other public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the Corporation's Common
Stock and of the common stock of its parent corporation, Thermo Electron
Corporation ("Thermo Electron"), a provider of diversified products and services
for the biomedical, instrument and environmental markets, is reported under the
caption "Stock Ownership." All of the nominees are currently directors of the
Corporation.
- --------------------------------------------------------------------------------
Jerry P. Davis Mr. Davis, 64, 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 also a vice president of Thermo
Electron from January 1986 through December 1996.
- --------------------------------------------------------------------------------
George N. Hatsopoulos Dr. Hatsopoulos, 71, 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 Photoelectron
Corporation, 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, senior vice president and
chief financial officer of the Corporation.
- --------------------------------------------------------------------------------
John N. Hatsopoulos Mr. Hatsopoulos, 63, has been a director of the
Corporation since 1990, its chief financial
officer since its inception in 1989, and a senior
vice president since 1997. From 1989 until 1997,
he also served as a vice president of the
Corporation. Mr. Hatsopoulos has been the
president of Thermo Electron since January 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
LOIS/USA Inc., Thermo Electron, Thermedics Inc.,
Thermedics Detection Inc., Thermo Fibertek Inc.,
Thermo Instrument Systems Inc., Thermo Power
Corporation, Thermo TerraTech Inc. and Thermo
Vision Corporation. Mr. Hatsopoulos is the
brother of Dr. George N. Hatsopoulos, a director
of the Corporation.
- --------------------------------------------------------------------------------
Brian D. Holt Mr. Holt, 49, 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. and Thermo TerraTech Inc.
- --------------------------------------------------------------------------------
Frank Jungers Mr. Jungers, 71, has been a director of the
Corporation since its inception in 1989 and its
chairman of the board since January 1997. Mr.
Jungers has been a self-employed 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.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
William A. Rainville Mr. Rainville, 55, 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 papermaking and
paper-recycling industries, since its inception in
1991; 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.
- --------------------------------------------------------------------------------
Susan F. Tierney Dr. Tierney, 46, has been a director of the
Corporation since March 1996. Dr. Tierney is a
partner with the Economics Resource 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
January 1991 to March 1993 and as Commissioner of
the Department of Public Utilities for the
Commonwealth of Massachusetts from 1988 to January
1991. Dr. Tierney is also a director of The
Randers Group Incorporated.
- --------------------------------------------------------------------------------
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-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 1997. 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 1997.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of Thermo Electron or
of any other companies affiliated with Thermo Electron (also referred to as
"outside directors") receive an annual retainer of $4,000 and a fee of $1,000
per day for attending regular meetings of the board of directors and $500 per
day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees of
the board of directors. Payment of outside directors' fees is made quarterly.
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. Either of the following
is deemed to be a change of control: (a) the acquisition, without the prior
approval of the board of directors, directly or indirectly, by any person of 50%
or more of the outstanding Common Stock or 25% or more of the outstanding common
stock of Thermo Electron; or (b) the failure of the persons serving on the board
of directors immediately
3
<PAGE>
prior to any contested election of directors or any exchange offer or tender
offer for the Common Stock or the common stock of Thermo Electron to constitute
a majority of the board of directors at any time within two years following any
such event. Amounts deferred pursuant to the Deferred Compensation Plan are
valued at the end of each quarter as units of the Corporation's Common Stock.
When payable, amounts deferred may be disbursed solely in shares of Common Stock
accumulated under the Deferred Compensation Plan. A total of 37,500 shares of
Common Stock have been reserved for issuance under the Deferred Compensation
Plan. As of November 28, 1997, deferred units equal to 1807.97 shares of Common
Stock were accumulated under the Deferred Compensation Plan.
Directors Stock Option Plan
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of Common Stock of
the Corporation and its majority-owned subsidiaries 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 was automatically 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
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
amendments to the plan 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, Dr. 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 have been
subject to repurchase by the Corporation at the exercise price if the recipient
had ceased to serve as a director of the Corporation or any other Thermo
Electron company prior to the first anniversary of the grant date.
In addition, under the Directors Plan, outside directors receive an annual
grant of options to purchase 1,000 shares of Common Stock commencing with the
1996 Annual Meeting of the Stockholders. The annual grant is made at the close
of business on the date of the Annual Meeting of the 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 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 immediately preceding and including the date
of grant, or, if the shares are not then traded, at the last price per share
paid by third parties in an arms-length transaction prior to the option grant.
As of November 28, 1997, options to purchase 83,200 shares of Common Stock had
been granted and were outstanding under the Directors Plan, no options had
lapsed, 1,000 options had been exercised, and options to purchase 140,800 shares
of Common Stock were reserved and available for grant.
4
<PAGE>
Compensation of the Chairman of the Board
Mr. Jungers was appointed the chairman of the board of the Corporation in
January 1997. Mr. Jungers is not an employee of the Corporation or of any other
company affiliated with Thermo Electron. For his service as chairman of the
board, Mr. Jungers receives an additional meeting fee equal to $1,00 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. He also receives an additional option to purchase 1,000 shares of
the Common Stock at an exercise price equal to the average closing price for the
five days preceding and including the date of grant, which is awarded at the
first regular meeting of the board of directors following the Annual Meeting of
the Stockholders in conjunction with his reappointment as chairman of the board.
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 the 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, which is described in the
Committee Report on Executive Compensation - Stock Ownership Policies.
In addition, the Committee adopted a policy requiring directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation - Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of the Corporation's majority-owned subsidiary, Thermo
Trilogy Corporation ("Thermo Trilogy"), and its parent company, Thermo Electron,
as of November 28, 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 executive officers as a group.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock beneficially owned by Thermo Electron.
5
<PAGE>
<TABLE>
<CAPTION>
Thermo Ecotek Thermo Electron Thermo Trilogy
Name (1) Corporation (2) Corporation (3) Corporation (4)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 32,198,449 N/A N/A
Brian D Chatlosh 41,250 20,794 0
Jerry P. Davis 118,146 67,589 0
Floyd M. Gent 63,079 30,625 0
George N. Hatsopoulos 25,575 3,651,571 0
John N. Hatsopoulos 35,569 671,006 0
Brian D. Holt 210,000 164,691 0
Frank Jungers 44,640 246,754 1,200
Robert P. Nordstrom 55,896 26,075 0
Parimal S. Patel 80,179 56,938 0
William A. Rainville 4,467 243,976 0
Susan F. Tierney 10,917 0 0
All directors and current executive
officers as a group (14 persons) 796,933 5,347,164 1,200
</TABLE>
(1) Except as reflected in the footnotes to this table, shares of Common
Stock of the Corporation and of the common stock of Thermo Electron and
Thermo Trilogy 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) Shares of the Common Stock beneficially owned by each director and
executive officer and by all directors and executive officers as a
group exclude 32,198,506 shares beneficially owned by Thermo Electron.
Shares beneficially owned by Mr. Chatlosh, Mr. Davis, Mr. Gent, Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos, Mr. Holt, Mr. Jungers, Mr. Nordstrom,
Mr. Patel, Dr. Tierney and all directors and executive officers as a
group include 41,250, 45,000, 60,000, 15,000, 13,257, 210,000, 39,500,
42,400, 42,050, 8,700 and 609,757 shares, respectively, that such
person or group has the right to acquire within 60 days of November 28,
1997, through the exercise of stock options. Shares of the Common Stock
beneficially owned by Mr. Jungers, Dr. Tierney and all directors and
executive officers as a group include 590, 1,217 and 1,807 full shares
allocated through November 28, 1997, to their respective accounts
maintained pursuant to the Corporation's Deferred Compensation Plan for
Directors. Shares beneficially owned by Mr. Jungers include 500 shares
held by Mr. Jungers' spouse. No director or executive officer
beneficially owned more than 1% of the Common Stock outstanding as of
November 28, 1997; all directors and executive officers as a group
beneficially owned 3.2% of the Common Stock outstanding as of such
date.
(3) Shares of the common stock of Thermo Electron 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 19,850, 22,545,
30,100, 1,649,500, 565,435, 164,000, 10,375, 20,075, 29,624, 185,424
and 2,816,615 shares, respectively, that such person or group has the
right to acquire within 60 days of November 28, 1997, 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
1,716, 2,266, 2,036 and 7,444 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 assets, were, as of November 28, 1997, 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 November 28, 1997,
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 Dr. G.
Hatsopoulos' spouse is the trustee, 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 Dr. G. Hatsopoulos' spouse
6
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maintained pursuant to Thermo Electron's employee stock ownership plan.
Shares beneficially owned by Dr. G. Hatsopoulos also include 50,000 shares
that a family trust of which Dr. G. Hatsopoulos' spouse is the trustee has
the right to acquire within 60 days of November 28, 1997, through the
exercise of stock options. Shares beneficially owned by Mr. Jungers include
4,500 shares held by Mr. Jungers' spouse. As of November 28, 1997, no
director or executive officer beneficially owned more than 1% of the Thermo
Electron common stock outstanding as of November 28, 1997, other than Dr.
G. Hatsopoulos, who beneficially owned 2.3% of such common stock; all
directors and executive officers as a group beneficially owned
approximately 3.3% of the Thermo Electron common stock outstanding as of
November 28, 1997.
(4) The beneficial ownership of shares of the common stock of Thermo Trilogy is
presented as of January 3, 1998. As of January 3, 1998, no director or
executive officer beneficially owned more than 1% of the outstanding common
stock of Thermo Trilogy; all directors and current executive officers as a
group beneficially owned less than 1% of Thermo Trilogy common stock
outstanding as of such date.
(5) Thermo Electron beneficially owned 91.3% of the Common Stock as of November
28, 1997. Shares beneficially owned by Thermo Electron include 10,815,789
shares issuable upon conversion of a 4% convertible debenture due 2000.
Thermo Electron's address is 81 Wyman Street, Waltham, Massachusetts 02254-
9046. As of November 28, 1997, 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
persons were complied with during fiscal 1997, except in the following
instances. Mr. Frank Jungers, a director of the Corporation, filed one Form 4
late reporting one purchase of Common Stock. Thermo Electron file nine Forms 4
late, by periods ranging from four days to six months, reporting a total of 144
transactions, including 104 open market purchases of shares of Common Stock and
40 transactions associated with the grant and exercise of options to purchase
Common Stock granted to employees under its stock option program.
EXECUTIVE COMPENSATION
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 two full fiscal years from September
29, 1996 to September 27, 1997 ("fiscal 1997") and 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.
7
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<TABLE>
<CAPTION>
Summary Compensation Table
- ----------------------------------------------------------------------------------------------------------------------------
Long Term
Compensation
------------
Annual Compensation (1) Securities Underlying
Fiscal ----------------------- Options (No. of Shares All Other
Name and Principal Position Year Salary Bonus (2) and Company) (3) Compensation (4)
- --------------------------- ---- ------ --------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Brian D. Holt (5) 1997 $182,250 $189,000 (2) 60,000 (TCK) $6,107
Chief Executive Officer 40,000 (TRIL)
and President 1996 $153,400 $112,000 150 (TMO) $360
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 1997 $167,000 $51,500 (2) 15,800 (TCK) $6,993
Executive Vice President, 2,400 (TMO)
Project Finance 2,500 (TRIL)
1996 $167,000 $64,000 17,850 (TMO) $6,750
1995 $125,250 (1) $85,000 2,850 (TMO) $6,750
1994 $161,000 $67,000 3,150 (TMO) $6,750
- ----------------------------------------------------------------------------------------------------------------------------
Floyd M. Gent (6) 1997 $133,000 $45,300 (2) 100 (TMO) $7,359
Vice President, Asset 2,500 (TRIL)
Management 1996 $130,000 $49,500 7,500 (TMO) $7,866
1995 $97,500 (1) $44,000 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Brian Chatlosh (7) 1997 $113,750 $36,300 (2) 200 (TMO) $6,686
Vice President, Business 10,000 (TRIL)
Development 1996 $107,625 $38,500 15,000 (TCK) $5,526
15,150 (TMO)
- ----------------------------------------------------------------------------------------------------------------------------
Robert P. Nordstrom (8) 1997 $114,500 $31,100 (2) 400 (TCK) $6,755
Vice President, Business 800 (TMO)
Development-Asia 2,500 (TRIL)
1996 $113,375 $38,500 15,900 (TMO) $6,310
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 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 reflects salary paid during
the Corporation's full fiscal year.
(2) The bonus amounts for fiscal 1995 and fiscal 1996 represent the bonuses
paid for performance during the calendar year in which the Corporation's
fiscal year-end occurred, calendar 1995 and calendar 1996, respectively.
Beginning with fiscal 1997, the Corporation changed its compensation
practices to determine bonuses for the named executive officers other than
the chief executive officer based on a fiscal year performance not calendar
year performance. Accordingly, for all named executive officers other than
Mr. Holt, the bonus for fiscal 1997 represents the prorated bonus paid for
performance during the nine-month period from January 1, 1997 through
September 27, 1997. Due to Mr. Holt's position as a vice president of
Thermo Electron, his bonus will continue to be determined and paid based on
performance for the calendar year. Mr. Holt's bonus for 1997 has not yet
been finalized and is an estimate based on his calendar year performance.
8
<PAGE>
(3) In addition to receiving options to purchase Common Stock of the
Corporation (designated in the table as TCK), the named executive officers
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: the Corporation (designated in the table as TCK), 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), Thermo Trilogy Corporation (designated in the table as TRIL)
and Trex Medical Corporation (designated in the table as TXM). 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 as
compensation for service in a capacity other than in his capacity as the
chief executive officer of the Corporation.
(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 of the Corporation 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 fiscal years reported 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 for Mr. Holt's services as its chief executive officer. For
each of calendar 1997, 1996 and 1995, approximately 90%, 80% and 80%,
respectively, of Mr. Holt's salary earned in all capacities throughout the
Thermo Electron organization was paid by the Corporation for his services
as its chief executive officer. For calendar 1997, 1996 and 1995,
approximately 82%, 47% 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.
(7) Mr. Chatlosh was appointed vice president, business development, effective
as of January 1, 1996.
(8) Mr. Nordstrom was appointed vice president, business development - Asia,
effective as of January 1, 1996.
Stock Options Granted During Fiscal 1997
The following table sets forth information concerning individual grants of
stock options by the Corporation and other Thermo Electron companies made during
fiscal 1997 to the Corporation's chief executive officer and the other named
executive officers in their capacities as executive officers of the Corporation.
It has not been the Corporation's policy in the past to grant stock appreciation
rights, and no such rights were granted during fiscal 1997.
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.
9
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Fiscal 1997
- -----------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation for
Number of Securities Granted to Exercise Option Term (2)
Underlying Options Employees in Price Per Expiration ---------------
Name Granted (1) Fiscal Year Share Date 5% 10%
---- ----------- ----------- ----- ---- -- --
<S> <C> <C> <C> <C> <C> <C>
Brian D. Holt 60,000 (TCK) 27.5% $13.94 09/25/09 $665,400 $1,788,600
40,000 (TRIL) 42.0% $3.00 12/03/08 $95,200 $256,800
- -----------------------------------------------------------------------------------------------------------------------
Parimal S. Patel 800 (TCK) 0.4% $15.70 12/03/99 $1,976 $4,160
15,000 (TCK) 6.9% $13.94 09/25/04 $85,050 $198,450
2,400 (TMO) 0.2% (3) $34.20 06/03/00 $12,936 $27,168
2,500 (TRIL) 2.6% $3.00 12/03/06 $4,700 $11,950
- -----------------------------------------------------------------------------------------------------------------------
Floyd M. Gent 100 (TMO) 0.01% (3) $34.20 06/03/00 $539 $1,132
2,500 (TRIL) 2.6% $3.00 12/03/06 $4,700 $11,950
- -----------------------------------------------------------------------------------------------------------------------
Brian Chatlosh 200 (TMO) 0.01% (3) $34.20 06/03/00 $1,078 $2,264
5,000 (TRIL) 5.2% $3.00 12/03/06 $9,400 $23,900
5,000 (TRIL) 5.2% $3.00 02/14/07 $9,400 $23,900
- -----------------------------------------------------------------------------------------------------------------------
Robert P. Nordstrom 400 (TCK) 0.2% $15.70 12/03/99 $988 $2,080
800 (TMO) 0.06% (3) $34.20 06/03/00 $4,312 $9,056
2,500 (TRIL) 2.6% $3.00 12/03/06 $4,700 $11,950
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) As part of Thermo Electron's stock option program, options have been
granted during fiscal 1997 to the named executive officers to purchase the
common stock of the Corporation (designated in the table as TCK), Thermo
Electron (TMO) and Thermo Trilogy Corporation (TRIL). All of the options
granted during the fiscal year are immediately exercisable at the date of
grant, except options to purchase shares of Thermo Trilogy 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 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 in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
granting corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and, accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
10
<PAGE>
Stock Options Exercised During Fiscal 1997 and Fiscal Year-End Values
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options to purchase shares of
Thermo Electron companies held at the end of fiscal 1997 by the Corporation's
chief executive officer and the other named executive officers. No stock
appreciation rights were exercised or were outstanding during fiscal 1997.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1997 And Fiscal 1997 Year-End Option Values
- -----------------------------------------------------------------------------------------------------------------------
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value (Exercisable/ In-the-Money
Name Company Exercise Realized (1) Unexercisable) (2) Options
---- ------- -------- ------------ ------------------ -------
<S> <C> <C> <C> <C> <C>
Brian D. Holt (3) Thermo Ecotek -- -- 210,000 /0 $1,197,450 /--
Thermo Electron -- -- 138,900 /0 (4) $2,553,848 /--
Thermo BioAnalysis -- -- 2,000 /0 $13,750 /--
Thermo Fibergen -- -- 2,000 /0 $0 /--
ThermoLase -- -- 5,000 /0 $0 /--
ThermoLyte -- -- 0 /2,000 -- /$0 (5)
Thermo Optek -- -- 6,000 /0 $40,128 /--
ThermoQuest -- -- 6,000 /0 $36,750 /--
Thermo Sentron -- -- 2,000 /0 $250 /--
Thermo Trilogy -- -- 0 /40,000 -- /$0 (5)
Trex Medical -- -- 4,000 /0 $16,000 /--
- -----------------------------------------------------------------------------------------------------------------------
Parimal S. Patel Thermo Ecotek 108,750 $1,233,750 42,050 /0 $218,216 /--
Thermo Electron -- -- 29,624 /0 (4) $301,332 /--
Thermo Fibertek -- -- 2,700 /0 $23,288 /--
ThermoTrex -- -- 1,080 /0 $23,747 /--
Thermo Trilogy -- -- 0 /2,500 -- /$0 (5)
- -----------------------------------------------------------------------------------------------------------------------
Floyd M. Gent Thermo Ecotek 15,000 $138,750 60,000 /0 $468,780 /--
Thermo Electron -- -- 30,100 /0 $480,514 /--
Thermo Trilogy -- -- 0 /2,500 -- /$0 (5)
- -----------------------------------------------------------------------------------------------------------------------
Brian Chatlosh Thermo Ecotek -- -- 41,250 /0 $265,212 /--
Thermo Electron -- -- 19,850 /0 $185,939 /--
Thermo Trilogy -- -- 0 /10,000 -- /$0 (5)
- -----------------------------------------------------------------------------------------------------------------------
Robert P. Nordstrom Thermo Ecotek 30,000 $273,000 42,400 /0 $349,146 /--
Thermo Electron -- -- 20,075 /0 (4) $181,981 /--
Thermo Fibertek -- -- 4,500 /0 $38,813 /--
Thermo Trilogy -- -- 0 /2,500 -- /$0 (5)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the
option because in many cases the shares are not sold on exercise but
continue to be held by the executive officer exercising the option. The
amounts shown represent the difference between the option exercise
price and the market price on the date of exercise, which is the amount
that would have been realized if the shares had been sold immediately
upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year
are immediately exercisable as of fiscal year-end, except options to
purchase shares of ThermoLyte Corporation and Thermo Trilogy
Corporation, which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that company's common
stock under Section 12 of the Exchange Act and (ii) nine years after
the grant date. In all cases, the shares acquired upon exercise of the
options reported in the table are subject to repurchase by the granting
corporation at the exercise price if the optionee ceases to be employed
by such corporation or another Thermo Electron company. The granting
corporation may exercise its repurchase rights within six
11
<PAGE>
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.
(3) 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.
(4) 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.
(5) No public market existed for the shares as of November 28, 1997.
Accordingly, no value in excess of the exercise price has been
attributed to these options.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive officers
are made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and
stock-based compensation for executives, the Committee follows guidelines
established by the human resources committee of the board of directors of its
parent corporation, Thermo Electron. The executive compensation program
presently consists of annual base salary ("salary"), short-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of stock
options.
The Committee believes that the total compensation of executive
officers should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the
mid-point of competitive salaries derived from market surveys and that
short-term and long-term incentive compensation should reflect the performance
of the Corporation and the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total compensation
for its executives is assessed by comparing it to market data provided by its
compensation consultant and by participating in annual executive compensation
surveys, primarily "Project 777," an executive compensation survey prepared by
Management Compensation Services, a division of Hewitt Associates. The majority
of firms represented in the Project 777 survey are included in the Standard &
Poor's Index, but do not necessarily correspond to the companies included in the
Corporation's peer group index, the Dow Jones Total Return Index for Industrial
and Commercial Services for Pollution Control and Waste Management.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by comparing
it to total compensation of other executives within the Thermo Electron
organization with comparable levels of responsibility for comparably sized
business units.
12
<PAGE>
The Committee changed its fiscal year to end on the Saturday nearest
September 30 in 1995. For calendar 1995 and 1996, the Committee continued to
conduct cash compensation reviews on a calendar-year basis in order to coincide
with the compensation reviews conducted by the human resources committee of the
board of directors of its parent company, Thermo Electron, which operates on a
fiscal year that ends on the Saturday nearest December 31. In fiscal 1997, the
Committee conducted its review of executive cash compensation based on fiscal
year performance, except in the case of Mr. Brian D. Holt, the Corporation's
chief executive officer and a vice president of Thermo Electron. Accordingly,
cash bonus compensation was determined based on performance for the nine months
from January 1, 1997 to September 27, 1997 and prorated for the nine-month
period. In future years, cash bonuses will be based on performance for the full
fiscal year. Due to Mr. Holt's position as an officer of Thermo Electron, his
compensation will continue to be reviewed based on calendar year performance.
The process for determining each of the elements of total compensation
for the Corporation's officers is outlined below.
Base Salary
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the Corporation's other named executive officers will
approach the mid-point of competitive data. The salary increases in calendar
1997 for the chief executive officer and the other named executive officers
generally reflect this practice of gradual increases and moderation.
Cash Bonus
The Committee establishes a median potential bonus for each executive
by using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically, the median
potential bonus plus the salary of an executive officer is approximately equal
to the mid-point of competitive total cash compensation for a similar position
and level of responsibility in businesses having comparable sales and complexity
to the Corporation. The actual bonus awarded to an executive officer may range
from zero to three times the median potential bonus. The value within the range
(the bonus multiplier) is determined at the end of each year by the Committee in
its discretion. The Committee exercises its discretion by evaluating each
executive's performance using a methodology developed by its parent corporation,
Thermo Electron, and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns which are designed to
measure profitability and contributions to shareholder value, and are measures
of corporate and divisional performance that are evaluated using graphs
developed by Thermo Electron intended to reward performance that is perceived as
above average and to penalize performance that is perceived as below average.
The measures of operating returns used in the Committee's determinations in
fiscal 1997 included return on net assets, growth in income, and return on
sales, and the Committee's determinations also included a subjective evaluation
of the contributions of each executive that are not captured by operating
measures but are considered important to the creation of long-term value for the
Stockholders. These measures of achievements are not financial targets that are
met, not met or exceeded. The relative weighting of the operating measures and
subjective evaluation varies among the executives, depending on their roles and
responsibilities within the organization.
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1997 performance in each instance exceeded the median
potential bonus.
Stock Option Program
The primary goal of the Corporation is to excel in the creation of
long-term value for the Stockholders. The principal incentive tool used to
achieve this goal is the periodic award to key employees of options to purchase
common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The
13
<PAGE>
grant of options to key employees encourages equity ownership in the
Corporation, and closely aligns management's interests to the interests of all
the Stockholders. The emphasis on stock options also results in management's
compensation being closely linked to stock performance. In addition, because
they are subject to vesting periods of varying durations and to forfeiture if
the employee leaves the Corporation prematurely, stock options are an incentive
for key employees to remain with the Corporation long-term. The Committee
believes stock option awards in its parent company, Thermo Electron, the
Corporation's majority-owned subsidiary, Thermo Trilogy, and the other majority-
owned subsidiaries of Thermo Electron, are an important tool in providing
incentives for performance within the entire organization.
In determining awards, the Committee considers the average annual value
of all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option pricing model.) Awards are
reviewed annually in conjunction with the annual review of cash compensation and
additional awards are made periodically as deemed appropriate. The Committee
considers total compensation of executives, actual and anticipated contributions
of each executive (which includes a subjective assessment by the Committee of
the value of the executive's future potential within the organization), as well
as the value of previously awarded options as described above, in determining
option awards. The option awards made with respect to the common stock of the
Corporation's parent company, Thermo Electron, as part of Thermo Electron's
stock option program were made under a program that awards options to certain
eligible employees annually based on the number of shares of the common stock of
Thermo Electron held by the employee, as an incentive to buy and hold Thermo
Electron stock.
Stock Ownership Policies
During fiscal 1996, 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 executive 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 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.
The Committee also adopted a policy requiring its executive officers to
hold a certain number of shares of the Corporation's Common Stock acquired upon
the exercise of stock options granted by the Corporation. Under this policy,
executive officers are required to hold shares of Common Stock equal to one-half
of their net option exercises over a period of five years. The net option
exercise is determined by calculating the number of shares acquired upon
exercise of a stock option, after deducting the number of shares that could have
been traded to exercise the option and the number of shares that could have been
surrendered to satisfy tax withholding obligations attributable to the exercise
of the option.
14
<PAGE>
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of
the Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives does
not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based." Therefore,
the Committee does not believe any further action is necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine the
Corporation's compensation practices and the effect of Section 162(m).
1997 CEO Compensation
Cash compensation for Mr. Brian D. Holt is reviewed by both the
Committee and the human resources committee of the board of directors of Thermo
Electron, due to his responsibilities as both the Corporation's chief executive
officer and as a vice president of Thermo Electron, the Corporation's parent
company. Each committee evaluates Mr. Holt's performance and proposed
compensation using a process similar to those used for the other executive
officers of the Corporation. At the Thermo Electron level, Mr. Holt is evaluated
on his performance relative to the Corporation, as well as other operating units
of Thermo Electron for which he is responsible, weighted in accordance with the
amount of time and effort devoted to each operation. The Corporation's Committee
then reviews the analysis and determinations of the Thermo Electron committee,
makes an independent assessment of Mr. Holt's performance as it relates to the
Corporation using criteria similar to that used for the other executive officers
of the Corporation, and then agrees to an appropriate allocation of Mr.
Holt's compensation to be paid by the Corporation.
In December 1997, the Committee conducted its review of Mr. Holt's
proposed salary for calendar 1998 and bonus for calendar 1997 performance. The
Committee concurred in the recommendation made by the Thermo Electron committee
and agreed to an allocation of 90% of Mr. Holt's salary and 82% of his bonus for
calendar 1997 to the Corporation, based on his relative responsibilities at the
Corporation and Thermo Electron. In determining Mr. Holt's cash compensation as
reported, the Committee considered as part of its subjective evaluation, among
other things, Mr. Holt's achievements in pursuing and developing new markets for
the Corporation, such as in Italy and the Czech Republic, and in identifying and
completing strategic acquisitions as part of the growth strategy for the
Corporation and its subsidiaries.
Awards to Mr. Holt of options to purchase shares of the Corporation's
Common Stock are reviewed annually and granted periodically by the Committee
using criteria similar to those used for the other executive officers of the
Corporation. The Committee awarded to Mr. Holt options to purchase 60,000 shares
of the Common Stock and 40,000 shares of the common stock of the Corporation's
majority-owned subsidiary, Thermo Trilogy, in fiscal 1997. In addition to stock
option awards by the Committee, Mr. Holt may receive awards to purchase shares
of the common stock of Thermo Electron or its other majority owned subsidiaries
from time to time as part of Thermo Electron's stock option program due to his
position as a chief executive officer of a majority-owned subsidiary of Thermo
Electron. No options to purchase stock were awarded to Mr. Holt under this
program in fiscal 1997.
Mr. Frank Jungers (Chairman)
Dr. Susan F. Tierney
15
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a
broad-based market index and either a nationally recognized industry standard or
an index of peer companies selected by the Corporation. The Corporation's Common
Stock has been publicly traded only since January 20, 1995 and, as a result, the
following graph commences as of such date. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for Industrial and Commercial Services for Pollution
Control and Waste Management.
Comparison of Total Return Among Thermo Ecotek Corporation,
the American Stock Exchange Market Value Index and the
Dow Jones Total Return Index for Industrial and Commercial Services for
Pollution Control and Waste Management
from January 20, 1995 to September 26, 1997
<TABLE>
<CAPTION>
---------------------------------------------------------
1/20/95 9/29/95 9/27/96 09/26/97
---------------------------------------------------------
<S> <C> <C> <C> <C>
TCK 100 125 119 108
---------------------------------------------------------
AMEX 100 124 130 158
---------------------------------------------------------
DJ POL 100 105 90 135
---------------------------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (TCK), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return for
Industrial and Commercial Services for Pollution Control and Waste Management
(DJ POL) assumes the reinvestment of dividends, although dividends have not been
declared on the Corporation's Common Stock. The American Stock Exchange Market
Value Index tracks the aggregate performance of equity securities of companies
listed on the American Stock Exchange. The Corporation's Common Stock is traded
on the American Stock Exchange under the ticker symbol "TCK."
16
<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.
In addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
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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, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management and certain financial and other services to the
Corporation. The Corporation was assessed an annual fee equal to 1% of the
Corporation's total revenues for these services in calendar 1996 and 1997. The
annual fee will be reduced to 0.8% of the Corporation's total revenues in
calendar 1998. The fee is reviewed annually and may be changed by mutual
agreement of the Corporation and Thermo Electron. During fiscal 1997, Thermo
Electron assessed the Corporation $1,800,000 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.
Tax Allocation Agreement
The Company and Thermo Electron have a Tax Allocation Agreement ("Tax
Allocation Agreement") under which the Company is included in the consolidated
federal and certain state income tax returns filed by Thermo Electron. The Tax
Allocation Agreement provides that Thermo Electron charges or pays the Company
amounts based on the Company's relative contribution to Thermo Electron's tax
liability. If in any year the Company incurs a loss or generates a tax credit,
Thermo Electron shall pay the Company the amount of such benefit realized by
Thermo Electron attributable to such loss or tax credit on the earlier of (i)
the year in which the Company would have obtained a tax benefit from such loss
or tax credit if the Company had filed separate federal income tax returns or
(ii) the year in which the applicable carry-forward period with respect to such
loss or tax credit expires. In fiscal 1997, the Corporation owed Thermo Electron
a net tax amount of $1,952,000 under the Tax Allocation Agreement which payment
was made by reducing the aggregate amount due to it from Thermo Electron under
the Tax Allocation Agreement. As of September 27, 1997, the aggregate amount due
to the Company from Thermo Electron pursuant to the Tax Allocation Agreement is
$10,164,000, subject to the payment conditions set forth therein.
Miscellaneous
Thermo Electron currently beneficially owns approximately 91.3% of the
outstanding shares of Common Stock. Such ownership includes 10,815,846 shares of
Common Stock issuable upon conversion of a 4% convertible debenture. 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 27, 1997, $69,300,000 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. The repurchase agreement
earns a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, reset quarterly.
As of September 27, 1997, 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 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.
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APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1998. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since 1990. Representatives of that firm
are expected to be present at the Meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to questions.
The board of directors has established an audit committee, presently consisting
of two outside directors, the purpose of which is to review the scope and
results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of the Stockholders of the Corporation must be received by the
Corporation for inclusion in the proxy statement and form of proxy relating to
that meeting no later than September 25, 1998.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the
Corporation. Solicitation will be made primarily by mail, but regular employees
of the Corporation may solicit proxies personally, by telephone or by telegram.
Brokers, nominees, custodians and fiduciaries are requested to forward
solicitation materials to obtain voting instructions from beneficial owners of
stock registered in their names, and the Corporation will reimburse such parties
for their reasonable charges and expenses in connection therewith.
Waltham, Massachusetts
January 21, 1998
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FORM OF PROXY
THERMO ECOTEK CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 10, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John N. Hatsopoulos, Brian D. Holt and
Melissa F. Riordan, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of Thermo Ecotek Corporation, a Delaware corporation
(the "Company"), to be held on Tuesday, March 10, 1998, at 10:00 a.m. at the
executive offices of Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts 02154, and at any adjournment or postponement thereof, and to vote
all shares of common stock of the Company standing in the name of the
undersigned on January 14, 1998, with all of the powers the undersigned would
possess if personally present at such meeting.
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
Please mark your
[x] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [_] WITHHELD [_]
- ---------------------------------------
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any)
- ---------------------------------------
<PAGE>
Nominees: Jerry P. Davis, George N. Hatsopoulos, John N. Hatsopoulos, Brian D.
Holt, Frank Jungers, William A. Rainville and Susan F. Tierney.
2. In their discretion on such other matters as may properly come before the
Meeting.
The shares represented by this Proxy will be voted "FOR" the nominees set forth
herein if no instruction to the contrary is indicated or if no instruction is
given.
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
SIGNATURE(S)
---------------------------------------
DATE
-----------------
Note: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.
