<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________________________________________
AMENDMENT NO. 3 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
-----
Exchange Act of 1934
_____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-13572
THERMO ECOTEK CORPORATION
(Exact name of Registrant as specified in its character)
Delaware 04-3072335
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
254 Winter Street
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. 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 October 3, 1998, was approximately $25,316,000.
As of October 3, 1998, the Registrant had 35,927,771 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended October 3, 1998.are incorporated by reference into Parts I and II.
<PAGE>
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 & 13 of Part III of the Registrant's Annual Report on Form 10-K
for the fiscal year ended October 3, 1998 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.3 on form 10-K/A
to be signed by the undersigned, duly authorized.
THERMO ECOTEK CORPORATION
By: /s/ Sandra L. Lambert
--------------------------
Sandra L. Lambert
Secretary
<PAGE>
Attachment A
Directors
Set forth below are the names of the persons serving as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its majority-owned
subsidiary, Thermo Trilogy Corporation, and of its parent corporation, Thermo
Electron Corporation ("Thermo Electron"), a provider of diversified products
and services for the biomedical, instrument and environmental markets, is
reported under the caption "Stock Ownership."
<TABLE>
<C> <S>
Jerry P. Davis......... Mr. Davis, 65, 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, 72, 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 of the Corporation.
John N. Hatsopoulos.... Mr. Hatsopoulos, 64, has been a director of the
Corporation since 1990. He served as the chief
financial officer and senior vice president of the
Corporation from 1989 and 1997, respectively, until
his retirement at the end of 1998, and as a vice
president from 1989 until 1997. Mr. Hatsopoulos was
the president of Thermo Electron from 1997 until 1998
and its chief financial officer from 1988 until 1998.
Prior to his appointment as president of Thermo
Electron, he served as an executive vice president
from 1986 until 1998. Mr. Hatsopoulos is also a
director of LOIS/USA Inc., Thermedics Inc., Thermo
Fibertek Inc., Thermo Electron, Thermo Instrument
Systems Inc., Thermo Power Corporation, Thermo
TerraTech Inc. and US Liquids Inc. Mr. Hatsopoulos is
the brother of Dr. George N. Hatsopoulos, a director
of the Corporation.
Brian D. Holt ........ Mr. Holt, 50, has been a director of the Corporation
since January 1995 and president and chief executive
officer of the Corporation since February 1994. He has
been the chief operating officer, environmental and
energy, of Thermo Electron since September 1998. From
March 1996 to September 1998, he was a vice president
of Thermo Electron. For more than five years prior to
his appointment as an officer of 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., Thermo TerraTech Inc.,
The Randers Killam Group Inc., ThermoRetec Corporation
and Thermo Power Corporation.
Frank Jungers.......... Mr. Jungers, 72, 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, ONIX Systems Inc., Thermo Electron and
ThermoQuest Corporation.
</TABLE>
3
<PAGE>
<TABLE>
<C> <S>
William A. Rainville.. Mr. Rainville, 56, 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 and has been chief operating
officer, recycling and recovery systems, of Thermo
Electron since September 1998. Prior to that time, Mr.
Rainville had been a senior vice president of Thermo
Electron from March 1993 to September 1998; and a vice
president of Thermo Electron from 1986 to 1993. Mr.
Rainville is also a director of Thermo Fibergen Inc.,
Thermo Fibertek Inc., ThermoRetec Corporation and
Thermo TerraTech Inc.
Susan F. Tierney...... Dr. Tierney, 47, has been a director of the Corporation
since March 1996. Dr. Tierney is a partner with the
Economics Resource Group, an economics/policy
consulting firm. 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 Killam Group Inc.
</TABLE>
Committees of the Board of Directors and Meetings
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are 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 six times, the audit committee met four times and
the human resources committee met twice during fiscal 1998. 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 1998, except Mr. J. Hatsopoulos
who attended 67% of such meetings. Mr. J. Hatsopoulos was the chief financial
officer of Thermo Electron and its subsidiaries during this period of time and
was required to travel extensively in this position. Mr. J. Hatsopoulos missed
two meetings due to travel on company business.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of Thermo Electron or of
any other companies affiliated with Thermo Electron (also referred to as
"outside directors") receive an annual retainer of $4,000 and a fee of $1,000
per day for attending regular meetings of the board of directors and $500 per
day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees
of the board of directors. Payment of 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
4
<PAGE>
Corporation that is not approved by the board of directors, deferred amounts
become payable immediately. Either of the following is deemed to be a change
of control: (a) the acquisition, without the prior approval of the board of
directors, directly or indirectly, by any person of 50% or more of the
outstanding Common Stock or 25% or more of the outstanding common stock of
Thermo Electron; or (b) the failure of the persons serving on the board of
directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the Common Stock or the common stock of
Thermo Electron to constitute a majority of the board of directors at any time
within two years following any such event. Amounts deferred pursuant to the
Deferred Compensation Plan are valued at the end of each quarter as units of
the Corporation's Common Stock. When payable, amounts deferred may be
disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. A total of 37,500 shares of Common Stock have been reserved
for issuance under the Deferred Compensation Plan. As of November 28, 1998,
deferred units equal to 7,188.48 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, 1998, options to purchase 13,200 shares of Common Stock
were outstanding and 86,200 shares of Common Stock had been granted under the
Directors Plan, no options had lapsed, 73,000 options had been exercised, and
options to purchase 138,800 shares of Common Stock were reserved and available
for grant.
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
5
<PAGE>
chairman of the board, Mr. Jungers receives an additional meeting fee equal to
$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. 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 within
three years of their appointment. Directors who are also executive officers of
the Corporation are required to comply with a separate stock holding policy
established by the Committee in fiscal 1996, which is described in the
Committee Report on Executive Compensation--Stock Ownership Policies.
In addition, the Committee adopted a policy requiring directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation--Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of the Corporation's majority-owned subsidiary,
Thermo Trilogy Corporation ("Thermo Trilogy"), and its parent company, Thermo
Electron, as of November 28, 1998, with respect to (i) each person who was
known by the Corporation to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director, (iii) each executive officer named
in the summary compensation table under the heading "Executive Compensation"
and (iv) all directors and current executive officers as a group.
While certain directors and current executive officers of the Corporation
are also directors and current executive officers of Thermo Electron or its
subsidiaries other than the Corporation, all such persons disclaim beneficial
ownership of the shares of Common Stock beneficially owned by Thermo Electron.
<TABLE>
<CAPTION>
Thermo Ecotek Thermo Electron Thermo Trilogy
Name (1) Corporation (2) Corporation (3) Corporation (4)
-------- --------------- --------------- ---------------
<S> <C> <C> <C>
Thermo Electron
Corporation (5)......... 33,696,106 N/A N/A
Brian D. Chatlosh........ 30,984 20,994 0
Jerry P. Davis........... 100,426 35,670 0
Floyd M. Gent............ 60,380 33,100 0
George N. Hatsopoulos.... 25,579 3,564,256 0
John N. Hatsopoulos...... 15,569 823,854 0
Brian D. Holt............ 210,000 284,793 0
Frank Jungers............ 47,335 175,754 3,000
John T. Miller........... 48,000 16,500 0
Randall W. Miselis....... 47,706 15,855 0
Parimal S. Patel......... 88,868 59,224 0
William A. Rainville..... 4,467 357,709 0
Susan F. Tierney......... 12,485 0 0
All directors and current
executive
officers as a group (14
persons)................ 709,799 5,821,834 3,000
</TABLE>
6
<PAGE>
- --------
(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 current
executive officer and by all directors and current executive officers as a
group exclude 33,696,106 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. Miller, Mr.
Miselis, Mr. Patel, Dr. Tierney and all directors and current executive
officers as a group include 28,500, 9,000, 55,800, 15,000, 13,257,
210,000, 5,500, 48,000, 45,900, 49,000, 9,700 and 507,657 shares,
respectively, that such person or group has the right to acquire within 60
days of November 28, 1998, through the exercise of stock options. Shares
of the Common Stock beneficially owned by Mr. Jungers, Dr. Tierney and all
directors and current executive officers as a group include 1,285, 1,785
and 3,070 full shares allocated through November 28, 1998, 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 current
executive officer beneficially owned more than 1% of the Common Stock
outstanding as of November 28, 1998; all directors and executive officers
as a group beneficially owned 1.97% 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. Miller, Mr. Miselis, Mr. Patel, Mr. Rainville and
all directors and current executive officers as a group include 20,050,
5,377, 33,100, 1,849,500, 762,735, 284,100, 9,125, 16,300, 15,100, 29,712,
293,287 and 3,691,158 shares, respectively, that such person or group has
the right to acquire within 60 days of November 28, 1998, through the
exercise of stock options. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Davis, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos
and all directors and current executive officers as a group include 1,716,
2,266, 2,036 and 8,515 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, 1998, executive officers of Thermo Electron. Shares of the
common stock of Thermo Electron beneficially owned by Mr. Jungers and all
directors and current executive officers as a group include 80,427 full
shares allocated through November 28, 1998, to Mr. Junger's account
maintained pursuant to Thermo Electron's deferred compensation plan for
directors. Shares beneficially owned by Dr. G. Hatsopoulos include 158,351
shares held by Dr. G. Hatsopoulos' spouse, 408,664 shares held by a family
trust of which Dr. G. Hatsopoulos' spouse is the trustee, 500,000 shares
held by a trust of which Dr. G. Hatsopoulos is the trustee and 153 shares
allocated to the account of Dr. G. Hatsopoulos' spouse 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, 1998, 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, 1998, no director or
current executive officer beneficially owned more than 1% of the Thermo
Electron common stock outstanding as of November 28, 1998, other than Dr.
G. Hatsopoulos, who beneficially owned 2.22% of such common stock; all
directors and current executive officers as a group beneficially owned
approximately 3.64% of the Thermo Electron common stock outstanding as of
November 28, 1998.
(4) The beneficial ownership of shares of the common stock of Thermo Trilogy
is presented as of November 28, 1998. As of November 28, 1998, no director
or current 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 93.77% of the Common Stock as of
November 28, 1998. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02454-9046. As of November 28, 1998, Thermo Electron had the
power to elect all of the members of the Corporation's board of directors.
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<PAGE>
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 1998, except in the following
instances. Thermo Electron filed six Forms 4 late, reporting a total of 81
transactions, including 73 open market purchases of shares of Common Stock,
six transactions associated with the grant, exercise and lapse of options to
purchase common stock granted to employees under its stock option program and
two conversions to common stock of the Corporation's 4% convertible
debentures.
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, four other most highly compensated executive officers who
were serving as executive officers at October 3, 1998, and one additional
individual for whom disclosure would have been required but for the fact that
such individual was not serving as an executive officer at October 3, 1998
(the "named executive officers") for the last three full fiscal years. The
Corporation has a fiscal year that is the 52- or 53-week period ending on the
Saturday nearest September 30.
The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Corporation's affairs
is provided to the Corporation under the Corporate Services Agreement between
the Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.
8
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
--------------------------
Securities
Underlying
Annual Options
Compensation (No. of All Other
Name And Principal Fiscal ------------------ Shares and Compensation
Position Year Salary Bonus (1) Company) (2) (3)
------------------ ------ -------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Brian D. Holt (4)........ 1998 $198,000 n/a $ 6,429
Chief Executive Officer
and 1997 $182,250 $189,000 60,000 (TCK) $ 6,107
President 40,000 (TRIL)
1996 $153,400 $ 112,00 150 (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)
Parimal S. Patel......... 1998 $170,000 $ 68,400 2,700 (TCK) $ 6,850
Executive Vice President 5,300 (TMO)
1997 $167,000 $ 51,500 15,800 (TCK) $ 6,993
2,400 (TMO)
2,500 (TRIL)
1996 $167,000 $ 64,000 17,850 (TMO) $ 6,750
Floyd M. Gent............ 1998 $138,700 $ 55,800 600 (TCK) $ 7,200
Vice President, 3,000 (TMO)
President, Clean Fuels 1997 $ 133,00 $ 45,300 100 (TMO) $ 7,359
Division 2,500 (TRIL)
1996 $130,000 $ 49,500 7,500 (TMO) $ 7,866
John T. Miller (5)....... 1998 $ 76,154 $ 65,000 38,000 (TCK) $19,500(7)
Vice President, 16,300 (TMO)
President, Clean Power
Division 5,000 (TRIL) $ 7,866
Randall W. Miselis....... 1998 $100,600 $ 38,400 400 (TCK) $ 5,847
Vice President,
Accounting & 100 (TMO)
Administration 1997 $ 93,000 $ 29,100 100 (TCK) $ 5,643
2,500 (TRIL)
1996 $ 87,500 $ 32,500 30,000 (TCK) $ 4,923
15,000 (TMO)
Brian D. Chatlosh (6).... 1998 $120,000 $ 66,900 200 (TMO) $ 5,880
Vice President, Business 1997 $113,750 $ 36,300 200 (TMO) $ 6,686
Development 10,000 (TRIL)
1996 $107,625 $ 38,500 15,000 (TCK) $ 5,526
15,150 (TMO)
</TABLE>
9
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- --------
(1) The bonus amounts for fiscal 1996 represent the bonuses paid for
performance during the calendar year in which the Corporation's fiscal
year-end occurred, calendar 1996. 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 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. For
subsequent fiscal years, the bonus for named executive officers represents
the bonus for the entire 12 months. Due to Mr. Holt's position as chief
operating officer, environmental and energy, of Thermo Electron, his bonus
will continue to be determined and paid based on performance for the
calendar year. Mr. Holt's bonus for 1998 has not been determined as of the
date hereof.
(2) 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 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 an officer 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.
(3) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) plan.
(4) Mr. Holt was appointed chief executive officer of the Corporation in
February 1994 and vice president of Thermo Electron in March 1996 and
chief operating officer, energy and environmental, of Thermo Electron in
September 1998. 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 1998, 1997 and 1996,
approximately 90%, 90% 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 1998, 1997 and 1996, approximately 90%, 82% and 46%,
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.
(5) Mr. Miller was appointed vice president of the Corporation, effective as
of March 23, 1998.
(6) Mr. Chatlosh is the vice president, business development of the
Corporation, a position he has held since January 1996. In March 1998, the
Board of Directors reorganized officer positions and functions, and
Mr. Chatlosh is no longer considered an executive officer for purposes of
the federal securities laws.
(7) Represents $4,500 of temporary living expenses and $15,000 of travel and
relocation expenses.
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<PAGE>
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options by the Corporation and other Thermo Electron companies made
during fiscal 1998 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 1998.
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.
Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Option Price Appreciation
Number of Securities Granted to Exercise for 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> <C> <C>
Brian D. Holt........... -- -- -- -- -- --
Parimal S. Patel........ 2,700 (TCK) 3.3% $19.25 03/11/01 $ 8,181 $ 17,199
2,400 (TMO) 0.1% (3) $34.50 06/02/03 $ 22,872 $ 50,544
2,900 (TMO) 0.1% (3) $16.20 09/23/03 $ 12,992 $ 28,681
Floyd M. Gent........... 600 (TCK) 0.7% $19.25 03/11/01 $ 1,818 $ 3,822
100 (TMO) 0.01% (3) $34.50 06/02/03 $ 953 $ 2,106
2,900 (TMO) 0.1% (3) $16.20 09/23/03 $ 12,992 $ 28,681
John T. Miller.......... 8,000 (TCK) 9.9% $19.23 03/23/03 $ 42,480 $ 93,920
30,000 (TCK) 36.9% $19.23 03/23/05 $234,900 $ 547,200
2,000 (TMO) 0.1% (3) $37.75 03/23/03 $ 20,860 $ 46,100
4,300 (TMO) 0.2% (3) $16.20 09/23/03 $ 19,264 $ 42,527
10,000 (TMO) 0.5% (3) $37.75 03/23/05 $ 153,700 $ 358,100
5,000 (TRIL) 11.2% $ 8.25 03/23/05 $ 16,800 $ 39,150
Randall W. Miselis...... 400 (TCK) 0.5% $19.25 03/11/01 $ 1,212 $ 2,548
100 (TMO) 0.01% (3) $34.50 06/02/03 $ 953 $ 2,106
Brian D. Chatlosh....... 200 (TMO) 0.01% (3) $34.50 06/02/03 $ 1,906 $ 4,212
</TABLE>
- --------
(1) As part of Thermo Electron's stock option program, options have been
granted during fiscal 1998 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 one- to five-year period, depending
on the option term, which may vary from three to seven 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.
11
<PAGE>
Stock Options Exercised During Fiscal 1998 and Fiscal Year-End Values
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options to purchase shares
of Thermo Electron companies held at the end of fiscal 1998 by the
Corporation's chief executive officer and the other named executive officers.
No stock appreciation rights were exercised or were outstanding during fiscal
1998.
Aggregated Option Exercised In Fiscal 1998 And Fiscal 1998 Year-end Option
Values
<TABLE>
<CAPTION>
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value (Exercisable/ In-the-money
Name Company Exercise Realized (1) Unexercisable) (2) Options
---- ------- ----------- ------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian D. Holt (3)... Thermo Ecotek -- -- 210,000 /0 $1,517,850 /--
Thermo Electron -- -- 138,750 /0 (4) $ 0 /--
Thermo BioAnalysis -- -- 2,000 /0 $ 1,250 /--
Thermo Fibergen -- -- 2,000 /0 $ 0 /--
ThermoLase -- -- 5,000 /0 $ 0 /--
ThermoLyte -- -- 0 /2,000 -- /$0(5)
Thermo Optek -- -- 6,000 /0 $ 0 /--
ThermoQuest -- -- 6,000 /0 $ 0 /0
Thermo Sentron -- -- 2,000 /0 $ 0 /--
Thermo Trilogy -- -- 0 /40,000 -- /$0(5)
Trex Medical -- -- 4,000 /0 $ 0 /--
Parimal S. Patel........ Thermo Ecotek 3,750 $52,500 41,000 /0 $ 243,713 /--
Thermo Electron 5,212 $91,109 29,712 /0 (4) $ 2,702 /--
Thermo Fibergen -- -- 2,700 /0 $ 12,150 /--
ThermoTrex 1,080 $20,034 -- /-- -- /--
Thermo Trilogy -- -- 0 /2,500 -- /$0(5)
Floyd M. Gent........... Thermo Ecotek 7,500 $85,313 53,100 /0 $ 492,188 /--
Thermo Electron -- -- 33,100 /0 $ 0 /--
Thermo Trilogy -- -- -- /2,500 -- /$0(5)
Brian D. Chatlosh....... Thermo Ecotek 12,750 $70,892 28,500 /0 $ 206,738 /--
Thermo Electron -- -- 20,050 /0 $ 0 /--
Thermo Trilogy -- -- 0 /10,000 -- /$0(5)
John T. Miller.......... Thermo Ecotek -- -- 38,000 /0 $ 0 /--
Thermo Electron -- -- 16,300 /0 $ 0 /--
Thermo Trilogy -- -- 0 /5,000 -- /$0(5)
Randall W. Miselis...... Thermo Ecotek -- -- 45,500 /0 $ 300,226 /--
Thermo Electron -- -- 15,100 /0 $ 0 /--
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
12
<PAGE>
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 one- to
ten-year period, depending on the option term, which may vary from three to
twelve years, provided that the optionee continues to be employed by the
Corporation or another Thermo Electron company. 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 an officer 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 and 15,000 shares of the common stock of Thermo
Electron granted to Mr. Holt and Mr. Patel, 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 October 3, 1998.
Accordingly, no value in excess of the exercise price has been attributed
to these options.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive officers
and key employees of the Corporation that provide severance benefits if there
is a change in control of Thermo Electron and their employment is terminated
for any reason, other than for cause, within 18 months thereafter. For
purposes of these agreements, a change in control exists upon (1) the
acquisition by any person of 40% or more of the outstanding common stock or
voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to be constituted of a majority of directors who are
"continuing directors", which term is defined to include directors who are
members of Thermo Electron's board on the date of the agreement or who
subsequent to the date of the agreement were nominated or elected by a
majority of directors who were "continuing directors" at the time of such
nomination or election; (iii) the consummation of a merger, consolidation,
reorganization, recapitalization or statutory share exchange involving Thermo
Electron or the sale or other disposition of all or substantially all of the
assets of Thermo Electron unless immediately after such transaction (a) all
holders of Thermo Electron common stock immediately prior to such transaction
own more than 60% of the outstanding voting securities of the resulting or
acquiring corporation in substantially the same proportions as their ownership
immediately prior to such transaction and (b) no person after the transaction
owns 40% or more of the outstanding voting securities of the resulting or
acquiring corporation; or (iv) approval by stockholders of a complete
liquidation or dissolution of Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement with
each of Brian D. Holt, Floyd M. Gent and John T. Miller. These agreements
provide that in the event the individual's employment is terminated within 18
months after a change in control, the individual would be entitled to a lump
sum payment equal to the sum of (a) in the case of Mr. Holt, two times, and in
the case of Mr. Gent and Mr. Miller, one times, the individual's highest
annual base salary in any 12 months period during the prior five year period,
plus (b) in the case of Mr. Holt, two times, and in the case of Mr. Gent and
Mr. Miller, one times, the individual's highest annual bonus in any 12 month
period during the prior five year period. In addition, the individual would be
provided benefits for a period of, in the case of Mr. Holt two years, and in
the case of Mr. Gent and Mr. Miller, one year, after such termination
substantially equivalent to the benefits package the individual would have
been otherwise entitled to receive if the individual was not terminated. The
individual would also be entitled to all other compensation due to the
individual from the Corporation through the date of termination. Further, all
options that the individual holds in Thermo Electron and its subsidiaries,
including the Corporation, would become fully vested as of the date of the
change in control. Finally, the individual would be entitled to a cash payment
equal to, in the case of Mr. Holt, $20,000, and in the case of Mr. Gent and
Mr. Miller, $15,000, to be used toward outplacement services. These executive
retention agreements supercede and replace any and all prior severance
arrangements which these individuals had with Thermo Electron.
Assuming that the severance benefits would have been payable as of January
1, 1999 the lump sum salary and bonus payment under such agreement to Mr.
Holt, Mr. Gent and Mr. Miller, would have been approximately $1,040,000,
$234,500 and $235,000, respectively. In the event that payments under these
agreements are deemed to be so called "excess parachute payments" under the
applicable provisions of the Internal Revenue Code of 1986, as amended, the
individuals would be entitled to receive a gross-up payment equal to the
amount of any excise tax payable by such individual with respect to such
payment plus the amount of all other additional taxes imposed on such
individual attributable to the receipt of such gross-up payment.
13
<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.
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 1997 and 0.8% of the
Corporation's total revenues in calendar 1998. The annual fee will be 0.8% of
the Corporation's total revenues in calendar 1999. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1998, Thermo Electron assessed the Corporation
$1,800,000 in fees under the Services Agreement. Management believes that
14
<PAGE>
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 Corporation and Thermo Electron have a Tax Allocation Agreement ("Tax
Allocation Agreement") under which the Corporation 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 Corporation amounts based on the Corporation's relative
contribution to Thermo Electron's tax liability. If in any year the
Corporation incurs a loss or generates a tax credit, Thermo Electron shall pay
the Corporation 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 Corporation would have obtained a tax benefit from such loss or tax
credit if the Corporation 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. As of October 3, 1998, the aggregate net
amount due from the Corporation to Thermo Electron pursuant to the Tax
Allocation Agreement is $2,500,000.
Miscellaneous
Thermo Electron currently beneficially owns approximately 94% of the
outstanding shares of Common Stock. On May 6, 1998, Thermo Electron converted
its 4.0% Subordinated Convertible Debentures due January 2001 in the aggregate
principal amount of $68.5 million into 10,821,485 shares of Common Stock at a
conversion rate of $6.33 per share.
At October 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of approximately $39,000 for amounts due under the
Corporate Services Agreement and related administrative charges and for
miscellaneous items excluding amounts owed under the Tax Allocation Agreement,
net of amounts owed to the Corporation for miscellaneous items. The largest
amount of net indebtedness owed by the Corporation to Thermo Electron and its
other subsidiaries since September 27, 1997, was approximately $39,000. These
amounts do not bear interest and are expected to be paid in the normal course
of business.
As of October 3, 1998, $21,207,000 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.
In December 1997 and March 1998, Thermo Trilogy Corporation, a subsidiary of
the Corporation, ("Thermo Trilogy") completed private placements of an
aggregate of 1,942,821 shares primarily to outside
15
<PAGE>
investors of minority investments in its common stock. In connection with
Thermo Trilogy's private placement of its shares of common stock in March
1998, Thermo Trilogy and Thermo Electron entered into a placement agreement
with KSH Investment Group, Inc. ("KSH") to act as placement agent on behalf of
Thermo Trilogy. KSH received a placement agent fee of approximately $387,050
representing 6% of the gross proceeds from the sale of shares of Thermo
Trilogy common stock in the March 1998 private placement to investors
introduced to Thermo Trilogy by KSH. KSH is a privately held investment
banking firm of which John C. Hatsopoulos is a shareholder and managing
director. John C. Hatsopoulos is the son of John N. Hatsopoulos, a director of
the Corporation. John C. Hatsopoulos received a portion of this placement
agent fee equal to $16,750.
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.
16
