<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 2 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X
___ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 28, 1996
___ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-10791
THERMOTREX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 52-1711436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10455 Pacific Center Court
San Diego, California 92121-4339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 646-5300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which registered
---------------------------- ------------------------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of January 30, 1997, was approximately $228,746,312.
As of January 30, 1997, the Registrant had 19,199,656 shares of Common Stock
outstanding.
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ThermoTrex Corporation Amendment No. 2
on Form 10K/A to Annual Report on Form 10-K
for the fiscal year ended September 28, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Fiscal 1996 Annual Report to Shareholders for the
year ended September 28, 1996, are incorporated by reference into Parts I and
II.
Part III, Item 10. Directors and Executive
Officers of the Registrant.
--------------------------
Part III, Item 11. Executive Compensation.
----------------------
Part III, Item 12. Security Ownership of Certain
Beneficial Owners and Management.
---------------------------------
Part III, Item 13. Certain Relationships and Transactions.
--------------------------------------
Items 10, 11, 12 and 13 of Part III of the Registrant's Annual Report on
Form 10-K for the fiscal year ended September 28, 1996 are hereby amended and
restated in their entirety as contained in the following Attachment A, which is
included herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 on
Form 10-K/A to be signed by the undersigned, duly authorized.
THERMOTREX CORPORATION
By: /s/ Jonathan W. Painter
-------------------------
Jonathan W. Painter
Treasurer
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ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the persons nominated as Directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as 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, is
reported under the caption "Stock Ownership." All of the nominees are currently
Directors of the Corporation.
- - --------------------------------------------------------------------------------
MORTON COLLINS Mr. Collins, 61, has been a Director of the
Corporation since 1991. Mr. Collins has been a
General Partner of DSV Partners III, a venture
capital limited partnership, since 1981 and a
General Partner of DSV Management, Ltd. since
1982. Since 1985, DSV Management, Ltd. has been a
General Partner of DSV Partners IV, a venture
capital limited partnership. Mr. Collins is also
a director of Kopin Corporation, The Liposome
Company and Tandem Computers, Inc.
- - --------------------------------------------------------------------------------
PETER O. CRISP Mr. Crisp, 64, has been a Director of the
Corporation since 1991. Mr. Crisp has been a
General Partner of Venrock Associates, a venture
capital investment firm, for more than five years.
Mr. Crisp is also a Director of American
Superconductor Corporation, Evans & Sutherland
Computer Corporation, Long Island Lighting
Company, Thermedics Inc., Thermo Electron, Thermo
Power Corporation and United States Trust
Corporation.
- - --------------------------------------------------------------------------------
PAUL F. FERRARI Mr. Ferrari, 66, a Director of the Corporation
since 1990, has been a consultant to Thermo
Electron since 1991. Mr. Ferrari was a Vice
President of Thermo Electron from 1988 until his
retirement at the end of 1990; its Secretary from
1981 to 1990; and its Treasurer from 1967 to 1988.
Mr. Ferrari is also a director of General
Scanning Inc. and Thermedics Inc.
- - --------------------------------------------------------------------------------
GEORGE N. HATSOPOULOS Dr. Hatsopoulos, 70, has been a Director of the
Corporation since 1988. Dr. Hatsopoulos has been
the Chairman of the Board and Chief Executive
Officer of Thermo Electron since 1956 and its
President from 1956 until January 1997. Dr.
Hatsopoulos is also a director of Thermedics Inc.,
Thermo Ecotek Corporation, Thermo Electron, Thermo
Fibertek Inc., Thermo Instrument Systems Inc.,
Thermo Optek Corporation and ThermoQuest
Corporation. Dr. Hatsopoulos is the brother of
Mr. John N. Hatsopoulos, a Director and Vice
President and Chief Financial Officer of the
Corporation.
- - --------------------------------------------------------------------------------
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- - --------------------------------------------------------------------------------
JOHN N. HATSOPOULOS Mr. Hatsopoulos, 62, has been a Director of the
Corporation and its Vice President and Chief
Financial Officer since 1990. Mr. Hatsopoulos has
been President and Chief Financial Officer of
Thermo Electron since January 1997 and 1988,
respectively. Prior to his appointment as
President of Thermo Electron, he was an Executive
Vice President from 1986 to 1997. Mr. Hatsopoulos
is also a director of Thermedics Inc., Thermo
Ecotek Corporation, Thermo Fibergen Inc., Thermo
Fibertek Inc., Thermo Instrument Systems Inc.,
Thermo Power Corporation and Thermo TerraTech Inc.
Mr. Hatsopoulos is the brother of Dr. George N.
Hatsopoulos, a Director of the Corporation.
- - --------------------------------------------------------------------------------
ROBERT C. HOWARD Mr. Howard, 66, has been a Director of the
Corporation since 1988 and was Chairman of the
Board from 1988 to February 1996. Mr. Howard was
an Executive Vice President of Thermo Electron
since 1986 until his retirement in January 1997.
Mr. Howard currently serves as a consultant to
Thermo Electron. He is also a Director of
Thermedics Inc., Thermo Cardiosystems Inc.,
ThermoLase Corporation, Thermo Power Corporation
and Trex Medical Corporation.
- - --------------------------------------------------------------------------------
FIROOZ RUFEH Mr. Rufeh, 59, has been a Director of the
Corporation since 1988. Mr. Rufeh was President of
the Corporation from 1988 until February 1997, and
Chairman of the Board and Chief Executive Officer
from 1988 to February 1996. Mr. Rufeh was also a
Vice President of Thermo Electron from 1986 until
February 1997. Beginning February 15, 1997, Mr.
Rufeh will be a consultant to Thermo Electron. Mr.
Rufeh is also a director of ThermoLase Corporation
and Trex Medical Corporation.
- - --------------------------------------------------------------------------------
GARY S. WEINSTEIN Mr. Weinstein, 39, has been Chairman of the
Board, Chief Executive Officer and a Director of
the Corporation since February 1996. Mr.
Weinstein has been a Managing Director of Lehman
Brothers Inc. from 1992 until February 1996,
serving from March 1995 until leaving the firm as
Managing Director, head of Global Syndicate and
Equity Capital Markets. Mr. Weinstein joined
Lehman Brothers in 1988 and served in various
positions, including head of Equities in Europe,
head of Equity New Issues in North and South
America and head of Global Convertible Securities.
Mr. Weinstein is also a director of ThermoLase
Corporation and Trex Medical Corporation.
- - --------------------------------------------------------------------------------
NICHOLAS T. ZERVAS Dr. Zervas, 67, has been a Director of the
Corporation since 1992. Dr. Zervas has been Chief
of Neurological Service at Massachusetts General
Hospital since 1977. Dr. Zervas is also a
director of Thermedics Inc., Thermo Cardiosystems
Inc. and ThermoLase Corporation.
- - --------------------------------------------------------------------------------
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors has established an Audit Committee and a Human
Resources Committee, each consisting solely of outside Directors. The present
members of the Audit Committee are Mr. Collins (Chairman), Mr. Crisp and Mr.
Ferrari. 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. Crisp (Chairman), Mr. Collins
and Dr. Zervas. The Human Resources Committee reviews the performance of senior
members of management, recommends executive compensation and administers the
Corporation's stock-based compensation plans. The Corporation does not have a
nominating committee of the Board of Directors. The Board of Directors met
eleven times, the Audit Committee met three times and the Human Resources
Committee met five times during fiscal 1996. Each Director attended at least 75%
of all meetings of the Board of Directors and Committees on which he served held
during fiscal 1996.
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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 and Mr. Weinstein are all employees of
Thermo Electron and do not receive any cash compensation from the Corporation
for their services as Directors. Directors are also reimbursed for out-of-
pocket expenses incurred in attending meetings.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Under the Deferred Compensation Plan for Directors (the "Deferred
Compensation Plan"), a Director has the right to defer receipt of his cash fees
until he ceases to serve as a Director, dies or retires from his principal
occupation. In the event of a change in control or proposed change in control of
the Corporation that is not approved by the Board of Directors, deferred amounts
become payable immediately. Either of the following is deemed to be a change of
control: (a) the occurrence, without the prior approval of the Board of
Directors, of the acquisition, directly or indirectly, by any person of 50% or
more of the outstanding Common Stock or the outstanding common stock of 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 22,500 shares of Common Stock have been reserved for issuance
under the Deferred Compensation Plan. As of December 28, 1996, deferred units
equal to 4,252.72 shares of Common Stock were accumulated under the Deferred
Compensation Plan.
DIRECTORS STOCK OPTION PLAN
In 1991, the Corporation adopted a directors stock option plan (the
"Directors Plan"), which was amended in 1995. The Directors Plan provides for
the grant of stock options to purchase shares of Common Stock to outside
Directors as additional compensation for their service as Directors. Under the
Directors Plan, outside Directors are automatically granted options to purchase
1,000 shares of Common Stock annually. In addition, the Directors Plan
provides for the automatic grant every five years of options to purchase 1,500
shares of the common stock of a majority-owned subsidiary of the Corporation
that is "spun out" to outside investors.
Prior to January 1, 1996, the Directors Plan provided for the grant of
stock options upon a Director's initial appointment. Outside Directors
appointed before the amendment of the plan received an option to purchase 21,600
shares of Common Stock upon their initial appointment or election. Options
granted prior to 1996 are currently exercisable, subject to restrictions upon
transfer and the right of the Corporation to repurchase such shares at the
exercise price in the event the Director ceases to serve as a Director of the
Corporation or another Thermo Electron company. Such repurchase rights lapse
ratably over a five-year period, commencing with the first anniversary of the
grant date. These options expire on the seventh anniversary of the grant date,
unless the Director dies or otherwise ceases to serve as a Director of the
Corporation or any other Thermo Electron company prior to that date. The grant
of options upon a Director's appointment was discontinued on December 31, 1995,
pursuant to the terms of the plan, as amended.
Pursuant to the amended Directors Plan, outside Directors receive an annual
grant of options to purchase 1,000 shares of Common Stock at the close of
business on the date of each Annual Meeting of Stockholders of the Corporation
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
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repurchase by the Corporation at the exercise price if the recipient ceases to
serve as a Director of the Corporation or another Thermo Electron company prior
to the first anniversary of the grant date.
In addition, under the amended Directors Plan, outside Directors are
automatically granted options to purchase 1,500 shares of common stock of each
majority-owned subsidiary that is "spun out" to outside investors. The grant
occurs on the close of business on the date of the first Annual Meeting of
Stockholders next following the subsidiary's spinout, which is the first to
occur of either an initial public offering of the subsidiary's common stock or a
sale of such stock to third parties in an arms-length transaction. The options
granted vest and become exercisable on the fourth anniversary of the date of
grant, unless prior to such date the subsidiary's common stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended ("Section 12
Registration"). In the event that the effective date of Section 12 Registration
occurs before the fourth anniversary of the grant date, the option will become
exercisable 90 days after the effective date and the shares acquired upon
exercise will be subject to restrictions on transfer and the right of the
Corporation to repurchase such shares at the exercise price in the event the
Director ceases to serve as a Director of the Corporation or another Thermo
Electron company. In the event of Section 12 Registration, the restrictions and
repurchase rights shall lapse or be deemed to lapse at the rate of 25% per year,
starting with the first anniversary of the grant date. These options expire
after five years.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the common stock as reported on the American
Stock Exchange (or other principal market on which the common stock is then
traded) for the five trading days preceding and including the date of grant, or,
if the shares are not then traded, at the last price paid per share by third
parties in an arms-length transaction prior to the option grant. An aggregate
of 225,000 shares of Common Stock has been reserved for issuance under the
Directors Plan.
STOCK OWNERSHIP POLICIES FOR DIRECTORS
During fiscal 1996, the Human Resources Committee of the Board of Directors
(the "Committee") established a stock holding policy for Directors. The stock
holding policy requires each Director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level by the
1998 Annual Meeting of Stockholders. Directors who are also executive officers
of the Corporation are required to comply with a separate stock holding policy
established by the Committee in fiscal 1996. The stock holding policy specifies
an appropriate level of ownership of the Corporation's Common Stock as a
multiple of the officer's compensation. For the chief executive officer, the
multiple is one times his base salary and reference bonus for the calendar year.
For all other executive officers, the multiple is one times the officer's base
salary. The Committee deemed it appropriate to permit officers to achieve these
ownership levels over a three-year period.
In addition, the Committee adopted a policy requiring Directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, Directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers. Under this policy, the executive officers are
required to hold shares of Common Stock equal to one-half of their net option
exercises over a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to exercise the
option and the number of shares that could have been surrendered to satisfy tax
withholding obligations attributable to the exercise of the option.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron, and ThermoLase Corporation
("ThermoLase") and Trex Medical Corporation ("Trex Medical"), each a majority-
owned subsidiary of the Corporation, as of December 28, 1996, with respect to
(i) each person who was known by the Corporation to own beneficially more than
5% of the outstanding shares of Common Stock, (ii) each Director and nominee for
Director, (iii) each executive officer named in the summary compensation table
under the heading "Executive Compensation" and (iv) all Directors and executive
officers as a group.
While certain Directors and executive officers of the Corporation are also
Directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron.
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<TABLE>
<CAPTION>
THERMOTREX THERMO ELECTRON
NAME (1) CORPORATION (2) CORPORATION (3) THERMOLASE (4) TREX MEDICAL (5)
--------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Thermo Electron Corporation (6)...... 9,847,540 N/A N/A N/A
Morton Collins....................... 24,513 0 13,504 2,164
Peter O. Crisp....................... 43,094 98,696 68,889 14,845
Paul F. Ferrari...................... 28,400 25,229 24,623 3,075
George N. Hatsopoulos................ 48,746 3,538,079 31,125 41,188
John N. Hatsopoulos.................. 23,844 566,768 63,503 40,983
Robert C. Howard..................... 35,554 194,493 70,181 43,174
Hal Kirshner......................... 93,321 117,824 62,086 285,000
Anthony J. Pellegrino................ 807,021 115,875 408,582 147,513
Firooz Rufeh......................... 100,541 133,286 260,694 93,600
Brett A. Spivey...................... 70,932 19,548 41,749 21,810
Kenneth Y. Tang...................... 79,516 26,033 354,318 48,706
Gary S. Weinstein.................... 110,000 160,412 168,044 315,000
Nicholas T. Zervas................... 28,156 0 87,020 3,000
All Directors and current executive
officers as a group (15 persons)..... 1,514,319 5,151,241 1,742,618 1,071,058
</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, ThermoLase
and Trex Medical beneficially owned consist of shares owned by the
indicated person, 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 9,847,540 shares beneficially owned by Thermo Electron, as to which
shares each Director and executive officer and all members of such group
disclaim beneficial ownership. Shares of the Common Stock beneficially
owned by Mr. Collins, Mr. Crisp, Mr. Ferrari, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Howard, Mr. Kirshner, Mr. Pellegrino, Mr. Rufeh, Dr.
Spivey, Dr. Tang, Mr. Weinstein, Dr. Zervas and all Directors and executive
officers as a group include 17,710, 27,800, 27,650, 36,600, 21,000, 31,320,
73,000, 134,500, 66,000, 67,969, 63,318, 100,000, 26,200 and 713,467
shares, respectively, that such person or group has the right to acquire
within 60 days of December 28, 1996 through the exercise of stock options.
Shares beneficially owned by Mr. Collins, Mr. Crisp, Dr. Zervas and all
Directors and executive officers as a group include 269, 1,921, 2,061 and
4,251 full shares, respectively, that had been allocated through December
28, 1996, to their respective accounts maintained under the Corporation's
Deferred Compensation Plan for Directors. Shares beneficially owned by
Mr. Ferrari include 750 shares held in a trust of which Mr. Ferrari is the
trustee. Shares beneficially owned by Dr. G. Hatsopoulos include 160
shares held by Dr. G. Hatsopoulos' spouse and 270 shares that Dr. G.
Hatsopoulos' spouse has the right to acquire within 60 days of December 28,
1996 through the exercise of stock options. Shares beneficially owned by
Mr. Pellegrino include 10,408 shares held in a trust of which Mr.
Pellegrino's spouse is the trustee for the benefit of Mr. Pellegrino's
minor child. Shares beneficially owned by Dr. Tang include 2,025 shares
held by Dr. Tang's daughter. As of December 28, 1996, no Director or
executive officer beneficially owned more than 1.0% of the Common Stock
outstanding as of December 28, 1996, other than Mr. Pellegrino, who
beneficially owned approximately 4.1% of the Common Stock; all Directors
and executive officers as a group beneficially owned 7.6% of the Common
Stock outstanding as of such date.
(3) The shares of the common stock of Thermo Electron shown in the table
reflect a three-for-two split of such stock distributed in June 1996 in the
form of a 50% stock dividend. Shares of the common stock of Thermo
Electron beneficially owned by Mr. Crisp, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Howard, Mr. Kirshner, Mr. Pellegrino, Mr. Rufeh, Dr.
Spivey, Dr. Tang, Mr. Weinstein and all Directors and
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executive officers as a group include 9,375, 1,499,500, 429,685, 47,361,
116,025, 115,875, 90,560, 13,853, 23,850, 160,075 and 2,613,733 shares,
respectively, that such person or group has the right to acquire within 60
days of December 28, 1996 through the exercise of stock options. Shares
beneficially owned by Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Howard
and all Directors and executive officers as a group include 2,164, 1,934,
3,040 and 8,615 full shares, respectively, allocated to their respective
accounts maintained pursuant to Thermo Electron's employee stock ownership
plan, of which the trustees, who have investment power over its assets
were, as of December 28, 1996, executive officers of Thermo Electron.
Shares beneficially owned by Mr. Crisp and all Directors and executive
officers as a group include 44,677 full shares, allocated through December
28, 1996 to Mr. Crisp's account maintained pursuant to Thermo Electron's
deferred compensation plan for directors. Shares beneficially owned by Mr.
Ferrari include 7,312 shares held in a trust of which Mr. Ferrari is the
trustee and 13,062 shares held in a trust for the benefit of Mr. Ferrari's
spouse. 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 for Dr. G. Hatsopoulos' spouse, 39,937 shares held by a family trust
of which Dr. G. Hatsopoulos' spouse is 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 and 10,800 shares that a family trust,
of which Dr. G. Hatsopoulos' spouse is the trustee, and Dr. G. Hatsopoulos'
spouse, respectively, has the right to acquire within 60 days of December
28, 1996 through the exercise of stock options. As of December 28, 1996, no
Director or executive officer beneficially owned more than 1% of the
outstanding Thermo Electron common stock, 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 3.4% of the
Thermo Electron common stock outstanding as of December 28, 1996.
(4) Shares of the common stock of ThermoLase beneficially owned by Mr. Collins,
Mr. Crisp, Mr. Ferrari, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Howard, Mr. Kirshner, Mr. Pellegrino, Mr. Rufeh, Dr. Spivey, Dr. Tang, Mr.
Weinstein, Dr. Zervas and all Directors and executive officers as a group
include 13,504, 22,508, 22,508, 28,800, 53,800, 43,200, 36,400, 72,000,
44,240, 32,000, 304,000, 100,000, 67,068 and 922,028 shares, respectively,
that such person or group has the right to acquire within 60 days of
December 28, 1996 through the exercise of stock options. Shares
beneficially owned by Dr. Zervas and all Directors and executive officers
as a group include 796 full shares, allocated through December 28, 1996 to
Dr. Zervas' account maintained pursuant to ThermoLase's deferred
compensation plan for directors shares beneficially owned by Mr. Ferrari
include 2,115 shares held in a trust of which Mr. Ferrari is the trustee.
Shares beneficially owned by Mr. Crisp include 11,446 shares owned by
Mr. Crisp's spouse, as to which shares Mr. Crisp disclaims beneficial
ownership. Shares beneficially owned by Dr. G. Hatsopoulos include 32
shares held by his spouse. Shares beneficially owned by Mr. Pellegrino
include 2,082 shares held in a trust of which Mr. Pellegrino's spouse is
the trustee for the benefit of his minor child. Shares beneficially owned
by Dr. Tang include 3,878 shares held by Dr. Tang's daughter. As of
December 28, 1996, no Director or executive officer beneficially owned more
than 1% of the common stock outstanding of ThermoLase, other than Mr.
Pellegrino, who beneficially owned 1.0% of such common stock; all Directors
and executive officers as a group beneficially owned approximately 4.2% of
the ThermoLase common stock outstanding as of such date.
(5) Shares of the common stock of Trex Medical beneficially owned by Mr.
Collins, Mr. Crisp, Mr. Ferrari, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos,
Mr. Howard, Mr. Kirshner, Mr. Pellegrino, Mr. Rufeh, Dr. Spivey, Dr. Tang,
Mr. Weinstein, Dr. Zervas and all Directors and executive officers as a
group include 1,500, 2,500, 1,500, 40,000, 40,000, 40,000, 150,000, 40,000,
40,000, 15,000, 40,000, 300,000, 1,500 and 723,000 shares, respectively,
that such person or group has the right to acquire within 60 days of
December 28, 1996 through the exercise of stock options. Shares
beneficially owned by Mr. Ferrari consist of 1,075 shares held in a trust
of which Mr. Ferrari is the trustee. Shares beneficially owned by Mr.
Pellegrino include 1,041 shares held in a trust of which Mr. Pellegrino's
spouse is the trustee for the benefit of his minor child. Shares
beneficially owned by Mr. Rufeh include 53,600 shares owned by the Rufeh
Family Trust of which Mr. Rufeh is the trustee. As of December 28, 1996,
no Director or executive officer beneficially owned more than 1% of the
outstanding common stock of Trex Medical, other than Mr.
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Weinstein, who beneficially owned 1.07% of such common stock; all Directors
and executive officers as a group owned 3.6% of such outstanding common
stock as of such date.
(6) Thermo Electron beneficially owned 51.3 % of the Common Stock outstanding
as of December 28, 1996. Thermo Electron's address is 81 Wyman Street,
Waltham, Massachusetts 02254-9046. As of December 28, 1996, Thermo Electron
had the power to elect all of the members of the Corporation's Board of
Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during fiscal 1996, except in the following
instances. Mr. Anthony J. Pellegrino failed to report a charitable gift of
2,500 shares on July 9, 1996 on his Form 5 for the fiscal year ended September
28, 1996. In addition, Thermo Electron, the beneficial owner of more than 10%
of the Common Stock, filed four Forms 4 late for the months of March 1996, May
1996, July 1996 and August 1996, reporting a total of 23 transactions consisting
of the exercise of options to purchase shares of Common Stock from Thermo
Electron by its employees in transactions ranging in size from 85 to 900 shares,
and two transactions consisting of the lapse of such options to purchase 180 and
135 shares without exercise. Thermo Electron also filed a fifth Form 4 late for
the month of July 1996 by eight days, reporting one transaction.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's chief
executive officer, its former chief executive officer, and its four other most
highly compensated executive officers (the "named executive officers") for the
last full fiscal year from October 1, 1995 to September 28, 1996 ("fiscal 1996")
and 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 two
preceding full fiscal years ("fiscal 1994" and "fiscal 1993").
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.
A-7
<PAGE>
Summary Compensation Table
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING OPTIONS
NAME AND PRINCIPAL FISCAL ------------------- (NO. OF SHARES AND ALL OTHER
POSITION YEAR SALARY BONUS COMPANY) (3) COMPENSATION (4)
-------- ---- ------ ----- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Gary S. Weinstein (5) 1996 $72,916 $100,000 (2) 100,000 (TKN) $10,256 (6)
Chief Executive Officer 100,000 (TLZ)
300,000 (TXM)
- - -------------------------------------------------------------------------------------------------------------------
Firooz Rufeh (7) 1996 $167,175 $90,000 (2) 40,000 (TXM) $6,750
President and Former 1995 $122,850 (1) $144,000 -- $7,058
Chief Executive Officer 1994 $157,500 $137,700 -- $6,423
1993 $137,052 $93,960 30,000 (TKN) $6,746
480,000 (TLZ)
- - -------------------------------------------------------------------------------------------------------------------
Anthony J. Pellegrino (8) 1996 $223,750 $150,000 (2) 40,000 (TXM) $5,344
Senior Vice President 1995 $187,500 (1) $200,000 -- -- $6,750
1994 $250,000 $180,000 22,500 (TMO) $6,750
1993 $250,000 $175,000 22,000 (TKN) $2,249
72,000 (TLZ)
9,000 (TMO)
- - -------------------------------------------------------------------------------------------------------------------
Hal Kirshner (8) 1996 $192,500 $200,000 (2) 150,000 (TXM) $9,958 (9)
President and Chief 150 (TMO)
Executive, Officer, Trex 2,000 (TBA)
Medical Corporation 2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
1995 $150,000 (1) $200,000 -- $7,005
1994 $200,000 $180,000 22,500 (TMO) $6,750
1993 $200,000 $175,000 22,000 (TKN) $2,249
36,400 (TLZ)
9,000 (TMO)
- - -------------------------------------------------------------------------------------------------------------------
Kenneth Y. Tang (9) 1996 $156,500 $50,000 (2) 40,000 (TXM) $6,975
Senior Vice President 1995 $114,000 (1) $49,000 -- $6,578
1994 $145,000 $50,000 -- $6,750
1993 $138,000 $38,000 15,000 (TKN) $6,868
304,000 (TLZ)
10,350 (TMO)
- - -------------------------------------------------------------------------------------------------------------------
Brett A. Spivey 1996 $123,750 $42,000 (2) 15,000 (TXM) $7,094
Vice President 1995 $90,000 (1) $40,000 -- $6,968
1994 $116,000 $36,000 -- $6,701
1993 $111,000 $33,000 30,000 (TKN) $6,208
32,000 (TLZ)
6,750 (TMO)
- - -------------------------------------------------------------------------------------------------------------------
</TABLE>
A-8
<PAGE>
(1) Annual compensation for executive officers is reviewed and determined on a
calendar year basis, even though the Corporation's fiscal year ends in
September. The Corporation changed its fiscal year-end to September from
December in 1995, and as a consequence, the salary data for fiscal 1995
reflects salary paid during the nine-month period from January 1, 1995 to
September 30, 1995. Salary data for subsequent fiscal years represents
salary paid during the Corporation's full fiscal year.
(2) The bonus amount presented for fiscal 1995 represents the bonus paid for
performance during calendar 1995. Bonuses have not yet been determined for
calendar 1996; therefore, the bonus amounts shown for fiscal 1996 are
estimates.
(3) Options to purchase Common Stock of the Corporation awarded to the named
executive officers are followed by the designation "TKN." Mr. Weinstein
and Mr. Rufeh have been granted certain options to purchase common stock of
Thermo Electron and certain of its subsidiaries other than the Corporation
and its subsidiaries, ThermoLase (designated in the table as "TLZ") and
Trex Medical (designated in the table as "TXM"), from time to time by
Thermo Electron or its other subsidiaries. These options are not reported
here as they were granted as compensation for service to the other Thermo
Electron companies in capacities other than in their capacities as officers
of the Corporation. The named executive officers of the Corporation have
been granted options to purchase common stock of Thermo Electron and
certain its other subsidiaries as part of Thermo Electron's stock option
program in their capacities as officers of the Corporation. Options have
been granted during the period covered by the table to the named executive
officers in the following Thermo Electron companies: Thermo Electron
(designated in the table as TMO), Thermo BioAnalysis Corporation
(designated in the table as TBA), Thermo Fibergen Inc. (designated in the
table as TFG), 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) and Thermo Sentron Inc.
(designated in the table as TSR). The shares of common stock of Thermo
Electron reported in the table reflect a three-for-two stock split
distributed in June 1996 in the form of a 50% stock dividend.
(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 or, as to Mr. Pellegrino and Mr. Kirshner for fiscal
1993, the LORAD 401(k) plan.
(5) Mr. Weinstein was appointed the Corporation's Chief Executive Officer
effective as of February 26, 1996. He was also appointed a vice president
of Thermo Electron effective as of February 26, 1996, and a portion of his
annual cash compensation (salary and bonus) has been allocated to and paid
by Thermo Electron since the commencement of his employment for the time he
devoted to his responsibilities in that capacity. The annual cash
compensation (salary and bonus) reported in the table for Mr. Weinstein
represents the amount paid by the Corporation and all other sources for Mr.
Weinstein's services as its chief executive officer. For fiscal 1996,
approximately 50% of Mr. Weinstein's aggregate salary and bonus earned in
all capacities throughout the Thermo Electron organization was paid by the
Corporation for his services as chief executive officer.
(6) Represents the amount of compensation attributable to an interest-free loan
provided to Mr. Weinstein pursuant to the Corporation's Stock Holding
Assistance Plan. See "Relationship with Affiliates - Stock Holding
Assistance Plan."
(7) Prior to February 1997, Mr. Rufeh served as a vice president of Thermo
Electron, as well as the president of the Corporation. He also served as
the chief executive officer of the Corporation until February 1996. A
portion of Mr. Rufeh's annual cash compensation (salary and bonus) has been
allocated to and paid by Thermo Electron for the time he devoted to his
responsibilities as a vice president of Thermo Electron. The annual cash
compensation (salary and bonus) reported in the table for Mr. Rufeh
represents the amount paid by the Corporation and all other sources for Mr.
Rufeh's services to the Corporation and its subsidiaries.
A-9
<PAGE>
For 1996, 1995, 1994 and 1993, 90%, 90%, 90% and 81%, respectively, of Mr.
Rufeh's aggregate salary and bonus earned in all capacities throughout the
Thermo Electron organization was paid by the Corporation for his services
in all capacities to the Corporation and its subsidiaries.
(8) Mr. Pellegrino and Mr. Kirshner were first appointed executive officers of
the Corporation in November 1992 in connection with the acquisition of
LORAD Corporation by the Corporation. The salary and bonus for each of Mr.
Pellegrino and Mr. Kirshner are determined by employment agreements entered
into with the Corporation at the time LORAD Corporation was acquired. Mr.
Pellegrino also serves as a Director of ThermoQuest Corporation, a majority
owned subsidiary of Thermo Electron. Options granted to Mr. Pellegrino in
his capacity as a Director of ThermoQuest are not included in the table as
they were granted for service in a capacity other than in his capacity as
an officer of the Corporation.
(9) In addition to the matching contribution referred to in footnote (4), such
amount includes $4,614, representing the market value of 115 shares of
Thermo Electron common stock received by Mr. Kirshner in May 1996 at Thermo
Electron's Annual Management Conference in recognition of his managerial
achievements.
STOCK OPTIONS GRANTED DURING FISCAL 1996
Mr. Weinstein and Mr. Rufeh have been granted options to purchase common
stock of Thermo Electron and certain of its subsidiaries from time to time as
compensation for service to other Thermo Electron companies in capacities other
than in his capacity as chief executive officer of the Corporation.
Accordingly, options granted by Thermo Electron companies other than the
Corporation and its subsidiaries have not been reported here. It has not been
the Corporation's policy in the past to grant stock appreciation rights, and no
such rights were granted during fiscal 1996.
A-10
<PAGE>
OPTIONS GRANTS IN FISCAL 1996
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
NUMBER OF GRANTED TO EXERCISE PRICE APPRECIATION FOR
SECURITIES EMPLOYEES PRICE OPTION TERM (2)
UNDERLYING OPTIONS IN FISCAL PER EXPIRATION ---------------
NAME GRANTED (1) YEAR SHARE DATE 5% 10%
---- ----------- ---- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary S. Weinstein. 100,000 (TKN) 73.6% $41.98 3/29/03 $1,709,000 $3,983,000
100,000 (TLZ) 21.3% (3) $26.95 2/23/03 $1,097,000 $2,557,000
100,000 (TXM) 5.7% (3) $11.00 3/26/08 $875,000 $2,352,000
100,000 (TXM) 5.7% (3) $11.00 2/28/08 $875,000 $2,352,000
100,000 (TXM) 5.7% (3) $11.00 3/11/08 $875,000 $2,352,000
- - ---------------------------------------------------------------------------------------------------------------
Firooz Rufeh ..... 40,000 (TXM) 2.3% (3) $11.00 3/26/08 $350,000 $940,800
- - ---------------------------------------------------------------------------------------------------------------
Anthony J. 40,000 (TXM) 2.3% (3) $11.00 3/26/08 $350,000 $940,800
Pellegino.........
- - ---------------------------------------------------------------------------------------------------------------
Hal Kirshner...... 150,000 (TXM) 8.5% (3) $11.00 3/26/08 $1,312,500 $3,528,000
150 (TMO) 0.01% (3) $42.79 5/22/99 $1,011 $2,124
2,000 (TBA) 0.2% (3) $10.00 3/11/08 $15,920 $42,760
2,000 (TFG) 0.4% (3) $10.00 9/12/08 $15,920 $42,760
2,000 (TLT) 0.6% (3) $10.00 3/11/08 $15,920 $42,760
6,000 (TOC) 0.2% (3) $12.00 4/9/08 $57,300 $153,960
6,000 (TMQ) 0.2% (3) $13.00 3/11/08 $62,100 $166,800
2,000 (TSR) 0.4% (3) $14.00 3/11/08 $22,280 $59,880
- - ---------------------------------------------------------------------------------------------------------------
Kenneth Y. Tang... 40,000 (TXM) 2.3% (3) $11.00 3/26/08 $350,000 $940,800
- - ---------------------------------------------------------------------------------------------------------------
Brent A. Spivey... 15,000 (TXM) 0.9% (3) $11.00 2/28/08 $131,250 $352,800
- - ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares of common stock of Thermo Electron shown in the table reflect a
three-for-two stock split distributed in June 1996 in the form of a 50%
stock dividend. All of the options granted during the fiscal year are
immediately exercisable, except options to purchase ThermoLyte Corporation
(designated in the table as TLT), which are not exercisable until the
earlier of (i) 90 days after the effective date of the registration of that
company's common stock under Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act") and (ii) nine years after the grant date. In all
cases, the shares acquired upon exercise are subject to repurchase by the
granting corporation at the exercise price if the optionee ceases to be
employed by the Corporation or another Thermo Electron company. The
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. For publicly traded
companies, the repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term, which may vary from seven to
twelve years, provided 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. As to the options to purchase shares of the
common stock of Trex Medical Corporation granted to Mr. Rufeh, Mr.
Pellegrino, Mr. Kirshner and Dr. Tang, the repurchase rights are deemed to
lapse 20% per year commencing on the sixth 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.
A-11
<PAGE>
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
granting corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and accordingly are reported as a percentage to total options
granted to employees of Thermo Electron and its public subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1996 AND FISCAL YEAR-END VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1996 and outstanding stock options of the Thermo
Electron companies held at the end of fiscal 1996 by the named executive
officers. No stock appreciation rights were exercised or were outstanding
during fiscal 1996.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 Year-END OPTION
VALUED
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NO. OF UNEXERCISED
SHARES OPTIONS AT FISCAL VALUE OF
ACQUIRED YEAR-END UNEXERCISED
ON VALUE (EXERCISABLE/ IN-THE-MONEY
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE) (1) OPTIONS
---- ------- -------- -------- ------------------ -------
<S> <C> <C> <C> <C> <C>
Gary S. Weinstein .....ThermoTrex -- -- 100,000 /0 $0 /--
ThermoLase -- -- 100,000 /0 $0 /--
Trex Medical -- -- 300,000 /0 $2,775,000 /--
- - ----------------------------------------------------------------------------------------------------------
Firooz Rufeh (2) ......ThermoTrex -- -- 66,000 /0 $1,760,550 /--
ThermoLase 435,760 $13,167,520 44,240 /0 $923,510 /--
Trex Medical -- -- 40,000 /0 $370,000 /--
- - ----------------------------------------------------------------------------------------------------------
Anthony J. Pellegrino ThermoTrex -- -- 134,500 /0 $3,442,288 /--
ThermoLase -- -- 72,000 /0 $1,557,000 /--
Trex Medical -- -- 40,000 /0 $370,000 /--
Thermo Electron -- -- 115,875 (3) $2,953,132 /--
- - ----------------------------------------------------------------------------------------------------------
Hal Kirshner ..........ThermoTrex 76,500 $ 2,079,270 73,000 /0 $1,809,155 /--
ThermoLase -- -- 36,400 /0 $787,150 /--
Trex Medical -- -- 150,000 /0 $1,387,500 /--
Thermo Electron -- -- 116,025 /0 (3) $2,953,132 /--
Thermo BioAnalysis -- -- 2,000 /0 $7,750 /--
Thermo Fibergen -- -- 2,000 /0 $5,250 /--
ThermoLyte -- -- 0 /2000 --/ $0 (4)
Thermo Optek -- -- 6,000 /0 $18,000 /--
ThermoQuest -- -- 6,000 /0 $3,000 /--
Thermo Sentron -- -- 2,000 /0 $0 /--
- - ----------------------------------------------------------------------------------------------------------
Kenneth Y. Tang .......ThermoTrex -- -- 63,318 /0 $1,840,598 /--
ThermoLase -- -- 304,000 /0 $6,490,000 /--
Trex Medical 40,000 /0 $370,000 /--
Thermo Electron 19,125 $ 595,419 23,850 /0 $674,004 /--
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
A-12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Thermo Ecotek -- -- 3,000 /0 $33,501 /--
Thermo Fibertek -- -- 4,500 /0 $45,563 /--
- - ----------------------------------------------------------------------------------------------------------
Brett A. Spivey .......ThermoTrex -- -- 67,969 /0 $1,822,918 /--
ThermoLase -- -- 32,000 /0 $692,000 /--
Trex Medical 15,000 /0 $138,750 /--
Thermedics -- -- 2,250 /0 $36,574 /--
Thermo Ecotek -- -- 1,500 /0 $16,751 /--
Thermo Electron 6,147 $ 39,6728 13,853 /0 $381,413 /--
Thermo Fibertek -- -- 4,500 /0 $45,563 /--
- - ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The shares of the common stock shown in the table have been adjusted to
reflect three-for-two stock splits, each in the form of a 50% stock
dividend, distributed by Thermo Electron in June 1996 and Thermo Fibertek
Inc. in June 1996. All of the options reported outstanding at the end of
the fiscal year are immediately exercisable as of fiscal year-end, except
ThermoLyte Corporation (designated in the table as TLT), which are not
exercisable until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under Section 12 of the
Exchange Act and (ii) nine years after the grant date. In all cases, the
shares acquired upon exercise of the options reported in the table are
subject to repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or another Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. For publicly traded companies, the repurchase rights generally
lapse ratably over a five- to ten-year period, depending on the option
term, which may vary from seven to twelve years, provided that the optionee
continues to be employed by the Corporation or another Thermo Electron
company. For companies that are not publicly traded, the repurchase rights
lapse in their entirety on the ninth anniversary of the grant date. As to
the options to purchase shares of the common stock of Trex Medical
Corporation granted to Mr. Rufeh, Mr. Pellegrino, Mr. Kirshner and Dr.
Tang, the repurchase rights are deemed to lapse 20% per year commencing on
the sixth anniversary of the grant date. Certain options granted as part
of Thermo Electron's stock option program have three-year terms, and the
repurchase rights lapse in their entirety on the second anniversary of the
grant date.
(2) As officers of Thermo Electron, Mr. Weinstein and Mr. Rufeh also hold
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 in their capacities as
officers of the Corporation.
(3) Options to purchase 22,500 shares of the common stock of Thermo Electron
granted to each of Mr. Kirshner and Mr. Pellegrino are subject to the same
terms described in footnote (1), except that the repurchase rights of the
granting corporation generally do not lapse until the tenth anniversary of
the grant date. In the event of the employee's death or involuntary
termination prior to the tenth anniversary of the grant date, the
repurchase rights of the granting corporation shall be deemed to have
lapsed ratably over a five-year period commencing with the fifth
anniversary of the grant date.
(4) No public market existed for the shares as of December 28, 1996.
Accordingly, no value in excess of the exercise price has attributed to
these options.
EMPLOYMENT AGREEMENTS
In connection with the acquisition of the LORAD Corporation ("LORAD") in
November 1992, the Corporation entered into an employment agreement with each of
Mr. Anthony J. Pellegrino and Mr. Hal Kirshner. Mr. Pellegrino's agreement
calls for Mr. Pellegrino to serve as Chairman of the Board and Chief Executive
Officer of LORAD until December 31, 1995, at a base salary of $250,000 per year
plus bonus. Mr. Kirshner's agreement
A-13
<PAGE>
calls for Mr. Kirshner to serve as President and Chief Operating Officer of
LORAD until December 31, 1995, at a base salary of $200,000 per year plus bonus.
These agreements expired on December 31, 1995.
SEVERANCE AGREEMENTS
In 1988, Thermo Electron entered into severance agreements with several of
its key employees, including key employees of the Corporation and other
majority-owned subsidiaries. These agreements provide severance benefits if
there is a change of control of Thermo Electron that is not approved by the
Board of Directors of Thermo Electron and the employee's employment with Thermo
Electron or the majority-owned subsidiary is terminated, for whatever reason,
within one year thereafter. For purposes of the agreement, a change of control
exists upon (i) the acquisition of 50% or more of the outstanding common stock
of Thermo Electron by any person without the prior approval of the Board of
Directors of Thermo Electron, (ii) the failure of the Board of Directors of
Thermo Electron, within two years after any contested election of directors or
tender or exchange offer not approved by the board of directors, to be
constituted of a majority of directors holding office prior to such event or
(iii) any other event that the Board of Directors of Thermo Electron determines
constitutes an effective change of control of Thermo Electron. Each of the
recipients of these agreements would receive a lump-sum benefit at the time of a
qualifying severance (as defined below) equal to the highest total cash
compensation paid to the employee by Thermo Electron or the majority-owned
subsidiary in any 12-month period during the three years preceding the
qualifying severance. A qualifying severance exists (i) if the employment of the
executive officer is terminated for any reason within one year after a change in
control of Thermo Electron or (ii) a group of directors of Thermo Electron
consisting of directors of Thermo Electron on the date of the severance
agreement or, if an election contest or tender or exchange offer for Thermo
Electron's common stock has occurred, the directors of Thermo Electron
immediately prior to such election contest or tender or exchange offer, and any
future directors who are nominated or elected by such directors, determines that
any other termination of the executive officer's employment should be treated as
a qualifying severance. The benefits to be provided are limited so that the
payments would not constitute so-called "excess parachute payments" under
applicable provisions of the Internal Revenue Code of 1986. Assuming that
severance benefits would have been payable under these agreements as of
September 28, 1996, Mr. Rufeh would have received approximately $335,000.
A-14
<PAGE>
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held majority-owned
subsidiaries. The Corporation has created ThermoLase Corporation ("ThermoLase")
and Trex Medical Corporation ("Trex Medical") as publicly held, majority-owned
subsidiaries. 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 have adopted the Thermo Electron Corporate Charter (the
"Charter") to define the relationships and delineate the nature of such
cooperation among themselves. The purpose of the Charter is to ensure that (1)
all of the companies and their stockholders are treated consistently and fairly,
(2) the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological strengths
of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of long-
range planning and providing other banking and credit services. Pursuant to the
Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Corporation, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. However,
a withdrawing company is required to continue to comply with all policies and
procedures applicable to the Thermo Group and to provide certain administrative
functions mandated by Thermo Electron so long as the withdrawing company is
controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain
A-15
<PAGE>
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 financial and other services to
the Corporation. Thermo Electron assessed the Corporation an annual fee equal to
1.2% and 1.25% of the Corporation's revenues for these services in calendar 1995
and for periods prior to calendar 1995, respectively. Effective January 1, 1996,
the fee was reduced to 1.0% of the Corporation's revenues. The fee may be
changed by mutual agreement of the Corporation and Thermo Electron. During
fiscal 1996, Thermo Electron assessed the Corporation $1,906,000 in fees under
the Services Agreement. Management believes that the charges under the Services
Agreement are reasonable and that such fees are representative of the expense
the Corporation would have incurred on a stand-alone basis. For additional items
such as employee benefit plans, insurance coverage and other identifiable costs,
Thermo Electron charges the Corporation based on costs 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.
From time to time, the Corporation may transact business with other
companies in the Thermo Group. In fiscal 1996, such transactions included the
following. A majority-owned subsidiary of Thermo Electron provides contract
administration and data processing services to the Corporation. The Corporation
was charged $90,000 for such services for fiscal 1996.
The Corporation leased two office and research facilities from Thermo
Electron under an agreement that was terminated in June 1996. The rental
payments made to Thermo Electron during fiscal 1996 were $89,000. In connection
with the Corporation's decision to close its Waltham facilities and because
Thermo Electron desires to sell these facilities, the Corporation vacated these
facilities in June 1996.
Trex Medical has an arrangement with the Tecomet division of Thermo
Electron for the manufacture of Trex Medical's proprietary HTC grid. Under this
arrangement Tecomet manufactures the grid for Trex Medical pursuant to written
purchase orders. During fiscal 1996, Trex Medical purchased 331 grids for an
aggregate purchase price of $397,000 under this arrangement. In addition, Trex
Medical paid Tecomet $250,000 during fiscal 1996 for research and development
provided by Tecomet in connection with this project. Trex Medical owns the
intellectual property rights to the grid.
Under an arrangement with Thermedics Detection Inc., a subsidiary of
Thermedics Inc., a majority-owned subsidiary of Thermo Electron, Trex Medical
manufactures an X-ray source that is used as a component to a fill-measuring
device produced by Thermedics Detection. Trex Medical manufactures these X-ray
sources for Thermedics Detection pursuant to written purchase orders. During
fiscal 1996, Thermedics Detection purchased 100 units from Trex Medical for an
aggregate purchase price of $361,000 under this arrangement.
In September 1995, the Corporation borrowed $8,000,000 from Thermo Electron
pursuant to a promissory note, due September 1996, and bearing interest at the
90-day Commercial Paper Composite Rate plus 25 basis points. This note was
repaid in September 1996. In September 1996, the Corporation borrowed $2,000,000
from Thermo Electron pursuant to a promissory note, due April 1997, and bearing
interest at the 90-day Commercial Paper Composite Rate plus 25 basis points.
The Corporation sold its thermo electrics and thermionics businesses to two
subsidiaries of Thermo Electron, for approximately $860,000, which represents
the net book value of the net assets transferred.
As of September 28, 1996, $40,727,000 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
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Thermo Electron, which Thermo Electron collateralizes with investments
principally consisting of corporate notes, U.S. government agency securities,
money market funds, commercial paper and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's funds subject to
the repurchase agreement are readily convertible into cash by the Corporation.
The repurchase agreement earns a rate based on the 90-day Commercial Paper
Composite Rate plus 25 basis points, set at the beginning of each quarter.
Thermo Electron owned approximately 51% of the Corporation's outstanding
Common Stock on December 28, 1996. Thermo Electron intends for the foreseeable
future to maintain at least 50% ownership of the Corporation. This may require
the purchase by Thermo Electron of additional shares of the Corporation's Common
Stock from time to time as the number of outstanding shares issued by the
Corporation increases. These and other purchases may be made either in the open
market or directly from the Corporation.
In November 1995, Mr. Crisp and Mr. Rufeh, Directors of the Corporation,
and Mr. Kirshner, Mr. Pellegrino and Dr. Spivey, executive officers of the
Corporation, purchased from Trex Medical 10,000, 19,600, 100,000, 20,000 and
9,800 shares of Trex Medical common stock, respectively, for an aggregate
purchase price of $102,500, $200,900, $1,025,000, $205,000 and $100,450,
respectively, in a private placement of 1,852,000 shares of common stock by Trex
Medical at $10.25 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. During 1996, Mr. Weinstein received a loan in the principal amount of
$375,003.85 under this plan to purchase 10,000 shares. The loan to Mr. Weinstein
is payable on demand and requires that 20% of the principal amount of the loan
be repaid from the bonus payable to Mr. Weinstein in each of the next five
years, commencing with the bonus payment in 1997 for calendar 1996 performance,
until the loan is repaid in full.
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