SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________________________________________
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the
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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 1-13104
THERMOLASE CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1360302
(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)
646-5700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which
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registered
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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
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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. [ ]
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The aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of November 22, 1996, was
approximately $281,022,000.
As of November 22, 1996, the Registrant had 40,719,299 shares of
Common Stock outstanding.
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ThermoLase Corporation Amendment No. 1
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.
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Part III, Item 11. Executive Compensation.
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Part III, Item 12. Security Ownership of Certain
Beneficial Owners and Management.
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Part III, Item 13. Certain Relationships and
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Transactions.
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The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy
statement to be filed with the Commission pursuant to Regulation
14A, not later than 120 days after the close of the fiscal year,
is contained in the following Attachment A, which is included
herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Amendment No. 1 on Form 10-K/A to be signed by the
undersigned, duly authorized.
THERMOLASE CORPORATION
By: /s/ Sandra L. Lambert
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Sandra L. Lambert
Secretary
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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, ThermoTrex Corporation ("ThermoTrex") and
ThermoTrex's parent corporation, Thermo Electron Corporation
("Thermo Electron"), is reported under the caption "Stock
Ownership." All of the nominees are currently Directors of the
Corporation.
Carliss Y. Baldwin Dr. Baldwin, 46, has been a Director of
the Corporation since June 1994. Dr.
Baldwin has been the William L. White
Professor of Business Administration,
Harvard Business School, since 1988. She
is also a director of the Federal Home
Loan Bank of Boston.
Elias P. Dr. Gyftopoulos, 69, has been a Director
Gyftopoulos of the Corporation since September 1994.
Dr. Gyftopoulos is Professor Emeritus of
the Massachusetts Institute of Technology,
where he was the Ford Professor of
Mechanical Engineering and of Nuclear
Engineering for more than twenty years
until his retirement in September 1996.
Dr. Gyftopoulos is also a director of
Thermo BioAnalysis Corporation, Thermo
Cardiosystems Inc., Thermo Electron,
Thermo Remediation Inc., ThermoSpectra
Corporation, Thermo Voltek Corp. and Trex
Medical Corporation.
John C. Hansen Mr. Hansen, 37, has been a Director of the
Corporation since February 1996 and its
President and Chief Executive Officer
since May 1995. From 1990 until joining
the Corporation, Mr. Hansen was President
of Dolphin Acquisition Corp., a skin-care
products retailer operating under the name
Bare Escentuals, and from 1988 until 1990
he was Vice President, Retail of
Performance, Inc., a direct marketer and
retailer of cycling products.
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Robert C. Howard Mr. Howard, 66, has been a Director of the
Corporation since its inception in
December 1992. Mr. Howard has been an
Executive Vice President of Thermo
Electron from 198 until his retirement in
January 1997. He is also a director of
Thermedics Inc., Thermo Cardiosystems
Inc., Thermo Power Corporation,
ThermoTrex Corporation and Trex Medical
Corporation.
Paul F. Kelleher Mr. Kelleher, 54, has been Chief
Accounting Officer of the Corporation
since its inception in December 1992 and a
Director since March 1994. Mr. Kelleher
has been Vice President, Finance of Thermo
Electron since 1987 and served as its
Controller from 1982 to January 1996.
Anthony J. Mr. Pellegrino, 56, has been a Director of
Pellegrino the Company since its inception in
Decemberi1992.esMr.nPellegrinoohasxbeenca
July 1995 and was chairman of LORAD
Corporation, a manufacturer of mammography
equipment that was acquired by ThermoTrex
in November 1992, for more than five years
prior to that time. Mr. Pellegrino is
also a director of ThermoQuest Corporation
and Trex Medical Corporation.
Firooz Rufeh Mr. Rufeh, 59, has been a Director of the
Corporation since its inception in
December 1992. He was also Vice Chairman
of the Board of Directors from February
1996 until January 1997. From December
1992 until May 1995 he was Chief Executive
Officer of the Corporation, and from May
1995 to February 1996, he was also its
Chairman of the Board. Mr. Rufeh was
also President of ThermoTrex Corporation
from 1988 and a Vice President of Thermo
Electron from January 1986, positions he
held until January 1997. Since January
1997, Mr. Rufeh has been a consultant to
Thermo Electron. He is also a director
of ThermoTrex Corporation and Trex Medical
Corporation.
Kenneth Y. Tang Dr. Tang, 49, has been a Director of the
Corporation since June 1995. Dr. Tang has
been Senior Vice President of ThermoTrex
Corporation for more than five years. He
is also a director of Trex Medical
Corporation.
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Gary S. Weinstein Mr. Weinstein, 39, has been a Director
and the Chairman of the Board of of the
Corporation since February 1996. Since
February 1996, Mr. Weinstein has also been
Chairman and Chief Executive Officer of
ThermoTrex and a Vice President of Thermo
Electron. Mr. Weinstein was a Managing
Director of Lehman Brothers Inc. from 1992
until February 1996, serving most recently
as its Managing Director, head of Global
Syndicate and Equity Capital Markets since
March 1995. Prior to that appointment,
Mr. Weinstein served in various positions
at Lehman Brothers since joining the firm
in 1988, 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 ThermoTrex Corporation
and Trex Medical Corporation.
Dr. Nicholas T. Dr. Zervas, 67, has been a Director of the
Zervas Corporation since its inception in
December 1992, and has been Chief of
Neurological Service, Massachusetts
General Hospital, since 1977. Dr. Zervas
is also a director of Thermedics Inc.,
Thermo Cardiosystems Inc., and ThermoTrex
Corporation.
Committees of the Board of Directors and Meetings
The Board of Directors has established an Audit Committee
and a Human Resources Committee, each consisting solely of
outside Directors. The present members of the Audit Committee are
Dr. Baldwin (Chairman) and Dr. Zervas. The Audit Committee
reviews the scope of the audit with the Corporation's independent
public accountants and meets with them for the purpose of
reviewing the results of the audit subsequent to its completion.
The present members of the Human Resources Committee are Dr.
Zervas (Chairman), Dr. Baldwin and Dr. Gyftopoulos. 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 seven times, the Audit Committee met
three times and the Human Resources Committee met seven times
during fiscal 1996. Each Director attended at least 75% of all
meetings of the Board of Directors and Committees on which he or
she served held during fiscal 1996.
Compensation of Directors
Cash Compensation
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Directors who are not employees of the Corporation, of
Thermo Electron or any other companies affiliated with Thermo
Electron (also referred to as "outside Directors") receive an
annual retainer of $2,000 and a fee of $1,000 per day for
attending regular meetings of the Board of Directors and $500 per
day for participating in meetings of the Board of Directors held
by means of conference telephone and for participating in certain
meetings of committees of the Board of Directors. Payment of
outside Directors' fees is made quarterly. Mr. Hansen, Mr.
Howard, Mr. Kelleher, Mr. Pellegrino, Mr. Rufeh and Mr. Weinstein
are all employees of Thermo Electron and its subsidiaries 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 cash fees until he or she 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 ThermoTrex or 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
ThermoTrex or 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 on the date of deferral as units of
the Corporation's Common Stock. When payable, amounts deferred
may be disbursed solely in shares of Common Stock accumulated
under the Deferred Compensation Plan. A total of 100,000 shares
of Common Stock have been reserved for issuance under the
Deferred Compensation Plan. As of September 28, 1996, 513.52
deferred units had been accumulated under the Deferred
Compensation Plan.
Directors Stock Option Plan
The Corporation has adopted a directors stock option plan
(the "Directors Plan") providing for the grant of stock options
to purchase shares of the Common Stock to outside Directors as
additional compensation for their service as Directors, which was
amended in 1995. The Directors Plan provides for the grant of
stock options upon a Director's initial appointment and,
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beginning in 1999, awards options to purchase 1,000 shares
annually to outside Directors.
Under the Directors Plan, outside Directors appointed prior
to 1995 were awarded an option to purchase 30,000 shares of
Common Stock upon the Director's appointment or election. The
size of the award to new Directors initially joining the Board of
Directors after 1995 is reduced by 6,000 shares in each
subsequent year. Directors initially joining the Board of
Directors after 1999 would not receive an option grant upon their
appointment or election to the Board of Directors, but would be
eligible to participate in the annual option awards described
below. All options evidencing initial grants are exercisable six
months after the grant, 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 any other Thermo Electron company.
In such event, the restrictions and repurchase rights lapse in
equal annual installments of 6,000 shares per year, starting with
the first anniversary of the grant date, provided the Director
has continuously served as a Director of the Corporation or any
other Thermo Electron company since the grant date. These
options expire on the seventh anniversary of the grant date if
granted before the end of 1995 and on the fifth anniversary of
the grant date if granted after 1995, 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.
In addition, under the Directors Plan, outside Directors
will also receive an annual grant of options to purchase 1,000
shares of Common Stock, commencing in 1999. The annual grant is
made at the close of business on the date of Annual Meeting of
the Stockholders to each outside Director then holding office,
commencing with the Annual Meeting of Stockholders in 1999.
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 would be 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 that have been granted under
the Directors Plan is the average of the closing prices of the
Common Stock as reported on the American Stock Exchange for the
five trading days preceding and including the date of grant. An
aggregate of 400,000 shares of Common Stock has been reserved for
issuance under the Directors Plan.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of
Common Stock, as well as the common stock of ThermoTrex and
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Thermo Electron, as of December 28, 1996, with respect to (i)
each person who was known by the Corporation to own beneficially
more than 5% of the outstanding shares of common stock, (ii) each
Director and 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
ThermoTrex or its subsidiaries other than the Corporation, all
such persons disclaim beneficial ownership of the shares of
Common Stock owned by ThermoTrex.
STOCKTABLE
(1) Except as reflected in the footnotes to this table, shares
of Common Stock of the Corporation and of the common stock
of ThermoTrex and Thermo Electron 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 25,960,996 shares
beneficially owned by ThermoTrex, as to which shares each
Director and executive officer and all members of such group
disclaim ownership. Shares of Common Stock beneficially
owned by Dr. Baldwin, Dr. Cain, Dr. Gyftopoulos, Mr. Hansen,
Mr. Howard, Mr. Kelleher, Mr. Pellegrino, Mr. Rufeh, Mr.
Spire, Dr. Tang, Mr. Weinstein, Mr. Wittenberg, Mr. Wurth,
Dr. Zervas and all Directors and executive officers as a
group include 61,400, 350,000, 61,400, 480,000, 43,200,
77,000, 72,000, 44,240, 50,000, 304,000, 100,000, 68,000,
150,000, 67,068 and 2,007,108 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 513 shares
allocated through September 28, 1996 to Dr. Zervas' account
maintained pursuant to the Corporation's Deferred
Compensation Plan for Directors. 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 Mr. Pellegrino's 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 1% or more of the Common Stock,
other than Mr. Hansen, who beneficially owned 1.2%, and Mr.
Pellegrino, who beneficially owned 1.0% of the Common Stock;
all Directors and executive officers as a group beneficially
owned 6.5% of Common Stock outstanding as of such date.
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(3) Shares of ThermoTrex common stock beneficially owned by Dr.
Gyftopoulos, Mr. Hansen, Mr. Howard, Mr. Kelleher, Mr.
Pellegrino, Mr. Rufeh, Dr. Tang, Mr. Weinstein, Mr. Wurth,
Dr. Zervas and all Directors and executive officers as a
group include 4,500, 100,000, 31,320, 10,400, 134,500,
66,000, 63,318, 100,000, 22,500, 26,200 and 580,638 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 1,956 shares allocated through September 28, 1996
to Dr. Zervas' account maintained pursuant to ThermoTrex's
Deferred Compensation Plan for Directors. Shares
beneficially owned by Mr. Pellegrino include10,408 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 Mr. 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% of the ThermoTrex common stock outstanding as of such
date, other than Mr. Pellegrino, who beneficially owned 4.1%
of such common stock; all directors and executive officers
as a group beneficially owned approximately 7.0% of the
ThermoTrex common stock outstanding as of December 28, 1996.
(4) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock effected
in May 1996. Shares of Thermo Electron common stock
beneficially owned by Dr. Gyftopoulos, Mr. Hansen, Mr.
Howard, Mr. Kelleher, Mr. Pellegrino, Mr. Rufeh, Dr. Tang,
Mr. Weinstein, Mr. Wittenberg, Mr. Wurth and all Directors
and executive officers as a group include 9,375, 22,500,
47,361, 97,574, 115,875, 90,560, 23,850, 160,075, 24,750,
7,500 and 1,041,892 shares, respectively, that such person
or member of the group have the right to acquire within 60
days of December 28, 1996 through the exercise of stock
options. Shares beneficially owned by Mr. Howard, Mr.
Kelleher and all Directors and executive officers as a group
include 3,040, 1,324 and 6,298 full shares, respectively,
allocated through December 28, 1996 to their respective
accounts maintained pursuant to Thermo Electron's employee
stock ownership plan. No Director or executive officer
beneficially owned more than 1% of Thermo Electron's common
stock outstanding as of such date; all Directors and
executive officers as a group beneficially owned 1.0% of the
common stock of Thermo Electron outstanding as of such date.
(5) ThermoTrex owned 63.9% of the Common Stock outstanding as of
December 28, 1996. ThermoTrex's address is 10455 Pacific
Center Court, San Diego, California 92121. As of December
28, 1996, ThermoTrex had the power to elect all of the
members of the Corporation's Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance
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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
change 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. The Forms 4 for the month of
September 1996 filed on behalf of ThermoTrex and Thermo Electron,
the beneficial owners of more than 10% of the Common Stock,
reporting the exercise of an option to purchase 5,000 shares from
ThermoTrex by an employee, was filed 74 days late on December 24,
1996. The Form 4 for the month of September 1996 filed on behalf
of Thermo Electron also reported two additional exercises of
options to purchase 10,000 and 600 shares by employees of Thermo
Electron. The Form 4 for the month of November 1995 filed on
behalf of Thermo Electron, reporting the exercise of an option to
purchase 110,000 shares from Thermo Electron granted to an
employee, was filed one month late.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation for services to
the Corporation in all capacities awarded to, earned by or paid
to the Corporation's chief executive officer and four other most
highly compensated executive officer (the "named executive
officers") for the last full fiscal year from October 1, 1995 to
September 28, 1996 ("fiscal 1996"), for the nine-month period
from January 1, 1995 to September 30, 1995 ("fiscal 1995"),
reflecting a change in the Corporation's fiscal year-end to the
52 or 53 week period ending on the Saturday closest to September
30, and for the preceding full fiscal year from January 2, 1994
to December 31, 1994 ("fiscal 1994").
The Corporation is required to appoint certain executive
officers and full-time employees of Thermo Electron as executive
officers of the Corporation, in accordance with the Thermo
Electron Corporate Charter. The compensation for these executive
officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's
affairs is provided to the Corporation under the Corporate
Services Agreement between the Corporation and Thermo Electron.
Accordingly, the compensation for these individuals is not
reported in the following table.
SUMMARYCOMPTABLE
(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
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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) In addition to receiving options to purchase Common Stock
(designated in the table as "TLZ"), executive officers of
the Corporation have been granted options to purchase common
stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option
program. Options have been granted during the 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), Thermo Sentron
Inc. (designated in the table as TSR), and Trex Medical
Corporation (designated in the table as TXM).
(4) Represents the amount of matching contributions made on
behalf of the named executive officer participating in the
Thermo Electron 401(k) Plan.
(5) Mr. Hansen was appointed Chief Executive Officer and
President of the Corporation on May 1, 1995.
(6) Mr. Wurth was appointed Vice President, Operations of the
Corporation in June 1995.
(7) In addition to $1,661, which represents the amount of
matching contributions made on behalf of the named executive
officer participating in the Thermo Electron 401(k) Plan,
the amount reported includes $2,698, which represents the
amount of compensation attributable to an interest-free loan
provided to Mr. Wurth in connection with his relocation to
San Diego, California. See "Relationship with Affiliates".
(8) Dr. Cain was appointed a Vice President of the Corporation
in March 1995. Dr. Cain also serves as a Director of
ThermoLyte Corporation, a majority owned subsidiary of
Thermo Electron. Options granted to Dr. Cain in his
capacity as a director of ThermoLyte are not included in the
table as they were granted as compensation for service in a
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capacity other than in his capacity as an officer of the
Corporation.
(9) Mr. Sphire was appointed a Vice President of the Corporation
on June 12, 1996.
(10) Mr. Wittenberg was appointed a Vice President of the
Corporation on January 9, 1996.
Stock Options Granted During Fiscal 1996
The following table sets forth information concerning
individual grants of stock options by the Corporation and other
Thermo Electron companies made during fiscal 1996 to the named
executive officers in their capacities as 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 1996.
OPTIONTABLE
(1) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two stock split effected in May
1996. All of the options granted during the fiscal year are
immediately exercisable at the date of grant, 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. The
granting corporation may permit the holders of such options
to exercise options and to satisfy tax withholding
obligations by surrendering shares equal in fair market
value to the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains
that could be achieved for the respective options if
exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10%,
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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
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options to purchase shares of Thermo Electron companies held at
the end of fiscal 1996 by the named executive officers. No stock
appreciation rights were exercised or were outstanding during
fiscal 1996.
AGGREGATETABLE
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(1) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two stock split effected in May
1996. All of the options reported outstanding at the end of
the fiscal year were immediately exercisable as of fiscal
year-end, except the options to purchase shares of
ThermoLyte Corporation (designated in the table as TLT),
which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that
company's common stock under Section 12 of the Exchange Act
and (ii) nine years from 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 the granting 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 whose shares are not
publicly traded, the repurchase rights lapse in their
entirety on the ninth anniversary of the grant date.
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(2) No public market existed for the shares as of December 28,
1996. Accordingly, no value in excess of the exercise price
has been attributed to these options.
(3) Prior to his appointment as a Vice President of the
Corporation in January 1996, Mr. Wittenberg was an
associate general counsel of Thermo Electron. Mr.
Wittenburg holds unexercised options to purchase common
stock of Thermo Electron and its subsidiaries other than the
Corporation, which were granted to him as compensation for
his service as an associate general counsel. Those options
are not reported in the table as they were granted as
compensation for service in a capacity other than in his
capacity as an officer of the Corporation.
Employment Agreement
In connection with the acquisition by the Corporation of CBI
Laboratories, Inc. ("CBI") in 1993, Dr. Cain entered into a
four-year employment agreement with CBI. Pursuant to the terms
of this agreement, Dr. Cain will be paid a base salary of
$150,000 per year and an annual bonus which in no event will
exceed $100,000. In the event Dr. Cain ceases to be an employee
of CBI, CBI is only obligated to continue paying salary to Dr.
Cain under the terms of his employment agreement if CBI
terminated Dr. Cain's employment without cause.
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, including the Corporation which was created by
ThermoTrex. 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 referred to hereinafter 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)
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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
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Thermo Electron so long as the withdrawing company is controlled
by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo
Electron have entered into a Corporate Services Agreement (the
"Services Agreement") under which Thermo Electron's corporate
staff provides certain administrative services, including certain
legal advice and services, risk management, 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 for calendar 1995 and
for the 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 $293,000 in fees under the
Services Agreement. Management believes that these charges are
reasonable and that the terms of the Services Agreement are
representative of the expenses 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.
In addition to the foregoing, ThermoTrex provides certain
services to the Corporation, including personnel administration,
accounting, data processing, and general administrative
management. The Corporation was charged $327,000 for these
services in fiscal 1996.
From time to time, the Corporation may transact business
with other companies in the Thermo Group. In fiscal 1996, such
transactions included the following.
During fiscal 1996, the Corporation engaged the LORAD
division of Trex Medical Corporation, a majority-owned subsidiary
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of ThermoTrex, to manufacture 143 laser systems at various prices
for an aggregate cost of $8,549,000. As of September 28, 1996,
the Corporation had committed to purchase 132 additional laser
systems at an aggregate cost of $6,402,000.
The Corporation subleases office and research facilities
from ThermoTrex and is charged for the actual square footage
occupied at approximately the same cost-per-square-foot paid by
ThermoTrex under it prime lease. During fiscal 1996, the
Corporation paid an aggregate of $125,000 under this arrangement.
Currently, the cost of the area occupied by the Corporation is
$342,000 per year.
In August 1996, the Corporation loaned $125,000 to Mark H.
Wurth, a Vice President and executive officer of the Corporation,
in connection with Mr. Wurth's relocation to San Diego,
California. The loan is non-interest bearing and is payable one
year from the date of issue.
As of September 28, 1996, $6,001,000 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 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.
Stock Holding Assistance Plan
In 1996, the Corporation adopted a stock holding policy
which requires its executive officers to acquire and hold a
minimum number of shares of Common Stock. In order to assist the
executive officers in complying with the policy, the Corporation
also adopted a Stock Holding Assistance Plan under which it may
make interest-free loans to certain key employees, including its
executive officers, to enable such employees to purchase the
Common Stock in the open market. No such loans are currently
outstanding under the plan.
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