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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
----- Securities Exchange Act of 1934
Transition Report Pursuant to Section 13 or 15(d)
----- of the Securities Exchange Act of 1934
Commission file number 1-13104
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:
(781) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.01 par value American Stock Exchange
Units (each unit consisting of one
share of common stock and one
redemption right) 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 October 31, 1997, was approximately $175,977,000.
As of October 31, 1997, the Registrant had 38,488,798 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended September 27, 1997, are incorporated by reference into Parts I and II.
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<S> <C>
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.
</TABLE>
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.
<PAGE>
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
------------------------------------
Sandra L. Lambert
Secretary
ATTACHMENT A
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the directors of the Corporation,
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"), a provider of medical products,
personal-care products and services, and advanced technology research, and
ThermoTrex's parent corporation, Thermo Electron Corporation ("Thermo
Electron"), a provider of diversified products and services for the biomedical,
instrument and environmental markets, is reported under the caption "Stock
Ownership."
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<CAPTION>
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<S> <C>
Carliss Y. Baldwin Dr. Baldwin, 47, 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. Gyftopoulos Dr. Gyftopoulos, 70, has been a director 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 20 years until his retirement in 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, 38, 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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</TABLE>
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<TABLE>
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<S> <C>
Paul F. Kelleher Mr. Kelleher, 55, has been chief accounting officer of the Corporation since its
inception in December 1992 and a director since March 1994. Mr. Kelleher has been
senior vice president, finance and administration, of Thermo Electron since June 1997
and served as its vice president, finance, from 1987 to 1997 and as its controller
from 1982 to January 1996.
------------------------------------------------------------------------------------------------------------------
Gary S. Weinstein Mr. Weinstein, 40, has been a director and the chairman of the board 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 from March 1995 until leaving the firm as managing
director and 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 ThermoTrex
Corporation and Trex Medical Corporation.
------------------------------------------------------------------------------------------------------------------
Dr. Nicholas T. Zervas Dr. Zervas, 68, has been a director of the Corporation since its inception in
December 1992, and 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 ThermoTrex Corporation.
------------------------------------------------------------------------------------------------------------------
</TABLE>
Committees of the Board of Directors and Meetings
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are Dr. 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 option and other stock-based compensation plans. The
Corporation does not have a nominating committee of the board of directors. The
board of directors met eight times, the audit committee met twice, and the human
resources committee met five times during fiscal 1997. Each director attended at
least 75% of all meetings of the board of directors and committees on which he
or she served held during fiscal 1997.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of Thermo Electron
or 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. Kelleher 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 acquisition, without the prior approval of
the board of directors, directly or indirectly, by any person of 50% or more of
the outstanding Common Stock or the outstanding common stock of ThermoTrex or
25% or more of the outstanding common stock of Thermo Electron; or (b) the
failure of the persons serving on the
2
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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 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 100,000 shares of Common Stock have been reserved
for issuance under the Deferred Compensation Plan. As of November 28, 1997,
deferred units equal to 1,019.55 shares of Common Stock were accumulated under
the Deferred Compensation Plan.
Directors Stock Option Plan
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of the Common Stock
to outside directors as additional compensation for their service as directors.
The Directors Plan provides for the grant of stock options upon a director's
initial appointment and, 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 the Annual Meeting of the Stockholders to each outside director then
holding office, commencing with the Annual Meeting of the 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 granted under the Directors Plan is the
average of the closing prices of the Common Stock as reported on the American
Stock Exchange (or other principal market on which the Common Stock is then
traded) for the five trading days immediately preceding and including the date
of grant or, if the shares are not then traded, at the last price paid per share
by third parties in an arms-length transaction prior to the option grant. As of
November 28, 1997, options to purchase 123,400 shares of Common Stock had been
granted and were outstanding under the Directors Plan, no options had lapsed,
no options had been exercised, and options to purchase 276,600 shares of Common
Stock were reserved and available for grant.
Stock Ownership Policies for Directors
During fiscal 1996, the human resources committee of the board of
directors (the "Committee") established a stock holding policy for directors.
The stock holding policy requires each director to hold a minimum of 1,000
shares of Common Stock. Directors are requested to achieve this ownership level
by the 1998 Annual Meeting of the Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a separate stock holding
policy established by the Committee in fiscal 1996, which is described in the
Committee Report on Executive Compensation -- Stock Ownership Policies.
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In addition, the Committee adopted a policy requiring directors to hold
a certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation -- Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common
Stock, as well as the common stock of ThermoTrex and Thermo Electron, as of
November 28, 1997, with respect to (i) each person who was known by the
Corporation to own beneficially more than 5% of the outstanding shares of common
stock, (ii) each director 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 beneficially owned by Thermo Electron.
<TABLE>
<CAPTION>
ThermoLase ThermoTrex Thermo Electron
Name (1) Corporation (2) Corporation (3) Corporation (4)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 26,742,204 N/A N/A
Carliss Y. Baldwin 61,400 0 1,000
Elias P. Gyftopoulos 61,400 4,500 72,070
John C. Hansen 504,831 100,353 23,612
Paul F. Kelleher 83,300 10,400 135,596
John Mlynski 91,000 20,000 0
Raymond D. Sphire 95,000 86 1,050
Gary S. Weinstein 198,044 110,000 201,211
Charles K. Wittenberg 80,500 0 24,884
Mark H. Wurth 150,000 22,620 7,780
Nicholas T. Zervas 87,243 29,541 0
All directors and current executive
officers as a group (11 persons) 1,455,047 321,344 1,138,209
</TABLE>
(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 or by that person for the benefit of minor children, and all share
ownership includes sole voting and investment power.
(2) Shares of the Common Stock beneficially owned by each director and
executive officer and by all directors and executive officers as a group
exclude 26,742,204 shares beneficially owned by Thermo Electron. Shares
of Common Stock beneficially owned by Dr. Baldwin, Dr. Gyftopoulos, Mr.
Hansen, Mr. Kelleher, Mr. Mlynski, Mr. Sphire, Mr. Weinstein, Mr.
Wittenberg, Mr. Wurth, Dr. Zervas and all directors and executive
officers as a group include 61,400, 61,400, 480,000, 77,000, 80,000,
95,000, 130,000, 80,500, 150,000, 67,068 and 1,321,768 shares,
respectively, that such person or group has the right to acquire within
60 days of November 28, 1997, through the exercise of stock options.
Shares beneficially owned by Dr. Zervas and all directors and executive
officers as a group include 1,019 full shares allocated through November
28, 1997 to Dr. Zervas's account maintained pursuant to the Corporation's
Deferred Compensation Plan for Directors. As of November 28, 1997, no
director or executive officer beneficially owned more than 1% of the
Common Stock, other than Mr. Hansen, who beneficially owned 1.3%; all
4
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directors and executive officers as a group beneficially owned 3.7% of
the Common Stock outstanding as of such date.
(3) Shares of ThermoTrex common stock beneficially owned by Dr. Gyftopoulos,
Mr. Hansen, Mr. Kelleher, Mr. Mlynski, Mr. Weinstein, Mr. Wurth, Dr.
Zervas and all directors and executive officers as a group include 4,500,
100,000, 10,400, 20,000, 100,000, 22,500, 27,200 and 305,600 shares,
respectively, that such person or group has the right to acquire within
60 days of November 28, 1997, through the exercise of stock options.
Shares beneficially owned by Dr. Zervas and all directors and executive
officers as a group include 2,341 full shares allocated through November
28, 1997, to Dr. Zervas's account maintained pursuant to ThermoTrex's
Deferred Compensation Plan for Directors. As of November 28, 1997, no
director or executive officer beneficially owned more than 1% of the
ThermoTrex common stock outstanding as of such date; all directors and
executive officers as a group beneficially owned 1.7% of the ThermoTrex
common stock outstanding as of November 28, 1997.
(4) Shares of Thermo Electron common stock beneficially owned by Dr.
Gyftopoulos, Mr. Hansen, Mr. Kelleher, Mr. Weinstein, Mr. Wittenberg, Mr.
Wurth and all directors and executive officers as a group include 10,375,
22,500, 95,137, 200,175, 24,750, 7,500 and 925,872 shares, respectively,
that such person or group has the right to acquire within 60 days of
November 28, 1997, through the exercise of stock options. Shares
beneficially owned by Mr. Kelleher, Mr. Wittenberg and all directors and
executive officers as a group include 1,426, 134 and 3,596 full shares,
respectively, allocated through November 28, 1997, 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 November 28, 1997, executive officers of Thermo
Electron. 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 less than
1% of the common stock of Thermo Electron outstanding as of such date.
(5) Thermo Electron beneficially owned 69.5% of the Common Stock outstanding
as of November 28, 1997, of which 67.4% is owned through ThermoTrex,
which is a majority-owned subsidiary of Thermo Electron. Thermo
Electron's address is 81 Wyman Street, Waltham, Massachusetts 02254-9046.
As of November 28, 1997, Thermo Electron had the power to elect all of
the members of the Corporation's board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of 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 1997, except in the following
instances. The Form 3 for Mr. Kurt A. Dasse, a vice president of the Corporation
was filed 11 days late. ThermoTrex, the Corporation's parent company, had two
late Forms 4, reporting a total of two transactions associated with the grant
and lapse of options to purchase Common Stock granted to employees under its
stock option program. Thermo Electron, the parent company of ThermoTrex, had
four late Forms 4, reporting a total of 19 transaction, including 14 open market
purchases of shares of Common Stock and five transactions associated with the
grant and lapse of options to purchase Common Stock granted to employees under
its stock option program.
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 its four other most highly compensated executive
officers (the "named executive officers") for the last two full fiscal years
from September 29, 1996 to September 27, 1997 ("fiscal 1997") and from October
1, 1995 to September 28, 1996 ("fiscal 1996"), and for the nine-month
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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. None of the named executive officers were
employed with the Corporation prior to fiscal 1995.
The Corporation is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Corporation,
in accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's affairs is
provided to the Corporation under the Corporate Services Agreement between the
Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.
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Summary Compensation Table
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Long Term
Compensation
------------
Name and Fiscal Annual Compensation (1) Securities Underlying
----------------------- Options (No. of Shares All Other
Principal Position Year Salary Bonus(2) and Company) (3) Compensation (4)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Hansen (5) 1997 $225,000 $100,000 (2) -- -- $9,926
Chief Executive Officer 1996 $225,000 $115,000 22,500 (TMO) $2,674
and President 2,000 (TBA)
2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
1995 $168,750 (1) $48,000 (5) 600,000 (TLZ) --
100,000 (TKN)
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Mark H. Wurth (6) 1997 $169,000 $55,000 (2) -- -- $15,935 (7)
Vice President, Operations 1996 $160,000 $60,000 7,500 (TMO) $ 2,519 (7)
1995 $53,333 (1) $30,000 (6) 150,000 (TLZ) --
25,000 (TKN)
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John Mlynski (8) 1997 $96,250 (9) $59,000 (2) 80,000 (TLZ) $1,006 (11)
Vice President, International 20,000 (TKN)
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Charles K. Wittenberg (9) 1997 $105,000 $43,000 (2) 12,500 (TLZ) $6,599
Vice President 1996 $67,500 $45,000 68,000 (TLZ) $5,321
- ---------------------------------------------------------------------------------------------------------------------
Raymond D. Sphire (10) 1997 $111,250 $36,000 (2) 45,000 (TLZ) $6,845
Vice President 1996 $100,000 $36,000 30,000 (TLZ)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annual compensation for the named 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 represents the bonus paid for performance during the
calendar year in which the Corporation's fiscal year-end occurred. As
bonuses have not yet been determined for calendar 1997, the bonus amounts
shown for fiscal 1997 are estimates.
(3) In addition to receiving options to purchase Common Stock (designated in
the table as TLZ), the named 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 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
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(designated in the table as TMO), Thermo BioAnalysis Corporation
(designated in the table as TBA), Thermo Fibergen Inc. (designated in the
table as TFG), ThermoLase Corporation (designated in the table as TLZ),
ThermoLyte Corporation (designated in the table as TLT), Thermo Optek
Corporation (designated in the table as TOC), ThermoQuest Corporation
(designated in the table as TMQ), Thermo Sentron Inc. (designated in the
table as TSR), ThermoTrex Corporation (designated in the table as TKN)
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. The bonus reported for Mr. Hansen for fiscal
1995 represents the bonus paid for the eight-month period from the
commencement of his employment through December 1995.
(6) Mr. Wurth was appointed vice president, operations of the Corporation in
June 1995. The bonus reported for Mr. Wurth for fiscal 1995 represents
the bonus paid for the seven-month period from the commencement of his
employment through December 1995.
(7) In addition to $1,661 and $9,063, which represent the amount of matching
contributions made on behalf of the named executive officer participating
in the Thermo Electron 401(k) Plan in fiscal 1996 and 1997, respectively,
this amount includes $858 for fiscal 1996 and $6,872 for fiscal 1997,
which represents the amount of compensation in the period attributable to
an interest-free loan provided to Mr. Wurth in connection with his
relocation to San Diego, California. See "Relationship with Affiliates."
(8) Mr. Mlynski was appointed vice president, international of the
Corporation on March 5, 1997.
(9) Mr. Wittenberg was appointed a vice president of the Corporation on
January 9, 1996.
(10) Mr. Sphire was appointed a vice president of the Corporation on June 11,
1996.
(11) This represents the amount of compensation attributable to an interest-
free loan provided to Mr. Mlynski pursuant to the Corporation's Stock
Holding Assistance Plan. See "Relationship with Affiliates -- Stock
Holding Assistance Plan."
Stock Options Granted During Fiscal 1997
The following table sets forth information concerning individual grants
of stock options by the Corporation and other Thermo Electron companies made
during fiscal 1997 to the 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 1997.
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<TABLE>
<CAPTION>
Option Grants in Fiscal 1997
- ------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation for
Number of Securities Granted to Exercise Option Term(2)
Underlying Opinions Employees in Price Per Expiration --------------
Name Granted (1) Fiscal Year Share Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Hansen -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Mark H. Wurth -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
John Mlynski 80,000 (TLZ) 27.3% $13.65 03/05/04 $444,800 $1,036,000
20,000 (TKN) 18.5 (3) $27.03 03/11/09 $430,200 $1,156,000
- ------------------------------------------------------------------------------------------------------------------------
Charles K. Wittenberg 12,500 (TLZ) 4.3% $13.65 03/05/09 $135,750 $364,875
- ------------------------------------------------------------------------------------------------------------------------
Raymond D. Sphire 25,000 (TLZ) 8.5% $13.65 03/05/09 $271,500 $729,750
20,000 (TLZ) 6.8% $17.10 09/19/09 $272,200 $731,400
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options have been granted during fiscal 1997 to the named executive
officers to purchase the common stock of the Corporation (designated in the
table as TLZ) and ThermoTrex Corporation (designated in the table as TKN).
All of the options granted during the fiscal year are immediately
exercisable at the date of grant. 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 in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10%, compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
granting corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and, accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
Stock Options Exercised During Fiscal 1997
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options to purchase shares of
Thermo Electron companies held at the end of fiscal 1997 by the Corporation's
chief executive officer and the other named executive officers. No stock
appreciation rights were exercised or were outstanding during fiscal 1997.
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<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In Fiscal 1997 And Fiscal 1997 Year-End Option Values
- -------------------------------------------------------------------------------------------------------------------------
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value Exercisable/ In-the-Money
Name Company Exercise Realized (1) Unexercisable)(2) Options
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John C. Hansen ThermoLase -- -- 480,000 /-- $2,704,800 /--
Thermo Electron -- -- 22,500 /-- $148,230 /--
Thermo BioAnalysis -- -- 2,000 /-- $13,750 /--
Thermo Fibergen -- -- 2,000 /-- $0 /--
ThermoLyte -- -- 0 /2,000 -- /$0 (3)
Thermo Optek -- -- 6,000 /-- $40,128 /--
ThermoQuest -- -- 6,000 /-- $36,750 /--
Thermo Sentron -- -- 2,000 /-- $250 /--
ThermoTrex -- -- 100,000 /-- $518,800 /--
Trex Medical -- -- 4,000 /-- $16,000 /--
- -------------------------------------------------------------------------------------------------------------------------
Mark H. Wurth ThermoLase -- -- 150,000 /-- $386,250 /--
Thermo Electron -- -- 7,500 /-- $49,410 /--
ThermoTrex -- -- 22,500 /-- $73,980 /--
- -------------------------------------------------------------------------------------------------------------------------
John Mlynski ThermoLase -- -- 80,000 /-- $298,001 /--
ThermoTrex -- -- 20,000 /-- $0 /--
- -------------------------------------------------------------------------------------------------------------------------
Charles K. Wittenberg (4) ThermoLase -- -- 80,500 /-- $46,563 /--
- -------------------------------------------------------------------------------------------------------------------------
Raymond D. Sphire ThermoLase -- -- 95,000 /-- $98,625 /--
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held by the executive officer exercising the option. The amounts shown
represent the difference between the option exercise price and the market
price on the date of exercise, which is the amount that would have been
realized if the shares had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of fiscal year-end, except the options to
purchase shares of ThermoLyte Corporation, which are not exercisable until
the earlier of (i) 90 days after the effective date of the registration of
that company's common stock under Section 12 of the Securities Exchange Act
of 1934 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.
(3) No public market existed for the shares as of November 28, 1997.
Accordingly, no value in excess of the exercise price has been attributed
to these options.
(4) 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
9
<PAGE>
table as they were granted as compensation for service in a capacity other
than in his capacity as an officer of the Corporation.
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, including the Corporation, 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. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
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<PAGE>
Corporate Services Agreement
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management and certain financial and other services to the
Corporation. The Corporation was assessed an annual fee equal to 1% of the
Corporation's total revenues for these services in calendar 1996 and 1997. The
annual fee will be reduced to 0.8% of the Corporation's total revenues in
calendar 1998. The fee is reviewed annually and may be changed by mutual
agreement of the Corporation and Thermo Electron. During fiscal 1997, Thermo
Electron assessed the Corporation $452,000 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.
Miscellaneous
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 the repayment due date has been extended an additional year and one-half
from the original due date of August 1997 to January 1999.
From time to time, the Corporation may transact business with other
companies in the Thermo Group. In fiscal 1997, such transactions included the
following.
ThermoTrex provides certain services to the Corporation, including
personnel administration, accounting, data processing, and general
administrative management. The Corporation was charged $144,000 for these
services in fiscal 1997.
During fiscal 1997, the Corporation engaged the LORAD division of Trex
Medical Corporation, a majority-owned subsidiary of ThermoTrex, to manufacture
laser systems at various prices for an aggregate cost of $11,390,000. As of
September 27, 1997, the Corporation had committed to purchase additional laser
systems at an aggregate cost of $6,000,000.
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 its prime lease. During fiscal
1997, the Corporation paid an aggregate of $296,000 under this arrangement.
Currently, the cost of the area occupied by the Corporation is $302,000 per
year.
As of September 27, 1997, $49,291,000 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.
11
<PAGE>
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 1997, Mr. Mlynski received a loan in the principal amount of
$148,549.80 under this plan to purchase 11,000 shares. The loan to Mr. Mlynski
is to be repaid upon the earlier of demand or the fifth anniversary of the date
of the loan, unless otherwise authorized by the human resources committee of the
Corporation's board of directors.
12
