<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
THERMOLASE CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
________________________________________________________________________
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________________________________________________________________________
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________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
[Thermolase Corporation Logo]
2055-C Luna Road, Carrollton, TX 75006
February 5, 1999
Dear Stockholder:
The enclosed Notice calls the 1999 Annual Meeting of the Stockholders of
ThermoLase Corporation. I respectfully request all Stockholders to attend this
meeting, if possible.
Our Annual Report for the fiscal year ended October 3, 1998, is enclosed. I
hope you will read it carefully. Feel free to forward any questions you may
have if you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer and Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
/s/ Gerald Feldman
-----------------------------
GERALD FELDMAN
President and Chief Executive
Officer
<PAGE>
[Thermolase Corporation Logo]
2055-C Luna Road, Carrollton, TX 75006
February 5, 1999
To the Holders of the Common Stock of
THERMOLASE CORPORATION
NOTICE OF ANNUAL MEETING
The 1999 Annual Meeting of the Stockholders of ThermoLase Corporation (the
"Corporation") will be held on Thursday, March 11, 1999 at 10:00 a.m. at the
Westin Hotel, 70 Third Avenue, Waltham, Massachusetts 02454. The purpose of
the meeting is to consider and take action upon the following matters:
1. Election of eight directors.
2. Such other business as may properly be brought before the meeting and any
adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive
notice of and to vote at the meeting is January 20, 1999.
The by-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to you
by order of the board of directors.
Sandra L. Lambert
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of ThermoLase
Corporation (the "Corporation") for use at the 1999 Annual Meeting of the
Stockholders (the "Meeting") to be held on Thursday, March 11, 1999 at 10:00
a.m. at the Westin Hotel, 70 Third Avenue, Waltham, Massachusetts 02154, and
any adjournment thereof. The mailing address of the executive offices of the
Corporation is 2055-C Luna Road, Carrollton, TX 75006. This proxy statement
and the enclosed proxy were first furnished to Stockholders of the Corporation
on or about February 9, 1999.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
eight directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of common stock of the Corporation, $.01 par value ("Common Stock"),
entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you
plan to attend the Meeting in person, please sign and promptly return the
enclosed proxy card, which requires no postage if mailed in the United States.
All signed and returned proxies will be counted towards establishing a quorum
for the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on
the proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors,
and as the individuals named as proxy holders on the proxy deem advisable on
all other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election. Withholding
authority to vote for a nominee for director will be treated as shares present
and entitled to vote and, for purposes of determining the outcome of the vote,
will have the same effect as a vote against the nominee. Broker "non-votes"
will not be treated as shares present and entitled to vote on a voting matter
and will have no effect on the outcome of the vote. A broker "non-vote" occurs
when a nominee holding shares for a beneficial holder does not have
discretionary voting power and does not receive voting instructions from the
beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the
secretary of the Corporation received prior to the Meeting, by executing and
returning a later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of January 20, 1999, consisted of
39,333,296 shares of Common Stock. Only Stockholders of record at the close of
business on January 20, 1999, are entitled to vote at the Meeting. Each share
is entitled to one vote.
1
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PROPOSAL 1
ELECTION OF DIRECTORS
Eight directors are to be elected at the Meeting, each to hold office until
his or her successor is chosen and qualified or until his or her earlier
resignation, death or removal.
Nominees For Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors
and the names of other public companies in which such persons hold
directorships. Information regarding their beneficial ownership of the
Corporation's Common Stock and of the common stock of its parent company,
ThermoTrex Corporation ("ThermoTrex"), a provider of medical products,
personal-care products and services, and advanced technology research, and
ThermoTrex's parent company, Thermo Electron Corporation ("Thermo Electron"),
a provider of diversified products and services for the biomedical, instrument
and environmental markets, is reported under the caption "Stock Ownership."
All of the nominees are currently directors of the Corporation.
<TABLE>
<S> <C>
Carliss Y. Baldwin...... Dr. Baldwin, 48, 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.
Gerald Feldman.......... Mr. Feldman, 48, has been a director of the Corporation since
September 1998. He has also served as the president and chief
executive officer of the Corporation since August 1998. Mr.
Feldman has been the president of International Technidyne
Corporation, a wholly owned subsidiary of Thermo CardioSystems
Inc., an indirect majority-owned subsidiary of Thermo Electron,
since October 1987 and a director since September 1991.
International Technidyne Corporation develops, manufactures and
markets hemostasis management products.
Elias P. Gyftopoulos.... Dr. Gyftopoulos, 71, 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
Corporation, ThermoRetec Corporation, ThermoSpectra Corporation,
Thermo Vision Corporation, Thermo Voltek Corp., and Trex Medical
Corporation.
John T. Keiser.......... Mr. Keiser, 63, has been a director of the Corporation since
September 1998. He has been the chief operating officer,
biomedical and advanced technology, of Thermo Electron since
September 1998, and a vice president from April 1997 until his
promotion. Mr. Keiser has been the president and chief executive
officer of Thermedics Inc., a majority-owned subsidiary of
Thermo Electron, since March 1998 and December 1998,
respectively, and was a senior vice president of Thermedics Inc.
from 1994 until his promotion to president. He has also been the
president of Thermo Electron's wholly owned biomedical group, a
manufacturer of medical equipment and instruments, since 1994.
Mr. Keiser was president of the Eberline Instrument, division of
Thermo Instrument Systems Inc., a majority-owned subsidiary of
Thermo Electron, from 1985 to July 1994. The Eberline Instrument
division manufactures radiation detection and counting
instrumentation and radiation monitoring systems. Mr. Keiser is
a director of Metrika Systems Corporation, Thermedics Inc.,
Thermedics Detection Inc., Thermo Cardiosystems Inc., Thermo
Sentron Inc., ThermoTrex Corporation and Trex Medical
Corporation.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Paul F. Kelleher........ Mr. Kelleher, 56, 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.
Melissa F. Riordan...... Ms. Riordan, 42, has been a director of the Corporation since
September 1998. She served as the treasurer of Thermo Electron
Corporation from 1997 until 1998. From 1988 to 1997, Ms. Riordan
was a stockbroker at NatWest Securities Corp. Ms. Riordan is
also a director of Thermo Vision Corporation.
Gary S. Weinstein....... Mr. Weinstein, 41, 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 and
Trex Medical Corporation.
Dr. Nicholas T. Zervas.. Dr. Zervas, 69, 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.
</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 nine times during
fiscal 1998. Each director attended at least 75% of all meetings of the board
of directors and committees on which he or she served held during fiscal 1998.
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. Feldman, Mr. Keiser, Mr. Kelleher and Mr. Weinstein are
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 or her
cash fees until he or she ceases to serve as a director, dies or retires from
3
<PAGE>
his or her principal occupation. In the event of a change in control or
proposed change in control of the Corporation that is not approved by the
board of directors, deferred amounts become payable immediately. Either of the
following is deemed to be a change of control: (a) the acquisition, without
the prior approval of the board of directors, directly or indirectly, by any
person of 50% or more of the outstanding Common Stock or 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 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, 1998, deferred units equal to 1803.14 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 will not receive an option grant upon their appointment or election
to the board of directors, but will 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 with this meeting. The annual grant is made at the close of
business on the date of the Annual Meeting of the Stockholders to each outside
director then holding office. Options evidencing annual grants may be
exercised at any time from and after the six-month anniversary of the grant
date of the option and prior to the expiration of the option on the third
anniversary of the grant date. Shares acquired upon exercise of the options
will 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, 1998, options to purchase 123,400 shares of Common
Stock had been granted and were outstanding under the Directors Plan, no
options had lapsed or been exercised, and options to purchase 276,600 shares
of Common Stock were reserved and available for grant.
4
<PAGE>
Stock Ownership Policies for Directors
During fiscal 1996, the human resources committee of the board of directors
(the "Committee") established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level within
three years of their appointment. Directors who are also executive officers of
the Corporation are required to comply with a separate stock holding policy
established by the Committee in fiscal 1996, which is described in the
Committee Report on Executive Compensation--Stock Ownership Policies.
In addition, the Committee adopted a policy requiring directors to hold a
certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options. Under this policy, directors are required to hold
shares of Common Stock equal to one-half of their net option exercises over a
period of five years. The net option exercise is determined by calculating the
number of shares acquired upon exercise of a stock option, after deducting the
number of shares that could have been traded to exercise the option and the
number of shares that could have been surrendered to satisfy tax withholding
obligations attributable to the exercise of the option. This policy is also
applicable to executive officers and is described in the Committee Report on
Executive Compensation--Stock Ownership Policies.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of ThermoTrex and Thermo Electron, as of November 28,
1998, with respect to (i) each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of common stock, (ii) each
director and nominee for director, (iii) each executive officer named in the
summary compensation table under the heading "Executive Compensation" and (iv)
all directors and current executive officers as a group.
While certain directors and 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) Corporatio (3) Corporation (4)
-------- --------------- -------------- ---------------
<S> <C> <C> <C>
Thermo Electron Corporation
(5)............................ 31,342,547 -- --
Carliss Y. Baldwin.............. 61,400 0 1,000
Silvia Carnini-Pulino........... 25,000 0 15,000
Gerald Feldman.................. 225,000 45,000 150,811
Gina M. Goodrich................ 43,400 0 0
Elias P. Gyftopoulos............ 62,400 6,000 71,704
John C. Hansen (6).............. 0 0 699
John T. Keiser.................. 0 0 292,508
Paul F. Kelleher................ 83,300 8,916 129,655
Melissa F. Riordan.............. 10,200 0 30,000
Gary S. Weinstein............... 198,044 110,000 210,612
Mark H. Wurth (7)............... 0 120 280
Nicholas T. Zervas.............. 88,027 31,207 0
All directors and current
executive officers as a group
(15 persons)................... 873,388 206,243 1,206,739
</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 current executive officers as
a group exclude 31,342,547 shares beneficially owned by Thermo Electron.
5
<PAGE>
Shares of Common Stock beneficially owned by Dr. Baldwin, Ms. Carnini-
Pulino, Mr. Feldman, Ms. Goodrich, Dr. Gyftopoulos, Mr. Kelleher, Ms.
Riordan, Mr. Weinstein, Dr. Zervas and all directors and current executive
officers as a group include 61,400, 25,000, 225,000, 42,400, 61,400,
77,000, 10,000, 130,000, 67,068 and 775,668 shares, respectively, that such
person or group has the right to acquire within 60 days of November 28,
1998, through the exercise of stock options. Shares beneficially owned by
Dr. Zervas and all directors and current executive officers as a group
include 1,803 full shares allocated through November 28, 1998 to Dr.
Zervas' account maintained pursuant to the Corporation's Deferred
Compensation Plan for Directors. Shares beneficially owned by Ms. Goodrich
include 1,000 shares held by her deceased spouse's estate of which Ms.
Goodrich is the administrator. As of November 28, 1998, no director or
current executive officer beneficially owned more than 1% of the Common
Stock, all directors and current executive officers as a group beneficially
owned 2.21% of the Common Stock outstanding as of such date.
(3) Shares of ThermoTrex common stock beneficially owned by Mr. Feldman, Dr.
Gyftopoulos, Mr. Kelleher, Mr. Weinstein, Dr. Zervas and all directors
and current executive officers as a group include 45,000, 6,000, 5,000,
100,000, 28,200 and 189,200 shares, respectively, that such person or
group has the right to acquire within 60 days of November 28, 1998,
through the exercise of stock options. Shares beneficially owned by Dr.
Zervas and all directors and current executive officers as a group
include 3,007 full shares allocated through November 28, 1998, to Dr.
Zervas's account maintained pursuant to ThermoTrex's Deferred
Compensation Plan for Directors. As of November 28, 1998, no director or
current executive officer beneficially owned more than 1% of the
ThermoTrex common stock outstanding as of such date; all directors and
current executive officers as a group beneficially owned 1.10% of the
ThermoTrex common stock outstanding as of November 28, 1998.
(4) Shares of Thermo Electron common stock beneficially owned by Ms. Carnini-
Pulino, Mr. Feldman, Dr. Gyftopoulos, Mr. Keiser, Mr. Kelleher, Ms.
Riordan, Mr. Weinstein, and all directors and current executive officers
as a group include 15,000, 123,570, 9,125, 251,622, 97,937, 25,000,
210,275 and 1,007,364 shares, respectively, that such person or group has
the right to acquire within 60 days of November 28, 1998, through the
exercise of stock options. Shares beneficially owned by Mr. Kelleher and
all directors and current executive officers as a group include 1,426 and
2,497 full shares, respectively, allocated through November 28, 1998, 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, 1998, executive officers
of Thermo Electron. No director or current executive officer beneficially
owned more than 1% of Thermo Electron's common stock outstanding as of
such date; all directors and current 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 79.19% of the Common Stock outstanding
as of November 28, 1998, of which 71.11 % is owned through ThermoTrex,
which is a majority-owned subsidiary of Thermo Electron. Thermo
Electron's address is 81 Wyman Street, Waltham, Massachusetts 02454-9046.
As of November 28, 1998, Thermo Electron, through ThermoTrex, had the
power to elect all of the members of the Corporation's board of
directors.
(6) Mr. Hansen resigned as the chief executive officer and president of the
Corporation on February 1, 1998.
(7) Mr. Wurth resigned as vice president of the Corporation on June 1, 1998.
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 1998, except in the following
instances. The Form 3 for Ms. Riordan was filed late. Dr. Zervas filed one
transaction late, consisting of the exempt acquisition of stock units to his
account pursuant to the Corporation's deferred compensation plan for
Directors. Thermo Electron filed seven Forms 4 late, reporting a total of 105
transactions, including 100 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.
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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 two of whom disclosure would have been required but for the fact that
such individuals were not serving as executive officers at October 3, 1998
(the "named executive officers") for the last three fiscal years. The
Corporation has a fiscal year that is the 52- or 53-week period ending on the
Saturday nearest September 30.
The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron.
The time and effort devoted by these individuals to the Corporation's affairs
is provided to the Corporation under the Corporate Services Agreement between
the Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
(1) Securities Underlying
Name and Principal Fiscal ------------------- (Options No. of Shares All Other
Position Year Salary Bonus and Company) (3) Compensation (4)
------------------ ------ --------- --------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gerry Feldman (5)....... 1998 $ 35,000 n/a(2) 225,000 (TLZ) $ 5,625
Chief Executive Officer 55,000 (TMO)
and President 45,000 (TKN)
Gina M. Goodrich (6).... 1998 $ 97,958 n/a(2) 27,400 (TLZ) $ 4,874
Vice President,
Licensees
Silvia Carnini-Pulino
(7).................... 1998 $ 70,000 n/a(2) 25,000 (TLZ) $ 0
Vice President,
International
John C. Hansen (8)...... 1998 $ 75,000 $ 0 $213,626(10)
Former Chief Executive 1997 $ 225,000 $ 100,000 -- -- $ 9,926
Officer and President 1996 $ 225,000 $ 115,000 22,500 (TMO) $ 2,674
2,000 (TBA)
2,000 (TFG)
2,000 (TLT)
6,000 (TOC)
6,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
Mark H. Wurth (9)....... 1998 $ 118,766 $ 40,000 29,000 (TLZ) $403,014(11)
Former Vice President, 1997 $ 169,000 $ 55,000 -- -- $ 15,935(12)
Operations 1996 $ 160,000 $ 60,000 7,500 (TMO) $ 2,519(12)
</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.
(2) Bonuses are generally determined and paid following the end of the
calendar year based on performance during the calendar year in which the
Corporation's fiscal year-end occurred. The bonus amount represents the
bonus paid for performance during the calendar year in which the
Corporation's fiscal year-end occurred. As of the date hereof, bonuses
for calendar 1998 have not yet been determined. The Committee expects to
determine bonuses in March 1999 when audited financial statements of the
Corporation's parent company will be available.
7
<PAGE>
(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: the
Corporation (designated in the table as TLZ), 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), 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. Feldman was appointed president and chief executive officer of the
Corporation on August 3, 1998. The salary reported for fiscal year 1998
represents the amount paid from the commencement of his employment through
October 3, 1998.
(6) Ms. Goodrich was elected vice president, licensees of the Corporation on
August 3, 1998. The salary reported for fiscal year 1998 represents
compensation for the entire fiscal year.
(7) Ms. Carnini-Pulino was elected vice president, international of the
Corporation on August 3, 1998. The salary reported for fiscal year 1998
represents the amount paid from the commencement of her employment with
the Corporation through October 3, 1998.
(8) Mr. Hansen resigned as the chief executive officer and president of the
Corporation on February 1, 1998.
(9) Mr. Wurth resigned as vice president of the Corporation on June 1, 1998.
(10) In addition to $7,200, which represents the amount of matching
contributions made on behalf of the named executive officer
participating in the Thermo Electron 401(k) Plan in fiscal 1998, this
amount includes a $206,426 payment made to Mr. Hansen as part of a
severance agreement. See Executive Compensation--Severance Agreements.
(11) In addition to $7,200, which represents the amount of matching
contributions made on behalf of the named executive officer
participating in the Thermo Electron 401(k) Plan in fiscal 1998, this
amount includes a $269,862 payment and $133,152 loan forgiveness made to
Mr. Wurth as part of a severance agreement. See Executive Compensation--
Severance Agreements.
(12) 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
<PAGE>
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options by the Corporation and other Thermo Electron companies made
during fiscal 1998 to the 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 1998.
Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Number of Total Options Price Appreciation for
Securities Granted to Exercise Option Term (2)
Underlying Options Employees in Price Per Expiration -----------------------
Name Granted (1) Fiscal Year Share Date 5% 10%
---- --------------------------------- --------- ---------- -- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald Feldman.......... 225,000 (TLZ) 29.4% $ 4.99 08/03/05 $ 456,750 $ 1,064,250
55,000 (TMO) 2.8%(3) $22.46 08/11/05 $ 502,700 $ 1,172,050
45,000 (TKN) 12.3%(3) $16.70 08/03/05 $ 306,000 $ 712,800
Gina M. Goodrich........ 15,000 (TLZ) 2.0% $ 6.16 04/02/03 $ 25,500 $ 56,400
7,400 (TLZ) 1.0% $ 5.48 09/16/03 $ 11,174 $ 24,790
5,000 (TLZ) 0.7% $12.43 12/12/04 $ 25,300 $ 58,950
Silvia Carnini-Pulino... 25,000 (TLZ) 3.3% $ 6.16 04/02/03 $ 42,500 $ 94,000
John C. Hansen.......... -- -- -- -- -- -- --
Mark H. Wurth........... 24,000 (TLZ) 3.1% $ 6.16 (4) (4) (4)
5,000 (TLZ) 0.7% $ 9.18 (4) (4) (4)
</TABLE>
- --------
(1) Options have been granted during fiscal 1998 to the named executive
officers to purchase the common stock of the Corporation (designated in
the table as TLZ), ThermoTrex Corporation (designated in the table as
TKN) and Thermo Electron Corporation (designated in the table as TMO).
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 four- to five-year period,
depending on the option term, which may vary from five to seven years,
provided that the optionee continues to be employed by the Corporation or
another Thermo Electron company. 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.
(4) Mr. Wurth resigned as a vice president of the Corporation on June 1,
1998. Therefore, options granted in fiscal 1998 have lapsed and do not
have a potential realizable value.
9
<PAGE>
Stock Options Exercised During Fiscal 1998
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options to purchase shares
of Thermo Electron companies held at the end of fiscal 1998 by the
Corporation's chief executive officer and the other named executive officers.
No stock appreciation rights were exercised or were outstanding during fiscal
1998.
Aggregated Option Exercises In Fiscal 1998 And Fiscal 1998 Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value Exercisable/ In-the-Money
Name Company Exercise Realised (1) Unexercisable) (2) Options
---- ------------------ ----------- ------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gerald Feldman.......... ThermoLase -- -- 225,000 /-- $86,625 /--
Thermo Electron 55,000 /-- $ 0 /--
ThermoTrex -- -- 45,000 /-- $ 0 /--
Gina M. Goodrich........ ThermoLase -- -- 42,000 /-- $ 0 /--
Silvia Carnini-Pulino... ThermoLase -- -- 25,000 /-- $ 0 /--
John C. Hansen.......... Thermo Electron 4,500 $34,709 -- /-- -- /--
Thermo BioAnalysis 200 $ 2,525 -- /-- -- /--
Thermo Optek 600 $ 4,068 -- /-- -- /--
ThermoQuest 600 $ 3,375 -- /-- -- /--
Trex Medical 400 $ 2,550 -- /-- -- /--
Mark H. Wurth........... -- -- -- -- /-- -- /--
</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. 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.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive officers
and key employees of the Corporation that provide severance benefits if there
is a change in control of Thermo Electron and their employment is terminated
for any reason, other than for cause, within 18 months thereafter. For
purposes of these agreements, a change in control exists upon (i) the
acquisition by any person of 40% or more of the outstanding common stock or
voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to be constituted of a majority of directors who are
"continuing directors", which term is defined to include directors who were
members of Thermo Electron's board on the date of the agreement or who
subsequent to the date of the agreement were nominated or elected by a
majority of directors who were "continuing directors" at the time of such
nomination or election; (iii) the consummation of a merger, consolidation,
reorganization,
10
<PAGE>
recapitalization or statutory share exchange involving Thermo Electron or the
sale or other disposition of all or substantially all of the assets of Thermo
Electron unless immediately after such transaction (a) all holders of Thermo
Electron common stock immediately prior to such transaction own more than 60%
of the outstanding voting securities of the resulting or acquiring corporation
in substantially the same proportions as their ownership immediately prior to
such transaction and (b) no person after the transaction owns 40% or more of
the outstanding voting securities of the resulting or acquiring corporation;
or (iv) approval by stockholders of a complete liquidation or dissolution of
Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement with
Gerald Feldman. This agreement provides that in the event the individual's
employment is terminated within 18 months after a change in control, the
individual would be entitled to a lump sum payment equal to the sum of one
times, the individual's highest annual base salary in any 12 month period
during the prior five year period, plus one times the individual's highest
annual bonus in any 12 month period during the prior five year period. In
addition, the individual would be provided benefits for a period of one year,
after such termination substantially equivalent to the benefits package the
individual would have been otherwise entitled to receive if the individual was
not terminated. The individual would also be entitled to all other
compensation due to the individual from the Corporation through the date of
termination. Further, all options that the individual holds in Thermo Electron
and its subsidiaries, including the Corporation, would become fully vested as
of the date of the change in control. Finally, the individual would be
entitled to a cash payment equal to $15,000, to be used toward outplacement
services. This executive retention agreement supercedes and replaces any and
all prior severance arrangements which this individual had with Thermo
Electron.
Assuming that the severance benefits would have been payable as of January
1, 1999, the lump sum salary and bonus payment under such agreement to Mr.
Feldman would have been approximately $313,000. In the event that payments
under this agreement are deemed to be so called "excess parachute payments"
under the applicable provisions of the Internal Revenue Code of 1986, as
amended, the individual would be entitled to receive a gross-up payment equal
to the amount of any excise tax payable by such individual with respect to
such payment plus the amount of all other additional taxes imposed on such
individual attributable to the receipt of such gross-up payment.
Severance Arrangements
Mr. John C. Hansen resigned as the president and chief executive officer of
the Corporation and as a director effective as of February 1, 1998 (the
"Hansen Employment Termination Date"). In connection with his resignation, the
Corporation entered into an agreement with Mr. Hansen providing for the
payment of severance and other fees to Mr. Hansen. The agreement provides that
in addition to receiving his regular salary through the Hansen Employment
Termination Date, Mr. Hansen has been paid a bonus of $100,000 for the 1997
calendar year as well as a lump sum severance payment of $150,000. Mr. Hansen
also received a lump sum payment of $50,000 to compensate him for his travel
and relocation expenses associated with his relocation to the San Francisco,
California area. The agreement also provides for an ongoing consulting
relationship between Mr. Hansen and the Corporation for the two-year period
from February 1, 1998 through January 31, 2000. For his consulting services,
Mr. Hansen is paid a retainer fee of $150,000 per year, payable in arrears in
quarterly installments of $37,500 and a per diem consulting fee of $2,000 per
day for each day that he provides consulting services to the Corporation
pursuant to its request.
Mr. Wurth resigned as a vice president of the Corporation effective as of
June 1, 1998 (the "Wurth Employment Termination Date"). In connection with
this resignation, the Corporation entered into an agreement with Mr. Wurth
providing for the payment of severance and other fees to Mr. Wurth. The
agreement provided that in addition to receiving his regular salary for a
period of six months after the Wurth Employment Termination Date, Mr. Wurth
would be paid a lump sum severance payment of $119,592. Mr. Wurth also
received a lump sum payment of $50,000 to compensate him for travel and
relocation expenses. A loan in the amount of $125,000 provided in connection
with Mr. Wurth's relocation to San Diego, California was also forgiven as part
of this severance agreement.
11
<PAGE>
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines
established by the human resources committee of the board of directors of its
parent corporation, Thermo Electron. The executive compensation program
presently consists of annual base salary ("salary"), short-term incentives in
the form of annual cash bonuses, and long-term incentives in the form of stock
options.
The Committee believes that the total compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the
mid-point of competitive salaries derived from market surveys and that short-
term and long-term incentive compensation should reflect the performance of
the Corporation and the contributions of each executive.
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total
compensation for its executives is assessed by comparing it to market data
provided by its compensation consultant and by participating in annual
executive compensation surveys, primarily "Project 777," an executive
compensation survey prepared by Management Compensation Services, a division
of Hewitt Associates. The majority of firms represented in the Project 777
survey are included in the Standard & Poor's Index, but do not necessarily
correspond to the companies included in the Corporation's peer group index,
the Dow Jones Total Return Index for the Cosmetics and Personal Care Industry
Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by
comparing it to total compensation of other executives within the Thermo
Electron organization with comparable levels of responsibility for comparably
sized business units.
The Corporation changed its fiscal year to end on the Saturday nearest
September 30 in 1995. Because the compensation practices of the Corporation
are guided by the policies of its parent corporation, Thermo Electron, the
Committee plans to continue to conduct cash compensation reviews on a
calendar-year basis in order to coincide with the compensation reviews
conducted by the human resources committee of the board of directors of Thermo
Electron. Thermo Electron operates on a fiscal year that ends on the Saturday
nearest December 31.
The process for determining each of the elements of total compensation for
the Corporation's officers is outlined below.
Base Salary
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the Corporation's other named executive officers will
approach the mid-point of competitive data. The salary increases in calendar
1998 for the named executive officers generally reflect this practice of
gradual increases and moderation.
Cash Bonus
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries. Specifically,
12
<PAGE>
the median potential bonus plus the salary of an executive officer is
approximately equal to the mid-point of competitive total cash compensation
for a similar position and level of responsibility in businesses having
comparable sales and complexity to the Corporation. The actual bonus awarded
to an executive officer may range from zero to three times the median
potential bonus. The value within the range (the bonus multiplier) is
determined at the end of each year by the Committee in its discretion. The
Committee exercises its discretion by evaluating each executive's performance
using a methodology developed by its parent corporation, Thermo Electron, and
applied throughout the Thermo Electron organization. The methodology
incorporates measures of operating returns which are designed to measure
profitability and contributions to shareholder value, and are measures of
corporate and divisional performance that are evaluated using graphs developed
by Thermo Electron intended to reward performance that is perceived as above
average and to penalize performance that is perceived as below average.
Generally, the measures of operating returns used in the Committee's
determinations include return on assets, growth in income, and return on
sales, and the Committee's determinations also included a subjective
evaluation of the contributions of each executive that are not captured by
operating measures but are considered important to the creation of long-term
value for the Stockholders. These measures of achievements are not financial
targets that are met, not met or exceeded. The relative weighting of the
operating measures and subjective evaluation varies depending on the
executive's role and responsibilities within the organization.
Stock Option Program
The primary goal of the Corporation is to excel in the creation of long-term
value for the Stockholders. The principal incentive tool used to achieve this
goal is the periodic award to key employees of options to purchase common
stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the
Stockholders. The emphasis on stock options also results in management's
compensation being closely linked to stock performance. In addition, because
they are subject to vesting periods of varying durations and to forfeiture if
the employee leaves the Corporation prematurely, stock options are an
incentive for key employees to remain with the Corporation long-term. The
Committee believes stock option awards in its parent corporations, Thermo
Electron and ThermoTrex, and other majority-owned subsidiaries of Thermo
Electron and ThermoTrex, are an important tool in providing incentives for
performance within the entire organization.
In determining awards, the Committee considers the average annual value of
all options to purchase shares of the Corporation and other companies within
the Thermo Electron organization that vest in the next five years. (Values are
established using a modified Black-Scholes option pricing model.) Awards are
reviewed annually in conjunction with the annual review of cash compensation,
and additional awards are made periodically as deemed appropriate. The
Committee considers total compensation of executives, actual and anticipated
contributions of each executive (which includes a subjective assessment by the
Committee of the value of the executive's future potential within the
organization), as well as the value of previously awarded options as described
above in determining option awards.
Stock Ownership Policies
The Committee established a stock-holding policy for executive officers of
the corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple was one times his base salary and reference
bonus for the calendar year. For all other officers, the multiple was one
times the officer's base salary. The Committee deemed it appropriate to permit
officers to achieve these ownership levels over a three-year period. The
policy was amended in 1998 to apply only to the chief executive officer.
13
<PAGE>
In order to assist officers in complying with the policy, the Committee also
adopted a stock-holding assistance plan under which the Corporation is
authorized to make interest-free loans to officers to enable them to purchase
shares of the Common Stock in the open market. The loans are required to be
repaid upon the earlier of demand or the fifth anniversary of the date of the
loan, unless otherwise authorized by the Committee. See Relationship with
Affiliates--Stock Holding Assistance Plan.
The Committee also adopted a policy requiring its executive officers to hold
a certain number of shares of the Corporation's Common Stock acquired upon the
exercise of stock options granted by the Corporation. Under this policy,
executive officers are required to hold shares of Common Stock equal to one-
half of their net option exercises over a period of five years. The net option
exercise is determined by calculating the number of shares acquired upon
exercise of a stock option, after deducting the number of shares that could
have been traded to exercise the option and the number of shares that could
have been surrendered to satisfy tax-withholding obligations attributable to
the exercise of the option.
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executives in excess of $1 million unless the
compensation qualifies as "performance based" or is otherwise exempt from
Section 162(m). The annual cash compensation paid to individual executives
does not approach the $1 million threshold, and it is believed that the stock
incentive plans of the Corporation qualify as "performance based." Therefore,
the Committee does not believe any further action is necessary in order to
comply with Section 162(m). From time to time, the Committee will reexamine
the Corporation's compensation practices and the effect of Section 162(m).
1998 CEO Compensation
Mr. Gerald Feldman was appointed the Corporation's president and chief
executive officer in August 1998. The salary of Mr. Feldman was established
using the same criteria as for the salaries and bonuses for the Corporation's
other named executive officers. No determination of Mr. Feldman's bonus has
been made to date, and the Committee is not expected to take any action until
March 1999, when the audited financial statements of the Corporation's parent
company will be available.
Awards to Mr. Feldman to purchase shares of the Corporation's Common Stock
are reviewed and determined periodically by the Committee using criteria
similar to those used for other executive officers of the Corporation. The
Committee awarded Mr. Feldman options to purchase 225,000 shares of the
Corporation's Common Stock in fiscal 1998 in connection with his appointment
as president and chief executive officer. In addition, Mr. Feldman also
received the following awards to purchase shares of the common stock of the
Corporation's parent companies, Thermo Electron and ThermoTrex, in connection
with his appointment as president and chief executive officer of the
Corporation: options to purchase 55,000 shares of the common stock of Thermo
Electron, and 45,000 shares of the common stock of ThermoTrex Corporation.
These awards were determined by the human resources committees of the board of
directors of the granting companies using a methodology similar to that used
by the Corporation and described above under Stock Option Program.
Dr. Nicholas T. Zervas (Chairman)
Dr. Carliss Y. Baldwin
Dr. Elias P. Gyftopoulos
14
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation include
in this proxy statement a line-graph presentation comparing cumulative, five-
year shareholder returns for the Corporation's Common Stock with a broad-based
market index and either a nationally recognized industry standard or an index
of peer companies selected by the Corporation. The Corporation's Common Stock
has been publicly traded only since June 10, 1994 and, as a result, the
following graph commences as of such date. The Corporation has compared its
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for the Cosmetics and Personal Care Industry Group.
Comparison of Total Return Among ThermoLase Corporation,
the American Stock Exchange Market Value Index and
the Dow Jones Total Return Index for the Cosmetics and Personal Care Industry
Group
from June 10, 1994 to October 2, 1998
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
6/13/94 12/30/94 9/29/95 9/27/96 9/26/97 10/2/98
<S> <C> <C> <C> <C> <C> <C>
TLZ 100 129 679 779 579 179
AMEX 100 98 124 129 156 138
DJ COS 100 112 137 190 233 208
</TABLE>
The total return for the Corporation's Common Stock (TLZ), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Cosmetics and Personal Care Industry Group (DJ COS) assumes the
reinvestment of dividends, although dividends have not been declared on the
Corporation's Common Stock. The American Stock Exchange Market Value Index
tracks the aggregate performance of equity securities of companies listed on
the American Stock Exchange. The Corporation's Common Stock is traded on the
American Stock Exchange under the ticker symbol "TLZ."
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.").
15
<PAGE>
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.
Corporate Services Agreement
As provided in the Charter, the Corporation and Thermo Electron have entered
into a Corporate Services Agreement (the "Services Agreement") under which
Thermo Electron's corporate staff provides certain administrative services,
including certain legal advice and services, risk management, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Corporation.
The Corporation was assessed an annual fee equal to 1% of the Corporation's
total revenues for these services in calendar 1997 and 0.8% of the
Corporation's total revenues in calendar 1998. The annual fee will be 0.8% of
the Corporation's total revenues in calendar 1999. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1998, Thermo Electron assessed the Corporation
$348,000 in fees under the Services Agreement. Management believes that
16
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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
Ms. Silvia Carnini-Pulino, vice president, international of the Corporation,
was the president of Gammatel, Inc., a Delaware communications corporation
until May 1, 1997. Gammatel filed a petition under the federal bankruptcy laws
on August 8, 1997.
From time to time, the Corporation may transact business with other
companies in the Thermo Group. In fiscal 1998, such transactions included the
following:
In fiscal 1998, the Corporation subleased office and research facilities
from ThermoTrex and was charged for the actual square footage occupied at
approximately the same cost-per-square-foot paid by ThermoTrex under its prime
lease. The accompanying statement of operations includes expenses from this
sublease of $306,000 in fiscal 1998. During fiscal 1998, the Corporation
relocated its operations and is no longer paying for this space.
During fiscal 1998, the Corporation purchased laser systems and components
at an aggregate cost of $2,902,000 from Trex Medical, a majority-owned
subsidiary of ThermoTrex.
As of October 3, 1998, the Corporation owed Thermo Electron $4,500,000
principal amount, pursuant to a 4 3/8% subordinated convertible debenture due
2004, convertible into shares of the Corporation's common stock at $17.385 per
share.
During fiscal 1998, the Corporation purchased vacuum equipment totaling
$241,000 from Bird Products Corporation, a wholly owned subsidiary of Thermo
Electron.
As of October 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $3,200,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services, and for miscellaneous items excluding the debentures described
above, net of amounts owed to the Corporation by Thermo Electron and its other
subsidiaries for products and services and miscellaneous items. The largest
amount of such net indebtedness owed by the Corporation to Thermo Electron and
its other subsidiaries since September 27, 1997 was $3,240,000. These amounts
do not bear interest and are expected to be paid in the normal course of
business.
As of October 3, 1998, $51,246,000 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.
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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. As of the date hereof, no loans to executive officers remain
outstanding. This policy and plan were amended in 1998 to apply only to the
chief executive officers of the Corporation in the future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since 1991. Representatives
of that firm are expected to be present at the meeting, will have the
opportunity to make a statement if they desire to do so and will be available
to respond to questions. The board of directors has established an audit
committee, presently consisting of two outside directors, the purpose of which
is to review the scope and results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement and
form of proxy relating to the 2000 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later
than October 8, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 of the Securities Exchange Act of 1934, as amended
(relating to proposals to be presented at the meeting but not included in the
Corporation's proxy statement and form of proxy), will be considered untimely,
and thus the Corporation's proxy may confer discretionary voting authority on
the persons named in the proxy with regard to such proposals, if received
after December 18, 1999.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally, by telephone or by telegram.
Brokers, nominees, custodians and fiduciaries are requested to forward
solicitation materials to obtain voting instructions from beneficial owners of
stock registered in their names, and the Corporation will reimburse such
parties for their reasonable charges and expenses in connection therewith.
Carrollton, Texas
February 5, 1999
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FORM OF PROXY
THERMOLASE CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Gerald Feldman, Gary S. Weinstein and John
T. Keiser, or any one of them in the absence of the others, as attorneys and
proxies of the undersigned, with full power of substitution, for and in the name
of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of ThermoLase Corporation, a Delaware corporation (the "Company"),
to be held on Thursday, March 11, 1999 at 10:00 a.m. at the Westin Hotel, 70
Third Avenue, Waltham, Massachusetts and at any adjournment or postponement
thereof, and to vote all shares of common stock of the Company standing in the
name of the undersigned on January 20, 1999, with all of the powers the
undersigned would possess if personally present at such meeting.
(IMPORTANT -- TO BE SIGNED AND DATED ON THE REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
THERMOLASE CORPORATION
March 11, 1999
- --------------- Please Detach and Mail in the Envelope Provided ---------------
[X] Please mark your
votes as in this
example.
1. ELECTION OF FOR WITHHELD Nominees: Carliss Y. Baldwin
DIRECTORS OF [_] [_] Gerald Feldman
THE COMPANY Elias P. Gyftopoulos
(see reverse). John T. Keiser
Paul F. Kelleher
FOR all nominees listed at right, Melissa F. Riordan
except authority to vote withheld Gary S. Weinstein
for the following nominees (if any). Nicholas T. Zervas
- -----------------------------------
2. In their discretion on such other matters as may properly come before the
Meeting.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.
Copies of the Notice of Meeting and of the Proxy Statement have been received by
the undersigned.
SIGNATURE(S) DATE
---------------------------------- -----------------------
NOTE: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.
