<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
THERMOSPECTRA CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THERMOSPECTRA CORPORATION
------------------------------------------------
(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):
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
(5) Total fee paid:
________________________________________________________________________
[_] 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:
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
(3) Filing Party:
________________________________________________________________________
(4) Date Filed:
________________________________________________________________________
<PAGE>
THERMOSPECTRA CORPORATION
81 Wyman Street
Waltham, Massachusetts 02254
April 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual Meeting of the Stockholders of
ThermoSpectra Corporation. I respectfully request that all Stockholders attend
this meeting, if possible.
Our Annual Report for the year ended January 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 & 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,
BARRY S. HOWE
President and Chief Executive Officer
<PAGE>
THERMOSPECTRA CORPORATION
81 Wyman Street
Waltham, Massachusetts 02254
April 23, 1998
To the Holders of the Common Stock of
THERMOSPECTRA CORPORATION
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of ThermoSpectra Corporation
(the "Corporation") will be held on Monday, June 1, 1998, at 10:45 a.m. at The
Hyatt Regency Scottsdale Resort at Gainey Ranch, 7500 East Doubletree Ranch
Road, Scottsdale, Arizona, 85258. The purpose of the meeting is to consider and
take action upon the following matters:
1. Election of six 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 April 3, 1998.
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 shares 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 ThermoSpectra
Corporation (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Monday, June 1, 1998, at 10:45 a.m.
at The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona and
any adjournment thereof. The mailing address of the executive office of the
Corporation is 81 Wyman Street, Waltham, Massachusetts 02254. This proxy
statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about April 29, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
six directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the 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 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. With respect to the election of directors, 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 April 3, 1998, consisted of
12,564,261 shares of Common Stock. Only Stockholders of record at the close of
business on April 3, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
1
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- PROPOSAL 1 -
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified or until his 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, Thermo Instrument Systems
Inc. ("Thermo Instrument"), a manufacturer of analytical, environmental-
monitoring and process-control instrumentation, and Thermo Instrument's parent
company, Thermo Electron Corporation ("Thermo Electron"), a provider of
diversified products and services for 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>
- ---------------------------------------------------------------------------------------------------------------
ROBERT E. FINNIGAN Dr. Finnigan, 70, has been a director of the Corporation since April 1997. Dr.
Finnigan served in various executive roles and was a director of Finnigan
Corporation, an analytical instrument manufacturer, from 1967 to 1990, when it was
acquired by Thermo Instrument. Since 1990, he has served as a consultant from time
to time to Thermo Instrument on technology issues, and as an advisor to Hambrecht &
Quist's Environmental Technology Fund, a venture capital fund. He is also a
director of Strategic Diagnostics Inc.
- ---------------------------------------------------------------------------------------------------------------
ELIAS P. GYFTOPOULOS Dr. Gyftopoulos, 70, has been a director of the Corporation since its inception in
August 1994. He 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 prior to his retirement in 1996. Dr. Gyftopoulos is also a
director of Thermo Electron, Thermo BioAnalysis Corporation, Thermo Cardiosystems
Inc., ThermoLase Corporation, Thermo Remediation Inc., Thermo Vision Corporation,
Thermo Voltek Corp. and Trex Medical Corporation.
- ---------------------------------------------------------------------------------------------------------------
BARRY S. HOWE Mr. Howe, 42, has been the president, chief executive officer and a director of the
Corporation since March 1998. Mr. Howe has been a vice president of Thermo
Instrument since 1994. He was chief executive officer, president and a director of
Thermo BioAnalysis Corporation, a majority-owned subsidiary of Thermo Instrument
that manufactures products for biochemical research, drug discovery and clinical
laboratories, from February 1995 to March 1998. From September 1989 to December
1995, he served as the president of Thermo Separation Products Inc. and its
predecessor, a manufacturer of chromatography instruments and a subsidiary of
ThermoQuest Corporation. Mr. Howe is also a director of Thermo BioAnalysis
Corporation.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------------
EARL R. LEWIS Mr. Lewis, 54, has been a director of the Corporation since its inception in August
1994. He has also been chairman of the board since June 1995 and was vice chairman
of the board from August 1994 to June 1995. Mr. Lewis has been president and chief
executive officer of Thermo Instrument since March 1997 and January 1998,
respectively, was chief operating officer of Thermo Instrument from January 1996 to
January 1998, was executive vice president of Thermo Instrument from January 1996 to
March 1997, was a senior vice president of Thermo Instrument from January 1994 to
January 1996, and was a vice president of Thermo Instrument from March 1992 to
January 1994. He has been a vice president of Thermo Electron since September 1996.
Mr. Lewis was also chief executive officer of Thermo Optek Corporation, a
majority-owned subsidiary of Thermo Instrument that manufactures analytical
instruments that measure energy and light for purposes of materials analysis,
characterization and preparation, from its inception in August 1995 to January 1998,
and served as president of its predecessor, Thermo Jarrell Ash Corporation, for more
than five years prior to 1995. Mr. Lewis is also a director of Metrika Systems
Corporation, ONIX Systems Inc., Thermo BioAnalysis Corporation, Thermo Instrument,
Thermo Optek Corporation, ThermoQuest Corporation and Thermo Vision Corporation.
- ---------------------------------------------------------------------------------------------------------------
THEO MELAS-KYRIAZI Mr. Melas-Kyriazi, 38, has been a director of the Corporation since its inception in
August 1994 and chairman of the board since March 1998. Mr. Melas-Kyriazi has also
been vice president of corporate strategy of Thermo Electron since March 1998.
Prior to his appointment at Thermo Electron, Mr. Melas-Kyriazi served as the
Corporation's president and chief executive officer from its inception to March
1998. Mr. Melas-Kyriazi was treasurer of Thermo Instrument and Thermo Electron from
1988 to August 1994. Mr. Melas-Kyriazi is also a director of Thermo Remediation
Inc. and Thermo Voltek Corp.
- ---------------------------------------------------------------------------------------------------------------
ARVIN H. SMITH Mr. Smith, 68, has been a director of the Corporation since its inception in August
1994 and was chairman of the board from August 1994 to June 1995. Mr. Smith has
been the chairman of the board of Thermo Instrument since March 1997 and previously
served as the president and chief executive officer of Thermo Instrument from 1986
to March 1997 and January 1998, respectively. Mr. Smith is also the chairman of the
board of Thermo Power Corporation, a majority-owned subsidiary of Thermo Electron
that manufactures traffic-control systems and industrial refrigeration equipment.
He has been an executive vice president of Thermo Electron since 1991 and was a
senior vice president of Thermo Electron from 1986 to 1991. Mr. Smith is also a
director of Metrika Systems Corporation, ONIX Systems Inc., Thermo BioAnalysis
Corporation, Thermo Instrument, Thermo Optek Corporation, Thermo Power Corporation,
ThermoQuest Corporation and Thermo Vision 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. Finnigan (Chairman) and Dr. Gyftopoulos.
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. Finnigan and Dr. Gyftopoulos (Chairman).
The human resources committee reviews the performance of senior members of
management, approves 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 four times, the audit committee met twice and the human resources committee
met three times during fiscal 1997. Each director attended at least 75% of all
meetings of the board of directors and committees on which he served held during
fiscal 1997.
3
<PAGE>
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Directors who are not employees of the Corporation, of Thermo Electron or
of any other companies affiliated with Thermo Electron (also referred to as
"outside directors") receive an annual retainer of $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 directors' fees is made quarterly. Messrs.
Howe, Lewis, Melas-Kyriazi and Smith are all employees of Thermo Electron
companies 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
Under the Corporation's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of his
cash fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change in control or proposed change in
control of the Corporation that is not approved by the board of directors,
deferred amounts become payable immediately. Either of the following is deemed
to be a change of control: (a) the 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 Thermo
Instrument or 25% or more of the outstanding common stock of Thermo Electron; or
(b) the failure of the persons serving on the board of directors immediately
prior to any contested election of directors or any exchange offer or tender
offer for the Common Stock or the common stock of Thermo Instrument 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 25,000 shares of Common Stock have been reserved for issuance
under the Deferred Compensation Plan. As of March 1, 1998, no deferred units
equal to shares of Common Stock were accumulated under the Deferred Compensation
Plan.
DIRECTORS STOCK OPTION PLAN
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of Common Stock 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. A total of 100,000 shares of Common Stock
have been reserved for issuance under the Directors Plan.
Under the Directors Plan, each new outside director who joined the board of
directors during 1994 was granted an option to purchase 20,000 shares of Common
Stock. The size of awards to new directors appointed to the board of directors
after 1994 was reduced by 5,000 shares in each subsequent year. Outside
directors who join the board of directors after 1998 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. Options
evidencing initial grants to directors are exercisable six months after the date
of grant. The shares acquired upon exercise are 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. The restrictions and
repurchase rights lapse or are deemed to have lapsed in equal annual
installments of 5,000 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 fifth anniversary of the grant date, unless the
director dies or otherwise ceases to serve as a director of the Corporation or
any other Thermo Electron company prior to that date.
Outside directors will also receive an annual grant of options to purchase
1,000 shares of Common Stock, commencing with the Annual Meeting of the
Stockholders to be held in 1999. The annual grant will be made at the close of
business on the date of each Annual Meeting of the Stockholders of the
Corporation to each outside director then holding office. Options evidencing
annual grants may be exercised at any time from and after the six-month
4
<PAGE>
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 ceased to serve as a director of the Corporation
or any other Thermo Electron company prior to the first anniversary of the grant
date.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the common stock as reported on the American
Stock Exchange (or other principal market on which the common stock is then
traded) for the five trading days immediately preceding and including the date
of grant, or, if the shares are not then traded, at the last price per share
paid by third parties in an arms-length transaction prior to the option grant.
As of March 1, 1998, options to purchase 30,000 shares of Common Stock were
outstanding under the Directors Plan, options to purchase 20,000 shares had
lapsed, no options to purchase shares had been exercised, and options to
purchase 70,000 shares were available for future grant.
STOCK OWNERSHIP POLICIES FOR DIRECTORS
During 1996, the human resources committee of the board of directors (the
"Committee") established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level by the
1998 Annual Meeting of Stockholders. The chief executive officer of the
Corporation is required to comply with a separate stock holding policy
established by the Committee in 1996, which is described in "Committee Report on
Executive Compensation - Stock Ownership Policies."
In addition, the Committee adopted a policy requiring directors to hold
shares of the Corporation's 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 "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 Thermo Instrument, the Corporation's parent company,
and of Thermo Electron, Thermo Instrument's parent company, as of March 1, 1998,
with respect to (i) each director (ii) each executive officer named in the
summary compensation table under the heading "Executive Compensation" and (iii)
all directors and current executive officers as a group. In addition, the
following table sets forth the beneficial ownership of Common Stock, as of March
1, 1998, with respect to each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of Common Stock.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron.
5
<PAGE>
<TABLE>
<CAPTION>
THERMOSPECTRA THERMO INSTRUMENT
NAME (1) CORPORATION (2) SYSTEMS INC.(3) THERMO ELECTRON (4)
------- --------------- ----------------- -------------------
<S> <C> <C> <C>
Thermo Electron Corporation (5) 12,731,070 -- --
Christopher J. Barron 25,000 10,205 148
Robert E. Finnigan 10,000 0 0
Elias P. Gyftopoulos 21,000 58,766 72,070
Barry S. Howe 4,010 125,422 77,670
Earl R. Lewis 55,000 203,726 84,037
Ronald W. Lindell 30,100 0 0
Theo Melas-Kyriazi 70,600 38,347 147,420
Arvin H. Smith 20,000 539,583 519,038
All directors and current executive
officers as a group (11 persons) 300,110 1,088,640 1,715,710
</TABLE>
(1) Except as reflected in the footnotes to this table, shares 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 Mr. Barron, Dr. Finnigan,
Dr. Gyftopoulos, Mr. Howe, Mr. Lewis, Mr. Lindell, Mr. Melas-Kyriazi, Mr.
Smith and all directors and current executive officers as a group include
25,000, 10,000, 20,000, 4,000, 50,000, 30,000, 57,000, 20,000 and 280,400
shares, respectively, that such person or group has the right to acquire
within 60 days of March 1, 1998, through the exercise of stock options. No
director or current executive officer beneficially owned more than 1% of
the Common Stock outstanding as of March 1, 1998; all directors and
current executive officers as a group beneficially owned 2.0% of the Common
Stock outstanding as of such date.
(3) The shares of the common stock of Thermo Instrument shown in the table
reflect a five-for-four split of such stock distributed in October 1997 in
the form of a 25% stock dividend. Shares of the common stock of Thermo
Instrument beneficially owned by Mr. Barron, Dr. Gyftopoulos, Mr. Howe, Mr.
Lewis, Mr. Melas-Kyriazi, Mr. Smith and all directors and current executive
officers as a group include 9,838, 18,075, 111,327, 172,085, 36,326,
292,968 and 734,681 shares, respectively, that such person or group had the
right to acquire within 60 days after March 1, 1998, through the exercise
of stock options. Shares of the common stock of Thermo Instrument
beneficially owned by Mr. Melas-Kyriazi, Mr. Smith and all directors and
current executive officers as a group include 468, 663 and 2,287 shares,
respectively, allocated through March 1, 1998, to their respective accounts
maintained pursuant to Thermo Electron's employee stock ownership plan (the
"ESOP"), of which the trustees, who have investment power over its assets,
are executive officers of Thermo Electron. Shares beneficially owned by
Mr. Lewis include 2,987 shares held by Mr. Lewis' spouse. Shares
beneficially owned by Mr. Howe include 2,460 shares held in a trust of
which he is the trustee and 374 shares held by him in custodial accounts
for the benefit of two minor children. The directors and current executive
officers of the Corporation did not individually or as a group beneficially
own more than 1% of the common stock of Thermo Instrument outstanding as of
March 1, 1998.
(4) Shares of the common stock of Thermo Electron beneficially owned by Dr.
Gyftopoulos, Mr. Howe, Mr. Lewis, Mr. Melas-Kyriazi, Mr. Smith and all
directors and current executive officers as a group include 10,375,
68,687, 84,037, 111,935, 228,411 and 1,211,417 shares, respectively, that
such person or group has the right to acquire within 60 days of March 1,
1998, through the exercise of stock options. Shares of the common stock of
Thermo Electron beneficially owned by Mr. Melas-Kyriazi, Mr. Smith and all
directors and current executive officers as a group include 1,071, 1,717
and 6,250 full shares, respectively, allocated to accounts maintained
pursuant to the ESOP. Shares beneficially owned by Mr. Howe include 200
shares held by him as custodian for two minor children. No director or
current executive officer beneficially owned more than 1% of the common
stock of Thermo Electron outstanding as of March 1,
6
<PAGE>
1998; all directors and current executive officers as a group beneficially
owned approximately 1.1% of the Thermo Electron common stock outstanding as
of such date.
(5) As of March 1, 1998, Thermo Electron, primarily through its majority-owned
subsidiary Thermo Instrument, beneficially owned approximately 83% of the
outstanding Common Stock. Thermo Electron's address is 81 Wyman Street,
Waltham, Massachusetts 02254-9046. As of March 1, 1998, 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 Instrument, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during 1997, except in the following instances. Mr.
Robert E. Finnigan, a director of the Corporation, filed his Form 3 eleven days
late. Thermo Electron filed six Forms 4 late, reporting a total of 96
transactions, including 87 open market purchases of Common Stock and nine
transactions associated with the grant, exercise and lapse of options to
purchase Common Stock granted to employees under its stock option program.
EXECUTIVE COMPENSATION
NOTE: All share amounts reported below, in all cases, have been adjusted as
applicable to reflect a five-for-four stock split with respect to the common
stock of Thermo Instrument distributed in October 1997 in the form of a 25%
stock dividend.
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 two other most highly compensated executive officers
(the "named executive officers") for the last three fiscal years. No other
executive officer of the Corporation met the definition of "highly compensated"
within the meaning of the Securities and Exchange Commission's executive
compensation disclosure rules.
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.
7
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES UNDERLYING
NAME AND FISCAL ------------------------------- OPTIONS (NO. OF SHARES ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER AND COMPANY (1) COMPENSATION (2)
------------------ ---- ------ ----- ----- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Theo Melas-Kyriazi(4) 1997 $155,000 $40,000 -- 2,000 (THS) $15,231 (3)
President and 3,300 (TMO)
Chief Executive 1996 $147,000 $85,000 -- 3,900 (TMO) $8,281 (3)
Officer 4,000 (TBA)
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
10,000 (TMQ)
2,000 (TSR)
4,000 (TXM)
1995 $142,000 $81,400 -- 3,750 (TMO) $6,750
- ---------------------------------------------------------------------------------------------------------------------------
Christopher J. Barron 1997 $120,000 $30,000 -- -- $1,861 (5)
Vice President 1996 $116,883 $25,100 -- 6,000 (TOC) --
4,000 (TMQ)
1995 $114,975 $23,000 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Ronald W. Lindell 1997 $120,000 $0 $14,941 (6) -- --
Vice President 1996 $108,000 $28,400 $17,105 (6) 6,000 (TOC) --
4,000 (TMQ)
1995 $103,000 $30,000 $42,927 (6) -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options granted by the Corporation are designated in the table as "THS."
In addition, the named executive officers also have been granted options to
purchase common stock of the following Thermo Electron companies from time
to time as part of Thermo Electron's stock option program: Thermo Electron
(designated in the table as TMO), Thermo BioAnalysis Corporation
(designated in the table as TBA), Thermo Fibergen Inc. (designated in the
table as TFG), ThermoLyte Corporation (designated in the table as TLT),
Thermo Optek Corporation (designated in the table as TOC), ThermoQuest
Corporation (designated in the table as TMQ), Thermo Sentron Inc.
(designated in the table as TSR) and Trex Medical Corporation (designated
in the table as TXM).
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of named executive officers participating in the Thermo
Electron 401(k) plan.
(3) In addition to the matching contribution referred to in footnote (2), such
amounts include $8,106 and $1,531 of compensation attributable in 1997 and
1996, respectively, to an interest-free loan provided to Mr. Melas-Kyriazi
pursuant to the Corporation's stock holding assistance plan. See
"Relationship with Affiliates - Stock Holding Assistance Plan."
(4) Mr. Melas-Kyriazi served as president and chief executive officer of the
Corporation from August 10, 1994 to March 11, 1998. Prior to August 1994,
he served as treasurer of Thermo Electron and its subsidiaries. Mr. Melas-
Kyriazi was granted options to purchase shares of the common stock of
Thermo Electron and certain of its subsidiaries other than the Corporation
from time to time by Thermo Electron and certain of its subsidiaries prior
to his appointment as the Corporation's chief executive officer. These
options are not reported in this table as they were granted as compensation
for service to other Thermo Electron companies
8
<PAGE>
in capacities other than in his capacity as the president and chief
executive officer of the Corporation. Mr. Melas-Kyriazi resigned as
president and chief executive officer of the Corporation on March 11, 1998
to accept a position with Thermo Electron Corporation as its vice
president, corporate strategy, and was succeeded in the position of
president and chief executive officer by Mr. Barry S. Howe.
(5) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officer participating in the
Nicolet Instrument Technology 401(k) plan.
(6) The amount of $9,579 out of the $14,941 reported for 1997 and the full
amounts reported for 1996 and 1995 consist of payments made to Mr. Lindell
as part of a relocation package comprised of relocation expenses and a
housing differential.
STOCK OPTIONS GRANTED DURING FISCAL 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to the Corporation's then chief executive
officer and the other named executive officers. 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.
<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 OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------
NAME GRANTED (1) FISCAL YEAR SHARE DATE 5% 10%
---- ----------- ----------- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Theo Melas-Kyriazi 2,000 (THS) 0.50% $14.98 3/6/04 $12,200 $28,420
3,300 (TMO) 0.20%(3) $34.20 6/3/00 $17,787 $37,356
- --------------------------------------------------------------------------------------------------------------------
Christopher J. Barron -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
Ronald W. Lindell -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The options granted during the fiscal year were immediately exercisable as
of the end of the fiscal year. 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 such corporation or
any other Thermo Electron company. The granting corporation may exercise
its repurchase rights within six months after the termination of the
optionee's employment. 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. Certain options have
three-year terms and the repurchase rights lapse in their entirety on the
second anniversary of the grant date. The granting corporation may permit
the holder of 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
applicable corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
9
<PAGE>
(3) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Corporation and accordingly are reported
as a percentage of total options granted to employees of that company.
STOCK OPTIONS EXERCISED DURING FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options held at the end of
fiscal 1997 by the Corporation's then chief executive officer and the other
named executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1997.
<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>
Theo Melas-Kyriazi(3) ThermoSpectra -- -- 57,000 /0 $3,465 /--
Thermo Electron -- -- 120,072 /0 (4) $3,071,021 /--
Thermo BioAnalysis -- -- 4,000 /0 $38,000 /--
Thermo Fibergen -- -- 2,000 /0 $0 /--
ThermoLyte -- -- 0 /2,000 -- /$0 (5)
Thermo Optek -- -- 15,000 /0 $71,700 /--
ThermoQuest -- -- 10,000 /0 $50,000 /--
Thermo Sentron -- -- 2,000 /0 $0 /--
Trex Medical -- -- 4,000 /0 $12,500 /--
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher J. Barron ThermoSpectra -- -- 25,000 /0 $1,575 /--
Thermo Instrument 8,500 $172,700 9,838 /0 $206,073 /--
Thermo Optek -- -- 6,000 /0 $28,680 /--
ThermoQuest -- -- 4,000 /0 $20,000 /--
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald W. Lindell ThermoSpectra -- -- 30,000 /0 $1,890 /--
Thermo Optek -- -- 6,000 /0 $28,680 /--
ThermoQuest -- -- 4,000 /0 $20,000 /--
- ------------------------------------------------------------------------------------------------------------------------------------
</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 the fiscal year-end, except options to
purchase the common stock 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
Exchange Act and (ii) nine years after the grant date. In all cases, the
shares acquired upon exercise of the options reported in the table are
subject to repurchase by the granting corporation at the exercise price if
the optionee ceases to be employed by such corporation or any other 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
10
<PAGE>
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. Certain options
have three-year terms and the repurchase rights lapse in their entirety on
the second anniversary of the grant date. The granting corporation may
permit the holder of 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.
(3) Mr. Melas-Kyriazi also holds other unexercised options to purchase common
stock of Thermo Electron and its subsidiaries other than the Corporation.
These options are not reported here as they were granted as compensation
for service to other Thermo Electron companies in capacities other than in
his capacity as chief executive officer of the Corporation.
(4) Options to purchase 22,500 shares of the common stock of Thermo Electron
granted to Mr. Melas-Kyriazi are subject to the same terms as described in
footnote (2), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In
the event of the employee's death or involuntary termination prior to the
tenth anniversary of the grant date, the repurchase rights of the granting
corporation shall be deemed to have lapsed ratably over a five-year period,
commencing with the fifth anniversary of the grant date.
(5) No public market existed for the shares underlying these options as of
January 3, 1998. Accordingly, no value in excess of the exercise price has
been attributed to these options.
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 committees of the board of directors of its parent
companies, Thermo Electron and Thermo Instrument. 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 (collectively referred to as "total compensation").
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.
ESTABLISHING COMPETITIVENESS
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
compensation consultants 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 500 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
Diversified Technology 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.
11
<PAGE>
The process for determining each of these elements for the Corporation's
executive officers is outlined below. For its review of the compensation of
other officers of the Corporation, the Committee follows a substantially similar
process.
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 other named executive officers will approximate the
mid-point of competitive data. The salary increases in 1997 for the chief
executive officer and the other 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, 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 company,
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.
The measures of operating returns used in the Committee's determinations in
fiscal 1997 measured return on net 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 measurers and
subjective evaluation varies among the executives, depending on their roles and
responsibilities within the organization.
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1997 performance in each instance exceeded the median
potential bonus, except in the case of one executive officer who received no
bonus in fiscal 1997.
STOCK OPTION PROGRAM
The primary goal of the Corporation and its parent companies 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 companies, Thermo Electron and Thermo Instrument, and the
other majority-owned subsidiaries of Thermo Electron and Thermo Instrument, are
an important tool in providing incentives for performance within the entire
organization.
12
<PAGE>
In determining awards, the Committee considers for each officer the annual
value of all options to purchase shares of the Corporation and other companies
within the Thermo Electron organization that vest in the next year and compares
the individual's total compensation using this value to competitive data. The
Committee uses a modified Black-Scholes option pricing model to determine the
value of an option award. In addition, the Committee considers the aggregate
amount of net awards to purchase shares of Common Stock granted to all employees
over the last five years to monitor the number of aggregate awards to all
employees. In reviewing the aggregate number of awards, the Committee considers
such factors as the size of the company, its stage of development and its growth
strategy, as well as the aggregate awards and option practices of comparably
situated companies.
The Committee periodically awards options based on its assessment of the
total compensation of each executive, the 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.
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.
In order to assist officers in complying with the policy, the Committee
also adopted in 1996 a stock holding assistance plan under which the Corporation
was 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. During 1996, Mr. Theo
Melas-Kyriazi, then the Corporation's chief executive officer, received loans in
the aggregate principal amount of $164,830.47 under this plan, of which amount
$131,864.38 was outstanding as of April 23, 1998. During 1998, Mr. Barry S.
Howe, Mr. Melas-Kyriazi's successor as president and chief executive officer of
the Corporation, received a loan in the principal amount of $41,991.76, the
entire amount of which was outstanding as April 23, 1998. This plan was also
amended in 1998 to apply only to the chief executive officer. See "Relationship
with Affiliates - Stock Holding Assistance Plan."
The Committee also has adopted a policy requiring its executive officers to
hold 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 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 options.
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 under
Section 162(m). The annual compensation paid to individual executives does not
approach the $1 million threshold, and it is believed that 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).
1997 CEO COMPENSATION
The salary and bonus of Mr. Melas-Kyriazi, who served as the Corporation's
chief executive officer in fiscal 1997, were established using the same criteria
as for the salaries and bonuses of the Corporation's other named executive
officers. In determining Mr. Melas-Kyriazi's compensation as reported, the
Committee evaluated Mr. Melas-Kyriazi based on the general performance of the
Corporation.
13
<PAGE>
Awards to Mr. Melas-Kyriazi to purchase shares of the Corporation's Common
Stock were reviewed and determined periodically by the Committee using criteria
similar to that used for other executive officers of the Corporation and
described above under the caption "Stock Option Program." The Committee awarded
to Mr. Melas-Kyriazi options to purchase 2,000 shares of the Common Stock in
fiscal 1997.
In addition to stock option awards by the Committee, Mr. Melas-Kyriazi was
also eligible to receive awards to purchase shares of the common stock of
majority-owned subsidiaries of Thermo Electron from time to time as part of
Thermo Electron's stock option program due to his position as a chief executive
officer of a majority-owned subsidiary of Thermo Electron. These awards were
determined using an analysis similar to that used by the Committee as described
above under "Stock Option Program." No stock option awards were made to Mr.
Melas-Kyriazi in fiscal 1997 under this stock option program. The award to
purchase shares of the common stock of Thermo Electron granted to Mr. Melas-
Kyriazi in fiscal 1997 was made by the Thermo Electron human resources committee
under a program that awards options to certain eligible employees annually based
on the number of shares of the common stock of Thermo Electron held by the
employee, as an incentive to buy and hold Thermo Electron shares.
Elias P. Gyftopoulos (Chairman)
Robert E. Finnigan
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 August 4, 1995 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 Diversified Technology Industry Group as of the
last trading day of the Corporation's fiscal year.
COMPARISON OF TOTAL RETURN AMONG THERMOSPECTRA CORPORATION,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX AND THE DOW JONES TOTAL RETURN
INDEX FOR THE DIVERSIFIED TECHNOLOGY INDUSTRY GROUP FROM AUGUST 4, 1995 TO
JANUARY 2, 1998
[GRAPH APPEARS HERE]
------------------------------------------------------
8/4/95 12/31/95 12/27/96 1/2/98
------------------------------------------------------
THS 100 91 69 59
------------------------------------------------------
AMEX 100 105 111 135
------------------------------------------------------
DJ DTC 100 108 140 160
------------------------------------------------------
The total return for the Corporation's Common Stock (THS), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Diversified Technology Industry Group (DJ DTC) 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 "THS."
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 subsidiaries, and
Thermo Instrument has created the Corporation and other subsidiaries as publicly
held majority-owned subsidiaries and privately held majority-owned subsidiaries.
From time to time, Thermo Electron and its subsidiaries will create other
majority-owned subsidiaries
15
<PAGE>
as part of its spinout strategy. (The Corporation and such other majority-owned
Thermo Electron subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, 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.
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, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and financial and other services to the Corporation. The
Corporation was assessed an annual fee equal to 1.0% of the Corporation's
revenues for these services in fiscal 1996 and 1997. The annual fee has been
reduced to 0.8% of the Corporation's total revenues for fiscal 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
$1,989,000 in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms of the
Services Agreement are fair to the Corporation. For additional items such as
employee benefit plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Corporation based on charges attributable to the
Corporation. The Services Agreement automatically renews for successive one-
16
<PAGE>
year terms, unless canceled by the Corporation upon 30 days' prior notice. In
addition, the Services Agreement terminates automatically in the event the
Corporation ceases to be a member of the Thermo Group or ceases to be a
participant in the Charter. In the event of a termination of the Services
Agreement, the Corporation will be required to pay a termination fee equal to
the fee that was paid by the Corporation for services under the Services
Agreement for the nine-month period prior to termination. Following termination,
Thermo Electron may provide certain administrative services on an as-requested
basis by the Corporation or as required in order to meet the Corporation's
obligations under Thermo Electron's policies and procedures. Thermo Electron
will charge the Corporation a fee equal to the market rate for comparable
services if such services are provided to the Corporation following termination.
From time to time, the Corporation may transact business with other
companies in the Thermo Group.
The Corporation leases certain office and manufacturing space from Nicolet
Instrument Corporation ("Nicolet"), a wholly owned subsidiary of Thermo Optek
Corporation. In 1997, the Corporation paid Nicolet $208,000 in rent under this
lease. Effective January 1, 1998, the annual rent expense is $209,000. This
lease is effective until December 31, 1998, but may be terminated by the
Corporation upon 90 days' prior written notice to Nicolet.
The Corporation also leases certain office and manufacturing space from
Shandon Leasing Inc. ("Shandon Leasing"), a subsidiary of Thermo Instrument. In
1997, the Corporation paid Shandon Leasing $393,000 in rent under this lease.
This lease expires in September 2000.
The Corporation's Nicolet Imaging Systems division has an arrangement with
ThermoTrex Corporation ("ThermoTrex"), a publicly traded, majority-owned
subsidiary of Thermo Electron, whereby ThermoTrex provides certain research and
development services to the Corporation, and the Corporation purchases flat
screen x-ray sensitive detectors pursuant to purchase orders. In 1997, the
Corporation paid ThermoTrex $136,000 for such products and services. In
addition, the Corporation purchases and sells products and services in the
ordinary course of business with other companies affiliated with Thermo
Electron. In 1997, purchases from these companies totaled $2,090,000 and sales
to these companies totaled $825,000.
To finance the acquisition of IRT Corporation in September 1994, the
Corporation borrowed $7,300,000 from Thermo Instrument pursuant to a promissory
note due September 2001. In connection with the 1996 acquisition of Kevex
Instruments and Kevex X-ray, the Corporation borrowed $15,000,000 from Thermo
Electron pursuant to a promissory note due August 1998. In connection with the
acquisition of Park Scientific Instruments Corporation in March 1997, the
Corporation borrowed $10,000,000 from Thermo Electron pursuant to a promissory
note due March 1999. In connection with the acquisition of NESLAB Instruments,
Inc. and its related sales and service entity, NESLAB Instruments Europa BV in
the Netherlands, from Thermo Instrument in July 1997, the Corporation borrowed
$45,000,000 from Thermo Electron pursuant to a promissory note due July 1999.
To partially finance the acquisition of Sierra Research and Technology Inc. in
July 1997, the Corporation borrowed $5,000,000 from Thermo Electron pursuant to
a promissory note due July 1999. These notes bear interest at the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter. The interest rate for the notes outstanding in 1997 was 5.76%.
The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a $150 million
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. In addition, funds on deposit under this arrangement provide
credit support for overdraft obligations of other participants. As of January
3, 1998, the Corporation had a positive cash balance of approximately $43,857,
based on an exchange rate of $1.65/(Pounds) 1.00 as of January 3, 1998. For
1997, the average annual interest rate earned on GBP deposits by participants in
this credit arrangement was approximately 6.5% and the average annual interest
rate paid on overdrafts was approximately 7.2%.
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The Corporation, along with certain other Thermo Subsidiaries, also
participates in a notional pool arrangement with ABN AMRO, which includes a $50
million credit facility. Only European-based Thermo Subsidiaries participate in
this arrangement. Under this arrangement the Bank notionally combines the
positive and negative cash balances held by the participants to calculate the
net interest yield/expense for the group. The benefit derived from this
arrangement is then allocated based on balances attributable to the respective
participants. Thermo Electron guarantees all of the obligations of each
participant in this arrangement. In addition, funds on deposit under this
arrangement provide credit support for overdraft obligations of other
participants. As of January 3, 1998, the Corporation had a negative cash
balance of approximately $9,551, based on an exchange rate of $0.495/NLG 1.00 as
January 3, 1998. For 1997, the average annual interest rate earned on NLG
deposits by participants in this credit arrangement was approximately 4.8% and
the average annual interest rate paid on NLG overdrafts was approximately 4.8%.
At January 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $1,561,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services and for miscellaneous items, net of amounts owed to the Corporation by
Thermo Electron and its other subsidiaries for products, services and for
miscellaneous items. The largest amount of net indebtedness owed by the
Corporation to Thermo Electron and its other subsidiaries since December 29,
1996 was $3,598,000. These amounts do not bear interest and are expected to be
paid in the normal course of business.
As of January 3, 1998, $14,311,000 of the Corporation's cash equivalents
were invested pursuant to 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 and have a maturity of
three months or less. The repurchase agreement earns a rate based on the 90-day
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
STOCK HOLDING ASSISTANCE PLAN
In 1996, the Corporation adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Corporation also adopted a stock holding assistance plan under which it may
make interest-free loans to certain key employees, including its executive
officers, to enable such employees to purchase the Common Stock in the open
market. During 1996, Mr. Melas-Kyriazi received loans in the aggregate
principal amount of $164,830.47 under this plan to purchase 12,525 shares, of
which amount $131,864.38 was outstanding as of April 23, 1998. During 1998, Mr.
Barry S. Howe, Mr. Melas-Kyriazi's successor as president and chief executive
officer of the Corporation, received a loan in the principal amount of
$141,991.76 to purchase 15,000 shares, the entire amount of which was
outstanding as of April 23, 1998. These loans are repayable 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. No new loans were made under this plan in 1997. This policy and plan
were amended in 1998 to apply only to the chief executive officer 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 1998. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1994.
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.
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STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of the Stockholders of the Corporation must be received by the
Corporation for inclusion in the proxy statement and form of proxy relating to
that meeting no later than December 29, 1998.
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 or by telephone, facsimile
transmission or 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.
Waltham, Massachusetts
April 23, 1998
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FORM OF PROXY
THERMOSPECTRA CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 1, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John N. Hatsopoulos, Barry S. Howe and
Melissa F. Riordan, 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 the Stockholders of ThermoSpectra Corporation, a Delaware corporation
(the "Company"), to be held on Monday, June 1, 1998, at 10:45 a.m. at The Hyatt
Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona, 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 April 3, 1998, 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.)
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Please mark your
[ X ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [ ] WITHHELD [ ]
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any): ______________________________________
NOMINEES: Robert E. Finnigan, Elias P. Gyftopoulos, Barry S. Howe, Earl R.
Lewis, Theo Melas-Kyriazi and Arvin H. Smith.
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.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
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.
2
