1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
AMENDMENT NO. 2 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
Commission file number 1-12636
THERMO REMEDIATION INC.
(Exact name of Registrant as specified in its charter)
Delaware 59-3203761
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1964 South Orange Blossom Trail
Apopka, Florida 32703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- -----------------------
Common Stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant as of May 24, 1996, was approximately $58,018,000.
As of May 24, 1996, the Registrant had 12,849,592 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended March 30, 1996, are incorporated by reference into Parts I and II.
2
THERMO REMEDIATION INC.
AMENDMENT NO. 2 ON FORM 10K/A TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 30, 1996
PART III, ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
PART III, ITEM 11. EXECUTIVE COMPENSATION.
----------------------
PART III, ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT.
----------
PART III, ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS.
--------------------------------------
The information required under these items, originally to be
incorporated by reference from the Registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14A, not later than 120 days
after the close of the fiscal year, is contained in the following Attachment A,
which is included herein and made a part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 on
Form 10-K/A to be signed by the undersigned, duly authorized.
THERMO REMEDIATION INC.
By: /s/ Sandra L. Lambert
-----------------------------------
Sandra L. Lambert
Secretary
3
ATTACHMENT A
------------
DIRECTORS AND DIRECTOR COMPENSATION
Set forth below are the names of the Directors of Thermo Remediation Inc.
(the "Corporation"), their ages, their offices in the Corporation, if any,
their principal occupation or employment for the past five years, the length of
their tenure as Directors and the names of other public companies in which such
persons hold directorships. Information regarding their beneficial ownership of
the Corporation's Common Stock and of the common stock of its parent
corporations, Thermo TerraTech Inc. ("Thermo TerraTech") and Thermo Electron
Corporation ("Thermo Electron"), is reported under the caption "Stock
Ownership."
- -------------------------------------------------------------------------------
JOHN P. APPLETON Dr. Appleton, 61, has been Chairman, Chief
Executive Officer and a Director of the
Corporation since September 1993. Dr. Appleton has
been President, Chief Executive Officer and a
Director of Thermo TerraTech since September 1993,
and has served as a Vice President of Thermo
Electron since 1975 in various managerial
capacities.
- -------------------------------------------------------------------------------
ELIAS P. GYFTOPOULOS Dr. Gyftopoulos, 68, has been a Director of the
Corporation since November 1994. He had been the
Ford Professor of Mechanical Engineering and of
Nuclear Engineering at the Massachusetts Institute
of Technology for more than five years. Dr.
Gyftopoulos is also a director of Thermo
Electron, Thermo Cardiosystems Inc., ThermoLase
Corporation, ThermoSpectra Corporation, Thermo
Voltek Corp. and Trex Medical Corporation.
- -------------------------------------------------------------------------------
FRED HOLUBOW Mr. Holubow, 57, has been a Director of the
Corporation since June 1992. Mr. Holubow has been
Vice President of Pegasus Associates, an
investment management firm, for more than five
years.
- -------------------------------------------------------------------------------
THEO MELAS-KYRIAZI Mr. Melas-Kyriazi, 37, has been a Director of the
Corporation since June 1992. Mr. Melas-Kyriazi has
been the President of ThermoSpectra Corporation
since its formation in August 1994. Prior to that,
Mr. Melas-Kyriazi was Treasurer of the Corporation
from January 1991 to September 1994 and was
Treasurer of Thermo Electron from May 1988 to
August 1994. Mr. Melas-Kyriazi is also a director
of ThermoSpectra Corporation and Thermo Voltek
Corp.
- -------------------------------------------------------------------------------
FRANK E. MORRIS Dr. Morris, 72, has been a Director of the
Corporation since 1993. Dr. Morris served as the
Peter Drucker Professor of Management at Boston
College from 1989 to 1994, and as President of the
Federal Reserve Bank of Boston from 1968 until he
retired in 1988. Dr. Morris is a director of
Thermo Electron and is a trustee of SEI Liquid
Asset Trust, SEI Cash Plus Trust, SEI Tax Exempt
Trust, SEI Index Funds, SEI International Trust,
SEI Institutional Managed Trust, The Capitol
Mutual Funds, FFB Lexicon Funds and The Arbor
Fund.
- -------------------------------------------------------------------------------
1
4
- -------------------------------------------------------------------------------
JEFFREY L. POWELL Jeffrey L. Powell, 38, has been President, Chief
Operating Officer and a Director of the
Corporation since December 1991. From March 1989,
upon the acquisition by Thermo TerraTech of its
soil-remediation technology, until January 1991,
Mr. Powell was Vice President, Sales and
Marketing, and from January 1991 through December
1991 was President, of the Corporation.
- -------------------------------------------------------------------------------
WILLIAM A. RAINVILLE William A. Rainville, 54, has been a Director of
the Corporation since June 1993. Mr. Rainville has
been President and Chief Executive Officer of
Thermo Fibertek Inc., a subsidiary of Thermo
Electron, since its inception in 1991 and a
director of that company since January 1992. Mr.
Rainville was the President and Chief Executive
Officer of Thermo Electron Web Systems Inc., a
subsidiary of Thermo Electron and the predecessor
to Thermo Fibertek Inc., from 1984 until 1993. Mr.
Rainville has been a Senior Vice President of
Thermo Electron since March 1993 and a Vice
President since 1986. Mr. Rainville is also a
director of Thermo Ecotek Corporation, Thermo
Fibertek Inc. and Thermo TerraTech.
- -------------------------------------------------------------------------------
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The Board of Directors has established an Audit Committee and a Human
Resources Committee, each consisting solely of outside Directors. The present
members of the Audit Committee are Mr. Holubow (Chairman) and Dr. Morris. 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. Morris (Chairman), Dr. Gyftopoulos and Mr.
Holubow. 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 plans. The Corporation does not have
a nominating committee of the Board of Directors. The Board of Directors met
seven times, the Audit Committee met twice and the Human Resources Committee met
five times during fiscal 1996. Each Director attended at least 75% of all
meetings of the Board of Directors and Committees on which he served held during
fiscal 1996.
COMPENSATION of DIRECTORS
CASH COMPENSATION. Directors who are not employees of the Corporation,
of Thermo Electron or of any other company 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. Dr. Appleton, Mr. Melas-Kyriazi, Mr. Powell and Mr. Rainville are all
employees of Thermo Electron or 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 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 occurrence,
without the prior approval of the Board of Directors, of the acquisition,
directly or indirectly, by any person of 50% or more of the outstanding Common
Stock or the outstanding common stock of Thermo TerraTech or Thermo Electron; or
(b) the failure of the persons serving on the Board of Directors immediately
prior to any contested election of Directors or any exchange offer or tender
offer for the Common Stock or the common stock of Thermo TerraTech 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
2
5
solely in shares of Common Stock accumulated under the Deferred Compensation
Plan. A total of 37,500 shares of Common Stock have been reserved for issuance
under the Deferred Compensation Plan. As of March 30, 1996, deferred units equal
to 3,391 full shares of Common Stock were accumulated under the Deferred
Compensation Plan.
DIRECTORS STOCK OPTION PLAN. The Corporation's Directors Stock Option
Plan, which was amended in 1995 ("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. Prior to the amendment
of the Directors Plan, new Directors were automatically granted options to
purchase 22,500 shares of Common Stock upon their election or appointment. In
addition, eligible Directors were granted options to purchase Common Stock on a
quarterly basis according to the following formula: 200 shares for each meeting
of the Board of Directors held during the quarter and attended in person by the
recipient and 100 shares for each telephone meeting or committee meeting of the
Board of Directors held during the quarter in which the recipient participated.
Effective January 1, 1995, the grant of stock options based on meeting
attendance was eliminated.
The Directors Plan presently provides that outside Directors first
appointed or elected during 1996 will be automatically granted options to
purchase 18,000 shares of Common Stock. The size of the award to new Directors
is reduced by 4,500 shares each year thereafter until 1998, when the initial
grant will be eliminated entirely. Options granted upon a Director's election or
appointment 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 fifth anniversary of the grant date. Such options are subject to
restrictions on resale and to the repurchase by the Corporation of the shares
subject to option at the exercise price if the Director ceases to serve as a
Director of the Corporation, Thermo Electron or any subsidiary of Thermo
Electron, for any reason other than death. The restriction and repurchase rights
lapse in equal installments of 4,500 shares starting with the first anniversary
of the grant date, provided the Director has continuously served as a Director
of the Corporation, Thermo Electron or any subsidiary of Thermo Electron since
the grant date.
Commencing with the 1998 Annual Meeting of Stockholders, outside Directors
will receive an annual grant of options to purchase 1,000 shares of Common Stock
pursuant to the Directors Plan at the close of business on the date of each
Annual Meeting of the Stockholders of the Corporation. Options evidencing annual
grants may be exercised at any time from and after the six-month anniversary of
the grant date of the option and prior to the expiration of the option on the
third anniversary of the grant date. Shares acquired upon exercise of the
options are subject to 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 preceding and including the date of grant.
Options to purchase an aggregate of 78,000 shares of Common Stock were reserved
and available for grant under the Directors Plan as of July 1, 1996.
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock,
as well as the common stock of Thermo TerraTech and Thermo Electron, as of July
1, 1996, with respect to (i) each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
Director, (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 or executive officers of the Corporation are
also directors or executive officers of Thermo Electron or Thermo TerraTech,
all such persons disclaim beneficial ownership of the shares of Common Stock
owned by Thermo TerraTech and the shares of common stock of Thermo TerraTech
owned by Thermo Electron.
3
6
THERMO THERMO ELECTRON THERMO
NAME(1) REMEDIATION INC.(2) (CORPORATION(3) TERRATECH INC.(4)
------- ------------------- --------------- -----------------
Thermo TerraTech Inc.(5) .............. 8,697,240 N/A N/A
William Harris Investors Inc.(6) ...... 1,057,226 N/A N/A
John P. Appleton ...................... 63,000 143,266 216,942
Elias P. Gyftopoulos .................. 27,600 70,570 1,500
Fred Holubow .......................... 52,758 6,000 16,500
Nels A. Johnson ....................... 22,250 19,908 13,072
James Lousararian ..................... 72,000 7,525 27,119
Theo Melas-Kyriazi .................... 22,500 166,164 10,520
Frank E. Morris ....................... 26,321 22,572 1,500
Jeffrey L. Powell ..................... 111,000 43,042 82,968
William A. Rainville .................. 24,000 252,593 60,000
Bruce J. Taunt ........................ 18,000 11,852 44,688
All Directors and current executive
officers as a group (13 persons)(7).. 533,434 1,525,375 546,167
- ---------
<FN>
(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 each Director and
executive officer and by all Directors and executive officers as a group
exclude 8,697,240 shares beneficially owned by Thermo TerraTech, as to
which shares each Director and executive officer and all members of such
group disclaim beneficial ownership. Shares beneficially owned by Dr.
Appleton, Dr. Gyftopoulos, Mr. Holubow, Mr. Johnson, Mr. Lousararian, Mr.
Melas-Kyriazi, Dr. Morris, Mr. Powell, Mr. Rainville, Mr. Taunt and all
Directors and executive officers as a group include 63,000, 27,600, 24,450,
22,250, 70,500, 22,500, 24,450, 111,000, 22,500, 18,000 and 443,750 shares,
respectively, that such person or group has the right to acquire within 60
days of July 1, 1996 through the exercise of stock options. Shares
beneficially owned by Mr. Holubow, Dr. Morris and all Directors and
executive officers as a group include 1,926, 1,871 and 3,797 shares,
respectively, that had been allocated through July 1, 1996, to their
respective accounts maintained under the Corporation's Deferred
Compensation Plan for Directors. No Director or executive officer
beneficially owned more than 1% of the Common Stock outstanding as of July
1, 1996; all Directors and executive officers as a group beneficially owned
4.0% of the Common Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron reported in the table reflect
a three-for-two split of such stock effected on June 5, 1996. Shares
beneficially owned by Dr. Appleton, Dr. Gyftopoulos, Mr. Johnson, Mr.
Lousararian, Mr. Melas-Kyriazi, Dr. Morris, Mr. Powell, Mr. Rainville, Mr.
Taunt and all Directors and executive officers as a group include 104,357,
8,875, 16,082, 4,275, 116,772, 8,875, 39,374, 205,648, 10,462 and 962,229
shares, respectively, that such person or group has the right to acquire
within 60 days of July 1, 1996 through the exercise of stock options.
Shares beneficially owned by Dr. Appleton, Mr. Johnson, Mr. Lousararian,
Mr. Melas-Kyriazi, Mr. Powell, Mr. Taunt and all Directors and executive
officers as a group include 1,417, 715, 468, 873, 497, 166 and 7,202 full
shares, respectively, allocated through June 30, 1996 to 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
July 1, 1996 executive officers of Thermo Electron ("ESOP"). Shares
beneficially owned by Dr. Morris and all Directors and executive officers
as a group each include 10,282 shares allocated through July 1, 1996, to
Dr. Morris' account maintained pursuant to Thermo Electron's Deferred
Compensation Plan for Directors. Shares beneficially owned by Dr. Morris
include 3,415 shares owned by his spouse, as to which shares he may have
shared voting and investment power. No Director or executive officer
beneficially owned more than 1% of the common stock of Thermo Electron
outstanding as of July 1, 1996; all Directors and executive officers as a
group beneficially owned approximately 1.1% of the Thermo Electron common
stock outstanding as of such date.
(4) Shares of the common stock of Thermo TerraTech beneficially owned by Dr.
Appleton, Dr. Gyftopoulos, Mr. Johnson, Mr. Lousararian, Mr. Melas-Kyriazi,
Dr. Morris, Mr. Powell, Mr. Rainville, Mr. Taunt and all Directors and
executive officers as a group include 215,000, 1,500, 12,000, 27,000,
10,000, 1,500, 63,000, 60,000, 42,000 and 477,000 shares, respectively,
that such person or group has the right to acquire within 60 days of July
1, 1996, through the exercise of stock options. Shares beneficially owned
4
7
by Mr. Holubow and all Directors and executive officers as a group
include 16,500 and 29,000 shares, respectively, that such person or group
has the right to acquire within 60 days of July 1, 1996, through the
exercise of stock purchase warrants acquired in connection with private
placements of the securities of Thermo TerraTech and one or more of the
Corporation's subsidiaries on terms identical to terms granted to
unaffiliated investors. Shares beneficially owned by Dr. Appleton, Mr.
Johnson, Mr. Lousararian, Mr. Melas-Kyriazi, Mr. Powell, Mr. Taunt and all
Directors and executive officers as a group include 208, 114, 119, 201,
133, 53 and 1,250 full shares, respectively, allocated through June 30,
1996 to accounts maintained pursuant to the ESOP. Shares beneficially
owned by Mr. Taunt include 160 shares held in a trust over which Mr.
Taunt has investment and voting control. Except for Dr. Appleton, who
beneficially owned approximately 1.2% of the common stock of Thermo
TerraTech outstanding as of July 1, 1996, no Director or executive officer
beneficially owned more than 1% of such common stock outstanding as of
July 1, 1996; all Directors and executive officers as a group beneficially
owned 2.9% of the Common Stock outstanding as of such date.
(5) Includes 269,583 shares of Common Stock that Thermo TerraTech has the right
to acquire within 60 days of July 1, 1996 through the conversion of
convertible securities. Thermo TerraTech owned 66.3% of the Common Stock
outstanding as of July 1, 1996. The address of Thermo TerraTech is 12068
Market Street, Livonia, Michigan 48150.
(6) Based on information provided in the Schedule 13G of William Harris
Investors, Inc. ("Harris") dated February 12, 1996, these shares of Common
Stock have been acquired by Harris on behalf of Irving B. Harris, Jerome
Kahn Jr. and Marc A. Neuerman, three discretionary clients of Harris.
Harris is an investment adviser registered under Section 203 of the
Investment Adviser Act of 1940, as amended. Its address is 2 North LaSalle
Street, Suite 300, Chicago, Illinois 60602.
(7) While certain Directors or executive officers of the Corporation are also
directors and/or executive officers of Thermo Electron or its
subsidiaries, all such persons disclaim beneficial ownership of the shares
of Common Stock of the Corporation owned by Thermo TerraTech and the
shares of common stock of Thermo TerraTech owned by Thermo Electron.
DISCLOSURE OF CERTAIN LATE FILINGS
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 TerraTech and Thermo Electron, to
file with the Securities and Exchange Commission initial reports of ownership
and periodic reports of changes in ownership of the Corporation's securities.
Based upon a review of such filings, all Section 16(a) filing requirements
applicable to such persons were complied with during fiscal 1996, except in the
following instances. The Form 3 for Mr. Nels Johnson, appointed a vice president
of the Corporation effective June 30, 1995, was filed four days late, on July
14, 1995. In addition, the Form 4 for March 1996 filed on behalf of Thermo
Electron, reporting the grant of employee stock options, was filed eight days
late.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the
Corporation in all capacities awarded to, earned by or paid to the Corporation's
chief executive officer and its four other most highly compensated executive
officers for the last three fiscal years.
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.
5
8
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES UNDERLYING
FISCAL AWARDS OF OPTIONS
NAME AND ------ (NO. OF SHARES AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPANY(1) COMPENSATION(2)
- ------------------ ---- ------ ----- --------- --------------
John P. Appleton(3) 1996 $168,750 $100,000 -- $ 6,919
Chief Executive Officer 1995 $146,250 $100,000 -- $11,171
1994 $ 75,533 $ 80,000 63,000 (THN) $11,115
- -----------------------------------------------------------------------------------------------------
Jeffrey L. Powell 1996 $116,000 $ 60,000 300 (TMO) $ 6,646
President and Chief 2,000 (TBA)
Operating Officer 2,000 (TSR)
5,000 (TLZ)
2,000 (TLT)
6,000 (TMQ)
4,000 (TXM)
1995 $108,000 $ 63,500 15,000 (THN) $ 6,858
10,000 (TTT)
22,725 (TMO)
1994 $101,600 $ 46,675(4) 96,000 (THN) $ 4,484
13,000 (TTT)
5,625 (TMO)
- -----------------------------------------------------------------------------------------------------
James Lousararian 1996 $102,000 $ 33,000 -- $ 6,636
Vice President, Sales 1995 $ 96,000 $ 49,500 10,500 (THN) $ 6,078
and Marketing 4,000 (TTT)
1994 $ 96,000 $ 39,075(4) 60,000 (THN) $ 5,314
7,000 (TTT)
2,250 (TMO)
- -----------------------------------------------------------------------------------------------------
Bruce J. Taunt(5) 1996 $ 95,000 $ 35,000 7,500 (TMO) $ 5,246
Vice President, Finance $ 91,000 $ 28,000 3,000 (THN) $ 5,203
and Administration 1995 4,000 (TTT)
- -----------------------------------------------------------------------------------------------------
Nels R. Johnson(6)
Vice President 1996 $ 93,600 $ 25,000 20,000 (THN) $ 4,730
- -----------------------------------------------------------------------------------------------------
- ----------
<FN>
(1) Options to purchase Common Stock of the Corporation awarded to executive
officers are followed by the designation "THN". In addition, executive
officers of the Corporation have been granted options to purchase common
stock of Thermo Electron and certain of its other subsidiaries as part of
Thermo Electron's stock option program. Options have been granted during
the last three fiscal years to the named executive officers in the
following Thermo Electron companies: Thermo Electron (designated in the
table as TMO), Thermo Remediation (designated in the table as THN), Thermo
BioAnalysis Corporation (designated in the table as TBA), Thermo Sentron
Inc. (designated in the table as TSR), ThermoLase Corporation (designated
in the table as TLZ), ThermoLyte Corporation (designated in the table as
TLT), ThermoQuest Corporation (designated in the table as TMQ), and Trex
Medical Corporation (designated in the table as TXM). The shares of common
stock of Thermo Electron reported in the table reflect a three-for-two
split of such stock effected on June 5, 1996 in the form of a 50% stock
dividend. Dr. Appleton has served as an officer of Thermo Electron since
1975 and has been 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 or such other subsidiaries. These
options are
6
9
not reported in this table as they were granted as compensation for service
to other Thermo Electron companies in capacities other than in his capacity
as the chief executive officer of the Corporation.
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of executive officers participating in the Thermo
Electron 401(k) plan.
(3) Dr. Appleton was appointed chairman and chief executive officer of the
Corporation effective September 1, 1993. Dr. Appleton is also a vice
president of Thermo Electron and chief executive officer of Thermo
TerraTech. Reported in the table under "Annual Compensation" are total
amounts paid to Dr. Appleton for his service in all capacities to Thermo
Electron companies since September 1, 1993. The Human Resources Committee
of the Board of Directors of the Corporation reviews total annual
compensation to be paid to Dr. Appleton from all sources within the Thermo
Electron organization and approves the allocation of a percentage of annual
compensation (salary and bonus) for the time he devotes to the affairs of
the Corporation. For 1996, 1995 and 1994, 20%, 20% and 0%, respectively, of
Dr. Appleton's annual compensation was allocated to the Corporation. The
bonuses paid to Dr. Appleton in fiscal 1996, 1995 and 1994 relate to
performance for Thermo Electron's fiscal year, which corresponds to the
calendar year ended on December 29, 1995, December 31, 1994 and January 1,
1994, respectively.
(4) In fiscal 1994, the Corporation changed its compensation practices to make
compensation decisions based on fiscal year performance rather than
calendar year performance. As a consequence, the bonuses paid to Mr. Powell
and Mr. Lousararian in fiscal 1994 related to a 15-month period from
January 3, 1993 through April 2, 1994.
(5) Mr. Taunt was appointed an executive officer of the Corporation on November
1, 1994.
(6) Mr. Johnson was appointed an executive officer of the Corporation on June
30, 1995.
STOCK OPTIONS GRANTED DURING FISCAL 1996
The following table sets forth information concerning individual grants of
stock options made during fiscal 1996 to the Corporation's 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 1996.
Dr. Appleton has served as a vice president of Thermo Electron since 1975
and from time to time has been granted options to purchase common stock of
Thermo Electron and certain of its subsidiaries other than the Corporation.
These options are not reported in this table as they were granted as
compensation for service to other Thermo Electron companies in capacities other
than in his capacity as the chief executive officer of the Corporation. During
fiscal 1996, no options to purchase Common Stock were granted to Dr. Appleton or
Mr. Lousararian.
7
10
OPTION GRANTS IN FISCAL 1996
- --------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL OPTIONS ANNUAL RATES OF STOCK
NUMBER OF SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING OPTIONS EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM
NAME GRAN FISCAL YEAR SHARE DATE -----------
---- ---- ----------- ----- ----
(2) 5% 10%
--- -- ---
Jeffrey L. Powell 300 (TMO) 0.02% $24.85 5/23/98 $ 1,176 $ 2,469
2,000 (TBA) 0.4% $10.00 3/11/08 $ 15,920 $ 42,760
2,000 (TSR) 0.4% $14.00 3/11/08 $ 22,280 $ 59,880
5,000 (TLZ) 0.4% $22.75 11/28/07 $ 90,550 $243,250
2,000 (TLT) 0.6% $10.00 3/11/08 $ 15,920 $ 42,760
6,000 (TMQ) 0.2% $13.00 3/11/08 $ 62,100 $166,800
4,000 (TXM) 0.3% $11.00 3/11/08 $ 35,000 $ 94,080
- --------------------------------------------------------------------------------------------------------
Bruce J. Taunt 7,500 (TMO) 0.5% $30.27 9/22/02 $ 92,400 $215,400
- --------------------------------------------------------------------------------------------------------
Nels R. Johnson 20,000 (THN) 10.9% $14.93 10/24/07 $237,600 $638,600
- --------------------------------------------------------------------------------------------------------
- ----------
<FN>
(1) In addition to the grant of options to purchase Common Stock of the
Corporation (designated in the table as THN), options have been granted
during fiscal 1996 to the named executive officers to purchase the common
stock of Thermo Electron (designated in the table as TMO), Thermo
Remediation (designated in the table as THN), Thermo BioAnalysis
Corporation (designated in the table as TBA), Thermo Sentron Inc.
(designated in the table as TSR), ThermoLase Corporation (designated in the
table as TLZ), ThermoLyte Corporation (designated in the table as TLT),
ThermoQuest Corporation (designated in the table as TMQ), and Trex Medical
Corporation (designated in the table as TXM). All of the options granted
during the fiscal year are immediately exercisable at the date of grant,
except options to purchase the common stock of Thermo BioAnalysis
Corporation and ThermoLyte Corporation, which are not exercisable until
that company's stock is publicly traded. However, 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. For publicly traded companies, the repurchase rights
generally lapse ratably over a five- to ten-year period, depending on the
option term, which may vary from seven to twelve years, provided that the
optionee continues to be employed by the Corporation or another Thermo
Electron company. For companies whose shares are not publicly traded, the
repurchase rights lapse in their entirety on the ninth anniversary of the
grant date. The granting corporation may permit the holders 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. The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock effected on June 5, 1996
in the form of a 50% stock dividend.
(2) All of the options reported in the table except those options granted to
Mr. Johnson were granted under stock option plans maintained by Thermo
Electron and accordingly are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1996
The following table reports certain information regarding stock option
exercises during fiscal 1996 and outstanding stock options held at the end of
fiscal 1996 by the Corporation's chief executive officer and the other named
executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1996.
8
11
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-End OPTION VALUES
- ----------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY
SHARES YEAR-END OPTIONS
ACQUIRED VALUE (EXERCISABLE/ (EXERCISABLE/
NAME COMPANY ON EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)
---- ------- ----------- -------- -------------- --------------
John P. Appleton(2) Thermo Remediation -- -- 63,000/0 $453,285/--
- ----------------------------------------------------------------------------------------------------
Jeffrey L. Powell Thermo Remediation -- -- 111,000/0 $731,145/--
Thermo TerraTech 10,800 $75,168 63,000/0(3) $342,535/--
Thermo BioAnalysis -- -- 0/2,000(5) $ --/0
Thermo Electron -- -- 38,774/0(4) $868,001/--
Thermo Fibertek -- -- 4,500/0 $ 53,249/--
Thermo Sentron -- -- 2,000/0 $ 4,000/--
ThermoLase -- -- 5,000/0 $ 7,500/--
ThermoLyte -- -- 0/2,000(5) $ --/0
ThermoQuest -- -- 6,000/0 $ 24,000/--
Trex Medical -- -- 4,000/0 $ 4,000/--
- ----------------------------------------------------------------------------------------------------
James Lousararian Thermo Remediation -- -- 70,500/0 $459,998/--
Thermo TerraTech 3,600 $33,894 38,250/0(3) $253,034/--
Thermedics 1,500 $22,058 -- --
Thermo Electron 5,061 $98,325 4,275/0 $103,875/--
Thermo Fibertek Therm -- -- 4,500/0 $ 53,249/--
Thermo Power 2,000 $20,590 -- --
- ----------------------------------------------------------------------------------------------------
Bruce J. Taunt Thermo Remediation -- -- 18,000/0 $116,010/--
Thermo TerraTech -- -- 42,000/0(3) $244,210/--
Thermo Electron -- -- 10,312/0 $142,756/--
- ----------------------------------------------------------------------------------------------------
Nels R. Johnson Thermo Remediation -- -- 22,250/0 $ 16,189/--
Thermo TerraTech -- -- 12,000/0 $ 56,340/--
Thermo Electron -- -- 15,182/0 $389,891/--
Thermo Instruments -- -- 20,625/0 $391,538/--
Thermo Spectra -- -- 600/0 $ 4,425/--
- ----------------------------------------------------------------------------------------------------
- ----------
<FN>
(1) All of the options granted during the fiscal year are immediately
exercisable at the date of grant, except options to purchase the common
stock of Thermo BioAnalysis Corporation and ThermoLyte Corporation, which
are not exercisable until that company's stock is publicly traded. However,
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. For publicly traded companies,
the repurchase rights generally lapse ratably over a five- to ten-year
period, depending on the option term, which may vary from seven to twelve
years, provided that the optionee continues to be employed by the
Corporation or another Thermo Electron company. For companies whose shares
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The shares of common stock of
Thermo Electron shown in the table reflect a three-for-two split of such
stock effected on June 5, 1996 in the form of a 50% stock dividend.
(2) Dr. Appleton has served as a vice president of Thermo Electron since 1975
and holds unexercised options to purchase common stock of Thermo Electron
and certain of its subsidiaries other than the Corporation. These options
are not reported here as they were granted as compensation for service to
other Thermo
9
12
Electron companies in capacities other than in his capacity as the chief
executive officer of the Corporation.
(3) Options to purchase 15,000, 9,000 and 15,000 shares of the common stock of
Thermo TerraTech held by Mr. Powell, Mr. Lousararian and Mr. Taunt,
respectively, are subject to the same terms described in footnote (1),
except that in the event of the optionee's voluntary resignation or
discharge for cause prior to February 8, 1998, all of the shares acquired
upon exercise of these options are subject to repurchase by Thermo
TerraTech at the exercise price. In addition, all shares acquired upon the
exercise of these options are subject to restrictions on resale until
February 8, 1998.
(4) Options to purchase 15,000 shares of the common stock of Thermo Electron
granted to Mr. Powell are subject to the same terms as described in
footnote (1), except that the repurchase rights of the granting corporation
generally do not lapse until the tenth anniversary of the grant date. In
the event of the employee's death or involuntary termination prior to the
tenth anniversary of the grant date, the repurchase rights of the granting
corporation shall be deemed to have lapsed ratably over a five-year period
commencing with the fifth anniversary of the grant date.
(5) No public market existed for the shares underlying these options as of
March 29, 1996. Accordingly, no value in excess of exercise price has been
attributed to these options.
SEVERANCE AGREEMENTS
Thermo Electron has entered into severance agreements with several key
employees, including Dr. Appleton. These agreements provide severance benefits
if there is a change of control of Thermo Electron that is not approved by the
Board of Directors of Thermo Electron and the employee's employment with Thermo
Electron or one of its majority-owned subsidiaries is terminated, for whatever
reason, within one year thereafter. For purposes of the agreements, a change of
control exists upon (i) the acquisition of 50% or more of the outstanding common
stock of Thermo Electron by any person without the prior approval of the board
of directors of Thermo Electron, (ii) the failure of the board of directors of
Thermo Electron, within two years after any contested election of directors or
tender or exchange offer not approved by the board of directors, to be
constituted of a majority of directors holding office prior to such event or
(iii) any other event that the board of directors of Thermo Electron determines
constitutes an effective change of control of Thermo Electron. The benefit under
these agreements is stated as an initial percentage which was established by the
Board of Directors of Thermo Electron and was generally based upon the
employee's age and length of service with Thermo Electron at the time of
severance. Benefits are to be paid over a five-year period. The benefit to be
paid in the first year is determined by applying this percentage to the
employee's highest annual total remuneration in any 12-month period during the
preceding three years. This benefit is reduced by 10% in each of the succeeding
four years in which benefits are paid. The initial percentage to be so applied
to Dr. Appleton is 40.1%. Assuming that severance benefits would have been
payable under such agreements as of April 1, 1996, Dr. Appleton would have
received approximately $108,250 in the first year thereof from Thermo Electron.
10
13
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 TerraTech has created the
Corporation as a publicly held subsidiary, and Thermo Electron and certain of
its subsidiaries have created several other privately and publicly held
subsidiaries. From time to time, Thermo Electron and its subsidiaries will
create other majority-owned subsidiaries as part of its spinout strategy. (The
Corporation and the other Thermo Electron subsidiaries are hereinafter referred
to as the "Thermo Subsidiaries".)
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries have adopted the Thermo Electron Corporate Charter (the
"Charter") to define the relationships and delineate the nature of such
cooperation among themselves. The purpose of the Charter is to ensure that (1)
all of the companies and their stockholders are treated consistently and fairly,
(2) the scope and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each company has access
to the combined resources and financial, managerial and technological strengths
of the others, and (4) Thermo Electron and the Thermo Subsidiaries, in the
aggregate, are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range financial 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, 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 1.2% of the
Corporation's
11
14
revenues for these services for calendar 1995. Beginning January 1, 1996, the
fee has been reduced to 1.0% of the Corporation's revenues. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1996, Thermo Electron assessed the Corporation $767,000
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 representative of the expenses the Corporation would have incurred
on a stand-alone basis. For 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-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.
As of March 30, 1996, $26,247,000 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 and have a maturity of
three months or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the beginning of
each quarter.
On June 30, 1995, the Corporation issued 1,583,360 shares of Common Stock
to Thermo TerraTech in consideration of the acquisition of Thermo TerraTech's
Nuclear Services Group (renamed Thermo Nutech) by the Corporation. Such shares
had a fair market value of $24,740,000 as of June 30, 1995. Thermo Nutech was
acquired by Thermo TerraTech in April 1995, along with several unrelated
environmental services businesses, for an aggregate purchase price of
$34,300,000, upon the dissolution of the joint venture between Thermo TerraTech
and Thermo Instrument Systems Inc. that had operated such businesses. The
methodology adopted by the Board of Directors of the Corporation in
establishing the valuation of Thermo Nutech was the same as that used by the
Corporation when making unrelated party acquisitions of mature, profitable
companies. The most important element of such method is based on projected
return on total investment: specifically, the pre-tax return on total investment
for the first full year of operation after the acquisition should not be less
than 10.0%, with a reasonable expectation that in future years the return on
investment would exceed that amount. Using Thermo Nutech's projected pre-tax
income of $2,474,000 for fiscal year 1996, a return on investment equal to
10.0% resulted in a valuation of $24,740,000.
12