SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------------------
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
(mark one)
X Annual Report Pursuant to Section 13 or 15(d) of the
---
Securities Exchange Act of 1934 for the fiscal year ended
September 28, 1996
___ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-14262
THERMOQUEST CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0407461
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
355 River Oaks Parkway
San Jose, California 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408)
577-1053
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange 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
PAGE
nonaffiliates of the Registrant as of January 24, 1997, was
approximately $53,336,000.
As of January 24, 1997, the Registrant had 48,450,000 shares of
Common Stock outstanding.
PAGE
ThermoQuest Corporation Amendment No. 1
on Form 10K/A to Annual Report on Form 10-K
for the fiscal year ended December 28, 1996
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Fiscal 1996 Annual Report to
Shareholders for the year ended December 28, 1996, are
incorporated by reference into Parts I and II.
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.
------------
Items 10, 11, 12 and 13 of Part III of the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 1996
are hereby amended and restated in their entirety as contained in
the following Attachment A, which is included herein and made a
part of this Annual Report on Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Amendment No. 1 on Form 10-K/A to be signed by the
undersigned, duly authorized officer.
THERMOQUEST CORPORATION
By: /s/ Jonathan W. Painer
----------------------
Jonathan W. Painter
Treasurer
ATTACHMENT A
PAGE
DIRECTORS
Set forth below are the names of the persons serving 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") and
Thermo Instrument's parent company, Thermo Electron Corporation
("Thermo Electron"), is reported under the caption "Stock
Ownership."
RichardW.K. Chapman Dr. Chapman, 52, has been the chief
executive officer, president and a director
of the Corporation since its inception in
June 1995. He served as president of
Finnigan Corporation ("Finnigan"), a
subsidiary of the Corporation, from 1992 to
1995, and as marketing manager of Finnigan
from 1989 to 1995. Dr. Chapman has been a
vice president of Thermo Instrument since
1992. He is also a director of Thermo
BioAnalysis Corporation and Thermo
Cardiosystems Inc.
George N. Dr. Hatsopoulos, 70, has been the chairman
Hatsopoulos of the board and a director of the
Corporation since its inception in June
1995. He has served as chairman and chief
executive officer of Thermo Electron since
he founded that company in 1956 and as
president of Thermo Electron from 1956 to
January 1997. Dr. Hatsopoulos is also a
director of Thermo Ecotek Corporation,
Thermo Electron, Thermo Fibertek Inc.,
Thermo Instrument, Thermedics Inc., Thermo
Optek Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the
brother of John N. Hatsopoulos, the chief
financial officer and a vice president of
the Corporation.
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PAGE
Frank Jungers Mr. Jungers, 69, has been a director of the
Corporation since January 1996. Mr.
Jungers has been a self-employed consultant
on business and energy matters since 1977.
In addition, he was vice chairman of Riedel
Environmental Technologies, Inc. from July
1989 to October 1991 and was president of
that company from January 1989 until July
1989. Mr. Jungers is also a director of
The AES Corporation, Donaldson, Lufkin &
Jenrette, Georgia-Pacific Corporation,
Thermo Electron and Thermo Ecotek
Corporation.
Anthony J. Mr. Pellegrino, 56, has been a director of
Pellegrino the Corporation since its inception in June
1995. Mr. Pellegrino has been director of
corporate development of ThermoTrex
Corporation ("ThermoTrex"), a Thermo
Electron subsidiary which, among other
things, manufactures mammography and
needle-biopsy systems and supplies general
x-ray equipment, since March 1997 and was a
senior vice president of that company from
July 1995 to March 1997. For more than
five years prior to 1995, Mr. Pellegrino
served as the chief executive officer and
chairman of LORAD Corporation, a company
acquired in 1992 by ThermoTrex. Mr.
Pellegrino is also a director of ThermoLase
Corporation and Trex Medical Corporation.
Michael E. Porter Dr. Porter, 49, has been a director of the
Corporation since November 1995. He has
been the C. Roland Christensen Professor of
Business Administration at the Harvard
Business School since 1990, and has held
various teaching positions at the Harvard
Business School since 1973. Dr. Porter is
also a director of Alpha-Beta Technologies
Inc. and Parametric Technologies
Corporation.
3
PAGE
Arvin H. Smith Mr. Smith, 67, 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 chief executive officer and
chairman of the board of Thermo Instrument
since 1986 and March 1997, respectively,
and also was the president of Thermo
Instrument from 1986 to March 1997. 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
Thermedics Inc., Thermo BioAnalysis
Corporation, Thermo Instrument, Thermo
Power Corporation, ThermoQuest Corporation
and ThermoSpectra Corporation.
Committees of the Board of Directors and Meeting
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. Porter (Chairman) and Mr. Jungers. 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 Mr.
Jungers (Chairman) and Dr. Porter . The Human Resources Committee
reviews the performance of senior members of management,
recommends executive compensation and administers the
Corporation's stock option and other stock-based compensation
plans. The Corporation does not have a nominating committee of
the Board of Directors. The Board of Directors met five times,
the Audit Committee met once and the Human Resources Committee
met six 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 companies affiliated with Thermo
Electron (also referred to as "outside directors") receive an
annual retainer of $4,000 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. Chapman, Dr. Hatsopoulos,
Mr. Pellegrino and Mr. Smith 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
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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
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 Instrument 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 75,000 shares
of Common Stock have been reserved for issuance under the
Deferred Compensation Plan. As of March 1, 1997, deferred units
equal to 1,247.64 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 of the Corporation 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
2000, awards options to purchase 1,000 shares annually to outside
directors. A total of 225,000 shares of Common Stock have been
reserved for issuance under the Directors Plan.
Under the Directors Plan, each outside director was granted
an option to purchase 45,000 shares of Common Stock upon the
effective date of the Corporation's initial public offering. The
size of awards to new directors appointed to the Board of
Directors after 1996 is reduced by 11,250 shares each year.
Outside directors who join the Board of Directors after 1999
would not receive an option grant upon their appointment or
election to the Board of Directors, but would be eligible to
participate in the annual option awards described below. Options
evidencing initial grants to directors are exercisable six months
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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 11,250 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 2000. 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 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 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, 1997, options to purchase 90,000
shares had been granted under the Directors Plan, no options had
lapsed, and options to purchase 135,000 shares of Common Stock
were available for grant under the Directors Plan.
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. Directors who are also executive
officers of the Corporation are 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."
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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.
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, 1997, with respect to
(i) each person who was known by the Corporation to own
beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each executive officer named in
the summary compensation table under the heading "Executive
Compensation" and (iv) all directors and current executive
officers as a group.
While certain directors and executive officers of the
Corporation are also directors and executive officers of Thermo
Instrument or its subsidiaries other than the Corporation, all
such persons disclaim beneficial ownership of the shares of
Common Stock owned by Thermo Instrument.
ThermoQuest Thermo Thermo
Instrument Electron
Name (1) Corporation Systems Inc. Corporation
-------- ----------- ------------ -----------
(2) (3) (4)
--- --- ---
Thermo Instrument 45,000,000 N/A N/A
Systems Inc. (5)
Richard W. K. Chapman 240,650 139,087 82,126
George N. Hatsopoulos 90,000 143,314 3,523,079
Frank Jungers 45,565 52,568 245,754
Anthony J. Pellegrino 91,000 0 115,875
Michael E. Porter 92,181 0 2,000
Arvin H. Smith 90,000 431,653 513,038
Philip L. Warren 85,000 59,935 21,518
All Directors and
current executive
officers as a group 832,496 926,467 5,175,156
(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 Dr.
Chapman, Dr. Hatsopoulos, Mr. Jungers, Mr. Pellegrino, Dr.
Porter, Mr. Smith, Mr. Warren and all directors and
executive officers as a group include 225,000, 90,000,
45,000, 90,000, 90,000, 90,000, 75,000 and 801,000 shares,
respectively, that such person or group has the right to
acquire within 60 days of March 1, 1997, through the
exercise of stock options. Shares of Common Stock owned by
Mr. Jungers, Dr. Porter and all directors and executive
officers as a group include 565, 681 and 1,246 full shares
allocated through March 1, 1997, to their respective
accounts maintained pursuant to the Corporation's deferred
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compensation plan for directors. No director or executive
officer beneficially owned more than 1% of the Common Stock
outstanding as of March 1, 1997; all directors and executive
officers as a group beneficially owned 1.79% of the Common
Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially
owned by Dr. Chapman, Dr. Hatsopoulos, Mr. Jungers, Mr.
Smith, Mr. Warren and all directors and executive officers
as a group include 121,287, 93,750, 13,809, 234,375, 30,375
and 574,221 shares, respectively, that such person or group
had the right to acquire within 60 days after March 1, 1997,
through the exercise of stock options. Shares of the common
stock of Thermo Instrument beneficially owned by Dr.
Hatsopoulos, Mr. Smith and all directors and executive
officers as a group include 529, 516 and 1,984 shares,
respectively, allocated through March 1, 1997, 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 of common
stock of Thermo Instrument beneficially owned by Mr. Jungers
and all directors and executive officers as a group include
12,200 full shares allocated through March 1, 1997 to Mr.
Junger's account maintained pursuant to Thermo Instrument's
deferred compensation plan for directors. Shares of the
common stock of Thermo Instrument beneficially owned by Mr.
Jungers includes 543 shares held by his spouse. Shares of
the common stock of Thermo Instrument beneficially owned by
Dr. Hatsopoulos includes 21,368 shares held by his spouse
and 50 shares allocated to the account of his spouse
maintained pursuant to the ESOP. The directors and
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, 1997.
(4) The shares of the common stock of Thermo Electron shown in
the table reflect a three-for-two split of such stock
distributed in June 1996 in the form of a 50% stock
dividend. Shares of the common stock of Thermo Electron
beneficially owned by Dr. Chapman, Dr. Hatsopoulos, Mr.
Jungers, Mr. Pellegrino, Mr. Smith, Mr. Warren and all
directors and executive officers as a group include 80,284,
1,510,300, 9,375, 115,875, 222,411, 19,386 and 2,484,890
shares, respectively, that such person or group has the
right to acquire within 60 days of March 1, 1997, through
the exercise of stock options. Shares of the common stock of
Thermo Electron beneficially owned by Dr. Hatsopoulos, Mr.
Smith and all directors and executive officers as a group
include 2,317, 1,717 and 7,292 full shares, respectively,
allocated to accounts maintained pursuant to the ESOP.
Shares beneficially owned by Dr. Hatsopoulos include 89,601
shares held by his spouse, 168,750 shares held by a QTIP
trust of which his spouse is the trustee, 39,937 shares held
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by a family trust of which his spouse is the trustee and 153
shares allocated to the account of his spouse maintained
pursuant to the ESOP. No director or executive officer
beneficially owned more than 1% of the common stock of
Thermo Electron outstanding as of March 1, 1997, except for
Dr. Hatsopoulos, who beneficially owned 2.3% of such stock
as of such date; all directors and executive officers as a
group beneficially owned approximately 3.4% of the Thermo
Electron common stock outstanding as of such date.
(5) As of March 1, 1997, Thermo Instrument beneficially owned
92.9% of the outstanding Common Stock. Thermo Instrument's
address is 1275 Hammerwood Avenue, Sunnyvale, California
94089. As of March 1, 1997, Thermo Instrument had the power
to elect all of the members of the Corporation's Board of
Directors. Thermo Instrument is a majority owned subsidiary
of Thermo Electron and therefore, Thermo Electron may be
deemed a beneficial owner of the shares of Common Stock
beneficially owned by Thermo Instrument. Thermo Electron
disclaims beneficial ownership of these shares.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as
Thermo Electron, to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of
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 1996, except
in the following instances. The Form 3 for Mr. Paul F. Kelleher
was omitted from the original filings for all executive officers
at the time of the Corporation's initial public offering and was
filed in February 1997. Thermo Instrument, the beneficial owner
of more than 10% of the Common Stock, filed three Forms 4 late,
reporting a total of four transactions, consisting of one grant
of an employee stock option to purchase shares of Common Stock
and the lapse of three such options without exercise. Thermo
Electron, the parent company of Thermo Instrument, filed five
Forms 4 late, reporting a total of 11 transactions, including the
four transactions reported by Thermo Instrument, as well as, four
open market purchases, two exercises of employee stock options
and one additional lapse of such options without exercise.
EXECUTIVE COMPENSATION
Note: All share amounts reported below, in all cases, have been
adjusted as applicable to reflect a three-for-two stock split
with respect to the common stock of Thermo Electron distributed
in June 1996 in the form of a 50% stock dividend.
Summary Compensation Table
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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 one other most
highly compensated executive officer for the last two 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.
Summary Compensation Table
Long Term
Compensation
------------
Securities
Underlying
Annual Options
Compensation (No. of
Name and Fiscal ------------ Shares and All Other
Principal Position Year Salary Bonus Company)(1) Compensation(2)
------------------ ---- ------ ----- ------------ -------------
<c
Richard W. K.Chapman 1996 $170,000$125,000 225,000 (TMQ) $6,130 (3)
President & Chief 150 (TMO)
Executive Officer 30,000 (TBA)
2,000 (TFG)
2,000 (TLT)
15,000 (TOC)
2,000 (TSR)
4,000 (TXM)
1995 $159,494 $95,000 -- -- $6,749
Philip L. Warren 1996 $152,817 $80,000 75,000 (TMQ) $3,849 (3)
Vice President 11,250 (TOC)
1995 $146,931 $50,000 15,000 (TMO)
1,000 (TBA)
(1) Options granted by the Corporation are designated in the
table as "TMQ." In addition, the named executive officers
have also 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
BioAnalysis Corporation (designated in the table as TBA),
Thermo Electron (designated in the table as TMO), Thermo
Fibergen Inc. (designated in the table as TFG), ThermoLyte
Corporation (designated in the table as TLT), Trex Medical
Corporation (designated in the table as TXM), Thermo
Instrument (designated in the table as THI), Thermo Optek
Corporation (designated in the table as TOC) and Thermo
Sentron, Inc. (designated in the table as TSR).
(2) Represents the amount of matching contributions made by the
individual's employer on behalf of executive officers
participating in the 401(k) plan maintained by Finnigan
Corporation, a subsidiary of the Corporation.
(3) In addition to the matching contribution referred to in
footnote (2), such amount includes $3,443 and $1,853, which
represents the amount of compensation attributable to
interest-free loan provided to Dr. Chapman and Mr. Warren,
respectively, pursuant to the Corporation'sstock holding
assistance plan. See "Relationship with Affiliates - Stock
Holding Assistance Plan."
Stock Options Granted During Fiscal 1996
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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 officer. 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.
Option Grants in Fiscal 1996
Potential Realizable
Percent of Value at Assumed
Total Annual Rates of Stock
Options
Number of Granted to Exercise Price Appreciation for
Securities
Underlying Employees Price Expir- Option Term (2)
Options in Per ation
Name Granted (1) Fiscal Year Share Date 5% 10%
----------- ----------- ----- ---- -- ---
Richard W. K. 225,000(TMQ) 12.3% $13.00 01/10/08 $2,328,750 $6,255,000
Chapman
150(TMO) 0.01%(3) $42.79 05/22/99 $1,011 $2,124
30,000(TBA) 3.7%(3) $10.00 01/31/08 $238,800 $641,400
2,000(TFG) 0.4%(3) $10.00 09/12/08 $15,920 $42,760
2,000(TLT) 0.6%(3) $10.00 03/11/08 $15,920 $42,760
15,000(TOC) 0.5%(3) $12.00 04/11/08 $143,250 $384,900
2,000(TSR) 0.4%(3) $14.00 03/11/08 $22,280 $59,880
4,000(TXM) 0.2%(3) $11.00 03/11/08 $35,000 $94,080
Philip L. Warren 75,000(TMQ) 4.1% $13.00 01/10/08 $776,250 $2,085,000
(1) The options granted during the fiscal year are immediately
exercisable, except options to purchase of the common stock
of ThermoLyte Corporation (designated in the table as TLT),
which are not exercisable until the earlier of (i) 90 days
after the effective date of the registration of that
company's common stock under Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act") and (ii) nine
years after the grant date. In all cases, the shares
acquired upon exercise are subject to repurchase by the
granting corporation at the exercise price if the optionee
ceases to be employed by 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 that are not publicly traded, the repurchase
rights lapse in their entirety on the ninth anniversary of
the grant date. Certain options granted as part of Thermo
Electron's stock option program 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 on this table represent hypothetical gains
that could be achieved for the respective options if
exercised at the end of the option term. These gains are
based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options
were granted to their expiration date. The gains shown are
net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the
exercise. Actual gains, if any, on stock option exercises
will depend on the future performance of the common stock of
the granting corporation, the optionee's continued
employment through the option period and the date on which
the options are exercised.
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(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 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 officer. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
Aggregated Option Exercises In Fiscal 1996 And Fiscal 1996 Year-End Option Values
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired Value (Exercisable/ In-the-Money
on
Name Company Exercise RealizedUnexercisable) (1) Options
Richard W. K. ThermoQuest -- -- 225,000 /0 $0 /0
Chapman (2)
Thermo -- -- 150 /0 /0
Electron
Thermo -- -- 30,000 /0 $93,750 /0
BioAnalysis
Thermo -- -- 2,000 /0 $1,500 /0
Fibergen
ThermoLyte -- -- 0 /2,000 $0 /0 (4)
Thermo Optek -- -- 15,000 /0 $0 /0
Thermo -- -- 2,000 /0 $0 /0
Sentron
Trex Medical -- -- 4,000 /0 $6,500 /0
Philip L. Warren ThermoQuest -- -- 75,000 /0 $0 /--
Thermo 2,362 $63,445 19,386 /0 (3) $179,393 /--
Electron
Thermo -- -- 1,000 /0 $3,125 /--
BioAnalysis
Thermo -- -- 3,375 /0 $20,250 /--
Fibertek
Thermo -- -- 30,375 /0 $596,451 /--
Instrument
Thermo Optek -- -- 11,250 /0 $0 /--
Thermo- 200 $1,100 800 /0 $1,500 /--
Spectra
(1) All of the options reported outstanding at the end of the
fiscal year are 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 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 granted as a part of Thermo
Electron's stock option program 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 such options to exercise options and to
satisfy tax withholding obligations by surrendering shares
equal in fair market value to the exercise price or
withholding obligation.
(2) Dr. Chapman also holds unexercised options to purchase
common stock of Thermo Electron and its subsidiaries other
than the Corporation. These options are not reported here
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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.
(3) Options to purchase 15,000 shares of the common stock of
Thermo Electron granted to Mr. Warren 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 optionee'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.
(4) No public market for the shares underlying these options
existed at fiscal year-end. Accordingly, no value in excess
of the exercise price has been attributed to these options.
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 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 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
13
PAGE
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.
However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group
and to provide certain administrative functions mandated by
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
14
PAGE
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 for
fiscal 1996. 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 $3,138,000
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 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.
From time to time, the Corporation may transact business
with other companies in the Thermo Group. During fiscal 1996
these transactions included the following:
The Corporation acts as a distributor of certain products of
Thermo BioAnalysis Corporation ("Thermo BioAnalysis"), is the
exclusive distributor of such company's MALDI-TOF products in
Japan and is the exclusive distributor of its CE products in
countries where the Corporation maintains a direct sales force.
In consideration of such arrangements, Thermo BioAnalysis sells
the Corporation such products at discounted rates negotiated by
the parties. The Corporation is responsible for all installation
and warranty labor obligations at its expense. These
arrangements may be terminated on not less than three months'
notice by either party. For the fiscal year ended December 28,
1996, Thermo BioAnalysis sold $1,974,000 of products to the
Corporation under these arrangements. In addition, Thermo
BioAnalysis pays the Company a finder's fee for each qualified
lead that generates an order for its MALDI-TOF products from
customers in the United States and Europe.
Thermo BioAnalysis has also entered into an arrangement with
the Corporation whereby the Corporation provides assembly labor
15
PAGE
for Thermo BioAnalysis' CE products on a contract basis. Under
this arrangement, the Corporation assembles instruments as
required by Thermo BioAnalysis for a charge based on the sum of
the Corporation's actual cost of materials and the allocable
portion of its labor, overhead and other indirect expenses. For
the fiscal year ended December 28, 1996, Thermo BioAnalysis paid
the Corporation approximately $468,000 under this arrangement.
The Corporation acts as a distributor in various countries
outside the United States for certain products manufactured by
various wholly owned subsidiaries of Thermo Instrument, as well
as for certain products manufactured by Thermo BioAnalysis and
Thermo Optek Corporation ("Thermo Optek"), each majority-owned
subsidiaries of Thermo Instrument. For the fiscal year ended
December 28, 1996, the Corporation purchased approximately
$1,071,000 of the wholly owned Thermo Instrument subsidiaries'
products, approximately $69,000 of Thermo BioAnalysis' products,
and approximately $1,427,000 of Thermo Optek's products under
these arrangements.
Thermo Optek and various wholly owned subsidiaries of Thermo
Instrument act as distributors for certain of the Corporation's
products in various countries outside the United States. For the
fiscal year ended December 28, 1996, Thermo Optek purchased
approximately $3,807,000 of the Corporation's products and the
wholly owned Thermo Instrument subsidiaries purchased
approximately $7,088,000 of the Corporation's products under
these arrangements.
Certain of the Company's products incorporate circuit boards
and other equipment manufactured by Thermo Optek. For the fiscal
year ended December 28, 1996, the Corporation purchased
approximately $5,924,000 of Thermo Optek's products under this
arrangement. In addition, Tecomet Inc. ("Tecomet"), a wholly
owned subsidiary of Thermo Electron, manufactures certain parts
of the Company's quadrupole mass spectrometers. For the fiscal
year ended December 28, 1996, the Corporation purchased
approximately $1,135,000 of Tecomet's products under this
arrangement.
As of December 28, 1996, $152,063,000 of the Company'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 U.S.
government agency securities, corporate notes, commercial paper,
money market funds, and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's
funds subject to the repurchase agreement are readily convertible
into cash by the Corporation. The repurchase agreement earns a
rate based on the 90-day Commercial Paper Composite Rate plus 25
basis points, set at the beginning of each quarter.
Stock Holding Assistance Plan
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PAGE
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 these individuals to purchase
Common Stock in the open market. In 1996, Dr. Richard W. K.
Chapman, the Corporation's chief executive officer, received a
loan in the principal amount of $210,653.50 under this plan to
purchase 15,000 shares of common stock, Mr. Philip L. Warren, the
Corporation's vice president, received a loan in the principal
amount of $139,881.57 under this plan to purchase 10,000 shares
of common stock and Mr. Daniel T. Feeney, the Corporation's
controller, received a loan in the principal amount of $71,495
under this plan to purchase 5,000 shares of common stock. Each
loan is payable on demand and requires that 20% of the principal
amount of the loan be repaid from the bonus payable to each
officer in each of the next five years until the loan is repaid
in full, unless otherwise determined by the Human Resources
Committee of the Corporation's Board of Directors, commencing
with the bonus payment in 1997 for calendar 1996 performance.
AA971050006