SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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LOGO
ELECTRON CORPORATION
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046
April 12, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of the
Stockholders of Thermo Electron Corporation. Your board of directors and
management look forward to greeting personally those stockholders able to
attend.
Our Annual Report for the year ended December 30, 2000, is enclosed. I hope
you will read it carefully. Please feel free to forward any questions you may
have if you are unable to attend the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Company to vote your shares for you if you do not attend the meeting. It is
important that your shares are represented and voted at the meeting whether or
not you plan to attend. Accordingly, you are requested to sign, date and mail
the enclosed proxy in the envelope provided at your earliest convenience.
On behalf of the board of directors, thank you for your cooperation and
continued support.
Yours very truly,
/s/ Richard F. Syron
RICHARD F. SYRON
Chairman and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD.
Thermo
ELECTRON CORPORATION
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046
April 12, 2001
To the Holders of the Common Stock of
THERMO ELECTRON CORPORATION
NOTICE OF ANNUAL MEETING
The 2001 Annual Meeting of the Stockholders of Thermo Electron Corporation
("Thermo Electron" or the "Company") will be held on Wednesday, May 16, 2001, at
3:30 p.m. in the Auditorium of the Fleet Conference Center, 100 Federal Street,
First Floor, Boston, Massachusetts. The purpose of the meeting is to consider
and take action upon the following matters:
1. Election of three directors, comprising the class of directors to be
elected for a three-year term expiring in the year 2004.
2. A proposal recommended by the Board of Directors to approve the
Company's 2001 equity incentive plan and to reserve five million shares
for issuance under the plan.
3. A proposal recommended by the Board of Directors to approve the
Company's 2000 employees' stock purchase plan.
4. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Company will not be closed prior to the meeting,
but, pursuant to appropriate action by the board of directors, the record date
for the determination of the stockholders entitled to notice of and to vote at
the meeting is March 30, 2001.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your stock be represented at the meeting regardless of the number
of shares you may hold. Enclosed is a proxy authorizing three officers of the
Company to vote your shares as you instruct. Whether or not you are able to be
present in person, please promptly sign the enclosed proxy and return it to our
transfer agent in the accompanying envelope, which requires no postage if mailed
in the United States.
This notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Vice President, Secretary
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo
Electron Corporation ("Thermo Electron" or the "Company") for use at the
2001 Annual Meeting of the Stockholders to be held on Wednesday, May 16, 2001,
at 3:30 p.m. in the Auditorium of the Fleet Conference Center, 100 Federal
Street, First Floor, Boston, Massachusetts and any adjournment thereof. The
mailing address of the executive office of the Company is 81 Wyman Street, P.O.
Box 9046, Waltham, Massachusetts 02454-9046. This proxy statement and the
enclosed proxy were first furnished to stockholders of the Company on or about
April 23, 2001.
VOTING PROCEDURES
The board of directors intends to present to the meeting the election
of three directors, constituting the class of directors to be elected for a
three-year term expiring in 2004, and two other proposals. The first proposal is
to approve the Company's 2001 equity incentive plan and reserve five million
shares for issuance under the plan. The second proposal is to approve the
Company's 2000 employees' stock purchase plan.
The representation in person or by proxy of a majority of the
outstanding shares of common stock, $1.00 par value, of the Company ("Common
Stock") entitled to vote at the meeting is necessary to provide a quorum for
the transaction of business at the meeting. Shares can be voted only if the
stockholder is present in person or is represented by returning a proxy. Each
stockholder's vote is very important. Whether or not you plan to attend the
meeting in person, please sign and promptly return the enclosed proxy card,
which requires no postage if mailed in the United States. Votes of stockholders
of record who are present at the meeting in person or by proxy, abstentions, and
broker non-votes (as defined below) are counted as present or represented at the
meeting for purposes of determining whether a quorum exists.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted FOR the management nominees for directors,
FOR the management proposals, and as the individuals named as proxy holders on
the proxy deem advisable on all other matters as may properly come before the
meeting.
Nominees for election as directors at the meeting will be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting. Withholding authority to vote for a nominee for director will
have no effect on the outcome of the vote. For the management proposals, the
affirmative vote of a majority of shares of Common Stock present or represented
by proxy and entitled to vote on the matter is necessary for approval. Because
abstentions are treated as shares present or represented and entitled to vote,
abstentions with respect to the management proposals have the same effect as a
vote against the proposal. If you hold your shares of Common Stock through a
broker, bank or other representative, generally the broker or your
representative may only vote the Common Stock that it holds for you in
accordance with your instructions. However, if it has not timely received your
instructions, the broker or your representative may vote on certain matters for
which it has discretionary voting authority. If a broker or your representative
cannot vote on a particular matter because it does not have discretionary voting
authority, this is a "broker non-vote" on that matter. As to the election of
directors and the management proposals, broker non-votes are not deemed to be
present and represented and are not entitled to vote, and therefore will have no
effect on the outcome of the vote.
A stockholder who returns a proxy may revoke it at any time before the
stockholder's shares are voted at the meeting by written notice to the Secretary
of the Company received prior to the meeting, or by executing and returning a
later dated proxy, or by voting by ballot at the meeting.
The outstanding stock of the Company entitled to vote (which excludes
shares held in treasury by the Company) as of March 30, 2001, consisted of
182,606,515 shares of Common Stock. Only stockholders of record at the close of
business on March 30, 2001, are entitled to vote at the meeting. Each share is
entitled to one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
For purposes of this meeting, the board of directors has fixed the
number of directors at nine, divided into three classes of three directors each.
Each class is elected for a three-year term at successive Annual Meetings of the
Stockholders. In all cases, directors hold office until their successors have
been elected and qualified, or until their earlier resignation, death or
removal. Mr. Marijn E. Dekkers, Mr. Robert A. McCabe and Mr. Robert W. O'Leary
are listed below as nominees for the three-year term expiring at the Annual
Meeting of the Stockholders to be held in the year 2004. All of the nominees
are currently directors of the Company.
In 2001, the board of directors adopted a mandatory retirement policy
for members of the board of directors. The policy states that no director will
be renominated for election after reaching the age of 70. Directors who are
already over 70 years of age will serve out their term of office, but will not
be nominated for election when their term of office expires.
Dr. Elias P. Gyftopoulos, who has served as a director of the Company
since 1976, is retiring from the board of directors at the Annual Meeting of the
Stockholders. The Company recognizes with gratitude and appreciation the
leadership, service and dedication of Dr. Gyftopoulos.
Nominees and Incumbent Directors
Set forth below are the names of the persons nominated as directors
and directors whose terms do not expire this year, their ages, their offices in
the Company, if any, their principal occupations 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 Company's Common Stock and of the common stock of
certain subsidiaries of the Company is reported under the caption "Stock
Ownership".
Nominees for Directors Whose Term of Office Will Expire in 2004
Marijn E. Dekkers Mr. Dekkers, 43, has been a director of the Company
since July 2000. He has been the chief operating officer and president of the
Company since July 2000. From June 1999 to July 2000, he served as the president
of Honeywell International's (formerly AlliedSignal Corporation) electronic
materials division; from August 1997 to May 1999, he served as vice president
and general manager of its fluorine products division; and from July 1995 to
July 1997, he served as vice president and general manager of its speciality
films division.
Robert A. McCabe Mr. McCabe, 66, has been a director of the Company
since 1962. He has been the chairman of Pilot Capital Corporation, which is
engaged in private investments, since 1998, and also served as the president of
Pilot Capital Corporation from 1987 to 1998. Mr. McCabe is also a director of
Church & Dwight Co., Inc.
Robert W. O'Leary Mr. O'Leary, 57, has been a director of the Company
since June 1998. He has been the chairman and chief executive officer of The
Sagamore Group, a firm specializing in change management situations with a focus
on the service sector, since March 2001. He was the president and chief
executive officer of PacificCare Health Systems Inc., a managed health services
company, from July 2000 to October 2000. From 1995 until July 2000, he was the
chairman and chief executive officer of Premier Inc., a strategic alliance of
not-for-profit health care and hospital systems. From 1990 to 1995, Mr. O'Leary
was the chairman of American Medical International, Inc., one of the three
predecessor entities of Premier Inc. Mr. O'Leary is also a director of Smith
Group PLC.
Incumbent Directors Whose Term of Office Will Expire in 2002
Frank Jungers Mr. Jungers, 74, has been a director of the Company
since 1978. Mr. Jungers has been a consultant on business and energy matters
since 1977. Mr. Jungers is also a director of The AES Corporation and Statia
Terminals Group N.V.
Hutham S. Olayan Ms. Olayan, 47, has been a director of the Company
since 1987. She has served since 1995 as president and a director of Olayan
America Corporation, a member of the Olayan Group, and as president and a
director of Competrol Real Estate Limited, another member of the Olayan Group,
from 1985 until its merger into Olayan America Corporation in 1997. The
surviving company is engaged in private investments, including real estate, and
advisory services.
Richard F. Syron Dr. Syron, 57, has been a director of the Company
since 1997, its chief executive officer since June 1999 and chairman of the
board since January 2000. He also served as president of the Company from June
1999 to July 2000. From April 1994 until May 1999, Dr. Syron was the chairman
and chief executive officer of the American Stock Exchange, Inc. Dr. Syron is
also a director of The American Stock Exchange, Inc., Dreyfus Corporation, John
Hancock Financial Services, Inc. and Thermo Fibertek Inc.
Incumbent Directors Whose Term of Office Will Expire in 2003
Samuel W. Bodman III Dr. Bodman, 62, has been a director of the Company
since 1999. Dr. Bodman has been the chairman of Cabot Corporation, a
manufacturer of specialty chemicals and materials, since 1988. From 1988 until
March 2001, he was also the chief executive officer of Cabot Corporation. Dr.
Bodman is also a director of Cabot Corporation, John Hancock Financial Services,
Inc., Security Capital Group Incorporated and Westvaco Corporation.
Peter O. Crisp Mr. Crisp, 68, has been a director of the Company since
1974. Mr. Crisp was a general partner of Venrock Associates, a venture capital
investment firm, for more than five years until his retirement in September
1997. He has been the vice chairman of Rockefeller Financial Services, Inc.
since December 1997. Mr. Crisp is also a director of American Superconductor
Corporation, Evans & Sutherland Computer Corporation, Lexent Inc., United States
Trust Corporation and Western Multiplex Corp.
Jim P. Manzi Mr. Manzi, 48, has been a director of the Company since May
2000. He is the managing director of Stonegate Capital, a firm he formed to
manage his personal investment activities in technology startup ventures,
primarily related to the Internet. From 1984 until 1995, he was the chairman,
president and chief executive officer of Lotus Development Corporation, a
software manufacturer that was acquired by IBM Corporation in 1995.
Committees of the Board of Directors and Meetings
The board of directors has established an executive committee, an
audit committee, a human resources committee and a nominating committee. The
present members of the executive committee are Dr. Syron (Chairman), Mr. Crisp,
Mr. Jungers and Ms. Olayan. The executive committee is empowered to act when it
is impractical to call a meeting of the entire board of directors and, with
certain exceptions, has the powers of the board of directors. The audit
committee consists solely of directors who meet the independence guidelines set
forth in the listing requirements of The New York Stock Exchange and its present
members are Mr. McCabe (Chairman), Dr. Gyftopoulos and Mr. Manzi. The audit
committee reviews the scope of the audit with the Company's independent public
accountants and meets with them for the purpose of reviewing the results of the
audit subsequent to its completion. The audit committee acts pursuant to the
charter attached as Appendix A to this proxy statement. The human resources
committee consists solely of directors who are not employees of the Company or
its subsidiaries ("outside directors") and its present members are Mr. Jungers
(Chairman), Dr. Bodman, Mr. Crisp and Mr. O'Leary. The human resources committee
reviews corporate organization, reviews the performance of senior members of
management, approves executive compensation and administers the Company's stock
option and other stock-based compensation plans. The nominating committee
consists solely of outside directors and its present members are Mr. Jungers
(Chairman), Dr. Bodman and Mr. O'Leary. The nominating committee reviews the
credentials of proposed nominees for directors, either to fill vacancies or for
election at the Annual Meeting of the Stockholders, and presents recommendations
for the selection of new directors to the board of directors. The board of
directors met eight times, the executive committee met three times, the audit
committee met twice, the human resources committee met eleven times and the
nominating committee met once during fiscal 2000. Each director attended at
least 75% of all meetings of the board of directors and committees on which he
or she served that were held during fiscal 2000.
Compensation Committee Interlocks and Insider Participation
The Company proposes to engage the services of The Sagamore Group to
provide advice regarding the proposed spin-off of the Company's biomedical
businesses. Mr. Robert W. O'Leary, a director of the Company and a member of
the human resources committee of the board of directors, is the chairman, chief
executive officer and principal shareholder of The Sagamore Group. The Sagamore
Group would be compensated at the rate of $3,800 a day for each day of service.
In addition, the Company would provide health insurance to Mr. O'Leary while The
Sagamore Group provides such services to the Company.
3
Compensation of Directors
Cash Compensation
Outside directors receive an annual retainer of $28,000 and a fee of
$1,000 per meeting for attending regular meetings of the board of directors and
its committees and $500 per meeting for participating in meetings of the board
of directors or its committees held by means of conference telephone. Payment of
directors' fees is made quarterly. Mr. Dekkers and Dr. Syron are full-time
employees of the Company and do not receive any cash compensation from the
Company for their service as a director. Directors are also reimbursed for out-
of-pocket expenses and in some instances for travel time incurred in attending
such meetings.
Deferred Compensation Plan for Directors
Under the Company'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 Company that is not approved by the board of directors, deferred
amounts become payable immediately. Any of the following are deemed to be a
change of control: (i) the acquisition by any person of 40% or more of the
outstanding common stock or voting securities of the Company; (ii) the failure
of the Company's board of directors to include a majority of directors who are
"continuing directors", which term is defined to include directors who were
members of the Company's board on July 1, 1999 or who subsequent to that date
were nominated or elected by a majority of directors who were "continuing
directors" at the time of such nomination or election; (iii) the consummation of
a merger, consolidation, reorganization, recapitalization or statutory share
exchange involving the Company or the sale or other disposition of all or
substantially all of the assets of the Company unless immediately after such
transaction (a) all holders of the Company's common stock immediately prior to
such transaction own more than 60% of the outstanding voting securities of the
resulting or acquiring corporation in substantially the same proportions as
their ownership immediately prior to such transaction and (b) no person after
the transaction owns 40% or more of the outstanding voting securities of the
resulting or acquiring corporation; or (iv) approval by stockholders of a
complete liquidation or dissolution of the Company. Amounts deferred pursuant to
the Deferred Compensation Plan are valued at the end of each quarter as units of
Common Stock. When payable, amounts deferred may be disbursed solely in shares
of Common Stock accumulated under the Deferred Compensation Plan. As of February
28, 2001, a total of 580,535 shares of Common Stock were reserved for issuance
under the Deferred Compensation Plan and deferred units equal to approximately
312,967 shares of Common Stock were accumulated under the Deferred Compensation
Plan.
Stock-Based Compensation
Outside directors of the Company are eligible for the discretionary
grant of stock options under the Company's equity incentive plan, which is
administered by the human resources committee of the board of directors. In
January 2000, each of the outside directors was granted options to purchase
15,000 shares of Common Stock, at an exercise price of $14.61 per share. These
options may be exercised at any time prior to the expiration of the option on
the fifth anniversary of the grant date.
In addition, the Company's directors stock option plan (the
"Directors Plan") provides for the automatic grant of stock options to
purchase shares of Common Stock to outside directors as additional compensation
for their service as directors. Pursuant to the Directors Plan, outside
directors receive an annual grant of options to purchase 1,000 shares of Common
Stock at the close of business on the date of each Annual Meeting of the
Stockholders of the Company. Options evidencing annual grants are immediately
exercisable at any time from and after the grant date of the option and expire
on the third 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 New York Stock Exchange (or other principal
market on which the common stock is then traded) for the five trading days
immediately preceding and including the date of grant. As of February 28, 2001,
options to purchase 51,750 shares of Common Stock were outstanding under the
Directors Plan, options to purchase 56,125 shares of Common Stock had been
exercised, and options to purchase 567,125 shares of Common Stock were available
for future grant.
4
Stock Ownership Policy for Directors
The human resources committee of the board of directors (the
"Committee") has established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level within a
three-year period. The chief executive officer of the Company is required to
comply with a separate stock holding policy established by the Committee, which
is described in "Committee Report on Executive Compensation--Stock Ownership
Policy".
STOCK OWNERSHIP
The following table sets forth, as of February 28, 2001, the
beneficial ownership of the Company's Common Stock by (a) each director and
nominee for director, (b) each of the Company's executive officers named in the
summary compensation table set forth below under the heading "Executive
Compensation" (the "named executive officers"), and (c) all directors and
current executive officers as a group, as well as their beneficial ownership of
the following majority-owned subsidiaries of the Company: Spectra-Physics
Lasers, Inc., Thermo Fibertek Inc., Thermo Fibergen Inc., a majority-owned
subsidiary of Thermo Fibertek Inc., and Thermo Trilogy Corporation. The common
stock of each of the majority-owned subsidiaries is publicly traded except for
the common stock of Thermo Trilogy Corporation, which is privately held. In
addition, the following table sets forth the beneficial ownership of Common
Stock, as of February 28, 2001, with respect to each person who was known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock.
While certain directors and executive officers of the Company are also
directors or executive officers of majority-owned subsidiaries of the Company,
all such persons disclaim beneficial ownership of the shares of common stock of
other Thermo Electron companies owned by the Company or such majority-owned
subsidiaries.
Thermo Thermo Thermo Thermo
Electron Spectra-Physics Fibertek Fibergen Trilogy
Name(1) Corporation (2) Lasers, Inc. (3) Inc. (4) Inc. (5) Corporation (6)
------- --------------- ---------------- --------- --------- ---------------
FMR Corporation (7)................ 26,723,617 N/A N/A N/A N/A
Dodge & Cox (8).................... 10,991,800 N/A N/A N/A N/A
Samuel W. Bodman................... 30,293 0 0 0 0
Peter O.Crisp...................... 143,803 0 1,500 1,000 0
Marijn E. Dekkers.................. 961,500 0 0 0 0
Elias P. Gyftopoulos............... 190,895 0 8,250 1,000 0
Brian D. Holt...................... 401,479 0 0 2,000 0
Frank Jungers...................... 247,764 0 8,250 4,000 3,000
Earl R. Lewis...................... 97,852 5,625 0 0 0
Jim P. Manzi....................... 16,061 0 0 0 0
Robert A. McCabe................... 111,936 0 8,250 1,000 18,000
Theo Melas-Kyriazi................. 695,975 0 86,250 27,000 0
Hutham S. Olayan................... 53,644 0 1,500 1,000 6,060
Robert W. O'Leary.................. 47,025 0 1,500 0 0
William A. Rainville............... 412,539 0 695,453 75,000 0
Richard F. Syron................... 1,405,548 0 0 0 0
All directors and current and
named executive officers as a
group (19 persons)................. 6,036,545 5,625 842,602 116,500 27,060
(1) Except as reflected in the footnotes to this table, shares of the Common
Stock of the Company and of the common stock of each of the Company's
subsidiaries 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 of the Company beneficially owned by Dr. Bodman,
Mr. Crisp, Mr. Dekkers, Dr. Gyftopoulos, Mr. Holt, Mr. Jungers, Mr. Lewis, Mr.
Manzi, Mr. McCabe, Mr. Melas-Kyriazi, Ms. Olayan, Mr. O'Leary, Mr. Rainville,
Dr. Syron and all directors and current executive officers as a group include
27,000, 25,460, 900,000, 73,477, 393,328, 82,454, 90,966, 15,000, 64,861,
618,449, 24,708, 28,566, 348,493, 1,311,000 and 5,114,867 shares, respectively,
that such person or members of the group have the right to acquire within 60
days of February 28, 2001, through the exercise of stock options. Shares
beneficially owned by Dr. Bodman, Mr. Crisp, Dr.
5
Gyftopoulos, Mr. Jungers, Mr. Manzi, Mr. McCabe, Ms. Olayan, Mr. O'Leary, Dr.
Syron and all directors and current executive officers as a group include 3,293,
49,277, 2,059, 80,427, 1,061, 34,725, 21,320, 5,459, 2,506 and 200,127 shares,
respectively, allocated to accounts maintained pursuant to the Deferred
Compensation Plan. Shares beneficially owned by Mr. Jungers include 215 shares
held by his spouse. Shares beneficially owned by Mr. McCabe include 109 shares
underlying units consisting of a fractional share and one redemption right that
were assumed by the Company in connection with the merger of the Company's
formerly publicly traded subsidiary, ThermoLase Corporation. Pursuant to the
redemption rights, these shares may be sold back to the Company for an aggregate
price of $16,828. Shares beneficially owned by Mr. Melas-Kyriazi include 1,377
shares issuable upon conversion of $100,000 in principal amount of the Company's
0% convertible subordinated debentures due 2003. Shares beneficially owned by
Ms. Olayan do not include 6,000,000 shares owned by Crescent Holding GmbH, a
member of the Olayan Group. Crescent Holding GmbH is indirectly controlled by
Suliman S. Olayan, Ms. Olayan's father. Ms. Olayan disclaims beneficial
ownership of the shares owned by Crescent Holding GmbH. Shares beneficially
owned by Mr. O'Leary include 13,000 shares held in a family trust of which Mr.
O'Leary and his spouse are the trustees. No director or named executive officer
beneficially owned more than 1% of the Common Stock outstanding as of February
28, 2001; all directors and current executive officers as a group beneficially
owned 3.3% of the Common Stock outstanding as of February 28, 2001.
(3) Shares of the common stock of Spectra-Physics Lasers, Inc. beneficially
owned by Mr. Lewis and all directors and current executive officers as a group
include 5,625 shares that he has the right to acquire within 60 days of February
28, 2001, through the exercise of stock options. The directors and the named
executive officers did not individually, and the directors and current executive
officers as a group did not, beneficially own more than 1% of the Spectra-
Physics Lasers, Inc. common stock outstanding as of February 28, 2001.
(4) Shares of the common stock of Thermo Fibertek Inc. beneficially owned by
Mr. Crisp, Dr. Gyftopoulos, Mr. Jungers, Mr. McCabe, Mr. Melas-Kyriazi, Ms.
Olayan, Mr. O'Leary, Mr. Rainville and all directors and current executive
officers as a group include 1,500, 1,500, 1,500, 1,500, 86,250, 1,500, 1,500,
550,000 and 675,750 shares, respectively, that such person or members of the
group have the right to acquire within 60 days of February 28, 2001, through the
exercise of stock options. Except for Mr. Rainville, who beneficially owned 1.1%
of the common stock of Thermo Fibertek Inc. outstanding as of February 28, 2001,
no director or named executive officer beneficially owned more than 1% of the
Thermo Fibertek Inc. common stock outstanding as of February 28, 2001; all
directors and current executive officers as a group beneficially owned 1.4% of
the Thermo Fibertek Inc. common stock outstanding as of February 28, 2001.
(5) Shares of the common stock of Thermo Fibergen Inc. beneficially owned by
Mr. Crisp, Dr. Gyftopoulos, Mr. Holt, Mr. Jungers, Mr. Lewis, Mr. McCabe, Mr.
Melas-Kyriazi, Ms. Olayan, Mr. Rainville and all directors and current executive
officers as a group include 1,000, 1,000, 2,000, 1,000, 1,000, 27,000, 1,000,
75,000 and 116,500 shares, respectively, that such person or members of the
group have the right to acquire within 60 days of February 28, 2001, through the
exercise of stock options. No director or named executive officer beneficially
owned more than 1% of the Thermo Fibergen Inc. common stock outstanding as of
February 28, 2001; all directors and current executive officers as a group
beneficially owned 1.01% of the Thermo Fibergen Inc. common stock outstanding as
of February 28, 2001.
(6) Shares of the common stock of Thermo Trilogy Corporation beneficially owned
by Mr. McCabe include 18,000 shares held by a trust of which he and members of
his family are trustees. Shares beneficially owned by Ms. Olayan do not include
60,000 shares owned by Crescent International Holdings Ltd., a member of the
Olayan Group which is indirectly controlled by Suliman S. Olayan, Ms. Olayan's
father. Ms. Olayan disclaims beneficial ownership of the shares owned by
Crescent International Holdings Ltd. The directors and the named executive
officers did not individually, and the directors and current executive officers
as a group did not, beneficially own more than 1% of the Thermo Trilogy
Corporation common stock outstanding as of February 28, 2001.
(7) Information regarding the number of shares of Common Stock beneficially
owned by FMR Corp. is based on the most recent Schedule 13G of FMR Corp.
received by the Company, which reported such ownership as of December 31, 2000.
The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
As of December 31, 2000, FMR Corp. beneficially owned approximately 14.8% of the
outstanding Common Stock.
(8) Information regarding the number of shares of Common Stock beneficially
owned by Dodge & Cox Incorporated is based on the most recent Schedule 13G of
Dodge & Cox Incorporated received by the Company,
6
which reported such ownership as of December 31, 2000. The address of Dodge &
Cox Incorporated is One Sansome Street, 35/th/ Floor, San Francisco, CA 94104.
As of December 31, 2000, Dodge & Cox beneficially owned approximately 6.0% of
the outstanding Common Stock.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Company's securities. Based upon a review
of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during 2000 except in the following instances. Mr.
Peter O. Crisp, Dr. Elias P. Gyftopoulos and Ms. Hutham S. Olayan, directors of
the Company, each filed one late Form 4 disclosing the exercise of stock options
pursuant to the Company's directors stock option plan. Mr. Theo Melas-Kyriazi,
an executive officer of the Company, filed one late Form 4 disclosing the open
market purchase of the Company's 0% convertible subordinated debentures due
2003.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation for services to the Company
received during the last three fiscal years by the Company's chief executive
officer, the four other most highly compensated executive officers who were
employed by the Company as of the end of fiscal 2000 and one former executive
officer of the Company. These executive officers are collectively referred to
herein as the "named executive officers."
Summary Compensation Table
------------------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
---------------------------
Restricted Securities
Name and Fiscal Annual Compensation Stock Underlying All Other
-------------------------
Principal Position Year Salary Bonus Award Options (1) Compensation (2)
------------------------- -------- --------- ----------- ---------- ----------- --------------------
Richard F. Syron 2000 $ 800,000 $ 1,120,000 $1,558,805 (3) 300,000 $ 134,777 (4)
Chairman and 1999 $ 514,667 (5) $ 370,000 (5) $ 199,500 (3) 1,000,000 $ 309,402 (4)
Chief Executive Officer
-------------------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers 2000 $ 238,095 (6) $ 500,000 (6) $1,410,000 (6) 900,000 $ 280,000 (7)
President and
Chief Operating Officer
-------------------------------------------------------------------------------------------------------------------------------
Brian D. Holt 2000 $ 330,000 $ 440,000 $ 577,500 (8) -- $ 653,532 (9)
Chief Operating Officer, 1999 $ 280,000 $ 170,000 $ 97,182 (8) 98,925 (10) $ 7,200
Energy and Environment 1998 $ 225,000 $ 120,000 -- 125,748 (10) $ 6,429
-------------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi 2000 $ 280,000 $ 240,000 $ 577,500 (11) -- $ 7,650
Chief Financial Officer 1999 $ 220,000 $ 180,000 $ 58,408 (11) 322,944 (12) $ 7,200
And Vice President 25,000 (TFG)
30,000 (TFT)
1998 $ 167,500 $ 105,000 -- 176,916 (12) $ 7,200
2,000 (TRIL)
-------------------------------------------------------------------------------------------------------------------------------
William A. Rainville 2000 $ 280,000 $ 180,000 -- -- $ 23,150 (13)
Chief Operating Officer, 1999 $ 270,000 $ 170,000 $ 28,370 (14) 4,300 $ 25,422 (13)
Recycling and Resource $ 71,498 (14) 40,000 (TFT)
and Recovery 35,000 (TFG)
1998 $ 260,000 $ 140,000 -- 153,023 (15) $ 28,922 (13)
-------------------------------------------------------------------------------------------------------------------------------
Earl R. Lewis (16) 2000 $ 341,667 $ 400,000 -- -- $1,378,752 (16)(17)
Former Chief Operating 1999 $ 320,000 $ 255,000 $ 100,128 (18) 127,500 (19) $ 14,868 (17)
Officer, Measurement 1998 $ 280,000 $ 200,000 -- 146,773 (19) $ 15,939 (17)
and Detection 2,000 (TRIL)
-------------------------------------------------------------------------------------------------------------------------------
7
(1) As part of the Company's spinout strategy, certain subsidiaries of the
Company sold minority interests to investors resulting in several majority-
owned, private and publicly-held subsidiaries and granted options to purchase
shares of these subsidiaries to employees and directors of Thermo Electron
companies as part of its compensation program. During 1999 and 2000, the Company
effected a major reorganization that, among other things, resulted in the
acquisition of the minority interest of substantially all of its subsidiaries
that had minority investors and the assumption by the Company of the outstanding
options to purchase shares of the subsidiaries. Options granted in the last
three years by these subsidiaries which were assumed by the Company have been
restated in the table as options to purchase shares of the Company. Options
granted in the last three years to the named executive officers by the following
subsidiaries with outstanding minority interests have not been assumed by the
Company and are designated in the table as follows: Thermo Fibergen Inc.
(designated in the table as TFG), Thermo Fibertek Inc. (designated in the table
as TFT) and Thermo Trilogy Corporation (designated in the table as TRIL).
(2) For all the named executive officers except for Dr. Syron in 1999, Mr.
Dekkers and Mr. Rainville, this amount includes matching contributions made on
behalf of the executive officer by the Company pursuant to the Company's 401(k)
plan. As to Mr. Rainville, this amount includes employer contributions to his
account under the profit sharing plan of Thermo Web Systems Inc., a subsidiary
of Thermo Fibertek Inc., as well as a cash payment of $1,273, $3,491 and $5,342
in fiscal 2000, 1999 and 1998, respectively, in connection with that
subsidiary's profit sharing program.
(3) In 2000, in connection with the adoption of the Company's
reorganization plan, the human resources committee of the board of directors
approved a retention arrangement for Dr. Syron that awarded him 50,000 shares of
restricted Common Stock valued at $825,000 on the grant date. The restricted
shares vest in equal installments over the next three years. Dr. Syron also was
awarded 10,800 shares of restricted Common Stock in June 2000 valued at $207,230
on the grant date, granted pursuant to the terms of his employment agreement,
that vest 100% on the third anniversary of the grant date. Upon the appointment
of the Company's chief operating officer, Dr. Syron was awarded 25,000 shares of
restricted Common Stock, valued at $526,575 on the grant date, that vests in
equal installments over the next three years. In fiscal 1999, Dr. Syron was
awarded 10,500 shares of restricted Common Stock valued at $199,500 on the grant
date, that vests 100% on the third anniversary of the grant date. Any cash
dividends paid on the restricted shares are retained by the recipient without
regard to vesting, however, any non-cash dividends paid on restricted shares are
subject to the same vesting restrictions as the underlying shares. At the end of
fiscal 2000, Dr. Syron held 96,300 restricted shares valued at $2,661,732.
(4) In addition to the matching contribution referred to in footnote (2),
this amount includes the reimbursement by the Company of $127,127 in fiscal 2000
and $309,402 in fiscal 1999 for expenses associated with Dr. Syron's relocation
to Massachusetts.
(5) Dr. Syron was appointed president and chief executive officer of the
Company on June 1, 1999. The salary and bonus reported for fiscal 1999
represents the amount paid for the portion of the year during which Dr. Syron
performed services for the Company.
(6) Mr. Dekkers was appointed president and chief operating officer of the
Company on July 11, 2000. The salary reported for fiscal 2000 represents the
amount paid for the portion of the year during which Mr. Dekkers performed
services for the Company. Mr. Dekkers' employment agreement provided that his
bonus for fiscal 2000 was not subject to proration. See "Executive Compensation
--Employment Agreement with Mr. Marijn E. Dekkers". Upon Mr. Dekkers
appointment, he was awarded 60,000 shares of restricted Common Stock with a
value of $1,410,000 on the grant date that vests in equal installments over the
next three years. Any cash dividends paid on the restricted shares are entitled
to be retained by Mr. Dekkers without regard to vesting, however, any non-cash
dividends are subject to the same vesting restrictions as the original
restricted shares. At the end of fiscal 2000, Mr. Dekkers held 60,000 shares of
restricted Common Stock with an aggregate value of $1,658,400.
(7) This amount represents the payment by the Company of a $280,000
signing bonus in fiscal 2000 in lieu of the reimbursement of expenses associated
with Mr. Dekkers' relocation to Massachusetts.
(8) In 2000, in connection with the adoption of the Company's
reorganization plan, the human resources committee of the board of directors
approved a retention arrangement for Mr. Holt that awarded him 35,000 shares of
restricted Common Stock valued at $577,500 on the grant date. The restricted
shares vest in equal installments over the next three years. In fiscal 1999, Mr.
Holt was awarded 2,300 shares of restricted Common Stock valued at $38,382 on
the grant date that vests 100% on the third anniversary of the grant date. Mr.
Holt was also awarded
8
5,600 shares of restricted common stock of Thermo Ecotek Corporation in fiscal
1999 valued at $58,800 on the grant date that vests 100% on the third
anniversary of the grant date. The restricted shares of Thermo Ecotek
Corporation were converted into 2,413 shares of restricted Common Stock of the
Company upon the merger of Thermo Ecotek Corporation into the Company during
2000. Any cash dividends paid on the restricted shares are entitled to be
retained by Mr. Holt without regard to vesting, however, any non-cash dividends
are subject to the same vesting restrictions as the original restricted shares.
At the end of fiscal 2000, Mr. Holt held 39,713 shares of restricted Common
Stock with an aggregate value of $1,097,667. See "Relationship with Affiliates -
Corporate Reorganization".
(9) In addition to the matching contribution referred to in footnote (2),
this amount includes $645,882 paid to Mr. Holt as a transaction bonus for
business units that were sold during 2000. In 2000, Mr. Holt entered into a
transaction bonus agreement with the Company providing that he would be entitled
to receive a transaction bonus in connection with the sale of certain business
units for which Mr. Holt is responsible. See "Executive Retention Agreements".
(10) Options granted in 1999 to Mr. Holt include options to purchase 98,625
shares of Common Stock that had been converted from options to purchase 250,000
shares of Thermo TerraTech Inc. upon the merger of that subsidiary into the
Company in 2000. Options granted in 1998 to Mr. Holt include options to purchase
929 shares of Common Stock that had been converted from options to purchase
2,000 shares of Metrika Systems Corporation upon the merger of that subsidiary
into the Company in 2000; options to purchase 872 shares of Common Stock that
had been converted from options to purchase 2,000 shares of ONIX Systems Inc.
upon the merger of that subsidiary into the Company in 2000; options to purchase
963 shares of Common Stock that had been converted from options to purchase
4,000 shares of The Randers Killam Group Inc. upon the merger of that subsidiary
into the Company in 2000; options to purchase 775 shares of Common Stock that
had been converted from options to purchase 2,000 shares of Thermedics Detection
Inc. upon the merger of that subsidiary into the Company in 2000; options to
purchase 698 shares of Common Stock that had been converted from options to
purchase 1,000 shares of Thermo Information Solutions Inc. upon the merger of
that subsidiary into the Company in 1999; options to purchase 849 shares of
Common Stock that had been converted from options to purchase 999 shares of
Thermo Instrument Systems Inc. upon the merger of that subsidiary into the
Company in 2000; and options to purchase 562 shares of Common Stock that had
been converted from options to purchase 1,023 shares of ThermoTrex Corporation
upon the merger of that subsidiary into the Company in 2000. See "Relationship
with Affiliates - Corporate Reorganization".
(11) In 2000, in connection with the adoption of the Company's
reorganization plan, the human resources committee of the board of directors
approved a retention arrangement for Mr. Melas-Kyriazi that awarded him 35,000
shares of restricted Common Stock valued at $577,500 on the grant date. The
restricted shares vest in equal installments over the next three years. In
fiscal 1999, Mr. Melas-Kyriazi was awarded 3,500 shares of restricted Common
Stock valued at $58,408 on the grant date that vests 100% on the third
anniversary of the grant date. Any cash dividends paid on the restricted shares
are entitled to be retained by Mr. Melas-Kyriazi without regard to vesting,
however, any non-cash dividends are subject to the same vesting restrictions as
the original restricted shares. At the end of fiscal 2000, Mr. Melas-Kyriazi
held 38,500 shares of restricted Common Stock with an aggregate value of
$1,064,140.
(12) Options granted in 1999 to Mr. Melas-Kyriazi include options to
purchase 11,612 shares of Common Stock that had been converted from options to
purchase 25,000 shares of Metrika Systems Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 13,090 shares of Common
Stock that had been converted from options to purchase 30,000 shares of ONIX
Systems Inc. upon the merger of that subsidiary into the Company in 2000;
options to purchase 9,000 shares of Common Stock that had been converted from
options to purchase 20,000 shares of Thermedics Inc. upon the merger of that
subsidiary into the Company in 2000; options to purchase 22,032 shares of Common
Stock that had been converted from options to purchase 15,000 shares of Thermo
BioAnalysis Corporation upon the merger of that subsidiary into the Company in
2000; options to purchase 8,620 shares of Common Stock that had been converted
from options to purchase 20,000 shares of Thermo Ecotek Corporation upon the
merger of that subsidiary into the Company in 2000; options to purchase 52,416
shares of Common Stock that had been converted from options to purchase 61,666
shares of Thermo Instrument Systems Inc. upon the merger of that subsidiary into
the Company in 2000; options to purchase 3,300 shares of Common Stock that had
been converted from options to purchase 25,000 shares of ThermoLase Corporation
upon the merger of that subsidiary into the Company in 2000; options to purchase
20,760 shares of Common Stock that had been
9
converted from options to purchase 25,000 shares of Thermo Optek Corporation
upon the merger of that subsidiary into the Company in 2000; options to purchase
14,117 shares of Common Stock that had been converted from options to purchase
15,000 shares of ThermoQuest Corporation upon the merger of that subsidiary into
the Company in 2000; options to purchase 17,752 shares of Common Stock that had
been converted from options to purchase 45,000 shares of Thermo TerraTech Inc.
upon the merger of that subsidiary into the Company in 2000; options to purchase
13,757 shares of Common Stock that had been converted from options to purchase
25,000 shares of ThermoTrex Corporation upon the merger of that subsidiary into
the Company in 2000; and options to purchase 3,788 shares of Common Stock that
had been converted from options to purchase 50,000 shares of Trex Medical
Corporation upon the merger of that subsidiary into the Company in 2000. Options
granted in 1998 to Mr. Melas-Kyriazi include options to purchase 2,411 shares of
Common Stock that had been converted from options to purchase 3,000 shares of
Thermo Coleman Corporation upon the merger of that subsidiary into the Company
in 1999; options to purchase 698 shares of Common Stock that had been converted
from options to purchase 1,000 shares of ThermoLase Corporation upon the merger
of that subsidiary into the Company in 2000; options to purchase 8,607 shares of
Common Stock that had been converted from options to purchase 10,127 shares of
Thermo TerraTech Inc. upon the merger of that subsidiary into the Company in
2000; options to purchase 1,525 shares of Common Stock that had been converted
from options to purchase 5,023 shares of ThermoTrex Corporation upon the merger
of that subsidiary into the Company in 2000; and options to purchase 775 shares
of Common Stock that had been converted from options to purchase 2,000 shares of
Trex Medical Corporation upon the merger of that subsidiary into the Company in
2000. See "Relationship with Affiliates - Corporate Reorganization".
(13) In addition to the matching contribution referred to in footnote (2),
such amounts include $5,038, $4,667 and $5,319, which represent the amount of
compensation attributable in fiscal 2000, 1999 and 1998, respectively, to an
interest-free loan provided to Mr. Rainville pursuant to the stock holding
assistance plan of Thermo Fibertek Inc., a subsidiary of the Company. See
"Relationship with Affiliates--Stock Holding Assistance Plans".
(14) In fiscal 1999, Mr. Rainville was awarded 1,700 shares of restricted
Common Stock valued at $28,370 on the grant date that vests 100% on the third
anniversary of the grant date. Mr. Rainville was also awarded 9,300 shares of
restricted common stock of Thermo Fibertek Inc. in fiscal 1999 valued at $71,498
on the grant date that vests 100% on the third anniversary of the grant date.
Any cash dividends paid on the restricted shares are entitled to be retained by
Mr. Rainville without regard to vesting, however, any non-cash dividends are
subject to the same vesting restrictions as the original restricted shares. At
the end of fiscal 2000, Mr. Rainville held 1,700 shares of restricted Common
Stock with an aggregate value of $46,988 and 9,300 shares of restricted common
stock of Thermo Fibertek Inc. with an aggregate value of $31,973.
(15) Options granted in 1998 to Mr. Rainville include options to purchase
4,645 shares of Common Stock that had been converted from options to purchase
10,000 shares of Metrika Systems Corporation upon the merger of that subsidiary
into the Company in 2000; options to purchase 4,363 shares of Common Stock that
had been converted from options to purchase 10,000 shares of ONIX Systems Inc.
upon the merger of that subsidiary into the Company in 2000; options to purchase
5,779 shares of Common Stock that had been converted from options to purchase
24,000 shares of The Randers Killam Group Inc. upon the merger of that
subsidiary into the Company in 2000; options to purchase 3,878 shares of Common
Stock that had been converted from options to purchase 10,000 shares of
Thermedics Detection Inc. upon the merger of that subsidiary into the Company in
2000; options to purchase 3,493 shares of Common Stock that had been converted
from options to purchase 5,000 shares of Thermo Information Solutions Inc. upon
the merger of that subsidiary into the Company in 1999; options to purchase
4,249 shares of Common Stock that had been converted from options to purchase
4,999 shares of Thermo Instrument Systems Inc. upon the merger of that
subsidiary into the Company in 2000; and options to purchase 2,816 shares of
Common Stock that had been converted from options to purchase 5,119 shares of
ThermoTrex Corporation upon the merger of that subsidiary into the Company in
2000. See "Relationship with Affiliates - Corporate Reorganization".
(16) Mr. Lewis entered into an agreement with the Company regarding the
termination of his employment with the Company and pursuant to which he resigned
as the Chief Operating Officer, Measurement and Detection, of the Company
effective July 10, 2000, and as an employee effective as of October 31, 2000.
The amount reported under the column headed "All Other Compensation" includes
$1,365,000 Mr. Lewis received as a lump sum severance payment pursuant to this
agreement. See "Severance Agreements - Agreement with Mr. Earl R. Lewis".
(17) In addition to the matching contribution referred to in footnote (2),
such amounts include $6,102, $7,668 and $8,739, which represent the amount of
compensation attributable in fiscal 2000, 1999 and 1998, respectively, to
10
an interest-free loan provided to Mr. Lewis pursuant to the stock holding
assistance plan of Thermo Optek Corporation, a subsidiary of the Company. Thermo
Optek Corporation was merged into the Company during fiscal 2000 and the entire
amount of the loan was repaid by Mr. Lewis. See "Relationship with Affiliates--
Stock Holding Assistance Plans".
(18) In fiscal 1999, Mr. Lewis was awarded 4,800 shares of restricted
common stock of Thermo Instrument Systems Inc. with a value of $80,102 on the
grant date. The restricted shares of Thermo Instrument Systems Inc. were
converted into 4,080 shares of restricted Common Stock of the Company upon the
merger of Thermo Instrument Systems Inc. into the Company during 2000. The
restricted stock award vested 100% upon the termination of Mr. Lewis' employment
without cause. At the end of fiscal 2000, Mr. Lewis held no restricted shares.
(19) Options granted in 1999 to Mr. Lewis include options to purchase
127,500 shares of Common Stock that had been converted from options to purchase
150,000 shares of Thermo Instrument Systems Inc. upon the merger of that
subsidiary into the Company in 2000. Options granted in 1998 to Mr. Lewis
include options to purchase 14,545 shares of Common Stock that had been
converted from options to purchase 33,333 shares of ONIX Systems Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 963
shares of Common Stock that had been converted from options to purchase 4,000
shares of The Randers Killam Group Inc. upon the merger of that subsidiary into
the Company in 2000; options to purchase 775 shares of Common Stock that had
been converted from options to purchase 2,000 shares of Thermedics Detection
Inc. upon the merger of that subsidiary into the Company in 2000; options to
purchase 698 shares of Common Stock that had been converted from options to
purchase 1,000 shares of Thermo Information Solutions Inc. upon the merger of
that subsidiary into the Company in 1999; options to purchase 9,230 shares of
Common Stock that had been converted from options to purchase 10,000 shares of
Thermo Power Corporation upon the merger of that subsidiary into the Company in
1999; and options to purchase 562 shares of Common Stock that had been converted
from options to purchase 1,023 shares of ThermoTrex Corporation upon the merger
of that subsidiary into the Company in 2000. See "Relationship with Affiliates -
Corporate Reorganization".
Stock Options Granted During Fiscal 2000
The following table sets forth information concerning individual
grants of stock options made during fiscal 2000 to the Company's named executive
officers. It has not been the Company's policy in the past to grant stock
appreciation rights, and no such rights were granted during fiscal 2000.
Option Grants in Fiscal 2000
--------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Percent of Stock Price
Total Options Appreciation for
Number of Securities Granted to Exercise Price Option Term (2)
Underlying Options Employees in Per Expiration ---------------
Name Granted (1) Fiscal Year Share Date 5% 10%
---- ----------- ----------- ----- ---- -- ---
Richard F. Syron 300,000 14% $21.23 06/30/07 $2,592,810 $ 6,042,390
--------------------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers 900,000 42% $22.67 07/11/07 $8,306,100 $19,356,660
--------------------------------------------------------------------------------------------------------------------------------
Brian D. Holt -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
William A. Rainville -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Earl R. Lewis -- -- -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
(1) All of the options reported are immediately exercisable as of the end
of the fiscal year. Generally, the shares acquired upon exercise are subject to
repurchase by the Company at the exercise price if the optionee's employment is
terminated voluntarily or for cause by the Company . The Company may exercise
its repurchase rights within six months after the termination of the optionee's
employment. The repurchase rights lapse ratably over a three-year period,
provided that the optionee continues to be employed by the Company. The Company
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.
11
(2) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
These gains are based on assumed rates of stock appreciation of 5% and 10%
compounded annually from the date the respective options were granted to their
expiration date. The gains shown are net of the option exercise price, but do
not include deductions for taxes or other expenses associated with the exercise.
Actual gains, if any, on stock option exercises will depend on the future
performance of the common stock of the granting company, the optionee's
continued employment through the option period and the date on which the options
are exercised.
Stock Options Exercised During Fiscal 2000 and Fiscal Year-End Option Values
The following table reports certain information regarding stock option
exercises during fiscal 2000 and outstanding stock options held at the end of
fiscal 2000 by the Company's named executive officers. No stock appreciation
rights were exercised or were outstanding during fiscal 2000.
Aggregated Option Exercises In Fiscal 2000 and Fiscal 2000 Year-End Option Values
---------------------------------------------------------------------------------
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options at Fiscal Options at Fiscal
Shares Year-End Year-End
Acquired on Value (Exercisable/ (Exercisable/
Name Company (1) Exercise Realized (2) Unexercisable) (1)(3) Unexercisable)
---- ----------- -------- ------------ --------------------- --------------
Richard F. Syron (TMO) -- -- 1,311,000 /0 $13,206,000 /--
-------------------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers (TMO) -- -- 900,000 /0 $ 6,372,000 /--
-------------------------------------------------------------------------------------------------------------------------------
Brian Holt (TMO) 101,683 $1,524,202 393,328 /0 (4) $ 4,143,949 /--
(TFG) -- -- 2,000 /0 $ 2,750 /--
(TLT) -- -- 0 /2,000 -- /$0 (5)
(TRIL) -- -- 0 /40,000 -- /$0 (5)
-------------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi (TMO) 15,187 $ 100,723 618,449 /0 (6) $ 8,992,779 /--
(TFG) -- -- 27,000 /0 $ 63,875 /--
(TFT) -- -- 86,250 /0 $ 19,710 /--
-------------------------------------------------------------------------------------------------------------------------------
William R. Rainville (TMO) 9,787 $ 148,941 348,493 /0 (7) $ 3,877,858 /--
(RGI) 9,600 $ 4,800 0 /0 -- /--
(TBA) 2,400 $ 43,200 0 /0 -- /--
(TFG) -- -- 75,000 /0 $ 140,575 /--
(TFT) -- -- 550,000 /0 $ 78,840 /--
(TLT) -- -- 0 /6,000 -- /$0 (5)
(THI) 9,033 $ 68,247 0 /0 -- /--
(TOC) 6,000 $ 27,180 0 /0 -- /--
(TMQ) 6,000 $ 24,000 0 /0 -- /--
(THN) 22,500 $ 1,575 0 /0 -- /--
-------------------------------------------------------------------------------------------------------------------------------
Earl R. Lewis (TMO) 118,949 $1,479,259 136,582 /0 (8) $ 1,523,350 /--
(TBA) 15,750 $ 258,000 0 /0 -- /--
(TFG) -- -- 2,000 /0 $ 2,750 /--
(TOC) 56,250 $ 254,813 0 /0 -- /--
(TMQ) 20,000 $ 80,000 0 /0 -- /--
-------------------------------------------------------------------------------------------------------------------------------
(1) As part of the Company's spinout strategy, certain subsidiaries of the
Company sold minority interests to investors resulting in several majority-
owned, private and publicly-held subsidiaries and granted options to purchase
shares of these subsidiaries to employees and directors of Thermo Electron
companies as part of its compensation program. During 1999 and 2000, the Company
effected a major reorganization that, among other things, resulted in the
acquisition of the minority interest of substantially all of its subsidiaries
that had minority investors and the assumption by the Company of the outstanding
options to purchase shares of the subsidiaries. Outstanding options at year-end
granted by these subsidiaries which were assumed by the Company have been
restated in the table as
12
options to purchase shares of the Company. Outstanding options at year-end to
the named executive officers by the following subsidiaries had not been assumed
by the Company as of year-end and are designated in the table as follows: Thermo
Fibergen Inc. (designated in the table as TFG), Thermo Fibertek Inc. (designated
in the table as TFT), ThermoLyte Corporation (designated in the table as TLT)
and Thermo Trilogy Corporation (designated in the table as TRIL). Certain of the
named executive officers exercised options to purchase shares of subsidiaries
during 2000 prior to the merger of the subsidiary into the Company and these
exercises are reported in the table opposite the abbreviated name of the
subsidiary as follows: The Randers Killam Group Inc. (designated in the table as
RGI), Thermo BioAnalysis Corporation (designated in the table as TBA), Thermo
Instrument Systems Inc. (designated in the table as THI), Thermo Optek
Corporation (designated in the table as TOC), ThermoQuest Corporation
(designated in the table as TMQ), and ThermoRetec Corporation (designated in the
table as THN).
(2) The amounts shown in this column represent the difference between the
option exercise price and the market price on the date of exercise, which is the
amount that would have been realized if the shares had been sold immediately
upon exercise. Amounts shown in this column do not represent actual sales
transactions.
(3) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of fiscal year-end, except options to purchase the
common stock of ThermoLyte Corporation and Thermo Trilogy Corporation, which are
not exercisable until the earlier of (i) 90 days after the effective date of the
registration of the company's common stock under Section 12 of the Exchange Act
or (ii) nine years after the grant date. Generally, the shares acquired upon
exercise of the options are subject to repurchase by the granting company at the
exercise price if the optionee ceases to be employed by, or ceases to serve as a
director of, such company or another Thermo Electron company. The granting
company may exercise its repurchase rights within six months after the
termination of the optionee's employment or the cessation of directorship, as
the case may be. For publicly traded companies, the repurchase rights generally
lapse ratably over a one- to ten-year period, depending on the option term,
which may vary from two to twelve years, provided that the optionee continues to
be employed by or serve as a director of the granting company 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 company 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.
(4) Outstanding options held by Mr. Holt at year-end include options to
purchase 929 shares of Common Stock that had been converted from options to
purchase 2,000 shares of Metrika Systems Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 872 shares of Common
Stock that had been converted from options to purchase 2,000 shares of ONIX
Systems Inc. upon the merger of that subsidiary into the Company in 2000;
options to purchase 963 shares of Common Stock that had been converted from
options to purchase 4,000 shares of The Randers Killam Group Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 775
shares of Common Stock that had been converted from options to purchase 2,000
shares of Thermedics Detection Inc. upon the merger of that subsidiary into the
Company in 2000; options to purchase 1,762 shares of Common Stock that had been
converted from options to purchase 1,200 shares of Thermo BioAnalysis
Corporation upon the merger of that subsidiary into the Company in 2000; options
to purchase 51,720 shares of Common Stock that had been converted from options
to purchase 120,000 shares of Thermo Ecotek Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 698 shares of Common
Stock that had been converted from options to purchase 1,000 shares of Thermo
Information Solutions Inc. upon the merger of that subsidiary into the Company
in 1999; options to purchase 849 shares of Common Stock that had been converted
from options to purchase 999 shares of Thermo Instrument Systems Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 660
shares of Common Stock that had been converted from options to purchase 5,000
shares of ThermoLase Corporation upon the merger of that subsidiary into the
Company in 2000; options to purchase 2,989 shares of Common Stock that had been
converted from options to purchase 3,600 shares of Thermo Optek Corporation upon
the merger of that subsidiary into the Company in 2000; options to purchase
5,646 shares of Common Stock that had been converted from options to purchase
6,000 shares of ThermoQuest Corporation upon the merger of that subsidiary into
the Company in 2000; options to purchase 1,550 shares of Common Stock that had
been converted from options to purchase 2,000 shares of Thermo Sentron Inc. upon
the merger of that subsidiary into the Company in 2000; options to purchase 562
shares of Common Stock that had been converted from options to purchase 1,023
shares of ThermoTrex Corporation upon the merger of that subsidiary into the
Company in 2000; options to purchase 78,900 shares of Common Stock that had been
converted from options to purchase 200,000 shares of Thermo TerraTech Inc. upon
the merger of that subsidiary into the Company in 2000;
13
and options to purchase 303 shares of Common Stock that had been converted from
options to purchase 4,000 shares of Trex Medical Corporation upon the merger of
that subsidiary into the Company in 2000. See "Relationship with Affiliates -
Corporate Reorganization".
(5) 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.
(6) Outstanding options held by Mr. Melas-Kyriazi at year-end include include
options to purchase 11,612 shares of Common Stock that had been converted from
options to purchase 25,000 shares of Metrika Systems Corporation upon the merger
of that subsidiary into the Company in 2000; options to purchase 13,090 shares
of Common Stock that had been converted from options to purchase 30,000 shares
of ONIX Systems Inc. upon the merger of that subsidiary into the Company in
2000; options to purchase 27,907 shares of Common Stock that had been converted
from options to purchase 19,000 shares of Thermo BioAnalysis Corporation upon
the merger of that subsidiary into the Company in 2000; options to purchase
2,411 shares of Common Stock that had been converted from options to purchase
3,000 shares of Thermo Coleman Corporation upon the merger of that subsidiary
into the Company in 1999; options to purchase 698 shares of Common Stock that
had been converted from options to purchase 1,000 shares of Thermo Information
Solutions Inc. upon the merger of that subsidiary into the Company in 1999;
options to purchase 139,131 shares of Common Stock that had been converted from
options to purchase 163,686 shares of Thermo Instrument Systems Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 4,615
shares of Common Stock that had been converted from options to purchase 5,000
shares of Thermo Power Corporation upon the merger of that subsidiary into the
Company in 1999; options to purchase 33,216 shares of Common Stock that had been
converted from options to purchase 40,000 shares of Thermo Optek Corporation
upon the merger of that subsidiary into the Company in 2000; options to purchase
23,528 shares of Common Stock that had been converted from options to purchase
25,000 shares of ThermoQuest Corporation upon the merger of that subsidiary into
the Company in 2000; and options to purchase 4,091 shares of Common Stock that
had been converted from options to purchase 54,000 shares of Trex Medical
Corporation upon the merger of that subsidiary into the Company in 2000. See
"Relationship with Affiliates - Corporate Reorganization".
(7) Outstanding options held by Mr. Rainville at year-end include options to
purchase 4,645 shares of Common Stock that had been converted from options to
purchase 10,000 shares of Metrika Systems Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 4,363 shares of Common
Stock that had been converted from options to purchase 10,000 shares of ONIX
Systems Inc. upon the merger of that subsidiary into the Company in 2000;
options to purchase 3,468 shares of Common Stock that had been converted from
options to purchase 14,403 shares of The Randers Killam Group Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 3,878
shares of Common Stock that had been converted from options to purchase 10,000
shares of Thermedics Detection Inc. upon the merger of that subsidiary into the
Company in 2000; options to purchase 5,287 shares of Common Stock that had been
converted from options to purchase 3,600 shares of Thermo BioAnalysis
Corporation upon the merger of that subsidiary into the Company in 2000; options
to purchase 3,493 shares of Common Stock that had been converted from options to
purchase 5,000 shares of Thermo Information Solutions Inc. upon the merger of
that subsidiary into the Company in 1999; options to purchase 8,526 shares of
Common Stock that had been converted from options to purchase 10,031 shares of
Thermo Instrument Systems Inc. upon the merger of that subsidiary into the
Company in 2000; options to purchase 1,320 shares of Common Stock that had been
converted from options to purchase 10,000 shares of ThermoLase Corporation upon
the merger of that subsidiary into the Company in 2000; options to purchase
7,474 shares of Common Stock that had been converted from options to purchase
9,001 shares of Thermo Optek Corporation upon the merger of that subsidiary into
the Company in 2000; options to purchase 8,471 shares of Common Stock that had
been converted from options to purchase 9,001 shares of ThermoQuest Corporation
upon the merger of that subsidiary into the Company in 2000; options to purchase
5,425 shares of Common Stock that had been converted from options to purchase
7,000 shares of Thermo Sentron Inc. upon the merger of that subsidiary into the
Company in 2000; options to purchase 9,862 shares of Common Stock that had been
converted from options to purchase 25,000 shares of Thermo TerraTech Inc. upon
the merger of that subsidiary into the Company in 2000; options to purchase
2,816 shares of Common Stock that had been converted from options to purchase
5,119 shares of ThermoTrex Corporation upon the merger of that subsidiary into
the Company in 2000; and options to purchase 1,515 shares of Common Stock that
had been converted from options to purchase 20,000 shares of Trex Medical
Corporation upon the merger of that subsidiary into the Company in 2000. See
"Relationship with Affiliates - Corporate Reorganization".
14
(8) Outstanding options held by Mr. Lewis at year-end include options to
purchase 2,787 shares of Common Stock that had been converted from options to
purchase 6,000 shares of Metrika Systems Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 5,818 shares of Common
Stock that had been converted from options to purchase 13,334 shares of ONIX
Systems Inc. upon the merger of that subsidiary into the Company in 2000;
options to purchase 385 shares of Common Stock that had been converted from
options to purchase 1,599 shares of The Randers Killam Group Inc. upon the
merger of that subsidiary into the Company in 2000; options to purchase 310
shares of Common Stock that had been converted from options to purchase 800
shares of Thermedics Detection Inc. upon the merger of that subsidiary into the
Company in 2000; options to purchase 70,835 shares of Common Stock that had been
converted from options to purchase 83,336 shares of Thermo Instrument Systems
Inc. upon the merger of that subsidiary into the Company in 2000; options to
purchase 264 shares of Common Stock that had been converted from options to
purchase 2,000 shares of ThermoLase Corporation upon the merger of that
subsidiary into the Company in 2000; options to purchase 21,176 shares of Common
Stock that had been converted from options to purchase 22,500 shares of
ThermoQuest Corporation upon the merger of that subsidiary into the Company in
2000; options to purchase 620 shares of Common Stock that had been converted
from options to purchase 800 shares of Thermo Sentron Inc. upon the merger of
that subsidiary into the Company in 2000; options to purchase 281 shares of
Common Stock that had been converted from options to purchase 511 shares of
ThermoTrex Corporation upon the merger of that subsidiary into the Company in
2000; and options to purchase 606 shares of Common Stock that had been converted
from options to purchase 8,000 shares of Trex Medical Corporation upon the
merger of that subsidiary into the Company in 2000. See "Relationship with
Affiliates - Corporate Reorganization".
Defined Benefit Retirement Plan
Thermo Web Systems Inc., a wholly owned subsidiary of Thermo Fibertek Inc.,
maintains a defined benefit retirement plan (the "Retirement Plan") for
eligible U.S. employees. Mr. Rainville is the chief executive officer of Thermo
Fibertek Inc. and the only executive officer of the Company who participates in
the Retirement Plan. The following table sets forth the estimated annual
benefits payable under the Retirement Plan upon retirement to employees of the
subsidiary in specified compensation and years-of-service classifications. The
estimated benefits at certain compensation levels reflect the statutory limits
on compensation that can be recognized for plan purposes. This limit is
currently $170,000 per year.
Annual Compensation Years of Service
------------------- --------------------------------------------------
15 20 25 30 35
------- ------- ------- ------- -------
$100,000 $26,250 $35,000 $43,750 $48,125 $48,125
$125,000 $32,813 $43,750 $54,688 $60,156 $60,156
$150,000 $39,375 $52,500 $65,625 $72,188 $72,188
$170,000 $44,625 $59,500 $74,375 $89,250 $89,250
Each eligible employee receives a monthly retirement benefit, beginning at
normal retirement age (65), based on a percentage (1.75%) of the average monthly
compensation of such employee before retirement, multiplied by his years of
service (up to a maximum of 30 years). Full credit is given for the first 25
years of service, and half credit is given for years over 25 and less than 30.
Benefits are reduced for retirement before normal retirement age. Average
monthly compensation is generally defined as average monthly base salary over
the five years of highest compensation in the ten-year period preceding
retirement. For 2000, the annual compensation of Mr. Rainville recognized for
plan purposes was $170,000. The estimated credited years of service recognized
under the Retirement Plan for Mr. Rainville is 30, assuming retirement at age
65. No benefits under the Retirement Plan vest for an employee until after five
years of participation, at which time they become fully vested. The benefits
shown in the above table are subject to reduction for Social Security benefits.
The plan benefits shown are payable during the employee's lifetime unless the
employee elects another form of benefit that provides death benefit protection.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive officers
and key employees of the Company that provide severance benefits if there is a
change in control of Thermo Electron and their employment is terminated by the
Company without cause or by the individual for good reason, as those terms are
defined therein, within 18 months thereafter. For purposes of these agreements,
a change in control exists upon (i) the acquisition by any person of 40% or more
of the outstanding Common Stock or voting securities of Thermo Electron; (ii)
the
15
failure of the Thermo Electron board of directors to include a majority of
directors who are"continuing directors," which term is defined to include
directors who were members of Thermo Electron's board on the date of the
agreement or who subsequent to the date of the agreement were nominated or
elected by a majority of directors who were "continuing directors" at the time
of such nomination or election; (iii) the consummation of a merger,
consolidation, reorganization, recapitalization or statutory share exchange
involving Thermo Electron or the sale or other disposition of all or
substantially all of the assets of Thermo Electron unless immediately after such
transaction (a) all holders of Thermo Electron Common Stock immediately prior to
such transaction own more than 60% of the outstanding voting securities of the
resulting or acquiring corporation in substantially the same proportions as
their ownership immediately prior to such transaction and (b) no person after
the transaction owns 40% or more of the outstanding voting securities of the
resulting or acquiring corporation; or (iv) approval by stockholders of a
complete liquidation or dissolution of Thermo Electron.
In 1998 and 1999, Thermo Electron authorized an executive retention
agreement with each of Dr. Richard F. Syron, Mr. Brian D. Holt, Mr. Theo Melas-
Kyriazi, Mr. William A. Rainville and Mr. Earl R. Lewis. These agreements
provide that in the event the individual's employment is terminated under
circumstances described above, the individual would be entitled to a lump sum
payment equal to the sum of (a) in the case of Dr. Syron, three times, and in
the case of Messrs. Holt, Melas-Kyriazi, Rainville and Lewis, two times, the
individual's highest annual base salary in any 12 month period during the prior
five-year period, plus (b) in the case of Dr. Syron, three times, and in the
case of Messrs. Holt, Melas-Kyriazi, Rainville and Lewis, two times, the
individual's highest annual bonus in any 12-month period during the prior five-
year period. In addition, the individual would be provided benefits for a period
of, in the case of Dr. Syron, three years, and in the case of Messrs. Holt,
Melas-Kyriazi, Rainville and Lewis, two years, after such termination
substantially equivalent to the benefits package the individual would have been
otherwise entitled to receive if the individual was not terminated. Further, all
repurchase rights of the Company and its subsidiaries shall lapse in their
entirety with respect to all options to purchase Common Stock, and all shares of
restricted Common Stock, and all options to purchase the common stock, and all
shares of restricted common stock, of Thermo Electron's subsidiaries that the
individual holds as of the date of the change in control. Finally, the
individual would be entitled to a cash payment equal to, in the case of Dr.
Syron, $25,000, and in the case of Messrs. Holt, Melas-Kyriazi, Rainville and
Lewis, $20,000, to be used toward outplacement services. These executive
retention agreements supersede and replace any prior severance arrangements
which these individuals may have had with Thermo Electron.
Assuming that the severance benefits would have been payable as of December
30, 2000, the lump sum salary and bonus payment under such agreement to Dr.
Syron, Mr. Holt, Mr. Melas-Kyriazi, Mr. Rainville and Mr. Lewis would have been
approximately $5,760,000, $1,540,000, $1,040,000, $920,000 and $0, respectively.
In the event that payments under these agreements are deemed to be so-called
"excess parachute payments" under the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), the
individuals would be entitled to receive a gross-up payment equal to the amount
of any excise tax payable by such individual with respect to such payment plus
the amount of all other additional taxes imposed on such individual.
In January 2000, in connection with the adoption of the Company's
reorganization plan, the human resources committee of the board of directors of
the Company approved a retention arrangement for Mr. Holt, entitling him to a
payment of two times his base salary if his employment is terminated with the
Company for any reason other than for cause or he terminates his employment
voluntarily. Mr. Holt, however, would not be entitled to severance payments
under this arrangement if he were also entitled to severance payments under his
executive retention agreement described above. In addition, in April 2000, Mr.
Holt entered into a transaction bonus agreement with the Company providing that
he will be entitled to receive a transaction bonus equal to 0.11% of the
aggregate proceeds up to $410,000,000 from the sale of the energy and
environment business units for which Mr. Holt is responsible, excluding Thermo
Ecotek Corporation. If the aggregate sale prices exceed $410,000,000, Mr. Holt
would be entitled to receive an additional bonus equal to 0.5% of the amount in
excess of $410,000,000. Pursuant to this transaction bonus agreement, Mr. Holt
has been paid $752,000 to date.
Employment Agreement with Dr. Richard F. Syron
Dr. Richard F. Syron, chief executive officer and chairman of the board of
directors of the Company, has an employment agreement with the Company (which
has been amended to, among other things, extend its term until July 11, 2003)
that provides for an annual base salary of $800,000 and for an annual incentive
bonus, as determined by the board of directors of the Company, of at least
$145,833 and $250,000, in calendar years 1999 and 2000,
16
respectively, and at least $104,167 for the first five months of 2001. In
addition, the agreement provides that on June 1 of each year that Dr. Syron
remains employed by the Company he will be granted an award of shares of Common
Stock having a market value at the time of grant of $200,000 based on the
average of the closing prices of the Common Stock as reported on the New York
Stock Exchange ("NYSE") for the five business days preceding and including the
corresponding grant date and vesting on the third anniversary of each
corresponding grant date. The agreement also provides for stock option awards to
be granted to Dr. Syron at an exercise price equal to the average of the closing
prices of the Common Stock on NYSE for the five business days including and
preceding each corresponding grant date as follows: (i) on June 1, 1999, the
Company granted Dr. Syron an option to purchase 1,000,000 shares of Common
Stock, with transfer restrictions lapsing on the first three anniversaries of
the grant date; and (ii) conditioned upon achieving certain objectives
established by the board of directors of the Company, the Company will grant Dr.
Syron additional stock options to purchase 260,000 shares of Common Stock on
each of July 11, 2001, July 11, 2002 and July 11, 2003 vesting ratably on the
first three anniversaries of the corresponding grant date.
If Dr. Syron's employment is terminated by the Company without cause or by
him for good reason, as those terms are defined in the agreement, he will be
entitled to receive a termination payment determined as follows: if such
termination occurs prior to July 11, 2001, an amount equal to three times the
sum of his then current base salary plus $200,000; if such termination occurs on
or after July 11, 2001 but prior to July 11, 2002, an amount equal to two times
the sum of his then current base salary plus $200,000; and if such termination
occurs on or after July 11, 2002, an amount equal to his then current base
salary plus $200,000. In addition, the transfer restrictions on the restricted
stock held by Dr. Syron would lapse and the outstanding stock options will be
fully vested, remain exercisable for two years from the employment termination
date (but in no event beyond the end of each option's exercise period), and be
no longer subject to any transfer restrictions.
If Dr. Syron's employment is terminated due to the expiration of the then-
current term, he will be entitled to receive payment of an amount equal to his
then current base salary plus $200,000, payable in 12 equal monthly
installments. In addition, the outstanding vested stock options held by Dr.
Syron on the expiration of the then current term of his agreement shall remain
exercisable for two years from such date (but in no event beyond the end of each
option's exercise period).
The agreement also provides for an additional retention benefit to be
payable to Dr. Syron if Mr. Marijn E. Dekkers is appointed chief executive
officer and Dr. Syron's employment is terminated for any reason. If Dr. Syron
is removed involuntarily from his position as chairman of the board of directors
of the Company on or before July 10, 2004, such retention benefit shall have a
lump sum value, as determined by the board of directors, of not less than
$3,200,000 and not more than $4,800,000, with a targeted mid-point of
$4,000,000; if Dr. Syron voluntarily resigns his position as chairman of the
board of directors of the Company on or before July 10, 2004, such retention
benefit shall have a lump sum value, as determined by the board of directors, of
not less than $800,000 and not more than $1,200,000, with a targeted mid-point
of $1,000,000; if Dr. Syron voluntarily resigns or is removed from his position
as chairman of the board of directors of the Company after July 10, 2004 but
before July 10, 2005, such retention benefit shall have a lump sum value, as
determined by the board of directors, of not less than $2,400,000 and not more
than $3,600,000, with a targeted mid-point of $3,000,000; and if Dr. Syron
voluntarily resigns or is removed from his position as chairman of the board of
directors of the Company after July 10, 2005, such retention benefit shall have
a lump sum value, as determined by the board of directors, of not less than
$1,600,000 and not more than $2,400,000, with a targeted mid-point of
$2,000,000. Dr. Syron may elect to receive the retention benefit in whole or in
part in a lump sum distribution or an annuity purchased with such lump sum
value. If the board of directors elects Mr. Dekkers as chief executive officer
of the Company, Dr. Syron would continue to act as the Company's chairman of the
board of directors under the terms of his agreement.
Under the following conditions, additional vesting rules apply to stock
options and restricted stock awards granted by the Company to Dr. Syron. If Dr.
Syron's employment continues after July 10, 2003, but is terminated by him
without good reason prior to July 10, 2004, then the outstanding unvested stock
options held by Dr. Syron that were granted after March 14, 2001 shall be 50
percent vested, and 50 percent of the unvested restricted stock held by Dr.
Syron shall be fully vested. Further, if Dr. Syron's employment continues to
July 10, 2004, then the outstanding unvested stock options held by Dr. Syron
that were granted after March 14, 2001 shall be fully vested, remain exercisable
until they expire by their terms and the transfer restrictions on restricted
stock held by Dr. Syron shall lapse.
17
Employment Agreement with Mr. Marijn E. Dekkers
Mr. Marijn E. Dekkers, president and chief operating officer of the
Company, has an employment agreement with the Company that provides for an
annual base salary of $500,000 and for an annual incentive bonus in an amount
equal to 60% of his base salary if he meets performance objectives established
by the board of directors. In 2000, Mr. Dekkers is entitled to receive his
incentive bonus without proration due to the commencement of his employment in
July 2000. The agreement provides that, subject to the board of directors'
satisfaction with his performance, Mr. Dekkers shall be appointed chief
executive officer of the Company no later than January 11, 2003, the effective
date of such appointment to be within six months following the board of
directors' action.
Upon commencing his employment, Mr. Dekkers received 60,000 shares of
Common Stock (the "Restricted Stock") and was granted an option to purchase
900,000 shares of Common Stock exercisable at a price of $22.67 per share for a
period of seven years from the grant date (the "Initial Option"). The
Restricted Stock and the Initial Option are subject to transfer restrictions
that lapse ratably each year over a three-year period commencing July 11, 2001
as long as Mr. Dekkers continues to be employed by the Company. Mr. Dekkers is
also entitled to receive options to purchase 200,000 shares of Common Stock (the
"Subsequent Options") on each of the first, second and third anniversaries of
his hiring, provided he continues to be employed with the Company and he
achieves financial and strategic performance objectives established by the board
of directors. The exercise price of the Subsequent Options will be the average
of the closing prices of the Common Stock on the New York Stock Exchange for the
five business days preceding and including the date of each grant.
If Mr. Dekkers' employment is terminated without cause or Mr. Dekkers
terminates his employment for good reason (which includes the failure of the
Company to appoint Mr. Dekkers as Chief Executive Officer), as those terms are
defined in the agreement, he will be entitled to receive an amount equal to (i)
a pro rata annual bonus payment for the year in which the termination occurs,
plus (ii) any deferred compensation and accrued vacation, plus (iii) an amount
equal to 4.8 times Mr. Dekkers then-current base salary. All of these amounts
are payable in equal monthly installments over 36 months after his termination.
Mr. Dekkers will also be entitled to retain his Restricted Stock and his Initial
Option and any Subsequent Options granted, all transfer restrictions relating
thereto will lapse in their entirety, and such stock options will continue to be
exercisable until two years from the employment termination date (but in no
event beyond the expiration date of the options). Mr. Dekkers employment
agreement has a three-year term (expiring July 11, 2003) unless it is terminated
in accordance with its terms.
Severance Agreement with Mr. Earl R. Lewis
Effective July 10, 2000, the Company entered into an agreement with Mr.
Earl R. Lewis regarding the termination of his employment with the Company as of
October 31, 2000. Pursuant to the agreement, Mr. Lewis continued to receive
salary payments based on his then-current annual base salary through October 31,
2000, as well as his bonus for 2000 of $400,000. Mr. Lewis also received a lump
sum severance payment of $1,365,000, representing two times his then-current
annual base salary, plus his annual executive automobile and supplemental
medical reimbursement amounts, and his 1999 bonus. The severance payment was
reduced by approximately $155,000 which represented amounts owed by Mr. Lewis
under the Thermo Optek Corporation Stock Holding Assistance Plan. Stock options
previously granted to Mr. Lewis that were not vested as of October 31, 2000
(except options to purchase shares of Spectra Physics Lasers Inc. and FLIR
systems, Inc.), were cancelled and all options that were vested as of that date
continued to be exercisable by Mr. Lewis in accordance with their terms. Mr.
Lewis also retained 5,280 shares of Common Stock that were subject to
restrictions on transfer, which restrictions lapsed on October 31, 2000.
Pursuant to the agreement, Mr. Lewis resigned all positions as an officer and
director of the Company and each of its subsidiaries and affiliated companies
effective July 10, 2000 (except as a director of Spectra-Physics Lasers, Inc.
and FLIR Systems, Inc. and as president of Spectra-Physics Holdings USA, Inc.,
which position he resigned as of July 14, 2000). Mr. Lewis also agreed that
until October 31, 2002, he would not compete directly or indirectly with the
Company as a stockholder, investor, partner, director, officer, employee or
consultant of a competitor (as that term is defined in the agreement).
18
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
Decisions on compensation for the Company's executive officers are made by
the human resources committee of the board of directors (the "Committee"). The
Committee has developed compensation policies that are designed to reward and
motivate executives in achieving long-term value for stockholders and other
business objectives, to attract and retain dedicated, talented individuals to
accomplish the Company's objectives, to recognize individual contributions as
well as the performance of the Company and its subsidiaries, and to encourage
stock ownership by executives through stock-based compensation and stock
retention programs in order to link executive and Stockholder interests.
The Committee evaluates the competitiveness of its compensation practices
through the use of market surveys and competitive analyses prepared by its
outside compensation consultants. Internal fairness of compensation within the
organization is also an important element of the Committee's compensation
philosophy. Compensation of executives is also evaluated by comparing it to the
compensation of other executives within the Thermo Electron organization who
have responsibility to manage businesses of comparable size and complexity.
The compensation program of the Company consists of annual cash
compensation and long-term incentive compensation. Annual cash compensation is
composed of base salary and performance-based incentive compensation ("bonus"),
which is reviewed and determined annually. Long-term incentive compensation is
in the form of stock-based compensation such as stock options and restricted
stock awards. The process for determining the components of executive
compensation for the named executive officers is described below. For its review
of the compensation of other officers of the Company, the Committee follows a
substantially similar process.
Components of Executive Compensation
Annual Cash Compensation
Annual cash compensation consists of base salary and performance-based
incentive compensation ("bonus"). The annual cash incentive paid to an executive
varies from year to year based on the performance of the Company and the
executive.
The Committee assesses the competitiveness of annual cash compensation by
establishing for each executive position at the beginning of each fiscal year a
base salary and target incentive. The base salary is intended to approximate
the median of competitive market data for similar positions at organizations
that are of comparable size and complexity as the Company. The target incentive
is a percentage of the base salary and is determined based on the salary level
and position of the executive within the Company.
Base Salary. Generally, executive salaries are adjusted to reflect
competitive salary levels or other considerations, such as geographic or
regional market data, industry trends or internal fairness within the Company.
The Committee may also adjust individual salaries to reflect the assumption of
increased responsibilities.
Annual Incentive Compensation ("Bonus"). The amount of incentive
compensation actually earned by an executive from year to year varies with the
performance of the Company and the executive. The Committee evaluates
performance (1) by using financial measures of profitability and contribution to
Stockholder value and (2) by subjectively evaluating the executive's
contribution to the achievement of the Company's long-term objectives. In fiscal
2000, the financial measures used by the Committee were revenues, division
income and asset management for the Company and certain subsidiaries for which
the named executive officers are responsible. The financial measures assess the
financial performance relative to the financial performance of comparable
companies and are designed to penalize below-average performance and reward
above-average performance. The financial measures do not represent financial
targets that are met, not met or exceeded. The relative weighting of the
financial measures and subjective evaluation varies depending on the executive's
role and responsibilities within the organization, as well as the objectives for
the business for which the executive is responsible. The incentive compensation
awarded to each named executive officer (other than the chief executive officer,
which is discussed below under the caption "2000 CEO Compensation") for fiscal
2000 reflected the financial performance of the businesses of the Company for
which they were responsible, as well as the Company as a whole.
19
Long-Term Incentive Compensation
The Committee and management believe that awards of stock-based
compensation of the Company accomplish many objectives. The award of stock-based
compensation to key employees encourages equity ownership in the Company,
closely aligns management's interests to the interests of all the stockholders,
and results in management's compensation being closely linked to stock
performance.
In determining the appropriate number of awards, the Committee considers
the prevailing compensation practices of competitive companies and competitive
market data for the position and salary level of each executive officer. Awards
are reviewed annually in conjunction with the annual review of cash compensation
and additional awards may be made periodically as deemed appropriate by the
Committee. The Committee uses a modified Black-Scholes option pricing model to
determine the value of an award.
Stock Ownership Policy
The Committee has established a stock holding policy for the chief
executive officer of the Company that requires him to own a multiple of his
compensation in shares of the Company's Common Stock. The multiple is one times
his annual base salary and reference incentive compensation for the fiscal year
in which he achieves compliance. The chief executive officer has three years
from the date of his appointment to achieve this ownership level.
In order to assist the chief executive officer in complying with the
policy, the Committee also adopted a stock holding assistance plan under which
the Company is authorized to make interest-free loans to the chief executive
officer to enable him to purchase shares of Common Stock in the open market. Any
loans are required to be repaid upon the earlier of demand or the tenth
anniversary of the date of the loan, unless otherwise determined by the
Committee. No loans were outstanding for the chief executive officer under this
program in 2000. See "Relationship with Affiliates - Stock Holding Assistance
Plan".
Policy on Deductibility of Compensation
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Company's compensation practices. Section 162(m)
limits the tax deduction available to public companies for annual compensation
that is paid to named executive officers in excess of $1,000,000, unless the
compensation qualified as "performance-based" or is otherwise exempt from
Section 162(m).
The Committee considers the potential effect of Section 162(m) in designing
its compensation program, but reserves the right to use its independent judgment
to approve nondeductible compensation, while taking into account the financial
effects such action may have on the Company. The Company has modified its stock-
based compensation plans in which its named executive officers participate in
order to qualify for the deduction. However, the Committee has not adopted
modifications to its cash compensation program that would avail the Company of
the deduction. Although the cash compensation reported for fiscal 2000 for the
chief executive officer of the Company exceeded $1,000,000 and is expected to
exceed $1,000,000 in future periods, the Committee does not believe that the
modifications necessary to preserve the deductibility of cash compensation in
excess of that amount are warranted at this time. The Committee will continue to
monitor the potential effect of Section 162(m) on the Company.
2000 CEO Compensation
The Committee determines the compensation for the Company's chief executive
officer. The determinations of the Committee as to the compensation of the chief
executive officer are subject to review by the entire board of directors. The
board of directors concurred in the decisions of the Committee with respect to
2000 compensation.
The Company's chief executive officer, Dr. Richard F. Syron, was appointed
effective June 1, 1999, and in connection with his appointment, the Company
entered into an employment agreement with Dr. Syron that set forth his minimum
cash compensation for the three-year term of the agreement, and also provided
for the award of restricted stock and employee stock options. See "Executive
Compensation - Employment Agreement with Dr. Richard F. Syron" for a description
of this agreement.
20
In 2000, the Committee consulted with its outside compensation consultants
and reviewed competitive market data to determine Dr. Syron's salary for fiscal
2000. Dr. Syron's bonus for fiscal 2000 was determined by the Committee using
the same criteria as described above for other executive officers. The
Committee's subjective evaluation of Dr. Syron's performance considered, among
other things, his leadership and effectiveness in furthering the Company's
business and financial objectives and in succession planning.
In January 2000, in connection with the adoption of the Company's
reorganization plan, the Committee approved a retention arrangement for Dr.
Syron that awarded him 50,000 shares of restricted Common Stock that would vest
in equal installments over the next three years. The award of 10,800 shares of
restricted Common Stock in June 2000 was granted pursuant to the terms of his
employment agreement. Upon the appointment of the Company's chief operating
officer, Dr. Syron was awarded 25,000 shares of restricted Common Stock and
options to purchase 300,000 shares of Common Stock. Each award vests in equal
installments over three years.
Mr. Frank Jungers (Chairman)
Dr. Samuel W. Bodman III
Mr. Peter O. Crisp
Mr. Robert W. O'Leary
AUDIT COMMITTEE REPORT
The role of the audit committee is to assist the board of directors in its
oversight of the Company's financial reporting process.
As set forth in the audit committee's charter, attached as Appendix A to
this proxy statement, management of the Company is responsible for the
preparation, presentation and integrity of the Company's financial statements,
the Company's accounting and financial reporting principles and internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent auditors are responsible
for auditing the Company's financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles.
In the performance of its oversight function, the audit committee has
reviewed and discussed the audited financial statements of the Company for the
fiscal year ended December 30, 2000, with management and the company's
independent auditors, Arthur Andersen LLP. The audit committee has also
discussed with Arthur Andersen LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
currently in effect. The audit committee has received from Arthur Andersen LLP
the letter and written disclosures required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, as currently in
effect, and has discussed with Arthur Andersen LLP the auditors' independence.
The audit committee has considered whether the provision of professional
services for financial information systems design and implementation and other
non-audit services by Arthur Andersen LLP is compatible with maintaining the
auditors' independence.
The members of the audit committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of auditing
or accounting, including in respect of auditor independence. Members of the
audit committee rely without independent verification on the information
provided to them and on the representations made by management and the
independent auditors. Accordingly, the audit committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the audit
committee's considerations and discussions referred to above do not assure that
the audit of the Company's financial statements has been carried out in
accordance with generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted accounting
principles or that the Company's auditors are in fact "independent."
Based upon the review and discussions described in this report, and subject
to the limitations on the role and responsibilities of the audit committee
referred to above and in the audit committee's charter, the audit
21
committee recommended to the board of directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the year
ended December 30, 2000 filed with the Securities and Exchange Commission.
Mr. Robert A. McCabe, Chairman
Dr. Elias P. Gyftopoulos
Mr. Jim P. Manzi
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this proxy statement a line-graph presentation comparing cumulative, five-year
shareholder returns for the Company's Common Stock with a broad-based market
index and either a nationally recognized industry standard or an index of peer
companies selected by the Company. The Company has compared its performance with
the Standard & Poor's 500 Index (the "S&P 500") and the Standard & Poor's High
Technology Composite Index (the "S&P High Tech"). In the past, the Company has
also compared its performace to a peer group composed of the following
companies: Corning Inc., Eaton Corp., Minnesota Mining and Manufacturing Co.,
The Perkin-Elmer Corp., Rockwell International Corp., TRW Inc., Tektronix, Inc.,
Texas Instruments Incorporated, United Technologies Corp. and Varian Associates,
Inc. (the "Former Peer Group"). In 2000, the Company completed a major
reorganization and refocused its business on its instrumentation products and
systems. The Company believes that the S&P High Tech Index is a more appropriate
comparison of its performance to its peer companies and will discontinue the
comparison to the Former Peer Group in future.
Comparison of Total Return Among Thermo Electron Corporation (TMO),
the Standard & Poor's 500 Index (S&P 500), the Standard & Poor's High Technology
Composite Index (S&P High Tech) and the Former Peer Group
[GRAPHIC]
------------------------------------------------------------------------------------------------------------------
12/29/95 12/27/96 1/2/98 12/31/98 12/31/99 12/29/00
------------------------------------------------------------------------------------------------------------------
TMO 100 109 125 49 43 86
------------------------------------------------------------------------------------------------------------------
S&P 500 100 126 165 211 255 232
------------------------------------------------------------------------------------------------------------------
S&P High Tech 100 143 181 305 534 321
------------------------------------------------------------------------------------------------------------------
Former Peer Group 100 135 149 176 294 335
------------------------------------------------------------------------------------------------------------------
The total return for the Company's Common Stock (TMO), the S&P 500, the S&P
High Tech and the Former Peer Group assumes the reinvestment of dividends,
although cash dividends have not been declared on the
22
Company's Common Stock. The Company's Common Stock is traded on the New York
Stock Exchange under the ticker symbol "TMO".
RELATIONSHIP WITH AFFILIATES
Effective February 21, 2000, the Company entered into an agreement with Mr.
John N. Hatsopoulos, the Company's former president and chief financial officer,
regarding the termination of his consulting arrangement with the Company. The
agreement provided for a lump sum payment to Mr. Hatsopoulos of $1,958,333
representing the balance of the compensation payable to him under the consulting
agreement, which was scheduled to end on December 31, 2003. The agreement also
provides for continuing health insurance coverage for Mr. Hatsopoulos and his
dependents, the provision of certain office-related services and $100,000 per
year to cover anticipated expenses, through December 31, 2003. Also, stock
options previously granted to Mr. Hatsopoulos that were, as of February 21,
2000, not "in-the-money" or "in-the-money" but for which the Company's or its
subsidiaries' repurchase rights had not lapsed, will continue to be exercisable
through December 31, 2003, subject to certain resale restrictions that would
lapse with the passage of time. All options that would have vested after that
date would be cancelled unless there occurs on or before such date a change of
control of the Company that would have accelerated the vesting under their
original terms, in which event the options would be exercisable to the extent
their vesting has been so accelerated. Pursuant to the agreement, Mr. J.
Hatsopoulos retired as a director of the Company and of each of its
subsidiaries, effective February 21, 2000.
Effective March 31, 2000, the Company entered into an agreement with Dr.
George N. Hatsopoulos, the Company's founder and former chairman and chief
executive officer, pursuant to which he will be employed by the Company on a
half-time basis until March 31, 2002, and thereafter until March 31, 2004, he
would serve as a consultant to the Company. During the two-year employment
period, Dr. Hatsopoulos would receive a salary of $500,000 per year. He was also
paid a bonus for the period January 1, 2000, to March 31, 2000, of $150,000.
During the consulting period, Dr. Hatsopoulos would be paid $500,000 per year.
Under the agreement, stock options previously granted to Dr. Hatsopoulos that
(i) were, as of March 31, 2000, either not "in-the-money," or "in-the-money" but
for which the Company's or its subsidiaries' repurchase rights would not have
lapsed as of March 31, 2002, would continue to be exercisable through March 31,
2004, subject to certain resale restrictions that would lapse with the passage
of time and (ii) are scheduled to vest after March 31, 2004 would be forfeited,
unless there occurs on or before such date a change of control of the Company
that would have accelerated the vesting under their original terms, in which
event the options would be exercisable to the extent their vesting has been so
accelerated. The Company also agreed to waive existing resale restrictions tied
to Dr. Hatsopoulos' retirement on shares of the Company's Common Stock
previously acquired by Dr. Hatsopoulos pursuant to the exercise of certain stock
options. Simultaneously with entering into this agreement, Dr. Hatsopoulos
retired from the Boards of Directors of the Company and its subsidiaries.
Corporate Reorganization
During 1999 and 2000, the Company completed a major reorganization plan
under which, among other things, it acquired the minority interest in
substantially all of its subsidiaries that have minority investors. The
consideration paid to the stockholders in each of these completed transactions
is as follows:
Cash Transactions
-----------------
Subsidiary Per Share Cash Payment
---------- ----------------------
Thermo Voltek Corp. $ 7.00
Thermo Power Corporation $ 12.00
ThermoSpectra Corporation $ 16.00
Thermo Vision Corporation $ 7.00
Thermo Sentron Inc. $ 15.50
Thermedics Detection Inc. $ 8.00
ONIX Systems Inc. $ 9.00
23
Thermo BioAnalysis Corporation $ 28.00
Thermo Coleman Corporation $ 10.50
Thermo Information Solutions Inc. $ 10.00
Trex Communications Corporation $ 4.00
Metrika Systems Corporation $ 9.00
ThermoQuest Corporation $ 17.00
Thermo Optek Corporation $ 15.00
ThermoRetec Corporation $ 7.00
The Randers Killam Group Inc. $ 4.50
Trex Medical Corporation $ 2.15
Stock Transactions
Subsidiary Exchange Ratio*
---------- ---------------
Thermo Instrument Systems Inc. 0.85
Thermedics Inc. 0.45
Thermo Ecotek Corporation 0.431
Thermo TerraTech Inc. 0.3945
ThermoLase Corporation 0.132
ThermoTrex Corporation 0.5503
*The Exchange Ratio represents the number of shares of Common Stock that were
exchanged for each share of the relevant subsidiary's common stock.
Executive Officer and Director Participation in Cash Transactions
Executive officers and directors of the Company who held shares of common
stock in the subsidiaries listed above under "Cash Transactions" received the
same cash consideration per share of subsidiary stock as all other stockholders
of such subsidiaries. In addition, the executive officers' and directors'
options to acquire shares of such subsidiaries' common stock, for which the
granting corporation's repurchase rights had not lapsed ("unvested options"),
were automatically assumed by either the acquiring corporation or Thermo
Electron, as applicable, and converted into options to purchase shares of the
acquiring corporation's common stock or the Common Stock on the same terms as
were applicable to all the other holders of such subsidiary's options, as
described below. In the case of options to acquire shares of such subsidiaries'
common stock, for which the granting corporation's repurchase rights had lapsed
("vested options"), the holders were given the opportunity to elect either to
convert the options into vested options to acquire shares of the acquiring
corporation's common stock or the Common Stock, as applicable, or to receive
cash at the applicable cash transaction price less the applicable exercise
price, on the same terms as were applicable to all the other holders of such
subsidiary's options.
Vested and unvested options that were assumed by the acquiring corporation
or the Company in these transactions generally were converted as follows: The
number of shares of the acquiring corporation's common stock or the Common Stock
underlying each assumed option equaled the number of shares of subsidiary common
stock underlying the option before the transaction, multiplied by the applicable
"cash exchange ratio" described below, rounded down to the nearest whole number
of shares of the acquiring corporation's common stock or the Common Stock. The
exercise price for each assumed option was calculated by dividing the exercise
price of the subsidiary stock option before the transaction by the applicable
"cash exchange ratio" described below, rounded up to the nearest whole cent. The
applicable "cash exchange ratio" for each transaction was a fraction, the
numerator of which was the cash price listed in the chart at the beginning of
this subsection (the "Chart") and the denominator of
24
which was the closing price of the acquiring corporation's common stock or the
Common Stock, as applicable, on the day preceding the effective date of the
transaction.
Additionally, certain directors participated in the deferred compensation
plans of the various subsidiaries. On the effective date of each of the
completed cash transactions listed above, each of the affected subsidiaries'
deferred compensation plans terminated and the participants received cash in an
amount equal to the balance of such participant's stock units credited to his or
her account under the respective deferred compensation plan, multiplied by the
cash price listed in the Chart. Any such stock units held by directors are
included in their stock ownership information described below.
In the Thermo Voltek Corp. transaction, Dr. Gyftopoulos, Mr. McCabe and Mr.
Melas-Kyriazi received a cash payment of $7.00 per share for 1,000, 1,800 and
5,581 shares of common stock of Thermo Voltek Corp. held by such individuals,
respectively. Additionally, Mr. Crisp and Dr. Gyftopoulos held options to
acquire 2,250 and 2,750 shares of Thermo Voltek Corp. common stock,
respectively, that were converted into options to acquire shares of common stock
of Thermedics Inc.
In the Thermo Power Corporation transaction, Mr. Crisp, Dr. Gyftopoulos,
Mr. Lewis, Mr. McCabe and Mr. Melas-Kyriazi received a cash payment of $12.00
per share for 31,165, 3,925, 2,500, 8,629 and 4,988 shares of common stock of
Thermo Power Corporation held by such individuals, respectively. Additionally,
Mr. Crisp, Dr. Gyftopoulos, Mr. Lewis, Mr. McCabe, Mr. Melas-Kyriazi and Ms.
Olayan held options to acquire 1,000, 3,000, 10,000, 3,000, 5,000 and 3,000
shares of Thermo Power Corporation common stock, respectively, that were
converted into options to acquire shares of Common Stock, as described above.
Additionally, Mr. Crisp and Mr. Jungers elected to receive cash payments, as
described above, for their options to purchase 4,500 and 3,000 shares of Thermo
Power Corporation common stock, respectively, and received payments of $13,414
and $11,850, respectively, for such options.
In the ThermoSpectra Corporation transaction, Dr. Gyftopoulos, Mr. Lewis
and Mr. Melas-Kyriazi received a cash payment of $16.00 per share for 1,022,
5,000 and 13,600 shares of common stock of ThermoSpectra Corporation held by
such individuals, respectively. Additionally, Dr. Gyftopoulos, Mr. Jungers, Mr.
Lewis, Mr. Melas-Kyriazi and Mr. Rainville held options to acquire 15,000,
1,500, 50,000, 64,200 and 10,000 shares of ThermoSpectra Corporation common
stock, respectively, that were converted into options to acquire shares of
common stock of Thermo Instrument Systems Inc., as described above.
Additionally, Mr. Crisp, Dr. Gyftopoulos, Mr. Keiser, Mr. McCabe and Ms. Olayan
elected to receive cash payments, as described above, for their options to
purchase 1,000, 6,000, 1,500, 1,500 and 1,000 shares of ThermoSpectra
Corporation common stock, respectively, and received payments of $6,000,
$36,000, $9,000, $9,000 and $6,000, respectively, for such options.
In the Thermo Vision Corporation transaction, Dr. Gyftopoulos, Mr. Jungers,
Mr. Lewis and Mr. McCabe received a cash payment of $7.00 per share for 1,061,
1,400, 17,720 and 1,120 shares of common stock of Thermo Vision Corporation held
by such individuals, respectively. Additionally, Mr. Crisp, Dr. Gyftopoulos, Mr.
Holt, Mr. Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe, Mr. Melas-Kyriazi, Ms.
Olayan, Mr. O'Leary and Mr. Rainville held options to acquire 1,000, 15,000,
1,500, 1,000, 1,500, 25,000, 1,000, 70,000, 1,000, 1,000 and 7,500 shares of
Thermo Vision Corporation common stock, respectively, that were converted into
options to acquire shares of common stock of Thermo Instrument Systems Inc., as
described above.
In the Thermo Sentron Inc. transaction, Mr. McCabe received a cash payment
of $15.50 per share for 2,000 shares of common stock of Thermo Sentron Inc. held
by Mr. McCabe. Additionally, Mr. Holt, Mr. John T. Keiser, formerly a chief
operating officer of the Company, Mr. Lewis, and Mr. Rainville held options to
acquire 2,000, 19,500, 2,000 and 7,000 shares of Thermo Sentron Inc. common
stock, respectively, that were converted into options to acquire shares of
Common Stock, as described above.
In the Thermedics Detection Inc. transaction, Dr. Gyftopoulos and Mr. Lewis
received a cash payment of $8.00 per share for 600 and 3 shares of common stock
of Thermedics Detection Inc. held by such individuals, respectively.
Additionally, Mr. Holt, Mr. Keiser, Mr. Lewis and Mr. Rainville held options to
acquire 2,000, 17,000, 2,000 and 10,000 shares of Thermedics Detection Inc.
common stock, respectively, that were converted into options to acquire shares
of Common Stock, as described above.
In the ONIX Systems Inc. transaction, Mr. Jungers and Mr. Lewis received a
cash payment of $9.00 per share for 10,000 and 2,333 shares of common stock of
ONIX Systems Inc. held by such individuals, respectively.
25
Also, Crescent International Holdings Ltd., a member of the Olayan Group that is
indirectly controlled by Suliman S. Olayan, Ms. Olayan's father, received a cash
payment of $9.00 per share for 16,666 shares of common stock of ONIX Systems
Inc. Ms. Olayan disclaims beneficial ownership of the shares owned by Crescent
International Holdings Ltd. Additionally, Mr. Holt, Mr. Jungers, Mr. Keiser, Mr.
Lewis, Mr. Melas-Kyriazi and Mr. Rainville held options to acquire 2,000,
30,000, 2,000, 33,333, 30,000 and 10,000 shares of ONIX Systems Inc. common
stock, respectively, that were converted into options to acquire shares of
Common Stock, as described above.
In the Thermo BioAnalysis Corporation transaction, Dr. Gyftopoulos, Mr.
Jungers, Mr. Lewis and Mr. McCabe received a cash payment of $28.00 per share
for 15,254, 2,000, 22,500 and 1,500 shares of common stock of Thermo BioAnalysis
Corporation held by such individuals, respectively. Additionally, Mr. Holt, Mr.
Lewis, Mr. Melas-Kyriazi and Mr. Rainville held options to acquire 2,000,
34,250, 19,000 and 3,600 shares of Thermo BioAnalysis common stock,
respectively, that were converted into options to acquire shares of Common
Stock, as described above. Additionally, Mr. Lewis and Mr. Rainville elected to
receive cash payments, as described above, for their options to purchase 15,750
and 2,400 shares of Thermo BioAnalysis common stock, respectively, and received
payments of $258,000 and $43,200, respectively, for such options.
Mr. Keiser and Mr. Melas-Kyriazi held options to purchase 30,000 and 3,000
shares of common stock of Thermo Coleman Corporation, respectively, that were
converted into options to acquire shares of Common Stock, as described above.
In the Thermo Information Solutions Inc. transaction, Mr. Jungers received
a cash payment of $10.00 per share for 2,000 shares of common stock of Thermo
Information Solutions Inc. held by Mr. Jungers. In addition, a trust of which
Mr. McCabe and members of his family are trustees received a cash payment of
$10.00 per share for 12,000 shares of common stock of Thermo Information
Solutions held by such trust. Additionally, Mr. Crisp, Dr. Gyftopoulos, Mr.
Holt, Mr. Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe, Mr. Melas-Kyriazi, Ms.
Olayan and Mr. Rainville held options to acquire 1,500, 1,500, 1,000, 1,500,
1,000, 1,000, 1,500, 1,000, 1,500 and 5,000 shares of Thermo Information
Solutions common stock, respectively, that were converted into options to
acquire shares of Common Stock, as described above.
In the Trex Communications Corporation transaction, Mr. Jungers received a
cash payment of $4.00 per share for 5,000 shares of common stock of Trex
Communications Corporation held by Mr. Jungers. In addition, a trust of which
Mr. McCabe and members of his family are trustees received a cash payment of
$4.00 per share for 12,500 shares of common stock of Trex Communications held by
such trust. Also, Crescent International Holdings Ltd., a member of the Olayan
Group that is indirectly controlled by Suliman S. Olayan, Ms. Olayan's father,
received a cash payment of $4.00 per share for 125,000 shares of common stock of
Trex Communications. Ms. Olayan disclaims beneficial ownership of the shares
owned by Crescent International Holdings Ltd. Additionally, Mr. Crisp, Dr.
Gyftopoulos, Mr. Holt, Mr. Jungers, Mr. Keiser, Mr. Lewis, Mr. Melas-Kyriazi,
Ms. Olayan, Mr. O'Leary and Mr. Rainville held options to acquire 1,000, 1,000,
2,000, 1,000, 2,000, 2,000, 2,000, 1,000, 1,000 and 10,000 shares of Trex
Communications common stock, respectively, that were converted into options to
acquire shares of common stock of ThermoTrex Corporation, as described above.
In the Metrika Systems Corporation transaction, Mr. Holt, Mr. Keiser, Mr.
Lewis, Mr. Melas-Kyriazi and Mr. Rainville held options to acquire 2,000,
12,000, 20,000, 25,000 and 10,000 shares of Metrika Systems Corporation common
stock, respectively, that were converted into options to acquire shares of
Common Stock, as described above.
In the ThermoQuest Corporation transaction, Mr. Jungers and Mr. Lewis
received a cash payment of $17.00 per share for 3,650 and 10,000 shares of
common stock of ThermoQuest Corporation held by such individuals, respectively.
Mr. Holt, Mr. Jungers, Mr. Lewis, Mr. Melas-Kyriazi and Mr. Rainville held
options to acquire 6,000, 45,000, 105,000, 25,000 and 9,000 shares of
ThermoQuest Corporation common stock, respectively, that were converted into
options to acquire shares of Common Stock, as described above. Additionally, Mr.
Lewis and Mr. Rainville elected to receive cash payments, as described above,
for their options to purchase 20,000 and 6,000 shares of ThermoQuest Corporation
common stock, respectively, and received payments of $80,000 and $24,000,
respectively, for such options.
In the Thermo Optek Corporation transaction, Mr. Lewis and Mr. McCabe
received a cash payment of $15.00 per share for 27,000 and 13,790 shares of
common stock of Thermo Optek Corporation held by such individuals, respectively.
In addition, a trust of which Mr. McCabe and members of his family are trustees
received
26
a cash payment of $15.00 per share for 5,000 shares of common stock of Thermo
Optek Corporation held by such trust. Mr. Holt, Mr. Lewis, Mr. McCabe,
Mr. Melas-Kyriazi and Mr. Rainville held options to acquire 6,000, 168,750,
45,000, 40,000 and 9,000 shares of Thermo Optek Corporation common stock,
respectively, that were converted into options to acquire shares of Common
Stock, as described above. Additionally, Mr. Lewis and Mr. Rainville elected to
receive cash payments, as described above, for their options to purchase 56,250
and 6,000 shares of Thermo Optek Corporation common stock, respectively, and
received payments of $254,813 and $27,180, respectively, for such options.
In the ThermoRetec Corporation transaction, Mr. Jungers, Mr. Rainville and
Dr. Gyftopoulos received a cash payment of $7.00 per share for 10,500, 1,500 and
1,831 shares of common stock of ThermoRetec Corporation held by such
individuals, respectively. Dr. Gyftopoulos held options to acquire 29,600 shares
of ThermoRetec Corporation common stock that were converted into options to
acquire shares of Common Stock, as described above. Additionally, Mr. Rainville
elected to receive a cash payment, as described above, for his options to
purchase 22,500 shares of ThermoRetec Corporation common stock and received a
payment of $1,575 for such options.
In The Randers Killam Group Inc. transaction, Mr. Holt, Mr. Keiser, Mr.
Lewis and Mr. Rainville held options to acquire 4,000, 4,000, 4,000 and 14,400
shares of The Randers Killam Group Inc. common stock, respectively, that were
converted into options to acquire shares of Common Stock, as described above.
Additionally, Mr. Rainville elected to receive a cash payment, as described
above, for his options to purchase 9,600 shares of The Randers Killam Group Inc.
common stock and received a payment of $4,800 for such options.
In the Trex Medical Corporation transaction, Dr. Gyftopoulos, Mr. Jungers,
Mr. McCabe and Ms. Olayan received a cash payment of $2.15 per share for 3,340,
650, 6,050 and 11,654 shares of common stock of Trex Medical Corporation held by
such individuals, respectively. Also, Olayan America Corporation, a member of
the Olayan Group that is indirectly controlled by Suliman S. Olayan, Ms.
Olayan's father, received a cash payment of $2.15 per share for 350,000 shares
of common stock of Trex Medical Corporation. Ms. Olayan disclaims beneficial
ownership of the shares owned by Olayan America Corporation. Mr. Crisp, Dr.
Gyftopoulos, Mr. Holt, Mr. Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe,
Mr. Melas-Kyriazi, Ms. Olayanand Mr. Rainville held options to acquire 1,500,
41,000, 4,000, 1,000, 20,000, 32,000, 1,000, 54,000, 41,000, and 20,000 shares
of Trex Medical Corporation common stock, respectively, that were converted into
options to acquire shares of Common Stock, as described above.
Executive Officer and Director Participation in Stock Transactions
Executive officers and directors of the Company who held shares of common
stock in the subsidiaries listed above under "Stock Transactions" received the
same Common Stock consideration per share of subsidiary stock as all other
stockholders of such subsidiaries. In addition, certain executive officers and
directors of the Company held options to acquire shares of common stock of the
subsidiaries listed above, which options were treated in the same manner as
options held by other employees.
In general, vested and unvested options that were assumed by Thermo
Electron in the stock transactions referenced above were converted as follows:
the number of shares of Common Stock underlying each assumed option was
calculated to be equal to the number of shares of subsidiary common stock
underlying the option before the transaction, multiplied by the applicable
exchange ratio set forth in the Chart, rounded down to the nearest whole number
of shares of Common Stock. The exercise price for each assumed option was
calculated by dividing the exercise price of the subsidiary stock option before
the transaction by the applicable exchange ratio set forth in the Chart, rounded
up to the nearest whole cent.
Additionally, certain directors participated in the deferred compensation
plans of the various subsidiaries. On the effective date of each of the stock
transactions listed above, each of the affected subsidiaries' deferred
compensation plans was assumed by the Company, and the stock units credited to
each participant's account under the respective deferred compensation plans was
converted into stock units for Common Stock at the exchange ratio set forth in
the Chart.
In the Thermo Instrument Systems Inc. transaction, Dr. Gyftopoulos, Mr.
Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe and Mr. Melas-Kyriazi received 0.85
share of Common Stock per share for 48,256, 14,969, 83,900, 27,418, 38,921 and
19,028 shares of common stock of Thermo Instrument Systems Inc. held by such
individuals, respectively. Additionally, Mr. Crisp, Dr. Gyftopoulos, Mr. Holt,
Mr. Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe,
27
Mr. Melas-Kyriazi, Ms. Olayan, Mr. O'Leary and Mr. Rainville held options to
acquire 666, 38,125, 999, 7,927, 71,311 392,642, 5,817, 163,686, 666, 666 and
10,031 shares of Thermo Instrument Systems Inc. common stock, respectively, that
were converted into options to acquire shares of Common Stock, as described
above.
In the Thermedics Inc. transaction, Mr. Crisp, Dr. Gyftopoulos, Mr.
Jungers, Mr. Keiser, Mr. Lewis, Mr. McCabe and Mr. Melas-Kyriazi received 0.45
share of Common Stock per share for 37,076, 5,548, 3,000, 6,793, 3, 24,498 and
11,861 shares of common stock of Thermedics Inc. held by such individuals,
respectively. Additionally, Mr. Crisp, Dr. Gyftopoulos and Mr. Keiser held
options to acquire 5,300, 1,750 and 187,100 shares of Thermedics Inc. common
stock, respectively, that were converted into options to acquire shares of
Common Stock, as described above.
In the Thermo Ecotek Corporation transaction, Mr. Crisp, Mr. Holt, Mr.
Jungers, and Mr. Rainville received 0.431 share of Common Stock per share for
2,941, 5,600, 44,511 and 4,467 shares of common stock of Thermo Ecotek
Corporation held by such individuals, respectively. Additionally, Mr. Holt and
Mr. Jungers held options to acquire 210,000 and 4,000 shares of Thermo Ecotek
Corporation common stock, respectively, that were converted into options to
acquire shares of Common Stock, as described above.
In the Thermo TerraTech Inc. transaction, Mr. McCabe and Mr. Melas-Kyriazi
received 0.3945 share of Common Stock per share for 2,160 and 618 shares of
common stock of Thermo TerraTech Inc. held by such individuals, respectively.
Additionally, Mr. Holt and Mr. Rainville held options to acquire 250,000 and
25,000 shares of Thermo TerraTech Inc. common stock, respectively, that were
converted into options to acquire shares of Common Stock, as described above.
In the ThermoLase Corporation transaction, Dr. Gyftopoulos, Mr. Jungers,
Mr. McCabe and Mr. Melas-Kyriazi received 0.132 share of Common Stock per share
for 3,097, 1,300, 1,976 and 5,217 shares of common stock of ThermoLase
Corporation held by such individuals, respectively. Additionally, Mr. Crisp, Dr.
Gyftopoulos, Mr. Holt, Mr. Lewis and Mr. Rainville held options to acquire 250,
62,400, 5,000, 5,000 and 10,000 shares of ThermoLase Corporation common stock,
respectively, that were converted into options to acquire shares of Common
Stock, as described above.
In the ThermoTrex Corporation transaction, Mr. Jungers, Mr. McCabe, Mr.
Rainville and Mr. Melas-Kyriazi received 0.5503 share of Common Stock per share
for 6,500, 5,500, 1,797 and 6,472 shares of common stock of ThermoTrex
Corporation held by such individuals, respectively. Additionally, Mr. Crisp, Mr.
Holt, Mr. Keiser, Mr. Lewis, and Mr. Rainville held options to acquire 4,200,
1,023, 91,023, 1,023 and 5,119 shares of ThermoTrex Corporation common stock,
respectively, that were converted into options to acquire shares of Common
Stock, as described above.
Stock Holding Assistance Plan
The Committee has established a stock holding policy for the chief
executive officer of the Company that requires him to own a multiple of his
compensation in shares of the Common Stock. In order to assist the chief
executive officer in complying with the policy, the Committee also adopted a
stock holding assistance plan under which the Company may make interest-free
loans to executive officers, to enable them to purchase Common Stock in the open
market. No loans were outstanding under this program in 2000.
The Company's publicly traded, majority-owned subsidiaries adopted similar
stock holding policies for their chief executive officers, along with stock
holding assistance plans. The stock holding assistance plans are intended to
assist chief executive officers in complying with the stock holding policies,
and provide for interest-free loans to enable those officers to purchase shares
of common stock in the open market. Certain of the named executive officers of
the Company are the chief executive officers of these subsidiaries and are
required to comply with the subsidiary's stock holding policies. Mr. William A.
Rainville, a chief operating officer of the Company, is also the chief executive
officer of Thermo Fibertek Inc. In 1996, Mr. Rainville received a loan in the
principal amount of $118,104 under the Thermo Fibertek Inc. stock holding
assistance plan to purchase 10,000 shares of the common stock of Thermo Fibertek
Inc. of which amount $72,503 was outstanding as of December 30, 2000. Mr.
Rainville's loan is payable on the earlier of demand or the tenth anniversary of
the date of the loan, unless otherwise determined by the human resources
committee of the board of directors of Thermo Fibertek Inc. In 1996, Mr. Earl R.
Lewis, then the chief executive officer of Thermo Optek Corporation, a former
majority-owned subsidiary of the Company, received a loan in the principal
amount of $194,029 under the Thermo Optek Corporation stock holding
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assistance plan to purchase 15,000 shares of the common stock of Thermo Optek
Corporation. Mr. Lewis' loan was repaid in full during 2000. Except for Thermo
Fibertek Inc., the subsidiary stock holding assistance plans were discontinued
during 2000.
PROPOSAL 2
PROPOSAL TO APPROVE THE 2001 EQUITY INCENTIVE PLAN
In March 2001, the board of directors adopted the 2001 equity incentive
plan (the "2001 Plan") and reserved five million shares of Common Stock for
issuance under the plan. The board of directors is recommending that the
stockholders approve the 2001 Plan at this meeting.
The board of directors believes that the future success of the Company
depends, in large part, upon the ability of the Company to maintain a
competitive position in attracting, retaining and motivating key personnel, and
does not believe that the shares currently available under its stock-based
incentive plans are sufficient to meet this need. As of March 27, 2001, the
number of shares of the Common Stock available for future grant under the
Company's stock-based incentive plans (including all stockholder-approved and
non-approved plans) were 1,292,783 shares and options to purchase 20,412,451
shares of Common Stock were outstanding under all of the Company's stock-based
incentive plans, representing total potential dilution under all of these plans
of approximately 10.6%. The additional shares represented by the 2001 Plan would
increase potential stockholder dilution to a total of approximately 12.7%.
For these reasons, the board of directors believes stockholder approval of
the 2001 Plan is in the best interests of the Company and its stockholders and
recommends a vote FOR this proposal.
The closing price per share on the New York Stock Exchange of the Common
Stock on April 9, 2001 was $22.55.
Summary of the 2001 Plan
The following summary of the terms of the 2001 Plan is qualified in its
entirety by reference to the plan.
Administration; Eligible Participants. The 2001 Plan is administered by the
board of directors of the Company (the "Board"). The Board has full power to
select, from among the persons eligible for awards, the individuals to whom
awards will be granted, to make any combination of awards to any participant,
and to determine the specific terms of each award, including terms and
conditions relating to events of merger, consolidation, dissolution and
liquidation, change of control, acceleration of vesting or lapse of
restrictions, vesting, forfeiture, other restrictions, dividends and interest on
deferred amounts. The Board also has the power to waive compliance by
participants with the terms and conditions of awards, to cancel awards with the
consent of participants and to accelerate the vesting or lapse of any
restrictions of any award. The Board may delegate all of its responsibilities
under the 2001 Plan to a committee composed of members of the Board (the
"Committee").
Employees and directors of, and consultants to, the Company and its
subsidiaries, or other persons who are expected to make significant
contributions to the growth and success of the Company and its subsidiaries,
selected by the Board, are eligible to participate in the 2001 Plan. The Company
employs approximately 13,000 persons in its continuing operations, and all such
employees would be eligible to participate in the 2001 Plan, including the
Company's executive officers and outside directors. The granting of awards under
the 2001 Plan is discretionary, and the Company cannot determine the number or
type of awards to be granted in the future to any particular person or group.
Shares Subject to the 2001 Plan; Use of Proceeds. The number of shares
reserved under the 2001 Plan is subject to adjustment for stock splits and
similar events. Awards and shares that are forfeited, reacquired by the Company,
satisfied by a cash payment by the Company or otherwise satisfied without the
issuance of Common Stock are not counted against the maximum number of reserved
shares under the plan.
The proceeds received by the Company from transactions under the 2001 Plan
are used for the general purposes of the Company. Shares issued under the 2001
Plan may be authorized but unissued shares, or shares reacquired by the Company
and held in its treasury.
Types of Awards; Limitations on Awards. The 2001 Plan permits the Board to
grant a variety of stock and stock-based awards in such form or in such
combinations as may be approved by the Board. Without limiting the
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foregoing, the types of awards may include stock options, restricted shares,
rights to receive cash or shares on a deferred basis or based on performance,
cash payments sufficient to offset the federal, state and local ordinary income
taxes of participants resulting from transactions under the 2001 Plan, and loans
to participants in connection with awards.
The following limitations apply to awards under the 2001 Plan. Options must
be granted at an exercise price that may not be less than 100% of the fair
market value of the Common Stock on the date of grant and may not be granted for
a term in excess of ten years. The Board may not reprice any outstanding awards
granted under the 2001 Plan or any other stock-based compensation plan of the
Company. The maximum number of shares with respect to which an award may be
granted to any participant under the 2001 Plan may not exceed 1,500,000 shares
per calendar year. The maximum number of shares of Common Stock that may be
issued pursuant to all awards that are not stock options, including without
limitation restricted stock awards, may not exceed 500,000 shares in any
calendar year. If a stock split is subsequently effected, the number of shares
of Common Stock available under the 2001 Plan and each of the share limits
described in the preceding sentences would be adjusted accordingly.
Stock Options. Awards under the 2001 Plan may be in the form of stock
options, which entitle the recipient, on exercise, to purchase shares of Common
Stock at a specified exercise price. Stock options granted under the plan may be
either stock options that qualify as incentive stock options ("incentive stock
options") under Section 422 of the Internal Revenue Code, or stock options that
are not intended to meet such requirements ("non-statutory options"). The
exercise price of each option is determined by the Board, but may not be less
than 100% of the fair market value per share of Common Stock on the date of
grant.
The term of each option is fixed by the Board, but may not exceed ten
years. The Board also determines at what time each option may be exercised.
Options may be made exercisable in installments, and the exercisability of
options may be accelerated by the Board. The Board may, in its discretion,
provide that upon exercise of any option, instead of receiving shares free from
restrictions under the 2001 Plan, the option holder will receive shares of
restricted stock or deferred stock awards.
The exercise price of options granted under the 2001 Plan must be paid in
full by check or other instrument acceptable to the Board or, if the Board so
determines, by delivery of shares of Common Stock held by the option holder for
at least six months (unless the Board expressly approves a shorter period) and
that have a fair market value on the exercise date equal to the exercise price
of the option, by delivery of a promissory note from the option holder to the
Company payable on terms acceptable to the Board, by delivery of an
unconditional and irrevocable undertaking by a broker to deliver sufficient
funds to the Company to pay the exercise price, or some combination of these
methods.
Incentive stock options must meet certain additional requirements in order
to qualify as incentive stock options under the Internal Revenue Code. Incentive
stock options may be granted only to employees of the Company and its
subsidiaries. The exercise price of an incentive stock option or any option
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code may not be less than 100% of the fair market value of
the shares on the date of grant. An incentive stock option may not be granted
under the 2001 Plan after the tenth anniversary of the date the Board adopted
the 2001 Plan and the latest date on which an incentive stock option may be
exercisable is ten years from the date of its grant. In addition, the Internal
Revenue Code limits the value of shares subject to incentive stock options that
may become exercisable annually by any option holder in a given year, and
requires a shorter exercise period and a higher minimum exercise price in the
case of stockholders owning more than ten percent (10%) of the Company's Common
Stock.
Restricted Stock. The Board may also award shares of Common Stock subject
to such conditions and restrictions as it may determine ("restricted stock").
The purchase price of shares of restricted stock shall be determined by the
Board, but may not be less than the par value of those shares.
Generally, if a participant who holds shares of restricted stock fails to
satisfy certain restrictions or other conditions as may be determined by the
Board (such as continuing employment for a given period) prior to the lapse or
waiver of the restrictions, the Company will have the right to require the
forfeiture or repurchase of the shares in exchange for an amount, if any,
determined by the Board as specifically set forth in the instrument evidencing
the award. The Board may at any time waive such restrictions or accelerate the
date or dates on which the restrictions will lapse. Prior to the lapse of
restrictions on shares of restricted stock, the recipient will have all the
rights of a Stockholder with respect to the shares, including voting and
dividend rights, subject only to the conditions and
30
restrictions generally applicable to restricted stock or specifically set forth
in the instrument evidencing the award. Generally, restricted stock awards vest
over three years.
Deferred Stock. The Board may also make deferred stock awards under the
2001 Plan which entitle the recipient to receive shares of Common Stock in the
future. Delivery of Common Stock will take place on such date or dates and on
such conditions as the Board specifies. The Board may at any time accelerate the
date on which delivery of all or any part of the Common Stock will take place or
otherwise waive any restrictions on the award.
Performance Awards. The Board may also grant performance awards entitling
the recipient to receive shares of Common Stock or cash in such combinations as
it may determine following the achievement of specified performance goals.
Payment of the performance award may be conditioned on achievement of individual
or Company performance goals over a fixed or determinable period or on such
other conditions as the Board shall determine.
Loans and Supplemental Grants. The Board may authorize a loan from the
Company to a participant either on or after the grant of an award to the
participant. Loans, including extensions, may be for any term specified by the
Board, may be either secured or unsecured, and may be with or without recourse
against the participant in the event of default. Each loan shall be subject to
such terms and conditions and shall bear such rate of interest, if any, as the
Board shall determine. In connection with any award, the Board may, at the time
such award is made or at a later date, provide for and make a cash payment to
the participant in an amount equal to (a) the amount of any federal, state and
local income tax on ordinary income for which the participant will be liable
with respect to the award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after payment of the amount described in (a).
Payment of Purchase Price. Except as otherwise provided in the 2001 Plan,
the purchase price of Common Stock or other rights acquired or granted pursuant
to such plan shall be determined by the Board, provided that the purchase price
of Common Stock shall not be less than its par value. The Board may determine
the method of payment for Common Stock acquired pursuant to the 2001 Plan and
may determine that all or any part of the purchase price has been satisfied by
past service rendered by the recipient of an award. The Board may, upon the
request of a participant, defer the date on which payment under any award will
be made.
Change in Control Provisions. Unless otherwise provided in the agreement
evidencing an award, if there is a "Change in Control" of the Company as defined
in the 2001 Plan, any stock options that are not then exercisable and fully
vested will become fully exercisable and vested; the restrictions applicable to
restricted stock awards will lapse and shares issued pursuant to such awards
will be free of restrictions and fully vested; and deferral and other
limitations and conditions that related solely to the passage of time or
continued employment or other affiliation will be waived and removed but other
conditions will continue to apply unless otherwise provided in the instrument
evidencing the awards or by agreement between the participant and the Company.
Generally, any of the following events shall be considered a "Change in
Control": (i) the acquisition by any person of 40% or more of the outstanding
common stock or voting securities of Thermo Electron; (ii) the failure of the
Thermo Electron board of directors to include a majority of directors who are
"continuing directors", which term is defined to include directors who were
members of Thermo Electron's board on July 1, 1999 or who subsequent to that
date were nominated or elected by a majority of directors who were "continuing
directors" at the time of such nomination or election; (iii) the consummation of
a merger, consolidation, reorganization, recapitalization or statutory share
exchange involving Thermo Electron or the sale or other disposition of all or
substantially all of the assets of Thermo Electron unless immediately after such
transaction (a) all holders of Thermo Electron common stock immediately prior to
such transaction own more than 60% of the outstanding voting securities of the
resulting or acquiring corporation in substantially the same proportions as
their ownership immediately prior to such transaction and (b) no person after
the transaction owns 40% or more of the outstanding voting securities of the
resulting or acquiring corporation; or (iv) approval by stockholders of a
complete liquidation or dissolution of Thermo Electron.
Nature of Rights as Stockholder Under the 2001 Plan. Except as specifically
provided by the 2001 Plan, the receipt of an award will not give a participant
rights as a Stockholder. The participant will obtain such rights, subject to any
limitations imposed by the plan or the instrument evidencing the award, upon
actual receipt of Common Stock.
Adjustments for Stock Dividends, etc. The Board will make appropriate
adjustments to the maximum number of shares of Common Stock that may be
delivered under the 2001 Plan, and under outstanding awards, to
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reflect stock dividends, stock splits and similar events. The Board may also
make appropriate adjustments to avoid distortions in the operation of the 2001
Plan in the event of any recapitalization, merger or consolidation involving the
Company, any transaction in which the Company becomes a subsidiary of another
entity, any sale or other disposition of all or a substantial portion of the
assets of the Company or any similar transaction, as determined by the Board.
Amendment and Termination. The 2001 Plan shall remain in full force and
effect until terminated by the Board. The Board may at any time or times amend
or review the 2001 Plan or any outstanding award for any purpose which may at
the time be permitted by law, or may at any time terminate the plan as to any
further grants of awards. No amendment of the 2001 Plan or any outstanding award
may adversely affect the rights of a participant as to any previously granted
award without his or her consent. If an amendment would (i) materially increase
the benefits accruing to participants under the 2001 Plan, (ii) materially
increase the number of shares under the 2001 Plan or (iii) materially modify the
requirements for eligibility, then to the extent required by law or deemed
necessary by the Board, the amendment shall be subject to stockholder approval.
Stock Withholding. In the case of an award under which Common Stock may be
delivered, the Board may permit the participant or other appropriate person to
elect to have the Company hold back from the shares to be delivered, or to
deliver to the Company, shares of Common Stock having a value sufficient to
satisfy any federal, state and local withholding tax requirements.
Federal Income Tax Consequences
The following is a summary of the principal United States federal income
tax consequences of transactions under the 2001 Plan. It does not describe all
federal tax consequences under the 2001 Plan, nor does it describe any state,
local or foreign tax consequences.
Incentive Stock Options. No taxable income is recognized by the optionee
upon the grant or exercise of an incentive stock option. However, the exercise
of an incentive stock option may result in alternative minimum tax liability for
the optionee. If no disposition of shares issued to an optionee pursuant to the
exercise of an incentive stock option is made by the optionee within the later
of two years from the date of grant or one year after the transfer of such
shares to the optionee, then upon the later sale of such shares, for federal
income tax purposes, any amount realized in excess of the exercise price will be
taxed to the optionee as a long-term capital gain and any loss sustained will be
a long-term capital loss, and no deduction will be allowed to the Company.
If the shares of Common Stock acquired upon the exercise of an incentive
stock option are disposed of prior to the expiration of the two- and one-year
holding periods described above, generally the optionee will recognize ordinary
compensation income in the year of disposition in an amount equal to the excess
(if any) of the fair market value of the shares at exercise (or, if less, the
amount realized on an arms-length sale of such shares) over the exercise price
thereof, and the Company will be entitled to deduct such amount, subject to the
limitations of Section 162(m) of the Internal Revenue Code. Any further gain
recognized will be taxed as short- or long-term capital gain and will not result
in any deduction by the Company. Special rules will apply where all or a portion
of the exercise price of the incentive stock option is paid by tendering shares
of Common Stock.
If any incentive stock option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is treated as a non-
statutory stock option. Generally, an incentive stock option will not be
eligible for the tax treatment described above if it is exercised more than
three months following termination of employment (one year following termination
of employment by reason of permanent and total disability), except in certain
cases where the incentive stock option is exercised after the death of an
optionee.
Non-statutory Options. With respect to non-statutory stock options granted
under the 2001 Plan, no income is recognized by the optionee at the time the
option is granted. Generally, at exercise, ordinary compensation income is
recognized by the optionee in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise,
and the Company receives a tax deduction for the same amount, subject to the
limitations of Section 162(m) of the Internal Revenue Code. At disposition of
the shares, appreciation or depreciation after the date of exercise is treated
as either short- or long-term capital gain or loss depending on how long the
shares have been held.
Restricted Stock. A recipient of restricted stock that is subject to a
risk of forfeiture generally will be subject to tax at ordinary income rates on
the fair market value of the stock at the time the stock is either transferable
32
or is no longer subject to forfeiture, less any amount paid for such stock.
However, a recipient who so elects under Section 83(b) of the Internal Revenue
Code ("Section 83(b)") within 30 days of the date of issuance of the restricted
stock will recognize ordinary compensation income on the date of issuance equal
to the fair market value of the shares of restricted stock at that time
(measured as if the shares were unrestricted and could be sold immediately),
minus any amount paid for such stock. The Company generally will be entitled to
a deduction equal to the amount that is taxable as ordinary income to the
recipient, subject to the limitations of Section 162(m) of the Internal Revenue
Code.
Upon sale of the shares after the forfeiture period has expired, the
appreciation or depreciation after the shares become transferable or free from
risk of forfeiture (or, if a Section 83(b) election was made, since the shares
were issued) will be treated as long- or short-term capital gain or loss. The
holding period to determine whether the recipient has long- or short-term
capital gain or loss begins just after the forfeiture period expires (or just
after the earlier issuance of the shares, if the recipient elected immediate
recognition of income under Section 83(b)). If restricted stock is received in
connection with another award under the 2001 Plan (for example, upon exercise of
an option), the income and the deduction, if any, associated with such award may
be deferred in accordance with the rules described above for restricted stock.
Deferred Stock. The recipient of a deferred stock award will generally be
subject to tax at ordinary income rates on the fair market value of the stock on
the date that the stock is distributed to the participant. The capital gain or
loss holding period for such stock will also commence on such date. The Company
generally will be entitled to a deduction equal to the amount that is taxable as
ordinary income to the employee. If a right to deferred stock is received under
another award (for example, upon exercise of an option), the income and
deduction, if any, associated with such award may be deferred in accordance with
the rules described above for deferred stock.
Performance Awards. The recipient of a performance award will generally be
subject to tax at ordinary income rates on any cash received and the fair market
value of any Common Stock issued under the award, and the Company will generally
be entitled to a deduction equal to the amount of ordinary income recognized by
the recipient. Any cash received under a performance award will be included in
income at the time of receipt. The fair market value of any Common Stock
received will also generally be included in income (and a corresponding
deduction will generally be available to the Company) at the time of receipt.
The capital gain or loss holding period for any Common Stock distributed under a
performance award will begin when the recipient recognizes ordinary income in
respect of that distribution.
Loans and Supplemental Grants. Generally speaking, bona fide loans made
under the 2001 Plan will not result in taxable income to the recipient or in a
deduction to the Company. However, any such loan made at a rate of interest
lower than certain rates specified under the Internal Revenue Code may result in
an amount (measured, in general, by reference to the difference between the
actual rate and the specified rate) being included in the borrower's income and
deductible by the Company. Forgiveness of all or a portion of a loan may also
result in income to the borrower and a deduction for the Company. If outright
cash grants are given in order to facilitate the payment of award-related taxes,
the grants will be includable as ordinary income by the recipient at the time of
receipt and will in general be deductible by the Company.
Recommendation
The board of directors believes that the 2001 Plan is an important tool for
the Company to attract and retain key employees and to be able to continue to
offer them the opportunity to participate in the ownership and growth of the
Company. The board of directors believes the 2001 Plan is in the best interests
of the Company and its stockholders and recommends that the stockholders vote
FOR the approval of the 2001 Plan. If not otherwise specified, Proxies will be
voted FOR approval of the 2001 Plan.
PROPOSAL 3
PROPOSAL TO APPROVE THE 2000 EMPLOYEES' STOCK PURCHASE PLAN
The board of directors adopted the 2000 employees' stock purchase plan (the
"2000 ESPP") in September 2000. The 2000 ESPP authorizes the issuance of up to
1,000,000 shares of Common Stock (subject to adjustment as described below) and
the material features of the plan are described below. The 2000 ESPP replaces
the Company's current employees' stock purchase plan. All available shares under
the Company's current employees' stock purchase plan were depleted upon the
completion of the 1999-2000 plan year.
33
The purpose of the 2000 ESPP is to provide eligible employees of the
Company and its subsidiaries with a continuing opportunity to purchase shares of
Common Stock. The Company has provided an employees' stock purchase plan to its
employees since 1982. By allowing eligible employees to participate in ownership
in the Company, the plan provides an important incentive in attracting and
retaining key personnel, in motivating individuals to contribute significantly
to the Company's future growth and success, and in aligning the long-term
interest of these individuals with those of the Company's stockholders. Approval
of the 2000 ESPP will make the employees participating in the plan eligible for
the favorable tax benefits described below.
For these reasons, the board of directors believes stockholder approval of
the 2000 ESPP is in the best interests of the Company and its stockholders and
recommends a vote FOR this proposal.
The closing price per share on the New York Stock Exchange of the Common
Stock on April 9, 2001 was $22.55.
Summary of the 2000 ESPP
The following summary of the terms of the 2000 ESPP is qualified in its
entirety by reference to the plan.
Participation; Administration. All full-time employees and part-time
employees working at least 20 hours per week and who have been employed for at
least six months by the Company are eligible to participate in the 2000 ESPP,
unless they own more than 5% of the Common Stock of the Company. Options to
purchase shares of the Common Stock of the Company may be granted from time to
time at the discretion of the board of directors, which also determines the date
upon which such options are exercisable. At the present time, only employees
based in the United States are eligible to participate in the 2000 ESPP. The
number of employees potentially eligible to participate in the 2000 ESPP is
approximately 7,000 persons.
Contributions. A participating employee may purchase stock only through
payroll deductions, which may not exceed 10% of the employees' gross salary or
wages during the year. Employees are allowed to decrease, but not increase the
percentage of wages contributed, once during the plan year. An employee may
suspend his or her contributions, but then is not permitted to contribute again
for the remainder of the plan year.
Terms of Options. The exercise price is 85% of the lower of the fair market
value of the Common Stock on the grant date or the exercise date. The grant date
and the exercise date are determined by the board of directors. On the exercise
date, participants may elect to use their accumulated payroll deductions to
purchase shares at the exercise price. As a condition to purchase, the Company
may require that participants must agree not to resell the shares so purchased
for a period of up to one year following the exercise date. The options are
nontransferable, and except in the case of death of the employee, may not be
exercised if the employee is not still employed by the Company at the exercise
date. If an employee dies, his or her beneficiary may withdraw the accumulated
payroll deduction or use such deductions to purchase shares on the exercise
date. A participant may elect to discontinue participation at any time prior to
the exercise date and to have his or her accumulated payroll deduction refunded.
Shares Subject to the 2000 ESPP. The number of shares reserved for issuance
under the 2000 ESPP is 1,000,000 shares of the Company's Common Stock, subject
to adjustment for stock splits and similar events. The proceeds received by the
Company from the exercise of options granted under the 2000 ESPP will be used
for the general purposes of the Company. Shares issued under the 2000 ESPP may
be authorized but unissued shares or shares reacquired by the Company and held
in its treasury.
Amendment and Termination. The 2000 ESPP shall remain in full force and
effect until suspended or discontinued by the board of directors. The board of
directors may at any time or times amend or review the 2000 ESPP for any purpose
which may be permitted by law, or may at any time terminate the 2000 ESPP,
provided that no amendment that is not approved by the stockholders shall be
effective if it would cause the 2000 ESPP to fail to satisfy the requirements of
Rule 16b-3 (or any successor rule) of the Securities Exchange Act of 1934, as
amended.
Term of the 2000 ESPP. The 2000 ESPP will expire on November 1, 2011,
provided that the number of shares available for issuance under the 2000 ESPP is
not exhausted prior to that date.
34
Federal Income Tax Aspects
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
2001 Plan and with respect to the sale of Common Stock acquired under the 2001
Plan.
If the stockholders approve the 2001 Plan, it will qualify as an "Employee
Stock Purchase Plan" within the meaning of Section 423 of the Internal Revenue
Code. The following tax consequences are those that will apply if stockholder
approval is obtained. The 2001 Plan is not a qualified plan under Section 401(a)
of the Internal Revenue Code.
Federal income tax is not imposed upon an employee in the year an option is
granted or the year the shares are purchased pursuant to the exercise of the
option granted under the 2000 ESPP. Federal income tax generally is imposed upon
an employee when he or she sells or otherwise disposes of the shares acquired
pursuant to the 2000 ESPP. When an employee sells or disposes of the shares, if
such sale or disposition occurs more than two years from the grant date, and
more than one year from the exercise date, then Federal income tax assessed at
ordinary rates will be imposed upon the amount by which the fair market value of
the shares on the date of grant or disposition, whichever is less, exceeds the
amount paid for the shares. In addition, the difference between the amount
received by the employee at the time of sale and the employees' tax basis in the
shares, which is equal to the amount paid on exercise of the option plus the
amount recognized as ordinary income, will be recognized as a capital gain or
loss. The Company will not be allowed a deduction under these circumstances for
Federal income tax purposes. If the employee sells or disposes of the shares
sooner than two years from the grant date or one year from the exercise date,
then the employee's entire gain (the difference between the fair market value at
disposition and the amount paid for the shares) will be taxed as ordinary
income, and the Company would be entitled to a deduction equal to that amount.
If stockholder approval is not obtained, the following tax consequences
will result. A participant will recognize ordinary income upon the purchase of
Common Stock in an amount equal to the excess of the fair market value of the
Common Stock over the purchase price. The Company would receive a tax deduction
for the amount of compensation income recognized by the participant. The
participant will have a basis in the Common Stock acquired equal to the sum of
the price paid and the amount of the compensation income recognized. Upon
selling the Common Stock, a participant will generally recognize capital gain or
loss in an amount equal to the difference between the sales price of the Common
Stock and the participant's basis in the Common Stock. This capital gain or loss
will be long-term capital gain or loss if the Common Stock is held more than one
year prior to the date of sale.
Recommendation
The board of directors believes that the 2000 ESPP is an important tool for
the Company to attract and retain key employees and to be able to continue to
offer them the opportunity to participate in the ownership and growth of the
Company through an employees' stock purchase plan that offers favorable tax
benefits under the Internal Revenue Code. The board of directors believes the
2000 ESPP is in the best interests of the Company and its stockholders and
recommends that the stockholders vote FOR the approval of the 2000 ESPP. If not
otherwise specified, Proxies will be voted FOR approval of the 2000 ESPP.
35
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has retained Arthur Andersen LLP as its independent accountants
since 1960 and intends to retain Arthur Andersen LLP for the current year ending
December 31, 2001. Representatives of Arthur Andersen LLP are expected to be
present at the meeting, will have the opportunity to make a statement if they
desire to do so and will be available to respond to questions.
During fiscal 2000, the Company retained Arthur Andersen LLP to provide
services in the following categories and amounts:
Audit Fees
Arthur Andersen LLP billed the Company and its subsidiaries an aggregate of
$3,410,000 in fees for professional services rendered in connection with the
audit of the financial statements of the Company and its subsidiaries for the
most recent fiscal year. This amount included fees of $2,225,000 associated with
the annual audit of the Company's continuing operations, as well as $862,000 of
fees for audit work on the financial statements of businesses reported as
discontinued operations. Included in the amount are also fees of $323,000
related to consulting on accounting and reporting matters and reviews of the
financial statements included in each of the Quarterly Reports on Form 10-Q of
the Company and its subsidiaries during the fiscal year ended December 30, 2000.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP billed the Company an aggregate of $740,000 in fees for
professional services rendered to the Company and its subsidiaries for the
fiscal year ended December 30, 2000 in connection with the design and
implementation of financial information systems.
All Other Fees
Arthur Andersen LLP billed the Company an aggregate of $3,387,000 in fees
for other services rendered to the Company and its subsidiaries for the fiscal
year ended December 30, 2000, primarily in connection with tax consulting
related to the reorganization and the related rulings requested from the
Internal Revenue Service, and audits of entities in connection with divestiture
activities.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be included in the proxy statement
and form of proxy relating to the 2002 Annual Meeting of the Stockholders of the
Company and to be presented at such meeting must be received by the Company for
inclusion in the proxy statement and form of proxy no later than December 24,
2001. In addition, the Company's Bylaws include an advance notice provision that
requires stockholders desiring to bring proposals before an annual meeting
(which proposals are not to be included in the Company's proxy statement and
thus are submitted outside the processes of Rule 14a-8 under the Exchange Act)
to do so in accordance with the terms of such advance notice provision. The
advance notice provision requires that, among other things, stockholders give
timely written notice to the Secretary of the Company regarding their proposals.
To be timely, notices must be delivered to the Secretary at the principal
executive offices of the Company not less than 60, nor more than 75, days prior
to the first anniversary of the date on which the Company mailed its proxy
materials for the preceding year's annual meeting of stockholders. Accordingly,
a stockholder who intends to present a proposal at the 2002 Annual Meeting of
Stockholders without inclusion of the proposal in the Company's proxy materials
must provide written notice of such proposal to the Secretary no earlier than
February 7, 2002 and no later than February 22, 2002. Proposals received at any
other time will not be voted on at the meeting. If a stockholder makes a timely
notification, the proxies that management solicits for the meeting may still
exercise discretionary voting authority with respect to the stockholder's
proposal under circumstances consistent with the proxy rules of the Securities
and Exchange Commission.
36
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Company.
Solicitation will be made primarily by mail, but regular employees of the
Company may solicit proxies personally or by telephone, facsimile transmission
or telegram. In addition, the Company has engaged D. F. King & Co., Inc. for a
fee not to exceed $10,000 plus out-of-pocket expenses in order to assist in the
solicitation of proxies. Brokers, nominees, custodians and fiduciaries are
requested to forward solicitation materials to obtain voting instructions from
beneficial owners of stock registered in their names, and the Company will
reimburse such parties for their reasonable charges and expenses in connection
therewith.
Waltham, Massachusetts
April 12, 2001
37
APPENDIX A
Thermo Electron Corporation
Audit Committee Charter
Organization
The Committee shall consist of only independent Directors as defined by the
relevant stock exchange listing authority for the Company's equity securities.
The Chairman of the Committee shall be chosen from among the members. Each
member of the Committee shall be financially literate or must become financially
literate within a reasonable period of time after his or her appointment to the
Committee, and at least one member of the Committee must have accounting or
related financial management expertise as the foregoing qualifications are
interpreted by the Board of Directors ("Board") in its business judgment. The
number of Directors serving on the Committee shall be determined by the Board of
Directors, and from and after June 14, 2001, the Committee shall consist of at
least three Directors.
Statement of Policy
The Committee shall, through regular or special meetings with management, the
Company's internal auditor and the Company's independent auditor, provide
oversight on matters relating to accounting, financial reporting, internal
control, auditing and other matters as the Board or the Committee Chairman deems
appropriate.
Responsibilities
The Company's management is responsible for preparing the Company's financial
statements and the independent auditors are responsible for auditing those
financial statements. The Committee is responsible for overseeing the conduct of
these activities by the Company's management and the independent auditors. The
financial management and the independent auditors of the Company have more time,
knowledge and more detailed information on the Company than do Committee
members. Consequently, in carrying out its oversight responsibilities, the
Committee is not providing any expert or special assurance as to the Company's
financial statements or any professional certification as to the independent
auditor's work.
In carrying out its oversight responsibilities, the Committee shall perform the
following functions:
Oversight of Independent Auditors.
In the course of its oversight of the independent auditors as provided under
this Charter, the Committee will be guided by the premise that the independent
auditor is ultimately accountable to the Board and the Committee.
1. The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the independent auditor.
2. The Committee shall:
(i) receive from the independent auditors annually, a formal written
statement delineating the relationships between the auditors and
the Company consistent with Independence Standards Board
Standard Number 1;
(ii) discuss with the independent auditors the scope of any such
disclosed relationships and their impact or potential impact on
the independent auditor's independence and objectivity; and
(iii) recommend that the Board take appropriate action in response to
the independent auditor's report to satisfy itself of the
auditor's independence.
3. The Committee shall review the original proposed scope of the annual
independent audit of the Company's financial statements and the
associated fees, as well as any significant variations in the actual
scope of the independent audit and the associated fees.
4. The Committee shall review the independent auditors' report relating
to reportable conditions in the internal control structure and
financial reporting practices.
A-1
Oversight of Internal Auditors.
The Committee shall review and discuss with management and the independent
auditors:
1. The quality and adequacy of the Company's internal accounting controls.
2. Organization of the internal audit department, the adequacy of its
resources and the competence of the internal audit staff.
3. The audit risk assessment process and the proposed scope of the
internal audit department for the upcoming year and the coordination of
that scope with independent auditors.
4. Results of the internal auditors examination of internal controls
including summaries of inadequate reports issued and/or management
improprieties together with management's response thereto.
Oversight of Management's Conduct of the Company's Financial Reporting Process.
1. Audited Financial Statements. The Committee shall review and discuss
with management and the independent auditors the audited financial
statements to be included in the Company's Annual Report on Form 10-K
(or the Annual Report to Shareowners if distributed prior to the filing
of Form 10-K) and review and consider with the independent auditors the
matters required to be discussed by the applicable Statement of
Auditing Standards ("SAS"). Based on these discussions, the Committee
will advise the board of directors whether it recommends that the
audited financial statements be included in the Annual Report on Form
10-K (or the Annual Report to Shareholders).
2. Interim Financial Statements. The Committee, through its Chairman or
the Committee as a whole, will review with management and the
independent auditors, prior to the filing thereof, the Company's
interim financial results to be included in the Company's quarterly
reports on Form 10-Q and the matters required to be discussed by the
applicable SAS.
3. Financial Reporting Practices. The Committee shall review:
(i) Significant changes in the Company's accounting policies and
practices and significant judgments that may affect the
financial results.
(ii) The nature of any unusual or significant commitments or
contingent liabilities together with the underlying assumptions
and estimates of management.
(iii) The effect of changes on accounting standards that may
materially affect the Company's financial reporting practices.
(iv) Litigation or other legal matters that could have a significant
impact on the Company's financial results.
Oversight and Review of Charter.
The Committee shall review and monitor, as appropriate, the adequacy of this
Charter, which shall be reviewed by the Committee on an annual basis. The
Committee will recommend to the Board any modifications to this Charter, which
the Committee deems appropriate, for approval by the Board.
A-2
FORM OF PROXY
THERMO ELECTRON CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 16, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Richard F. Syron, Theo Melas-Kyriazi and
Seth H. Hoogasian, and each of them, proxies of the undersigned, each with power
to appoint his substitute, and hereby authorizes them to represent and to vote,
as designated below, all the shares of common stock of Thermo Electron
Corporation held of record by the undersigned on March 30, 2001, at the Annual
Meeting of the Stockholders to be held in the Auditorium of the Fleet Conference
Center, 100 Federal Street, Boston, Massachusetts, on Wednesday, May 16, 2001,
at 3:30 p.m., and at any postponement or adjournment thereof, as set forth on
the reverse side hereof, and in their discretion upon any other business that
may properly come before the meeting.
The Proxy will be voted as specified, or if no choice is specified, FOR the
election of the nominees for director, FOR Proposals 2 and 3, if presented at
the meeting, and as said proxies deem advisable on such other matters as may
properly come before the meeting.
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
1
Vote by Telephone
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number
1-877-PRX-VOTE (1-877-779-8683).
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recorded instructions.
Your vote is important!
Call 1-877-PRX-VOTE anytime!
Vote by Internet
It's fast, convenient, and your vote is immediately confirmed and posted.
Call Toll-Free on a Touch-Tone Phone
Follow these four easy steps:
1. Read the accompanying Proxy Statement and Proxy Card.
2. Go to the Website
http://www.eproxyvote.com/tmo
3. Enter your 14-digit Voter Control Number located on your Proxy Card above
your name.
4. Follow the recorded instructions.
Your vote is important!
Go to http://www.eproxyvote.com/tmo anytime!
Do not return your Proxy Card if you are voting by Telephone or Internet
2
Please mark your
[x] votes as in this
example.
The Board of Directors recommends a vote For Proposals 1, 2 and 3.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
Nominees: (01) Marijn E. Dekkers, (02) Robert A. McCabe and (03) Robert W.
O'Leary.
FOR ALL NOMINEES [_]
WITHHELD FROM ALL NOMINEES [_]
FOR, except vote withheld for the following nominee(s): ________________________
FOR AGAINST ABSTAIN
2. Approve a management proposal to approve [_] [_] [_]
the Company's 2001 Equity Incentive Plan and
to reserve five million shares for issuance under
the plan.
FOR AGAINST ABSTAIN
3. Approve a management proposal to approve [_] [_] [_]
Company's 2000 Employees' Stock Purchase Plan.
4. In their discretion on such other matters as may properly come before the
meeting.
(This proxy should be dated, signed by the shareholder(s) exactly as his or her
name appears hereon, and returned promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
Copies of the Notice of Meeting and of the Proxy Statement have been received by
the undersigned.
SIGNATURE(S)_______________________________________ DATE_________________
3