SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
THERMO ELECTRON CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
[Thermo Logo]
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046
April 11, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 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 29, 2001, 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/ Dick Syron
RICHARD F. SYRON
Chairman and Chief Executive Officer
YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN YOUR PROXY CARD.
[Thermo Logo]
81 Wyman Street
P.O. Box 9046
Waltham, MA 02454-9046
April 11, 2002
To the Holders of the Common Stock of
THERMO ELECTRON CORPORATION
NOTICE OF ANNUAL MEETING
The 2002 Annual Meeting of the Stockholders of Thermo Electron Corporation
("Thermo Electron" or the "Company") will be held on Wednesday, May 15, 2002, 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 2005.
2. 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 April 1, 2002.
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.
/s/ Seth H. Hoogasian
SETH H. HOOGASIAN
Vice President, General Counsel and
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 2002
Annual Meeting of the Stockholders to be held on Wednesday, May 15, 2002, 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 11,
2002.
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 2005.
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. Shares can be voted only if the stockholder is present
in person or is represented by returning a properly signed proxy. Each
stockholder's vote is very important. Whether or not you plan to attend the
meeting in person, please sign and promptly return the enclosed proxy card,
which requires no postage if mailed in the United States. 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,
and as the individuals named as proxy holders on the proxy deem advisable on all
other matters that 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. 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, broker non-votes are not counted in the vote totals, 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 prior to the meeting, or by voting by ballot at the meeting.
The outstanding stock of the Company entitled to vote as of April 1, 2002,
consisted of 173,217,172 shares of Common Stock. Only stockholders of record at
the close of business on April 1, 2002, 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. Dr. John L. LaMattina, Dr. Michael E. Porter and Mr. Richard F. Syron,
are listed below as nominees for the three-year term expiring at the Annual
Meeting of the Stockholders to be held in 2005. 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.
Mr. Frank Jungers, who has served as a director of the Company since 1978,
is retiring from the board of directors at the Annual Meeting of the
Stockholders. Ms. Hutham S. Olayan, who has served as a director of the Company
since 1987, is not standing for reelection as a director. The Company recognizes
with gratitude and appreciation the leadership, service and dedication of Mr.
Jungers and Ms. Olayan.
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 they hold directorships. Information regarding their
beneficial ownership of the Company's Common Stock is reported under the caption
"Stock Ownership."
Nominees for Directors Whose Term of Office Will Expire in 2005
John L. LaMattina Dr. LaMattina, 52, has been a director of the Company
since January 2002. He has served since April 2000 as the executive vice
president, Global Research and Development, and president, Worldwide Research,
of Pfizer Incorporated, a pharmaceutical company. From September 1998 until
April 2000, Dr. LaMattina was the senior vice president of Worldwide Discovery,
Pfizer Central Research. Previously, he served as vice president of Pfizer's
U.S. Discovery unit.
Michael E. Porter Dr. Porter, 54, has been a director of Thermo Electron
since July 2001. Dr. Porter is the Bishop William Lawrence University Professor
at the Harvard Business School, and a leading authority on competitive strategy
and international competitiveness. Dr. Porter is also a director of Inforte
Corp. and Parametric Technology Corporation.
Richard F. Syron Mr. Syron, 58, 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, Mr. Syron was the chairman and chief
executive officer of the American Stock Exchange, Inc. Mr. Syron is also a
director of John Hancock Financial Services, Inc., Dreyfus Corporation and
McKesson Corporation.
Incumbent Directors Whose Term of Office Will Expire in 2003
Peter O. Crisp Mr. Crisp, 69, 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
Corporationand United States Trust Corporation.
Jim P. Manzi Mr. Manzi, 50, has been a director of the Company since May
2000. He is the chairman 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.
2
Elaine S. Ullian Ms. Ullian, 54, has been a director of Thermo Electron
since July 2001. Ms. Ullian has been president and chief executive officer of
Boston Medical Center, a 550-bed academic medical center affiliated with Boston
University, since July 1996. Ms. Ullian is also a director of Hologic, Inc. and
Vertex Pharmaceuticals, Inc.
Incumbent Directors Whose Term of Office Will Expire in 2004
Marijn E. Dekkers Mr. Dekkers, 44, has been a director and 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
Allied Signal 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 specialty films division.
Robert A. McCabe Mr. McCabe, 67, 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, 58, 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. Mr. O'Leary is also a director
of Smiths Group PLC and Viasys Healthcare Inc.
Committees of the Board of Directors and Meetings
The board of directors has established an audit committee, a human
resources committee and a nominating and corporate governance committee. 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), Mr. Manzi and Ms. Ullian. The
audit committee, among other things, 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 ("outside directors") and its present members are
Mr. Jungers (Chairman), 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 and corporate
governance committee consists solely of outside directors and its present
members are Mr. Jungers (Chairman), and Mr. O'Leary. The nominating and
corporate governance 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. In addition, the nominating and corporate governance
committee reviews and monitors the Company's principles and policies of
corporate governance, business code of conduct and ethical responsibilities. The
board of directors met nine times, the audit committee met three times, the
human resources committee met seven times and the nominating and corporate
governance committee met four times during fiscal 2001. 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 2001.
Compensation Committee Interlocks and Insider Participation
In fiscal 2001, the Company engaged the services of The Sagamore Group to
provide advice regarding the 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 was
compensated $141,200 for its services under this agreement and was reimbursed
for related out-of-pocket expenses. In addition, the Company provided health
insurance to Mr. O'Leary while The Sagamore Group provided such services to the
Company. These services terminated in December 2001, after the spin-off was
completed.
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 Mr. 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
"Directors Deferred Compensation Plan"), a director has the right to defer
receipt of his or her cash fees until he or she ceases to serve as a director,
dies or retires from his or her 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 Directors Deferred Compensation Plan. As
of December 29, 2001, a total of 658,659 shares of Common Stock were reserved
for issuance under the Directors Deferred Compensation Plan and deferred units
equal to approximately 351,129 shares of Common Stock were accumulated under the
Directors 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. The
Company's current policy is to award options to purchase 15,000 shares to any
new director of the Company upon his or her appointment as a director. The
options vest in three equal annual installments and expire on the seventh
anniversary of the grant date.
In addition, the Company's directors stock option plan (the "Directors
Stock Option 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 seventh anniversary of the grant date except that options granted prior
to February 2002 expire on the third anniversary of the grant date. The exercise
price for options granted under the Directors Stock Option 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, 2002, options to purchase 23,240 shares of Common Stock were
outstanding under the Directors Stock Option Plan, options to purchase 97,491
shares of Common Stock had been exercised since inception of the Directors Stock
Option Plan, and options to purchase 664,263 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, 2002, 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. In addition, the following table sets forth the beneficial
ownership of Common Stock, as of February 28, 2002, with respect to each person
who was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
Number of Percent of
Shares Shares
Owned(2) Beneficially
Owned
Name(1)
FMR Corp.(3)...................................... 24,441,884 14.0
Wellington Management Company, LLP(4)............. 13,841,067 8.0
Iridian Asset Management LLC(5)................... 11,354,457 6.5
Dodge & Cox(6).................................... 11,089,607 6.4
Guy Broadbent..................................... 59,917 *
Peter O. Crisp.................................... 150,623 *
Marijn E. Dekkers................................. 481,818 *
Brian D. Holt..................................... 254,532 *
Seth H. Hoogasian................................. 257,142 *
Barry S. Howe..................................... 474,584 *
Frank Jungers..................................... 266,001 *
John L. LaMattina................................. 0 0
Jim P. Manzi...................................... 21,829 *
Robert A. McCabe.................................. 94,002 *
Theo Melas-Kyriazi................................ 821,107 *
Colin Maddix...................................... 259,737 *
Hutham S. Olayan.................................. 59,451 *
Robert W. O'Leary................................. 55,261 *
Michael E. Porter................................. 4,585 *
Richard F. Syron.................................. 1,717,597 *
Elaine S. Ullian.................................. 1,256 *
All directors and current executive
officers as a group (17
persons).......................................... 4,551,982 2.57
* Less than one percent.
(1) Except as reflected in the footnotes to this table, shares of the Common
Stock of the Company 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 Mr.
Broadbent, Mr. Crisp, Mr. Dekkers, Mr. Holt, Mr. Hoogasian, Mr. Howe, Mr.
Jungers, Mr. Maddix, Mr. Manzi, Mr. McCabe, Mr. Melas-Kyriazi, Ms. Olayan, Mr.
O'Leary, Mr. Syron and all directors and current executive officers as a group
include: 54,271; 24,251; 426,417; 244,289; 237,029; 435,593; 39,451; 253,826;
18,606; 22,860; 745,768; 23,816; 33,439; 1,624,258; and 3,760,160 shares,
respectively, that such person or members of the group have the right to acquire
within 60 days of February 28, 2002, through the exercise of stock options.
Shares beneficially owned by Mr. Crisp, Mr. Jungers, Mr. Manzi, Mr. McCabe, Ms.
Olayan, Mr. O'Leary, Mr. Syron, and Ms. Ullian and all directors and current
executive officers as a group include: 57,306; 93,534; 3,223; 40,384; 26,705;
8,822; 2,914; 1,256; and 234,144 shares, respectively, allocated to accounts
maintained pursuant to the Directors Deferred Compensation Plan. Shares
beneficially owned by Mr. Hoogasian, Mr. Howe, Mr. Melas-Kyriazi and all
directors and current executive officers as a group include: 425; 2,622; 1,727;
5
and 5,332 shares, respectively, held in the Company's 401(k) Plan. Shares
beneficially owned by Mr. Jungers include 215 shares held by his spouse. Shares
beneficially owned by Mr. Melas-Kyriazi include 1,621 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, which is indirectly
owned by a family company of which Ms. Olayan is a member of the Board of
Directors. 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. Shares beneficially owned by Mr. Howe include 516 shares held for his
two minor children.
(3) 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, 2001.
The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
The number of shares of Common Stock beneficially owned by FMR Corp. includes
793,651 shares issuable upon conversion of the Company's 4.25% Convertible
Subordinated Debentures due 2003. FMR Corp. has sole voting power with respect
to 3,324,263 shares and sole dispositive power with respect to all the shares.
The power to dispose of all the shares is also attributable to Edward C. Johnson
III and Abigail P. Johnson by virtue of their positions and ownership interests
in FMR Corp.
(4) Information regarding the number of shares of Common Stock attributed to
Wellington Management, LLP is based on the Schedule 13G of Wellington
Management, LLP received by the Company, which reported such ownership as of
December 31, 2001. The address of Wellington Management, LLP is 75 State Street,
Boston, Massachusetts 02109. These shares are held of record by clients of
Wellington Management, LLP, an investment advisor. Wellington Management, LLP
has shared voting power with respect to 8,730,367 shares and shared dispositive
power with respect to all of the shares.
(5) Information regarding the number of shares of Common Stock attributed to
Iridian Asset Management LLC is based on the Schedule 13G of Iridian Asset
Management LLC received by the Company, which reported such ownership as of
December 31, 2001. The address of Iridian Asset Management LLC is 276 Post Road
West, Westport, CT 06880-4704. The shares are beneficially owned as follows:
Iridian Asset Management LLC, 10,462,057 shares; First Eagle Fund of America,
504,700 shares; Iridian Partners Fund , L.P. 49,200 shares; Iridian Investors,
L.P., 37,500 shares; and Iridian Private Business Value Equity Fund, L.P.,
242,700 shares. As a result of their various positions with affiliates of
Iridian Asset Management LLC, each of David L. Cohen and Harold J. Levy has
shared voting and shared dispositive power over 11,354,457 shares. Each of
Iridian Asset Management LLC, LC Capital Management, LLC, and CL Investors, Inc.
has shared voting and shared dispositive power over 10,791,457 shares. Cole
Partners LLC has shared voting and shared dispositive power over 329,400 shares.
Iridian Partners Fund, L.P.. has shared voting and shared dispositive power over
49,200 shares. Iridian Investors, L.P. has shared voting and shared dispositive
power over 37,500 shares. Iridian Private Business Value Equity Fund, L.P. has
shared voting and shared dispositive power over 242,700 shares.
(6) Information regarding the number of shares of Common Stock attributed to
Dodge & Cox is based on the most recent Schedule 13G of Dodge & Cox received by
the Company, which reported such ownership as of December 31, 2001. The address
of Dodge & Cox is One Sansome Street, 35th Floor, San Francisco, CA 94104. These
shares are beneficially owned by clients of Dodge & Cox, an investment advisor,
which clients may include investment companies registered under the Investment
Company Act of 1940 and/or employee benefit plans, pension funds, endowment
funds or other institutional clients. Dodge & Cox has sole voting power with
respect to 10,406,007 shares, sole dispositive power with respect to 11,089,607
shares and shared voting power with respect to 134,000 shares.
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 2001 except that Mr. Frank Jungers, a director
of the Company, in connection with his reporting of the exercise of an option to
purchase Common Stock, inadvertently failed to report that the purchase price
for the exercise was paid by exchanging shares of Common Stock that he already
owned.
6
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 five other most highly compensated executive officers who were
employed by the Company as of the end of fiscal 2001 and two former executive
officers of the Company. These executive officers are collectively referred to
in this proxy statement as the "named executive officers."
Summary Compensation Table
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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 2001 $800,000 $800,000 $199,716 (3) 302,368 $7,650
Chairman and 2000 $800,000 $1,120,000 $1,558,805 (3) 348,886 $134,777 (4)
Chief Executive Officer 1999 $514,667 (5) $370,000(5) $199,500 (3) 1,162,955 $309,402 (4)
-------------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers 2001 $500,000 $425,000 -- 232,591 $5,625
President and 2000 $238,095 (6) $500,000 (6) $1,410,000 (6) 1,046,660 $280,000 (7)
Chief Operating Officer
-------------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian(8) 2001 $307,000 $185,000 -- (9) 44,191 $7,650
General Counsel
-------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi 2001 $297,000 $185,000 -- 34,306 $7,650
Chief Financial Officer 2000 $280,000 $240,000 $577,500 (10) -- $7,650
1999 $220,000 $180,000 $58,408 (10) 397,550 (11) $7,200
-------------------------------------------------------------------------------------------------------------------------
Guy Broadbent(12) 2001 $270,000 $150,000 -- (13) 171,518 --
President, Optical
Technologies
-------------------------------------------------------------------------------------------------------------------------
Barry S. Howe(14) 2001 $270,000 $150,000 -- (15) 46,518 $7,225
President, Measurement
and Control
-------------------------------------------------------------------------------------------------------------------------
Brian D. Holt(16) 2001 $343,200 $220,000 -- -- $163,620 (17)
Former Chief Operating 2000 $330,000 $440,000 $577,500 (18) -- $653,532 (17)
Officer, Energy and
Environment 1999 $280,000 $170,000 $97,182 (18 115,044 (19) $7,200
-------------------------------------------------------------------------------------------------------------------------
Colin Maddix(20) 2001 $270,000 $135,000 -- 40,703 $7,650
Former Chief Operating
Officer, Life Sciences
-------------------------------------------------------------------------------------------------------------------------
(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. In addition, in
2001, the Company spun off to its shareholders all of the shares of Kadant Inc.
(formerly known as Thermo Fibertek Inc.) and, as a result, all of the options
held by employees of the Company in Kadant Inc. and its publicly-owned
subsidiary, Thermo Fibergen Inc., were converted into options to purchase shares
of the Company. Options granted in the last three years by all of the
subsidiaries described in this footnote have been restated in the table as
options to purchase shares of the Company. Options granted in the three fiscal
years in the table above have also been restated to reflect adjustments made to
the number and exercise prices of the options as a result of the spin-off to
shareholders by the Company of its Kadant Inc. and Viasys Healthcare Inc.
subsidiaries in August 2001 and November 2001, respectively.
7
(2) For all the named executive officers except for Mr. Syron in 1999 and Mr.
Dekkers in 2000, this amount includes matching contributions made on behalf of
the executive officer by the Company pursuant to the Company's 401(k) plan.
(3) In June 2001, Mr. Syron was awarded 7,120 shares of restricted Common Stock
valued at $199,716 on the grant date, pursuant to the terms of his employment
agreement, that vest 100% on the third anniversary of the grant date. In January
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. 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
annual installments over the three year period commencing on the grant date. In
June 2000, Mr. Syron was awarded 10,800 shares of restricted Common Stock valued
at $207,230 on the grant date, 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 in June 2000, Mr. Syron was
awarded 25,000 shares of restricted Common Stock, valued at $526,575 on the
grant date, that vest in equal annual installments over the three year period
commencing on the grant date. In June 1999, Mr. Syron was awarded 10,500 shares
of restricted Common Stock valued at $199,500 on the grant date, pursuant to the
terms of his employment agreement, 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 2001, Mr. Syron held 78,421 restricted shares
valued at $1,856,225.
(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 Mr. Syron's relocation to
Massachusetts.
(5) Mr. 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 Mr. 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 vest in equal annual installments
over the three year period commencing on the grant date. 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
2001, Mr. Dekkers held 40,000 shares of restricted Common Stock with an
aggregate value of $946,800.
(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) Mr. Hoogasian became an executive officer of the Company on January 18,
2001. The salary and bonus reported for fiscal 2001 represent amounts paid to
Mr. Hoogasian for the entire year.
(9) At the end of fiscal 2001, Mr. Hoogasian held 21,370 shares of restricted
Common Stock with an aggregate value of $505,828. These restricted shares were
awarded to Mr. Hoogasian before he became an executive officer.
(10) In January 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 annual installments over the three year period
commencing on the grant date. In January 1999, Mr. Melas-Kyriazi was awarded
3,500 shares of restricted Common Stock valued at $58,408 on the grant date that
vested in January 2002. 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 2001, Mr. Melas-Kyriazi held
26,834 shares of restricted Common Stock with an aggregate value of $635,161.
(11) Options granted in 1999 to Mr. Melas-Kyriazi include options to purchase
209,939 shares of Common Stock that had been converted from options to purchase
shares of subsidiaries of the Company. See footnote (1) above.
(12) Mr. Broadbent became an executive officer of the Company on January 18,
2001. The salary and bonus reported for fiscal 2001 represent amounts paid to
Mr. Broadbent for the entire year.
8
(13) At the end of fiscal 2001, Mr. Broadbent held 4,000 shares of restricted
Common Stock with an aggregate value of $94,680. These restricted shares were
awarded to Mr. Broadbent before he became an executive officer.
(14) Mr. Howe became an executive officer of the Company on January 18, 2001.
The salary and bonus reported for fiscal 2001 represent amounts paid to Mr. Howe
for the entire year.
(15) At the end of fiscal 2001, Mr. Howe held 2,550 shares of restricted Common
Stock with an aggregate value of $60,359. These restricted shares were awarded
to Mr. Howe before he became an executive officer.
(16) Mr. Holt resigned as an executive officer of the Company on December 31,
2001.
(17) In addition to the matching contribution referred to in footnote (2), this
amount includes $155,970 paid to Mr. Holt as a transaction bonus for business
units sold during 2001 and $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 was responsible. See "Transaction Bonus Agreement with
Mr. Brian D. Holt."
(18) In January 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 annual installments over the three year period commencing
on the grant date. In January 1999, Mr. Holt was awarded 2,300 shares of
restricted Common Stock valued at $38,382 on the grant date that vested in
January 2002. Mr. Holt was also awarded 5,600 shares of restricted common stock
of Thermo Ecotek Corporation in January 1999 valued at $58,800 on the grant date
that vested in January 2002. 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 in June 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 2001, Mr. Holt held 28,047 shares of restricted Common Stock with an
aggregate value of $663,872.
(19) 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 shares
of subsidiaries of the Company. See footnote (1) above.
(20) Mr. Maddix served as an executive officer of the Company from January 18,
2001 until November 1, 2001. The salary and bonus reported for fiscal 2001
represent amounts paid to Mr. Maddix for the entire year.
(21) At the end of fiscal 2001, Mr. Maddix held 9,547 shares of restricted
Common Stock with an aggregate value of $225,977. These restricted shares were
awarded to Mr. Maddix before he became an executive officer.
Stock Options Granted During Fiscal 2001
The following table sets forth information concerning individual grants of
stock options made during fiscal 2001 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 2001.
Option Grants in Fiscal 2001
----------------------------------------------------------------------------------------------------------------------
Potential Realizable
Percent of Value at Assumed
Total Options Annual Rates of Stock
Name of Securities Granted to Exercise Price Price Appreciation for
Underlying Options Employees in Per Option Term (2)
Name Granted (1) Fiscal Year Share Date 5% 10%
---- ----------- ----------- ----- ---- -- ---
Richard F. Syron 302,368 9.9% $22.47 03/14/08 $2,765,910 $6,445,790
----------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers 232,591 7.6% $22.47 03/14/08 $2,127,630 $4,958,305
----------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian 44,191 1.5% $22.47 03/14/08 $404,240 $942,050
----------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi 34,306 1.1% $22.47 03/14/08 $313,810 $731,325
----------------------------------------------------------------------------------------------------------------------
Guy Broadbent 46,518 1.5% $22.47 03/14/08 $425,520 $991,657
125,000 4.1% $22.28 11/29/08 $1,133,780 $2,642,175
----------------------------------------------------------------------------------------------------------------------
Barry S. Howe 46,518 1.5% $22.47 03/14/08 $425,520 $991,657
----------------------------------------------------------------------------------------------------------------------
Brian D. Holt -- -- -- -- -- --
----------------------------------------------------------------------------------------------------------------------
Colin Maddix 40,703 1.3% $22.47 03/14/08 $372,330 $867,694
----------------------------------------------------------------------------------------------------------------------
9
(1) All of the options reported vest in three equal annual installments over a
three-year period from the date of grant, provided that the optionee continues
to be employed by the Company. Upon a change of control of the Company, all
options become immediately exercisable. Options in the table above granted prior
to November 15, 2001 reflect adjustments made to the number and exercise prices
of the options as a result of the spin-off to shareholders by the Company of its
Kadant Inc. and Viasys Healthcare Inc. subsidiaries in August 2001 and November
2001, respectively.
(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 2001 and Fiscal Year-End Option Values
The following table reports information regarding stock option exercises
during fiscal 2001 and outstanding stock options held at the end of fiscal 2001
by the Company's named executive officers. No stock appreciation rights were
exercised or were outstanding during fiscal 2001.
Aggregated Option Exercises In Fiscal 2001 and Fiscal 2001 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/ Unexercisable) (Exercisable/
- ----------------
Name Exercise Realized (1) (2)(3) Unexercisable)(3)
---- -------- ------------ ------ -----------------
Richard F. Syron -- -- 1,523,469/ 302,368 $10,303,779/ $ 362,842
-------------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers -- -- 348,887/ 930,364 $1,454,857/ $3,188,824
-------------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian 72,909 $932,433 222,897/ 44,191 $1,830,922 / $ 53,029
-------------------------------------------------------------------------------------------------------------------------
Theo Melas-Kyriazi 4,500 $41,220 745,769/ 34,306 $7,923,163/ $ 41,167
-------------------------------------------------------------------------------------------------------------------------
Guy Broadbent -- -- 38,765/ 249,048 $37,214/ $ 304,000
-------------------------------------------------------------------------------------------------------------------------
Barry S. Howe 63,647 $875,781 420,087/ 46,518 $5,053,911/ $ 55,822
-------------------------------------------------------------------------------------------------------------------------
Brian D. Holt 107,321 $912,123 334,005/ 0 $2,475,271/ $ 0
-------------------------------------------------------------------------------------------------------------------------
Colin Maddix 14,688 $257,481 240,838/ 40,703 $2,166,945/ $ 48,844
-------------------------------------------------------------------------------------------------------------------------
(1) 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.
(2) 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. In addition, in
2001, the Company spun off to its shareholders all of the shares of Kadant Inc.
(formerly known as Thermo Fibertek Inc.) and, as a result, all of the options in
Kadant Inc. and its publicly-owned subsidiary, Thermo Fibergen Inc., were
converted into options to purchase shares of the Company. Outstanding options at
year-end granted by these subsidiaries which were assumed by the Company have
been restated in the table as options to purchase shares of the Company.
(3) Generally, options outstanding at the end of the fiscal year that were
granted prior to July 2000 are exercisable immediately. However, these options
are subject to certain transfer restrictions and the right of the Company to
repurchase, at the exercise price, the shares issued upon exercise of the
options, upon certain events, primarily cessation of employment with the
Company. The restrictions and repurchase rights lapse over periods ranging from
0 to 10 years, depending on the term of the option, which may range from 3 to 12
years. Options outstanding at the end of the fiscal year that were granted in or
10
after July 2000 generally vest ratably over three years after the grant date,
provided that the optionee continues employment with the Company. Upon a change
of control of the Company, all options, regardless of the grant date, become
immediately exercisable and cease to be subject to transfer restrictions and the
Company's repurchase rights.
Change in Control Agreements
Thermo Electron has entered into executive retention agreements with its
executive officers (other than Mr. Dekkers whose severance arrangements are
included in his employment agreement) and certain 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 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.
Thermo Electron has entered into these executive retention agreements with
each of Mr. Richard F. Syron, Mr. Seth H. Hoogasian, Mr. Theo Melas-Kyriazi, Mr.
Guy Broadbent, Mr. Barry S. Howe, Mr. Brian D. Holt, and Mr. Colin Maddix. 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 Mr. Syron, three times, and
in the case of Messrs. Hoogasian, Melas-Kyriazi, Broadbent, Howe, Holt and
Maddix, 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 Mr. Syron,
three times, and in the case of Messrs. Hoogasian, Melas-Kyriazi, Broadbent,
Howe, Holt and Maddix, 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 Mr. Syron, three
years, and in the case of Messrs. Hoogasian, Melas-Kyriazi, Broadbent, Howe,
Holt and Maddix, 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 Mr. Syron, $25,000, and in the case of
Messrs. Hoogasian, Melas-Kyriazi, Broadbent, Howe, Holt and Maddix, $20,000, to
be used toward outplacement services.
Assuming that the severance benefits would have been payable as of December
29, 2001, the lump sum salary and bonus payment under such agreements to,
Messrs. Syron, Hoogasian, Melas-Kyriazi, Broadbent, Howe, Holt and Maddix would
have been approximately $5,760,000, $1,060,000, $1,040,000, $840,000, $840,000,
$1,540,000, and $810,000, 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.
Executive Severance Agreements
January 2000 Agreements. 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 retention arrangements for each of Messrs.
Hoogasian, Melas-Kyriazi and Holt, entitling each person to a payment of two
times his base salary if his employment with the Company is terminated on or
before December 31, 2002 for any reason other than for cause or he terminates
his employment voluntarily. Each executive, however, would not be entitled to
severance payments under this arrangement if he were also entitled to severance
payments in connection with a change in control under his executive severance
agreement described above.
11
Severance Agreement with Mr. Brian D. Holt. Effective September 21, 2001,
the Company entered into an agreement with Mr. Brian D. Holt regarding the
termination of his employment with the Company as of March 31, 2002. Pursuant to
the agreement, Mr. Holt continued to receive salary payments based on his
then-current annual base salary through December 31, 2001, as well as salary
payments from January 1, 2002 until March 31, 2002 at the rate of one-half his
then-current base salary. In addition, Mr. Holt received his bonus for 2001 of
$220,000. On or before April 30, 2002, Mr. Holt will receive, pursuant to the
January 2000 Severance Agreement referred to above, a lump sum severance payment
of $686,400, representing two times his annual base salary at December 2001 and
he will continue to receive until March 31, 2004, the same benefits that he
would have received as an officer of the Company. Stock options previously
granted to Mr. Holt that were not vested as of March 31, 2002, were cancelled
and all options that were vested as of that date continued to be exercisable by
Mr. Holt until June 30, 2002 in accordance with their terms. Mr. Holt also
retained shares of Common Stock that were subject to restrictions on transfer,
the lapsing of which was accelerated to March 31, 2002. Pursuant to the
agreement, Mr. Holt resigned as an officer of the Company effective December 31,
2001.
Severance Agreement with Mr. Colin Maddix. Effective October 30, 2001, the
Company entered into an agreement with Mr. Colin Maddix regarding his
resignation from the Company as of July 1, 2002. Pursuant to the agreement, Mr.
Maddix continues to receive salary payments based on his then-current annual
base salary through July 1, 2002, unless prior to that date he becomes employed
with another company, in which case the Company's salary payments would
terminate. In addition, Mr. Maddix received his bonus for 2001 of $135,000. On
or before July 1, 2002, Mr. Maddix will receive a lump sum severance payment of
$225,000. Stock options previously granted to Mr. Maddix that are not vested as
of his employment termination date will be cancelled. All options that were
vested as of that date will continue to be exercisable by Mr. Maddix for periods
ranging from 90 days to two years in accordance with their terms. Pursuant to
the agreement, Mr. Maddix resigned as an officer of the Company effective
November 1, 2001.
Transaction Bonus Agreement with Mr. Brian D. Holt
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 $801,852 to date.
Deferred Compensation Plan
In November 2001, the Company established a deferred compensation plan for
a select group of management and highly compensated employees (the "Deferred
Compensation Plan"), including executive officers of the Company. Under the
Deferred Compensation Plan, a participant has the right to defer, on a pre-tax
basis, receipt of his or her annual base salary (up to 90%) and/or bonus (up to
100%) until he or she ceases to serve as an employee of the Company as a result
of death, disability, retirement or termination of employment for any other
reason. In addition, a participant may defer payment of his or her compensation
until a future date even while the participant continues to be an employee of
the Company. Amounts that are deferred under the Deferred Compensation Plan can
be invested at the discretion of the participant in either (or both) an equity
fund or bond fund. Any gains or losses on amounts invested are not taxable under
federal, state or local taxes until deferred amounts are paid to the
participant. The Deferred Compensation Plan is administered by an outside third
party.
Employment Agreement with Mr. Richard F. Syron
Mr. 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, 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 Mr. 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 Mr. 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 Mr. Syron an option to
12
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 Mr. 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 Mr. 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 Mr. 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 Mr. 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 Mr.
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 Mr. Syron if Mr. Marijn E. Dekkers is appointed chief executive
officer and Mr. Syron's employment is terminated for any reason. If Mr. 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 Mr.
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 Mr.
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 Mr. 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. Mr. 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, Mr. 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 Mr. Syron. If Mr.
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 Mr. Syron that were granted after March 14, 2001 shall be 50
percent vested, and 50 percent of the unvested restricted stock held by Mr.
Syron shall be fully vested. Further, if Mr. Syron's employment continues to
July 10, 2004, then the outstanding unvested stock options held by Mr. 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 Mr. Syron shall lapse.
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 was 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
13
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.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The human resources committee of the board of directors, which is composed
entirely of non-employee directors (the "Committee"), has overall responsibility
for establishing and administering the Company's policies and programs that
govern annual cash, long-term incentive and other executive compensation. The
compensation program established by the Committee for its executive officers is
designed to reward and motivate executive officers in achieving long-term value
for the Company's stockholders and other business objectives, to attract,
motivate and retain dedicated, talented individuals to accomplish the Company's
objectives, to recognize individual, business unit and Company performance, to
reward behavior consistent with the Company's values, and to encourage stock
ownership by executive officers in order to link financial interests of the
Company's executive officers with its stockholders.
The Committee evaluates the competitiveness of its compensation policies
and programs through the use of market surveys and competitive analyses prepared
by its outside compensation consultants. Internal fairness of compensation
within the Company is also an important element of the Committee's compensation
philosophy. As such, the Committee evaluates individual executive compensation
through the use of compensation comparisons with other executive officers of the
Company who have similar levels of responsibility or responsibility for managing
businesses of comparable size and complexity.
Components of Executive Compensation
The compensation program of the Company for its executive officers consists
of annual cash and long-term incentive compensation. Annual cash compensation is
composed of base salary and annual, performance-based incentive awards.
Long-term incentive compensation consists of stock-based awards such as stock
options and restricted stock. Using the external and internal compensation data
described above, for each fiscal year the Committee establishes a target total
compensation amount, including each of its components, for each executive
officer position. The target total compensation 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 process for
determining the components of executive officer compensation is described below.
For its review of the compensation of other officers of the Company, the
Committee follows a substantially similar process.
Annual Cash Compensation
Base Salary. Generally, the Committee adjusts executive base salaries to
reflect competitive salary levels or other considerations, such as geographic or
regional market data, industry trends or internal fairness within the Company.
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.
Annual, Performance-Based, Incentive Cash Awards. The target incentive cash
award amount, which is a percentage of the base salary, is determined by the
Committee based on the salary level and position of the executive officer within
14
the Company. The amount of annual, performance-based, incentive cash
compensation actually awarded to an executive officer from year-to-year varies
with the performance of the executive officer, the businesses for which the
executive officer is responsible, and the Company as a whole. The Committee
evaluates performance (1) by using financial measures of corporate performance,
and (2) by subjectively evaluating the executive's contribution to the
achievement of the Company's long-term objectives and values as well as the
executive's achievement of individual annual objectives and leadership
performance. The relative weighting of the financial measures and subjective
evaluation varies depending on the executive officer's role and responsibilities
within the organization, as well as the objectives for the businesses for which
the executive officer is responsible.
In fiscal 2001, the financial measures established by the Committee were
revenues, earnings before interest, taxes and amortization ("EBITA"), cash flow
and productivity. The financial measures assess financial performance relative
to the internal operating plans of the Company for the fiscal year. The
assessment of financial performance for each executive officer is measured at
various organizational levels depending on the position of the executive officer
within the Company. For each of the financial measures, a range of amounts set
forth in the relevant operating plan corresponds with a multiplier ranging from
0 to 2. The actual incentive cash award amount attributable to that financial
measure is the target amount multiplied by the multiplier corresponding to the
actual financial performance.
The Company paid annual incentive awards to each named executive officer
(including the chief executive officer, whose annual performance-based incentive
award is discussed below under the caption "2001 CEO Compensation") for fiscal
2001. The Committee considered the following with respect to fiscal 2001
financial performance: (1) the impact that the weakened economy had on the
financial performance of the businesses for which the executives were
responsible and on the financial performance of the Company as a whole, which
contributed to their falling short of the minimum financial measures for
incentive cash awards in the various operating plans for the year, and (2) the
fact that the Company's total stockholder return for 2001 (including the
reinvestment of the cash equivalent value of the Kadant Inc. and Viasys
Healthcare Inc. dividends paid to shareholders in 2001), exceeded the
performance of the Standard & Poor's 500 Index and the Standard and Poor's High
Technology Composite Index. In light of the foregoing, the Committee gave a
higher weight to its subjective evaluation of the executive's contribution to
the achievement of the Company's long-term objectives and values as well as the
executive's achievement of individual annual objectives and leadership
performance for fiscal 2001. In determining the incentive awards for 2001, the
Committee concluded that a reduction from the awards made in fiscal 2000 was
appropriate in light of the Company's cost reduction objectives.
Long-Term Incentive Compensation
The Committee and management believe that the inclusion of long-term
incentive compensation, which consists of stock-based awards such as stock
options and restricted stock, in the Company's compensation program accomplishes
many objectives. The award of stock-based compensation to its executives and
other key employees encourages equity ownership in the Company, which aligns
their interests to the interests of all the stockholders and results in
executive compensation being closely linked to the Company's stock performance.
In determining the appropriate award of stock compensation, the Committee
considers the prevailing compensation practices of competitive companies and
competitive market data for the position and salary level of each executive
officer (other than Messrs. Syron and Dekkers, whose minimum stock compensation
is set forth in their respective employment agreements). 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 2001. See "Relationship with Affiliates - Stock Holding Assistance
Plan."
15
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 2001 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.
2001 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
2001 compensation.
The Company's chief executive officer, Richard F. Syron, was appointed
effective June 1, 1999, and in connection with his appointment, the Company
entered into an employment agreement with Mr. Syron that set forth his minimum
cash compensation for the three-year term of the agreement, and also provided
for the annual award of restricted stock and employee stock options. See
"Executive Compensation - Employment Agreement with Mr. Richard F. Syron" for a
description of this agreement.
Mr. Syron's bonus for fiscal 2001 was determined by the Committee based on
the same considerations described above for other executive officers. In
addition, the Committee's subjective evaluation of Mr. Syron's performance
included, among other things, his leadership and effectiveness in furthering the
Company's business and financial objectives and in succession planning.
Pursuant to the terms of his employment agreement, in 2001 the Company
awarded Mr. Syron 7,120 shares of restricted Common Stock in and an option to
purchase 302,368 shares of Common Stock, adjusted to reflect the spinoffs.
Mr. Frank Jungers (Chairman)
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 29, 2001, 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.
16
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 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
29, 2001 filed with the Securities and Exchange Commission.
Mr. Robert A. McCabe, Chairman
Mr. Jim P. Manzi
Ms. Elaine S. Ullian
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").
Comparison of Total Return Among Thermo Electron Corporation (TMO),
the Standard & Poor's 500 Index (S&P 500)
and the Standard & Poor's High Technology
Composite Index (Technology-500)
[GRAPH]
---------------- -------------- ------------- ------------- -------------- ------------- -------------
12/27/96 1/2/98 12/31/98 12/31/99 12/29/00 12/28/01
---------------- -------------- -------------- ------------- ------------- -------------- -------------
TMO 100 114 45 40 79 73
---------------- -------------- -------------- ------------- ------------- -------------- -------------
S&P 500 100 131 168 203 185 166
---------------- -------------- -------------- ------------- ------------- -------------- -------------
Technology-500 100 126 213 372 224 176
---------------- -------------- -------------- ------------- ------------- -------------- -------------
17
The total return for the Company's Common Stock, the S&P 500 and the
Technology-500 assumes the reinvestment of dividends. The Company's Common Stock
is traded on the New York Stock Exchange under the ticker symbol "TMO." In
August and November 2001, the Company spun off to its shareholders its Kadant
Inc. and Viasys Healthcare Inc. subsidiaries, respectively. For purposes of the
above table, the Kadant and Viasys shares distributed to the Company's
stockholders are treated as nontaxable cash dividends that would have been
reinvested in additional shares of Common Stock of the Company in August and
November 2001, respectively.
RELATIONSHIP WITH AFFILIATES
Pursuant to an international distributorship agreement, the Company
appointed Arabian Business Machines Co. ("ABM") as its exclusive distributor of
security instruments in certain Middle Eastern countries. ABM is a member of The
Olayan Group. Ms. Hutham S. Olayan, a director of the Corporation, is the
president and a director of Olayan America Corporation, a member of The Olayan
Group, which is indirectly owned by a family company of which Ms. Olayan is a
member of the Board of Directors. Revenues recorded under this agreement totaled
$163,000 in fiscal 2001.
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 2001.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has retained Arthur Andersen LLP as its independent accountants
since 1960. The Company has not yet selected independent accountants for the
audit of the Company's financial statements for the year ending December 28,
2002. 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 2001, the Company retained Arthur Andersen LLP to provide
services in the following categories and amounts:
Audit Fees
Arthur Andersen LLP billed the Company an aggregate of $1,934,200 in fees
for professional services rendered in connection with the audit of the financial
statements of the Company for the most recent fiscal year and reviews of the
financial statements included in each of the Quarterly Reports on Form 10-Q of
the Company during the fiscal year ended December 29, 2001.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP billed the Company an aggregate of $200,000 in fees for
professional services rendered to the Company for the fiscal year ended December
29, 2001 in connection with the design and implementation of financial
information systems.
All Other Fees
Arthur Andersen LLP billed the Company an aggregate of $3,919,225 in fees
for other services rendered to the Company for the fiscal year ended December
29, 2001, primarily in connection with tax consulting related to the
reorganization of international subsidiaries, audits of entities in connection
with divestiture activities and foreign statutory audits.
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.
18
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be included in the proxy statement
and form of proxy relating to the 2003 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 12,
2002. 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 2003 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
January 27, 2003 and no later than February 10, 2003. 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.
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. 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 11, 2002
19
Thermo ElectronCorporation
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 15, 2002
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 on the reverse side, all the shares of common stock of Thermo
Electron Corporation held of record by the undersigned on April 1, 2002, 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
15, 2002, 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 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)
Please mark your
[ x ] votes as in this
example.
The Board of Directors recommends a vote FOR Proposal 1.
1. ELECTION OF DIRECTORS OF THE COMPANY.
Nominees: (01) John L. LaMattina, (02) Michael E. Porter and
(03) Richard F. Syron.
FOR ALL NOMINEES [ ]
WITHHELD FROM ALL NOMINEES [ ]
[ ]_______________________________________
FOR, except vote withheld from nominee(s) as noted above:
2. In their discretion on such other matters as may properly come before the
meeting.
The shares represented by this Proxy will be voted "FOR" the proposal set
forth above if no instruction to the contrary is indicated or if no instruction
is given.
Copies of the Notice of Meeting and of the Proxy Statement have been
received by the undersigned.
PLEASE DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE(S)_______________________________________ DATE_________________
(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.)