SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THERMO FIBERTEK
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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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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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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Notes:
THERMO FIBERTEK INC.
81 Wyman Street,
Waltham, MA 02254-9046
April 23, 1998
Dear Stockholder:
The enclosed Notice calls the 1998 Annual meeting of the Stockholders of
Thermo Fibertek Inc. I respectfully request that all Stockholders attend this
meeting, if possible.
Our Annual Report for the year ended January 3, 1998, is enclosed. I hope
you will read it carefully. Feel free to forward any questions you may have if
you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer & Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
WILLIAM A. RAINVILLE
President and Chief Executive Officer
THERMO FIBERTEK INC.
81 Wyman Street
Waltham, MA 02254-9046
April 23, 1998
To the Holders of the Common Stock of
THERMO FIBERTEK INC.
NOTICE OF ANNUAL MEETING
The 1998 Annual Meeting of the Stockholders of Thermo Fibertek Inc. (the
"Corporation") will be held on Monday, June 1, 1998, at 8:15 a.m. at The Hyatt
Regency Scottsdale Resort at Gainey Ranch, 7500 East Doubletree Ranch Road,
Scottsdale, Arizona, 85258. The purpose of the meeting is to consider and take
action upon the following matters:
1. Election of six directors.
2. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is April 3, 1998.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your shares be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This Notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of Thermo
Fibertek Inc. (the "Corporation") for use at the 1998 Annual Meeting of the
Stockholders (the "Meeting") to be held on Monday, June 1, 1998, at 8:15 a.m. at
The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale, Arizona and any
adjournment thereof. The mailing address of the executive office of the
Corporation is 81 Wyman Street, Waltham, Massachusetts 02254-9046. This proxy
statement and the enclosed proxy were first furnished to Stockholders of the
Corporation on or about April 29, 1998.
VOTING PROCEDURES
The board of directors intends to present to the Meeting the election of
six directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock of the Corporation, $.01 par value, (the "Common
Stock") entitled to vote at the Meeting is necessary to provide a quorum for the
transaction of business at the Meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the Meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. All
signed and returned proxies will be counted towards establishing a quorum for
the Meeting, regardless of how the shares are voted.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted for the management nominees for directors,
and as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the Meeting.
In order to be elected a director, a nominee must receive the affirmative
vote of a majority of the shares of Common Stock present and entitled to vote on
the election. Withholding authority to vote for a nominee for director will be
treated as shares present and entitled to vote and, for purposes of determining
the outcome of the vote, will have the same effect as a vote against the
nominee. With respect to the election of directors, broker "non-votes" will not
be treated as shares present and entitled to vote on a voting matter and will
have no effect on the outcome of the vote. A broker "non-vote" occurs when a
nominee holding shares for a beneficial holder does not have discretionary
voting power and does not receive voting instructions from the beneficial owner.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the Meeting by written notice to the Secretary
of the Corporation received prior to the Meeting, by executing and returning a
later-dated proxy or by voting by ballot at the Meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of April 3, 1998, consisted of
62,485,759 shares of Common Stock. Only Stockholders of record at the close of
business on April 3, 1998, are entitled to vote at the Meeting. Each share is
entitled to one vote.
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--PROPOSAL 1--
ELECTION OF DIRECTORS
Six directors are to be elected at the Meeting, each to hold office until
his successor is chosen and qualified or until his earlier resignation, death or
removal.
NOMINEES FOR DIRECTORS
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors and
the names of other public companies in which such persons hold directorships.
Information regarding their beneficial ownership of the Corporation's Common
Stock and of the common stock of its majority-owned subsidiary, Thermo Fibergen
Inc. ("Thermo Fibergen"), and of its parent company, Thermo Electron Corporation
("Thermo Electron"), a provider of diversified products and services for the
biomedical, instrument and environmental markets, is reported under the caption
"Stock Ownership." All of the nominees are currently directors of the
Corporation.
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DR. WALTER J. BORNHORST Dr. Bornhorst, 57, has been a director of the Corporation since its
inception in 1991. Since 1994, Dr. Bornhorst has been the chairman of Z
Corporation, a developer of rapid prototyping equipment. From the inception
of the Corporation to December 1992, Dr. Bornhorst was chairman of the
board. He was a senior vice president of Thermo Electron from 1985 to
1992. Dr. Bornhorst is also a director of Thermo Cardiosystems Inc. Dr.
Bornhorst is the son-in-law of Dr. George N. Hatsopoulos, a director of the
Corporation.
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DR. GEORGE N. HATSOPOULOS Dr. Hatsopoulos, 71, has been a director of the Corporation since its
inception. Dr. Hatsopoulos has been the chairman of the board and chief
executive officer of Thermo Electron since he founded the company in 1956
and was president of Thermo Electron from 1956 to January 1997. Dr.
Hatsopoulos is also a director of Photoelectron Corporation, Thermedics
Inc., Thermo Electron, Thermo Ecotek Corporation, Thermo Instrument Systems
Inc., Thermo Optek Corporation, ThermoQuest Corporation and ThermoTrex
Corporation. Dr. Hatsopoulos is the brother of Mr. John N. Hatsopoulos, a
director, the chief financial officer and a senior vice president of the
Corporation, and is the father-in-law of Dr. Walter J. Bornhorst, a
director of the Corporation.
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JOHN N. HATSOPOULOS Mr. Hatsopoulos, 63, has been a director and the chief financial officer of
the Corporation since its inception. He was also vice president of the
Corporation from its inception until December 1997 and has been its senior
vice president since December 1997. He has been the president of Thermo
Electron since January 1997, the chief financial officer of Thermo Electron
since 1988, and was an executive vice president of Thermo Electron from
1986 to 1997. Mr. Hatsopoulos is also a director of LOIS/USA Inc., ONIX
Systems Inc., Thermedics Inc., Thermo Ecotek Corporation, Thermo Electron,
Thermo Instrument Systems Inc., Thermo Power Corporation and Thermo
TerraTech Inc. Mr. Hatsopoulos is the brother of Dr. George N.
Hatsopoulos, a director of the Corporation.
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FRANCIS L. MCKONE Mr. McKone, 64, has been a director of the Corporation since March 1998.
Mr. McKone has been the president and co-chief executive officer of Albany
International Corp., a worldwide supplier of paper machine fabrics, since
1984. In 1993, he became the president and chief executive officer of
Albany International Corp. He is also a director of Albank Financial
Corporation and Thermo Fibergen Inc.
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DONALD E. NOBLE Mr. Noble, 83, has been a director of the Corporation since January 1992
and chairman of the board since December 1992. For more than 20 years,
from 1959 to 1980, Mr. Noble served as the chief executive officer of
Rubbermaid Incorporated, first with the title of president and then as the
chairman of the board. Mr. Noble is also a director of Thermo Electron,
Thermo Power Corporation, Thermo Sentron Inc. and Thermo TerraTech Inc.
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WILLIAM A. RAINVILLE Mr. Rainville, 56, has been president and chief executive officer of the
Corporation since its inception and a director since January 1992. From
1984 until January 1993, Mr. Rainville was the president and chief
executive officer of Thermo Web Systems Inc., a subsidiary of the
Corporation. He has been a senior vice president of Thermo Electron since
March 1993 and was a vice president from 1986 to 1993. Mr. Rainville is
also a director of Thermo Ecotek Corporation, Thermo Fibergen Inc., Thermo
Remediation Inc., and Thermo TerraTech Inc.
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COMMITTEES OF THE BOARD OF DIRECTORS AND MEETINGS
The board of directors has established an audit committee and a human
resources committee, each consisting solely of outside directors. The present
members of the audit committee are Mr. Noble (Chairman) and Mr. McKone. The
audit committee reviews the scope of the audit with the Corporation's
independent public accountants and meets with them for the purpose of reviewing
the results of the audit subsequent to its completion. The present members of
the human resources committee are Mr. Noble (Chairman) and Mr. McKone. The
human resources committee reviews the performance of senior members of
management, approves executive compensation and administers the Corporation's
stock option and other stock-based compensation plans. The Corporation does not
have a nominating committee of the board of directors. The board of directors
met six times, the audit committee met twice and the human resources committee
met four times during fiscal 1997. Each director attended at least 75% of all
meetings of the board of directors and committees on which he served held during
fiscal 1997.
COMPENSATION OF DIRECTORS
CASH COMPENSATION
Directors who are not employees of the Corporation, of Thermo Electron or
of any other companies affiliated with Thermo Electron (also referred to as
"outside directors") receive an annual retainer of $5,000 and a fee of $1,000
per day for attending regular meetings of the board of directors and $500 per
day for participating in meetings of the board of directors held by means of
conference telephone and for participating in certain meetings of committees of
the board of directors. Payment of directors' fees is made quarterly. Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos and Mr. Rainville are all employees of Thermo
Electron or its subsidiaries and do not receive any cash compensation from the
Corporation for their services as directors. Directors are also reimbursed for
out-of-pocket expenses incurred in attending such meetings.
DEFERRED COMPENSATION PLAN
Under the Deferred Compensation Plan for directors (the "Deferred
Compensation Plan"), a director has the right to defer receipt of his cash fees
until he ceases to serve as a director, dies or retires from his principal
occupation. In the event of a change in control or proposed change in control of
the Corporation that is not approved by the board of directors, deferred amounts
become payable immediately. Either of the following is deemed to be a change of
control: (a) the acquisition, without the prior approval of the board of
directors, directly or indirectly, by any person of 50% or more of the
outstanding Common Stock or 25% or more of the outstanding common stock of
Thermo Electron; or (b) the failure of the persons serving on the board of
directors immediately prior to any contested election of directors or any
exchange offer or tender offer for the Common Stock on the common stock of
Thermo Electron to constitute a majority of the board of directors at any time
within two years following any such event. Amounts deferred pursuant to the
Deferred Compensation Plan are valued at the end of each quarter as units of the
Corporation's Common Stock. When payable, amounts deferred may be disbursed
solely in shares of Common Stock accumulated under the Deferred Compensation
Plan. A total of 100,000 shares of Common Stock
3
are currently reserved for issuance under the Deferred Compensation Plan. As of
March 1, 1998, deferred units equal to 7,171.20 shares of Common Stock were
accumulated under the Deferred Compensation Plan.
DIRECTORS STOCK OPTION PLAN
The Corporation's directors stock option plan (the "Directors Plan")
provides for the grant of stock options to purchase shares of common stock of
the Corporation and its majority-owned subsidiaries to outside directors as
additional compensation for their service as directors. Commencing in 1997,
outside directors are automatically granted options to purchase 1,000 shares of
Common Stock annually. In addition, the Directors Plan provides for the
automatic grant every five years of options to purchase 1,500 shares of the
common stock of a majority-owned subsidiary of the Corporation that is "spun
out" to outside investors.
Prior to 1996, the Directors Plan provided for the grant of stock options
upon a director's initial appointment. Outside directors appointed before the
amendment of the plan received an option to purchase 40,000 shares of Common
Stock upon their initial appointment or election. Options granted prior to 1996
are immediately exercisable, and are subject to restrictions upon transfer and
the right of the Corporation to repurchase such shares at the exercise price in
the event the director ceases to serve as a director of the Corporation or any
other Thermo Electron company. Such repurchase rights lapse ratably over a
five-year period, commencing with the first anniversary of the grant date.
These options expire on the seventh anniversary of the grant date, unless the
director dies or otherwise ceases to serve as a director of the Corporation or
any other Thermo Electron company prior to that date.
Outside directors first appointed or elected during 1996 were automatically
granted options to purchase 8,000 shares of Common Stock upon their election or
appointment under this provision of the Directors Plan. These options are
exercisable six months after the date of grant, and are subject to restrictions
upon transfer and the right of the Corporation to repurchase such shares at the
exercise price in the event the director ceases to serve as a director of the
Corporation or any other Thermo Electron company. Such repurchase rights lapse
in their entirety on the first anniversary of the grant date. These options
expire on the fifth anniversary of the grant date, unless the director dies or
otherwise ceases to serve as a director of the Corporation or any other Thermo
Electron company prior to that date. The grant of options upon a director's
appointment was discontinued after December 31, 1996, pursuant to the terms of
the plan, as amended.
Commencing with the Annual Meeting of Stockholders to be held in 1997,
outside directors will receive an annual grant of options to purchase 1,000
shares of Common Stock pursuant to the Directors Plan at the close of business
on the date of each Annual Meeting of the Stockholders of the Corporation.
Options evidencing annual grants may be exercised at any time from and after the
six-month anniversary of the grant date of the option and prior to the
expiration of the option on the third anniversary of the grant date. Shares
acquired upon exercise of the options are subject to repurchase by the
Corporation at the exercise price if the recipient ceases to serve as a director
of the Corporation or any other Thermo Electron company prior to the first
anniversary of the grant date.
In addition, under the Directors Plan, outside directors are automatically
granted every five years options to purchase 1,500 shares of common stock of
each majority-owned subsidiary of the Corporation that is "spun out" to outside
investors. The grant occurs on the close of business on the date of the first
Annual Meeting of the Stockholders next following the subsidiary's spinout,
which is the first to occur of either an initial public offering of the
subsidiary's common stock or a sale of such stock to third parties in an arms-
length transaction, and also as of the close of business on the date of every
fifth Annual Meeting of the Stockholders of the Corporation that occurs
thereafter during the duration of the Plan. The options granted vest and become
exercisable on the fourth anniversary of the date of grant, unless prior to such
date the subsidiary's common stock is registered under Section 12 of the
Securities Exchange Act of 1934, as amended ("Section 12 Registration"). In the
event that the effective date of Section 12 Registration occurs before the
fourth anniversary of the grant date, the option will become immediately
exercisable and the shares acquired upon exercise will be subject to
restrictions on transfer and the right of the Corporation to repurchase such
shares at the exercise price in the event the director ceases to serve as a
director of the Corporation or any other Thermo Electron company. In the event
of Section 12 Registration, the restrictions and repurchase rights shall lapse
or be deemed to lapse at the rate of 25% per year, starting with the first
anniversary of the grant date. These options expire after five years. Under
this provision of the Directors Plan, each eligible outside director received an
option to purchase 1,500 shares of the common stock of the Corporation's
4
majority-owned subsidiary, Thermo Fibergen Inc., at the close of business on the
date of the 1997 Annual Meeting of Stockholders.
The exercise price for options granted under the Directors Plan is the
average of the closing prices of the common stock as reported on the American
Stock Exchange (or other principal market on which the common stock is then
traded) for the five trading days immediately preceding and including the date
of grant, or, if the shares are not then traded, at the last price per share
paid by third parties in an arms-length transaction prior to the option grant.
As of March 1, 1998, options to purchase 137,675 shares of Common Stock were
outstanding under the Directors Plan, options to purchase 149,850 shares had
been exercised, no options had lapsed and options to purchase 387,475 shares of
Common Stock were available for future grant.
COMPENSATION OF THE CHAIRMAN OF THE BOARD
Mr. Noble has served as the chairman of the board of the Corporation since
December 1992. Mr. Noble is not an employee of the Corporation or of any other
company affiliated with Thermo Electron. For his service as chairman of the
board, Mr. Noble receives an additional meeting fee equal to $1,000 per day for
attending regular meetings of the board of directors and $500 per day for
participating in meetings of the board of directors held by means of conference
telephone. He receives an additional option to purchase 1,000 shares of the
Common Stock at an exercise price equal to the average closing price for the
five days immediately preceding and including the date of grant, which is
awarded at the first regular meeting of the board of directors following the
Annual Meeting of the Stockholders in conjunction with his annual appointment as
chairman of the board.
STOCK OWNERSHIP POLICIES FOR DIRECTORS
During 1996, the human resources committee of the board of directors (the
"Committee") established a stock holding policy for directors. The stock
holding policy requires each director to hold a minimum of 1,000 shares of
Common Stock. Directors are requested to achieve this ownership level by the
1998 Annual Meeting of Stockholders. The chief executive officer of the
Corporation is required to comply with a separate stock holding policy
established by the Committee in 1996, which is described in "Committee Report on
Executive Compensation - Stock Ownership Policies."
In addition, the Committee adopted a policy requiring directors to hold
shares of the Corporation's Common Stock equal to one-half of their net option
exercises over a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to exercise the
option and the number of shares that could have been surrendered to satisfy tax
withholding obligations attributable to the exercise of the option. This policy
is also applicable to executive officers and is described in "Committee Report
on Executive Compensation - Stock Ownership Policies."
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Electron and the Corporation's majority-owned
subsidiary, Thermo Fibergen Inc. ("Thermo Fibergen"), as of March 1, 1998, with
respect to (i) each director, (ii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and (iii) all
directors and current executive officers as a group. In addition, the following
table sets forth the beneficial ownership of Common Stock as of March 1, 1998,
with respect to each person who was known by the Corporation to own beneficially
more than 5% of the outstanding shares of Common Stock.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock owned by Thermo Electron.
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THERMO THERMO THERMO
Name (1) FIBERTEK (2) ELECTRON (3) FIBERGEN (4)
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Thermo Electron Corporation (5) 55,531,705 N/A N/A
Jan-Eric Bergstedt (6) 164,149 21,234 20,250
Walter J. Bornhorst 139,825 9,415 1,500
George N. Hatsopoulos 188,484 3,423,423 20,000
John N. Hatsopoulos 78,320 681,072 20,000
Edwin D. Healy 207,018 58,179 10,000
Bruno Lamort de Gail 137,500 550 10,000
Francis L. McKone 0 0 15,053
Donald E. Noble (6) 118,706 56,651 4,500
William A. Rainville (6) 759,086 239,893 41,500
Edward J. Sindoni 257,877 44,173 10,000
All directors and current
executive officers as a group
(13 persons) 2,482,058 4,728,228 187,803
(1) Except as reflected in the footnotes to this table, shares of Common Stock
of the Corporation and of the common stock of Thermo Electron and Thermo
Fibergen 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 Common Stock beneficially owned by Mr. Bergstedt, Dr. Bornhorst,
Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Healy, Mr. Lamort de Gail, Mr.
Noble, Mr. Rainville, Mr. Sindoni and all directors and current executive
officers as a group include 159,500, 139,825, 157,910, 57,600, 202,500,
137,500, 98,850, 735,000, 247,500 and 2,329,935 shares, respectively, that
such person or group has the right to acquire within 60 days of March 1,
1998, through the exercise of stock options. Shares beneficially owned by
Mr. Noble and all directors and current executive officers as a group
include 7,171 full shares that had been allocated through March 1, 1998, to
Mr. Noble's account maintained under the Corporation's Deferred
Compensation Plan for directors. Except for Mr. Rainville, who beneficially
owned 1.2% of the Corporation's common stock outstanding as of March 1,
1998, no director or current executive officer beneficially owned more than
1% of the Common Stock outstanding as of March 1, 1998; all directors and
current executive officers as a group beneficially owned 4.0% of the Common
Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Bergstedt, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr. Healy, Mr. Noble,
Mr. Rainville, Mr. Sindoni and all directors and current executive officers
as a group include 19,850, 1,649,500, 615,435, 47,925, 10,375, 178,674,
30,250 and 2,742,775 shares, respectively, that such person or members of
the group have the right to acquire within 60 days of March 1, 1998,
through the exercise of stock options. Shares beneficially owned by Dr. G.
Hatsopoulos, Mr. J. Hatsopoulos and all directors and current executive
officers as a group include 2,266, 2,036 and 6,318 full shares,
respectively, allocated through March 1, 1998, to accounts maintained
pursuant to Thermo Electron's employee stock ownership plan, of which the
trustees, who have investment power over its assets are executive officers
of Thermo Electron (the "ESOP"). Shares beneficially owned by Mr. Noble
and all directors and current executive officers as a group each include
42,861 shares allocated through March 1, 1998, to Mr. Noble's account
maintained pursuant to Thermo Electron's deferred compensation plan for
directors. Shares beneficially owned by Dr. G. Hatsopoulos include 89,601
shares held by his spouse, 168,750 shares held by a QTIP trust of which his
spouse is the trustee, 39,937 shares held by a family trust of which his
spouse is the trustee, 4,000 shares held by a second family trust of which
Dr. Elias P. Gyftopoulos is a trustee and 153 shares allocated to the
account of his spouse maintained pursuant to the ESOP. Shares beneficially
owned by Dr. G. Hatsopoulos also include 50,000 shares that a family trust,
of which Dr. G. Hatsopoulos' spouse is the trustee, has the right to
acquire within 60 days of March 1, 1998, through the exercise of stock
options. Shares beneficially owned by Mr. Lamort de Gail include 550
shares held by his daughter. Except for Dr. G. Hatsopoulos, who
beneficially owned 2.1% of
6
the Thermo Electron common stock outstanding as of March 1, 1998, no
director or current executive officer beneficially owned more than 1% of
such common stock outstanding as of such date; all directors and current
executive officers as a group beneficially owned approximately 3.0% of the
Thermo Electron common stock outstanding as of March 1, 1998.
(4) Shares of the common stock of Thermo Fibergen beneficially owned by Mr.
Bergstedt, Dr. Bornhorst, Dr. G. Hatsopoulos, Mr. J. Hatsopoulos, Mr.
Healy, Mr. Lamort de Gail, Mr. McKone, Mr. Noble, Mr. Rainville, Mr.
Sindoni and all directors and current executive officers as a group include
19,500, 1,500, 20,000, 20,000, 10,000, 10,000, 15,000, 1,500, 40,000,
10,000 and 182,500 shares, respectively, that such person or members of the
group have the right to acquire within 60 days of March 1, 1998, through
the exercise of stock options. Shares beneficially owned by Mr. Bergstedt
include 750 shares held by his spouse. No director or current executive
officer beneficially owned more than 1% of such common stock outstanding as
of March 1, 1998; all directors and current executive officers as a group
beneficially owned 1.2% of the Thermo Fibergen common stock outstanding as
of such date.
(5) Thermo Electron beneficially owned 90.2% of the Common Stock outstanding as
of March 1, 1998. Thermo Electron's address is 81 Wyman Street, Waltham,
Massachusetts 02254-9046.
(6) As of March 1, 1998, Mr. Bergstedt, Mr. Noble and Mr. Rainville
beneficially owned 750, 3,000 and 1,500 redemption rights, respectively,
issued by Thermo Fibergen. The redemption rights beneficially owned by Mr.
Bergstedt are held by his spouse. Each of these rights, issued in a public
offering in September 1996, permits the holder to sell one share of Thermo
Fibergen common stock back to Thermo Fibergen at certain periods in the
future at a price of $12.75 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and beneficial owners of more
than 10% of the Common Stock, such as Thermo Electron, to file with the
Securities and Exchange Commission initial reports of ownership and periodic
reports of changes in ownership of the Corporation's securities. Based upon a
review of such filings, all Section 16(a) filing requirements applicable to such
persons were complied with during 1997, except in the following instances.
Thermo Electron filed seven Forms 4 late, reporting a total of 73 transactions,
including 60 open market purchases of shares of Common Stock and 12 transactions
associated with the grant and exercise of options to purchase Common Stock
granted to employees under its stock option program.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Corporation
in all capacities awarded to, earned by or paid to the Corporation's chief
executive officer and its four other most highly compensated executive officer
(the "named executive officers") for the last three fiscal years.
The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's affairs is
provided to the Corporation under the Corporate Services Agreement between the
Corporation and Thermo Electron. Accordingly, the compensation for these
individuals is not reported in the following table.
7
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term
Compensation
------------
Annual Compensation Securities Underlying
Name and Fiscal ------------------- Options (No. of Shares All Other
Principal Position Year Salary Bonus and Company (1) Compensation (2)
------------------ ---- ------ ----- --------------- ----------------
William A. Rainville (3) 1997 $110,000 $100,000 240,000 (TFT) $23,151 (4)
President and
Chief Executive Officer 1996 $102,500 $95,500 40,000 (TFG) $17,558 (4)
1995 $97,500 $110,000 -- $15,870
- ------------------------------------------------------------------------------------------------------------------------------------
Jan-Eric O. Bergstedt (5) 1997 $159,000 $91,350 95,000 (TFT) $5,344
Vice President 200 (TMO)
1996 $145,000 $76,500 15,000 (TFT) $5,344
7,650 (TMO)
19,500 (TFG)
1995 $136,000 $75,600 22,500 (TFT) $6,750
7,500 (TMO)
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Sindoni 1997 $159,000 $86,000 45,000 (TFT) $17,346
Vice President 1,900 (TMO)
1996 $151,500 $68,700 2,250 (TMO) $15,997
10,000 (TFG)
1995 $145,500 $79,500 2,250 (TMO) $15,122
- ------------------------------------------------------------------------------------------------------------------------------------
Edwin D. Healy 1997 $189,000 $42,000 1,200 (TMO) $7,169
Vice President 1996 $184,000 $44,000 900 (TMO) $9,136
10,000 (TFG)
1995 $176,000 $88,300 600 (TMO) $5,851
- ------------------------------------------------------------------------------------------------------------------------------------
Bruno Lamort de Gail (6) 1997 1,030,000 Fr. 126,000 Fr. -- 255,360 Fr.
Vice President 1996 999,938 Fr. 290,000 Fr. 10,000 (TFG) 241,112 Fr.
1995 925,060 Fr. 309,000 Fr. -- 252,564 Fr.
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Options to purchase Common Stock of the Corporation awarded to executive
officers are followed by the designation "TFT." In addition, the named
executive officers of the Corporation have been granted options to purchase
common stock of Thermo Electron companies from time to time as part of
Thermo Electron's stock option program. Options have been granted to the
named executive officers during the last three fiscal years in the
following Thermo Electron companies: Thermo Electron (designated in the
table as TMO) and Thermo Fibergen Inc. (designated in the table as TFG).
(2) Represents, for Mr. Rainville and Mr. Sindoni, amounts contributed to their
respective accounts under the Corporation's profit-sharing plan.
Represents, for Mr. Healy, amounts contributed to his account under the
profit-sharing plan maintained by Fiberprep Inc., a subsidiary of the
Corporation. Represents, for Mr. Lamort de Gail, amounts contributed for
his account under the retirement and profit-sharing plans maintained by E.
& M. Lamort, S.A. ("Lamort"), the Corporation's French subsidiary.
Represents, for Mr. Bergstedt, the amount of matching contributions made by
his employer to his account under the Thermo Electron 401(k) plan.
(3) Mr. Rainville is a senior vice president of Thermo Electron, as well as the
president and chief executive officer of the Corporation. A portion of Mr.
Rainville's annual cash compensation (salary and bonus) has been paid by
Thermo Electron in each of the last three fiscal years as compensation for
the services provided to Thermo Electron based on the time he devoted to
his responsibilities as a senior vice president of Thermo Electron. The
annual cash compensation (salary and bonus) reported in the table for Mr.
Rainville represents the amount paid by the Corporation and its
subsidiaries solely for Mr. Rainville's services as chief executive officer
of the Corporation. For each of 1997, 1996 and 1995, 50% of Mr.
8
Rainville's annual cash compensation (salary and bonus) was allocated to
the Corporation for his service as the Corporation's chief executive
officer. In addition, Mr. Rainville has been granted options to purchase
shares of the common stock of Thermo Electron and certain of its
subsidiaries other than the Corporation from time to time by Thermo
Electron or such other subsidiaries. These options are not reported in
this table as they were granted as compensation for service to other Thermo
Electron companies in capacities other than in his capacity as the chief
executive officer of the Corporation.
(4) In addition to the matching contribution referred to in footnote (2), such
amount includes $5,741 and $1,313 of compensation attributable to interest-
free loans provided to Mr. Rainville in 1997 and 1996, respectively,
pursuant to the Corporation's Stock Holding Assistance Plan. See
"Relationship with Affiliates - Stock Holding Assistance Plan."
(5) Mr. Bergstedt was appointed an executive officer of the Corporation in
September 1995. Reported in the table under "Annual Compensation" and "All
Other Compensation" are the total amounts paid in 1995 to Mr. Bergstedt for
service in all capacities to the Corporation.
(6) Mr. Lamort de Gail is a citizen of France and all compensation received by
him is paid in French francs. Translated into U.S. dollars using the
average exchange rates for 1997, 1996 and 1995, Mr. Lamort de Gail received
annual salaries of $179,014, $196,587, and $184,364, respectively, annual
bonuses of $21,899, $57,014 and $61,584, respectively, and aggregate
contributions under Lamort's retirement plans of $44,382, $47,403 and
$50,336, respectively.
STOCK OPTIONS GRANTED DURING FISCAL YEAR 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to the Corporation's chief executive
officer and the other named executive officers. It has not been the
Corporation's policy in the past to grant stock appreciation rights, and no such
rights were granted during fiscal 1997.
Mr. Rainville is a senior vice president of Thermo Electron and from time
to time has been granted options to purchase common stock of Thermo Electron and
certain of its subsidiaries other than the Corporation. These options are not
reported in this table as they were granted as compensation for service to other
Thermo Electron companies in capacities other than in his capacity as the chief
executive officer of the Corporation.
Stock Options Granted in Fiscal 1997
- -------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation for
Number of Securities Granted to Exercise Option Term (2)
Underlying Options Employees in Price Per Expiration ---------------
Name Granted (1) Fiscal Year Share Date 5% 10%
---- ----------- ----------- ----- ---- ---------- ----------
William A. Rainville 140,000 (TFT) 17.10% $11.28 3/19/09 $1,257,200 $3,376,800
100,000 (TFT) 12.20% $11.45 9/23/09 $911,000 $2,449,000
- ---------------------------------------------------------------------------------------------------------------
Jan-Eric Bergstedt 95,000 (TFT) 11.60% $11.28 3/19/04 $436,050 $1,016,500
200 (TMO) 0.01%(3) $34.20 6/3/00 $1,078 $2,264
- ---------------------------------------------------------------------------------------------------------------
Edward J. Sindoni 45,000 (TFT) 5.50% $11.28 3/19/04 $206,550 $481,500
1,900 (TMO) 0.10%(3) $34.20 6/3/00 $10,241 $21,508
Edwin D. Healy 1,200 (TMO) 0.10%(3) $34.20 6/3/00 $6,468 $13,584
- ---------------------------------------------------------------------------------------------------------------
Bruno Lamort de Gail -- -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
(1) All of the options granted during the fiscal year are immediately
exercisable. In all cases, the shares acquired upon exercise are subject
to repurchase by the granting corporation at the exercise price if the
optionee ceases to be employed by the granting corporation or another
Thermo Electron company. The
9
granting corporation may exercise its repurchase rights within six months
after the termination of the optionee's employment. The repurchase rights
generally lapse ratably over a five-to ten-year period, depending on the
option term, which may vary from seven to twelve years, provided that the
optionee continues to be employed by the Corporation or another Thermo
Electron company. Certain options have three-year terms and the repurchase
rights lapse in their entirety on the second anniversary of the grant date.
The granting corporation may permit the holders of options to exercise
options and to satisfy tax withholding obligations by surrendering shares
equal in fair market value to the exercise price or withholding obligation.
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date. The gains shown are net of the option
exercise price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend on the future performance of the common stock of the
applicable corporation, the optionee's continued employment through the
option period and the date on which the options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron companies other than the Corporation and accordingly are reported
as a percentage of total options granted to employees of Thermo Electron
and its subsidiaries.
STOCK OPTIONS EXERCISED DURING FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options held at the end of
fiscal 1997 by the Corporation's chief executive officer and the other named
executive officers. No stock appreciation rights were exercised or were
outstanding during fiscal 1997.
Aggregated Option Exercises in Fiscal 1997 and Fiscal 1997 Year-End Option Values
- ----------------------------------------------------------------------------------------------------------
Number of
Unexercised
Options at Fiscal Value of
Shares Year-End Unexercised
Acquired on Value (Exercisable/ In-the-Money
Name Company Exercise Realized(1) Unexercisable)(2) Options
____ ------- ------- ----------- ----------------- ------
William A. Rainville (3) Thermo Fibertek -- -- 735,000 /0 (4) $4,465,480 /--
Thermo Fibergen -- -- 40,000 /0 (5) $0 /--
Jan-Eric Bergstedt Thermo Fibertek -- -- 159,500 /0 $304,336 /--
Thermo Electron -- -- 19,850 /0 $249,394 /--
Thermo Fibergen -- -- 19,500 /0 $0 /--
Edward J. Sindoni Thermo Fibertek -- -- 247,500 /0 (4) $1,759,680 /--
Thermo Electron -- -- 30,250 /0 (6) $613,992 /--
Thermo Fibergen -- -- 10,000 /0 $0 /--
Edwin D. Healy Thermo Fibertek -- -- 202,500 /0 (4) $1,577,070 /--
Thermo Electron -- -- 47,925 /0 (6) $1,069,049 /--
Thermo Fibergen -- -- 10,000 /0 $0 /--
Bruno Lamort de Gail Thermo Fibertek 65,000 $446,875 137,500 /0 (4) $1,121,600 /--
Thermo Fibergen -- -- 10,000 /0 $0 /--
- -------------------------------------------------------------------------------------------------------------
(1) Amounts shown in this column do not necessarily represent actual value
realized from the sale of the shares acquired upon exercise of the option
because in many cases the shares are not sold on exercise but continue to
be held be the executive officer exercising the option. The amounts shown
represent the difference
10
between the option exercise price and the market price on the date of
exercise, which is the amount that would have been realized if the shares
had been sold immediately upon exercise.
(2) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of fiscal year-end. In all cases, the shares
acquired upon exercise of the options reported in the table are subject to
repurchase by the granting corporation at the exercise price if the
optionee ceases to be employed by such corporation or another Thermo
Electron company. The granting corporation may exercise its repurchase
rights within six months after the termination of the optionee's
employment. The repurchase rights generally lapse ratably over a five- to
ten-year period, depending on the option term, which may vary from seven to
twelve years, provided that the optionee continues to be employed by the
Corporation or another Thermo Electron company. Certain options have three-
year terms and the repurchase rights lapse in their entirety on the second
anniversary of the grant date.
(3) Mr. Rainville has served as an officer of Thermo Electron in various
capacities since 1986 and holds other unexercised options to purchase
common stock of Thermo Electron and certain of its subsidiaries other than
the Corporation. These options are not reported here as they were granted
as compensation for service to other Thermo Electron companies in
capacities other than in his capacity as the chief executive officer of the
Corporation.
(4) Options to purchase 180,000, 45,000, 67,500 and 45,000 shares of the
Corporation's Common Stock held by Mr. Rainville, Mr. Sindoni, Mr. Healy
and Mr. Lamort de Gail, respectively, are subject to the same terms
described in footnote (2), except that the repurchase rights of the
Corporation lapse ratably on the second through sixth anniversaries of the
option grant date and shares purchased upon exercise thereof are further
restricted from resale until such executive officer's retirement.
(5) Options to purchase 20,000 shares of the common stock of Thermo Fibergen
granted to Mr. Rainville are subject to the same terms described in
footnote (2), except that the repurchase rights of the granting corporation
are deemed to lapse 20% per year commencing on the sixth anniversary of the
grant date.
(6) Options to purchase 22,500 and 45,000 shares, respectively, of the common
stock of Thermo Electron granted to Mr. Sindoni and Mr. Healy are subject
to the same terms as described in footnote (2), except that the repurchase
rights of the granting corporation generally do not lapse until the tenth
anniversary of the grant date. In the event of the employee's death or
involuntary termination prior to the tenth anniversary of the grant date,
the repurchase rights of the granting corporation shall be deemed to have
lapsed ratably over a five-year period commencing with the fifth
anniversary of the grant date.
DEFINED BENEFIT RETIREMENT PLAN
The Corporation's subsidiary, Thermo Web Systems Inc., maintains a defined
benefit retirement plan (the "Retirement Plan") for eligible U.S. employees.
The following table sets forth the estimated annual benefits payable under the
Retirement Plan upon retirement to employees of the subsidiary in specified
compensation and years-of-service classifications. The estimated benefits at
certain compensation levels reflect the statutory limits on compensation that
can be recognized for plan purposes. This limit is currently $160,000 per year.
Years of Service
- ---------------------------------------------------------------------------------------------------
Annual Compensation 15 20 25 30 35
- ------------------- ------- ------- ------- ------- -------
$100,000 $26,250 $35,000 $43,750 $48,125 $48,125
$125,000 $32,813 $43,750 $54,688 $60,156 $60,156
$150,000 $39,375 $52,500 $65,625 $72,188 $72,188
$160,000 $42,000 $56,000 $70,000 $84,000 $84,000
Each eligible employee receives a monthly retirement benefit, beginning at
normal retirement age (65), based on a percentage (1.75%) of the average monthly
compensation of such employee before retirement, multiplied by his years of
service (up to a maximum of 30 years). Full credit is given for the first 25
years of service, and half credit is given for years over 25 and less than 30.
Benefits are reduced for retirement before normal retirement age.
11
Average monthly compensation is generally defined as average monthly base salary
over the five years of highest compensation in the ten-year period preceding
retirement. For 1997, the compensation recognized for plan purposes for Mr.
Rainville and Mr. Sindoni was $160,000 and $160,000, respectively. The estimated
credited years of service recognized under the Retirement Plan for Mr. Rainville
and Mr. Sindoni is 30 and 23, respectively, assuming retirement at age 65. Mr.
Healy, Mr. Lamort de Gail and Mr. Bergstedt are not entitled to receive any
benefits under the Retirement Plan. No benefits under the Retirement Plan vest
for an employee until after five years of participation, at which time they
become fully vested. The benefits shown in the above table are subject to
reduction for Social Security benefits. The plan benefits shown are payable
during the employee's lifetime unless the employee elects another form of
benefit that provides death benefit protection.
SEVERANCE AGREEMENTS
In 1988, Thermo Electron entered into severance agreements with several of
its key employees, including key employees of the Corporation and other
majority-owned subsidiaries. These agreements provide severance benefits if
there is a change of control of Thermo Electron that is not approved by the
board of directors of Thermo Electron and the employee's employment with Thermo
Electron or the majority-owned subsidiary is terminated, for whatever reason,
within one year thereafter. For purposes of the agreement a change of control
exists upon (i) the acquisition of 50% or more of the outstanding common stock
of Thermo Electron by any person without the prior approval of the board of
directors of Thermo Electron, (ii) the failure of the board of directors of
Thermo Electron, within two years after any contested election of directors or
tender or exchange offer not approved by the board of directors, to be
constituted of a majority of directors holding office prior to such event or
(iii) any other event that the board of directors of Thermo Electron determines
constitutes an effective change of control of Thermo Electron. Each of the
recipients of these agreements would receive a lump-sum benefit at the time of a
qualifying severance equal to the highest total cash compensation paid to the
employee by Thermo Electron or the majority-owned subsidiary in any 12-month
period during the three years preceding the severance event. A qualifying
severance exists (i) if the employment of the executive officer is terminated
for any reason within one year after a change in control of Thermo Electron or
(ii) a group of directors of Thermo Electron consisting of directors of Thermo
Electron on the date of the severance agreement or, if an election contest or
tender or exchange offer for Thermo Electron's common stock has occurred, the
directors of Thermo Electron immediately prior to such election contest or
tender or exchange offer, and any future directors who are nominated or elected
by such directors, determine that any other termination of the executive
officer's employment should be treated as a qualifying severance. The benefits
to be provided are limited so that the payments would not constitute so-called
"excess parachute payments" under applicable provisions of the Internal Revenue
Code of 1986. Assuming that severance benefits would have been payable under
these agreements as of January 3, 1998, Mr. Rainville would have received
approximately $420,000.
In connection with the acquisition of E. & M. Lamort, S.A., the Corporation
entered into a noncompetition agreement with Mr. Lamort de Gail. Pursuant to
this agreement, if Mr. Lamort de Gail's employment is terminated prior to his
normal retirement age of 65, in consideration of Mr. Lamort de Gail's agreement
not to compete with the Corporation for three years after such termination, the
Corporation has agreed to pay Mr. Lamort de Gail an aggregate of 3,500,000
French Francs ($574,665 at the applicable exchange rate on March 1, 1998),
payable in 36 equal monthly installments. Installments payable to Mr. Lamort de
Gail after his 60th birthday will be reduced by 20% in each year thereafter and
no installments will be payable to Mr. Lamort de Gail after his 65th birthday.
In the event that Mr. Lamort de Gail voluntarily resigns from the Corporation,
amounts payable under this agreement will be reduced by one-third.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
All decisions on compensation for the Corporation's executive officers are
made by the human resources committee of the board of directors (the
"Committee"). In reviewing and establishing total cash compensation and stock-
based compensation for executives, the Committee follows guidelines established
by the human resources committee of the board of directors of its parent
company, Thermo Electron. The executive compensation program presently consists
of annual base salary ("salary"), short-term incentives in the form of annual
cash bonuses, and long-term incentives in the form of stock options
(collectively referred to as "total compensation").
12
The Committee believes that the total compensation of executive officers
should reflect the scope of their responsibilities, the success of the
Corporation, and the contributions of each executive to that success. In
addition, the Committee believes that base salaries should approximate the mid-
point of competitive salaries derived from market surveys and that short-term
and long-term incentive compensation should reflect the performance of the
Corporation and the contributions of each executive.
ESTABLISHING COMPETITIVENESS
External competitiveness is an important element of the Committee's
compensation policy. The competitiveness of the Corporation's total compensation
for its U.S.-based executives is assessed by comparing it to market data
provided by compensation consultants and by participating in annual executive
compensation surveys, primarily "Project 777," an executive compensation survey
prepared by Management Compensation Services, a division of Hewitt Associates.
The majority of firms represented in the Project 777 survey are included in the
Standard & Poor's 500 Index, but do not necessarily correspond to the companies
included in the Corporation's peer group index, the Dow Jones Total Return Index
for the Paper Products Industry Group.
Principles of internal equity are also central to the Committee's
compensation policies. Total compensation considered for the Corporation's
officers, whether cash or stock-based incentives, is also evaluated by comparing
it to total compensation of other executives within the Thermo Electron
organization with comparable levels of responsibility for comparably sized
business units.
The process for determining each of these elements for the Corporation's
executive officers is outlined below. For its review of the compensation of
other officers of the Corporation, the Committee follows a substantially similar
process.
BASE SALARY
Base salaries are intended to approximate the mid-point of competitive
salaries for similar organizations of comparable size and complexity to the
Corporation. Executive salaries are adjusted gradually over time and only as
necessary to meet this objective. Increases in base salary may be moderated by
other considerations, such as geographic or regional market data, industry
trends or internal fairness within the Corporation and Thermo Electron. It is
the Committee's intention that over time the base salaries for the chief
executive officer and the other named executive officers will approximate the
mid-point of competitive data. The salary increases in 1997 for the chief
executive officer and the other named executive officers generally reflect this
practice of gradual increases and moderation.
CASH BONUS
The Committee establishes a median potential bonus for each executive by
using the market data on total cash compensation from the same executive
compensation surveys as used to determine salaries for U.S.-based executives and
local market data for executives who are based outside of the U.S. and are not
U.S. citizens. Specifically, the median potential bonus plus the salary of an
executive officer is approximately equal to the mid-point of competitive total
cash compensation for a similar position and level of responsibility in
businesses having comparable sales and complexity to the Corporation. The actual
bonus awarded to an executive officer may range from zero to three times the
median potential bonus. The value within the range (the bonus multiplier) is
determined at the end of each year by the Committee in its discretion. The
Committee exercises its discretion by evaluating each executive's performance
using a methodology developed by its parent company, Thermo Electron, and
applied throughout the Thermo Electron organization. The methodology
incorporates measures of operating returns which are designed to measure
profitability and contributions to shareholder value and are measures of
corporate and divisional performance that are evaluated using graphs developed
by Thermo Electron intended to reward performance that is perceived as above
average and to penalize performance that is perceived as below average. The
measures of operating returns used in the Committee's determinations in fiscal
1997 measured return on net assets, growth in income, and return on sales, and
the Committee's determinations also included a subjective evaluation of the
contributions of each executive that are not captured by operating measures but
are considered important to the creation of long-term value for the
Stockholders. These measures of achievements are not financial targets that are
met, not met or exceeded. The relative weighting of the operating measures and
subjective evaluation varies among the executives depending on their roles and
responsibilities within the organization.
13
The bonuses for named executive officers approved by the Committee with
respect to fiscal 1997 performance in each instance exceeded the median
potential bonus.
STOCK OPTION PROGRAM
The primary goal of the Corporation and its parent company is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of options
to purchase common stock of the Corporation and other Thermo Electron companies.
The Committee and management believe that awards of stock options to
purchase the shares of both the Corporation and other companies within the
Thermo Electron group of companies accomplish many objectives. The grant of
options to key employees encourages equity ownership in the Corporation, and
closely aligns management's interests to the interests of all the Stockholders.
The emphasis on stock options also results in management's compensation being
closely linked to stock performance. In addition, because they are subject to
vesting periods of varying durations and to forfeiture if the employee leaves
the Corporation prematurely, stock options are an incentive for key employees to
remain with the Corporation long-term. The Committee believes stock option
awards in its parent company, Thermo Electron, its majority-owned subsidiary,
Thermo Fibergen, and the other majority-owned subsidiaries of Thermo Electron,
are an important tool in providing incentives for performance within the entire
organization.
In determining awards, the Committee considers for each officer the annual
value of all options to purchase shares of the Corporation and other companies
within the Thermo Electron organization that vest in the next year and compares
the individual's total compensation using this value to competitive data. The
Committee uses a modified Black-Scholes option pricing model to determine the
value of an option award. In addition, the Committee considers the aggregate
amount of net awards to purchase shares of Common Stock granted to all employees
over the last five years to monitor the number of aggregate awards to all
employees. In reviewing the aggregate number of awards, the Committee considers
such factors as the size of the company, its stage of development, and its
growth strategy, as well as the aggregate awards and option practices of
comparably situated companies.
The Committee periodically awards options based on its assessment of the
total compensation of each executive, the actual and anticipated contributions
of each executive (which include a subjective assessment by the Committee of the
value of the executive's future potential with the organization), as well as the
value of previously awarded options as described above. The options awarded in
1997 to the named executive officers with respect to the common stock of the
Corporation's parent company, Thermo Electron, were made pursuant to a program
that awards options to certain eligible employees annually based on the number
of shares of Thermo Electron common stock held by the employee, as an incentive
to buy and hold shares of Thermo Electron common stock.
STOCK OWNERSHIP POLICIES
The Committee established a stock holding policy for executive officers of
the Corporation in 1996 that required executive officers to own a multiple of
their compensation in shares of the Corporation's Common Stock. For the chief
executive officer, the multiple was one times his base salary and reference
bonus for the calendar year. For all other officers, the multiple was one times
the officer's base salary. The Committee deemed it appropriate to permit
officers to achieve these ownership levels over a three-year period. The policy
was amended in 1998 to apply only to the chief executive officer.
In order to assist officers in complying with the policy, the Committee
also adopted in 1996 a stock holding assistance plan under which the Corporation
was authorized to make interest-free loans to officers to enable them to
purchase shares of the Common Stock in the open market. The loans are required
to be repaid upon the earlier of demand or the fifth anniversary of the date of
the loan, unless otherwise authorized by the Committee. During 1996, Mr.
Rainville, the Corporation's chief executive officer, received a loan in the
principal amount of $118,104 under this plan, of which $94,483.20 remains
outstanding. During 1997, Mr. Jonathan W. Painter, an executive vice president
of the Corporation, received a loan in the principal amount of $118,104 under
the plan, of which the entire amount remains outstanding. This plan was also
amended in 1998 to apply only to the chief executive officer. See "Relationship
with Affiliates - Stock Holding Assistance Plan."
14
The Committee also has adopted a policy requiring its executive officers to
hold shares of the Corporation's Common Stock acquired upon the exercise of
stock options granted by the Corporation. Under this policy, executive officers
are required to hold one-half of their net option exercises over a period of
five years. The net option exercise is determined by calculating the number of
shares acquired upon exercise of a stock option, after deducting the number of
shares that could have been traded to exercise the option and the number of
shares that could have been surrendered to satisfy tax withholding obligations
attributable to the exercise of the options.
POLICY ON DEDUCTIBILITY OF COMPENSATION
The Committee has also considered the application of Section 162(m) of the
Internal Revenue Code to the Corporation's compensation practices. Section
162(m) limits the tax deduction available to public companies for annual
compensation paid to senior executive in excess of $1 million, unless the
compensation qualified as "performance-based" or is otherwise exempt from
Section 162(m). The annual compensation paid to individual executives does not
approach the $1 million threshold, and it is believed that the stock incentive
plans of the Corporation qualify as "performance-based." Therefore, the
Committee does not believe any further action is necessary in order to comply
with Section 162(m). From time to time, the Committee will reexamine the
Corporation's compensation practices and the effect of Section 162(m).
1997 CEO COMPENSATION
Cash compensation for Mr. William A. Rainville is reviewed by both the
Committee and the human resources committee of the board of directors of Thermo
Electron, due to Mr. Rainville's responsibilities as both the Corporation's
chief executive officer and as a senior vice president of Thermo Electron, the
Corporation's parent company. Each committee evaluates Mr. Rainville's
performance and proposed compensation using a process similar to that used for
the other executive officers of the Corporation. At the Thermo Electron level,
Mr. Rainville is evaluated on his performance related to the Corporation as well
as other operating units of Thermo Electron for which he is responsible,
weighted in accordance with the amount of time and effort devoted to each
operation. Approximately 50% of Mr. Rainville's bonus for 1997 performance was
attributable to his responsibilities at the Corporation. The Corporation's
Committee then reviews the analysis and determinations of the Thermo Electron
committee, makes an independent assessment of Mr. Rainville's performance as it
relates to the Corporation using criteria similar to that used for the other
executive officers of the Corporation, and then agrees to an appropriate
allocation of Mr. Rainville's compensation to be paid by the Corporation.
In December 1997, the Committee conducted its review of Mr. Rainville's
proposed salary for 1998 and bonus for 1997 performance. The Committee
concurred in the recommendations made by the Thermo Electron committee and
agreed to an allocation of 50% of Mr. Rainville's total cash compensation for
1997 to the Corporation, based on his relative responsibilities at the
Corporation and Thermo Electron.
The Committee awarded to Mr. Rainville options to purchase 240,000 shares
of the Common Stock in fiscal 1997. This award was determined in a manner
consistent with awards to other officers, as described above under the caption
"Stock Option Program."
Mr. Donald E. Noble (Chairman)
Mr. Francis L. McKone
15
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a broad-
based market index and either a nationally recognized industry standard or an
index of peer companies selected by the Corporation. The Corporation has
compared its performance with the American Stock Exchange Market Value Index and
the Dow Jones Total Return Index for the Paper Products Industry Group ("DJ
PAPER") as of the last trading day of the Corporation's fiscal year.
COMPARISON OF TOTAL RETURN AMONG THERMO FIBERTEK INC.,
THE AMERICAN STOCK EXCHANGE MARKET VALUE INDEX AND THE
DOW JONES TOTAL RETURN INDEX FOR THE PAPER PRODUCTS INDUSTRY GROUP
FROM DECEMBER 31, 1992 TO JANUARY 2, 1998
[GRAPH APPEARS HERE]
_____________________________________________________________________________
12/31/92 12/31/93 12/30/94 12/29/95 12/27/96 1/2/98
_____________________________________________________________________________
TFT 100 167 167 357 213 289
_____________________________________________________________________________
AMEX 100 120 109 137 146 177
_____________________________________________________________________________
DJ PAPER 100 108 120 137 146 161
_____________________________________________________________________________
The total return for the Corporation's Common Stock (TFT), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Paper Products Industry Group (DJ PAPER) assumes the reinvestment of
dividends, although dividends have not been declared on the Corporation's Common
Stock. The American Stock Exchange Market Value Index tracks the aggregate
performance of equity securities of companies listed on the American Stock
Exchange. The Corporation's Common Stock is traded on the American Stock
Exchange under the ticker symbol "TFT."
RELATIONSHIP WITH AFFILIATES
Thermo Electron has adopted a strategy of selling a minority interest in
subsidiary companies to outside investors as an important tool in its future
development. As part of this strategy, Thermo Electron and certain of its
subsidiaries have created several privately and publicly held subsidiaries.
From time to time, Thermo Electron and its subsidiaries will create other
majority-owned subsidiaries as part of its spinout strategy. (The Corporation
and such other majority-owned Thermo Electron subsidiaries are hereinafter
referred to as the "Thermo Subsidiaries.")
16
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Corporation, have adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of long-
range planning and providing other banking and credit services. Pursuant to the
Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
each of the Thermo Subsidiaries.
The Charter presently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Corporation, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal. In
addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and financial and other services to the Corporation. The
Corporation was assessed an annual fee equal to 1.0% of the Corporation's
revenues for these services in fiscal 1996 and 1997. The annual fee has been
reduced to 0.8% of the Corporation's total revenues for fiscal 1998. The fee is
reviewed annually and may be changed by mutual agreement of the Corporation and
Thermo Electron. During fiscal 1997, Thermo Electron assessed the Corporation
$2,396,000 in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms of the
Services Agreement are fair to the Corporation. For items such as employee
benefit plans, insurance coverage and other identifiable costs, Thermo Electron
charges the Corporation based on charges attributable to the Corporation. The
Services Agreement automatically renews for successive one-year terms, unless
canceled by the Corporation upon 30 days' prior notice. In addition, the
Services Agreement terminates automatically in the event the Corporation ceases
to be a member of the Thermo Group or ceases to be a participant in the Charter.
In the event of a termination of the Services Agreement, the Corporation will be
required to pay a termination fee equal to the fee that was paid by the
Corporation for services under the Services Agreement
17
for the nine-month period prior to termination. Following termination, Thermo
Electron may provide certain administrative services on an as-requested basis by
the Corporation or as required in order to meet the Corporation's obligations
under Thermo Electron's policies and procedures. Thermo Electron will charge the
Corporation a fee equal to the market rate for comparable services if such
services are provided to the Corporation following termination.
The Corporation and Thermo Electron have a tax allocation agreement under
which the Corporation and its subsidiaries are included in the consolidated
federal and state income tax returns filed by Thermo Electron. The agreement
provides that in years in which these entities have taxable income, the
Corporation will pay to Thermo Electron amounts comparable to the taxes it would
have paid if the Corporation had filed separate tax returns. In years in which
these entities incur a loss, Thermo Electron will reimburse the Corporation the
amount that the Corporation would have received if it had filed separate tax
returns. If Thermo Electron's equity ownership of the Company were to drop
below 80%, the Corporation would be required to file its own income tax returns.
In 1997, the Corporation paid Thermo Electron approximately $6,466,000 under the
tax allocation agreement.
From time to time, the Corporation may transact business with other
companies in the Thermo Group.
During 1997, the Corporation purchased 151,950 shares of common stock of
its Thermo Fibergen subsidiary from Thermo Electron for an aggregate of
$1,463,000.
In December 1994, Thermo Electron subcontracted with the Corporation's
Fiberprep subsidiary to supply approximately $16,000,000 in equipment and
services for an office wastepaper and de-inking facility. Thermo Electron is
the primary contractor on the construction of such facility. The Corporation
recorded revenues of $316,607 under this subcontract in fiscal 1997.
In connection with the acquisition of Thermo Black Clawson, the Corporation
borrowed $110.0 million from Thermo Electron in May 1997. The promissory note
bore interest at the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter. In July 1997, the Corporation
repaid the borrowed amount in full.
The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a $150 million
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. In addition, funds on deposit under this arrangement provide
credit support for overdraft obligations of other participants. As of January
3, 1998, the Corporation had a positive cash balance of approximately $3,000,
based on an exchange rate of $1.65/(Pounds)1.00 as of January 3, 1998. For
1997, the average annual interest rate earned on GBP deposits by participants in
this credit arrangement was approximately 6.5% and the average annual interest
rate paid on overdrafts was approximately 7.2%.
At January 3, 1998, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $511,000 for amounts due under the Corporate
Services Agreement and related administrative charges, for other products and
services, and for miscellaneous items, net of amounts owed to the Corporation by
Thermo Electron and its other subsidiaries under the Tax Allocation Agreement
and for miscellaneous items. The largest amount of net indebtedness owed by the
Corporation to Thermo Electron and its other subsidiaries since December 29,
1996 was $3,766,000. These amounts do not bear interest and are expected to be
paid in the normal course of business.
As of January 3, 1998, $62,550,000 of the Corporation's cash equivalents
were invested in a repurchase agreement with Thermo Electron. Under this
agreement, the Corporation in effect lends excess cash to Thermo Electron, which
Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. The Corporation's funds subject to the repurchase agreement
are readily convertible into cash by the Corporation. The repurchase agreement
earns a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter.
18
The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a $150 million
credit facility. Only European-based Thermo Subsidiaries participate in this
arrangement. Under this arrangement the Bank notionally combines the positive
and negative cash balances held by the participants to calculate the net
interest yield/expense for the group. The benefit derived from this arrangement
is then allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. In addition, funds on deposit under this arrangement provide
credit support for overdraft obligations of other participants. As of January
3, 1998, the Corporation had a positive cash balance of approximately $3,000,
based on an exchange rate of $1.65/(Pounds) 1.00 as of January 3, 1998. For
1997, the average annual interest rate earned on GBP deposits by participants in
this credit arrangement was approximately 6.5% and the average annual interest
rate paid on overdrafts was approximately 7.2%.
STOCK HOLDING ASSISTANCE PLAN
In 1996, the Corporation adopted a stock holding policy which requires its
executive officers to acquire and hold a minimum number of shares of Common
Stock. In order to assist the executive officers in complying with the policy,
the Corporation also adopted a stock holding assistance plan under which it may
make interest-free loans to certain key employees, including its executive
officers, to enable such employees to purchase the Common Stock in the open
market. During 1996, Mr. Rainville received a loan in the principal amount of
$118,104 under this plan to purchase 10,000 shares, of which amount $94,483.20
remains outstanding. During 1997, Mr. Jonathan W. Painter, an executive vice
president of the Corporation, received a loan in the principal amount of
$157,303.50 under the plan to purchase 13,000 shares of Common Stock, of which
the entire amount remains outstanding. The loans to Mr. Rainville and Mr.
Painter are repayable upon the earlier of demand or the fifth anniversary of the
date of the loan, unless otherwise authorized by the human resources committee
of the Corporation's board of directors. This policy and plan were amended in
1998 to apply only to the chief executive officer of the Corporation in the
future.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1998. Arthur Andersen LLP has acted as
independent public accountants for the Corporation since its inception in 1991.
Representatives of that firm are expected to be present at the Meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to questions. The board of directors has established an
audit committee, presently consisting of two outside directors, the purpose of
which is to review the scope and results of the audit.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the Meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the 1999 Annual
Meeting of the Stockholders of the Corporation must be received by the
Corporation for inclusion in the proxy statement and form of proxy relating to
that meeting no later than December 29, 1998.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally or by telephone, facsimile
transmission or telegram. Brokers, nominees, custodians and fiduciaries are
requested to forward solicitation materials to obtain voting instructions from
beneficial owners of stock registered in their names, and the Corporation will
reimburse such parties for their reasonable charges and expenses in connection
therewith.
Waltham, Massachusetts
April 23, 1998
19
FORM OF PROXY
THERMO FIBERTEK INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD JUNE 1, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints John N. Hatsopoulos, William A.
Rainville and Melissa F. Riordan, or any one of them in the absence of the
others, as attorneys and proxies of the undersigned, with full power of
substitution, for and in the name of the undersigned, to represent the
undersigned at the Annual Meeting of the Stockholders of Thermo Fibertek Inc., a
Delaware corporation (the "Company"), to be held on Monday, June 1, 1998, at
8:15 a.m. at The Hyatt Regency Scottsdale Resort at Gainey Ranch, Scottsdale,
Arizona, and at any adjournment or postponement thereof, and to vote all shares
of common stock of the Company standing in the name of the undersigned on April
3, 1998, with all of the powers the undersigned would possess if personally
present at such meeting:
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
Please mark your
[ X ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [ ] WITHHELD [ ]
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any): ______________________________________
NOMINEES: Walter J. Bornhorst, George N. Hatsopoulos, John N. Hatsopoulos,
Francis L. McDone, Donald E. Noble and William A. Rainville.
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_________________
NOTE: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.
