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THERMO FIBERTEK INC.
81 Wyman Street, Post Office Box 9046, Waltham, MA 02254-9046
April [ ], 1997
Dear Stockholder:
The enclosed Notice calls the 1997 Annual Meeting of the
Stockholders of Thermo Fibertek Inc. I respectfully request all
Stockholders attend this Meeting, if possible.
Our Annual Report for the year ended December 28, 1996, 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 and 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
PAGE
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THERMO FIBERTEK INC.
81 Wyman Street, Post Office Box 9046, Waltham, MA 02254-9046
April [ ], 1997
To the Holders of the Common Stock of
THERMO FIBERTEK INC.
NOTICE OF ANNUAL MEETING
The 1997 Annual Meeting of the Stockholders of Thermo
Fibertek Inc. (the "Corporation") will be held on Monday, June 2,
1997, at 8:00 a.m. at The Hyatt Regency Hotel, Hilton Head, South
Carolina. The purpose of the Meeting is to consider and take
action upon the following matters:
1. Election of five Directors.
2. A proposal, recommended by the Board of Directors, to
amend the Corporation's Certificate of Incorporation to
increase the Corporation's authorized common stock,
$.01 par value, from 75 million shares to 150 million
shares.
3. 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 notice of and vote at the Meeting is
April 7, 1997.
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.
PAGE
This Notice, the Proxy and Proxy Statement enclosed herewith
are sent to you by order of the Board of Directors.
SANDRA L. LAMBERT
Secretary
1
PAGE
PROXY STATEMENT
The enclosed Proxy is solicited by the Board of Directors of
Thermo Fibertek Inc. (the "Corporation") for use at the 1997
Annual Meeting of the Stockholders (the "Meeting") to be held on
Monday, June 2, 1997, at 8:00 a.m. at The Hyatt Regency Hotel,
Hilton Head, South Carolina 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 [ ], 1997.
VOTING PROCEDURES
The Board of Directors intends to present to the Meeting the
election of five Directors, constituting the entire Board of
Directors and one other matter: a proposal to amend the
Corporation's Certificate of Incorporation to increase the
Corporation's authorized common stock $.01 par value ("Common
Stock") from 75 million shares to 150 million shares.
The representation in person or by proxy of a majority of
the outstanding shares of 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, for the
management proposal, 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. For the proposal
to increase the authorized Common Stock, the affirmative vote of
a majority of the outstanding shares of Common Stock entitled to
vote on the matter is necessary for approval. Withholding
authority to vote for a nominee for Director or an instruction to
abstain from voting on a proposal 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 or a proposal. 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. With respect to the
2
PAGE
management proposal to increase the authorized Common Stock,
broker "non-votes" will have the same effect as a vote against
the proposal to increase the authorized Common Stock. 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 7, 1997 consisted of [ ] shares of
Common Stock. Only Stockholders of record at the close of
business on April 7, 1997 are entitled to vote at the Meeting.
Each share is entitled to one vote.
3
PAGE
--PROPOSAL 1--
ELECTION OF DIRECTORS
Five 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 parent
corporation, Thermo Electron Corporation ("Thermo Electron"), is
reported under the caption "Stock Ownership." All of the nominees
are currently Directors of the Corporation. Senator Paul E.
Tsongas, who had served as a Director of the Corporation since
1992, passed away in January 1997.
Dr. Walter J. Dr. Bornhorst, 56, has been a Director of
Bornhorst 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 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.
Dr. George N. Dr. Hatsopoulos, 70, has been a Director of
Hatsopoulos the Corporation since its inception. Dr.
Hatsopoulos has been the Chairman of the
Board and Chief Executive Officer of Thermo
Electron since 1956 and President of Thermo
Electron from 1956 to January 1997. Dr.
Hatsopoulos is also a director of
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
Vice President of the Corporation, and is
the father-in-law of Dr. Walter J.
Bornhorst, a Director of the Corporation.
4
PAGE
John N. Hatsopoulos Mr. Hatsopoulos, 62, has been a Director,
Chief Financial Officer and Vice President
of the Corporation since its inception. He
has been the President of Thermo Electron
since January 1997, the Chief Financial
Officer of Thermo Electron since 1988, and
an Executive Vice President of Thermo
Electron from 1986 to 1997. Mr.
Hatsopoulos is also a director of LOIS/USA
Inc., Thermedics Inc., Thermo Ecotek
Corporation, Thermo Fibergen Inc., Thermo
Instrument Systems Inc., Thermo Power
Corporation, Thermo TerraTech Inc. and
ThermoTrex Corporation. Mr. Hatsopoulos is
the brother of Dr. George N. Hatsopoulos, a
Director of the Corporation.
Donald E. Noble Mr. Noble, 82, has been a Director of the
Corporation since January 1992 and Chairman
of the Board since December 1992. 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.
William A. Mr. Rainville, 55, has been President and
Rainville 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 a Vice President since 1986. Mr.
Rainville is also a director of Thermo
Ecotek Corporation, Thermo TerraTech Inc.
and Thermo Remediation Inc.
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 Dr. Bornhorst. 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 Dr. Bornhorst. The Human Resources
Committee reviews the performance of senior members of
management, recommends executive compensation and administers the
5
PAGE
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 once and the Human Resources Committee met
five times during fiscal 1996. Each Director attended at least
75% of all meetings of the Board of Directors and Committees on
which he served held during fiscal 1996.
Compensation of Directors
Cash Compensation
Directors who are not employees of the Corporation, of
Thermo Electron or of any other 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. Beginning in
January 1997, the non-executive Chairman of the Board receives an
additional meeting fee for his service 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. 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
occurrence, without the prior approval of the Board of Directors,
of the acquisition, directly or indirectly, by any person of 50%
or more of the outstanding Common Stock or the outstanding common
stock of Thermo 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 are currently reserved
for issuance under the Deferred Compensation Plan. As of March
6
PAGE
1, 1997, deferred units equal to 10,119.76 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. Under the Directors
Plan, new outside Directors elected or appointed during 1996 will
be automatically granted options to purchase 8,000 shares of
Common Stock upon their election or appointment. 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 1995
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
will automatically be 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
will be 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
7
PAGE
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 will receive
an option to purchase 1,500 shares of the common stock of the
Corporation's 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 preceding and including the date of grant, or, if
the shares are not then traded, at the last price per share paid
by third parties in an arms-length transaction prior to the
option grant. As of March 1, 1997, an aggregate of
------------
shares of Common Stock had been reserved for issuance
--------
under the Directors Plan, options to purchase shares
------------
8
PAGE
of Common Stock were outstanding and shares
----------------------
of Common Stock were available for grant under the Directors
Plan.
Stock Ownership Policies for Directors
During 1996, the Human Resources Committee of the Board of
Directors (the "Committee") established a stock holding policy
for Directors. The stock holding policy requires each Director
to hold a minimum of 1,000 shares of Common Stock. Directors are
requested to achieve this ownership level by the 1998 Annual
Meeting of Stockholders. Directors who are also executive
officers of the Corporation are required to comply with a
separate stock holding policy established by the Committee in
1996, which is described in "Committee Report on Executive
Compensation - Stock Ownership Policies."
In addition, the Committee adopted a policy requiring
Directors to hold a certain number of 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, 1997, with respect to (i)
each person who was known by the Corporation to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) each
Director, (iii) each executive officer named in the summary
compensation table under the heading "Executive Compensation" and
(iv) all Directors and executive officers as a group.
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.
Name Thermo Fibertek Thermo Electron Thermo Fibergen
(2) (3) (4)
Thermo Electron 53,524,300 N/A N/A
Corporation (6)
Jan-Eric Bergstedt 67,980 20,691 20,250
Walter J. Bornhorst 168,825 9,415 0
George N. Hatsopoulos 191,910 3,523,079 20,000
John N. Hatsopoulos 119,155 526,768 20,000
Edwin D. Healy 205,806 56,624 10,000
Bruno Lamort de Gail 202,500 550 10,000
Donald E. Noble 114,250 54,701 30,000
William A. Rainville 517,894 252,294 41,500
Edward J. Sindoni 221,695 46,026 10,000
All Directors and
current executive
officers as a group
(12 persons) 2,108,566 4,669,639 149,750
(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
9
PAGE
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) The shares of Common Stock shown in the table reflect a
three-for-two split of such stock effected in September 1996
in the form of a 50% stock dividend. Shares 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
executive officers as a group include 64,500, 168,825,
157,910, 97,200, 202,500, 202,500, 95,850, 495,000, 202,500
and 2,030,885 shares, respectively, that such person or
group has the right to acquire within 60 days of March 1,
1997 through the exercise of stock options. Shares
beneficially owned by Mr. Noble and all Directors and
executive officers as a group include 5,715 shares that had
been allocated through March 1, 1997 to Mr. Noble's account
maintained under the Corporation's Deferred Compensation
Plan for Directors. No Director or executive officer
beneficially owned more than 1% of the Common Stock
outstanding as of March 1, 1997; all Directors and executive
officers as a group beneficially owned 3.3% of the Common
Stock outstanding as of such date.
(3) The shares of common stock of Thermo Electron shown in the
table reflect a three-for-two split of such stock
distributed in June 1996 in the form of a 50% stock
dividend. Shares of the common stock of Thermo Electron
beneficially owned by Mr. Bergstedt, Dr. G. Hatsopoulos, Mr.
J. Hatsopoulos, Mr. Healy, Mr. Noble, Mr. Rainville, Mr.
Sindoni and all Directors and executive officers as a group
include 19,650, 1,510,300, 429,685, 46,725, 9,375, 205,648,
28,350 and 2,374,261 shares, respectively, that such person
or members of the group has the right to acquire within 60
days of March 1, 1997 through the exercise of stock options.
Shares beneficially owned by Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos and all Directors and executive officers as a
group include 2,317, 1,934 and 5,575 full shares,
respectively, allocated through March 1, 1997 to accounts
maintained pursuant to Thermo Electron's employee stock
ownership plan, of which the trustees, who have investment
power over its assets, were as of March 1, 1997 executive
officers of Thermo Electron (the "ESOP"). Shares
beneficially owned by Mr. Noble and all Directors and
executive officers as a group each include 41,911 shares
allocated through March 1, 1997 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 Dr.
Hatsopoulos' spouse, 168,750 shares held by a QTIP trust
(the "Hatsopoulos QTIP Trust") of which Dr. G. Hatsopoulos'
spouse is the trustee, 39,937 shares held by a family trust
of which Dr. G. Hatsopoulos' spouse is the trustee, and 153
shares allocated to the account of Dr. G. Hatsopoulos'
10
PAGE
spouse maintained pursuant to the ESOP. Shares beneficially
owned by Dr. G. Hatsopoulos also include 10,800 shares that
his spouse has the right to acquire within 60 days of March
1, 1997, through the exercise of stock options. Except for
Dr. G. Hatsopoulos, who beneficially owned 2.3% of the
Thermo Electron common stock outstanding as of March 1,
1997, no Director or executive officer beneficially owned
more than 1% of such common stock outstanding as of such
date; all Directors and executive officers as a group
beneficially owned approximately 3% of the Thermo Electron
common stock outstanding as of March 1, 1997.
(4) Shares of the common stock of Thermo Fibergen beneficiary
owned by Mr. Bergstedt, Dr. G. Hatsopoulos, Mr. J.
Hatsopoulos, Mr. Healy, Mr. Lamort de Gail, Mr. Rainville,
Mr. Sindoni and all Directors and executive officers as a
group include 19,500, 20,000, 20,000, 10,000, 10,000,
40,000, 10,000 and 134,500 shares, respectively, that such
person or members of the group has the right to acquire
within 60 days of March 1, 1997, through the exercise of
stock options. No Director or executive officer
beneficially owned more than 1% of such common stock
outstanding as of March 1, 1997; all Directors and executive
officers as a group beneficially owned less than 1% of the
Thermo Fibergen common stock outstanding as of such date.
(5) In addition, Mr. Rainville owns 1,500 rights to redeem
shares of the common stock of Thermo Fibergen.
(6) Includes 1,888,122 shares Thermo Electron has the right to
acquire within 60 days of March 1, 1997 through the
conversion of a convertible note of the Corporation issued
to Thermo Electron on February 22, 1994. Thermo Electron
beneficially owned 84% of the Common Stock outstanding as of
March 1, 1997. Thermo Electron's address is 81 Wyman
Street, Waltham, Massachusetts 02254-9046.
Disclosure of Certain Late Filings
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's Directors and executive officers, and
beneficial owners of more than 10% of the Common Stock, such as
Thermo Electron, to file with the Securities and Exchange
Commission initial reports of ownership and periodic reports of
changes in ownership of the Corporation's securities. Based upon
a review of such filings, all Section 16(a) filing requirements
applicable to such persons were complied with during 1996, except
in the following instances. Thermo Electron filed two Form 4s
late, rerporting a total of five transactions, consisting of two
open market purchases, the conversion of a derivate security and
the expiration without exercise of two options to purchase Common
Stock granted to employees of THermo Electron under its option
program.
11
PAGE
EXECUTIVE COMPENSATION
NOTE: All share amounts reported below have, in all cases, been
adjusted as applicable to reflect a three-for-two stock splits
distributed in June 1996 with respect to the Common Stock and the
common stock of Thermo Electron, each in the form of a 50% stock
dividend.
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 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.
Summary Compensation Table
Long Term
Compensa
tion
Securities
Underlying
Options All Other
(No. of Compensa
Name and Fiscal Annual Compensation Shares -tion (2)
Principal Year Salary Bonus and
Position Company
(1)
William A. 1996 $102,500 $95,500 40,000 (TFG) $17,558(4)
Rainville (3)
President and 1995 $97,500 $110,000 ---- $15,870
Chief Executive
Officer 1994 $91,000 $86,500 ---- $16,269
Edwin D. Healy (5)1996 $184,000 $44,000 900 (TMO) $9,136
Vice President 10,000 (TFG)
1995 $176,000 $88,300 600 (TMO) $5,851
1994 $168,000 $75,500 45,225 (TMO) $9,240
Bruno Lamort de 1996 999,938 Fr. 290,000 Fr. 10,000 (TFG)
Gail (6)
Vice President
1995 925,060 Fr. 309,000 Fr. 252,564Fr.
1994 875,751 Fr. 257,000 Fr. ---- 196,859Fr.
Edward J. Sindoni 1996 $151,500 $68,700 2,250 (TMO) $15,997
(5) 10,000 (TFG)
Vice President
1995 $145,500 $79,500 1,500 (TMO) $15,122
1994 $140,000 $48,000 24,750 (TMO) $14,416
Jan-Eric O. 1996 $145,000 $76,500 15,000 (TFT) $5,344
Bergstedt (7) 7,650 (TMO)
Vice President 19,500 (TFG)
1995 $136,000 $75,600 22,500 (TFT) $6,750
(1) Options to purchase Common Stock of the Corporation awarded
to executive officers are followed by the designation "TFT."
In addition, executive officers of the Corporation have been
granted options to purchase common stock of Thermo Electron
from time to time (designated in the table as "TMO").
(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).
(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 allocated to and
paid by Thermo Electron in each of the last three fiscal
12
PAGE
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 from all sources, including the Corporation, for
Mr. Rainville's services as chief executive officer of the
Corporation. For 1996, 1995 and 1994, 50%, 50% and 50%,
respectively, of Mr. 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 $1,313 of compensation
attributable to an interest-free loan provided to Mr.
Rainville pursuant to the Corporation's Stock Holding
Assistance Plan. See "Relationship with Affiliates - Stock
Holding Assistance Plan."
(5) Mr. Healy and Mr. Sindoni were all appointed executive
officers of the Corporation on June 2, 1994. Reported in
the table under "Annual Compensation" and "All Other
Compensation" are the total amounts paid in 1994 to these
individuals 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 1996, 1995 and 1994, Mr. Lamort de Gail received
annual salary of $196,587, $184,364 and $157,285,
respectively, annual bonuses of $57,014, $61,584 and
$46,157, respectively, and aggregate contributions under
Lamort's retirement plans of $50,336 and $35,356,
respectively.
(7) 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. Mr. Bergstedt was not an
employee of the Corporation prior to 1995.
Stock Options Granted During Fiscal Year 1996
The following table sets forth information concerning
individual grants of stock options made during fiscal 1996 to the
13
PAGE
Corporation's chief executive officer and the other named
executive officers. It has not been the Corporation's policy in
the past to grant stock appreciation rights, and no such rights
were granted during fiscal 1996.
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.
14
PAGE
Stock Options Granted in Fiscal 1996
Poten-
tial
Realiz-
able
Value at
Assumed
Annual
Rates of
Stock
Percent of Price
Total Appreciation
Number of Options for Option
Securities Granted to Exercise Term
Underlying Employees Price Expira- (2)
Options in Per tion
Name Granted Fiscal Year Share Date 5% 10%
(1)
William A. 20,000 (TFG) 3.5% $10.00 08/14/08 $159,200 $427,600
Rainville
20,000 (TFG) 3.5% $10.00 08/14/08 $159,200 $427,600
Edwin D. 900 (TMO) 0.1% (4) $42.79 05/22/99 $6,066 $ 12,744
Healy
10,000 (TFG) 1.8% $10.00 09/11/08 $79,600 $213,800
Bruno Lamort 10,000 (TFG) 1.8% $10.00 09/11/08 $79,600 $213,800
De Gail
Edward J. 2,250 (TMO) 0.1% (4) $42.79 05/22/99 $15,165 $31,860
Sindoni
10,000 (TFG) 1.8% $10.00 09/11/08 $79,600 $213,800
Jan-Eric 15,000 (TFT) 17.6% $10.75 12/10/03 $65,700 $153,000
Bergstedt
150 (TMO) 0.1% (4) $42.79 05/22/99 $1,011 $2,124
7,500 (TM0) 0.5% $37.98 03/11/08 $226,725 $609,150
7,500 (TFG) 1.3% $13.50 12/10/03 $41,250 $96,075
12,000 (TFG) 2.1% $10.00 09/11/08 $95,520 $256,560
(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 granting corporation may exercise its
repurchase rights within six months after the termination of
the optionee's employment. For publicly traded companies,
the repurchase rights generally lapse ratably over a
five-to-ten year period, depending on the option term, which
may vary from seven to twelve years, provided that the
optionee continues to be employed by the Corporation or
another Thermo Electron company. Certain options granted as
part of Thermo Electron's stock option program have
three-year terms, and the repurchase rights lapse in their
entirety on the second anniversary of the grant date. The
granting corporation may permit the 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 granted to Mr. Rainville are subject to the
same terms described in footnote (1), 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.
(4) These options were granted under stock option plans
maintained by Thermo Electron companies and accordingly are
reported as a percentage of total options granted to
employees of Thermo Electron and its subsidiaries.
15
PAGE
STOCK OPTIONS EXERCISED DURING FISCAL 1996
The following table reports certain information regarding
stock option exercises during fiscal 1996 and outstanding stock
options held at the end of fiscal 1996 by the Corporation's chief
executive officer and the other named executive officers. No
stock appreciation rights were exercised or were outstanding
during fiscal 1996.
Aggregated Option Exercises In Fiscal 1995 And Fiscal 1995
Year-End Option Values
Number of
Unexercised
Options at
Shares Fiscal Value of
Acquired Year-End Unexercised
on Value (Exercisable/ In-the-Money
Name Company Exercise Realized Unexercisable) Options
(1)
William A. Thermo Fibertek -- -- 495,000 /0 $2,686,500/--
Rainville (2)
Thermo Fibergen -- -- 40,000 /0 $30,000/--
Edwin D. Healy Thermo Fibertek -- -- 202,500 /0 (4) $931,500/--
Thermo Electron 9,774 $280,269 46,725 /0 (4) $808,709/--
10,000 /0 (5) $7,500/--
Bruno Lamort Thermo Fibertek -- -- 202,500 /0 (4) $1,073,250/--
de Gail
Thermo Fibergen 10,000 /0 7,500
Edward J. Thermo Fibertek -- -- 202,500 /0 (4) $1,073,250/--
Sindoni
Thermo Electron 5,624 $142,395 28,350 /0 (4) $454,088/--
Thermo Ecotek 1,500 $18,750 -- /-- --/--
Thermo Fibergen -- -- 10,000 /0 (5) $7,500/--
ThermoTrex 900 $37,958 -- /-- --/--
Jan-Eric Thermo Fibertek -- -- 64,500 /0 $76,950
Bergstedt /--
Thermo Electron -- -- 19,650 /0 $143,220/--
Thermo Fibergen -- -- 19,500 $9,000/--
(1) The shares of the common stock shown in the table have been
adjusted to reflect a three for-two stock split with respect
to the common stock of Thermo Ecotek distributed in October
1996 in the form of a 50% stock dividend. 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 granted as a part of Thermo Electron's stock option
program have three-year terms, and the repurchase rights
lapse in their entirety on the second anniversary of the
grant date.
(2) Mr. Rainville has served as an officer of Thermo Electron in
various capacities since 1986 and holds unexercised options
to purchase common stock of Thermo Electron and certain of
its subsidiaries other than the Corporation. These options
are not reported here as they were granted as compensation
for service to other Thermo Electron companies in capacities
other than in his capacity as the chief executive officer of
the Corporation.
(3) Options to purchase 20,000 shares of the common shares of
the common stock of Thermo Fibergen granted to Mr. Rainville
are subject to the same terms described in footnote (1),
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.
16
PAGE
(4) Options to purchase 180,000, 67,500, 45,000 and 45,000
shares of the Corporation's Common Stock held by Mr.
Rainville, Mr. Healy, Mr. Lamort de Gail and Mr. Sindoni,
respectively, are subject to the same terms described in
footnote (1), 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 45,000 and 22,500 shares, respectively,
of the common stock of Thermo Electron granted to Mr. Healy,
and Mr. Sindoni are subject to the same terms as described
in footnote (1), except that the repurchase rights of the
granting corporation generally do not lapse until the tenth
anniversary of the grant date. In the event of the
employee's death or involuntary termination prior to the
tenth anniversary of the grant date, the repurchase rights
of the granting corporation shall be deemed to have lapsed
ratably over a five-year period commencing with the fifth
anniversary of the grant date.
Defined Benefit Retirement Plan
The Corporation's Auburn, Massachusetts 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 $150,000
per year.
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
Each eligible employee receives a monthly retirement
benefit, beginning at normal retirement age (65), based on a
percentage (1.75%) of the average monthly compensation of such
employee before retirement, multiplied by his years of service
(up to a maximum of 30 years). Full credit is given for the
first 25 years of service, and half credit is given for years
over 25 and less than 30. Benefits are reduced for retirement
before normal retirement age. Average monthly compensation is
generally defined as average monthly base salary over the five
years of highest compensation in the ten-year period preceding
17
PAGE
retirement. For 1996, the compensation recognized for plan
purposes for Mr. Rainville and Mr. Sindoni was [$150,000 and
$145,500] respectively. The estimated credited years of service
recognized under the Retirement Plan for Mr. Rainville and Mr.
Sindoni is 30 and 22, 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, determines 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
18
PAGE
been payable under these agreements as of December 28, 1996, Mr.
Rainville would have received approximately $415,000.
In connection with the acquisition of E. & M. Lamort, S.A.,
the Corporation entered into a noncompetition agreement with Mr.
Lamort de Gail. Pursuant to this agreement, if Mr. Lamort de
Gail's employment is terminated prior to his normal retirement
age of 65, in consideration of Mr. Lamort de Gail's agreement not
to compete with the Corporation for three years after such
termination, the Corporation has agreed to pay Mr. Lamort de Gail
an aggregate of 3,500,000 French Francs ($ at the
---------------
applicable exchange rate on March 1, 1997), 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 corporation, 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.
The Committee believes that the 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.
External competitiveness is an important element of the
Committee's compensation policy. The competitiveness of the
Corporation's compensation for its U.S.-based executives is
assessed by comparing it to market data provided by its
compensation consultant 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
19
PAGE
Dow Jones Total Return Index for the Paper Products Industry
Group.
Principles of internal equity are also central to the
Committee's compensation policies. Compensation considered for
the Corporation's officers, whether cash or stock-based
incentives, is also evaluated by comparing it to 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.
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 approach the mid-point of
competitive data. The salary increases in 1996 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 corporation, Thermo Electron,
and applied throughout the Thermo Electron organization. The
methodology incorporates measures of operating returns, 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
20
PAGE
measures of operating returns used in the Committee's
determinations in fiscal 1996 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.
The bonuses for named executive officers approved by the
Committee with respect to fiscal 1996 performance in each
instance exceeded the median potential bonus.
Stock Option Program
The primary goal of the Corporation 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 the average
annual value of all options to purchase shares of the Corporation
and other companies within the Thermo Electron organization that
vest in the next five years. (Values are established using a
modified Black-Scholes option pricing model.) As a guideline,
the Committee strives to maintain the aggregate amount of net
awards to all employees over a five-year period below 12% of the
Corporation's outstanding common stock, although other factors
such as unusual transactions and acquisitions and standards for
awards of comparably situated companies may affect the number of
awards granted.
21
PAGE
Awards are not made annually in conjunction with the annual
review of cash compensation, but are made periodically. The
Committee considers total compensation of executives, 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, in
determining option awards. The option awards made in 1996 to the
named executive officers with respect to the common stock of the
Corporation, the Corporation's parent, Thermo Electron, and the
Corporation's majority-owned subsidiary, Thermo Fibergen, were
determined by the human resources committee of the board of
directors of the applicable company using a similar analysis.
Stock Ownership Policies
During 1996, the Committee established a stock holding
policy for executive officers of the Corporation. The stock
holding policy specifies an appropriate level of ownership of the
Corporation's Common Stock as a multiple of the officer's
compensation. For the chief executive officer, the multiple is
one times his base salary and reference bonus for the calendar
year. For all other officers, the multiple is 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.
In order to assist officers in complying with the policy,
the Committee also adopted a stock holding assistance plan under
which the Corporation is 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 ratably
to the Corporation over a five-year period. During 1996, Mr.
Rainville, the Corporation's chief executive officer, received a
loan in the principal amount of $ under
---------------------
this plan. See "Relationship with Affiliates - Stock Holding
Assistance Plan."
The Committee also adopted a policy requiring its executive
officers to hold a certain number of 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 for 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
22
PAGE
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).
1996 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 1996 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 1996, the Committee conducted its review of Mr.
Rainville's proposed salary for 1997 and bonus for 1996
performance. In 1996, Mr. Rainville was awarded options to
purchase 40,000 shares of the Common stock of the Corporation's
majority-owned subsidiary, Thermo Fibergen. These options were
awarded in connection with Mr. Rainville's position as a Director
and Chairman of the Board of Thermo Fibergen, and were determined
in a manner consistent with awards to other officers, as
described above. 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 1996 to the
Corporation, based on his relative responsibilities at the
Corporation and Thermo Electron.
Mr. Donald E. Noble (Chairman)
Dr. Walter J. Bornhorst
23
PAGE
COMPARATIVE PERFORMANCE GRAPH
(Graph Appears Here)
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's Common Stock has been publicly traded only since
November 2, 1992 and, as a result, the following graph commences
as of such date. 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").
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 November 2, 1992 to December 27, 1996
[GRAPH TO BE ADDED]
11/02/92 12/31/92 12/31/93 12/30/94 12/29/95 12/27/96
TFT 100 119 198 198 424 261
AMEX 100 104 125 113 143 152
DJ 100 101 109 122 139 149
Paper
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
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Electron subsidiaries are hereinafter referred to as the "Thermo
Subsidiaries.")
Thermo Electron and each of the Thermo Subsidiaries
recognize that the benefits and support that derive from their
affiliation are essential elements of their individual
performance. Accordingly, Thermo Electron and each of the Thermo
Subsidiaries have adopted the Thermo Electron Corporate Charter
(the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the
Charter is to ensure that (1) all of the companies and their
stockholders are treated consistently and fairly, (2) the scope
and nature of the cooperation among the companies, and each
company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial,
managerial and technological strengths of the others, and (4)
Thermo Electron and the Thermo Subsidiaries, in the aggregate,
are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general
principles to be followed by the companies, addresses the role
and responsibilities of the management of each company, provides
for the sharing of group resources by the companies and provides
for centralized administrative, banking and credit services to be
performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by
members, coordinating the access of Thermo Electron and the
Thermo Subsidiaries (the "Thermo Group") to external financing
sources, ensuring compliance with external financial covenants
and internal financial policies, assisting in the formulation of
long-range financial planning and providing other banking and
credit services. Pursuant to the Charter, Thermo Electron may
also provide guarantees of debt or other obligations of the
Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In
certain instances, the Thermo Subsidiaries may provide credit
support to, or on behalf of, the consolidated entity or may
obtain financing directly from external financing sources. Under
the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed
by external financing sources, including covenants related to
borrowings of Thermo Electron or other members of the Thermo
Group, and for apportioning such constraints within the Thermo
Group. In addition, Thermo Electron establishes certain internal
policies and procedures applicable to members of the Thermo
Group. The cost of the services provided by Thermo Electron to
the Thermo Subsidiaries is covered under existing corporate
services agreements between Thermo Electron and each of the
Thermo Subsidiaries.
The Charter presently provides that it shall continue in
effect so long as Thermo Electron and at least one Thermo
Subsidiary participate. The Charter may be amended at any time by
agreement of the participants. Any Thermo Subsidiary, including
the Corporation, can withdraw from participation in the Charter
25
PAGE
upon 30 days' prior notice. In addition, Thermo Electron may
terminate a subsidiary's participation in the Charter in the
event the subsidiary ceases to be controlled by Thermo Electron
or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the
Charter automatically terminates the corporate services agreement
and tax allocation agreement (if any) in effect between the
withdrawing company and Thermo Electron. The withdrawal from
participation does not terminate outstanding commitments to third
parties made by the withdrawing company, or by Thermo Electron or
other members of the Thermo Group, prior to the withdrawal.
However, a withdrawing company is required to continue to comply
with all policies and procedures applicable to the Thermo Group
and to provide certain administrative functions mandated by
Thermo Electron so long as the withdrawing company is controlled
by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo
Electron have entered into a Corporate Services Agreement (the
"Services Agreement") under which Thermo Electron's corporate
staff provides certain administrative services, including certain
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. Beginning January 1, 1996, the Corporation was
assessed an annual fee equal to 1.0% of the Corporation's
revenues for these services. The fee is reviewed annually and may
be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1996, Thermo Electron assessed the
Corporation $1,922,000 in fees under the Services Agreement.
Management believes that the charges under the Services Agreement
are reasonable and that the terms of the Services Agreement are
fair to the Corporation. For items such as employee benefit
plans, insurance coverage and other identifiable costs, Thermo
Electron charges the Corporation based on charges attributable to
the Corporation. The Services Agreement automatically renews for
successive one-year terms, unless canceled by the Corporation
upon 30 days' prior notice. In addition, the Services Agreement
terminates automatically in the event the Corporation ceases to
be a member of the Thermo Group or ceases to be a participant in
the Charter. In the event of a termination of the Services
Agreement, the Corporation will be required to pay a termination
fee equal to the fee that was paid by the Corporation for
services under the Services Agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may
provide certain administrative services on an as-requested basis
by the Corporation or as required in order to meet the
Corporation's obligations under Thermo Electron's policies and
procedures. Thermo Electron will charge the Corporation a fee
equal to the market rate for comparable services if such services
are provided to the Corporation following termination.
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
26
PAGE
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 1996, the Corporation paid Thermo Electron $
--------
under the tax allocation agreement.
----------
As of December 28, 1996, $75,566,000 of the Corporation's
cash equivalents were invested in a repurchase agreement with
Thermo Electron. Under this agreement, the Corporation in effect
lends excess cash to Thermo Electron, which Thermo Electron
collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market
funds, commercial paper and other marketable securities, in the
amount of at least 103% of such obligation. The Corporation's
funds subject to the repurchase agreement are readily convertible
into cash by the Corporation and have a maturity of three months
or less. The repurchase agreement earns a rate based on the
Commercial Paper Composite Rate plus 25 basis points, set at the
beginning of each quarter.
In December 1994, Thermo Electron subcontracted with the
Corporation's Fiberprep subsidiary to supply approximately
$16,000,000 in equipment and services over a two-year period 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 $1,876,000 under this
subcontract in 1996.
Thermo Electron owned approximately 84% of the Corporation's
outstanding Common Stock on December 28, 1996. Thermo Electron
intends for the foreseeable future to maintain at least 80%
ownership of the Corporation. This may require the purchase by
Thermo Electron of additional shares of the Corporation's Common
Stock from time to time as the number of outstanding shares
issued by the Corporation increases. These purchases may be made
in the open market, directly from the Corporation or pursuant to
conversion of the Corporation's 3.5% Subordinated Convertible
Note due August 1, 1997 held by Thermo Electron.
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
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PAGE
received a loan in the principal amount of $ under this
-------
plan to purchase shares. The loan to Mr.
---------------
Rainville is payable on demand and requires that 20% of the
principal amount of the loan be repaid from the bonus payable to
Mr. Rainville in each of the next five years, commencing with the
bonus payment in 1997 for calendar 1996 performance, until the
loan is repaid in full.
- PROPOSAL 2 -
PROPOSAL TO AMEND THE CORPORATION'S CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors has determined that it is advisable
to increase the Corporation's authorized Common Stock from 75
million shares to 150 million shares, and has voted to recommend
that the Stockholders adopt an amendment to the Corporation's
Certificate of Incorporation effecting the proposed increase.
As of March 1, 1997, approximately [ ] million shares of
Common Stock were issued and outstanding (excluding treasury
shares), after giving effect to the three-for-two stock split of
the Common Stock distributed in June 1996, and approximately an
additional [ ] million shares were reserved for issuance upon
the conversion of existing securities and exercise of options
granted under the Corporation's various stock-based plans.
Accordingly, a total of approximately [ ] million shares of
Common Stock are available for future issuance.
The Board of Directors believes it continues to be in the
best interest of the Corporation to have sufficient additional
authorized but unissued shares of Common Stock available in order
to provide flexibility for corporate action in the future.
Management believes that the availability of additional
authorized shares for issuance from time to time in the Board of
Directors' discretion in connection with possible acquisitions of
other companies, future financing, investment opportunities,
stock splits or dividends or for other corporate purposes is
desirable in order to avoid repeated separate amendments to the
Corporation's Certificate of Incorporation and the delay and
expense incurred in holding special meetings of the Stockholders
to approve such amendments. There are at present no specific
understandings, arrangements or agreements with respect to any
future acquisitions that would require the Corporation to issue
any new shares of its Common Stock. The Board of Directors
believes that the currently available unissued shares do not
provide sufficient flexibility for corporate action in the
future.
No further authorization by vote of the Stockholders will be
solicited for the issuance of the additional shares of Common
Stock proposed to be authorized, except as might be required by
law, regulatory authorities or rules of the American Stock
28
PAGE
Exchange or any stock exchange on which the Corporation's shares
may then be listed. The issuance of additional shares of Common
Stock may have a dilutive effect on the Corporation' s current
Stockholders. The Stockholders of the Corporation do not have
any preemptive right to purchase or subscribe for any part of any
new or additional issuance of the Corporation's securities.
Thermo Electron, which owned approximately [ ]% of the
outstanding voting stock of the Corporation on April 7, 1997, has
sufficient votes to approve the amendment and has indicated its
intention to vote for the approval of the amendment.
The affirmative vote of a majority of the Common Stock
outstanding and entitled to vote at the Meeting is required to
approve the amendment to the Corporation's Certificate of
Incorporation to effect the proposed increase in the
Corporation's authorized shares. The Board of Directors
considers this amendment to be advisable and in the best
interests of the Corporation and its Stockholders and recommends
that you vote FOR approval of the amendment. If not otherwise
specified, Proxies will be vote FOR approval of this amendment.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as
independent public accountants for fiscal 1997. 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
1998 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 [ ], 1997.
29
PAGE
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, by telephone 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 [ ], 1997
