UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date
of earliest event reported):
February 27, 2006
----------------------------------------
THERMO ELECTRON CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-8002 04-2209186
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification
incorporation or organization) Number)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
(781) 622-1000
(Registrant's telephone number
including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On February 27, 2006, the Compensation Committee of the Board of Directors
(the "Compensation Committee") of Thermo Electron Corporation (the "Company")
took the following actions relating to executive compensation, and on February
28, 2006, the Board of Directors (the "Board") of the Company took the following
actions relating to director compensation:
2005 Executive Compensation Matters
Annual Cash Incentive Plans - Approval of Payout of Cash Bonuses for 2005.
The Compensation Committee approved the payout of cash bonuses for 2005 to the
Company's executive officers under the Company's 2003 Annual Incentive Award
Plan (the "162(m) Plan"), which was approved by the stockholders of the Company
at its 2003 Annual Meeting of Stockholders. The Compensation Committee exercised
its discretion to lower the amount of the cash bonuses payable under the 162(m)
Plan based on its determinations as to the level of achievement of the
applicable supplemental performance metrics for 2005 under the Company's annual
cash incentive program, which operates in connection with the 162(m) Plan. The
amount of cash bonuses approved by the Compensation Committee to be paid to the
Company's "named executive officers" (as defined by Item 402(a)(3) of Regulation
S-K) are set forth in the table below.
2006 Executive Compensation Matters
Annual Cash Incentive Plans - Establishment of Criteria for 2006 Bonus. The
Compensation Committee established the performance goal under the 162(m) Plan
for 2006 as earnings before interest, taxes and amortization, excluding the
impact of charges for restructuring, discontinued operations, extraordinary
items, other unusual or non-recurring items and cumulative effects of accounting
changes ("Adjusted Operating Income"); and determined the percentage of Adjusted
Operating Income that each of the Company's executive officers is entitled to
receive as a cash bonus for 2006 under the 162(m) Plan, subject to the
Compensation Committee's right to lower, but not raise, the actual cash bonus to
be paid to such executive officer for the year. The Compensation Committee's
determination as to whether to lower the actual cash bonus to be paid to
executive officers is generally based on the results of its determinations under
the Company's annual cash incentive program for that year (which is described in
the next paragraph).
The Compensation Committee also established a target cash bonus amount for
each of the Company's executive officers as well as supplemental performance
metrics for such officers and the Company as a whole under the Company's annual
cash incentive program for 2006. The target amount for each of the Company's
executive officers, which is a percentage of base salary (ranging from 45% to
100%), was determined by the Compensation Committee based on the salary level
and position of such officer within the Company. The supplemental performance
metrics are based on (a) (70%) financial measures for the Company, comprised of
growth in (i) revenue (adjusted for the impact of acquisitions and divestitures
and for foreign currency changes) (35%) and (ii) earnings
(adjusted for restructuring charges and certain other items of income or
expense) before interest, taxes and amortization as a percentage of revenue
(35%) and (b) (30%) qualitative measures of the Company's executive officers'
contributions to the achievement of certain business objectives of the Company.
For each of the financial measures, the Company's actual performance will be
measured relative to the Company's internal operating plan for 2006. For both
the financial and the qualitative measures, a range of performance for each such
measure corresponds with a multiplier of 0 to 2. After giving effect to the
weighting of the supplemental performance metrics, a composite final multiplier
will be applied to the target cash bonus amounts for all of the Company's
officers, including its executive officers. The sum of these amounts will be
added together to form a bonus pool for all of the Company's officers, including
its executive officers, and will allocated by the Compensation Committee among
such officers.
Base Salary - Approval of Increases for 2006. Effective April 1, 2006, the
Compensation Committee increased the annual base salary of the Company's
executive officers. The annual base salary approved by the Compensation
Committee for the Company's named executive officers is set forth in the table
below.
Stock Options and Restricted Stock - Approval of Grants for 2006. The
Compensation Committee granted stock options to the Company's executive officers
under the Company's equity incentive plans. The stock option grants for the
executive officers, other than the chief executive officer, are evidenced by the
Company's standard form of Stock Option Agreement to its officers, a copy of
which is on file with the Securities and Exchange Commission. The stock option
grant to the chief executive officer, Marijn E. Dekkers, is evidenced by the
Company's standard form of Stock Option Agreement for Mr. Dekkers, a copy of
which is on file with the Securities and Exchange Commission. The options all
(a) vest in equal annual installments over the three-year period commencing on
the date of grant (i.e., the first 1/3 of a stock option grant would vest on the
first anniversary of the date of grant) so long as the executive officer is
employed by the Company on each such date, (b) have an exercise price equal to
the average of the opening and closing prices of the Company's common stock on
the New York Stock Exchange on the date of grant, and (c) have a term of 7 years
from such date. In addition, the Compensation Committee awarded 20,000 shares of
restricted common stock of the Company to Guy Broadbent, president, laboratory
equipment, that vest in annual equal installments over the three-year period
commencing on February 27, 2006 assuming continuous employment with the Company
on each such date. The stock option grants approved by the Compensation
Committee for the Company's named executive officers are set forth in the table
below.
CEO Employment Agreement -Amendment. The Compensation Committee approved,
and the Company and Mr. Dekkers entered into, a letter agreement dated as of
February 27, 2006 that provided that (a) all references in Mr. Dekkers' Amended
& Restated Employment Agreement to the "Reference Bonus Amount" shall mean 100%
of his then current salary and (b) the stock option to purchase 450,000 shares
of the Company's common stock, exercisable for a period of 7 years from the date
of grant, being granted to Mr. Dekkers on February 27, 2006, shall be in lieu of
the stock option to purchase 260,000 shares of the Company's common stock,
exercisable for a period of 10 years from the date of grant, to which he is
entitled pursuant to Section 6(c) of his Amended & Restated Employment
Agreement.
------------------------------------------------------------------------------------------------------------------
2006 Salary 2006 Securities
(Effective April 1, Underlying Option
Name 2005 Cash Bonus 2006) Grant
------------------------------------------------------------------------------------------------------------------
Marijn E. Dekkers $1,339,500 $1,050,000 450,000
President and Chief Executive Officer
------------------------------------------------------------------------------------------------------------------
Guy Broadbent $ 420,000 $ 480,000 125,000
Vice President; President
Laboratory Equipment
------------------------------------------------------------------------------------------------------------------
Marc N. Casper $ 634,500 $ 620,000 190,000
Senior Vice President
------------------------------------------------------------------------------------------------------------------
Seth H. Hoogasian $ 307,098 $ 400,000 90,000
Vice President, General Counsel and
Secretary
------------------------------------------------------------------------------------------------------------------
Peter M. Wilver $ 307,796 $ 400,000 130,000
Vice President, Chief Financial Officer
------------------------------------------------------------------------------------------------------------------
2006 Director Compensation Matters
The Board approved the following compensation arrangement for
non-management directors:
I. Board Members (Other than the Chairman)
A. Annual Cash Compensation (effective April 1, 2006)
Annual Cash Retainer: $70,000
Additional Cash Retainer for Presiding Director: $ 3,000
Additional Cash Retainer for Chairman of Audit Committee: $20,000
Additional Cash Retainer for Chairs of Compensation
Committee; Nominating and Corporate Governance Committee;
and Strategy Committee: $ 5,000
B. Meeting Fees
If a Board Committee meets more than six times during a calendar year, then
the members thereof shall receive the following fees for attending meetings
that exceed six in number:
--------------------------------------------------------------------------------
Committee Meeting Fees: $1,500 per meeting attended in person,
on a day other than a day on which the
Board meets
--------------------------------------------------------------------------------
$1,000 per meeting attended in person,
on the same day as a Board meeting
--------------------------------------------------------------------------------
Telephone Committee
Meeting Fees: $750 per meeting attended by conference
telephone
--------------------------------------------------------------------------------
Directors are also reimbursed for reasonable out-of-pocket expenses
incurred in attending meetings.
C. Stock Options
Upon appointment as a director, the director is granted an option to
purchase 15,000 shares, vesting 1/3 on each of the first three
anniversaries of the grant date, expiring seven years from the grant date.
Annual grant of options for 10,500 shares, vesting 1/3 on each of the first
three anniversaries of the grant date, expiring seven years from the grant
date.
II. Chairman of the Board
A. Annual Cash Compensation
Annual Cash Compensation (in lieu of annual retainer and meeting fees):
$250,000
B. Stock Options/Restricted Stock
In connection with Mr. Manzi's appointment as Chairman of the Board (in
December 2003) he was granted (a) options to purchase 240,000 shares of the
common stock, vesting 1/3 on each of the first three anniversaries of the
grant date, assuming continued service as Chairman of the Board, expiring
seven years from the grant date and (b) 15,000 shares of restricted common
stock, vesting 1/3 on each of the first three anniversaries of the grant
date, assuming continued service as Chairman of the Board. In February
2005, Mr. Manzi was granted 2,500 shares of common stock, and in February
2006 he was granted 2,500 shares of common stock.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, on this 1st day of March, 2006.
THERMO ELECTRON CORPORATION
By: /s/ Seth H. Hoogasian
-----------------------------------
Seth H. Hoogasian
Vice President, General Counsel and
Secretary