<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
ONIX SYSTEMS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3823 76-0546330
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
22001 NORTH PARK DRIVE
KINGWOOD, TX 77339
(281) 348-1111
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SANDRA L. LAMBERT, SECRETARY
ONIX SYSTEMS INC.
C/O THERMO ELECTRON CORPORATION
81 WYMAN STREET
P. O. BOX 9046
WALTHAM, MA 02254-9046
(781) 622-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C>
SETH H. HOOGASIAN, ESQ. EDWIN L. MILLER, JR., ESQ.
GENERAL COUNSEL TESTA, HURWITZ & THIBEAULT, LLP
ONIX SYSTEMS INC. 125 HIGH STREET
C/O THERMO ELECTRON CORPORATION BOSTON, MASSACHUSETTS 02110
81 WYMAN STREET (617) 248-7000
WALTHAM, MASSACHUSETTS 02254-9046
(781) 622-1000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement has become effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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==================================================================================================
PROPOSED MAXIMUM
AMOUNT PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
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Common Stock, $.01 par value.... $ $55,027,500 $16,234
==================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, JANUARY 30, 1998
PROSPECTUS
, 1998
SHARES
ONIX SYSTEMS INC.
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by ONIX
Systems Inc. ("ONIX" or the "Company"), a majority-owned subsidiary of Thermo
Instrument Systems Inc. ("Thermo Instrument"), which is a majority-owned
subsidiary of Thermo Electron Corporation ("Thermo Electron"). Following the
offering, Thermo Instrument will own approximately % of the outstanding shares
of Common Stock of the Company (assuming no exercise of the Underwriters'
over-allotment option).
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting" for
information relating to the factors to be considered in determining the initial
public offering price. Application has been made to list the Common Stock on the
American Stock Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Per Share................ $ $ $
Total(3)................. $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares of Common Stock solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as and if accepted by the Underwriters, and subject
to various prior conditions, including their right to reject any order in whole
or in part. It is expected that delivery of the shares will be made in New York,
New York on or about , 1998.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
GRUNTAL & CO., L.L.C.
<PAGE> 3
Photo -- 1
Photograph depicting the Company's well-head control unit which is a large
steel box-like structure resting on a metal-grated floor suspended in the
upper-level of a manufacturing plant. On the front-left side of the box-like
structure are two cylindrical tanks attached to the box resting on a metal frame
supporting the tanks. On the right side of the box-like structure are numerous
circular gauges with removable gauge panels and various lighted gauges along the
top. In the background are various pipes, lighting and support structures in the
manufacturing plant.
Caption -- 1
The Company's multi-well control system, installed at a customer's offshore
platform, provides highly-reliable process monitoring, valve control and safety
shutdown for oil and gas production wells.
Photo -- 2
Photograph of table-like structure on wheels with a motor resting just
above the wheels, two rectangular box-like structures suspended in the middle
with small screens and switches on the front of those boxes and a computer
console and keyboard resting on the top of the table. Running down the left side
of the table are various wires and connective apparatus connecting the various
components on the table.
Caption -- 2
The Company's ultratrace system is an ultrasensitive portable mass
spectrometer that is used to measure gas impurities in semiconductor fabrication
processes.
Photo -- 3
Photograph of six box-like structures randomly displayed which are data
recorder instruments with graphic or paper display panels on the front along
with various buttons which control measuring and display parameters.
Caption -- 3
The Company manufactures a wide array of data acquisition and display
systems, including paper and paperless strip chart recorders, that measure,
display and record critical variables within an industrial or manufacturing
process.
Photo -- 4
Photograph depicts various sensors randomly displayed from left to right.
On the left side is a silver-colored cylinder resting on a square video console
to its right. Beneath the cylinder to the left is a square box with a round
gauge in the front. To the right of the video console is a cylinder with a small
window in the center. Behind, to the right is a rectangular box with small
display screen on the top with various buttons on front and an electrical cord
running out of the right side. To the right are two cylinder shaped sensors
resting on cone-like bases.
Caption -- 4
The Company's level sensors employ non-contacting gamma, radar and
ultrasonic measurement techniques to continuously and accurately measure the
level of liquid and solid materials within process vessels.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Except as otherwise indicated, all information in this
Prospectus (i) assumes that the Underwriters' over-allotment option will not be
exercised and (ii) reflects a two-for-three reverse stock split of the Common
Stock declared and effected in January 1998. Investors should carefully consider
the information set forth under the heading "Risk Factors."
THE COMPANY
ONIX Systems Inc. ("ONIX" or the "Company") designs, develops, markets and
services sophisticated field measurement instruments and on-line sensors. The
Company utilizes its proprietary knowledge and significant experience regarding
application-specific technologies to develop products that address the needs of
process industry participants within targeted markets. The Company's products
gather information regarding the flow, level, density or composition of a
particular material and, using advanced communications techniques, communicate
this information to a customer's centralized control location.
The Company manufactures field measurement instruments and on-line sensors
in four general product areas: flow instruments, level and density instruments,
composition analysis instruments and industry-specific instruments. The
Company's flow measurement instruments measure and locally control the flow of
liquids and gases. The Company's level and density measurement instruments
incorporate sophisticated measurement technologies that measure and locally
control the level and density of liquid and solid materials and the density of
gaseous materials. The Company's composition analysis instruments include field
and on-line analysis instruments that are used to analyze the chemical
composition of solids, liquids and gases. The Company also offers
technologically advanced microprocessor-based sensors and recording instruments
that are utilized in specific industries for customized applications. The
Company incorporates a range of advanced measurement technologies into its
instruments, including gamma ray, radar, infrared, ultraviolet, ultrasonic and
vibrational measurement techniques. Additionally, the Company's international
presence and experience enable it to provide rapid, expert preventive
maintenance and aftermarket support services to its customers.
The Company's products are sold primarily to participants in process
industries, including oil and gas producers, processors and distributors and
chemical companies, as well as water/wastewater, iron, steel, electric utility,
minerals and mining and pulp and paper companies. The Company's customers use
its products for increased efficiency, process and quality control, regulatory
compliance and increased employee safety. In 1997, customers in the oil and gas
industries accounted for approximately 61% of the Company's total revenues, with
such revenues approximately evenly divided between the production segment and
the refining and petrochemical segments of the industry. The Company has a broad
customer base, selling products to more than 2,000 customers worldwide,
including affiliates or operations of The Dow Chemical Company, Shell Oil
Company, E.I. duPont De Nemours & Co., BASF AG, Petroleos Mexicanos ("Pemex")
and Duke Energy Corporation. In 1997, approximately 33% of the Company's sales
were to customers outside of North America.
Industry sources estimate that worldwide revenues for the field measurement
instruments and sensors segment of the process control market were approximately
$10.4 billion in 1995 and will grow to approximately $20.0 billion by the year
2000, which represents a compound annual growth rate of 14%. Factors
contributing to this growth include competitive pressures to increase
efficiencies and reduce costs; technological advances, which have increased the
availability of higher quality microprocessor-based sensors; the increased use
of sensor-intensive, model-based controls of process functions; deregulation and
privatization; developments in communications protocols and computer systems;
and concerns over regulatory compliance and employee safety. The Company's
current products address approximately $3.3 billion of the field measurement
instruments and sensors segment of the process control market.
The Company's strategy is to be a leading provider of field measurement
instruments and on-line sensors used in targeted industries within the process
control market where the Company's expertise and technologies are best suited.
The Company seeks to implement this strategy by broadening its technologies and
product
3
<PAGE> 5
offerings, including expanding the scope of its addressed markets, through
internal development, acquisitions and strategic partnerships and by continuing
to focus on customers in targeted markets. In addition, the Company intends to
expand the geographic scope of its addressed markets to areas with significant
growth opportunities, including Latin America, Eastern Europe and the Pacific
Rim, and to expand its service and support organization to establish a
comprehensive international presence.
The Company has grown since its inception in March 1994, primarily as a
result of acquisitions, as well as through internal growth. The Company's
revenues have increased from $62.1 million in 1994 to $121.5 million in 1997,
which reflects a compound annual growth rate of 25%. The Company's net income
has increased from $1.3 million in 1994 to $8.8 million in 1997, which reflects
a compound annual growth rate of 89%. During the same period, operating income
as a percentage of sales increased from 3.2% to 11.9%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company's predecessor business was formed as a separate business unit
of Thermo Instrument in 1994 with the acquisition of the EnviroTech Measurement
and Controls division of Baker Hughes Incorporated ("Baker Hughes"), comprised
of Westronics Inc. ("Westronics"), CAC Inc. and CAC UK Limited (collectively,
"CAC"), Houston Atlas Inc. ("Houston Atlas") and TN Technologies Inc. ("TN
Technologies"). In 1995, Thermo Instrument, through CAC, acquired the business
of Flow Automation Inc. and Flow Automation (UK) Limited (collectively, "Flow
Automation") from Galveston-Houston Company. In 1996, Thermo Instrument, through
TN Technologies, acquired Kay-Ray/Sensall, Inc. ("Kay-Ray/Sensall") from
Rosemount Inc., and through CAC, acquired the business of VG Gas Analysis
Systems Inc. and VG Gas Analysis Limited (collectively, "VG Gas") from
Rhone-Poulenc Rorer, Inc. in connection with Thermo Instrument's acquisition of
a substantial portion of the businesses constituting the Scientific Instruments
division of Fisons plc. In 1997, Thermo Instrument, through Westronics, acquired
the Angus Electronics division ("Angus") of Esterline Technologies Corporation.
The Company was incorporated in August 1997. In connection with the
Company's incorporation, Thermo Instrument transferred to the Company all of the
stock of certain of its subsidiaries relating to the CAC, Flow Automation, VG
Gas, Westronics, Houston Atlas, TN Technologies and Kay-Ray/Sensall businesses
in exchange for 10,666,667 shares of the Company's Common Stock. Since August
1997, the Company acquired the Peek Measurement Business from Thermo Power
Corporation ("Thermo Power"), the Rustrak Ranger Logger product line ("Ranger")
from a subsidiary of Danaher Corporation and the business of Fluid Data, Inc.
("Fluid Data") from Elsag-Bailey, Inc. See "Business -- Recent Acquisitions."
Unless the context otherwise requires, references in this Prospectus to the
Company or ONIX refer to ONIX Systems Inc. and its subsidiaries and the
predecessor businesses that constitute the Company. The Company's principal
executive offices are located at 22001 North Park Drive, Kingwood, Texas 77339,
and its telephone number is (281) 348-1111.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company....... shares
Common Stock to be Outstanding after the
Offering(1)............................. shares
Proposed AMEX Symbol...................... ONX
Use of Proceeds........................... Repayment of certain debt obligations to
Thermo Instrument and for general corporate
purposes, including acquisitions and research
and development funding. See "Use of
Proceeds."
</TABLE>
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(1) Does not include 1,083,334 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans. As of January 21, 1998,
options to purchase 518,667 shares of Common Stock had been granted under
these plans. See "Capitalization," "Management -- Compensation of Directors"
and "-- Compensation of Executive Officers" and Notes 3 and 10 to
Consolidated Financial Statements.
4
<PAGE> 6
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
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THE
PREDECESSOR(1)(3) COMPANY(1)(3) TOTAL(3) THE COMPANY(1)(2)
------------------------------ ------------- ------------- -------------------------------
FISCAL YEAR JANUARY 1, 1994 MAR. 16, 1994 JAN. 1, 1994 FISCAL YEAR
----------- THROUGH THROUGH THROUGH -------------------------------
1993 MARCH 15, 1994 DEC. 31, 1994 DEC. 31, 1994 1995(4) 1996(5)(6) 1997(8)
----------- ---------------- ------------- ------------- ------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $82,885 $ 11,468 $50,591 $62,059 $72,105 $ 95,316 $121,525
Gross Profit.............. 23,646 2,497 19,087 21,584 28,469 35,601 49,519
Research and Development
Expenses................ 3,284 835 3,182 4,017 5,042 5,568 6,830
Operating Income (Loss)... (2,081) (1,648) 3,660 2,012 6,117 8,098 14,488
Net Income (Loss)......... (1,555) (976) 2,240 1,264 3,627 4,858 8,799
Basic and Diluted Earnings
per Share(7)............ .20 .33 .44 .77
Basic and Diluted Weighted
Average Shares(7)....... 11,054 11,054 11,054 11,380
</TABLE>
<TABLE>
<CAPTION>
JANUARY 3, 1998
----------------------
AS
ACTUAL ADJUSTED(9)
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and Cash Equivalents............................................... $ 24,960 $
Debt Payable to Affiliate for Acquisition............................... 19,117 --
Working Capital......................................................... 41,947
Total Assets............................................................ 159,709
Shareholders' Investment................................................ 104,938
</TABLE>
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(1) On March 16, 1994, Thermo Instrument acquired the Predecessor from Baker
Hughes. The periods prior to March 16, 1994 represent the results of TN
Technologies, CAC, Westronics and Houston Atlas as included in Baker
Hughes' financial statements. Periods subsequent to March 15, 1994
represent the results of TN Technologies, CAC, Westronics and Houston Atlas
as included in Thermo Instrument's consolidated financial statements. The
principal difference in the basis of accounting between the Predecessor and
the Company relates to the cost in excess of net assets of acquired
companies (goodwill), the amortization of which approximates $730,000 per
year.
(2) The Company's 1995, 1996 and 1997 fiscal years set forth in this table and
referred to elsewhere in this Prospectus ended on December 30, 1995,
December 28, 1996 and January 3, 1998, respectively.
(3) Derived from unaudited financial statements.
(4) Includes the results of Flow Automation since its acquisition by Thermo
Instrument on July 20, 1995.
(5) Includes the results of VG Gas since its acquisition by Thermo Instrument
on March 29, 1996.
(6) Includes the results of Kay-Ray/Sensall since its acquisition by Thermo
Instrument on October 22, 1996.
(7) Pursuant to Securities and Exchange Commission requirements, earnings per
share for the Company have been presented for all periods subsequent to
March 15, 1994. Weighted average shares for such periods include 10,666,667
shares issued to Thermo Instrument in connection with the initial
capitalization of the Company and, in fiscal 1997, the effect of shares
sold through the Company's private placements, as well as for all periods
the incremental effect of the assumed issuance of the private placement
shares and the assumed exercise of stock options issued within one year
prior to the Company's proposed initial public offering.
(8) Includes the results of Angus since its acquisition by Thermo Instrument on
May 8, 1997 and the results of the Peek Measurement Business, the Ranger
product line and Fluid Data since their acquisitions by the Company on
November 6, 1997, November 24, 1997 and December 2, 1997, respectively.
(9) Adjusted to reflect the sale by the Company of shares of
Common Stock offered hereby at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and
commissions and offering expenses payable by the Company.
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5
<PAGE> 7
RISK FACTORS
In addition to the other information in this Prospectus, investors should
carefully consider the following risk factors when evaluating an investment in
the shares of Common Stock offered hereby. This Prospectus contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this Prospectus should be read as being applicable
to all forward-looking statements wherever they appear in this Prospectus. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include those
discussed below, as well as those discussed elsewhere in this Prospectus.
Dependence on Oil and Gas Industry. Historically, a substantial portion of
the Company's total revenues has been attributable to the sale of products and
related services to customers in the oil and gas industry. In 1997, customers in
the oil and gas industry accounted for approximately 61% of the Company's total
revenues. Demand for the Company's products and services within the oil and gas
industry is dependent upon the level of capital spending by oil and gas
companies for exploration, production and distribution. These activities depend
in part on oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the discovery rate of new
oil and gas reserves, local and international political, regulatory and economic
conditions and the ability of oil and gas companies to obtain capital. There can
be no assurance that current levels of oil and gas activities will be maintained
or that demand for the Company's products and related services will reflect the
level of such activities. Decreases in oil and gas activities could have a
significant adverse effect upon the demand for the Company's products and
related services, which would materially adversely affect the Company's
business, financial condition and results of operations. See
"Business -- Customers."
Market Acceptance of New Products. The Company develops products that
represent alternatives to traditional instruments and methods, and as a result,
its products may be slow to achieve, or may not achieve, market acceptance since
customers may seek further validation of the efficiency and efficacy of the
Company's technology before making an investment. This is particularly true
where the purchase of the product requires a significant capital commitment.
Further, because on-line process measurement instruments are incorporated into a
customer's production line, a decision to invest in these instruments involves
significant operating risks if the instrument fails or shuts down. In addition,
the Company believes that, to a significant extent, its growth prospects depend
on its ability to gain acceptance of its technologies and product applications
by a broader group of customers and broader industry segments. There can be no
assurance that the Company will be successful in obtaining broad acceptance of
its products.
Dependence on Capital Spending Policies of Customers. The Company's
customers include oil and gas production, processing and distribution
facilities, electric utilities and chemical companies. The capital spending
policies of these companies can have a significant effect on the demand for the
Company's products. Such policies are based on a wide variety of factors,
including the resources available to make such purchases, the spending
priorities among various types of process control equipment or techniques and
policies regarding capital expenditures during recessions. Any decrease in
capital spending by these customers could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Customers."
No Assurance of a Successful Acquisition Strategy. An element of the
Company's strategy includes the acquisition of businesses and technologies that
complement or augment the Company's existing product lines. Attractive
acquisitions are difficult to identify and complete for a number of reasons,
including competition among prospective buyers and the need for regulatory
approvals, including antitrust approvals. There can be no assurance that the
Company will be able to complete future acquisitions or that the Company will be
able to successfully integrate any acquired business, including the recently
acquired businesses, into its existing business or that the Company will be able
to retain key personnel and customers, or adequately improve the financial
performance, of any acquired business, including the recently acquired
businesses. In order to finance such acquisitions, it may be necessary for the
Company to raise additional funds through public or private financings. Any
equity or debt financing, if available at all, may be on terms that are not
favorable to the
6
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Company and, in the case of an equity financing, may result in dilution to the
Company's stockholders. See "Business -- Strategy," "Business -- Recent
Acquisitions," "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Risks Associated with Pending Arbitration. In December 1996, one former
employee and four then current employees of Thermo Instrument's Epsilon
Industrial Inc. ("Epsilon") subsidiary commenced an arbitration proceeding
naming as joint defendants Epsilon, Thermo Electron, Thermo Instrument and
certain affiliates of Thermo Instrument, including TN Technologies, a wholly
owned subsidiary of the Company, alleging that these entities breached the terms
of certain agreements entered into with such employees at the time that a
predecessor of Epsilon acquired the assets and business of a company formerly
owned by such employees. The employees are claiming damages of between $27
million and $46 million, punitive damages, attorneys' fees and expenses, and
pre-judgment and post-judgment interest, resulting from the alleged failure of
Thermo Instrument and such affiliates, including TN Technologies, to, among
other things, use their best efforts to develop and promote certain products
acquired at that time. The employees are also alleging, among other things,
fraud, breach of fiduciary duty, violation of the Uniform Commercial Code and
theft of trade secrets. The defendants, including the Company, are contesting
this matter vigorously. However, due to the inherent uncertainty of dispute
resolution, the Company cannot predict the outcome of this matter, including
what portion of damages, if any, may be allocable to the Company in the event of
an unfavorable resolution of this matter.
In connection with the organization of the Company, Thermo Instrument
agreed to indemnify the Company for any and all damages allocable to the
Company, if any, relating to the arbitration, other than royalties due, if any,
arising from sales by the Company after August 21, 1997 of products
incorporating technology that is the subject of the arbitration or as a result
of a breach by the Company of any obligation, arising after August 21, 1997,
under the disputed agreements. Notwithstanding this indemnification, the Company
would be required to report as an expense the full amount, including any
indemnifiable amount, of any damages, with any indemnification payment it
receives from Thermo Instrument being treated as a contribution to shareholders'
investment. Although an unsuccessful outcome in this matter could have a
material adverse effect on the Company's results of operations in a particular
quarter or year, in the opinion of management, any resolution will not have a
material adverse effect on the Company's financial position.
Risks Associated with International Sales. Sales outside North America
accounted for approximately 33% of the Company's total revenues in 1997. The
Company intends to continue to expand its presence in markets outside of North
America. International revenues are subject to a number of risks, however,
including the following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign customers
may have longer payment cycles; foreign countries may impose additional
withholding taxes or otherwise tax the Company's foreign income, impose tariffs
or adopt other restrictions on foreign trade; fluctuations in exchange rates may
affect product demand and adversely affect the profitability in U.S. dollars of
products and services provided by the Company in foreign markets where payment
for the Company's products and services is made in the local currency; U.S.
export licenses may be difficult to obtain or enforce; and intellectual property
rights in foreign countries may be more difficult to enforce. Further, a
significant portion of the Company's business is conducted in foreign countries,
including Canada, the United Kingdom, Mexico, Oman and the United Arab Emirates.
Foreign operations are also subject to various risks, including potentially
unstable economic conditions, unexpected changes in regulatory requirements,
compliance with a variety of foreign laws and regulations and the existence of
different tax structures. Tax rates in certain foreign countries exceed those in
the United States, and foreign earnings may be subject to withholding
requirements or the imposition of tariffs, exchange controls or other
restrictions. There can be no assurance that any of these or other factors will
not have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Strategy" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Technological Change and New Products. The markets for the Company's
products are characterized by changing technology, evolving industry standards
and new product introductions and enhancements. The Company's future success
will depend in part upon its ability to enhance its existing products, to
develop and introduce new products and technologies and to successfully expand
its aftermarket support services for such
7
<PAGE> 9
new or enhanced products in order to meet changing customer requirements and
serve broader industry segments. The Company is currently devoting significant
resources toward the enhancement of its existing products, the development of
new products and technologies and the expansion of its preventive maintenance
and aftermarket support activities. There can be no assurance, however, that the
Company will successfully complete the enhancement and development of these
products and the expansion of its services in a timely fashion or that the
Company's current or future products and services will satisfy the process
measurement needs of participants in the Company's targeted markets. See
"Business -- Strategy" and "Business -- Research and Development."
Intense Competition. The Company encounters and expects to continue to
encounter intense competition in the sale of its products. The Company believes
that its ability to compete successfully in the market for field measurement
instruments and sensors depends upon a number of factors both within and beyond
its control, including quality and reliability; technical features; accuracy;
ease of use; product pricing; reputation for aftermarket service; timing of new
product releases and enhancements by the Company and its competitors; name
recognition; the establishment of strategic alliances; and industry and general
economic trends. In addition, the Company competes with companies utilizing
competing technologies that may be viewed as cost-effective alternatives to the
technologies incorporated into the Company's products. Certain of the Company's
current and potential competitors have significantly greater financial,
marketing, technical and other competitive resources, as well as greater name
recognition, than the Company. As a result, the Company's competitors may be
able to adapt more quickly to new or emerging technologies and changes in
customer requirements, and may be able to devote greater resources to the
promotion and sale of their products. There can be no assurance that the Company
will be able to compete successfully with existing or new competitors. An
increase in competition could result in price reductions and loss of market
share, which could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business -- Competition."
Risks of Gamma Technology. Certain of the Company's level and density
measurement instruments incorporate gamma technologies that are subject to
health and safety risks in connection with the use, handling and possible
radioactive emissions associated with gamma materials. Although the Company
maintains general liability insurance and believes that it conducts its
operations prudently, insurance is subject to coverage limits and the Company
could be materially and adversely affected by a claim that is not covered or
only partially covered by insurance. In addition, the development and sale of
products that utilize gamma technology may subject the Company to extensive
federal, state, local and foreign regulations that could increase the costs of
producing the Company's products, or otherwise materially adversely affect the
demand for the Company's gamma measurement instruments.
Limited Sources of Supply. The Company currently contracts with local
subcontractors for the manufacture of certain major components incorporated into
its products. The Company has experienced no significant disruption or delay in
obtaining required components for its products, and believes that it could in
most instances develop other sources of supply or qualify other suppliers for
such components. However, a prolonged inability to obtain adequate deliveries
could require the Company to pay more for inventory, parts and other supplies or
to seek alternative sources of supply, could delay the Company's ability to ship
its products and could damage its relationships with current and prospective
customers. Any such delay or damage could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business -- Manufacturing and Suppliers."
Dependence on Key Personnel. The Company's success depends to a
significant extent upon a number of key employees, including members of senior
management. The loss of the services of one or more of these key employees could
have a material adverse effect on the Company. The Company believes that its
future success will depend in part on its ability to attract, motivate and
retain highly skilled technical, managerial and marketing personnel. Competition
for such personnel is intense and there can be no assurance that the Company
will be successful in attracting, motivating and retaining key personnel.
Uncertain Protection of Proprietary Rights. Proprietary rights relating to
the Company's products are protected from unauthorized use by third parties only
to the extent that they are covered by valid and
8
<PAGE> 10
enforceable patents or are maintained in confidence as trade secrets. The
Company has 46 issued U.S. patents that have expiration dates ranging from 1999
through 2018 and the Company has four patent applications pending. The Company
also owns corresponding foreign patents in a number of jurisdictions throughout
the world. There can be no assurance that any patents now or hereafter owned by
the Company will afford protection against competitors. Proceedings initiated by
the Company to protect its proprietary rights could result in substantial costs
to the Company. There can be no assurance that competitors of the Company, some
of whom have substantially greater resources than those of the Company, will not
initiate litigation to challenge the validity of the Company's patents, or that
they will not use their resources to design comparable products that do not
infringe the Company's patents. The Company could incur substantial costs and
diversion of management resources with respect to the defense of any such
claims, which could have a material adverse effect on the Company's business,
financial condition and results of operations. Furthermore, parties making such
claims could secure a judgment awarding substantial damages, as well as
injunctive or other equitable relief, that could effectively block the Company's
ability to make, use, sell, distribute or market its products and services in
the U.S. and abroad. There may also be pending or issued patents of which the
Company is not aware held by parties not affiliated with the Company that relate
to the Company's products or technologies. In the event that a claim relating to
proprietary technology or information is asserted against the Company, the
Company may need to acquire licenses to, or contest the validity of, any such
competitor's proprietary technology. It is likely that significant funds would
be required to contest the validity of any such competitor's proprietary
technology. There can be no assurance that any license required under any such
competitor's proprietary technology would be made available on acceptable terms
or that the Company would prevail in any such contest. There can be no assurance
that the steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or independent
development by others of similar technology. In addition, the laws of some
jurisdictions do not protect the Company's proprietary rights to the same extent
as the laws of the U.S. and there can be no assurance that the available
protections will be adequate.
The Company also relies on trade secrets and proprietary know-how that it
seeks to protect, in part, by confidentiality agreements with its employees and
consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or independently
developed by competitors. See "Business -- Intellectual Property."
Government Regulations and Approvals. The market for certain of the
Company's products, both in the United States and abroad, is subject to or
influenced by various domestic and foreign environmental and consumer protection
laws. The Company designs, develops and markets its products, in part, to meet
customer needs created by existing and anticipated regulations, and any changes
in these regulations may adversely affect consumer demand for the Company's
products.
Shares Eligible for Sale After this Offering. At the conclusion of the
120-day period following the closing of this offering, the Company will file a
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), covering the resale of 1,639,670 shares of Common Stock held
by existing investors other than Thermo Instrument. The 10,666,667 shares of
Common Stock owned by Thermo Instrument will become eligible for sale under Rule
144 promulgated under the Securities Act commencing in August 1998. In addition,
as long as Thermo Instrument is able to elect a majority of the Company's Board
of Directors, it will have the ability to cause the Company at any time to
register for resale all or a portion of the Common Stock owned by Thermo
Instrument. Thermo Electron, Thermo Instrument and the Company have agreed not
to sell any shares of Common Stock for a 180-day period after the date of this
Prospectus, with certain exceptions. See "Shares Eligible for Future Sale" and
"Underwriting."
Additional shares of Common Stock issuable upon exercise of options granted
under the Company's stock-based compensation plans will become available for
future sale in the public market at prescribed times. Sales of a significant
number of shares of Common Stock in the public market following this offering
could adversely affect the market price of the Common Stock. See "Relationship
with Thermo Electron and Thermo Instrument," "Shares Eligible for Future Sale"
and "Underwriting."
9
<PAGE> 11
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the initial public offering price.
Additional dilution is likely to occur upon the exercise of outstanding stock
options. See "Dilution."
Potential Volatility of Stock Price. Prior to this offering there has been
no public market for the Common Stock and there can be no assurance that an
active trading market will develop or be sustained after this offering. The
initial offering price of the Common Stock will be determined by negotiations
between the Company and the Representatives of the Underwriters and may not be
indicative of future market prices. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
Factors such as fluctuations in the Company's operating results, announcements
of technological innovations or new contracts or products by the Company or its
competitors, government regulation and approvals, developments in patent or
other proprietary rights and market conditions for stocks of companies similar
to the Company could have a significant impact on the market price of the Common
Stock. There can be no assurance that the market price of the Common Stock will
not decline below the initial offering price.
Potential Conflict of Interest. For financial reporting purposes the
Company's financial results are included in the consolidated financial
statements of Thermo Instrument and Thermo Electron. The members of the Board of
Directors of the Company who are also affiliated with Thermo Electron or Thermo
Instrument will consider both the short-term and the long-term impact of
operating decisions on the Company as well as the impact of such decisions on
the consolidated financial results of Thermo Instrument and Thermo Electron. The
interest of Thermo Electron and Thermo Instrument on the one hand and the
Company on the other hand may differ. The Company is an indirect subsidiary of
Thermo Electron and is a party to various agreements with Thermo Electron. These
agreements may limit the Company's operating flexibility. See "Relationship with
Thermo Electron and Thermo Instrument."
Control by Thermo Instrument. The Company's shareholders do not have the
right to cumulate votes for the election of directors. Thermo Instrument, which
will own % of the voting stock of the Company after this offering, has the
power to elect the entire Board of Directors of the Company and to approve or
disapprove any corporate actions submitted to a vote of the Company's
stockholders. See "Relationship with Thermo Electron and Thermo Instrument" and
"Security Ownership of Certain Beneficial Owners and Management."
Lack of Dividends. The Company anticipates that for the foreseeable
future, the Company's earnings, if any, will be retained for use in the business
and that no cash dividends will be paid on the Common Stock. Declaration of
dividends on the Common Stock will depend upon, among other things, future
earnings, the operating and financial condition of the Company, its capital
requirements and general business conditions. See "Dividend Policy."
10
<PAGE> 12
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering are
estimated to be $ (approximately $ if the Underwriters'
over-allotment option is exercised in full) assuming an initial offering price
of $ per share and after deducting estimated underwriting discounts and
commissions and offering expenses. The Company intends to use the net proceeds
from this offering (i) to repay $12.0 million of outstanding indebtedness owed
to Thermo Instrument in connection with the acquisition of the Peek Measurement
Business, which indebtedness is due July 31, 1998 and bears interest at a rate
based on the 90-day Commercial Paper Composite Rate for 90-day maturities plus
25 basis points, set at the beginning of each quarter (See "Business -- Recent
Acquisitions" and "Relationship with Thermo Electron and Thermo Instrument --
Related Party Transactions"), (ii) for general corporate purposes, including
acquisitions and (iii) to fund research and development with respect to new
products. The Company is in discussions with respect to several acquisitions;
however, it currently has no commitment or agreement for any material
acquisition.
Pending these uses, the Company expects to invest the net proceeds from
this offering primarily in investment grade interest bearing or dividend bearing
instruments, either directly by the Company or pursuant to a repurchase
agreement with Thermo Electron in which the Company would in effect lend excess
cash to Thermo Electron on a collaterized basis at market interest rates. See
"Relationship with Thermo Electron and Thermo Instrument -- Miscellaneous."
DIVIDEND POLICY
The Company anticipates that for the foreseeable future the Company's
earnings, if any, will be retained for use in the business and that no cash
dividends will be paid on the Common Stock.
11
<PAGE> 13
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of January 3, 1998, stated on a pro forma basis to reflect the
January 1998 payment of approximately $19.1 million to Thermo Power of the
purchase price for the Peek Measurement Business and the related borrowing of
$12.0 million from Thermo Instrument to partially fund such payment, and as
adjusted to give effect to the sale of shares of Common Stock offered
hereby at an assumed initial public offering price of $ per share, after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by the Company.
<TABLE>
<CAPTION>
JANUARY 3, 1998
-------------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Note Payable to Parent Company........................................ $12,000 $ --
======= =======
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares authorized;
12,306,337 shares issued and outstanding and shares as
adjusted (1).....................................................
Capital in excess of par value......................................
Retained earnings................................................... 3,150 3,150
Cumulative translation adjustment................................... 699 699
------- -------
Total Shareholders' Investment.............................. $ $
======= =======
</TABLE>
- ---------------
(1) Does not include 1,083,334 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans. As of January 21, 1998,
options to purchase 518,667 shares of Common Stock had been granted under
these plans. See "Management -- Compensation of Directors" and
"-- Compensation of Executive Officers" and Notes 3 and 10 of Notes to
Consolidated Financial Statements.
12
<PAGE> 14
DILUTION
As of January 3, 1998, the Company had a net tangible book value of
$49,412,000, or $4.02 per share. Net tangible book value per share is determined
by dividing net tangible book value (total tangible assets less total
liabilities) of the Company by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of shares of Common
Stock offered hereby at an assumed initial public offering price of $ per
share (after deducting the estimated underwriting discounts and commissions and
offering expenses), the pro forma net tangible book value of the Company as of
January 3, 1998 would have been $ , or $ per share. This represents
an immediate increase in net tangible book value of $ per share to the
existing shareholders and an immediate dilution in net tangible book value of
$ per share to investors purchasing Common Stock in this offering. See "Risk
Factors -- Immediate and Substantial Dilution." The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed price to public.................................................... $
---
Net tangible book value per share as of January 3, 1998, before this
offering.............................................................. $4.02
Increase per share attributable to this offering.........................
---
Pro forma net tangible book value per share as of January 3, 1998, after
this offering(1).........................................................
---
Dilution per share to new investors(1)..................................... $
===
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $ ,
resulting in an immediate dilution of $ per share to investors
purchasing shares in this offering. See "Underwriting."
The following table sets forth as of January 3, 1998 the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share by existing shareholders and by
investors purchasing shares of Common Stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Thermo Instrument (1)................. 10,666,667 % $79,134,000 % $ 7.42
Other existing investors(2)........... 1,639,670 23,365,000 14.25
New investors.........................
---------- --- ----------- ---
Total....................... 100% $ 100%
========== === =========== ===
</TABLE>
- ---------------
(1) Represents the book value of net assets transferred or contributed by Thermo
Instrument to the Company in exchange for 10,666,667 shares of the Company's
Common Stock.
(2) Represents the price paid for shares of Common Stock purchased for cash.
13
<PAGE> 15
SELECTED FINANCIAL INFORMATION
The selected financial information below as of and for the fiscal years
ended December 30, 1995, December 28, 1996 and January 3, 1998 has been derived
from the Company's Consolidated Financial Statements, which have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report included elsewhere in this Prospectus. This information should be read in
conjunction with the Company's Consolidated Financial Statements and related
notes included elsewhere in this Prospectus. The selected financial information
as of and for the fiscal years ended December 31, 1993 and December 31, 1994 and
for the periods from January 1, 1994 through March 15, 1994 and from March 16,
1994 through December 31, 1994 has not been audited but, in the opinion of the
Company, includes all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly such information in accordance with
generally accepted accounting principles applied on a consistent basis.
<TABLE>
<CAPTION>
PREDECESSOR(1) THE THE COMPANY(1)
---------------------------- COMPANY(1) TOTAL -------------------------------
------------- -------------
FISCAL YEAR JANUARY 1, 1994 MAR. 16, 1994 JAN. 1, 1994 FISCAL YEAR
----------- THROUGH THROUGH THROUGH -------------------------------
1993 MARCH 15, 1994 DEC. 31, 1994 DEC. 31, 1994 1995(2) 1996(3)(4) 1997(6)
----------- --------------- ------------- ------------- ------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $82,885 $11,468 $50,591 $62,059 $72,105 $ 95,316 $121,525
------- ------- ------- ------- ------- ---------- --------
Costs and Operating
Expenses:
Cost of revenues........ 59,239 8,971 31,504 40,475 43,636 59,715 72,006
Selling, general and
administrative
expenses.............. 22,443 3,310 12,245 15,555 17,310 21,935 28,201
Research and development
expenses.............. 3,284 835 3,182 4,017 5,042 5,568 6,830
------- ------- ------- ------- ------- -------- --------
84,966 13,116 46,931 60,047 65,988 87,218 107,037
------- ------- ------- ------- ------- -------- --------
Operating Income (Loss)..... (2,081) (1,648) 3,660 2,012 6,117 8,098 14,488
Interest Income............. -- -- -- -- -- -- 344
Interest Expense............ -- -- -- -- -- -- (113)
------- ------- ------- ------- ------- -------- --------
Income (Loss) Before
Provision for Income
Taxes..................... (2,081) (1,648) 3,660 2,012 6,117 8,098 14,719
Provision for (Benefit from)
Income Taxes.............. (526) (672) 1,420 748 2,490 3,240 5,920
------- ------- ------- ------- ------- -------- --------
Net Income (Loss)........... $(1,555) $ (976) $ 2,240 $ 1,264 $ 3,627 $ 4,858 $ 8,799
======= ======= ======= ======= ======= ======== ========
Basic and Diluted Earnings
per Share(5).............. $ .20 $ .33 $ .44 $ .77
======= ======= ======== ========
Basic and Diluted Weighted
Average Shares(5)......... 11,054 11,054 11,054 11,380
======= ======= ======== ========
BALANCE SHEET DATA (AT END
OF PERIOD):
Working Capital............. $27,977 $13,327 $13,327 $26,199 $ 29,873 $ 41,947
Total Assets................ 65,015 71,710 71,710 76,221 97,010 159,709
Shareholders' Investment.... 18,394 50,795 50,795 59,791 73,110 104,938
</TABLE>
- ---------------
(1) On March 16, 1994, Thermo Instrument acquired the Predecessor from Baker
Hughes. The periods prior to March 16, 1994 represent the results of TN
Technologies, CAC, Westronics and Houston Atlas as included in Baker Hughes'
financial statements. Periods subsequent to March 15, 1994 represent the
results of TN Technologies, CAC, Westronics and Houston Atlas as included in
Thermo Instrument's consolidated financial statements. The principal
difference in the basis of accounting between the Predecessor and the
Company relates to the cost in excess of net assets of acquired companies
(goodwill), the amortization of which approximates $730,000 per year.
(2) Includes the results of Flow Automation since its acquisition by Thermo
Instrument on July 20, 1995.
(3) Includes the results of VG Gas since its acquisition by Thermo Instrument on
March 29, 1996.
14
<PAGE> 16
(4) Includes the results of Kay-Ray/Sensall since its acquisition by Thermo
Instrument on October 22, 1996.
(5) Pursuant to Securities and Exchange Commission requirements, earnings per
share for the Company have been presented for all periods subsequent to
March 15, 1994. Weighted average shares for such periods include 10,666,667
shares issued to Thermo Instrument in connection with the initial
capitalization of the Company and, in fiscal 1997, the effect of shares sold
through the Company's private placements, as well as for all periods the
incremental effect of the assumed issuance of the private placement shares
and the assumed exercise of stock options issued within one year prior to
the Company's proposed initial public offering.
(6) Includes the results of Angus since its acquisition by Thermo Instrument on
May 8, 1997 and the results of the Peek Measurement Business, the Ranger
product line and Fluid Data since their acquisitions by the Company on
November 6, 1997, November 24, 1997 and December 2, 1997, respectively.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company designs, develops, markets and services sophisticated field
measurement instruments and on-line sensors. These products incorporate a range
of advanced measurement technologies to provide real-time data collection,
analysis and local control functions to enhance production efficiency, improve
process and quality control, ensure regulatory compliance and increase employee
safety. The Company manufactures field measurement instruments and on-line
sensors in four general product areas: flow instruments, level and density
instruments, composition analysis instruments and industry-specific sensors and
recording instruments.
The Company's products are sold primarily to participants in process
industries, including oil and gas producers, processors and distributors and
chemical companies, as well as water/wastewater, iron, steel, electric utility,
minerals and mining and pulp and paper companies. In 1997, customers in the oil
and gas industries accounted for approximately 61% of the Company's total
revenues, with such revenues approximately evenly divided between the production
segment and the refining and petrochemical segments of the industry. Demand for
the Company's products and services within the oil and gas industry is dependent
upon the level of capital spending by oil and gas companies for exploration,
production and distribution, which in turn is affected by current and
anticipated oil and gas prices, the discovery rate of new oil and gas reserves,
political, regulatory and economic conditions and the ability of oil and gas
companies to obtain capital. Decreases in oil and gas activities could have a
significant adverse effect upon the demand for the Company's products and
related services, which would materially adversely affect the Company's
business, financial condition and results of operations. See "Risk
Factors -- Dependence on Oil and Gas Industry."
An element of the Company's strategy is to supplement its internal growth
with the acquisition of complementary products and technologies. The Company has
successfully completed several such acquisitions, having purchased the
businesses of Flow Automation in July 1995, VG Gas in March 1996, Kay-
Ray/Sensall in October 1996, Angus in May 1997, the Peek Measurement Business
effective November 1997, the Ranger product line in November 1997 and Fluid Data
in December 1997.
Sales to customers outside of North America accounted for approximately 33%
of total revenues in 1997. Although the Company seeks to charge its customers in
the same currency as its operating costs, the Company's financial performance
and competitive position can be affected by currency exchange rate fluctuations
affecting the relationship between the U.S. dollar and foreign currencies.
RESULTS OF OPERATIONS
1997 Compared With 1996
Revenues increased 27% to $121.5 million in 1997 from $95.3 million in
1996. Revenues increased $19.7 million due to acquisitions. Revenues from
existing businesses grew 6.8%, primarily due to an increase in sales of
industry-specific instruments as a result of an increase in spending by the
production segment of the oil and gas industry. This increase was offset in part
by a decrease in revenues from composition analysis instruments. The decrease in
sales of composition analysis instruments primarily relates to lower spending by
the refining and petrochemical segments of the oil and gas industry and, to a
lesser extent, the chemicals industry.
The gross profit margin increased to 41% in 1997 from 37% in 1996,
primarily due to an increase in higher-margin revenues from industry-specific
instruments. In addition, the gross profit margin from sales of flow instruments
increased as a result of the introduction of certain new, higher-margin
products. The inclusion of higher-margin revenues at Kay-Ray/Sensall, acquired
in October 1996, contributed to the improved margin.
Selling, general and administrative expenses as a percentage of revenues
remained consistent at 23% in both 1997 and 1996.
16
<PAGE> 18
Research and development expenses increased to $6.8 million in 1997 from
$5.6 million in 1996. This increase was primarily due to acquisitions and, to a
lesser extent, an increase in spending at certain industry-specific instrument
and composition analysis businesses.
Interest income in 1997 primarily represents interest earned on the
invested proceeds from the third quarter 1997 private placement of the Company's
common stock. Interest expense in 1997 represents interest on the indebtedness
relating to the acquisition of the Peek Measurement Business.
The effective tax rate was 40.2% in 1997 and 40.0% in 1996. The effective
tax rates exceed the statutory federal income tax rate primarily due to the
impact of state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies.
The Company is involved in an arbitration proceeding as described in Note 5
to the consolidated financial statements.
1996 Compared With 1995
Revenues increased 32% to $95.3 million in 1996 from $72.1 million in 1995.
Revenues increased $19.5 million due to the acquisitions of Flow Automation in
July 1995, VG Gas in March 1996 and Kay-Ray/Sensall in October 1996. Revenues
from existing businesses grew 5.1%, primarily due to an increase in sales of
industry-specific instruments as a result of an increase in spending by the
production segment of the oil and gas industry. This increase was offset in part
by a decrease in revenues from composition analysis instruments and level
density sensors for the reasons discussed in the results of operations for 1997
compared with 1996.
The gross profit margin decreased to 37% in 1996 from 39% in 1995,
primarily due to the Company's 1996 initiation of an outsourcing program for
mechanical assemblies and electronic components in its industry-specific
instrument product lines. In addition to these set-up costs, the Company
introduced three new industry-specific products in 1996, initially resulting in
higher cost of goods sold.
Selling, general and administrative expenses as a percentage of revenues
decreased to 23% in 1996 from 24% in 1995, primarily due to lower costs as a
percentage of revenues at VG Gas. Research and development expenses increased to
$5.6 million in 1996 from $5.0 million in 1995. An increase in costs of $1.5
million related to acquired businesses was offset in part by a decrease in
spending at certain industry-specific instrument and composition analysis
instrument businesses due to the completion of several research and development
projects at those businesses.
The effective tax rate was 40.0% in 1996 and 40.7% in 1995. The effective
tax rates exceed the statutory federal income tax rate primarily due to the
impact of state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated working capital was $41.9 million as of January 3, 1998,
compared with $29.9 million as of December 28, 1996. Included in working capital
are cash and cash equivalents of $25.0 million as of January 3, 1998, compared
with $2.4 million as of December 28, 1996.
During 1997, the Company's operating activities provided $13.3 million of
cash. Cash of $5.0 million was used to fund an increase in inventories primarily
due to a buildup in work in process inventories in the Company's
industry-specific products as result of new orders. This decrease in cash was
offset in part by an increase in other current liabilities, primarily as a
result of an increase in accrued taxes and deferred revenue.
The Company used $11.3 million of cash for investing activities in 1997.
Cash of $9.7 million was used for acquisitions and $1.9 million was used for
purchases of property, plant and equipment. The Company expects to expend
approximately $1.5 million for property, plant and equipment during 1998.
The Company's financing activities provided $21.1 million of cash in 1997.
The Company raised $22.0 million of cash from the private placement of its
common stock. In January 1998, the Company paid Thermo Power the purchase price
of $19.1 million for the Peek Measurement Business. The Company
17
<PAGE> 19
borrowed $12.0 million from Thermo Instrument to partially fund the payment for
the Peek Measurement Business. The note to Thermo Instrument bears interest at
the 90-day Commercial Paper Composite Rate for 90-day maturities plus 25 basis
points, set at the beginning of each quarter and is due on July 31, 1998.
Although the Company expects to have positive cash flow from its existing
operations, the Company anticipates it will require significant amounts of cash
for the possible acquisition of complementary businesses and technologies. The
Company expects that it will finance these acquisitions through a combination of
internal funds, including the net proceeds from the sale of the shares of Common
Stock offered hereby, additional debt or equity financing from the capital
markets and/or short-term borrowings from Thermo Instrument or Thermo Electron,
although there is no agreement with these companies to ensure that funds will be
available on acceptable terms or at all. The Company believes that its existing
resources are sufficient to meet the capital requirements of its existing
businesses for the foreseeable future including at least the next 24 months.
18
<PAGE> 20
BUSINESS
OVERVIEW
The Company designs, develops, markets and services sophisticated field
measurement instruments and on-line sensors. The Company utilizes its
proprietary knowledge and significant experience regarding application-specific
technologies to develop products that address the needs of process industry
participants within targeted markets. The Company's products gather information
regarding the flow, level, density or composition of a particular material and,
using advanced communications techniques, communicate this information to a
customer's centralized control location.
The Company manufactures field measurement instruments and on-line sensors
in the following four general product areas:
- Flow Instruments. The Company offers a range of instruments designed to
measure and locally control the flow of liquids and gases. These
instruments include microprocessor-based gas flow computers,
non-contacting ultrasonic flow meters, impeller flow meters, turbine
flow meters and air flow measurement systems.
- Level and Density Instruments. The Company's level and density
instruments incorporate sophisticated measurement technologies that
measure and locally control the level and density of liquid and solid
materials and the density of gaseous materials. These instruments
include intelligent point level and continuous level measurement
instruments.
- Composition Analysis Instruments. The Company's composition analysis
instruments are used for on-line analysis of the chemical composition of
solids, liquids and gases. The Company's instruments include sulfur
analyzers, gas chromatographs, portable elemental analysis instruments,
infrared and ultraviolet spectrometers and on-line mass spectrometers.
- Industry-Specific Instruments. The Company offers sophisticated sensor
systems that are used in specific industries to provide real-time
measurement, data collection, recording, analysis and local control of
process functions. These special purpose instruments and sensors include
rod pump controllers, strip chart recorders, process alarm monitors and
other data acquisition systems.
INDUSTRY BACKGROUND
Industry sources estimate that worldwide revenues for the field measurement
instruments and sensors market segment of the process control market were
approximately $10.4 billion in 1995 and will grow to approximately $20.0 billion
by the year 2000, which represents a compound annual growth rate of
approximately 14%. Factors contributing to this growth include competitive
pressures to increase efficiencies and reduce costs; technological advances,
which have increased the availability of higher quality microprocessor-based
sensors; the increased use of sensor-intensive, model-based controls of process
functions; deregulation and privatization; developments in communications
protocol and computer systems; and concerns over regulatory compliance and
employee safety. The Company's current products address approximately $3.3
billion of the field measurement instruments and sensors segment of the process
control market.
Participants in process industries need to monitor, analyze and control
their operations more efficiently in order to optimize production and
distribution and to remain competitive. In order to increase the output and
quality of products while reducing costs, these participants must consistently,
accurately and reliably measure, analyze and control the flow, level, density,
composition, pressure and temperature of the materials that are used in their
industrial processes, including those materials that they are producing and
distributing. The field measurement instruments and sensors market generally can
be divided into two categories: traditional mechanical sensors and advanced
intelligent sensors, which incorporate microprocessor-based technologies to
provide real-time data collection, analysis and local control functions.
Traditional analog and mechanical sensors cannot provide the levels of accuracy
and reliability that process industry participants need in today's increasingly
competitive global marketplace. Participants in the natural gas industry, for
example, can no longer compete effectively using traditional flow measurement
instruments for natural gas transfer because
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such instruments are slow, labor intensive and often produce inaccurate results,
translating into lost profits and wasted product. As a result, process industry
participants are seeking more advanced measurement technologies that they can
economically utilize at multiple points throughout their operations.
Developments in communications protocols and computer systems, the trend
away from analog to digital technology and advances in technologies, such as
sophisticated electronic, ultrasonic and radar techniques, have facilitated the
development of advanced intelligent sensors. These sensors provide faster, more
reliable, efficient and accurate measurement instruments that allow considerably
more information to be collected, analyzed and communicated through the process
control system. By utilizing advanced, microprocessor-based sensor technologies
to measure, analyze and control their operations, process industry participants
are able to operate in environments that were previously considered unsafe or
not cost-effective and gain a competitive advantage over those who obtain and
monitor data utilizing traditional mechanical and analog devices. In addition,
as technological advances have allowed manufacturers to incorporate more
cost-effective, sophisticated microprocessor-based technologies into their
sensors and other measurement instruments, participants in complex industries
have increasingly sought to utilize multiple sensors to collect, record and
analyze data and locally control operations using model-based formulas.
Deregulation and privatization in certain process industries, such as in
the natural gas and electric utility industries, make it even more critical for
participants in such industries to utilize accurate and reliable process
measurement technologies. For example, natural gas pipelines are now considered
"common carriers" and are therefore utilized by many different parties. As a
result, participants in the natural gas industry need highly sophisticated
sensors that are capable of quickly and accurately measuring the flow of natural
gas at the multiple custody transfer points within each system. This enables
them to accurately and automatically account and bill for gas flow in real time.
At the same time, government regulations, increased record-keeping
requirements and worker safety concerns mandate tighter controls with advanced
diagnostics to monitor specific aspects of the industrial process and to avoid
releases and costly environmental clean-ups. In order to comply with government
regulations, participants in process industries are using more sophisticated
measurement instruments that are capable of accurately monitoring pollutant
levels, quickly detecting leaks, performing self diagnostics and storing and
monitoring data for periodic reports to government agencies. These advanced
sensors also enable participants to improve record-keeping and maintain a safer
workplace. For example, companies engaged in offshore oil production can monitor
and control their operations remotely in adverse weather conditions without
jeopardizing the safety of their employees.
THE ONIX SOLUTION
The Company's process industry customers require reliable sensor,
communication and control products that are designed to maximize the performance
of their operations through increased efficiency and reduced process downtime.
The Company believes that its current products, over 90% of which have been
developed within the last five years, provide superior performance, accuracy and
reliability over traditional measurement instruments for the process industry.
The Company designs products, using its extensive proprietary application
database, that are intended to meet or exceed the customer's requirements. The
Company typically tests its products under conditions beyond normal operating
parameters so as to ensure superior reliability. The Company's application
database contains proprietary information, including field conditions,
technology performance and process engineering, that the Company utilizes to
develop the best solution for its customers' requirements. The Company also
maintains a comprehensive, experienced international preventive maintenance and
aftermarket service and support organization to provide fast, reliable response
to its customers' needs.
STRATEGY
The Company's objectives are to be a leading provider of field measurement
instruments and on-line sensors used in targeted industries within the process
control market and to expand the scope of its addressed markets within the field
measurement instruments and sensors market segment, while continuing to improve
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its financial performance. The Company intends to achieve these objectives
through the implementation of the following key strategies:
Broaden Technological Leadership and Product Offerings. The Company
intends to continue to broaden its technologies and product offerings in order
to provide more comprehensive process measurement solutions for its customers.
The Company intends to utilize its experience and application-specific knowledge
to develop new applications for its existing technologies while expanding its
technological base. The Company also intends to develop or acquire technologies
for field measurement instruments and sensors not currently offered by the
Company.
Maintain Market Focus. The Company believes there are significant
opportunities to market and sell process measurement instruments to participants
within targeted markets that can best be served by companies with
industry-specific and application-specific technologies and knowledge. The
Company focuses on customers primarily in the oil and gas, chemical,
petrochemical, electric utility, pulp and paper manufacturing, semiconductor and
water/wastewater industries. The Company's sophisticated instrumentation and
applications expertise are well-suited to the needs of these industries, which
are capital-intensive and have difficult measurement applications.
Pursue Acquisitions and Strategic Relationships. The Company intends to
pursue acquisitions of, and strategic relationships with, companies that have
products, technologies and/or market presence that complement or augment its
existing technological base and current market presence. In addition, the
Company seeks to make acquisitions where it can add value through its financial,
operating, technological, marketing and management expertise. The field
measurement instruments and sensors segment of the process control industry is
highly fragmented, providing significant opportunities for industry
consolidation. The Company, with its successful acquisition track record and
strong financial resources, is well-positioned to be an active participant in
the consolidation of this market.
Expand into New Geographic Markets. The Company intends to expand
internationally through opening new sales and support offices and through
strategic acquisitions in geographic areas with significant growth
opportunities, including Latin America, Eastern Europe and the Pacific Rim.
Expand Experienced Service and Support Organization. The Company is
seeking to expand its preventive maintenance and aftermarket support activities,
which it sees as critical to sustaining relationships with customers as well as
being an important factor in generating new product sales in the industrial
process markets.
PRODUCTS
The Company utilizes its proprietary knowledge and application-specific
expertise to offer instruments to participants in targeted industries within the
field measurement instruments and sensors segment of the process control market.
The Company's customers use its products to monitor, analyze and locally control
the flow, level, density and composition of gaseous, liquid and solid materials.
The Company's flow measurement instruments measure and locally control the
flow of liquids and gases. The Company's level and density measurement
instruments incorporate sophisticated measurement technologies that measure and
locally control the level and density of liquid and solid materials and the
density of gaseous materials. The Company's composition analysis instruments
include field and on-line analysis instruments that are used to analyze the
chemical composition of solids, liquids and gases. The Company also offers
technologically advanced microprocessor-based sensors and recording instruments
that are utilized in specific industries for customized applications. The
Company incorporates a range of sophisticated measurement technologies into its
instruments, including gamma ray, radar, infrared, ultraviolet, ultrasonic and
vibrational measurement techniques.
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The primary industries served by the Company's products are as follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRIMARY
PRODUCT AREA INDUSTRIES SERVED TRADE NAMES
------------ -------------------- ----------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Flow Instruments Oil and Gas Flow Automation
Chemical TN Technologies
Water/Wastewater Peek Measurement
Iron and Steel
- ---------------------------------------------------------------------------------------------
Level and Density Instruments Oil and Gas TN Technologies
Chemical Kay-Ray/Sensall
Minerals and Metals Peek Measurement
Iron and Steel
Pulp and Paper
- ---------------------------------------------------------------------------------------------
Composition Analysis Instruments Oil and Gas Houston Atlas
Chemical VG Gas
Semiconductor TN Technologies
Pharmaceutical Fluid Data
- ---------------------------------------------------------------------------------------------
Industry-Specific Instruments Oil and Gas CAC
Chemical Westronics
Electric Utilities Peek Measurement
Minerals and Metals Angus Electronics
</TABLE>
- --------------------------------------------------------------------------------
Flow Instruments
The Company designs, develops, markets and services a broad product line of
mechanical and electronic flow measurement instruments that measure and locally
control the flow of liquids and gases. The Company's flow measurement
instruments include intelligent microprocessor-controlled flow computers, which
are remotely installed electronic flow metering instruments, often solar
powered, that are connected to the primary flow meters installed directly in the
customer's pipeline; non-contacting flow meters that use ultrasonic technology
mounted outside a customer's pipe; in-line turbine meters, which are designed to
function in a wide variety of operating conditions, including corrosive fluids,
high pressure gases, extreme temperatures and sanitary and hazardous
environments; and insertion turbine meters for use where in-line monitoring is
not economically or operationally viable, such as in large pipelines or where
pressure drop is critical. Suggested U.S. retail prices for the Company's flow
measurement instruments range from approximately $1,200 to $6,500 per unit.
The Company's field flow computers are primarily utilized by customers in
the natural gas industry to monitor and locally control the flow of natural gas
at custody transfer points in the natural gas distribution chain. The Company's
ultrasonic flow meters, utilizing both Transit Time and Doppler technologies,
are sold primarily to customers in the water/wastewater industry for a variety
of applications. The Company believes that it is the world leader in Doppler
ultrasonic flow meters. The Company sells its turbine and impeller meters to
customers throughout the world in a diverse range of industries, including the
oil and gas, chemical processing, petrochemical, pulp and paper, aerospace,
automotive, food and beverage, power generation and water/wastewater industries.
The Company's air flow measurement systems are used for a variety of air flow
applications, including drying, paint spraying, combustion and clean room
pressurization. Customers for the Company's flow measurement instruments include
affiliates or operations of Texaco Inc., Duke Energy Corporation and Coastal
Energy.
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Level and Density Instruments
The Company designs, develops, markets and services intelligent point
level, continuous level and density measurement instruments that use a variety
of sophisticated technologies, including gamma, radar, ultrasonic and
vibrational measurement techniques, to meet the cost and application-specific
needs of process industry participants within targeted markets. The Company
believes that it is the world leader in level measurement instruments
incorporating gamma measuring technology and point level measurement instruments
incorporating ultrasonic measuring technology and that it is the only U.S.
manufacturer of continuous level instruments incorporating radar measuring
technology. The Company's level and density measurement instruments are
microprocessor-based and are designed to ensure increased accuracy and
reliability despite harsh process environments. In addition, they are primarily
non-contacting and therefore well-suited for use in industrial processes that
utilize harmful or toxic materials that cause maintenance problems for
traditional contacting techniques. The Company's point level instruments measure
the presence or absence of a substance, while its continuous level instruments
measure the changing level of a substance on an ongoing basis. Suggested U.S.
retail prices for the Company's level and density measurement instruments range
from approximately $1,000 to $8,500 per unit.
The Company's level measurement instruments are utilized within several
targeted industries, including the oil and gas, chemical, mineral and mining,
iron and steel, pharmaceutical, water/wastewater and pulp and paper industries.
Customers in these industries store large quantities of materials in tanks or
other storage vessels and use the Company's instruments to either continuously
measure and monitor levels of the stored materials or to ensure the presence of
either a minimum or maximum amount of the material. The Company's density
measurement products are used primarily in the paper industry to measure pulp
consistency and by pipeline companies responsible for transporting refined
petroleum products. Customers for the Company's level and density measurement
instruments include affiliates or operations of E.I. duPont De Nemours & Co.,
The Dow Chemical Company and Mobil Oil Corporation.
Composition Analysis Instruments
The Company designs, develops, markets and services a variety of
instruments designed to analyze the chemical composition of solids, liquids and
gases. These products include lead acetate-based and chemiluminescent sulfur
analyzers, which utilize fiber optics and precision colorimetry for field and
on-line measurement of the sulfur content in liquid and gaseous materials; a
UV/Vis photodiode spectrometer used for sulfur recovery plant optimization;
on-line gas chromatographs, which are utilized in content and purity analysis of
natural gas and light hydrocarbon liquids, including butane and propane;
portable elemental analysis instruments that utilize proprietary sensors to
provide accurate, real-time analysis of the presence of metals and the
composition of alloys; and on-line mass spectrometers that provide highly
accurate, real-time analysis of the type and content of a variety of gases at
multiple points within a customer's operations. The Company believes that it is
a leader in the market for portable elemental analysis instruments, process
sulfur monitors and on-line mass spectrometers. Suggested U.S. retail prices for
the Company's composition analysis instruments range from approximately $35,000
to $225,000 per unit.
Customers use the Company's portable elemental analysis instruments for
field composition analysis of alloys, analysis of the presence of lead within
paint and composition analysis of the metallic content of soil, particularly at
Superfund sites. The Company's mass spectrometers are used in a variety of
process industries, including the petrochemical, iron and steel and
semiconductor industries for real-time, ultrasensitive measurement of gases.
Customers for the Company's composition analysis instruments include affiliates
or operations of Eastman Kodak Company, LSI Logic Corp., Saudi ARAMCO and BASF
AG.
Industry-Specific Instruments
The Company's industry-specific instruments include rod pump controllers,
remote data collection and communication devices known as Remote Terminal Units
("RTUs") and other specialized products utilized in oil and gas production,
processing and distribution, data acquisition systems, chart recorders, process
alarm monitors, current-to-pressure and pressure-to-current transducers and
AC-power monitoring instruments.
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The Company specializes in the development, installation and service of
scalable and redundant rod pump controllers and RTUs that are utilized to
automate the measurement, control, safety and environmental protection needs in
onshore and offshore oil and gas production and pipeline transmission. These
products incorporate microprocessor-based, smart technologies to provide
customers with a variety of functions, including leak detection, gas flow
measurement, custody transfer data and on-line gas composition analysis.
Suggested U.S. retail prices for these specialized products range from
approximately $1,200 to $100,000 per unit. The Company believes that it has
developed and sold approximately 80% of the rod pump controllers currently being
used worldwide.
In addition, the Company offers a range of wellhead safety and control
products that monitor, control and provide failsafe shutdown of oil and gas
production wells. To complement these products, the Company developed a subsea
control module to assist in oil production from reserves below the ocean floor.
The control module rests on the ocean floor to monitor, analyze and locally
control the level and flow of oil in up to four oil wells and is connected to
operations located on the ocean surface by a tube through which the oil is
transported. This product is designed to offer a more efficient and
cost-effective alternative to traditional offshore drilling, which requires
substantial time and expense in building and later disassembling surface
drilling platforms. The control module also allows oil companies to access oil
reserves that would otherwise be inaccessible either because of their location
or cost. The control module was first presented and exhibited in late 1997 at an
offshore engineering conference in Aberdeen, Scotland. Based on feedback
received from other conference participants, the Company made improvements to
the control module and it has since been hydrostatically certified by the
National Hyperbaric Centre in Aberdeen, Scotland to operate at a maximum depth
of 1,000 meters beneath the ocean surface. The Company is currently responding
to requests for quotations and actively soliciting an opportunity for its
initial commercial application. The Company anticipates that the subsea control
module will sell for approximately $1 million per unit. See "-- Research and
Development."
The Company also offers data acquisition systems, paper and paperless strip
chart recorders, process alarm monitors, current-to-pressure and
pressure-to-current transducers and AC-power monitoring instruments to customers
in the power generation and transmission, petrochemical, chemical, pulp and
paper, water/wastewater and pharmaceutical industries. The Company's strip chart
recorders are designed to continuously and accurately measure, display and
record critical variables within an industrial or manufacturing process and
provide plant managers with valuable information regarding flow, level, density,
temperature and pressure. Suggested U.S. retail prices for the Company's strip
chart recorders range from approximately $1,300 to $10,000 per unit. The Company
has sold its strip chart recorders to approximately 90% of the nuclear power
plants in the United States. The Company's alarm monitoring systems provide an
interface for sensors measuring pressure, temperature, vibration or gas
detection, which in turn allow critical alarm conditions to be displayed or
communicated to a centralized control system. The Company's current-to-pressure
and pressure-to-current transducers are used for valve positioning in processing
plants for the chemical, petrochemical, power, pulp and paper and pharmaceutical
industries. Customers for the Company's industry-specific instruments include
operations or affiliates of Shell Oil Company, Chevron Corporation, Pemex, Duke
Energy Corporation and Houston Lighting & Power Company.
RECENT ACQUISITIONS
An element of the Company's strategy is to supplement its internal growth
with the acquisition of complementary products and technologies. See " --
Strategy." The Company has recently completed the acquisition of a number of
businesses, including those described below:
Fluid Data. In December 1997, the Company, through Houston Atlas, acquired
from Elsag-Bailey, Inc. substantially all the assets of Fluid Data, a
Texas-based manufacturer and distributor of pyrolysis gas sampling systems,
on-line process gas chromatographs, chemiluminescent sulfur chromatography
systems and high speed calorimeters, for $8.5 million and the assumption of
certain liabilities. Fluid Data's on-line gas chromatograph technology, combined
with the Houston Atlas gas chromatograph business, gives the Company a strong
presence in the hydrocarbon processing industry, the largest market segment
existing in the on-line analytical marketplace. The acquisition of the Fluid
Data business complements the Company's
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<PAGE> 26
existing product lines, adds several new products to its current offerings and
substantially contributes to the Company's strategy to provide its customers
with an integrated, comprehensive parts and service business.
Peek Measurement. In November 1997, Thermo Power, a majority-owned
subsidiary of Thermo Electron, completed a tender offer for all of the
outstanding ordinary shares of Peek plc, a UK-based manufacturer and supplier of
electronic traffic control instrumentation, as well as density and flow meters.
The Company acquired from Thermo Power all of the outstanding capital stock of
Peek Measurement Limited, Brandt Instruments, Inc. and Peek Measurement, Inc.,
collectively representing the process instrumentation business of Peek plc (the
"Peek Measurement Business"), for approximately $19.1 million, effective
November 1997.
The product lines of the Peek Measurement Business include non-invasive
ultrasonic flow meters, impeller flow meters, air flow measurement systems,
process alarm monitors, gas and liquid density meters and current-to-pressure
and pressure-to-current transducers. The acquisition of the Peek Measurement
Business augments the Company's current technologies and provides it with
significant presence in the water/wastewater market.
Ranger. In November 1997, the Company, through Westronics, acquired from a
subsidiary of Danaher Corporation, the assets comprising the Ranger product
line, a New York-based manufacturer and distributor of power-monitoring and
data-acquisition equipment, for $1.8 million and the assumption of certain
liabilities. Since the acquisition, the Company has integrated the Ranger
product line with the Angus Electronics division of Westronics in Indianapolis,
Indiana. The market for Ranger's products is evenly divided between industrial
and utility customers. The combination of Ranger's products with those of
Westronics allows for a broader range of products to be marketed to a much
larger and geographically diverse customer base, especially internationally
where Westronics has an established presence. Additionally, Ranger's presence in
the utility industry is increasingly important to the Company as the electric
industry continues towards domestic deregulation.
Angus. In May 1997, the Company, through Westronics, acquired from
Esterline Technologies Corporation the assets of its Angus Electronics division,
an Indiana-based manufacturer and distributor of analog and digital data
acquisition and recorder products and power measurement instruments, for $1.9
million and the assumption of certain liabilities. Angus manufactures and sells
a full line of paperless recorders, which is the fastest growing segment of the
recorder market. Angus's customer base consists of both process control system
manufacturers and end-users in the petroleum, chemical, pharmaceutical, food
manufacturing and electric and gas utility industries. Additionally, Angus
brings to Westronics a substantial parts, service and accessories business.
CUSTOMER SERVICE, MAINTENANCE AND SUPPORT
Customers typically utilize the Company's instruments throughout their
operations and thus demand preventive maintenance, reliable aftermarket support
and quick response and repair service. The Company provides high-quality
customer service, preventive maintenance and aftermarket support, which it
believes are critical to success in process industries where downtime translates
to lost profits. The Company enters into multi-year contracts for the provision
of preventive maintenance services. The Company currently provides preventive
maintenance services and aftermarket support through its own employees and
independent representatives in the United States, Canada, Mexico, the United
Kingdom, the Netherlands, Oman and the United Arab Emirates, and in other areas
solely through independent representatives. The Company believes that its
experienced staff of chemical, electrical, mechanical and software engineers, as
well as its international customer service and support organization, provide it
with a significant competitive advantage.
CUSTOMERS
In 1997, the Company sold its products to more than 2,000 customers
worldwide, including affiliates or operations of The Dow Chemical Company, Shell
Oil Company, E.I. duPont De Nemours & Co., BASF AG, Pemex and Duke Energy
Corporation. The Company targets customers in markets with application-specific
needs. In particular, the Company's flow measurement instruments are used
primarily by customers in the natural gas and water/wastewater industries; its
continuous and point level and density measurement
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instruments are used primarily by customers in the oil and gas, minerals and
mining, iron and steel, and pulp and paper industries; its chemical composition
analysis instruments are used primarily by participants in the oil and gas
industries; and its strip chart recorders are sold primarily to customers in the
electric utility industry, as well as to customers in the petrochemical,
chemical, pulp and paper, water/wastewater and pharmaceutical industries. In
1997, customers in the oil and gas industry represented approximately 61% of the
Company's total revenues, with such revenues approximately evenly divided
between the production segment and the refining and petrochemical segments of
the industry. In each of the last three years, no single customer accounted for
more than 10% of the Company's total revenues.
SALES AND MARKETING
The Company markets, sells and distributes its products through a
combination of a direct sales force and a network of independent sales
representatives and distributors. The method of distribution is determined by
product line and market size and potential, as well as by local business
convention, industry mix and the availability of technically qualified
representatives. The Company's flow and industry-specific products for the oil
and gas industry are primarily sold through a direct sales force with
industry-specific expertise. The Company's flow instruments for other industries
and its level and density measurement and composition analysis instruments are
primarily sold through independent sales representatives or distributors
supported by local sales managers and application specialists.
Direct Sales Force. As of January 3, 1998, the Company had direct sales
operations in the United States, Canada, the United Kingdom, Mexico, the United
Arab Emirates, Oman and the Netherlands.
Independent Sales Representatives. As of January 3, 1998, the Company had
relationships with approximately 175 independent sales representatives in the
United States and approximately 145 independent sales representatives
internationally. The Company's sales representatives generally operate on an
exclusive basis, and are paid a commission on products sold or shipped into
their territory. The Company's agreements with its sales representatives
typically provide either party with the right to terminate with up to 60 days'
notice. The Company believes that independent sales representatives offer the
advantages of being close to the local market, seeing customers on a regular
basis and having compatible products to sell to the same customer base.
Distributors. As of January 3, 1998, the Company had relationships with
approximately 320 distributors. The Company's distribution agreements are
generally exclusive in an identified country or territory and typically provide
either party with the right to terminate on 90 days' notice. The Company's
distributors generally provide service and support for customers located in
their territory.
COMPETITION
The Company believes that its ability to compete successfully in the market
for field measurement instruments and sensors depends upon a number of factors
both within and beyond its control, including quality and reliability; technical
features; accuracy; ease of use; product pricing; reputation for aftermarket
service; timing of new product releases and enhancements by the Company and its
competitors; name recognition; the establishment of strategic alliances; and
industry and general economic trends. In addition, the Company competes with
companies utilizing competing technologies that may be viewed as cost-effective
alternatives to the technologies incorporated into the Company's products.
The field measurement instruments and sensors market segment of the process
control market is highly fragmented and intensely competitive, and the Company
expects competition to continue to increase. The Company competes with a few
large competitors, including Fisher-Rosemount, a division of Emerson Electric
Co., Inc., Elsag-Bailey Process Automation N.V., affiliates of ABB Asea Brown
Boveri (Holding) Ltd. and Yokokawa Electric Corporation, in each of its product
areas and with many companies within specific industries. As the technologies
utilized within the process measurement industry continue to develop, the
Company expects to face increasing competition in the future from emerging
competitors.
Certain of the Company's current and potential competitors have
significantly greater financial, marketing, technical and other competitive
resources, as well as greater name recognition, than the Company.
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As a result, the Company's competitors may be able to adapt more quickly to new
or emerging technologies and changes in customer requirements, and may be able
to devote greater resources to the promotion and sale of their products. There
can be no assurance that the Company will be able to compete successfully with
existing or new competitors. An increase in competition could result in price
reductions and loss of market share, which could have a material adverse effect
on the Company's business, financial condition or results of operations. See
"Risk Factors -- Intense Competition."
MANUFACTURING AND SUPPLIERS
The Company manufactures its instruments on an as-needed basis to meet its
customers' specific delivery requirements. The Company currently contracts with
local subcontractors for the manufacture of certain major components
incorporated into its products. Final product assembly, inspection and testing
takes place at the Company's facilities. The Company believes that by
subcontracting certain assembly processes it can focus its efforts on adding
greater value to the design and development of process measurement instruments
for its customers. Although the Company has not experienced any significant
difficulty in its relationships with subcontractors, the Company's ability to
expand its capacity and rate of growth will depend on its ability to obtain
increased production from its existing subcontractors and to identify additional
qualified subcontractors.
The Company believes that there is more than one source for the major
components of its products. If, however, the Company were to experience any
shortage in any of the major components of its products due to supply shortages
or other reasons, including reasons beyond its control, the Company's business,
financial condition and results of operations would be materially adversely
affected. See "Risk Factors -- Limited Sources of Supply."
RESEARCH AND DEVELOPMENT
The Company maintains an active research and development program for the
introduction of new products and improvements to existing products. The Company
also seeks to develop new applications for its existing products and
technologies.
The Company is currently engaged in research and development programs
designed to enhance the measurement, analysis and control capabilities of its
products. Products and enhancements under development include: a subsea control
module, which is designed to assist oil companies in producing oil from the
ocean floor; the use of radar technologies as a cost-effective alternative to
ultrasonic technologies in level measurements of liquids and solids; an advanced
microprocessor-based RTU and windows interface; a scintillator for gamma level
applications requiring lower levels of radiation; and a point level radio
frequency ("RF") capacitance gauge to complement the Company's point level
product offering.
During 1995, 1996 and 1997, research and development expenses were
approximately $5.0 million, $5.6 million and $6.8 million, respectively. As of
January 3, 1998, the Company had 79 full-time employees engaged in research and
development.
BACKLOG
At December 28, 1996 and January 3, 1998, the Company's backlog of unfilled
orders was approximately $21.0 million and $26.5 million, respectively. The
Company includes in backlog only those orders for which it has received a
completed purchase order and for which delivery has been specified within 12
months. Such orders are generally subject to cancellation by the customer with
payment of a specified charge. Because of the possibility of customer changes in
delivery schedules, cancellation of orders and potential delays in product
shipments, the Company's backlog as of any particular date may not be
representative of actual sales for any succeeding period.
INTELLECTUAL PROPERTY
The Company's success depends in part on the strength and protection of its
proprietary methodologies and designs and other proprietary intellectual rights.
The Company relies upon a combination of patent, trade secret, nondisclosure and
other contractual arrangements, and copyright and trademark laws, to protect its
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proprietary rights. The Company seeks to limit access to and distribution of its
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter the misappropriation of its
proprietary information, that the Company will be able to detect unauthorized
use and take appropriate steps to enforce its intellectual property rights or
that competitors will not be able to develop similar technology independently.
The Company currently holds 46 issued United States patents expiring at
various dates ranging from 1999 to 2018. The Company also has four applications
pending for additional United States patents and a number of foreign
counterparts for its patents in various foreign countries. In addition, the
Company has certain registered and other trademarks. See "Risk Factors
- --Uncertain Protection of Proprietary Rights."
EMPLOYEES
As of January 3, 1998, the Company had a total of 845 full-time employees.
None of the Company's employees is represented by a labor union. The Company
believes that its employee relations are good.
PROPERTIES
The Company operates its various businesses primarily from leased
facilities in the United States, Europe and the Middle East, including an
approximately 147,000 square foot facility in Kingwood, Texas pursuant to a
lease, on a month-to-month basis, with Thermo Instrument (see "Relationship with
Thermo Electron and Thermo Instrument -- Related Party Transactions") and an
approximately 100,000 square foot facility in Round Rock, Texas pursuant to a
lease that expires in 2005. The Company leases office space throughout the world
for its sales and service operations. The Company believes that these facilities
are adequate for its current requirements and that suitable additional space
will be available as needed in the future.
LEGAL PROCEEDINGS
Except as described above under "Risk Factors -- Risks Associated with
Pending Arbitration," the Company is not a party to any litigation that it
believes could reasonably be expected to have a material adverse effect on the
Company or its business.
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<PAGE> 30
RELATIONSHIP WITH THERMO ELECTRON
AND THERMO INSTRUMENT
The Company was organized in August 1997 as a wholly owned subsidiary of
Thermo Instrument. At that time, Thermo Instrument contributed all of the assets
or stock of certain of its subsidiaries relating to the CAC, Flow Automation, TN
Technologies, Kay-Ray/Sensall, Houston Atlas, Westronics and VG Gas businesses
to the Company in exchange for 10,666,667 shares of Common Stock of the Company.
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 Instrument created the Company as
a privately held subsidiary, and Thermo Instrument and Thermo Electron, and
certain of their subsidiaries, have created several other privately and publicly
held majority-owned subsidiaries. From time to time, Thermo Electron and its
subsidiaries will create other majority-owned subsidiaries as part of its
spin-out strategy. (The Company and the other Thermo Electron subsidiaries are
hereinafter referred to as the "Thermo Subsidiaries.")
Thermo Instrument develops, manufactures and markets analytical instruments
used to detect and monitor air pollution, radioactivity, complex chemical
compounds and toxic metals and other elements in a broad range of liquids, gases
and solids. For its fiscal year ended December 28, 1996 and the nine months
ended September 27, 1997, Thermo Instrument had consolidated revenues of
$1,209,362,000 and $1,138,255,000, respectively, and consolidated net income of
$132,751,000 and $108,079,000, respectively.
Thermo Electron and its subsidiaries develop, manufacture and market
environmental monitoring and analysis instruments and manufacture biomedical
products including heart-assist devices and mammography systems, papermaking and
recycling equipment, alternative-energy systems and other specialized products
and technologies. Thermo Electron and its subsidiaries also provide
environmental and metallurgical services and conduct advanced technology
research and development. For its fiscal year ended December 28, 1996 and the
nine months ended September 27, 1997, Thermo Electron had consolidated revenues
of $2,932,558,000 and $2,548,371,000, respectively, and consolidated net income
of $190,816,000 and $170,075,000, respectively.
THE THERMO ELECTRON CORPORATE CHARTER
Thermo Electron and the Thermo Subsidiaries recognize that the benefits and
support they derive from their affiliation are essential elements of their
individual performance. Accordingly, Thermo Electron and each of the Thermo
Subsidiaries 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 (i) all of the
companies and their stockholders are treated consistently and fairly, (ii) the
scope and nature of the cooperation among the companies, and each company's
responsibilities, are adequately defined, (iii) each company has access to the
combined resources and financial, managerial and technological strengths of the
others and (iv) Thermo Electron and the Thermo Subsidiaries, in the aggregate,
are able to obtain the most favorable terms from outside parties.
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of
long-range planning and providing other banking and credit services. Pursuant to
the Charter, Thermo Electron may also provide guarantees of debt 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 is also responsible for ensuring that
members comply with internal policies and procedures.
29
<PAGE> 31
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 participates. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Company, can withdraw from participation in the Charter upon 30
days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement 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.
CORPORATE SERVICES AGREEMENT
As provided in the Charter, the Company 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, certain employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Company. The
annual fee for these services was equal to 1% of the Company's revenues for 1997
and will decrease to 0.8% of revenues for 1998. The fee is reviewed annually and
may be changed by mutual agreement of the Company and Thermo Electron.
Management believes that the service fees charged under the Services
Agreement are reasonable and that the terms of the Services Agreement are fair
to the Company. For items such as employee benefit plans, insurance coverage and
other identifiable costs, Thermo Electron charges the Company based on charges
directly attributable to the Company. The Services Agreement automatically
renews for successive one-year terms, unless canceled by the Company upon 30
days' prior written notice. In addition, the Services Agreement terminates
automatically in the event the Company 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 Company will be required to pay a termination fee
equal to the fee that was paid by the Company 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 Company or as required in order to meet the Company's obligations
under Thermo Electron's policies and procedures. Thermo Electron will charge the
Company a fee equal to the market rate for comparable services if such services
are provided following termination.
TAX ALLOCATION AGREEMENT
The Tax Allocation Agreement between the Company and Thermo Electron
outlines the terms under which the Company is to be included in Thermo
Electron's consolidated Federal and state income tax returns. Under current law,
the Company will be included in such tax returns so long as Thermo Instrument
owns at least 80% of the Company's outstanding Common Stock and Thermo Electron
owns at least 80% of Thermo Instrument's outstanding common stock. In years in
which the Company has taxable income it will pay to Thermo Electron amounts
comparable to the taxes it would have paid if it had filed its own separate
corporate tax returns. Immediately following this offering, Thermo Instrument
will own less than 80% of the Company's outstanding Common Stock and the Company
will not be included in Thermo Electron's consolidated Federal and state income
tax returns for periods commencing thereafter and will be required to file its
own tax returns.
MASTER GUARANTEE REIMBURSEMENT AND LOAN AGREEMENTS
The Company has entered into a Master Guarantee Reimbursement and Loan
Agreement with Thermo Electron which provides that the Company will reimburse
Thermo Electron for any costs it incurs in the event it is required to pay third
parties pursuant to any guarantees it issues on the Company's behalf. Thermo
Instrument has entered into a similar agreement with Thermo Electron with regard
to the Company's obligations which are guaranteed by Thermo Electron. The
Company has also entered into a Master
30
<PAGE> 32
Guarantee Reimbursement and Loan Agreement with Thermo Instrument which provides
that the Company will reimburse Thermo Instrument for any costs it incurs in the
event that Thermo Instrument is required to pay Thermo Electron or any other
party pursuant to any guarantees it issues on the Company's behalf.
RELATED PARTY TRANSACTIONS
Commencing October 1997, the Company leases on a month-to-month basis
approximately 147,000 square feet of space from Thermo Instrument in Kingwood,
Texas. The Company pays Thermo Instrument rent in an amount that is
approximately equal to the Company's pro rata share of Thermo Instrument's
occupancy costs, which payments in 1998 are estimated to be $180,000 in the
aggregate.
The Company acquired the Peek Measurement Business from Thermo Power for
approximately $19.1 million, effective November 1997. The purchase price
represents the sum of (i) the net tangible book value of the Peek Measurement
Business as of the date of the acquisition by Thermo Power, plus (ii) the total
goodwill associated with Thermo Power's acquisition of Peek plc equal to the
total fiscal 1997 revenue of the Peek Measurement Business relative to the total
revenues of Peek plc for such period, plus (iii) $1.0 million, which represents
an estimate of the amount of tax that will be incurred by Thermo Power as a
result of the transfer of the Peek Measurement Business to the Company. In
addition, the Company paid $256,000 in interest, representing interest on the
purchase price, from November 6, 1997 through January 29, 1998 at an interest
rate equal to the 90-day Commercial Paper Composite Rate for 90-day maturities
plus 25 basis points, set at the beginning of each quarter.
In January 1998, the Company borrowed $12.0 million from Thermo Instrument
to partially fund the Company's acquisition of the Peek Measurement Business
from Thermo Power. The loan is due July 31, 1998 and carries an interest rate
equal to the 90-day Commercial Paper Composite Rate for 90-day maturities plus
25 basis points, set at the beginning of each quarter.
Commencing January 1998, the Company leases approximately 24,000 square
feet of a 60,000 square foot facility in Winchester, England on a month-to-month
basis from Thermo Power. The Company pays Thermo Power rent in an amount that is
approximately equal to the pro rata share of Thermo Power's occupancy costs,
which payments in 1998 are estimated to be $61,000 in the aggregate.
Each of Thermo Instrument, Thermo Sentron Inc. ("Thermo Sentron"), an
indirect majority-owned subsidiary of Thermo Electron, Thermo BioAnalysis
Corporation ("Thermo BioAnalysis"), a majority-owned subsidiary of Thermo
Instrument, Thermo Optek Corporation ("Thermo Optek"), a majority-owned
subsidiary of Thermo Instrument and ThermoQuest Corporation ("ThermoQuest"), a
majority-owned subsidiary of Thermo Instrument, act as a distributor of certain
of the Company's products in countries where such entities maintain a sales
force. In consideration of such arrangements, the Company sells such products to
such entities at discounted rates negotiated by the parties. For the year ended
January 3, 1998, the Company sold $333,000, $583,000, $632,000, $776,000 and
$184,000 of products to each of Thermo Instrument, Thermo Sentron, Thermo
BioAnalysis, Thermo Optek and ThermoQuest, respectively.
MISCELLANEOUS
As of January 3, 1998, $19.6 million of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron that Thermo Electron
collateralizes with investments principally consisting of U.S. government-agency
securities, corporate notes, commercial paper, money market funds and other
marketable securities, in the amount of at least 103% of such obligation. The
Company's funds subject to the repurchase agreement will be readily convertible
into cash by the Company. The repurchase agreement earns interest at a rate
based on the 90-day Commercial Paper Composite Rate for 90-day maturities plus
25 basis points, set at the beginning of each quarter.
From time to time, the Company may transact business in the ordinary course
with other companies in the Thermo Group. All such transactions are on terms
comparable to those the Company would receive from unaffiliated parties.
31
<PAGE> 33
MANAGEMENT
The Directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Earl R. Lewis........................ 53 Chairman of the Board and Director
William J. Zolner.................... 54 President, Chief Executive Officer and Director
C.R. (Neil) Duarte................... 54 Vice President
William C. Holstead.................. 62 Vice President
Mark Whitman......................... 42 Vice President
John N. Hatsopoulos.................. 62 Senior Vice President, Chief Financial Officer and Director
Paul F. Kelleher..................... 54 Chief Accounting Officer
Arvin H. Smith....................... 68 Director
</TABLE>
All of the Company's Directors are elected annually by the stockholders and
hold office until their respective successors are duly elected and qualified.
Executive officers are elected annually by the Board of Directors and serve at
its discretion.
Earl R. Lewis has been Chairman of the Board and a Director of the Company
since its inception. Mr. Lewis has been a Director and Chief Executive Officer
of Thermo Optek Corporation since August 1995 and President of Thermo Optek
Corporation from August 1995 to March 1997. Mr. Lewis served as President of
Thermo Jarrell Ash through January 1996, and for more than five years prior to
that date. Mr. Lewis has also been Chief Executive Officer and a Director of
Thermo Instrument since January 1998 and President since March 1997, was Chief
Operating Officer from January 1996 to January 1998, and was Executive Vice
President from January 1996 to March 1997, Senior Vice President from January
1994 to January 1996 and Vice President from March 1992 to January 1994. Mr.
Lewis is also Director of Metrika Systems Corporation, Thermo BioAnalysis
Corporation, ThermoQuest Corporation, ThermoSpectra Corporation and Thermo
Vision Corporation and he is Chairman of the Board of Thermo BioAnalysis
Corporation, Thermo Optek Corporation, ThermoQuest Corporation, ThermoSpectra
Corporation and Thermo Vision Corporation.
William J. Zolner, has been President, Chief Executive Officer and a
Director of the Company since its inception. From March 1995 to October 1997,
Dr. Zolner served as President of CAC, formerly known as Thermo Instrument
Controls, a wholly owned subsidiary of Thermo Instrument and a predecessor to
the business comprising the Company. From 1993 to 1995 Dr. Zolner worked for
Thermo Instrument analyzing acquisition opportunities and serving as a
technology assistant to Mr. Arvin H. Smith, then Chief Executive Officer of
Thermo Instrument. Dr. Zolner previously worked for Thermo Electron from 1971 to
1977 in the environmental instruments division. From 1978 to 1993, he held key
management positions with divisions of Bendix Corporation, Combustion
Engineering, JWP Inc. and Lear Seigler Measurement Controls. Dr. Zolner has over
26 years of experience in the process control instrumentation marketplace, where
he has led organizations in engineering, marketing and sales operations and as
divisional president.
C.R. (Neil) Duarte has served as Vice President of the Company since its
inception and as President of Flow Automation since 1991. Prior to that, Mr.
Duarte served in a variety of general, financial and engineering management
positions with Input/Output, Hydril, Solar Turbines, Creole Production and
Shell.
William C. Holstead has served as Vice President of the Company since its
inception and has served as President of CAC since October 1997. Prior to
becoming President, Mr. Holstead served in various positions with CAC since
1991, including Manager, Western Hemisphere Sales and Manager, Systems
Engineering. Mr. Holstead has over 35 years of experience in the automation and
electrical industry. In 1966, Mr. Holstead founded and served as Chief Executive
Officer of Control Systematologist, Inc.
Mark Whitman has served as Vice President of the Company since its
inception and as President of TN Technologies since 1992. Prior to joining the
Company, he held various positions at Baker Hughes. He served as Vice President
of Finance for Baker Hughes Process Equipment from 1990 to 1992, Controller and
Chief Financial Officer for Baker Hughes Production Tools from 1988 to 1990,
Controller and Chief Financial Officer for Texas Nuclear from 1981 to 1988 and
Audit Senior for Baker International Inc. in 1981. He was an Audit Senior with
Ernst & Whinney from 1975 to 1981.
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<PAGE> 34
John N. Hatsopoulos has served as Vice President, Chief Financial Officer
and a Director of the Company since its inception and as Senior Vice President
since January 1998. Mr. Hatsopoulos has been a Vice President and Chief
Financial Officer of Thermo Instrument since 1988. Mr. Hatsopoulos has been
President of Thermo Electron since January 1997, Chief Financial Officer of
Thermo Electron since 1988 and was an Executive Vice President of Thermo
Electron from 1986 to January 1997. He is also a Director of LOIS/USA, Inc.,
Thermo Electron, Thermedics Inc., Thermedics Detection Inc., Thermo Ecotek
Corporation, Thermo Fibertek Inc., Thermo Instrument, Thermo Power Corporation,
Thermo TerraTech Inc. and Thermo Vision Corporation.
Paul F. Kelleher has been the Chief Accounting Officer of the Company since
its inception. Mr. Kelleher has served as Senior Vice President, Finance and
Administration, of Thermo Electron since June 1997, as Vice President, Finance,
from 1987 to June 1997 and as its Controller from 1982 to January 1996. He is
also a Director of ThermoLase Corporation.
Arvin H. Smith has been a Director of the Company since its inception. Mr.
Smith has been a Director of Thermo Instrument since 1986. He has also been
Chairman of the Board of Thermo Instrument since March 1997, was Chief Executive
Officer from 1986 to January 1998, was President from 1986 to March 1997 and has
been an Executive Vice President of Thermo Electron since 1991. Mr. Smith is
currently Chairman of the Board of Thermo Power, a position he has held since
December 1996. Mr. Smith is also a Director of Metrika Systems Corporation,
Thermo BioAnalysis Corporation, Thermo Optek Corporation, Thermo Power,
ThermoQuest Corporation, ThermoSpectra Corporation and Thermo Vision
Corporation.
COMPENSATION OF DIRECTORS
All Directors who are not employees of the Company, Thermo Instrument or
Thermo Electron receive an annual retainer of $2,000 and a fee of $1,000 per day
for attending meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of conference
telephone and for participating in certain meetings of committees of the Board
of Directors. Payment of Directors fees is made quarterly. Messrs. Zolner,
Hatsopoulos, Lewis, and Smith are all employees of Thermo Electron companies and
do not receive any cash compensation from the Company for their services as
Directors. Directors are also reimbursed for reasonable out-of-pocket expenses
incurred in attending such meetings.
Directors Deferred Compensation Plan. Under the Company's Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), a Director
has the right to defer receipt of his fees until he ceases to serve as a
Director, dies or retires from his principal occupation. In the event of a
change in control or proposed change in control of the Company that is not
approved by the Board of Directors, deferred amounts become payable immediately.
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 Instrument or 25% or more of the
outstanding common stock of Thermo Electron; or (b) the failure of the persons
serving on the Board of Directors immediately prior to any contested election of
directors or any exchange offer or tender offer for the Common Stock or the
common stock of Thermo Instrument or 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 Common Stock. When payable, amounts deferred may
be disbursed solely in shares of Common Stock accumulated under the Deferred
Compensation Plan. As of January 5, 1998, the Company has reserved 16,666 shares
under this plan. The Deferred Compensation Plan will not become effective until
completion of an initial public offering. No stock options have been granted
under this plan.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Company in
all capacities awarded to, earned by or paid to the Company's chief executive
officer and three other executive officers for the fiscal year ended January 3,
1998. No other executive officer of the Company who held office at the end of
fiscal 1997
33
<PAGE> 35
met the definition of "highly compensated" within the meaning of the Securities
and Exchange Commission's executive compensation disclosure rules for this
period. The Company is required to appoint certain executive officers and
full-time employees of Thermo Electron as executive officers of the Company, 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 Company's affairs is
provided to the Company under the Services Agreement between the Company and
Thermo Electron. Accordingly, the compensation for these individuals is not
reported in the following table. See "Relationship with Thermo Electron and
Thermo Instrument."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING OPTIONS
--------------------- (NO. OF SHARES AND ALL OTHER
NAME AND PRINCIPAL POSITION FY SALARY BONUS COMPANY)(1) COMPENSATION(2)
<S> <C> <C> <C> <C> <C>
William J. Zolner............ 1997 $150,000 $100,000(3) (ONX) $ 7,200
President and Chief 10,000(TMO)
Executive Officer
Mark Whitman................. 1997 $141,600 $ 40,500(3) (ONX) $ 7,200
Vice President
C.R. (Neil) Duarte........... 1997 $112,791 $ (4) (ONX) $ 5,344
Vice President
William C. Holstead.......... 1997 $ 97,213 $ (4) (ONX) $ 4,802
Vice President
</TABLE>
- ---------------
(1) All options to purchase shares of the Company's Common Stock shown in the
table were granted after the end of fiscal 1997 but are included in the
table for clarity of presentation. In addition to grants of options to
purchase Common Stock of the Corporation (designated in the table as "ONX"),
the named executive officers of the Corporation have been granted options to
purchase common stock of Thermo Electron and certain of its other
subsidiaries as part of Thermo Electron's stock option program. Options have
been granted during the last fiscal year to the named executive officers in
Thermo Electron (designated in the table as "TMO").
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officer participating in the
Thermo Electron 401(k) plan.
(3) As bonuses have not yet been determined for fiscal 1997, the bonus amounts
shown for fiscal 1997 are estimates.
(4) Bonuses have not yet been determined for fiscal 1997 and estimated bonuses
are not available for these individuals.
34
<PAGE> 36
Stock Options Granted During Fiscal 1997
The following table sets forth information concerning individual grants of
stock options made during fiscal 1997 to the Company's chief executive officer
and the other named executive officers. It has not been the Company's policy in
the past to grant stock appreciation rights, and no rights were granted during
fiscal 1997.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE ---------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE EXPIRATION DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
William J. Zolner...... (ONX) $ $
10,000(TMO) 0.7%(3) $39.39 09/24/09 $313,500 $842,300
C.R. (Neil) Duarte..... (ONX) $ $
William C. Holstead.... (ONX) $ $
Mark Whitman........... (ONX) $ $
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company
(designated in the table as "ONX") were granted after the end of fiscal 1997
but are included in the table for clarity of presentation. As part of Thermo
Electron's stock option program, options have been granted during fiscal
1997 to the named executive officers to purchase the common stock of Thermo
Electron (designated in the table as "TMO"). All of the options granted
during the fiscal year are immediately exercisable, except the options to
purchase shares of the Common Stock of the Company, which are not
exercisable until the earlier of (i) 90 days after the effective date of the
registration of the Company's Common Stock under Section 12 of the
Securities Exchange Act of 1934 and (ii) nine years after the grant date. 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 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. 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
granting corporation or another Thermo Electron company. For companies that
are not publicly traded, the repurchase rights lapse in their entirety on
the ninth anniversary of the grant date. The granting corporation may permit
the holders of all such options to exercise options and satisfy tax
withholding obligations by surrendering shares equal in fair market value to
the exercise price or withholding obligation.
(2) The amounts shown in this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the date the respective options were granted
to their expiration date. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock, the option holders'
continued employment through the option period and the date on which the
options are exercised.
(3) These options were granted under stock option plans maintained by Thermo
Electron and, accordingly, are reported as a percentage of total options
granted to employees of Thermo Electron and its subsidiaries.
35
<PAGE> 37
Stock Options Exercised During Fiscal 1997 and Fiscal Year-end Option
Values
The following table reports certain information regarding stock option
exercises during fiscal 1997 and outstanding stock options to purchase shares of
Thermo Electron, the Company and other Thermo Subsidiaries held at the end of
fiscal 1997 by the Company's chief executive and the other named executive
officers. No stock appreciation rights were exercised or were outstanding during
fiscal 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END
ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME COMPANY EXERCISE REALIZED UNEXERCISABLE)(1) UNEXERCISABLE)
<S> <C> <C> <C> <C> <C>
William J. Zolner............ ONIX -- -- 0/ --/0(2)
Thermo Electron -- -- 28,375/0 $280,494/0
Thermo BioAnalysis -- -- 2,000/0 $19,000/0
Thermo Instrument -- -- 61,718/0 $563,094/0
Thermo Optek -- -- 15,000/0 $71,700/0
ThermoQuest -- -- 10,000/0 $50,000/0
ThermoSpectra -- -- 2,500/0 $158/0
Mark Whitman................. ONIX -- -- 0/ --/0(2)
Thermo Instrument -- -- 28,750/0 $468,825/0
Thermo Optek -- -- 7,500/0 $35,850/0
ThermoQuest -- -- 5,000/0 $25,000/0
ThermoSpectra -- -- 800/0 $50/0
C.R. (Neil) Duarte........... ONIX -- -- 0/ --/0(2)
Thermo Instrument -- -- 10,000/0 $64,200/0
Thermo Optek -- -- 6,000/0 $28,680/0
ThermoQuest -- -- 4,000/0 $20,000/0
William C. Holstead.......... ONIX -- -- 0/ --/0(2)
Thermo Instrument -- -- 7,265/0 $99,929/0
</TABLE>
- ---------------
(1) All options to purchase shares of the Common Stock of the Company were
granted after the end of fiscal 1997 but are included in the table for
clarity of presentation. All of the options reported outstanding at the end
of the fiscal year are immediately exercisable, except for options to
purchase shares of the Common Stock of the Company which are not exercisable
until the earlier of (i) 90 days after the effective date of the
registration of the Company's Common Stock under Section 12 of the
Securities Exchange Act and (ii) nine years after the grant date. 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. 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 granting corporation or another Thermo
Electron company. For companies whose shares are not publicly traded, the
repurchase rights lapse in their entirety on the ninth anniversary of the
grant date.
(2) No public market existed for the shares as of January 29, 1998. Accordingly,
no value in excess of the exercise price has been attributed to these
options.
36
<PAGE> 38
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 3, 1998 with respect to each person who
was known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
<S> <C> <C>
Thermo Electron Corporation(1)........................ 10,666,667 87%
81 Wyman Street
Waltham, MA 02254-9046
</TABLE>
- ---------------
(1) Thermo Electron beneficially owned 87% of the Common Stock outstanding as of
January 3, 1998, of which 100% is owned through Thermo Instrument. Thermo
Electron, through Thermo Instrument, has the power to elect all of the
members of the Company's Board of Directors. After the sale of the Common
Stock in this offering, Thermo Electron will beneficially own approximately
% of the outstanding Common Stock ( % if the Underwriters' over-allotment
option is exercised in full).
Thermo Instrument intends to adopt a stock option plan with respect to the
Common Stock that it owns. Under this plan, options to purchase up to
shares of such stock may be granted to any person within the discretion of the
human resources committee of the Board of Directors of Thermo Instrument,
including officers and key employees of Thermo Instrument.
MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of January 3, 1998 as well as information
regarding the beneficial ownership of the common stock of Thermo Instrument and
Thermo Electron, as of the dates indicated in the footnotes, with respect to (i)
each Director, (ii) each executive officer named in the summary compensation
table above, and (iii) all Directors and current executive officers as a group.
While certain Directors or executive officers of the Company are also
directors and executive officers of Thermo Instrument or its subsidiaries other
than the Company, all such persons disclaim beneficial ownership of the shares
of Common Stock owned by Thermo Instrument.
<TABLE>
<CAPTION>
THERMO INSTRUMENT
ONIX SYSTEMS SYSTEMS THERMO ELECTRON
NAME(1) INC.(2) INC.(3)(4) CORPORATION(4)(5)
<S> <C> <C> <C>
C.R. (Neil) Duarte....................... -- 10,328 584
John N. Hatsopoulos...................... -- 81,204 632,768
William C. Holstead...................... -- 7,356 92
Earl R. Lewis............................ 333 178,233 124,184
Arvin H. Smith........................... 4,000 431,667 519,038
Mark Whitman............................. -- 29,582 719
William J. Zolner........................ -- 62,114 28,639
All Directors and executive officers as a
group (8 persons)...................... 4,333 819,176 1,441,518
</TABLE>
- ---------------
(1) Except as reflected in the footnotes to this table, shares of Common Stock
and common stock of Thermo Instrument and Thermo Electron beneficially owned
include shares owned by the indicated person and by that person for the
benefit of minor children, and all share ownership involves sole voting and
investment power.
37
<PAGE> 39
(2) Shares of the Common Stock beneficially owned by each Director and executive
officer and by all directors and executive officers as a group exclude
10,666,667 shares beneficially owned by Thermo Electron. Shares beneficially
owned by Mr. Lewis include 333 shares held by his son. Shares beneficially
owned by Mr. Smith include 4,000 shares held by his spouse. As of January 3,
1998, no Director or executive officer beneficially owned more than 1% of
the Common Stock outstanding as of such date, and all Directors and
executive officers as a group beneficially owned less than 1% of the Common
Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by Mr.
Hatsopoulos, Mr. Lewis and Mr. Smith include 65,625; 162,500; and 234,375
shares, respectively that such person had the right to acquire within 60
days after June 28, 1997, through the exercise of stock options. Shares of
the common stock of Thermo Instrument beneficially owned by Mr. Duarte, Mr.
Holstead, Mr. Whitman and Dr. Zolner include 10,000; 7,265; 28,750; and
61,718 shares, respectively that such person has the right to acquire within
60 days after January 3, 1998, through the exercise of stock options. Shares
of the common stock of Thermo Instrument beneficially owned by Mr.
Hatsopoulos and Mr. Smith include 529 and 530 shares, respectively,
allocated through June 28, 1997, to their respective accounts maintained
pursuant to Thermo Electron's employee stock ownership plan, of which the
trustees, who have investment power over its assets are executive officers
of Thermo Electron (the "ESOP"). Shares beneficially owned by Mr. Lewis
include 2,390 shares held by Mr. Lewis' spouse. The directors and executive
officers of the Company did not individually or as a group beneficially own
more than 1% of the common stock of Thermo Instrument outstanding as of June
28, 1997.
(4) Reflects beneficial ownership of shares of the common stock of Thermo
Instrument and Thermo Electron beneficially owned by Mr. Hatsopoulos, Mr.
Lewis and Mr. Smith as of June 28, 1997 and by Mr. Duarte, Mr. Holstead, Mr.
Whitman and Dr. Zolner as of January 3, 1998.
(5) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Hatsopoulos, Mr. Lewis and Mr. Smith include 535,685; 121,536; and 228,411
shares, respectively that such person had the right to acquire within 60
days after June 28, 1997, through the exercise of stock options. Shares of
the common stock of Thermo Electron beneficially owned by Dr. Zolner include
28,375 shares that he has the right to acquire within 60 days after January
3, 1998, through the exercise of stock options. Shares of the common stock
of Thermo Electron beneficially owned by Mr. Hatsopoulos and Mr. Smith
include 1,934 and 1,717 shares, respectively, allocated to accounts
maintained pursuant to the ESOP. The directors and executive officers of the
Company did not individually or as a group beneficially own more than 1% of
the common stock of Thermo Electron outstanding as of June 28, 1997.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
As of January 3, 1998, the Company had 50,000,000 shares of Common Stock
authorized for issuance, of which 12,306,337 were issued and outstanding. Each
share of Common Stock is entitled to pro rata participation in distributions
upon liquidation and to one vote on all matters submitted to a vote of
stockholders. Dividends may be paid to the holders of Common Stock when and if
declared by the Board of Directors out of funds legally available therefor.
Holders of Common Stock have no preemptive or similar rights. The outstanding
shares of Common Stock are, and the shares offered hereby when issued will be,
legally issued, fully paid and nonassessable.
The shares of Common Stock have noncumulative voting rights, which means
that the holders of more than 50% of the shares voting can elect all the
Directors if they so choose, and in such event, the holders of the remaining
shares cannot elect any Directors. Prior to this offering, Thermo Instrument
owned 10,666,667 shares of Common Stock, which represented approximately 87% of
the outstanding Common Stock. Upon completion of this offering, Thermo
Instrument (and Thermo Electron through its majority ownership of Thermo
Instrument) will continue to beneficially own at least % of the outstanding
Common Stock, and will have the power to elect all of the members of the
Company's Board of Directors.
The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of Directors. The provisions eliminate a Director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts or omissions that involve intentional misconduct or a
knowing violation of law. The Company's Certificate of Incorporation also
contains provisions to indemnify the Directors and officers of the Company to
the fullest extent permitted by the General Corporation Law of Delaware. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as Directors and officers.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option). The shares issued in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by affiliates of the Company, as that term is
defined in Rule 144 under the Securities Act, may generally only be resold in
compliance with applicable provisions of Rule 144. The Company has agreed,
pursuant to a Stock Purchase Agreement with the shareholders of the Company
other than Thermo Instrument, to file a registration statement under the
Securities Act covering the sale of 1,639,670 shares of the Common Stock owned
by them (the "Registrable Shares") within 120 days of the closing of this
offering. All fees, costs and expenses of the registration of the Registrable
Shares will be paid by the Company. See "Risk Factors -- Shares Eligible for
Sale After this Offering."
Of such outstanding shares, 10,666,667 will be owned by Thermo
Instrument. The Company, Thermo Instrument and Thermo Electron have agreed not
to, without the prior written consent of DLJ (as defined below under the caption
"Underwriters"), offer, sell, grant any option to purchase or otherwise dispose
of any shares of the Common Stock within 180 days after the date of this
Prospectus, other than (i) shares of Common Stock to be sold to the Underwriters
in this offering, (ii) the issuance of options and sales of shares of Common
Stock pursuant to existing stock-based compensation plans, and (iii) shares of
Common Stock issuable upon the conversion of securities outstanding on the date
of this Prospectus. Upon expiration of this lock-up agreement, Thermo Instrument
may sell its shares of Common Stock in an offering registered under the
Securities Act or pursuant to an exemption from such registration. So long as
Thermo Instrument is able to elect a majority of the Board of Directors it will
be able to cause the Company at any time to register under the Securities Act
all or a portion of the Common Stock owned by Thermo Instrument or its
affiliates, in which case it would be able to sell such shares without
restriction upon effectiveness of the registration statement. In general, under
Rule 144 as currently in effect, a person (or persons whose shares are
aggregated)
39
<PAGE> 41
who has beneficially owned restricted shares for at least one year is entitled
to sell, within any three-month period, a number of such shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock or
(ii) the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the date of the notice filed pursuant to Rule 144.
Sales under Rule 144 are also subject to certain manner of sale restrictions and
notice requirements and to the availability of current public information about
the Company. In addition, a person who is deemed an "affiliate" of the Company
must comply with Rule 144 in any sale of shares of Common Stock not covered by a
registration statement (except, in the case of registered shares acquired by the
affiliate on the open market, for the holding period requirement). A person (or
person whose shares are aggregated) who is not deemed an "affiliate" of the
Company and who has beneficially owned restricted shares for at least two years
is entitled to sell such shares under Rule 144(k) without regard to the volume,
notice and other limitations of Rule 144. In meeting the one and two year
holding periods described above, a holder of restricted shares can include the
holding periods of a prior owner who was not an affiliate.
The Company has reserved 1,083,334 shares for grants under its existing
stock-based compensation plans. As of January 21, 1998, the Company had options
outstanding to purchase up to 518,667 shares of Common Stock to its employees
and Directors at an exercise price of $14.25 per share. None of such options are
currently exercisable. Ninety days after the completion of the Company's initial
public offering, such options will become immediately exercisable, subject to
repurchase at the exercise price if the optionee ceases to be employed by the
Company. This repurchase right lapses ratably (on an annual basis) over a five-
to ten-year period depending upon the term of the option. As of January 3, 1998,
the repurchase rights had not lapsed with respect to any shares issuable upon
exercise of outstanding options. The Company intends to file registration
statements under the Securities Act to register all shares of Common Stock
issuable under such plans. Shares covered by these registration statements will
be eligible for sale in the public market after the effective date of such
registration statements. Each of the Company, Thermo Instrument and Thermo
Electron has agreed that it will not offer, sell, or grant any option to
purchase or otherwise dispose of any shares of Common Stock (except for the
grant of options and the sale of shares of Common Stock pursuant to stock-based
compensation plans, sales to Thermo Instrument and the issuance of shares as
consideration for the acquisition of one or more businesses (provided that such
shares may not be resold prior to the expiration of 180 days after the date of
this Prospectus)) within 180 days after the date of this Prospectus, without the
prior consent of DLJ.
Prior to this offering there has been no public market for the Common
Stock. The effect, if any, of public sales or the availability of shares for
sale at prevailing market prices cannot be predicted. Nevertheless, sales of
substantial amounts of shares in the public market could adversely affect
prevailing market prices.
40
<PAGE> 42
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
, 1998 (the "Underwriting Agreement"), the Underwriters named
below (the "Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Lazard Freres & Co. LLC and Gruntal & Co.,
L.L.C. (the "Representatives"), have severally agreed to purchase from the
Company the respective number of shares of Common Stock set forth opposite their
names below:
<TABLE>
<CAPTION> NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............................
Lazard Freres & Co. LLC.........................................................
Gruntal & Co., L.L.C............................................................
---------
Total......................................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The Underwriters are obligated to purchase and
accept delivery of all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased.
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including the
Underwriters) at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may re-allow, to certain other dealers
a concession not in excess of $ per share. After the initial offering of the
Common Stock, the public offering price and other selling terms may be changed
by the Representatives at any time without notice. The Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
The Company has granted to the Underwriters an option, exercisable within
30 days after the date of this Prospectus, to purchase, from time to time, in
whole or in part, up to an aggregate of additional shares of Common Stock
at the initial public offering price less underwriting discounts and
commissions. The Underwriters may exercise such option solely to cover
over-allotments, if any, made in connection with the offering. To the extent
that the Underwriters exercise such option, each Underwriter will become
obligated, subject to certain conditions, to purchase its pro rata portion of
such additional shares based on such Underwriter's percentage underwriting
commitment in the offering as indicated in the preceding table.
The Company and Thermo Electron have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments that the Underwriters may be required to make in
respect thereof.
Each of the Company, Thermo Instrument and Thermo Electron has agreed,
subject to certain conditions, not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
are to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of DLJ (except for the issuance of shares of
Common Stock pursuant to
41
<PAGE> 43
existing stock option, purchase and compensation plans, or upon conversion of
any currently outstanding convertible securities described in the Prospectus or
the issuance of shares of Common Stock as consideration for the acquisition of
one or more businesses provided that such Common Stock may not be resold prior
to the expiration of the 180-day period referenced above, or sales of shares of
Common Stock by the Company to Thermo Instrument and except for the grant of
options pursuant to existing stock option, purchase and compensation plans).
Prior to the offering, there has been no established trading market for the
Common Stock. The initial public offering price for the shares of Common Stock
offered hereby will be determined by negotiation among the Company and the
Representatives. The factors to be considered in determining the initial public
offering price include the history of and the prospects for the industry in
which the Company competes, the past and present operations of the Company, the
historical results of operations of the Company, the prospects for future
earnings of the Company, the recent market prices of securities of generally
comparable companies and the general condition of the securities markets at the
time of the offering.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. The Underwriters may bid for and purchase
shares of Common Stock in the open market to cover such syndicate short position
or to stabilize the price of the Common Stock. In addition, the underwriting
syndicate may reclaim selling concessions from syndicate members if DLJ
repurchases previously distributed Common Stock in syndicate covering
transactions, in stabilization transactions or otherwise. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
Certain of the Underwriters from time to time have rendered various
investment banking services to the Company, Thermo Electron and their affiliates
and received customary compensation therefor.
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Seth H. Hoogasian, Esq., General Counsel of
Thermo Electron, Thermo Instrument and the Company, and certain legal matters
will be passed upon for the Underwriters by Testa, Hurwitz & Thibeault, LLP,
Boston, Massachusetts. Mr. Hoogasian owns or has the right to acquire
shares of Common Stock of the Company, 20,986 shares of common stock of Thermo
Instrument and 108,764 shares of common stock of Thermo Electron.
EXPERTS
The financial statements of the Company included in this Prospectus and the
financial statement schedule included in the Registration Statement of which
this Prospectus forms a part have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
42
<PAGE> 44
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act,
with respect to the securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, copies of which may be obtained upon payment of the fees prescribed
by the Commission from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 7 World Trade Center, New York, New York 10048 and at 500 West Madison
Street, Chicago, Illinois 60661. The Commission also maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. The address of such site is http://www.sec.gov.
REPORTS TO SECURITY HOLDERS
The Company intends to furnish holders of the Common Stock offered hereby
with annual reports containing financial statements audited by an independent
public accounting firm and with quarterly reports containing unaudited summary
financial statements for each of the first three quarters of each fiscal year.
43
<PAGE> 45
ONIX SYSTEMS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Statement of Income for the years ended December 30, 1995, December 28,
1996 and January 3, 1998............................................................ F-3
Consolidated Balance Sheet as of December 28, 1996 and January 3, 1998................ F-4
Consolidated Statement of Cash Flows for the years ended December 30, 1995,
December 28, 1996 and January 3, 1998............................................... F-5
Consolidated Statement of Shareholders' Investment for the years ended December 30,
1995, December 28, 1996 and January 3, 1998......................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of ONIX Systems Inc.:
We have audited the accompanying consolidated balance sheet of ONIX Systems
Inc. (a Delaware corporation and 87%-owned subsidiary of Thermo Instrument
Systems Inc.) and subsidiaries as of December 28, 1996 and January 3, 1998, and
the related consolidated statements of income, cash flows and shareholders'
investment for each of the three years in the period ended January 3, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ONIX Systems
Inc. and subsidiaries as of December 28, 1996 and January 3, 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended January 3, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 28, 1998
F-2
<PAGE> 47
ONIX SYSTEMS INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues (Notes 6 and 8)................................... $72,105 $95,316 $121,525
------- ------- --------
Costs and Operating Expenses:
Cost of revenues...................................... 43,636 59,715 72,006
Selling, general and administrative expenses
(Note 6)............................................ 17,310 21,935 28,201
Research and development expenses..................... 5,042 5,568 6,830
------- ------- --------
65,988 87,218 107,037
------- ------- --------
Operating Income........................................... 6,117 8,098 14,488
Interest Income............................................ -- -- 344
Interest Expense........................................... -- -- (113)
------- ------- --------
Income Before Provision for Income Taxes................... 6,117 8,098 14,719
Provision for Income Taxes (Note 4)........................ 2,490 3,240 5,920
------- ------- --------
Net Income................................................. $ 3,627 $ 4,858 $ 8,799
======= ======= ========
Basic and Diluted Earnings per Share (Note 9).............. $ .33 $ .44 $ .77
======= ======= ========
Basic and Diluted Weighted Average Shares (Note 9)......... 11,054 11,054 11,380
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 48
ONIX SYSTEMS INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
1996 1997
------- --------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................ $ 2,386 $ 24,960
Accounts receivable, less allowances of $1,347 and $2,155........ 26,862 32,583
Inventories...................................................... 20,130 32,932
Prepaid expenses................................................. 778 1,032
Prepaid income taxes (Note 4).................................... 2,047 3,531
Due from affiliated companies.................................... 342 --
------- --------
52,545 95,038
------- --------
Property, Plant and Equipment, at Cost, Net........................... 6,425 9,145
------- --------
Other Assets.......................................................... 185 87
------- --------
Cost in Excess of Net Assets of Acquired Companies (Note 2)........... 37,855 55,439
------- --------
$97,010 $159,709
======= ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Payable to affiliated companies (Note 2)......................... $ -- $ 19,508
Accounts payable................................................. 9,497 12,775
Accrued payroll and employee benefits............................ 3,861 3,811
Accrued income taxes............................................. 800 3,455
Accrued installation and warranty expenses....................... 1,093 1,583
Deferred revenue................................................. 597 3,624
Other accrued expenses........................................... 6,824 8,335
------- --------
22,672 53,091
------- --------
Deferred Income Taxes (Note 4)........................................ 1,228 1,680
------- --------
Commitments and Contingency (Notes 5 and 6)
Shareholders' Investment (Notes 7 and 10):
Common stock, $.01 par value, 50,000,000 shares authorized in
1997; 12,306,337 shares issued and outstanding in 1997.......... -- 123
Capital in excess of par value................................... -- 100,966
Retained earnings................................................ -- 3,150
Net parent company investment.................................... 72,437 --
Cumulative translation adjustment................................ 673 699
------- --------
73,110 104,938
------- --------
$97,010 $159,709
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 49
ONIX SYSTEMS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................................... $ 3,627 $ 4,858 $ 8,799
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for losses on accounts receivable......... 779 283 674
Depreciation and amortization....................... 1,909 2,530 3,172
Increase in deferred income taxes................... 700 312 450
Other noncash items................................. (18) -- (7)
Changes in current accounts, excluding the effects
of acquisitions:
Accounts receivable............................ (3,343) (2,857) 1,746
Inventories.................................... (413) (1,517) (4,991)
Other current assets........................... 2,937 2,674 (600)
Accounts payable............................... 362 2,824 (227)
Other current liabilities...................... (3,304) (1,244) 3,980
Other............................................... 127 (155) 328
------- ------- -------
Net cash provided by operating activities......... 3,363 7,708 13,324
------- ------- -------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (Note 2).............. -- -- (9,660)
Purchases of property, plant and equipment............... (1,093) (1,505) (1,868)
Proceeds from sale of property, plant and equipment...... 595 -- 240
------- ------- -------
Net cash used in investing activities............. (498) (1,505) (11,288)
------- ------- -------
FINANCING ACTIVITIES:
Net proceeds from issuance of Company common stock (Note
7)..................................................... -- -- 21,955
Net transfers to parent company prior to capitalization
of the Company......................................... (2,346) (4,662) (865)
------- ------- -------
Net cash provided by (used in) financing
activities..................................... (2,346) (4,662) 21,090
------- ------- -------
Exchange Rate Effect on Cash.................................. (123) 182 (552)
------- ------- -------
Increase in Cash and Cash Equivalents......................... 396 1,723 22,574
Cash and Cash Equivalents at Beginning of Year................ 267 663 2,386
------- ------- -------
Cash and Cash Equivalents at End of Year...................... $ 663 $ 2,386 $24,960
======= ======= =======
CASH PAID FOR:
Income taxes............................................. $ -- $ 293 $ 1,060
NONCASH ACTIVITIES (NOTE 2):
Transfer of acquired businesses from parent company...... $ 7,772 $12,345 $ 1,913
======= ======= =======
Fair value of assets of acquired companies............... $ -- $ -- $34,989
Cash paid for acquired companies......................... -- -- (9,889)
Payable to affiliated company............................ (19,117)
------- ------- -------
Liabilities assumed of acquired companies.............. $ -- $ -- $ 5,983
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 50
ONIX SYSTEMS INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
COMMON STOCK, $.01 PAR VALUE
Balance at beginning of year....................... $ -- $ -- $ --
Capitalization of the Company...................... -- -- 107
Net proceeds from issuance of Company common stock
(Note 7)......................................... -- -- 16
------- ------- --------
Balance at end of year............................. -- -- 123
------- ------- --------
CAPITAL IN EXCESS OF PAR VALUE
Balance at beginning of year....................... -- -- --
Capitalization of the Company...................... -- -- 79,027
Net proceeds from issuance of Company common stock
(Note 7)......................................... -- -- 21,939
------- ------- --------
Balance at end of year............................. -- -- 100,966
------- ------- --------
RETAINED EARNINGS
Balance at beginning of year....................... -- -- --
Net income after capitalization of the Company..... -- -- 3,150
------- ------- --------
Balance at end of year............................. -- -- 3,150
------- ------- --------
NET PARENT COMPANY INVESTMENT
Balance at beginning of year....................... 50,843 59,896 72,437
Net income prior to capitalization of the
Company.......................................... 3,627 4,858 5,649
Transfer of acquired businesses from parent company
(Note 2)......................................... 7,772 12,345 1,913
Net transfers to parent company.................... (2,346) (4,662) (865)
Capitalization of the Company...................... -- -- (79,134)
------- ------- --------
Balance at end of year............................. 59,896 72,437 --
------- ------- --------
CUMULATIVE TRANSLATION ADJUSTMENT
Balance at beginning of year....................... 49 (105) 673
Translation adjustment............................. (154) 778 26
------- ------- --------
Balance at end of year............................. (105) 673 699
------- ------- --------
TOTAL SHAREHOLDERS' INVESTMENT.......................... $59,791 $73,110 $104,938
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 51
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
ONIX Systems Inc. ("ONIX" or the "Company") designs, develops, markets and
services sophisticated field measurement instruments and on-line sensors. These
products incorporate a range of advanced measurement technologies to provide
real-time data collection, analysis and local control functions to enhance
production efficiency, improve process and quality control, ensure regulatory
compliance and increase employee safety. The Company manufactures field
measurement instruments and on-line sensors in four general product areas: flow
instruments, level and density instruments, composition analysis instruments and
industry-specific instruments.
RELATIONSHIP WITH THERMO INSTRUMENT SYSTEMS INC. AND THERMO ELECTRON CORPORATION
The Company operated as a division of Thermo Instrument Systems Inc.
(Thermo Instrument) until its incorporation as a Delaware corporation in August
1997 as a wholly owned subsidiary of Thermo Instrument. At that time, Thermo
Instrument contributed all of the assets or stock of certain of its subsidiaries
relating to the CAC, Flow Automation, TN Technologies, Kay-Ray/Sensall, Houston
Atlas, Westronics and VG Gas businesses to the Company in exchange for
10,666,667 shares of the Company's common stock. As of January 3, 1998, Thermo
Instrument owned 87% of the Company's outstanding common stock. As of January 3,
1998, Thermo Instrument was an 82%-owned subsidiary of Thermo Electron
Corporation (Thermo Electron).
The accompanying financial statements include the assets, liabilities,
income and expenses of the Company as included in Thermo Instrument's
consolidated financial statements. The accompanying financial statements do not
include Thermo Instrument's general corporate debt, which is used to finance
operations of all of its respective business segments, or an allocation of
Thermo Instrument's interest expense. The Company had positive cash flow from
operations for all periods presented.
PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company
and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
FISCAL YEAR
The Company has adopted a fiscal year ending the Saturday nearest December
31. References to 1995, 1996 and 1997 are for the fiscal years ended December
30, 1995, December 28, 1996 and January 3, 1998, respectively. Fiscal years 1995
and 1996 each included 52 weeks; 1997 included 53 weeks.
REVENUE RECOGNITION
The Company recognizes product revenues upon shipment of its products and
recognizes service contract revenues ratably over the term of the contract. The
Company provides a reserve for its estimate of warranty and installation costs
at the time of shipment.
STOCK-BASED COMPENSATION PLANS
The Company applies Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock-based compensation plans (Note 3). Accordingly, no
accounting recognition is given to stock options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.
F-7
<PAGE> 52
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Company and Thermo Electron have a tax allocation agreement under which
the Company is included in Thermo Electron's consolidated federal and certain
state income tax returns. The agreement provides that in years in which the
Company has taxable income, it will pay to Thermo Electron amounts comparable to
the taxes the Company would have paid if it had filed separate tax returns. Upon
completion of the proposed initial public offering, Thermo Instrument's
ownership of the Company will drop below 80% and the Company will be required to
file its own corporate tax returns.
In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
EARNINGS PER SHARE
Pursuant to Securities and Exchange Commission requirements, earnings per
share have been presented for all periods. Earnings per share have been computed
in accordance with SFAS No. 128 "Earnings per Share." Basic and diluted earnings
per share are the same as one another for each of the years presented and have
been computed by dividing net income by the weighted average number of shares
outstanding during the year. Weighted average shares for all periods include
10,666,667 shares issued to Thermo Instrument in connection with the initial
capitalization of the Company and, in 1997, the effect of shares sold through
the Company's private placement. In addition, weighted average shares for all
periods include the incremental effect of the assumed issuance of the Company's
1997 private placement shares and the assumed exercise of stock options issued
within one year prior to the Company's proposed initial public offering.
CASH AND CASH EQUIVALENTS
Prior to its incorporation, the cash receipts and disbursements of the
Company's domestic operations were combined with other Thermo Instrument
corporate cash transactions and balances. Therefore, cash of the Company's
domestic operations through August 1997 is not included in the accompanying
balance sheet.
As of January 3, 1998, $19,618,000 of the Company's cash equivalents were
invested in a repurchase agreement with Thermo Electron. Under this agreement,
the Company in effect lends excess cash to Thermo Electron, which Thermo
Electron collateralizes with investments principally consisting of U.S.
government-agency securities, corporate notes, commercial paper, money market
funds and other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement are readily
convertible into cash by the Company. The repurchase agreement earns a rate
based on the 90-day Commercial Paper Composite Rate for 90-day maturities plus
25 basis points, set at the beginning of each quarter. As of January 3, 1998,
the Company's cash equivalents also include investments in short-term
certificates of deposit of the Company's foreign subsidiaries, which have an
original maturity of three months or less. Cash equivalents are carried at cost,
which approximates market value.
F-8
<PAGE> 53
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost (on a first-in, first-out or
weighted average basis) or market value and include materials, labor and
manufacturing overhead. The components of inventories are as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies........................... $ 9,526 $18,095
Work in process...................................... 7,195 8,033
Finished goods....................................... 3,409 6,804
------- -------
$20,130 $32,932
======= =======
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings, 30 to 40 years; machinery
and equipment, 3 to 10 years; and leasehold improvements, the shorter of the
term of the lease or the life of the asset. Property, plant and equipment
consists of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Buildings............................................ $ 907 $ 1,485
Machinery, equipment and leasehold improvements...... 8,906 12,928
------- -------
9,813 14,413
Less: Accumulated depreciation and amortization...... 3,388 5,268
------- -------
$ 6,425 $ 9,145
======= =======
</TABLE>
COST IN EXCESS OF NET ASSETS OF ACQUIRED COMPANIES
The excess of cost over the fair value of net assets of acquired companies
is amortized using the straight-line method over 40 years. Accumulated
amortization was $2,287,000 and $3,488,000 at year-end 1996 and 1997,
respectively. The Company assesses the future useful life of this asset whenever
events or changes in circumstances indicate that the current useful life has
diminished. The Company considers the future undiscounted cash flows of the
acquired companies in assessing the recoverability of this asset. If impairment
has occurred, any excess of carrying value over fair value is recorded as a
loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, due from/payable to affiliated companies and
accounts payable. The carrying amounts of these financial instruments
approximate fair value due to their short-term nature.
FOREIGN CURRENCY
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year, in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected as a
separate component of shareholders' investment titled "Cumulative translation
adjustment." Foreign currency transaction gains and losses are included in the
accompanying statement of income and are not material for the three years
presented.
F-9
<PAGE> 54
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS
On November 6, 1997, Thermo Power Corporation (Thermo Power), a majority
owned subsidiary of Thermo Electron, acquired Peek plc. Thereafter, the Company
acquired from Thermo Power the assets of the Peek Measurement Business for
$19,117,000. The purchase price was determined based on the net book value of
the Peek Measurement Business at November 6, 1997, a pro rata allocation of
Thermo Power's total cost in excess of net assets of acquired companies recorded
in connection with its acquisition of Peek plc based on 1997 revenues of Peek
Measurement relative to Peek plc's total revenues, plus an estimate of Thermo
Power's tax liability that arises from the sale of the business to the Company.
Peek Measurement manufactures flow and density measurement systems for use in
the water/wastewater and oil and gas industries. The purchase price is included
in payable to affiliated companies in the accompanying 1997 balance sheet.
On March 29, 1996, Thermo Instrument acquired a substantial portion of the
businesses constituting the Scientific Instruments Division of Fisons plc
(Fisons), a wholly owned subsidiary of Rhone-Poulenc Rorer, Inc. Thereafter,
Thermo Instrument contributed the business of VG Gas Analysis (VG Gas), the
on-line process analysis division of Fisons, to the Company. The amount of net
assets transferred, $6,345,000, was determined based on the net book value of VG
Gas at March 29, 1996, and a pro rata allocation of Thermo Instrument's total
cost in excess of net assets of acquired companies recorded in connection with
its acquisition of the Fisons businesses, based on the revenues of VG Gas
relative to the total revenues of all of the Fisons businesses purchased by
Thermo Instrument.
Because the Company, Peek Measurement and VG Gas were deemed for accounting
purposes to be under control of their common majority owner, Thermo Electron,
the transactions have been accounted for in a manner similar to a pooling of
interests. Accordingly, the Company's financial statements include the results
of Peek Measurement and VG Gas from November 6, 1997 and March 29, 1996, the
respective dates Peek Measurement and VG Gas were acquired by Thermo Electron's
majority-owned subsidiaries.
In December 1997, the Company acquired substantially all of the assets of
Fluid Data, Inc. (Fluid Data) for $8,500,000 in cash and the assumption of
certain liabilities. Fluid Data is a manufacturer and distributor of pyrolysis
gas sampling systems, on-line process gas chromatographs, chemiluminescent
sulfur chromatography systems and high speed calorimeters. During 1997, the
Company and Thermo Instrument made two other acquisitions for an aggregate
$3,713,000 in cash.
In October 1996, Thermo Instrument acquired Kay-Ray/Sensall (Kay-Ray) from
Rosemount Inc., a division of Emerson Electric Co., Inc., for $6,000,000 in
cash. Kay-Ray is a manufacturer and distributor of nuclear gauges and ultrasonic
point level and continuous level switches.
In July 1995, Thermo Instrument acquired the Flow Automation division of
Galveston-Houston Company for $7,800,000 in cash and the assumption of certain
liabilities. Flow Automation is a supplier of fluid flow measurement and control
devices and offers a full range of electronic products to the gas/pipeline
automation market.
These acquisitions, except for Peek Measurement and VG Gas, have been
accounted for using the purchase method of accounting and their results of
operations have been included in the accompanying financial statements from
their respective dates of acquisition. The aggregate cost of these acquisitions
exceeded the estimated fair value of the acquired net assets by $30,848,000,
which is being amortized over
F-10
<PAGE> 55
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
40 years. Allocation of the purchase price for these acquisitions was based on
estimates of the fair value of the net assets acquired and, for the businesses
acquired in 1997, is subject to adjustment upon finalization of the purchase
price allocation. The Company has gathered no information that indicates that
the final allocation will differ materially from the preliminary estimates.
Based on unaudited data, the following table presents selected financial
information for the Company, Peek Measurement and Fluid Data on a pro forma
basis, assuming the companies had been combined since the beginning of 1996. The
effect of the acquisitions not included in the pro forma data was not material
to the Company's results of operations.
<TABLE>
<CAPTION>
1996 1997
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Revenues........................................... $130,547 $153,877
Net income......................................... 5,532 6,384
Basic and diluted earnings per share............... .50 .56
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions of Peek
Measurement and Fluid Data been made at the beginning of 1996.
3. EMPLOYEE BENEFIT PLANS
STOCK-BASED COMPENSATION PLANS
Stock Option Plans
In December 1997, the Company adopted a stock-based compensation plan for
its key employees, directors and others, which permits the grant of stock and
stock-based awards as determined by the human resources committee of the
Company's Board of Directors (the Board Committee), including restricted stock,
stock options, stock bonus shares or performance-based shares. The option
recipients and the terms of options granted under this plan are determined by
the Board Committee. Options granted generally vest and become immediately
exercisable on the ninth anniversary of the grant date, unless the Company's
stock becomes publicly traded prior to such date. In such an event, the options
become exercisable 90 days after the Company becomes subject to the Securities
Exchange Act of 1934, but are subject to certain transfer restrictions and the
right of the Company to repurchase shares issued upon exercise of the options at
the exercise price, upon certain events. The restrictions and repurchase rights
generally will be deemed to have lapsed ratably over periods ranging from five
to ten years after the first anniversary of the grant date, depending on the
term of the option, which generally ranges from seven to twelve years.
Nonqualified stock options may be granted at any price determined by the Board
Committee, although incentive stock options must be granted at not less than the
fair market value of the Company's stock on the date of grant. As of January 3,
1998, no options had been granted under this plan (Note 10). In addition to the
Company's stock-based compensation plan, certain officers and key employees may
also participate in the stock-based compensation plans of Thermo Instrument and
Thermo Electron.
Employee Stock Purchase Program
Substantially all of the Company's full-time U.S. employees are eligible to
participate in an employee stock purchase program sponsored by Thermo Instrument
and Thermo Electron. Under this program, shares of Thermo Instrument's and
Thermo Electron's common stock can be purchased at the end of a 12-month period
at 95% of the fair market value at the beginning of the period and the shares
purchased are subject to a six-month resale restriction. Prior to November 1,
1995, the applicable shares of common stock could be purchased at 85% of the
fair market value at the beginning of the period, and the shares purchased were
subject to a one-year resale restriction. Shares are purchased through payroll
deductions of up to 10% of each participating employee's gross wages.
F-11
<PAGE> 56
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
401(k) SAVINGS PLAN
The majority of the Company's full-time U.S. employees are eligible to
participate in Thermo Electron's 401(k) savings plan. Contributions to the
401(k) savings plans are made by both the employee and the Company. Company
contributions are based upon the level of employee contributions. For these
plans, the Company contributed and charged to expense $810,000, $829,000 and
$727,000 in 1995, 1996 and 1997, respectively.
4. INCOME TAXES
The components of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic.................................. $ 5,640 $ 5,587 $10,239
Foreign................................... 477 2,511 4,480
------- ------- -------
$ 6,117 $ 8,098 $14,719
======= ======= =======
</TABLE>
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Currently payable:
Federal.............................. $ 1,424 $ 1,373 $ 4,372
State................................ 316 272 909
Foreign.............................. 170 775 1,457
------- ------- -------
1,910 2,420 6,738
------- ------- -------
Net deferred (prepaid):
Federal.............................. 504 633 (740)
State................................ 76 108 (112)
Foreign.............................. -- 79 34
------- ------- -------
580 820 (818)
------- ------- -------
$ 2,490 $ 3,240 $ 5,920
======= ======= =======
</TABLE>
The provision for income taxes in the accompanying statement of income
differs from the provision calculated by applying the statutory federal income
tax rate of 35% to income before provision for income taxes due to the
following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for income taxes at statutory
rate.................................... $ 2,141 $ 2,834 $ 5,152
Increases (decreases) resulting from:
State income taxes, net of federal
tax................................ 255 247 518
Amortization of cost in excess of net
assets of acquired companies....... 100 100 128
Net foreign losses not benefited and
tax rate differential.............. 3 (24) (77)
Tax benefit of foreign sales
corporation........................ (114) (131) (114)
Other, net........................... 105 214 313
------- ------- -------
$ 2,490 $ 3,240 $ 5,920
======= ======= =======
</TABLE>
F-12
<PAGE> 57
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Prepaid income taxes and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes:
Reserves and accruals............................... $ 577 $1,035
Inventory basis difference.......................... 1,053 1,993
Accrued compensation................................ 390 564
Other, net.......................................... 27 (61)
------ ------
$2,047 $3,531
====== ======
Deferred income taxes:
Depreciation........................................ $ 61 $ 63
Intangible assets................................... 1,167 1,617
------ ------
$1,228 $1,680
====== ======
</TABLE>
A provision has not been made for U.S. or additional foreign taxes on
$7,200,000 of undistributed earnings of foreign subsidiaries that could be
subject to taxation if remitted to the U.S. because the Company currently plans
to keep these amounts permanently reinvested overseas. The Company believes that
any additional U.S. tax liability due upon remittance of such earnings would be
immaterial.
5. COMMITMENTS AND CONTINGENCY
OPERATING LEASES
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of income
includes expenses from operating leases of $1,443,000, $1,559,000 and $2,230,000
in 1995, 1996 and 1997, respectively. Future minimum payments due under
noncancellable operating leases at January 3, 1998, are: $2,216,000 in 1998;
$2,262,000 in 1999; $2,071,000 in 2000; $1,856,000 in 2001; $1,414,000 in 2002
and $2,898,000 in 2003 and thereafter. Total future minimum lease payments are
$12,717,000. See Note 6 for space leased from a related party.
CONTINGENCY
In December 1996, one former employee and four then current employees of
Thermo Instrument's Epsilon Industrial, Inc. (Epsilon) subsidiary commenced an
arbitration proceeding naming as joint defendants Epsilon, Thermo Electron,
Thermo Instrument and certain affiliates of Thermo Instrument, including TN
Technologies, a wholly owned subsidiary of the Company, alleging that these
entities breached the terms of certain agreements entered into with such
employees at the time that a predecessor of Epsilon acquired the assets and
business of a company formerly owned by such employees. The employees are
claiming damages of between $27 million and $46 million, punitive damages,
attorneys' fees and expenses, and pre-judgement and post-judgement interest,
resulting from the alleged failure of Thermo Instrument and such affiliates,
including TN Technologies, to, among other things, use their best efforts to
develop and promote certain products acquired at that time. The employees are
also alleging, among other things, fraud, breach of fiduciary duty, violations
of the Uniform Commercial Code and theft of trade secrets. The defendants,
including the Company, are contesting this matter vigorously. However, due to
the inherent uncertainty of dispute resolution, the Company cannot predict the
outcome of the matter, including what portion of damages, if any, may be
allocable to the Company in the event of an unfavorable resolution of this
matter. The Company has been indemnified by Thermo Instrument for any damages
that result from alleged actions of the Company prior to its capitalization in
August 1997, although any payments received as a result of such indemnification
would be treated as contributions to shareholders' investment. Accordingly, in
the opinion of management, while an unfavorable resolution of this matter could
materially affect the Company's future results of
F-13
<PAGE> 58
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operations, any such resolution would not have a material adverse effect on the
Company's financial position. The arbitration proceeding is expected to conclude
in the first quarter of 1998.
6. RELATED PARTY TRANSACTIONS
CORPORATE SERVICES AGREEMENT
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company paid Thermo Electron annually an amount equal to 1.20% of the
Company's revenues in 1995 and 1.0% of the Company's revenues in 1996 and 1997.
For these services, the Company was charged $865,000, $953,000 and $1,215,000 in
1995, 1996 and 1997, respectively. Beginning in 1998, the Company will pay an
annual fee equal to 0.8% of the Company's revenues. The annual fee is reviewed
and adjusted annually by mutual agreement of the parties. Management believes
that the service fee charged by Thermo Electron is reasonable and that such fees
are representative of the expenses the Company would have incurred on a
stand-alone basis. The corporate services agreement is renewed annually but can
be terminated upon 30 days' prior notice by the Company or upon the Company's
withdrawal from the Thermo Electron Corporate Charter (the Thermo Electron
Corporate Charter defines the relationship among Thermo Electron and its
majority-owned subsidiaries). For additional items such as employee benefit
plans, insurance coverage, and other identifiable costs, Thermo Electron charges
the Company based upon costs attributable to the Company.
OPERATING LEASES
Commencing in January 1998, the Company leases approximately 24,000 square
feet of a 60,000 square foot facility in Winchester, England, from Thermo Power.
The Company pays Thermo Power rent in an amount that is approximately equal to
its pro rata share of Thermo Power's occupancy costs. The Company's estimated
share of Thermo Power's occupancy costs for 1998 is $61,000.
Commencing in October 1997, the Company leases office and manufacturing
facilities from Thermo Instrument and is charged its share of occupancy costs.
The Company's rent for this facility in 1997 totaled $45,000. The Company's
expected commitment for rent in 1998 is approximately $180,000.
OTHER RELATED PARTY TRANSACTIONS
The Company sells products in the ordinary course of business to other
subsidiaries of Thermo Electron. Sales of such products to affiliated companies
totaled $435,000, $4,126,000 and $2,550,000 in 1995, 1996 and 1997,
respectively.
REPURCHASE AGREEMENT
The Company invests excess cash in a repurchase agreement with Thermo
Electron as discussed in Note 1.
7. COMMON STOCK
In 1997, the Company sold 1,639,670 shares of its common stock in a private
placement at $14.25 per share, for net proceeds of $21,955,000.
F-14
<PAGE> 59
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. GEOGRAPHICAL INFORMATION AND CONCENTRATION OF RISK
The following table shows data for the Company by geographical area:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
United States.......................................... $61,688 $ 70,569 $ 99,144
United Kingdom......................................... 10,097 22,413 23,941
Other.................................................. 2,617 4,708 6,696
Transfers among geographical areas (a)................. (2,297) (2,374) (8,256)
------- -------- --------
$72,105 $ 95,316 $121,525
======= ======== ========
Income before provision for income taxes:
United States.......................................... $ 5,920 $ 5,805 $ 11,223
United Kingdom......................................... 1,105 2,751 2,711
Other.................................................. 452 953 1,769
Corporate and eliminations (b)......................... (1,360) (1,411) (1,215)
------- -------- --------
Total operating income................................. 6,117 8,098 14,488
Interest income, net................................... -- -- 231
------- -------- --------
Income before provision for income taxes............... $ 6,117 $ 8,098 $ 14,719
======= ======== ========
Total assets:
United States.......................................... $71,823 $ 76,387 $108,275
United Kingdom......................................... 3,574 18,634 21,341
Other.................................................. 824 1,989 7,053
Corporate (c).......................................... -- -- 23,040
------- -------- --------
$76,221 $ 97,010 $159,709
======= ======== ========
Export revenues included in United States revenues above
(d):
Asia................................................... $ 8,273 $ 5,754 $ 7,721
Europe................................................. 4,017 3,789 4,226
South America.......................................... 2,747 2,936 2,689
Other.................................................. 5,548 6,024 6,951
------- -------- --------
$20,585 $ 18,503 $ 21,587
======= ======== ========
</TABLE>
(a) Transfers among geographical areas are accounted for at prices that are
representative of transactions with unaffiliated parties.
(b) Primarily general and administrative expenses.
(c) Primarily cash and cash equivalents.
(d) In general, export sales are denominated in U.S. dollars.
The Company sells a majority of its products to customers in the oil and
gas industries. The Company does not normally require collateral or other
security to support its accounts receivable. Management does not believe that
this concentration of credit risk has or will have a significant negative effect
on the Company.
F-15
<PAGE> 60
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. EARNINGS PER SHARE
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Net income.................................................... $ 3,627 $ 4,858 $ 8,799
------- ------- -------
Weighted average shares....................................... 10,667 10,667 11,083
Effect of:
Private placement........................................... 339 339 249
Stock options............................................... 48 48 48
------- ------- -------
Weighted average shares, as adjusted.......................... 11,054 11,054 11,380
------- ------- -------
Basic and diluted earnings per share.......................... $ .33 $ .44 $ .77
======= ======= =======
</TABLE>
10. SUBSEQUENT EVENTS
STOCK OPTIONS
In January 1998, the Board Committee granted options to purchase 518,667
shares of the Company's common stock at $14.25 per share, which was the fair
market value on the date of the grant. As of January 29, 1998, the Company had
reserved 1,083,334 unissued shares of its common stock for possible issuance
under its stock-based compensation plans.
STOCK SPLIT
In January 1998, the Company declared and effected a two-for-three reverse
stock split. All share and per share information has been restated to reflect
the stock split.
NOTE PAYABLE TO PARENT COMPANY
In January 1998, the Company paid Thermo Power $19,117,000, representing
the purchase price for the Peek Measurement Business. The Company borrowed
$12,000,000 from Thermo Instrument to partially fund this payment. The note to
Thermo Instrument bears interest at the 90-day Commercial Paper Composite Rate
for 90-day maturities plus 25 points, set at the beginning of each quarter and
is due on July 31, 1998.
F-16
<PAGE> 61
[Picture of the Company's solar-powered gas flow computers which are attached
to a natural gas pipeline. The flow computers are connected to the pipe by long
black cables. A long pole is set in the ground immediately adjacent to the pipe
and supports the computers and solar panel.]
The Company's remotely installed, solar-powered gas flow computers are critical
in custody transfer measurement by the natural gas industry.
[Picture of a technician measuring flow readings on a blue gas pipe. The
technician is holding the Company's hand-held data presentation instrument,
which is about the size of a cellular phone, with an alphanumeric key pad
beneath a graphic display. Coming out of the top of the device is a cable
connected to two clamp-on transducers which attach to the gas pipe. The
transducers measure the flow rate through the pipe using a non-intrusive
doppler technology.]
The Company's recently acquired Peek Measurement Business products include a
portable flow meter that uses non-contacting ultrasonic technology to measure
the flow of liquids in process operations.
[Picture of a technician using the Company's mass spectrometer system to analyze
the type and content of gases within the customer's operations. The technician
is shown attaching a tank, containing gases used to calibrate the system, to a
multistream inlet, which is an approximately 9" diameter silver wheel. The inlet
is attached to the front panel of the spectometer system, a 58" long and 22"
wide rectangular black box that stands erect on the floor of the customers'
facilities.]
The Company's process mass spectrometer system provides highly
accurate, real-time analysis of the type and content of gases at multiple points
within a customer's operations.
<PAGE> 62
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Information........ 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 16
Business.............................. 19
Relationship with Thermo Electron and
Thermo Instrument................... 29
Management............................ 32
Security Ownership of Certain
Beneficial Owners and Management.... 37
Description of Capital Stock.......... 39
Shares Eligible for Future Sale....... 39
Underwriting.......................... 41
Legal Opinions........................ 42
Experts............................... 42
Additional Information................ 43
Reports to Security Holders........... 43
Index to Consolidated Financial
Statements.......................... F-1
------------------------
UNTIL , 1998 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON
STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS REQUIREMENT IS IN ADDITION
TO THE OBLIGATIONS OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
</TABLE>
SHARES
ONIX SYSTEMS INC.
COMMON STOCK
----------------------
PROSPECTUS
----------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
GRUNTAL & CO., L.L.C.
, 1998
================================================================================
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee, the NASD filing fee
and the American Stock Exchange listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 16,234
NASD filing............................................................... 6,003
American Stock Exchange listing fee....................................... 45,000
Legal fees and expenses................................................... 150,000
Accounting fees and expenses.............................................. 400,000
Blue Sky fees and expenses (including legal fees)......................... 10,000
Printing and engraving expenses........................................... 180,000
Transfer agent fees....................................................... 5,000
Miscellaneous............................................................. 87,763
--------
Total........................................................... $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and the Registrant's Certificate of
Incorporation and By-Laws limit the monetary liability of directors to the
Registrant and to its stockholders and provide for indemnification of the
Registrant's officers and directors for liabilities and expenses that they may
incur in such capacities. In general, officers and directors are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, the best interests of the Registrant, and with respect
to any criminal action or proceeding, actions that the indemnitee had no
reasonable cause to believe were unlawful. The Registrant also has
indemnification agreements with its directors and officers that provide for the
maximum indemnification allowed by law. Reference is made to the Registrant's
Certificate of Incorporation, By-Laws and form of Indemnification Agreement for
Officers and Directors incorporated by reference as Exhibits 3.1, 3.2 and 10.10
hereto, respectively.
Thermo Electron has an insurance policy which insures the directors and
officers of Thermo Electron and its subsidiaries, including the Registrant,
against certain liabilities which might be incurred in connection with the
performance of their duties.
Under the Underwriting Agreement, the Underwriters are obligated, under
certain circumstances, to indemnify directors and officers of the Registrant
against certain liabilities, including liabilities under the Securities Act.
Reference is made to the form of Underwriting Agreement filed as Exhibit 1
hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On August 21, 1997, the Registrant issued 10,666,667 shares of Common Stock
(adjusted to reflect a two-for-three reverse stock split effected in January
1998) to Thermo Instrument in exchange for the assets or stock of certain of its
subsidiaries relating to the CAC, Flow Automation, TN Technologies, Kay-
Ray/Sensall, Houston Atlas, Westronics and VG Gas businesses. Exemption from
registration of this transaction is claimed under Section 4(2) of the Securities
Act.
On September 24, 1997, the Registrant sold an aggregate of 1,473,674 shares
of Common Stock to accredited investors for an aggregate purchase price of
$20,999,949.50, pursuant to Regulation D of the Commission promulgated under the
Securities Act.
II-1
<PAGE> 64
On October 22, 1997, the Registrant sold an aggregate of 165,996 shares of
Common Stock to accredited investors for an aggregate purchase price of
$2,365,500, pursuant to Regulation D of the Commission promulgated under the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
(b) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules as of January 3, 1998 and the Report of
Independent Accountants on such schedules are included in this Registration
Statement. All other schedules are omitted because they are not applicable or
are not required under Regulation S-X.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement certificates
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and By-Laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-2
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on this 30th day of January, 1998.
ONIX SYSTEMS INC.
By: /s/ WILLIAM J. ZOLNER
----------------------------------
William J. Zolner
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of ONIX Systems Inc., hereby
constitute and appoint John N. Hatsopoulos, Paul F. Kelleher, Seth H. Hoogasian,
Sandra L. Lambert and Melissa F. Riordan, and each of them singly, our true and
lawful attorneys with full power to them, and each of them singly, to sign for
us and in our names in the capacities indicated below, the Registration
Statement on Form S-1 filed herewith and any and all amendments to said
Registration Statement (including any subsequent Registration Statement for the
same offering which may be filed under Rule 462(b)), and generally to do all
such things in our names and on our behalf in our capacities as officers and
directors to enable ONIX Systems Inc. to comply with the provisions of the
Securities Act and all requirements of the Securities and Exchange Commission,
hereby ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------- -----------------
<C> <S> <C>
/s/ EARL R. LEWIS Chairman of the Board and January 30, 1998
- --------------------------------------------- Director
Earl R. Lewis
/s/ WILLIAM J. ZOLNER President, Chief Executive January 30, 1998
- --------------------------------------------- Officer & Director
William J. Zolner
/s/ JOHN N. HATSOPOULOS Senior Vice President, January 30, 1998
- --------------------------------------------- Chief Financial Officer
John N. Hatsopoulos & Director
/s/ PAUL F. KELLEHER Chief Accounting Officer January 30, 1998
- ---------------------------------------------
Paul F. Kelleher
/s/ ARVIN H. SMITH Director January 30, 1998
- ---------------------------------------------
Arvin H. Smith
</TABLE>
II-3
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ONIX Systems Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of ONIX Systems Inc. included in ONIX
Systems Inc.'s Form S-1 and have issued our report thereon dated January 28,
1998. Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. ONIX Systems Inc.'s Schedule
of Valuation and Qualifying Accounts, included in Schedule II on page S-2, is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic consolidated
financial statements and, in our opinion, fairly states, in all material
respects, the financial data required to be set forth therein in relation to the
basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 28, 1998
S-1
<PAGE> 67
SCHEDULE II
ONIX SYSTEMS INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO ACCOUNTS ACCOUNTS AT END
DESCRIPTION OF YEAR EXPENSE OTHER(a) RECOVERED WRITTEN OFF OF YEAR
- ------------------------------------- ---------- ---------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 30, 1995
Allowance for Doubtful Accounts.... $1,940 $779 $ (432) $ 111 $(1,038) $ 1,360
YEAR ENDED DECEMBER 28, 1996
Allowance for Doubtful Accounts.... $1,360 $283 $ 364 $ 7 $ (667) $ 1,347
YEAR ENDED JANUARY 3, 1998
Allowance for Doubtful Accounts.... $1,347 $674 $ 613 $ 9 $ (488) $ 2,155
</TABLE>
- ---------------
(a) Includes allowance of businesses acquired during the year as described in
Note 2 to Consolidated Financial Statements included elsewhere in this
Prospectus and foreign currency translation adjustment.
S-2
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ------------------------------------------------------------------------------ -----
<S> <C> <C>
1* Form of Underwriting Agreement
2 Share Purchase Agreement dated January 29, 1998 between Thermo Power and the
Registrant relating to the acquisition of the Peek Measurement Business
3.1 Certificate of Incorporation of the Registrant
3.2 By-Laws of the Registrant
4* Specimen Common Stock Certificate
5* Opinion of Seth H. Hoogasian, Esq. with respect to the validity of the
securities being offered
10.1 Corporate Services Agreement dated as of August 21, 1997 between Thermo
Electron and the Registrant
10.2 Thermo Electron Corporate Charter, as amended and restated effective January
3, 1993 (filed as exhibit 10.1 to Thermo Electron's Annual Report on Form 10-K
for the fiscal year ended January 3, 1993 [File No. 1-8002] and incorporated
herein by reference)
10.3 Tax Allocation Agreement dated as of August 21, 1997 between Thermo Electron
and the Registrant
10.4 Master Repurchase Agreement dated as of August 21, 1997 between Thermo
Electron and the Registrant
10.5 Amended and Restated Master Guarantee Reimbursement and Loan Agreement dated
as of January 5, 1998 between Thermo Electron and the Registrant
10.6 Amended and Restated Master Guarantee Reimbursement and Loan Agreement dated
as of January 5, 1998 between Thermo Instrument and the Registrant
10.7 Stock Transfer Agreement dated August 21, 1997 between Thermo Instrument and
the Registrant
10.8 Indemnification Agreement dated as of August 21, 1997 between Thermo
Instrument and the Registrant
10.9 Form of Deferred Compensation Plan for Directors of the Registrant
10.10 Form of Indemnification Agreement for Officers and Directors of the Registrant
10.11 Promissory Note dated January 29, 1998 in the principal amount of $12,000,000
issued by the Registrant to Thermo Instrument
10.12 Lease Agreement dated June 4, 1990 between Crow-Gottesman-Hill #43, as
landlord and TN Technologies, as tenant for property located in the City of
Round Rock, Williamson County, Texas
10.13 Equity Incentive Plan of the Registrant
10.14 Incentive Stock Option Plan of Thermo Electron (filed as Exhibit 4(d) to
Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and
incorporated herein by reference)
10.15 Nonqualified Stock Option Plan of Thermo Electron (filed as Exhibit 4(e) to
Thermo Electron's Registration Statement on Form S-8 [Reg. No. 33-8993] and
incorporated herein by reference)
10.16 Equity Incentive Plan of Thermo Electron (filed as Exhibit 10.1 to Thermo
Electron's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994
[File No. 1-8002] and incorporated herein by reference)
10.17 Incentive Stock Option Plan of Thermo Instrument (filed as Exhibit 10(c) to
Thermo Instrument's Registration Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference)
10.18 Nonqualified Stock Option Plan of Thermo Instrument (filed as Exhibit 10(d) to
Thermo Instrument's Registration Statement on Form S-1 [Reg. No. 33-6762] and
incorporated herein by reference)
10.19 Equity Incentive Plan of Thermo Instrument (filed as Appendix A to the Proxy
Statement dated April 27, 1993, of Thermo Instrument [File No. 1-9786] and
incorporated herein by reference)
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ ------------------------------------------------------------------------------ -----
<S> <C> <C>
10.20 Thermo Instrument Systems Inc. -- ThermoSpectra Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.51 to Thermo Instrument's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994 [File No. 1-9786] and
incorporated herein by reference)
10.21 Thermo Instrument Systems Inc. -- Thermo BioAnalysis Corporation Nonqualified
Stock Option Plan (filed as Exhibit 10.64 to Thermo Cardiosystems' Annual
Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference)
10.22 Thermo Instrument Systems Inc. -- Thermo Optek Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.27 to Thermo Instrument's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996 [File No. 1-9786] and
incorporated herein by reference)
10.23 Thermo Instrument Systems Inc. -- ThermoQuest Corporation Nonqualified Stock
Option Plan (filed as Exhibit 10.65 to Thermo Cardiosystems' Annual Report on
Form 10-K for the fiscal year ended December 30, 1995 [File No. 1-10114] and
incorporated herein by reference)
21 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
23.2* Consent of Seth H. Hoogasian, Esq. (included in Exhibit 5)
24 Power of Attorney (see Signature Page of this Registration Statement)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 2
SHARE PURCHASE AGREEMENT
This AGREEMENT is dated as of January 29, 1998 by and among (i) Radley
Services Ltd. ("Radley") and Peek Corporation ("PC"), on the one hand, (ii) ONIX
Systems Inc., on the other hand ("Buyer"), and (iii) Thermo Power Corporation, a
Massachusetts corporation ("Thermo"). Thermo, Radley and PC are sometimes
referred to herein collectively as the Sellers.
WHEREAS, Sellers desire to sell all of the issued and outstanding
shares of each of (i) Peek Measurement Ltd., a company organized under the laws
of England ("PML"), (ii) Brandt Instruments Inc., a company organized under the
laws of the State of Delaware ("Brandt") and (iii) Peek Measurement Inc., a
company organized under the laws of the State of Texas ("PMI") to Buyer, and
Buyer desires to purchase such shares from the Sellers;
NOW, THEREFORE, in consideration of the premises and mutual promises
and agreements set forth herein, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF SHARES.
(a) PC hereby sells, assigns, transfers, conveys, and delivers
to Buyer 100% of the issued and outstanding shares of capital stock of each of
Brandt (the "Brandt Shares") and PMI (the "PMI Shares") and (ii) Radley hereby
sells, assigns, transfers, conveys, and delivers to Buyer 100% of the issued and
outstanding share capital of PML (the "PML Shares," collectively with the Brandt
Shares and PMI Shares, the "Shares"). In consideration for the Shares, Buyer
shall pay to Sellers an aggregate of $19,116,825 in cash (the "Purchase Price")
plus interest on such amount for the period beginning November 6, 1997 and
ending on the date of payment of the Purchase Price, at a rate equal to the
90-day Commercial Paper Composite Rate for 90-day maturities as reported by
Merrill Lynch Capital Markets, as an average of the last five business days of
the Buyer's latest fiscal quarter, plus 25 basis points, reset each quarter. The
parties acknowledge and agree that the Purchase Price represents the sum of (i)
the aggregate net tangible assets of PML, Brandt and PMI (collectively, the
"Peek Measurement Business") (assumed to be $5,559,000) as of the date of
Thermo's acquisition of the Peek Measurement Business as part of the acquisition
on November 6, 1997, by Thermo of Peek plc (the "Peek plc Business"), plus (ii)
a percentage of the total goodwill associated with Thermo's acquisition of the
Peek plc Business equal to the total revenues of the Peek Measurement Business
for the 1997 fiscal year relative to the total revenues of the Peek plc Business
for such period, plus (iii) $1,038,825, representing the estimated tax liability
of Thermo relating to the transfer of the Peek Measurement Business to Buyer.
2. FURTHER ASSURANCES. At the request of Buyer at any time on or
after the date hereof, Sellers will execute and deliver such further
instruments of transfer and conveyance and take such other action as Buyer
reasonably may request effectively to assign and transfer to Buyer any of the
Shares.
<PAGE> 2
3. SELLERS' REPRESENTATIONS AND WARRANTIES. Each Seller represents
and warrants that:
(a) ORGANIZATION AND EXISTENCE. Such Seller is a company
organized and existing under the laws of its respective jurisdiction of
organization.
(b) APPROVAL OF TRANSACTIONS. Each Seller has obtained all
necessary corporate authorizations and approvals, and has taken all actions
required for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
(c) NO CONFLICT. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor the
fulfillment of or compliance with the terms and provisions hereof will (1)
conflict with the charter documents or by-laws of such Seller, (2) violate any
current provisions of law, administrative regulation, or court decree applicable
to such Seller or (3) conflict with or result in a breach of any of the terms,
conditions or provisions of or constitute default under any material agreement
or instrument to which such Seller, or any Peek Measurement Business entity, is
a party or by which each is bound.
(d) OWNERSHIP OF ASSETS AND SHARES; AUTHORITY TO TRANSFER. The
Shares are not encumbered and are freely transferable by the respective Seller.
PC holds good and marketable title to the Brandt Shares and the PMI Shares and
no third party is entitled to claim any right thereto or make any claim thereon.
Radley holds good and marketable title to the PML Shares and no third party is
entitled to claim any right thereto or make any claim thereon. The transfer of
the Shares to Buyer pursuant to this Agreement will vest in Buyer title to the
Shares, free and clear of all liens, claims, equities, options, calls, voting
trusts, agreements, commitments and encumbrances whatsoever.
4. BUYER'S REPRESENTATIONS AND WARRANTIES.
(a) ORGANIZATION AND EXISTENCE. The Buyer is a company organized
and existing under the laws of its jurisdiction of organization.
(b) APPROVAL OF TRANSACTIONS. The Buyer has obtained all
necessary corporate authorizations and approvals, and has taken all actions
required for the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
(c) NO CONFLICT. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor the
fulfillment of or compliance with the terms and provisions hereof will (1)
conflict with the charter documents or by-laws of the Buyer, (2) violate any
current provisions of law, administrative regulation, or court decree applicable
to the Buyer or (3) conflict with or result in a breach of any of the terms,
conditions or provisions of or constitute default under any material agreement
or instrument to which the Buyer is a party or by which it is bound.
2
<PAGE> 3
5. INDEMNIFICATION.
(a) Sellers jointly and severally agree to indemnify and hold
harmless Buyer from any and all damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any reasonable legal,
accounting or other expenses for investigating or defending any actions or
threatened actions) incurred by Buyer as a result of (i) the inaccuracy of any
representation or warranty contained in Section 3 hereof or (ii) the breach by
Sellers of any provision hereof.
(b) Buyer agrees to indemnify and hold harmless Sellers from any
and all damages, losses, liabilities, costs and expenses (including, without
limitation, settlement costs and any reasonable legal, accounting or other
expenses for investigating or defending any actions or threatened actions)
incurred by Sellers as a result of (i) the inaccuracy of any representation or
warranty contained in Section 4 hereof or (ii) the breach by Buyer of any
provision hereof.
(c) Whenever any claim shall arise for indemnification
hereunder, the party seeking indemnification (the "Indemnified Party") shall
promptly notify the other party or parties from whom indemnification is sought
(as the case may be, the "Indemnifying Party") of the claim and, when known, the
facts constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnifying Party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which the Indemnified Party is entitled to
indemnification hereunder without the prior consent of the Indemnifying Party,
unless suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Section 5(d) of this Agreement.
(d) In connection with any claim giving rise to indemnity
hereunder resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, the Indemnifying Party at its sole
cost and expense may, upon notice to the Indemnified Party, assume the defense
of any such claim or legal proceeding if it acknowledges to the Indemnified
Party its obligations to indemnify the Indemnified Party with respect to all
elements of such claim. The Indemnified Party shall be entitled to participate
in (but not control) the defense of any such action, with its counsel and at its
own expense. If the Indemnifying Party does not assume the defense of any such
claim or litigation resulting therefrom within 30 days after the date the
Indemnifying Party is notified of such claim pursuant to Paragraph 5(c) hereof,
(i) the Indemnified Party may defend against such claim or litigation, after
giving notice of the same to the Indemnifying Party, on such terms as are
appropriate in the Indemnified Party's reasonable judgment, and (ii) the
Indemnifying Party shall be entitled to participate in (but not control) the
defense of such action, with its counsel and at its own expense.
6. EFFECTIVE DATE. The transfer of the Shares shall be deemed to be
effective as of November 6, 1997.
3
<PAGE> 4
7. CAPTIONS. The captions and headings to the various sections,
paragraphs and exhibits of this Agreement are for convenience of reference only
and shall not affect or control the meaning or interpretation of any of the
provisions of this Agreement.
8. INTEGRATION. This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein.
9. NOTICES AND COMMUNICATIONS. Any notice or other communication
shall be in writing and shall be personally delivered, or sent by overnight or
second day courier or by first class mail, return receipt requested, to the
party to whom such notice or other communication is to be given or made at such
party's address set forth below, or to such other address as such party shall
designate by written notice to the other party as follows:
If to Sellers or Thermo Power Corporation:
Thermo Power Corporation
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn.: General Counsel
If to Buyer:
ONIX Systems Inc.
c/o Thermo Electron Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn.: General Counsel
provided that any notice of change of address, and any notice or other
communication given otherwise than as specified above shall be effective only
upon receipt; and further that any presumption of receipt by the addressee shall
be inoperable during the period of any interruption in Postal Service.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by Sellers or Buyer in this Agreement shall survive the
execution and delivery of this Agreement.
4
<PAGE> 5
11. GOVERNING LAW; ASSIGNMENT. This Agreement is to be construed,
interpreted, applied and governed in all respects in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its conflict of laws
provisions, is to take effect as a sealed instrument, is binding upon and inures
to the benefit of the parties hereto and their respective successors and assigns
and may be canceled, modified or amended only by a written instrument executed
by Thermo, Sellers and Buyer. No party hereto may assign its rights hereunder
without prior written consent of the other party.
12. GUARANTY. Thermo hereby unconditionally guarantees all of the
obligations of the other Sellers under this Agreement.
13. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall for all purposes constitute one Agreement, binding on
the parties hereto notwithstanding that such parties have not signed the same
counterpart.
[Remainder of Page Intentionally Left Blank]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
SELLERS:
RADLEY SERVICES LTD. PEEK CORPORATION
By: /s/ J. Timothy Corcoran By: /s/ J. Timothy Corcoran
---------------------------- ----------------------------
Title: Authorized Signatory Title: Chairman
------------------------- --------------------------
BUYER: THERMO:
ONIX SYSTEMS INC. THERMO POWER CORPORATION
By: /s/ William J. Zolner By: /s/ J. Timothy Corcoran
---------------------------- ----------------------------
Title: President & CEO Title: President & CEO
------------------------- -------------------------
6
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
OnIX SYSTEMS INC.
* * * * * * *
FIRST: The name of the corporation is:
OnIX SYSTEMS INC.
SECOND: The address of its registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is Fifty Million (50,000,000), and the
par value of each of such shares is one cent ($.01), amounting in the aggregate
to Five Hundred Thousand dollars ($500,000) of capital stock.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
NAME MAILING ADDRESS
Tammy Viera 81 Wyman Street
Waltham, Massachusetts 02254
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be subject
to the payment of the corporation debts to any extent whatever.
EIGHTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the corporation and for defining
and regulating the powers of the corporation and its directors and stockholders
and are in the furtherance and not in limitation of the powers conferred upon
the corporation by statute:
<PAGE> 2
(a) The by-laws of the corporation may fix and alter, or provide
the manner for fixing and altering, the number of directors
constituting the whole Board. In case of any vacancy on the Board of
Directors or any increase in the number of directors constituting the
whole Board, the vacancies shall be filled by the directors or by the
stockholders at the time having voting power, as may be prescribed in
the by-laws. Directors need not be stockholders of the corporation, and
the election of directors need not be by ballot.
(b) The Board of Directors shall have the power and authority:
(1) to make, alter or repeal by-laws of the corporation,
subject only to such limitation, if any, as may be from time to
time imposed by law or by the by-laws; and
(2) to the full extent permitted or not prohibited by law,
and without the consent of or other action by the stockholders, to
authorize or create mortgages, pledges or other liens or
encumbrances upon any or all of the assets, real, personal or
mixed, and franchises of the corporation, including after-acquired
property, and to exercise all of the powers of the corporation in
connection therewith; and
(3) subject to any provision of the by-laws, to determine
whether, to what extent, at what times and places and under what
conditions and regulations the accounts, books and papers of the
corporation (other than the stock ledger), or any of them, shall
be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or paper of the
corporation except as conferred by statute or authorized by the
by-laws or by the Board of Directors.
NINTH: Meetings of stockholders may be held outside the State of
Delaware, if the by-laws so provide. The books of the corporation may be kept
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the by-laws of the
corporation.
TENTH: The corporation shall indemnify each director and officer of the
corporation, his heirs, executors and administrators, and may indemnify each
employee and agent of the corporation, his heirs, executors, administrators and
all other persons whom the corporation is authorized to indemnify under the
provisions of the General Corporation Law of the State of Delaware, to the
maximum extent permitted by law (a) against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any action, suit or proceeding, whether
civil, criminal, administrative or investigative (except an action by or in the
right of the corporation), or in connection with any appeal therein, or
otherwise, and (b) against all expenses (including attorney's fees) actually and
reasonably incurred by him
<PAGE> 3
in connection with the defense or settlement of any action or suit by or in the
right of the corporation, or otherwise; and no provision of this Article
Eleventh is intended to be construed as limiting, prohibiting, denying or
abrogating any of the general or specific powers or rights conferred by the
General Corporation Law of the State of Delaware upon the corporation to
furnish, or upon any court to award, such indemnification, or indemnification as
otherwise authorized pursuant to the General Corporation Law of the State of
Delaware or any other law now or hereafter in effect.
The Board of Directors of the corporation may, in its discretion,
authorize the corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the foregoing paragraph of this Article Eleventh.
ELEVENTH: To the maximum extent that Delaware law in effect from time
to time permits limitation of the liability of directors, no director of the
corporation shall be liable to the corporation or its stockholders for money
damages. Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the corporation's Certificate of
Incorporation or by-laws inconsistent with this Article, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption. The limitation on liability provided by this Article applies to events
occurring at the time a person serves as a director of the corporation whether
or not such person is a director at the time of any proceeding in which
liability is asserted.
TWELFTH: The corporation reserves the right to amend, alter, change or
repeal any provisions contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this certificate, hereby declaring and
certifying that this is my act and deed and the facts stated herein are true,
and accordingly have hereunto set my hand this 18th day of August, 1997.
/s/ Tammy Viera
---------------------------
Tammy Viera
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
OnIX SYSTEMS INC.
I, the undersigned, being the sole incorporator of OnIX Systems Inc., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: That the first paragraph of Article I of the Certificate of
Incorporation be and it hereby is amended to read as follows:
The name of the Corporation is:
ONIX Systems Inc.
SECOND: That the corporation has not received any payment for any of its
stock.
THIRD: That the amendment was duly adopted in accordance with the
provisions of section 241 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, we have signed this certificate this Twentieth day of
August, 1997.
/s/ Tammy J. Viera
---------------------------------
Tammy J. Viera, Sole Incorporator
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ONIX SYSTEMS INC.
* * * * *
ONIX Systems Inc. (the "Corporation"), a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows,
pursuant to Section 242 of the General Corporation Law of the State of Delaware:
FIRST: That Article FOURTH of the Certificate of Incorporation of the
Corporation is hereby amended to effect a reverse stock split and that
such amendment is hereby effected by deleting said Article in its entirety and
inserting the following in substitution therefor:
"FOURTH: The total number of shares of Common Stock which the
corporation shall have authority to issue is fifty million (50,000,000),
and the par value of each of such shares is one cent ($.01), amounting
in the aggregate to five hundred thousand dollars ($500,000) of Common
Stock. Each share of Common Stock, $.01 par value per share, issued as
of the close of business on the date that this Certificate of Amendment
to the corporation's Certificate of Incorporation becomes effective
shall automatically be converted into two-thirds (2/3rds) of a validly
issued, fully paid and nonassessable share of Common Stock, $.01 par
value. Upon this amendment becoming effective, each certificate
representing shares of Common Stock, $.01 par value, immediately prior
to the effectiveness of this Certificate of Amendment, shall represent
two-thirds (2/3rds) of a share of Common Stock, $.01 par value, from and
after the effectiveness of this Certificate of Amendment. Each
stockholder who would otherwise be entitled to receive a fractional
share will be paid cash in lieu of such fractional share in the sum of
such stockholder's fractional interest multiplied by $14.25."
SECOND: That the Board of Directors of the Corporation, in a written
action in lieu of a meeting dated January 29, 1998, duly adopted the following
resolution:
RESOLVED: That the Directors of the Corporation recommend that the
stockholders of the Corporation approve an amendment to
the Corporation's Certificate of Incorporation declaring
a reverse stock split of two shares for every three
shares (2:3) of the Common Stock of the Corporation; said
split to be accomplished by issuing to the holders of
record of the Common Stock of the Corporation two shares
of Common Stock for every three shares of
<PAGE> 6
Common Stock held by such holders as of the date the
Certificate of Amendment to the Corporation's Certificate
of Incorporation is filed with the office of the Delaware
Secretary of State.
THIRD: That the amendment to the Corporation's Certificate of
Incorporation was duly adopted by the affirmative vote of the stockholders of
the Corporation holding in excess of 50% of the shares of Common Stock, $.01 par
value per share, entitled to vote thereon in accordance with the provisions of
Section 242 and Section 228 of the General Corporation Law of the State of
Delaware.
FOURTH: That in accordance with Section 228 of the General Corporation
Law of the State of Delaware, written notice of such amendment shall be promptly
given to each stockholder of the Corporation who has not consented to such
amendment.
FIFTH: That this Certificate of Amendment of the Certificate of
Incorporation shall be effective immediately upon filing.
IN WITNESS WHEREOF, ONIX Systems Inc. has caused this Certificate of
Amendment to be signed by Melissa F. Riordan, its Treasurer, and attested by
Sandra L. Lambert, its Secretary, this 29th day of January, 1998.
ONIX SYSTEMS INC.
By: /s/ Melissa F. Riordan
-----------------------------
Melissa F. Riordan
Treasurer
ATTEST:
By: /s/ Sandra L. Lambert
--------------------------
Sandra L. Lambert
Secretary
2
<PAGE> 1
EXHIBIT 3.2
ONIX SYSTEMS INC.
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - GENERAL......................................................... 1
Section 1.1. Offices..................................................... 1
Section 1.2. Seal........................................................ 1
Section 1.3. Fiscal Year................................................. 1
ARTICLE II - STOCKHOLDERS................................................... 1
Section 2.1. Place of Meetings........................................... 1
Section 2.2. Annual Meeting......................... .................... 1
Section 2.3. Quorum...................................................... 1
Section 2.4. Right to Vote; Proxies...................................... 2
Section 2.5. Voting...................................................... 2
Section 2.6. Notice of Annual Meetings................................... 2
Section 2.7. Stockholders' List.......................................... 2
Section 2.8. Special Meetings............................................ 2
Section 2.9. Notice of Special Meetings.................................. 3
Section 2.10. Inspectors.................................................. 3
Section 2.11. Stockholders' Action by Consent............................. 3
ARTICLE III - DIRECTORS..................................................... 3
Section 3.1. Number of Directors......................................... 3
Section 3.2. Change in Number of Directors; Vacancies.................... 4
Section 3.3. Resignation................................................. 4
Section 3.4. Removal..................................................... 4
Section 3.5. Place of Meetings and Books................................. 4
Section 3.6. General Powers.............................................. 4
Section 3.7. Executive Committee......................................... 4
Section 3.8. Other Committees............................................ 4
Section 3.9. Powers Denied to Committees................................. 5
Section 3.10. Substitute Committee Member................................. 5
</TABLE>
(i)
<PAGE> 2
<TABLE>
<S> <C>
Section 3.11. Compensation of Directors................................... 5
Section 3.12. Annual Meeting.............................................. 5
Section 3.13. Regular Meetings............................................ 5
Section 3.14. Special Meetings............................................ 5
Section 3.15. Quorum...................................................... 5
Section 3.16. Telephonic Participation in Meetings........................ 6
Section 3.17. Action by Consent........................................... 6
ARTICLE IV - OFFICERS....................................................... 6
Section 4.1. Selection; Statutory Officers............................... 6
Section 4.2. Time of Election............................................ 6
Section 4.3. Additional Officers......................................... 6
Section 4.4. Terms of Office............................................. 6
Section 4.5. Compensation of Officers.................................... 6
Section 4.6. Chairman of the Board....................................... 7
Section 4.7. President................................................... 7
Section 4.8. Vice-Presidents............................................. 7
Section 4.9. Treasurer................................................... 7
Section 4.10. Secretary................................................... 7
Section 4.11. Assistant Secretary......................................... 8
Section 4.12. Assistant Treasurer......................................... 8
Section 4.13. Subordinate Officers........................................ 8
ARTICLE V - STOCK........................................................... 8
Section 5.1. Stock....................................................... 8
Section 5.2. Fractional Share Interests.................................. 9
Section 5.3. Transfers of Stock.......................................... 9
Section 5.4. Record Date................................................. 9
Section 5.5. Transfer Agent and Registrar................................ 10
Section 5.6. Dividends................................................... 10
1. Power to Declare.................................................. 10
2. Reserves.......................................................... 10
Section 5.7. Lost, Stolen, or Destroyed Certificates..................... 10
Section 5.8. Inspection of Books......................................... 10
ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS............................ 10
Section 6.1. Checks, Drafts and Notes.................................... 10
</TABLE>
(ii)
<PAGE> 3
<TABLE>
<S> <C>
Section 6.2. Notices...................................................... 11
Section 6.3. Conflict of Interest......................................... 11
Section 6.4. Voting of Securities owned by this Corporation............... 11
Section 6.5. Indemnification.............................................. 12
ARTICLE VII - AMENDMENTS.................................................... 12
Section 7.1. Amendments................................................... 12
</TABLE>
(iii)
<PAGE> 4
ONIX SYSTEMS INC.
ARTICLE I - GENERAL
SECTION 1.1. OFFICES. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation may also
have offices at such other places both within and without the State of Delaware
as the Board of Directors may from time to time determine or the business of the
Corporation may require.
SECTION 1.2. SEAL. The seal of the Corporation shall be in the form
approved by the Board of Directors.
SECTION 1.3. FISCAL YEAR. The fiscal year of the Corporation shall end
on the Saturday closest to DECEMBER 31ST of each year.
ARTICLE II - STOCKHOLDERS
SECTION 2.1. PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such place within or without the State of Delaware as may be
designated from time to time by the Board of Directors or the President or, if
not so designated, at the registered office of the Corporation.
SECTION 2.2. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting shall be held on a date to be fixed by
the Board of Directors, the Chairman of the Board, if any, or the President
(which date shall not be a legal holiday in the place where the meeting is to be
held) at the time and place to be fixed by the Board of Directors, the Chairman
of the Board, if any, or the President and stated in the notice of the meeting.
If no annual meeting is held in accordance with the foregoing provisions, the
Board of Directors shall cause the meeting to be held as soon thereafter as
convenient. If no annual meeting is held in accordance with the foregoing
provisions, a special meeting may be held in lieu of the annual meeting, and any
action taken at that special meeting shall have the same effect as if it had
been taken at the annual meeting, and in such case all references in these
by-laws to the annual meeting of the stockholders shall be deemed to refer to
such special meeting.
SECTION 2.3. QUORUM. At all meetings of the stockholders the holders of
a majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business except as otherwise provided by law, by the
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have the power to adjourn the meeting from time to time
without notice other than announcement at the meeting until the requisite amount
of voting stock shall be present. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting,
1
<PAGE> 5
a notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At such adjourned meeting, at which the
requisite amount of voting stock shall be represented, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
SECTION 2.4. RIGHT TO VOTE; PROXIES. Each stockholder having the right
to vote at any meeting shall be entitled to one vote for each share of stock
held by him. Any stockholder entitled to vote at any meeting of stockholders may
vote either in person or by proxy, but no proxy which is dated more than three
years prior to the meeting at which it is offered shall confer the right to vote
thereat unless the proxy provides that it shall be effective for a longer
period. Every proxy shall be in writing, subscribed by a stockholder or his duly
authorized attorney in fact, and dated, but need not be sealed, witnessed, or
acknowledged.
SECTION 2.5 VOTING. At all meetings of stockholders all questions,
except as otherwise expressly provided for by statute, the Certificate of
Incorporation or these by-laws, shall be determined by a majority vote of the
stockholders present in person or represented by proxy. Except as otherwise
expressly provided by law, the Certificate of Incorporation or these by-laws, at
all meetings of stockholders the voting shall be by voice vote, but any
stockholder qualified to vote on the matter in question may demand a stock vote,
by shares of stock, upon such question, whereupon such stock vote shall be taken
by ballot, each of which shall state the name of the stockholder voting and the
number of shares voted by him, and, if such ballot be cast by a proxy, it shall
also state the name of the proxy. All elections of directors shall be decided in
accordance with Article FOURTH of the Certificate of Incorporation.
SECTION 2.6. NOTICE OF ANNUAL MEETINGS. Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to vote
thereat at such address as appears on the stock books of the Corporation at
least ten (10) days (and not more than sixty (60) days) prior to the meeting. It
shall be the duty of every stockholder to furnish to the Secretary of the
Corporation or to the transfer agent, if any, of the class of stock owned by
him, his post office address and to notify said Secretary or transfer agent of
any change therein.
SECTION 2.7. STOCKHOLDERS' LIST. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder, and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and filed
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held, at least ten days before such meeting,
and shall at all times during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder for a
purpose germane to the meeting.
SECTION 2.8. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes, unless otherwise provided by statute, may be called by
the Board of Directors, the Chairman of the Board, if any, the President or any
Vice President.
2
<PAGE> 6
SECTION 2.9. NOTICE OF SPECIAL MEETINGS. Written notice of a special
meeting of stockholders, stating the time and place and object thereof shall be
mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the corporation. No business may be
transacted at such meeting except that referred to in said notice, or in a
supplemental notice given also in compliance with the provisions hereof, or such
other business as may be germane or supplementary to that stated in said notice
or notices.
SECTION 2.10. INSPECTORS. One or more inspectors may be appointed by
the Board of Directors before or at any meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which the inspector or inspectors
are appointed, he or they shall open and close the polls, receive and take
charge of the proxies and ballots, and decide all questions touching on the
qualifications of voters, the validity of proxies and the acceptance and
rejection of votes. If any inspector previously appointed shall fail to attend
or refuse or be unable to serve, the presiding officer shall appoint an
inspector in his place.
SECTION 2.11. STOCKHOLDERS' ACTION BY CONSENT. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the statutes, the
Certificate of Incorporation, or these by-laws, the meeting and vote of
stockholders may be dispensed with, and any corporate action upon which a vote
of stockholders is required or permitted may be taken with the written consent
of stockholders having not less than 50% of all of the stock entitled to vote
upon the action if a meeting were held; PROVIDED that in no case shall the
written consent be by holders having less than the minimum percentage of the
total vote required by statute for the proposed corporate action and provided
that prompt notice be given to all stockholders of the taking of such corporate
action without a meeting and by less than unanimous consent.
ARTICLE III - DIRECTORS
SECTION 3.1. NUMBER OF DIRECTORS. Except as otherwise provided by law,
the Certificate of Incorporation or these by-laws, the property and business of
the Corporation shall be managed by or under the direction of a board of not
less than one nor more than thirteen directors. Within the limits specified, the
number of directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. Directors need not be
stockholders, residents of Delaware or citizens of the United States. The
directors shall be elected by ballot at the annual meeting of the stockholders
and each director shall be elected to serve until his successor shall be elected
and shall qualify or until his earlier resignation or removal; PROVIDED that in
the event of failure to hold such meeting or to hold such election at such
meeting, such election may be held at any special meeting of the stockholders
called for that purpose. If the office of any director becomes vacant by reason
of death, resignation, disqualification, removal, failure to elect, or
otherwise, the remaining directors, although more or less than a quorum, by a
majority vote of such remaining directors may elect a successor or successors
who shall hold office for the unexpired term.
3
<PAGE> 7
SECTION 3.2. CHANGE IN NUMBER OF DIRECTORS; VACANCIES. The maximum
number of directors may be increased by an amendment to these by-laws adopted by
a majority vote of the Board of Directors or by a majority vote of the capital
stock having voting power, and if the number of directors is so increased by
action of the Board of Directors or of the stockholders or otherwise, then the
additional directors may be elected in the manner provided above for the filling
of vacancies in the Board of Directors or at the annual meeting of stockholders
or at a special meeting called for that purpose.
SECTION 3.3. RESIGNATION. Any director of this Corporation may resign
at any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the Corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein and at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 3.4. REMOVAL. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
SECTION 3.5. PLACE OF MEETINGS AND BOOKS. The Board of Directors may
hold their meetings and keep the books of the Corporation outside the State of
Delaware, at such places as they may from time to time determine.
SECTION 3.6. GENERAL POWERS. In addition to the powers and authority
expressly conferred upon them by these by-laws, the board may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
SECTION 3.7. EXECUTIVE COMMITTEE. There may be an executive committee
of one or more directors designated by resolution passed by a majority of the
whole board. The act of a majority of the members of such committee shall be the
act of the committee. Said committee may meet at stated times or on notice to
all by any of their own number, and shall have and may exercise those powers of
the Board of Directors in the management of the business affairs of the
Corporation as are provided by law and may authorize the seal of the Corporation
to be affixed to all papers which may require it. Vacancies in the membership of
the committee shall be filled by the Board of Directors at a regular meeting or
at a special meeting called for that purpose.
SECTION 3.8. OTHER COMMITTEES. The Board of Directors may also
designate one or more committees in addition to the executive committee, by
resolution or resolutions passed by a majority of the whole board; such
committee or committees shall consist of one or more directors of the
Corporation, and to the extent provided in the resolution or resolutions
designating them, shall have and may exercise specific powers of the Board of
Directors in the management of the business and affairs of the Corporation to
the extent permitted by statute and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it. Such
4
<PAGE> 8
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors.
SECTION 3.9. POWERS DENIED TO COMMITTEES. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
Certificate of Incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommend to the
stockholders a dissolution of the Corporation or a revocation or a dissolution
or to amend the by-laws of the Corporation. Further, committees of the Board of
Directors shall not have any power or authority to declare a dividend or to
authorize the issuance of stock.
SECTION 3.10. SUBSTITUTE COMMITTEE MEMBER. In the absence or on the
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of such absent or disqualified
member. Any committee shall keep regular minutes of its proceedings and report
the same to the board as may be required by the board.
SECTION 3.11. COMPENSATION OF DIRECTORS. The Board of Directors shall
have the power to fix the compensation of directors and members of committees of
the Board. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at each meeting of the board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3.12. ANNUAL MEETING. The newly elected board may meet at such
place and time as shall be fixed and announced by the presiding officer at the
annual meeting of stockholders, for the purpose of organization or otherwise,
and no further notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present, or they may meet at such place and time as shall be stated in a notice
given to such directors two (2) days prior to such meeting, or as shall be fixed
by the consent in writing of all the directors.
SECTION 3.13. REGULAR MEETINGS. Regular meetings of the board may be
held without notice at such time and place as shall from time to time be
determined by the board.
SECTION 3.14. SPECIAL MEETINGS. Special meetings of the board may be
called by the Chairman of the Board, if any, or the President, on two (2) days'
notice to each director, or such shorter period of time before the meeting as
will nonetheless be sufficient for the convenient assembly of the directors so
notified; special meetings shall be called by the Secretary in like manner and
on like notice, on the written request of two or more directors.
SECTION 3.15. QUORUM. At all meetings of the Board of Directors, a
majority of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of
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business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically permitted or provided by statute, or by the
Certificate of Incorporation, or by these by-laws. If at any meeting of the
board there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum is obtained, and no further
notice thereof need be given other than by announcement at said meeting which
shall be so adjourned.
SECTION 3.16. TELEPHONIC PARTICIPATION IN MEETINGS. Members of the
Board of Directors or any committee designated by such board may participate in
a meeting of the board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
SECTION 3.17. ACTION BY CONSENT. Unless otherwise restricted by the
Certificate of Incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if written consent thereto is signed by all
members of the board or of such committee as the case may be and such written
consent is filed with the minutes of proceedings of the board or committee.
ARTICLE IV - OFFICERS
SECTION 4.1. SELECTION; STATUTORY OFFICERS. The officers of the
Corporation shall be chosen by the Board of Directors. There shall be a
President, a Secretary and a Treasurer, and there may be a Chairman of the Board
of Directors, one or more Vice Presidents, one or more Assistant Secretaries,
and one or more Assistant Treasurers, as the Board of Directors may elect. Any
number of offices may be held by the same person, except that the offices of
President and Secretary shall not be held by the same person simultaneously.
SECTION 4.2. TIME OF ELECTION. The officers above named shall be chosen
by the Board of Directors at its first meeting after each annual meeting of
stockholders. None of said officers need be a director.
SECTION 4.3. ADDITIONAL OFFICERS. The board may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
SECTION 4.4. TERMS OF OFFICE. Each officer of the Corporation shall
hold office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
SECTION 4.5. COMPENSATION OF OFFICERS. The Board of Directors shall
have the power to fix the compensation of all officers of the Corporation. It
may authorize any officer, upon whom the power of appointing subordinate
officers may have been conferred, to fix the compensation of such subordinate
officers.
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SECTION 4.6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall preside at all meetings of the stockholders and directors, and
shall have such other duties as may be assigned to him from time to time by the
Board of Directors.
SECTION 4.7. PRESIDENT. Unless the Board of Directors otherwise
determines, the President shall be the chief executive officer and head of the
Corporation. Unless there is a Chairman of the Board, the President shall
preside at all meetings of directors and stockholders. Under the supervision of
the Board of Directors and of the executive committee, the President shall have
the general control and management of the Corporation's business and affairs,
subject, however, to the right of the Board of Directors and of the executive
committee to confer any specific power, except such as may be by statute
exclusively conferred on the President, upon any other officer or officers of
the Corporation. The President shall perform and do all acts and things incident
to the position of President and such other duties as may be assigned to him
from time to time by the Board of Directors or the executive committee.
SECTION 4.8. VICE-PRESIDENTS. The Vice-Presidents shall perform such of
the duties of the President on behalf of the Corporation as may be respectively
assigned to them from time to time by the Board of Directors or by the executive
committee or by the President. The Board of Directors or the executive committee
may designate one of the Vice-Presidents as the Executive Vice-President, and in
the absence or inability of the President to act, such Executive Vice-President
shall have and possess all of such powers and discharge all of the duties of the
President, subject to the control of the board and of the executive committee.
SECTION 4.9. TREASURER. The Treasurer shall have the care and custody
of all the funds and securities of the Corporation which may come into his hands
as Treasurer, and the power and authority to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or
proper and to deposit the same to the credit of the Corporation in such bank or
banks or depository as the Board of Directors or the executive committee, or the
officers or agents to whom the Board of Directors or the executive committee may
delegate such authority, may designate, and he may endorse all commercial
documents requiring endorsements for or on behalf of the Corporation. He may
sign all receipts and vouchers for the payments made to the Corporation. He
shall render an account of his transactions to the Board of Directors or to the
executive committee as often as the board or the committee shall require the
same. He shall enter regularly in the books to be kept by him for that purpose
full and adequate account of all moneys received and paid by him on account of
the Corporation. He shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors and of the executive
committee. He shall when requested, pursuant to vote of the Board of Directors
or the executive committee, give a bond to the Corporation conditioned for the
faithful performance of his duties, the expense of which bond shall be borne by
the Corporation.
SECTION 4.10. SECRETARY. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; he shall attend to
the giving and serving of all notices of the Corporation. Except as otherwise
ordered by the Board of Directors or the executive committee, he shall attest
the seal of the Corporation upon all contracts and instruments executed under
such seal and shall affix the seal of the Corporation thereto and to all
certificates of shares
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of the Capital Stock. He shall have charge of the stock certificate book,
transfer book and stock ledger, and such other books and papers as the Board of
Directors or the executive committee may direct. He shall, in general, perform
all the duties of Secretary, subject to the control of the Board of Directors
and of the executive committee.
SECTION 4.11. ASSISTANT SECRETARY. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or more
Assistant Secretaries of the Corporation. Any Assistant Secretary upon his
appointment shall perform such duties of the Secretary, and also any and all
such other duties as the executive committee or the Board of Directors or the
President or the Executive Vice-President or the Treasurer or the Secretary may
designate.
SECTION 4.12. ASSISTANT TREASURER. The Board of Directors or any two of
the officers of the Corporation acting jointly may appoint or remove one or more
Assistant Treasurers of the Corporation. Any Assistant Treasurer upon his
appointment shall perform such of the duties of the Treasurer, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice-President or the Treasurer or the Secretary
may designate.
SECTION 4.13. SUBORDINATE OFFICERS. The Board of Directors may select
such subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority, and perform such duties as the
Board of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
ARTICLE V - STOCK
SECTION 5.1. STOCK. Each stockholder shall be entitled to a certificate
or certificates of stock of the Corporation in such form as the Board of
Directors may from time to time prescribe. The certificates of stock of the
Corporation shall be numbered and shall be entered in the books of the
Corporation as they are issued. They shall certify the holder's name and number
and class of shares and shall be signed by both of (a) either the President or a
Vice-President, and (b) any one of the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, and shall be sealed with the corporate
seal of the Corporation. If such certificate is countersigned (1) by a transfer
agent other than the Corporation or its employee, or, (2) by a registrar other
than the Corporation or its employee, the signature of the officers of the
Corporation and the corporate seal may be facsimiles. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the Corporation, such certificate or certificates may nevertheless be adopted by
the Corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature shall have
been used thereon had not ceased to be such officer or officers of the
Corporation.
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SECTION 5.2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall
not be required to, issue fractions of a share. If the Corporation does not
issue fractions of a share, it shall (a) arrange for the disposition of
fractional interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (c) issue scrip or warrants in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation in the event of liquidation. The Board of Directors may cause scrip
or warrants to be issued subject to the conditions that they shall become void
if not exchanged for certificates representing full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the Corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
SECTION 5.3. TRANSFERS OF STOCK. Subject to any transfer restrictions
then in force, the shares of stock of the Corporation shall be transferable only
upon its books by the holders thereof in person or by their duly authorized
attorneys or legal representatives and upon such transfer the old certificates
shall be surrendered to the Corporation by the delivery thereof to the person in
charge of the stock and transfer books and ledgers or to such other person as
the directors may designate by whom they shall be cancelled and new certificates
shall thereupon be issued. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof save as expressly provided by the laws of
Delaware.
SECTION 5.4. RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. If no such record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is necessary, shall be the day on which the first written
consent is expressed; and the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
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SECTION 5.5. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
SECTION 5.6. DIVIDENDS.
1. POWER TO DECLARE. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and the laws of
Delaware.
2. RESERVES. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such
sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose
as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve
in the manner in which it was created.
SECTION 5.7. LOST, STOLEN, OR DESTROYED CERTIFICATES. No certificates
for shares of stock of the Corporation shall be issued in place of any
certificate alleged to have been lost, stolen or destroyed, except upon
production of such evidence of the loss, theft or destruction and upon
indemnification of the Corporation and its agents to such extent and in such
manner as the Board of Directors may from time to time prescribe.
SECTION 5.8. INSPECTION OF BOOKS. The stockholders of the Corporation,
by a majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and at what times and
places and under what conditions and regulations the accounts and books of the
Corporation (other than the stock ledger) or any of them, shall be open to
inspection of stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation except as conferred by
statute or authorized by the Board of Directors or by a resolution of the
stockholders.
ARTICLE VI - MISCELLANEOUS MANAGEMENT PROVISIONS
SECTION 6.1. CHECKS, DRAFTS AND NOTES. All checks, drafts or orders for
the payment of money, and all notes and acceptances of the Corporation shall be
signed by such officer or officers, agent or agents as the Board of Directors
may designate.
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SECTION 6.2 NOTICES.
1. Notices to directors may, and notices to stockholders shall,
be in writing and delivered personally or mailed to the directors or
stockholders at their addresses appearing on the books of the
Corporation. Notice by mail shall be deemed to be given at the time
when the same shall be mailed. Notice to directors may also be given by
telegram or orally, by telephone or in person.
2. Whenever any notice is required to be given under the
provisions of the laws of Delaware or of the Certificate of
Incorporation of the Corporation or of these by-laws, a written waiver
of notice, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting except when the person
attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because
the meeting is not lawfully called or convened.
SECTION 6.3. CONFLICT OF INTEREST. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of the Corporation's directors or officers are
directors or officers, or in which such directors or officers have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
board or committee thereof which authorized the contract or transaction, or
solely because his or their votes are counted for such purpose, provided that
the material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee and the board or committee in good faith authorizes the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum or
provided that the contract or transaction is otherwise authorized in accordance
with the laws of Delaware. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
SECTION 6.4. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
Corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this Corporation if he is present at such
meeting, or in his absence by the Treasurer of this Corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this Corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this Corporation, such proxy or consent shall be executed in the name of this
Corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or
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consent. Any person or persons designated in the manner above stated as the
proxy or proxies of this Corporation shall have full right, power and authority
to vote the shares or other securities issued by such other corporation and
owned by this Corporation the same as such shares or other securities might be
voted by this Corporation.
SECTION 6.5. INDEMNIFICATION. The Corporation shall indemnify each
director and officer against all judgments, fines, settlement payments and
expenses, including reasonable attorneys' fees, paid or incurred in connection
with any claim, action, suit or proceeding, civil or criminal, to which he may
be made a party or with which he may be threatened by reason of his being or
having been a director or officer of the Corporation, or, at its request, a
director, officer, stockholder or member of any other corporation, firm or
association of which the Corporation is a stockholder or creditor and by which
he is not so indemnified, or by reason of any action or omission by him in such
capacity, whether or not he continues to be a director or officer at the time of
incurring such expenses or at the time the indemnification is made. No
indemnification shall be made hereunder (a) with respect to payments and
expenses incurred in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding not to have acted in good faith and
in the reasonable belief that his action was in the best interests of the
Corporation, or (b) otherwise prohibited by law. The foregoing right of
indemnification shall not be exclusive of other rights to which any director or
officer may otherwise be entitled and shall inure to the benefit of the executor
or administrator of the estate of such director or officer.
ARTICLE VII - AMENDMENTS
SECTION 7.1. AMENDMENTS. The by-laws of the Corporation may be altered,
amended or repealed at any meeting of the Board of Directors upon notice thereof
in accordance with these by-laws, or at any meeting of the stockholders by the
vote of the holders of the majority of the stock issued and outstanding and
entitled to vote at such meeting, in accordance with the provisions of the
Certificate of Incorporation of the Corporation and of the laws of Delaware.
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EXHIBIT 10.1
CORPORATE SERVICES AGREEMENT
THIS IS AN AGREEMENT dated as of August 21, 1997 between Thermo
Electron Corporation, a Delaware corporation ("Thermo"), and ONIX Systems Inc.,
a Delaware corporation ("Subsidiary").
PRELIMINARY STATEMENT
Subsidiary desires to obtain administrative and other services from
Thermo and Thermo is willing to furnish or make such services available to
Subsidiary.
By this Agreement, Thermo and Subsidiary desire to set forth the basis
for Thermo's providing services of the type referred to herein.
AGREEMENTS
IT IS MUTUALLY agreed by the parties hereto as follows:
1. SERVICES
1.1 Beginning on the date of this Agreement, Thermo, through its
corporate staff, will provide or otherwise make available to Subsidiary certain
general corporate services, including but not limited to accounting, tax,
corporate communications, legal, financial and other administrative staff
functions, and arrange for administration of insurance and employee benefit
programs. The services will include the following:
(a) ACCOUNTING AND SECURITIES COMPLIANCE RELATED SERVICES.
Maintenance of corporate records, assistance, if and when necessary, in
preparation of Securities and Exchange Commission filings, including without
limitation registration statements, Forms 10-K, 10-Q and 8-K, assistance in the
preparation of Proxies and Proxy Statements and the solicitation of Proxies, and
assistance in the preparation of the Annual and Quarterly Reports to
Stockholders, maintenance of internal audit support services and review of
compliance with financial and accounting procedures.
(b) TAX RELATED SERVICES. Preparation of Federal tax returns,
preparation of state and local tax returns (including income tax returns), tax
research and planning and assistance on tax audits (Federal, state and local).
(c) INSURANCE AND EMPLOYEE BENEFIT RELATED SERVICES. Arranging for
liability, property and casualty, and other normal business insurance coverage.
Support for product, worker safety and environmental programs (Subsidiary
acknowledges that principal responsibility for compliance rests with the
Subsidiary). Administration of Subsidiary's employee participation in employee
benefit plans sponsored by Thermo and insurance programs such as the following:
401(k) plan, group medical insurance, group life insurance, employee stock
purchase plan and
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various stock options plans. Filing of all required reports under ERISA for
employee benefit plans sponsored by Thermo.
(d) CORPORATE RECORD KEEPING SERVICES. Maintenance of corporate
records, including without limitation, maintenance of minutes of meetings of the
Boards of Directors and Stockholders, supervision of transfer agent and
registration functions, coordination of stock repurchase programs, and tracking
of stock issuances and reserved shares.
(e) Services in addition to those enumerated in subsections 1.1(a)
through 1.1(d) above including, but not limited to, routine legal and other
administrative activities, Corporate information and treasury and other
financial services as reasonably requested by Subsidiary.
1.2 For performing general services of the types described above in
Paragraph 1.1, Thermo will initially charge Subsidiary an annual fixed fee equal
to 1.0% of the gross revenues of Subsidiary for the fiscal year in which such
services are performed (such amount to be prorated on a daily basis for any
partial year), which fee is intended to compensate Thermo for Subsidiary's pro
rata share of the aggregate costs actually incurred by Thermo in connection with
the provision of such services to all recipients thereof. The fee set forth in
the preceding sentence may be adjusted from time to time by mutual agreement of
Thermo and Subsidiary.
1.3 In addition to the foregoing services, certain specific services
are made available to Subsidiary by Thermo on an as-requested basis. These may
include, but are not limited to, services specifically requested by Subsidiary
or services which, in Thermo's judgment, are not routine administrative services
or create unusual burdens or demands on Thermo's resources, such as litigation
support, acquisition and offering support services (including legal services),
corporate development, tax audit support or public or investor relations
services other than routine shareholder communications. Thermo will charge
Subsidiary the costs actually incurred (including overhead and general
administrative expenses) for such services that are requested by Subsidiary and
supplied by Thermo.
1.4 The charges for services pursuant to Subsections 1.2 and 1.3
above will be determined and payable no less frequently than on a quarterly
basis. The charges will be due when billed and shall be paid no later than 30
days from the date of billing.
1.5 When services of the type described above in this Section 1 are
provided by outside providers to Subsidiary or, in connection with the provision
of such services out-of-pocket costs are incurred such as travel, the cost
thereof will be paid by Subsidiary. To the extent that Subsidiary is billed by
the provider directly, Subsidiary shall pay the bill directly. If Thermo is
billed for such services, Thermo may pay the bill and charge Subsidiary the
amount of the bill or forward the bill to Subsidiary for payment by Subsidiary.
2. SUBSIDIARY'S DIRECTORS AND OFFICERS. Nothing contained herein
will be construed to relieve the directors or officers of Subsidiary from the
performance of their respective duties or to limit the exercise of their powers
in accordance with the charter or By-Laws of Subsidiary or in accordance with
any applicable statute or regulation.
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3. LIABILITIES. In furnishing Subsidiary with management advice and
other services as herein provided, neither Thermo nor any of its officers,
directors or agents shall be liable to Subsidiary or its creditors or
shareholders for errors of judgment or for anything except willful malfeasance,
bad faith or gross negligence in the performance of their duties or reckless
disregard of their obligations and duties under the terms of this Agreement. The
provisions of this Agreement are for the sole benefit of Thermo and Subsidiary
and will not, except to the extent otherwise expressly stated herein, inure to
the benefit of any third party.
4. TERM.
(a) TERM. The initial term of this Agreement shall begin on the date
of this Agreement and continue through the end of the current fiscal year. This
Agreement shall automatically renew at the end of the initial term for
successive one-year terms until terminated in accordance with Subsection (b)
below.
(b) TERMINATION. This Agreement may be terminated by Subsidiary at
any time on thirty days prior notice to Thermo. In addition, this Agreement
shall automatically terminate without any further action by either party on the
date the Subsidiary ceases to be a member of the Thermo Group or a participant
in the Thermo Electron Corporate Charter.
(c) TERMINATION FEE. In the event of a termination of this
Agreement, Subsidiary shall pay to Thermo its pro rata fee pursuant to Section
1.2 for the year in which the termination takes effect plus a termination fee
equal to the fee payable under Section 1.2 for the most recent nine consecutive
months.
(d) POST-TERMINATION SERVICES. Following a termination of this
Agreement, corporate administrative services of the kind provided under the
Agreement may continue to be provided to Subsidiary on an as-requested basis by
the Subsidiary or as required in the event it is not practicable for the
Subsidiary to provide such services or it is otherwise unable to identify
another source to provide such services (as would be the case of administration
of employee benefit plans and insurance programs sponsored by Thermo and in
which Subsidiary's employees participate) or as otherwise required by Thermo
acting in its capacity as majority stockholder of Subsidiary. In the even such
services are provided by Thermo to Subsidiary, Subsidiary shall be charged by
Thermo a fee equal to the market rate for comparable services charged by
third-party vendors. Such fee will be charged monthly and payable by Subsidiary
within thirty days. The obligations of Subsidiary set forth in this Section 4(d)
shall survive the termination of this Agreement.
5. STATUS. Thermo shall be deemed to be an independent contractor
and, except as expressly provided or authorized in this Agreement, shall have no
authority to act for or represent Subsidiary.
6. OTHER ACTIVITIES OF THERMO. Subsidiary recognizes that Thermo
now renders and may continue to render management and other services to other
companies that may or may not have policies and conduct activities similar to
those of Subsidiary. Thermo shall be free to render
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such advice and other services, and Subsidiary hereby consents thereto. Thermo
shall not be required to devote full time and attention to the performance of
its duties under this Agreement, but shall devote only so much of its time and
attention as it deems reasonable or necessary to perform the services required
hereunder.
7. NOTICES. All notices, billings, requests, demands, approvals,
consents, and other communications which are required or may be given under this
Agreement shall be in writing and will be deemed to have been duly given if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid to the parties at their respective addresses set
forth below:
IF TO SUBSIDIARY: IF TO THERMO:
ONIX Systems Inc. Thermo Electron Corporation
22001 North Park Drive 81 Wyman Street
Kingwood, Texas 77339 Waltham, Massachusetts 02254
Attention: President Attention: Chief Executive Officer
8. NO ASSIGNMENT. This Agreement shall not be assignable except
with the prior written consent of the other party to this Agreement.
9. APPLICABLE LAW. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed therein.
10. PARAGRAPH TITLES. The paragraph titles used in this Agreement
are for convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as a sealed instrument by their duly authorized offices as of the date
first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
-----------------------
Title: Treasurer
SUBSIDIARY:
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
-----------------------
Title: President
4
<PAGE> 1
EXHIBIT 10.3
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT is made as of August 21, 1997, between
Thermo Electron Corporation, a Delaware corporation ("Thermo Electron") and ONIX
Systems Inc., a Delaware corporation ("ONIX").
PRELIMINARY STATEMENT
Thermo Electron is the parent of an affiliated group of corporations
(including ONIX) within the meaning of Section 1504(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
Thermo Electron owns over 80% of the issued and outstanding shares of
voting common stock of Thermo Instrument Systems Inc. which in turn owns over
80% of the issued and outstanding shares of voting common stock of ONIX, the
only class of stock ONIX is authorized to issue. ONIX is required to file
consolidated federal income tax returns with Thermo Electron.
Thermo Electron as the common parent of an affiliated group of
corporations and ONIX recognize that any one of them that sustains a net
operating loss or otherwise generates beneficial tax attributes for a taxable
period may be deprived of such benefits when offset in that or other periods
against income or tax liabilities of the others.
AGREEMENTS
IT IS MUTUALLY agreed by the parties hereto as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 The Term "Thermo Electron Group" means the group of
corporations of which Thermo Electron is common parent and with which Thermo
Electron files a consolidated federal income tax return, excluding ONIX and
subsidiaries of ONIX that may exist now or in the future. For purposes of this
Agreement, the Thermo Electron Group shall be treated as a single corporate
entity. The Thermo Electron Group and ONIX and its subsidiaries, respectively,
are sometimes herein referred to collectively as the "Two Companies" or the
"Companies." The term "Deficit Company" means either one of the Companies that
has an ordinary loss, capital loss, special deduction or tax credit arising in a
consolidated return year, or in a prior separate return year, that is utilized
to a greater extent in the then current consolidated federal income tax return
than would have been the case if the Company had filed a separate federal income
tax return for the year. This Agreement anticipates that Thermo Electron will
set aside and retain certain sums calculated as provided herein. All reference
to Thermo Electron paying sums to itself pursuant to this Agreement shall be
satisfied by Thermo Electron setting aside sums in respect of the obligations
established under this Agreement.
<PAGE> 2
1.2 The paragraph titles used herein are for convenience of
reference only and will not be considered in the interpretation or construction
of any of the provisions hereof. Words may be construed in the singular or the
plural as the context requires.
2. TAX RETURNS.
2.1 FEDERAL TAX RETURNS. Thermo Electron as the common parent
will prepare and file or cause to be prepared and filed federal and state income
tax returns on a consolidated basis, for the Thermo Electron Group and ONIX and
its subsidiaries for all fiscal periods as to which a consolidated return is
appropriate in accordance with the terms of this Agreement.
2.2 STATE TAX RETURNS. Thermo Electron as the common parent will
prepare and file or cause to be filed state income tax returns on a combined,
consolidated, unitary, or other method that Thermo Electron believes will result
in a lower overall tax liability to the Two Companies. ONIX will reimburse
Thermo Electron for its portion of the tax. Such reimbursement will be the tax
ONIX would have paid on a separate return basis, but only if it was required to
file a return in that state.
3. TIME OF PAYMENT OF FEDERAL OBLIGATIONS TO THERMO ELECTRON. The
obligations of the Companies for Federal income tax payments will be determined
and paid as follows:
(a) Not later than the 15th day after the end of the fourth,
sixth, ninth and twelfth months of each consolidated taxable year of Thermo
Electron, Thermo Electron will make a reasonable determination (consistent with
the provisions of Section 6655 of the Code) of the separate federal income tax
liability that each Company would be required to pay as estimated payments on a
separate return basis for that period. Each Company shall pay to Thermo Electron
the amount of such liability within ten days.
(b) After the end of Thermo Electron's fourth accounting quarter
and before the 15th day of the third month thereafter, each Company will
promptly pay to Thermo Electron the entire amounts estimated to be due and
payable under such Company's federal income tax return as if filed on a separate
return basis, less all amounts previously paid with respect to that year
pursuant to subparagraph (a) of this Paragraph 3.
(c) If upon the filing of the consolidated income tax return, a
revised calculation is made in the manner set forth in subparagraph (b) of this
Paragraph 3, and it is determined that either Company has paid to Thermo
Electron with respect to the consolidated taxable year an amount greater than
that required by Paragraph 3(b), then that excess will be promptly paid by
Thermo Electron to that Company.
4. TAX OBLIGATIONS OF THERMO ELECTRON. Thermo Electron will pay the
consolidated tax liabilities of the Companies arising from filing a consolidated
federal tax return.
5. PAYMENT OF FUNDS BY THERMO ELECTRON. If in any year ONIX incurs a
loss or generates tax credits or similar tax benefits (a "tax benefit item"),
Thermo Electron shall pay to
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<PAGE> 3
ONIX a sum equal to the amount of benefit realized by Thermo Electron that is
attributable to the ONIX tax benefit item; payments due to ONIX from Thermo
Electron under this section shall be made upon the earlier of (1) the year in
which ONIX would have obtained a tax benefit from the tax benefit item if ONIX
had in all years filed a separate federal income tax return or (2) the year in
which any applicable carry-forward period with respect to the tax benefit item
expires; provided that payments under this section shall be made first by being
taken into account in determining amounts payable to ONIX under Section 3, and
any remaining amount due to ONIX shall be paid by Thermo Electron to ONIX at the
times set forth for payments by ONIX under Section 3.
6. CHANGES IN PRIOR YEAR'S TAX LIABILITIES. In the event that the
consolidated tax liability or the separate tax liability referred to in
Paragraphs 3 and 5 hereof for any year for which a consolidated tax return for
the two Companies was filed is or would be increased or decreased by reason of
filing an amended return or returns (including carry-back claims), or by reason
of the examination of the returns by the Internal Revenue Service, the amounts
due Thermo Electron for payment of taxes under Paragraph 3 hereof, and the
amount to be paid to Thermo Electron for allocation to ONIX under Paragraph 5
hereof for each year will be recomputed by Thermo Electron to reflect the
adjustments to taxable income and tax credits for the taxable year and interest
or penalties, if any. In accordance with those recomputations, additional sums
will be paid by the Companies to Thermo Electron or paid by Thermo Electron to
the Companies regardless of whether a member has become a Departing Member (as
defined in Paragraph 8 hereof) subsequent to the taxable year of recomputation.
7. NEW MEMBERS. The Companies agree that if, subsequent to the
execution of this Agreement, Thermo Electron becomes the Parent, as that term is
used in Section 1504 of the Code, of one or more subsidiary corporations, in
addition to ONIX, then each newly acquired subsidiary corporation may become a
separate party to this Agreement by consenting in writing to be bound by its
provisions, effective immediately upon its delivery to Thermo Electron, but the
income, deductions and tax credits of the newly acquired subsidiary corporations
will first be included in the consolidated federal income tax return as required
by the Code.
8. DEPARTING MEMBERS.
8.1 The term "Departing Members," as used herein, will mean a
Company that is no longer permitted under the Code to be included in the
consolidated federal income tax return.
8.2 In applying this Agreement to a Departing Member for the
final taxable year in which its income, deductions, and tax credits are required
to be included in the consolidated federal income tax return: (i) the amount
required to be paid by a Departing Member under the provisions of Paragraph 3
hereof and (ii) the amount that the Departing Member is entitled to receive
under the provisions of Paragraph 5 hereof, will be determined by taking into
account the income, deductions and tax credits of the Departing Member only for
the fractional part of such year as the Departing Member was a member of the
consolidated group and included in the consolidated federal income tax return.
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<PAGE> 4
8.3 After the filing of the consolidated federal income tax
return for the last taxable year that the Departing Member was included therein,
the Departing Member will be informed of the amount of consolidated carry-overs
as of the end of the taxable year or period which are attributable to the
Departing Member, as provided by Treasury Regulations Section 1.1502-79 or
otherwise, including the agreement of the parties.
9. DETERMINATION OF SUMS DUE FROM AND PAYABLE TO MEMBERS. Thermo
Electron will determine the sums due from and payable to the Companies under the
provisions of this Agreement (including the determination for purposes of
Paragraph 6 hereof). The Companies agree to provide Thermo Electron with such
information as may reasonably be necessary to make these determinations. Issues
arising in the course of the determinations that are not expressly provided for
in this agreement will be resolved in an equitable manner.
10. TAX CONTROVERSIES. If a consolidated federal income tax return
for any taxable year during which this Agreement is in effect is examined by the
Internal Revenue Service, the examination, as well as any other matters relating
to that tax return, including any tax litigation, will be handled solely by
Thermo Electron. ONIX will cooperate with Thermo Electron and to this end will
execute protests, petitions, and any other documents as Thermo Electron
determines to be necessary or appropriate. The cost and expense of Thermo
Electron's handling of a tax controversy, including legal and accounting fees,
will be allocated to and paid by the Company to whom the tax controversy
relates. If the tax controversy relates to both Companies, the cost and expense
will be allocated between the Companies in the proportion that each Company's
potential additional tax liability bears to the total potential additional tax
liability of both Companies (determined in accordance with Paragraph 6 hereto
and assuming that the tax controversy is resolved in favor of the Internal
Revenue Service) for the taxable year on issue. If the tax controversy
encompasses more than one taxable year, Thermo Electron will first allocate the
cost and expense to each taxable year in the proportion that the potential
additional tax liability for each taxable year bears to the total potential
additional tax liability for the taxable years in issue.
11. EFFECTIVE DATE. This Agreement shall be effective beginning as of
the date of this Agreement, and will continue on a year-to-year basis thereafter
with respect to ONIX for so long as ONIX is permitted to file a consolidated
federal income tax return with Thermo Electron.
12. STATE TAXES. The two Companies will jointly file any state tax
return on a combined, consolidated, unitary, or other method that Thermo
Electron determines results in a lower overall tax liability to the Two
Companies. In the event that said state tax returns shall be filed, the
provisions of Sections 1-11 hereof shall apply, MUTATIS MUTANDIS (the necessary
changes being made) to the allocation, preparation, filing and payment related
to such state taxes and tax returns provided, however, that any benefit realized
by the filing of the combined, consolidated or unitary return will remain with
Thermo Electron.
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
------------------------
Title: Treasurer
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
------------------------
Title: President
5
<PAGE> 1
EXHIBIT 10.4
MASTER REPURCHASE AGREEMENT
AGREEMENT dated as of August 21, 1997 between Thermo Electron
Corporation, a Delaware corporation ("Seller"), and ONIX Systems Inc., a
Delaware corporation (the "Buyer").
1. APPLICABILITY
From time to time Buyer and Seller may enter into transactions in which
Seller agrees to transfer to Buyer certain securities and/or financial
instruments ("Securities") against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Securities on demand,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and shall be governed by this Agreement, unless
otherwise agreed in writing.
2. DEFINITIONS
(a) "Act of Insolvency", with respect to either party (i) the
commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law,
or such party seeking the appointment of a receiver, trustee, custodian or
similar official for such party or any substantial part of its property; or (ii)
the commencement of any such case or proceeding against such party, or another
seeking such an appointment, which (A) is consented to or not timely contested
by such party, (B) results in the entry of an order for relief, such an
appointment or the entry of an order having a similar effect, or (C) is not
dismissed within 15 days; or (iii) the making by a party of a general assignment
for the benefit of creditors; or (iv) the admission in writing by a party of
such party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller
to Buyer pursuant to Paragraph 4(a) hereof;
(c) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest, dividends or other distributions thereon;
(d) "Market Value", with respect to any Securities as of any date,
the price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued Income to the extent not included therein (other
than any Income transferred to Seller pursuant to Paragraph 6 hereof) as of such
date (unless contrary to market practice for such Securities);
(e) "Other Buyers", third parties that have entered into an agreement
with Seller that is substantially similar to this Agreement;
<PAGE> 2
(f) "Pricing Rate", a rate equal to the Commercial Paper Composite
rate for 90-day maturities provided by Merrill Lynch, Pierce, Fenner & Smith
Incorporated (or, if such rate is not available, a substantially equivalent rate
agreed to by Buyer and Seller) plus 25 basis points, which rate shall be
adjusted on the first business day of each fiscal quarter and shall be in effect
for the entirety of such fiscal quarter;
(g) "Purchase Price", the price at which Purchased Securities are
transferred by Seller to Buyer;
(h) "Purchased Securities", the Securities transferred by Seller to
Buyer in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect
to any Transaction at any time also shall include Additional Purchase Securities
transferred pursuant to Paragraph 4(a) and shall exclude Securities returned
pursuant to Paragraph 4(b);
(i) "Repurchase Collateral Account", a book account maintained by
Seller containing, among other Securities, the Purchased Securities.
(j) "Repurchase Price", for any Purchased Security, an amount equal
to the Purchase Price paid by Buyer to Seller for such Purchased Security;
3. TRANSACTIONS
(a) A Transaction may be initiated by Buyer upon the transfer of the
Purchase Price to Seller's account. Upon such transfer, Seller shall transfer to
Buyer Purchased Securities having a Market Value equal to 103% of the Purchase
Price.
(b) Purchased Securities shall be held in custody for Buyer by Seller
in the Repurchase Collateral Account. Seller shall indicate on its books for
such account Buyer's ownership of the Purchased Securities. Upon reasonable
request from Buyer, Seller shall provide Buyer with a complete list of Purchased
Securities owned by Buyer.
(c) Upon demand by Buyer or Seller, Seller shall repurchase from
Buyer, and Buyer shall sell to Seller, for the Repurchase Price all or any part
of the Purchased Securities then owned by Buyer.
4. MARGIN MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer is less than 103% of the aggregate Repurchase
Price for such Purchased Securities, then Seller shall transfer to Buyer
additional Securities ("Additional Purchased Securities"), so that the aggregate
Market Value of such Purchased Securities, including any such Additional
Purchased Securities, will thereupon equal or exceed 103% of such aggregate
Repurchase Price.
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(b) If at any time the aggregate Market Value of all Purchased
Securities then owned by Buyer exceeds 103% of the aggregate Repurchase Price
for such Purchased Securities, then Seller may transfer Purchased Securities to
Seller, so that the aggregate Market Value of such Purchased Securities will
thereupon not exceed 103% of such aggregate Repurchase Price.
5. INTEREST PAYMENTS
If during any fiscal month Buyer owned Purchased Securities, then on
the first day of the next following fiscal month Seller shall pay to Buyer an
amount equal to the sum of the aggregate Repurchase Prices of the Purchased
Securities owned by Buyer at the close of each day during the preceding fiscal
month divided by the number of days in such month and the product multiplied by
the Pricing Rate times the number of days in such month divided by 360.
6. INCOME PAYMENTS AND VOTING RIGHTS
Where a particular Transaction's term extends over an Income payment
date on the Purchased Securities subject to that Transaction, Buyer shall, on
the date such Income is payable, transfer to Seller an amount equal to such
Income payment or payments with respect to any Purchased Securities subject to
such Transaction. Seller shall retain all voting rights with respect to
Purchased Securities sold to Buyer under this Agreement.
7. SECURITY INTEREST
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction and this
Agreement, and shall be deemed to have granted to Buyer a security interest in,
all of the Purchased Securities with respect to all Transactions hereunder and
all proceeds thereof.
8. PAYMENT AND TRANSFER
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. As used herein with respect to
Securities, "transfer" is intended to have the same meaning as when used in
Section 8-313 of the Massachusetts Uniform Commercial Code or, where applicable,
in any federal regulation governing transfers of the Securities.
9. SUBSTITUTION
Buyer hereby grants Seller the authority to manage, in Seller's sole
discretion, the Purchased Securities held in custody for Buyer by Seller in the
Repurchase Collateral Account. Buyer expressly agrees that Seller may (i)
substitute other Securities for any Purchased Securities and (ii) commingle
Purchased Securities with other Securities held in the Repurchase Collateral
Account. Substitutions shall be made by transfer to Buyer of such other
Securities and transfer to Seller of the Purchased Securities for which
substitution is being made. After substitution, the
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<PAGE> 4
substituted Securities shall be deemed to be Purchased Securities. Securities
which are substituted for Purchased Securities shall have a Market Value at the
time of substitution equal to or greater than the Market Value of the Purchased
Securities for which such Securities were substituted.
10. REPRESENTATIONS
Each of Buyer and Seller represents and warrants to the other that (i)
it is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) the person signing this Agreement on its behalf is duly
authorized to do so on its behalf, (iii) it has obtained all authorizations of
any governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(iv) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the date for any Transaction Buyer and Seller shall
each be deemed to repeat all the foregoing representations made by it.
11. EVENTS OF DEFAULT
In the event that (i) Seller fails to repurchase or Buyer fails to
transfer Purchased Securities upon demand for repurchase from either Buyer or
Seller, (ii) Seller or Buyer fails, after one business day's notice, to comply
with Paragraph 4 hereof, (iii) Buyer fails to make payment to Seller pursuant to
Paragraph 6 hereof, (iv) Seller fails to comply with Paragraph 5 hereof, (v) an
Act of Insolvency occurs with respect to Seller or Buyer, (vi) any
representation made by Seller or Buyer shall have been incorrect or untrue in
any material respect when made or repeated or deemed to have been made or
repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or
its intention not to, perform any of its obligations hereunder (each an "Event
of Default"):
(a) At the option of the nondefaulting party, exercised by written
notice to the defaulting party (which option shall be deemed to have been
exercised, even if no notice is given, immediately upon the occurrence of any
Act of Insolvency), Seller shall become obligated to repurchase, and Buyer shall
become obligated to sell, all Purchased Securities then owned by Buyer for the
Repurchase Price of such Purchased Securities.
(b) If Seller is the defaulting party and Buyer exercises or is
deemed to have exercised the option referred to in subparagraph (a) of this
Paragraph, (i) the Seller's obligations hereunder to repurchase all Purchased
Securities in such Transactions shall thereupon become immediately due and
payable, (ii) all Income paid after such exercise or deemed exercise shall be
retained by Buyer and applied to the aggregate unpaid Repurchase Prices owed by
Seller, and (iii) Seller shall immediately deliver to Buyer any Purchased
Securities subject to such Transactions then in Seller's possession.
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(c) In all Transactions in which Buyer is the defaulting party, upon
tender by Seller of payment of the aggregate Repurchase Prices for all such
Transactions, Buyer's right, title and interest in all Purchased Securities
subject to such Transactions shall be deemed transferred to Seller, and Buyer
shall deliver all such Purchased Securities to Seller.
(d) After one business day's notice to the defaulting party (which
notice need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subparagraph (a) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which Seller is the defaulting party,
(A) immediately sell, in a recognized market at such price or prices as Buyer
may reasonably deem satisfactory, any or all Purchased Securities subject to
such Transactions and apply the proceeds thereof to the aggregate unpaid
Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its
sole discretion elect, in lieu of selling all or a portion of such Purchased
Securities, to give Seller credit for such Purchased Securities in an amount
equal to the price therefor on such date, obtained from a generally recognized
source or the most recent closing bid quotation from such a source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by Seller
hereunder; and
(ii) as to Transactions in which Buyer is the defaulting party,
(A) purchase securities ("Replacement Securities") of the same class and amount
as any Purchased Securities that are not delivered by Buyer to Seller as
required hereunder or (B) in its sole discretion elect, in lieu of purchasing
Replacement Securities, to be deemed to have purchased Replacement Securities at
the price therefor on such date, obtained from a generally recognized source or
the most recent closing bid quotation from such a source.
(e) As to Transactions in which Buyer is the defaulting party, Buyer
shall be liable to Seller (i) with respect to Purchased Securities (other than
Additional Purchased Securities), for any excess of the price paid (or deemed
paid) by Seller for Replacement Securities therefor over the Repurchase Price
for such Purchased Securities and (ii) with respect to Additional Purchased
Securities, for the price paid (or deemed paid) by Seller for the Replacement
Securities therefor.
(g) The defaulting party shall be liable to the nondefaulting party
for the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
12. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in
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consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to
perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries and other transfers may be applied against each other
and netted.
13. ENTIRE AGREEMENT; SEVERABILITY
This Agreement shall supersede any existing agreements between the
parties containing general terms and conditions for repurchase transactions.
Each provision and agreement and agreement herein shall be treated as separate
and independent from any other provision or agreement herein and shall be
enforceable notwithstanding the unenforceability of any such other provision or
agreement.
14. NON-ASSIGNABILITY; TERMINATION
The rights and obligations of the parties under this Agreement and
under any Transactions shall not be assigned by either party without the prior
written consent of the other party. Subject to the foregoing, this Agreement and
any Transactions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. This Agreement may be
canceled by either party upon giving written notice to the other, except that
this Agreement shall, notwithstanding such notice, remain applicable to any
Transactions then outstanding.
15. GOVERNING LAW
This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts without giving effect to the conflict of law principles thereof.
16. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a wavier of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto.
19. INTENT
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar
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as the type of Securities subject to such Transaction or the term of such
Transaction would render such definition inapplicable), and a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
(b) It is understood that either party's right to liquidate
Securities delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual
right to liquidate such Transaction as described in Sections 555 and 559 of
Title 11 of the United States Code, as amended.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
-----------------------
Title: Treasurer
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
-----------------------
Title: President
7
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EXHIBIT 10.5
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 5th day of January, 1998, by and
among Thermo Electron Corporation (the "Parent") and those of its subsidiaries
that join in this Agreement by executing the signature page hereto (the
"Majority Owned Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries and their wholly-owned
subsidiaries wish to enter into various financial transactions, such as
convertible or nonconvertible debt, loans, and equity offerings, and other
contractual arrangements with third parties (the "Underlying Obligations") and
may provide credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent acknowledge that
the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from the Parent (a "Parent Guarantee") or without
obtaining Credit Support Obligations from other Majority Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their wholly-owned
subsidiaries may borrow funds from the Parent, and the Parent may loan funds or
provide credit to the Majority Owned Subsidiaries and their wholly-owned
subsidiaries, on a short-term and unsecured basis;
WHEREAS, certain Majority Owned Subsidiaries ("Second Tier Majority Owned
Subsidiaries ") may themselves be majority owned subsidiaries of other Majority
Owned Subsidiaries ("First Tier Majority Owned Subsidiaries");
WHEREAS, for various reasons, Parent Guarantees of a Second Tier Majority
Owned Subsidiary's Underlying Obligations may be demanded and given without the
respective First Tier Majority Owned Subsidiary also issuing a guarantee of such
Underlying Obligation;
WHEREAS, the Parent may itself make a loan or provide other credit to a
Second Tier Majority Owned Subsidiary or its wholly-owned subsidiaries under
circumstances where the applicable First Tier Majority Owned Subsidiary does not
provide such credit; and
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees and providing credit, and the Majority Owned Subsidiaries are willing
to consider continuing to provide Credit Support Obligations and to borrow
funds, on the terms and conditions set forth below;
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying Obligation, and
the beneficiary(ies) of the Parent Guarantee enforce the Parent Guarantee,
or the Parent performs under the Parent Guarantee for any other reason,
then the Majority Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such Underlying
Obligation shall indemnify and save harmless the Parent from any liability,
cost, expense or damage (including reasonable attorneys' fees) suffered by
the Parent as a result of the Parent Guarantee. If the Underlying
Obligation is issued by a Second Tier Majority Owned Subsidiary or a
wholly-owned subsidiary thereof, and such Second Tier Majority Owned
Subsidiary is unable to fully indemnify the Parent (because of the poor
financial condition of such Second Tier Majority Owned Subsidiary, or for
any other reason), then the First Tier Majority Owned Subsidiary that owns
the majority of the stock of such Second Tier Majority Owned Subsidiary
shall indemnify and save harmless the Parent from any remaining liability,
cost, expense or damage (including reasonable attorneys' fees) suffered by
the Parent as a result of the Parent Guarantee. If a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof provides a Credit Support
Obligation for any subsidiary of the Parent, other than a subsidiary of
such Majority Owned Subsidiary, and the beneficiary(ies) of the Credit
Support Obligation enforce the Credit Support Obligation, or the Majority
Owned Subsidiary or its wholly-owned subsidiary performs under the Credit
Support Obligation for any other reason, then the Parent shall indemnify
and save harmless the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, from any liability, cost, expense or damage
(including reasonable attorneys' fees) suffered by the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, as a result of
the Credit Support Obligation. Without limiting the foregoing, Credit
Support Obligations include the deposit of funds by a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof in a credit arrangement
with a banking facility whereby such funds are available to the banking
facility as collateral for overdraft obligations of other Majority Owned
Subsidiaries or their subsidiaries also participating in the credit
arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall include not only
a formal guarantee of an obligation, but also any other arrangement where
the Parent is liable for the obligations of a Majority Owned Subsidiary or
its wholly-owned subsidiaries. Such other arrangements include (a)
representations, warranties and/or covenants or other obligations joined in
by the Parent, whether on a joint or joint and several basis, for the
benefit of the Majority Owned Subsidiary or its wholly-owned subsidiaries
and (b) responsibility of the Parent by operation of law for the acts and
omissions of the Majority Owned Subsidiary or its wholly-owned
subsidiaries, including controlling person liability under securities and
other laws.
3. Promptly after the Parent receives notice that a beneficiary of a Parent
Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned
<PAGE> 3
Subsidiary(s) obligated, either directly or indirectly through a
wholly-owned subsidiary, under the relevant Underlying Obligation. Such
Majority Owned Subsidiary(s) or wholly-owned subsidiary thereof, as
applicable, shall have the right, at its own expense, to contest the claim
of such beneficiary. If a Majority Owned Subsidiary or wholly-owned
subsidiary thereof, as applicable, is contesting the claim of such
beneficiary, the Parent will not perform under the relevant Parent
Guarantee unless and until, in the Parent's reasonable judgment, the Parent
is obligated under the terms of such Parent Guarantee to perform. Subject
to the foregoing, any dispute between a Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, and a beneficiary of a
Parent Guarantee shall not affect such Majority Owned Subsidiary's
obligation to promptly indemnify the Parent hereunder. Promptly after a
Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit Support
Obligation is seeking to enforce such Credit Support Obligation, the
Majority Owned Subsidiary shall notify the Parent. The Parent shall have
the right, at its own expense, to contest the claim of such beneficiary. If
the Parent or the subsidiary of the Parent on whose behalf the Credit
Support Obligation is given is contesting the claim of such beneficiary,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, will not perform under the relevant Credit Support Obligation
unless and until, in the Majority Owned Subsidiary's reasonable judgment,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, is obligated under the terms of such Credit Support Obligation
to perform. Subject to the foregoing, any dispute between the Parent or the
subsidiary of the Parent on whose behalf the Credit Support Obligation was
given, on the one hand, and a beneficiary of a Credit Support Obligation,
on the other, shall not affect the Parent's obligation to promptly
indemnify the Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent may make loans
and advances to the Majority Owned Subsidiary or its wholly-owned
subsidiaries on a short-term, revolving credit basis, from time to time in
such amounts as mutually determined by the Parent and the Majority Owned
Subsidiary. The aggregate principal amount of such loans and advances shall
be reflected on the books and records of the Majority Owned Subsidiary (or
wholly-owned subsidiary, as applicable) and the Parent. All such loans and
advances shall be on an unsecured basis unless specifically provided
otherwise in loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable, shall pay
interest on the aggregate unpaid principal amount of such loans from time
to time outstanding at a rate ("Interest Rate") equal to the rate of the
Commercial Paper Composite Rate for 90-day maturities as reported by
Merrill Lynch Capital Markets, as an average of the last five business days
of such Majority Owned Subsidiary's latest fiscal quarter then ended, plus
twenty-five (25) basis points. The Interest Rate shall be adjusted on the
first business day of each fiscal quarter of such Majority Owned Subsidiary
pursuant to the Interest Rate formula contained in the preceding sentence
and shall be in effect for the entirety of such fiscal quarter. Interest
shall be computed on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on demand. The
principal and accrued interest may be paid by the Majority Owned
Subsidiaries or their wholly-owned
<PAGE> 4
subsidiaries, as applicable, at any time or from time to time, in whole or
in part, without premium or penalty. All payments shall be applied first to
accrued interest and then to principal. Principal and interest shall be
payable in lawful money of the United States of America, in immediately
available funds, at the principal office of the Parent or at such other
place as the Parent may designate from time to time in writing to the
Majority Owned Subsidiary. The unpaid principal amount of any such
borrowings, and accrued interest thereon, shall become immediately due and
payable, without demand, upon the failure of the Majority Owned Subsidiary
or its wholly-owned subsidiary, as applicable, to pay its debts as they
become due, the insolvency of the Majority Owned Subsidiary or its
wholly-owned subsidiary, as applicable, the filing by or against the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, of
any petition under the U.S. Bankruptcy Code (or the filing of any similar
petition under the insolvency law of any jurisdiction), or the making by
the Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, of an assignment or trust mortgage for the benefit of creditors
or the appointment of a receiver, custodian or similar agent with respect
to, or the taking by any such person of possession of, any property of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable. In
case any payments of principal and interest shall not be paid when due, the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable,
further promises to pay all cost of collection, including reasonable
attorneys' fees.
5. If the Parent makes a loan or provides other credit ("Credit Extension") to
a Second Tier Majority Owned Subsidiary, the First Tier Majority Owned
Subsidiary that owns the majority of the stock of such Second Tier Majority
Owned Subsidiary hereby guarantees the Second Tier Majority Owned
Subsidiary's obligations to the Parent thereunder. Such guaranty shall be
enforced only after the Parent, in its reasonable judgment, determines that
the Second Tier Majority Owned Subsidiary is unable to fully perform its
obligations under the Credit Extension. If the Parent provides Credit
Extension to a wholly-owned subsidiary of a Second Tier Majority Owned
Subsidiary, the Second Tier Majority Owned Subsidiary hereby guarantees it
wholly-owned subsidiary's obligations to the Parent thereunder and the
First Tier Majority Owned Subsidiary that owns the majority of the stock of
such Second Tier Majority Owned Subsidiary hereby guarantees the Second
Tier Majority Owned Subsidiary's obligations to the Parent hereunder. Such
guaranty by the First Tier Majority Owned Subsidiary shall be enforced only
after the Parent, in its reasonable judgment, determines that the Second
Tier Majority Owned Subsidiary is unable to fully perform its guaranty
obligation hereunder.
6. All payments required to be made by a Majority Owned Subsidiary or its
wholly-owned subsidiaries, as applicable, shall be made within two days
after receipt of notice from the Parent. All payments required to be made
by the Parent shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
7. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts applicable to contracts made and
performed therein.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
THERMO ELECTRON CORPORATION
By: /s/ Melissa F. Riordan
---------------------------------
Title: Treasurer
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
---------------------------------
Title: President
<PAGE> 1
EXHIBIT 10.6
AMENDED AND RESTATED MASTER GUARANTEE REIMBURSEMENT
AND LOAN AGREEMENT
This AGREEMENT is entered into as of the 5th day of January, 1998, by and
among Thermo Instrument Systems Inc. (the "Parent") and those of its
subsidiaries that join in this Agreement by executing the signature page hereto
(the "Majority Owned Subsidiaries").
WITNESSETH:
WHEREAS, the majority owned subsidiaries and their wholly-owned
subsidiaries wish to enter into various financial transactions, such as
convertible or nonconvertible debt, loans, and equity offerings, and other
contractual arrangements with third parties (the "Underlying Obligations") and
may provide credit support to, on behalf of or for the benefit of, other
subsidiaries of the Parent ("Credit Support Obligations");
WHEREAS, the Majority Owned Subsidiaries and the Parent acknowledge that
the Majority Owned Subsidiaries and their wholly-owned subsidiaries may be
unable to enter into many kinds of Underlying Obligations without a guarantee of
their performance thereunder from the Parent (a "Parent Guarantee") or without
obtaining Credit Support Obligations from other Majority Owned Subsidiaries;
WHEREAS, the Majority Owned Subsidiaries and their wholly-owned
subsidiaries may borrow funds from the Parent, and the Parent may loan funds or
provide credit to the Majority Owned Subsidiaries and their wholly-owned
subsidiaries, on a short-term and unsecured basis; and
WHEREAS, the Parent is willing to consider continuing to issue Parent
Guarantees and providing credit, and the Majority Owned Subsidiaries are willing
to consider continuing to provide Credit Support Obligations and to borrow
funds, on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each party hereto, the parties agree as follows:
1. If the Parent provides a Parent Guarantee of an Underlying Obligation, and
the beneficiary(ies) of the Parent Guarantee enforce the Parent Guarantee,
or the Parent performs under the Parent Guarantee for any other reason,
then the Majority Owned Subsidiary that is obligated, either directly or
indirectly through a wholly-owned subsidiary, under such Underlying
Obligation shall indemnify and save harmless the Parent from any liability,
cost, expense or damage (including reasonable attorneys' fees) suffered by
the Parent as a result of the Parent Guarantee. If a Majority Owned
Subsidiary or a wholly-owned subsidiary thereof provides a Credit Support
Obligation for any subsidiary of the Parent, other than a subsidiary of
such Majority Owned Subsidiary, and the
<PAGE> 2
beneficiary(ies) of the Credit Support Obligation enforce the Credit
Support Obligation, or the Majority Owned Subsidiary or its wholly-owned
subsidiary performs under the Credit Support Obligation for any other
reason, then the Parent shall indemnify and save harmless the Majority
Owned Subsidiary or its wholly-owned subsidiary, as applicable, from any
liability, cost, expense or damage (including reasonable attorneys' fees)
suffered by the Majority Owned Subsidiary or its wholly-owned subsidiary,
as applicable, as a result of the Credit Support Obligation. Without
limiting the foregoing, Credit Support Obligations include the deposit of
funds by a Majority Owned Subsidiary or a wholly-owned subsidiary thereof
in a credit arrangement with a banking facility whereby such funds are
available to the banking facility as collateral for overdraft obligations
of other Majority Owned Subsidiaries or their subsidiaries also
participating in the credit arrangement with such banking facility.
2. For purposes of this Agreement, the term "guarantee" shall include not only
a formal guarantee of an obligation, but also any other arrangement where
the Parent is liable for the obligations of a Majority Owned Subsidiary or
its wholly-owned subsidiaries. Such other arrangements include (a)
representations, warranties and/or covenants or other obligations joined in
by the Parent, whether on a joint or joint and several basis, for the
benefit of the Majority Owned Subsidiary or its wholly-owned subsidiaries
and (b) responsibility of the Parent by operation of law for the acts and
omissions of the Majority Owned Subsidiary or its wholly-owned
subsidiaries, including controlling person liability under securities and
other laws.
3. Promptly after the Parent receives notice that a beneficiary of a Parent
Guarantee is seeking to enforce such Parent Guarantee, the Parent shall
notify the Majority Owned Subsidiary(s) obligated, either directly or
indirectly through a wholly-owned subsidiary, under the relevant Underlying
Obligation. Such Majority Owned Subsidiary(s) or wholly-owned subsidiary
thereof, as applicable, shall have the right, at its own expense, to
contest the claim of such beneficiary. If a Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, is contesting the claim of
such beneficiary, the Parent will not perform under the relevant Parent
Guarantee unless and until, in the Parent's reasonable judgment, the Parent
is obligated under the terms of such Parent Guarantee to perform. Subject
to the foregoing, any dispute between a Majority Owned Subsidiary or
wholly-owned subsidiary thereof, as applicable, and a beneficiary of a
Parent Guarantee shall not affect such Majority Owned Subsidiary's
obligation to promptly indemnify the Parent hereunder. Promptly after a
Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, receives notice that a beneficiary of a Credit Support
Obligation is seeking to enforce such Credit Support Obligation, the
Majority Owned Subsidiary shall notify the Parent. The Parent shall have
the right, at its own expense, to contest the claim of such beneficiary. If
the Parent or the subsidiary of the Parent on whose behalf the Credit
Support Obligation is given is contesting the claim of such beneficiary,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, will not perform under the relevant Credit Support Obligation
unless and until, in the Majority Owned Subsidiary's reasonable judgment,
the Majority Owned Subsidiary or wholly-owned subsidiary thereof, as
applicable, is obligated under the terms of such
<PAGE> 3
Credit Support Obligation to perform. Subject to the foregoing, any dispute
between the Parent or the subsidiary of the Parent on whose behalf the
Credit Support Obligation was given, on the one hand, and a beneficiary of
a Credit Support Obligation, on the other, shall not affect the Parent's
obligation to promptly indemnify the Majority Owned Subsidiary or its
wholly-owned subsidiary, as applicable, hereunder.
4. Upon the request of a Majority Owned Subsidiary, the Parent may make loans
and advances to the Majority Owned Subsidiary or its wholly-owned
subsidiaries on a short-term, revolving credit basis, from time to time in
such amounts as mutually determined by the Parent and the Majority Owned
Subsidiary. The aggregate principal amount of such loans and advances shall
be reflected on the books and records of the Majority Owned Subsidiary (or
wholly-owned subsidiary, as applicable) and the Parent. All such loans and
advances shall be on an unsecured basis unless specifically provided
otherwise in loan documents executed at that time. The Majority Owned
Subsidiary or its wholly-owned subsidiaries, as applicable, shall pay
interest on the aggregate unpaid principal amount of such loans from time
to time outstanding at a rate ("Interest Rate") equal to the rate of the
Commercial Paper Composite Rate for 90-day maturities as reported by
Merrill Lynch Capital Markets, as an average of the last five business days
of such Majority Owned Subsidiary's latest fiscal quarter then ended, plus
twenty-five (25) basis points. The Interest Rate shall be adjusted on the
first business day of each fiscal quarter of such Majority Owned Subsidiary
pursuant to the Interest Rate formula contained in the preceding sentence
and shall be in effect for the entirety of such fiscal quarter. Interest
shall be computed on a 360-day basis. The aggregate principal amount
outstanding and accrued interest thereon shall be payable on demand. The
principal and accrued interest may be paid by the Majority Owned
Subsidiaries or their wholly-owned subsidiaries, as applicable, at any time
or from time to time, in whole or in part, without premium or penalty. All
payments shall be applied first to accrued interest and then to principal.
Principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office
of the Parent or at such other place as the Parent may designate from time
to time in writing to the Majority Owned Subsidiary. The unpaid principal
amount of any such borrowings, and accrued interest thereon, shall become
immediately due and payable, without demand, upon the failure of the
Majority Owned Subsidiary or its wholly-owned subsidiary, as applicable, to
pay its debts as they become due, the insolvency of the Majority Owned
Subsidiary or its wholly-owned subsidiary, as applicable, the filing by or
against the Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable, of any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any jurisdiction), or
the making by the Majority Owned Subsidiary or its wholly-owned subsidiary,
as applicable, of an assignment or trust mortgage for the benefit of
creditors or the appointment of a receiver, custodian or similar agent with
respect to, or the taking by any such person of possession of, any property
of the Majority Owned Subsidiary or its wholly-owned subsidiary, as
applicable. In case any payments of principal and interest shall not be
paid when due, the Majority Owned Subsidiary or its wholly-owned
subsidiary, as applicable, further promises to pay all cost of collection,
including reasonable attorneys' fees.
<PAGE> 4
5. All payments required to be made by a Majority Owned Subsidiary or its
wholly-owned subsidiaries, as applicable, shall be made within two days
after receipt of notice from the Parent. All payments required to be made
by the Parent shall be made within two days after receipt of notice from
the Majority Owned Subsidiary.
6. This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts applicable to contracts made and
performed therein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first above written.
THERMO INSTRUMENT SYSTEMS INC.
By: /s/ Earl R. Lewis
---------------------------------
Title: President
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
---------------------------------
Title: President
<PAGE> 1
EXHIBIT 10.7
STOCK TRANSFER AGREEMENT
This Stock Transfer Agreement dated August 21, 1997 is entered into by
Thermo Instrument Systems Inc., a Delaware corporation ("THI"), and ONIX Systems
Inc., a Delaware corporation ("ONIX").
WHEREAS, THI owns (a) 100% of the issued and outstanding shares of the
capital stock of each of the following subsidiaries ("Subsidiaries") (i) Thermo
Instrument Controls Inc., a Delaware corporation, (ii) Thermo Instrument
Controls Limited, a United Kingdom corporation, (iii) TN Technologies Inc., a
Texas corporation, (iv) VG Gas Analysis Limited, a United Kingdom corporation,
(v) Westronics Inc., a Texas corporation, (vi) Flow Automation (UK) Limited, a
United Kingdom corporation, (vii) Houston Atlas Inc., a Texas corporation and
(viii) TN Spectrace Europe B.V., a Netherlands corporation, and (b) 1% of the
issued and outstanding shares of the capital stock of Thermo Instrument Controls
de Mexico S.A. de C.V., a Mexican corporation (collectively, the "Shares"); and
WHEREAS, THI wishes to transfer to ONIX all of the Shares, upon the
terms and conditions set forth below;
NOW, THEREFORE, in consideration of the promises set forth below and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, THI and ONIX hereby agree as follows:
1. DELIVERY OF OUTSTANDING SHARES. THI hereby assigns, transfers,
conveys and delivers to ONIX all of its right, title and interest in and to the
Shares, free and clear of all liens, encumbrances, charges, equities or
restrictions, subject to the terms and conditions in this Agreement.
2. CONSIDERATION. In consideration for the Shares, and subject to the
terms and conditions contained in this Agreement, ONIX shall issue to THI
16,000,000 shares of ONIX's common stock, $.01 par value per share (the "Common
Stock")
3. TRANSFER DOCUMENTS. In addition to the taking of such other action
as may be provided in this Agreement, (i) THI shall deliver certificates for the
Shares to ONIX, duly endorsed by THI or accompanied by duly executed stock
powers, and (ii) ONIX shall deliver a certificate or certificates for 16,000,000
shares of Common Stock to THI .
4. REPRESENTATIONS AND WARRANTIES OF THI. THI represents and warrants
to ONIX that, as of the Closing Date:
(a) ORGANIZATION AND QUALIFICATION. THI is a corporation validly
existing and in good standing under the laws of the State of Delaware.
<PAGE> 2
(b) AUTHORITY. The execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby to be performed by THI,
have been duly and validly authorized by all necessary corporate action on the
part of THI. This Agreement constitutes the valid and binding obligation of THI
enforceable against THI in accordance with the terms hereof.
(c) OWNERSHIP OF SHARES; AUTHORITY TO TRANSFER. The Shares are
not encumbered and are freely transferable by THI. THI holds good and marketable
title to the Shares to be transferred to ONIX hereunder and no third party is
entitled to claim any right thereto or make any claim thereon. The transfer of
the Shares to ONIX pursuant to this Agreement will vest in ONIX title to the
Shares, free and clear of all liens, claims, equities, options, calls, voting
trusts, agreements, commitments and encumbrances whatsoever.
(d) NO CONFLICT. Neither the execution nor delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor the
fulfillment of or compliance with the terms and provisions hereof will, to the
best of THI's knowledge, (i) violate any current provisions of law,
administrative regulation, or court decree applicable to any of the
Subsidiaries' businesses or (ii) conflict with or result in a breach of any of
the terms, conditions or provisions of or constitute a default under any
agreement or instrument to which THI or any Subsidiary is a party or by which
they are bound.
5. REPRESENTATIONS AND WARRANTIES OF ONIX. ONIX represents and
warrants to THI that:
(a) ORGANIZATION AND QUALIFICATION. ONIX is a corporation
validly existing and in good standing under the laws of the State of Delaware.
(b) AUTHORITY. The execution and delivery of this Agreement, and
the consummation of the transactions contemplated hereby to be performed by
ONIX, have been duly and validly authorized by all necessary corporate action on
the part of ONIX. This Agreement constitutes the valid and binding obligation of
ONIX enforceable against ONIX in accordance with the terms hereof.
6. FURTHER ASSURANCES. From time to time and at any time after the
Closing, and without further expense to the requesting party, each party will
execute and furnish to the requesting party all documents and will do or cause
to be done all other things that the requesting party may reasonably request in
order to give full effect to this Agreement and to effectuate the intent of the
parties.
7. CONFIDENTIALITY OF INFORMATION. THI agrees that (a) it possesses
confidential and proprietary information about the Subsidiaries, including, but
not limited to, their business plans, strategies, customer lists, and financial
and statistical information and (b) they will not disclose, directly or
indirectly, such information or use it for any purpose other than for ONIX's
benefit.
- 2 -
<PAGE> 3
8. SUCCESSORS AND ASSIGNS. Each and every provision hereof shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns.
9. ENTIRE AGREEMENT. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof.
10. CAPTIONS. Titles or captions of sections contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof.
11. COUNTERPARTS. This Agreement may be executed in counterparts, all
of which together shall for all purposes constitute one Agreement, binding on
the parties hereto notwithstanding that such parties have not signed the same
counterpart.
12. APPLICABLE LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and interpreted, construed and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
13. CREDITORS. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditor of any party hereto.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement on
August 21, 1997.
THERMO INSTRUMENT SYSTEMS INC. ONIX SYSTEMS INC.
By: /s/ Earl R. Lewis By: /s/ William J. Zolner
------------------------- ---------------------
Earl R. Lewis William J. Zolner
- 4 -
<PAGE> 1
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This AGREEMENT is dated as of August 21, 1997 by and between Thermo
Instrument Systems Inc., a Delaware corporation ("THI"), and ONIX Systems Inc.,
a Delaware corporation ("ONIX"). As used herein ONIX shall mean ONIX Systems
Inc. and its direct and indirect wholly owned subsidiaries.
WHEREAS, ONIX is a wholly owned subsidiary of THI;
WHEREAS, THI has agreed to transfer to ONIX all of the Shares as that
term is defined in the Stock Transfer Agreement of even date herewith between
THI and ONIX (the "Stock Transfer Agreement"); and
WHEREAS, in connection therewith, THI is willing to indemnify and hold
harmless ONIX as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
set forth herein, the parties hereto hereby agree as follows:
1. INDEMNIFICATION BY THI.
(a) THI agrees to indemnify and hold harmless ONIX from any and
all claims, damages, losses (including diminution in value), liabilities, costs
and expenses (including, without limitation, settlement costs and any reasonable
legal, accounting or other expenses for investigating or defending any actions
or threatened actions) (collectively "Losses") incurred by ONIX relating solely
to the acts or omissions, or related to conduct, of the business of the
Subsidiaries as defined in the Stock Transfer Agreement, including foreign
operations thereof, that occurred prior to the date hereof. Notwithstanding the
foregoing, THI agrees to indemnify and hold harmless ONIX from any and all
Losses incurred by ONIX relating to the following: (i) the ownership, operation,
assets and business of the BJ Software division formerly owned and operated by
Thermo Instrument Controls Inc., a Delaware corporation, whether such Losses
arose before or after the date of this Agreement; (ii) the radioactive materials
incident that occurred at the operations of Kay-Ray/Sensall Inc. in April 1994;
and (iii) the Cannonbear arbitration except to the extent such Losses are
directly attributable to (a) royalties due, if any, arising from sales by ONIX,
after the date of this Agreement, of products incorporating technology which is
the subject of the Cannonbear arbitration or (b) the breach by ONIX of any
obligations arising after the date of this Agreement under contracts which are
the subject of the Cannonbear arbitration.
(b) Whenever any claim shall arise for indemnification
hereunder, ONIX shall promptly notify THI of the claim and, when known, the
facts constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third-party, the notice to THI shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. ONIX
shall not settle or compromise any claim by a third party for which ONIX is
entitled to indemnification hereunder
<PAGE> 2
without the prior consent of THI, unless suit shall have been instituted
against ONIX and THI shall not have taken control of such suit after
notification thereof as provided in Paragraph 1(c) of this Agreement.
(c) In connection with any claim giving rise to indemnity
hereunder resulting from or arising out of any claim or legal proceeding by a
person who is not a party to this Agreement, THI at its sole cost and expense
may, upon notice to ONIX, assume the defense of any such claim or legal
proceeding if it acknowledges to ONIX its obligations to indemnify ONIX with
respect to all such elements of such claim. ONIX shall be entitled to
participate in (but not control) the defense of any such action, with its
counsel and at its own expense. If THI does not assume the defense of any such
claim or litigation resulting therefrom within 30 days after the date THI is
notified of such claim pursuant to Paragraph 1(b) hereof, (i) ONIX may defend
against such claim or litigation, after giving notice of the same to THI, on
such terms as are appropriate in ONIX's reasonable judgment, and (ii) THI shall
be entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense.
2. MISCELLANEOUS.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that THI and ONIX may not assign their respective obligations hereunder
without the prior written consent of the other party. Any assignment in
contravention of this provision shall be void.
(b) This Agreement represents the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof.
This Agreement may be amended or modified only by a written instrument executed
by THI and ONIX.
(c) Any notice or other communication shall be in writing and
shall be personally delivered, or sent by overnight or second day courier or by
first class mail, return receipt requested, to the party to whom such notice or
other communication is to be given or made at such party's address set forth
below, or to such other address as such party shall designate by written notice
to the other party as follows:
If to THI:
Thermo Instrument Systems Inc.
1851 Central Drive, Suite 314
Bedford, TX 76021
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
<PAGE> 3
If to ONIX:
ONIX Systems Inc.
22001 North Park Drive
Kingwood, TX 77339
Attn: President
With a copy to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02254
Attention: General Counsel
provided that any notice of change of address, and any notice or other
communication given otherwise than as specified above shall be effective only
upon receipt; and further that any presumption of receipt by the addressee shall
be inoperable during the period of any interruption in Postal Service.
(d) This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(f) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall be one
and the same document.
(g) This Agreement is the joint work product of the parties
hereto, and, therefore, in the case of an ambiguity no inference shall be drawn
to the detriment of either party.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
THERMO INSTRUMENT SYSTEMS INC. ONIX SYSTEMS INC.
By: /s/ Earl R. Lewis By: /s/ William J. Zolner
-------------------------- ---------------------
Title: President Title: President
<PAGE> 1
Exhibit 10.9
FORM OF
ONIX SYSTEMS INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Section 1. Participation. Any director of ONIX Systems Inc. (the "Company") may
elect to have such percentage as he or she may specify of the fees otherwise
payable to him or her deferred and paid to him or her as provided in this Plan.
A director who is also an officer of the Company or its parent corporation,
Thermo Electron Corporation, shall not be eligible to participate in this Plan.
Each election shall be made by notice in writing delivered to the Clerk of the
Company, in such form as the Clerk shall designate, and each election shall be
applicable only with respect to fees earned subsequent to the date of the
election for the period designated in the form. The term "participant" as used
herein refers to any director who shall have made an election. No participant
may defer the receipt of any fees to be earned after the later to occur of
either (a) the date on which the participant shall retire from or otherwise
cease to engage in his or her principal occupation or employment or (b) the date
on which he or she shall cease to be a director of the Company, or such earlier
date as the Board of Directors of the Company, with the participant's consent,
may designate (the "deferral termination date"). In the event that the
participant's deferral termination date is the date on which he or she ceases to
engage in his or her principal occupation or employment, the participant or a
personal representative shall advise the Company of that date by written notice
delivered to the Clerk of the Company.
Section 2. Establishment of Deferred Compensation Accounts. There shall be
established for each participant an account to be designated as that
participant's deferred compensation account.
Section 3. Allocations to Deferred Compensation Accounts. There shall be
allocated to each participant's deferred compensation account, as of the end of
each quarter, an amount equal to his or her fees for that quarter
<PAGE> 2
2
which that participant shall have elected to have deferred pursuant to
Section 1.
Section 4. Stock Units and Stock Unit Accounts. All amounts allocated to a
participant's deferred compensation account pursuant to Section 3 and Section 5
shall be converted, at the end of each quarter, into stock units by dividing the
accumulated balance in the deferred compensation account as of the end of that
quarter by the average last sale price per share of the Company's common stock
as reported on in The Wall Street Journal, for the five business days up to and
including the last business day of that quarter. The number of stock units, so
determined, rounded to the nearest one-hundredth of a share, shall be credited
to a separate stock unit account to be established for the participant, and the
aggregate value thereof as of the last business day of that quarter shall be
charged to the participant's deferred compensation account. No amounts credited
to the participant's deferred compensation account pursuant to Section 5
subsequent to the close of the fiscal year in which occurs the participant's
deferral termination date shall be converted into stock units. Any such amount
shall be distributed in cash as provided in Section 8. A maximum number of
25,000 shares of the Company's common stock may be represented by stock units
credited under this Plan, subject to proportionate adjustment in the event of
any stock dividend, stock split or other capital change affecting the Company's
common stock.
Section 5. Cash Dividend Credits. Additional credits shall be made to a
participant's deferred compensation account, until all distributions shall have
been made from the participant's stock unit account, in amounts equal to the
cash dividends (or the fair market value of dividends paid in property other
than dividends payable in common stock of the Company) which the participant
would have received from time to time had he or she been the owner on the record
dates for the payment of such dividends of the number of shares of the Company's
common stock equal to the number of units in his or her stock unit account on
those dates.
Section 6. Stock Dividend Credits. Additional credits shall be made to a
participant's stock unit account, until
<PAGE> 3
3
all distributions shall have been made from the participant's stock unit
account, of a number of units equal to the number of shares of the Company's
common stock, rounded to the nearest one-hundredth share, which the participant
would have received from time to time as stock dividends had he or she been the
owner on the record dates for the payments of such stock dividends of the number
of units of the Company's common stock equal to the number of units credited to
his or her stock unit account on those dates.
Section 7. Recapitalization. If, as a result of a recapitalization of the
Company (including a stock split), the Company's outstanding shares of common
stock shall be changed into a greater or smaller number of shares, the number of
units then credited to a participant's stock unit account shall be appropriately
adjusted on the same basis.
Section 8. Distribution of Stock and Cash After Participant's Deferral
Termination Date. When a participant's deferral termination date shall occur,
the Company shall become obligated to make the distributions prescribed in the
following paragraphs (a) and (b).
(a) The Company shall distribute to the participant the number of
shares of the common stock of the Company which shall equal the total number of
units accumulated in his or her stock unit account as of the close of the fiscal
year in which the participant's deferral termination date occurs. Such
distribution of stock shall be made in ten annual installments, unless, at least
six months prior to his or her deferral termination date, the participant shall
have elected, by notice in writing filed with the Secretary of the Company, to
have such distribution made in five annual installments. In either such case,
the installments shall be of as nearly equal number of shares as practicable,
adjusted to reflect any changes pursuant to Sections 6 and 7 in the number of
units remaining in the participant's stock unit account. The first such
installment shall be distributed within 60 days after the close of the fiscal
year in which the participant's deferral termination date occurs. The remaining
installments shall be distributed at annual intervals thereafter. Anything
herein to the contrary notwithstanding, the Company shall have the option,
<PAGE> 4
4
if its Board of Directors shall by resolution so determine, in lieu of making
distribution in ten or five annual installments as set forth above, with the
participant's consent, to distribute stock or any remaining installments thereof
in a single distribution at any time following the close of the fiscal year in
which the participant's deferral termination date occurs. Distribution of stock
made hereunder may be made from shares of common stock held in the treasury
and/or from shares of authorized but previously unissued shares of common stock.
All distributions under the plan shall be completed not later than December 31,
2025.
(b) The Company shall distribute to the participant sums in cash equal
to the balance credited to his or her deferred compensation account as of the
close of the fiscal year in which his or her deferral termination date occurs
plus such additional amounts as shall be credited thereto from time to time
thereafter pursuant to Section 5. The cash distribution shall be made on the
same dates as the annual distributions made pursuant to paragraph (a) above, and
each cash distribution shall consist of the entire balance credited to the
participant's deferred compensation account at the time of the annual
distribution.
If a participant's deferral termination date shall occur by reason of
his or her death or if he or she shall die after his or her deferral termination
date but prior to receipt of all distributions of stock and cash provided for in
this Section 8, all stock and cash remaining distributable hereunder shall be
distributed to such beneficiary as the participant shall have designated in
writing and filed with the Secretary of the Company or, in the absence of
designation, to the participant's personal representative. Such distributions
shall be made in the same manner and at the same intervals as they would have
been made to the participant had he or she continued to live.
Section 9. Participant's Rights Unsecured. The right of any participant to
receive distributions under Section 8 shall be an unsecured claim against the
general assets of the Company. The Company may but shall not be obligated to
acquire shares of its outstanding common stock from time to
<PAGE> 5
5
time in anticipation of its obligation to make such distributions, but no
participant shall have any rights in or against any shares of stock so acquired
by the Company. All such stock shall constitute general assets of the Company
and may be disposed of by the Company at such time and for such purposes as it
may deem appropriate.
Section 10. Termination of the Plan. The Plan shall terminate and full
distribution shall be made from all participants' deferred compensation accounts
and stock unit accounts upon any change of control of the Company. Either of the
following shall be 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 of
either the Company or its parent corporation, Thermo Instrument Systems Inc.
("Thermo Instrument"), or the beneficial owner of 25% or more of the outstanding
common stock of Thermo Electron Corporation ("Thermo Electron"), without the
prior approval of the prior directors of the Company, Thermo Instrument, or
Thermo Electron, as the case may be; (b) the failure of the prior directors to
constitute a majority of the Board of Directors of the Company, Thermo
Instrument or Thermo Electron, at any time within two years following any
electoral event. As used in this sentence and the preceding sentence, person
shall mean a natural person, an entity (together with an affiliate thereof, as
defined in Rule 405 under the Securities Act of 1933) or a group, as defined in
Rule 13d-5 under the Securities Exchange Act of 1934; prior directors shall mean
the persons serving on the Board of Directors immediately prior to any electoral
event; and electoral event shall mean any contested election of directors or any
tender or exchange offer for common stock of the Company, Thermo Instrument or
Thermo Electron by any person other than the Company, Thermo Instrument, Thermo
Electron or a subsidiary of any of the foregoing companies. The Board of
Directors at any time, at its discretion, may terminate the Plan. If the Board
of Directors terminates the Plan after any person or group of persons shall have
acquired or proposed to acquire control of the Company through the Board of
Directors, Thermo Instrument or Thermo Electron, full and prompt distribution
shall be made from all participants' deferred compensation accounts and stock
unit accounts. Otherwise, distributions in respect of
<PAGE> 6
6
credits to participants' deferred compensation accounts and stock unit accounts
as of the date of termination shall be made in the manner and at the time
prescribed in Section 8.
Section 11. Amendment of the Plan. The Board of Directors of the Company may
amend the Plan at any time and from time to time, provided, however, that no
amendment affecting credits already made to any participant's deferred
compensation account or stock unit account may be made without the consent of
that participant or, if that participant has died, that participant's
beneficiary.
Section 12. Effective Date of the Plan. The Plan shall become effective
commencing upon the date the U. S. Securities and Exchange Commission shall have
declared effective the registration of shares of the Company's Common Stock in
an underwritten public offering pursuant to the Securities Act of 1933, as
amended.
<PAGE> 1
Exhibit 10.10
FORM OF
ONIX SYSTEMS INC.
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this ** day of **, 1997,
("Agreement"), by and between ONIX Systems Inc., a Delaware corporation (the
"Company"), and *** ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to, and activities on behalf of, the corporation;
WHEREAS, uncertainties relating to the continued availability of
adequate directors and officers liability insurance ("D&O Insurance") and the
uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the difficulty in attracting and retaining such persons is
detrimental to the best interests of the Company's stockholders and that the
Company should act to assure such persons that there will be increased certainty
of such protection in the future;
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified;
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to
take on additional service for or on behalf of the Company on the condition that
he be so indemnified and that such indemnification be so guaranteed.
<PAGE> 2
2
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve or continue to
serve as a Director of the Company. This agreement shall not impose any
obligation on the Indemnitee or the Company to continue the Indemnitee's
position with the Company beyond any period otherwise applicable.
2. Indemnity. The Company shall indemnify, and shall advance Expenses
(as hereinafter defined) to, Indemnitee as provided in this Agreement and to the
fullest extent permitted by law.
3. General. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 3 if, by reason of his Corporate Status
(as hereinafter defined), he is, or is threatened to be made, a party to any
threatened, pending, or completed action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or other proceeding
whether civil, criminal, administrative or investigative. Pursuant to this
Section 3, Indemnitee shall be indemnified against Expenses, judgments,
penalties, fines and amounts paid in settlement incurred by him or on his behalf
in connection with such action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or other proceeding
whether civil, criminal, administrative or investigative or any claim, issue or
matter therein, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
4. Proceedings by or in the Right of the Company. In the case of any
action or suit by or in the right of the Company, indemnification shall be made
only (i) for Expenses or (ii) in respect of any claim, issue or matter as to
which Indemnitee shall have been adjudged to be liable to the Company if such
indemnification is permitted by Delaware law; provided, however, that
indemnification against Expenses shall nevertheless be made by the Company in
such event to the extent that the Court of Chancery of the State of Delaware, or
the court in which such action or suit shall have been brought or is pending,
shall
<PAGE> 3
3
determine to be proper despite the adjudication of liability but in view
of all the circumstances of the case.
5. Indemnification for Expenses of a Party who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or other proceeding whether civil, criminal, administrative or investigative, he
shall be indemnified against all Expenses incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful but is successful,
on the merits or otherwise, as to one or more but less than all claims, issues
or matters in such action, suit, arbitration, alternative dispute resolution
mechanism, investigation, administrative hearing or other proceeding whether
civil, criminal, administrative or investigative, the Company shall indemnify
Indemnitee against all Expenses incurred by him or on his behalf in connection
with each successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue or matter by
dismissal, or withdrawal, with or without prejudice, shall be deemed to be a
successful result as to such claim, issue or matter.
6. Advance of Expenses. The Company shall advance all Expenses incurred
by or on behalf of Indemnitee in connection with any action, suit, arbitration,
alternative dispute resolution mechanism, investigation, administrative hearing
or any other proceeding whether civil, criminal, administrative or investigative
within twenty (20) days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such action, suit,
arbitration, alternative dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded or
accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses, which undertaking shall be
accepted by or on behalf of the Company
<PAGE> 4
4
without reference to the financial ability of Indemnitee to make repayment.
7. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 7(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case:
(i) if a Change in Control (as hereinafter defined) shall have occurred, by
Independent Counsel (as hereinafter defined) in a written opinion to the Board,
a copy of which shall be delivered to Indemnitee (unless Indemnitee shall
request that such determination be made by the Board or the Stockholders, in
which case the determination shall be made in the manner provided below in
clauses (ii) or (iii)); (ii) if a Change of Control shall not have occurred, (A)
by the Board by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board consisting
of Disinterested Directors is not obtainable or, even if obtainable, such quorum
of Disinterested Directors so directs, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) by
the Stockholders of the Company; or (iii) as provided in Section 8(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information that is not
privileged or otherwise protected from disclosure and that is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements)
<PAGE> 5
5
incurred by Indemnitee in so cooperating shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement,
the Independent Counsel shall be selected as provided in this Section 7(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected. If a Change
of Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board, in which event the preceding sentence shall apply), and Indemnitee shall
give written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company, as
the case may be, may, within 7 days after such written notice of selection shall
have been given, deliver to the Company or to Indemnitee, as the case may be, a
written objection to such selection. Such objection may be asserted only on the
ground that the Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 14 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 7(a) hereof, no Independent Counsel shall have been selected or if
selected, shall have been objected to, in accordance with this Section 7(c),
either the Company or Indemnitee may petition the Court of Chancery of the State
of Delaware or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the other's
selection of independent counsel and/or for the appointment as independent
counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is favorably
resolved or the person so appointed shall act as Independent Counsel under
Section 7(b) hereof. The Company shall pay reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to
<PAGE> 6
6
Section 7(b) hereof. The Company shall pay any and all reasonable fees and
expenses incident to the procedures of this Section 7(c), regardless of the
manner in which such Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section
9(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
8. Presumptions and Effect of Certain Proceedings.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 7(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under
Section 7 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made such determination within sixty (60) days
after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have been
made and Indemnitee shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional thirty (30)
days, if the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
8(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 7(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of
<PAGE> 7
7
the request for such determination the Board has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made thereat, or (B) a special meeting of stockholders is
called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 7(b) of this Agreement.
(c) The termination of any action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or other
proceeding whether civil, criminal, administrative or investigative or of any
claim, issue or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except as otherwise
expressly provided in this Agreement) of itself adversely affect the right of
Indemnitee to indemnification or create a presumption that Indemnitee did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any criminal
action or proceeding, that Indemnitee had reasonable cause to believe that his
conduct was unlawful.
9. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to Section 7
of this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 6
of this Agreement, (iii) the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 7(b) of this Agreement and
such determination shall not have been made and delivered in a written opinion
within ninety (90) days after receipt by the Company of the request for
indemnification, (iv) payment of indemnification is not made pursuant to Section
5 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Section 8 of this Agreement, Indemnitee shall be
<PAGE> 8
8
entitled to an adjudication in an appropriate court of the State of Delaware, or
in any other court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. Alternatively, Indemnitee, at his
option, may seek an award in arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in arbitration
within one hundred eighty (180) days following the date on which Indemnitee
first has the right to commence such proceeding pursuant to this Section 9(a).
The Company shall not oppose Indemnitee's right to seek any such adjudication or
award in arbitration.
(b) In the event that a determination shall have been made pursuant to
Section 7 of this Agreement that Indemnitee is not entitled to indemnification,
any judicial proceeding or arbitration commenced pursuant to this Section 9
shall be conducted in all respects as a de novo trial, or arbitration, on the
merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. If a Change of Control shall have occurred, in any judicial
proceeding or arbitration commenced pursuant to this Section 9 the Company shall
have the burden of proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 7 or 8 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 9, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 9 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 9, seeks a
judicial adjudication of or an award in arbitration to
<PAGE> 9
9
enforce his rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all expenses (of the types described
in the definition of Expenses in Section 14 of this Agreement) actually and
reasonably incurred by him in such judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the expenses
incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
10. Security. To the extent requested by the Indemnitee and approved by
the Board, the Company may at any time and from time to time provide security to
the Indemnitee for the Company's obligations hereunder through an irrevocable
bank line of credit, funded trust or other collateral. Any such security, once
provided to the Indemnitee, may not be revoked or released without the prior
written consent of Indemnitee.
11. Non-Exclusivity; Duration of Agreement; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's certificate of incorporation or by-laws, any other agreement,
a vote of stockholders or a resolution of directors, or otherwise. This
Agreement shall continue until and terminate upon the later of: (a) ten (10)
years after the date that Indemnitee shall have ceased to serve as a Director of
the Company or fiduciary of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which Indemnitee served at the
request of the Company; or (b) the final termination of all pending actions,
suits, arbitrations, alternative dispute resolution mechanisms, investigations,
administrative hearings or other proceedings whether civil, criminal,
administrative or investigative in respect of which Indemnitee is granted rights
of indemnification or advancement of expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 9 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the
<PAGE> 10
10
benefit of Indemnitee and his heirs, executors and administrators.
(b) To the extent that the Company maintains D&O Insurance, Indemnitee
shall be covered by such D&O Insurance in accordance with its terms to the
maximum extent of the coverage available for any Director under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Severability; Reformation. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
13. Exception to Right of Indemnification or Advancement of Expenses.
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any action, suit or proceeding, or any claim therein, initiated,
brought or made by him (i) against the Company, unless a Change in Control shall
have occurred, or (ii) against any person other than the Company, unless
approved in advance by the Board.
<PAGE> 11
11
14. Definitions. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f)
of Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred
if (i) any "person" (as such term is used in Section 13(d) and 14(d) of
the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's
then outstanding securities without the prior approval of at least
two-thirds of the members of the Board in office immediately prior to
such person attaining such percentage interest; (ii) the Company is a
party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members
of the Board in office immediately prior to such transaction or event
constitute less than a majority of the Board thereafter; or (iii)
during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (including for this
purpose any new director whose election or nomination for election by
the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at
least a majority of the Board.
(b) "Corporate Status" describes the status of a person who is or was
or has agreed to become a director of the Company, or is or was an
officer or fiduciary of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the
Company.
(c) "Disinterested Director" means a director of the Company who is not
and was not a party to the action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or
any other proceeding whether civil, criminal, administrative or
<PAGE> 12
12
investigative in respect of which indemnification is sought by
Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, travel expenses,
duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses
of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend or investigating an action,
suit, arbitration, alternative dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative.
(e) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither currently
is, nor in the past five years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party or
(ii) any other party to the action, suit, arbitration, alternative
dispute resolution mechanism, investigation, administrative hearing or
any other proceeding whether civil, criminal, administrative or
investigative giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee's Rights under this Agreement.
15. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute
part of this Agreement or to affect the construction thereof.
16. Modification and Waiver. This Agreement may be amended from time to
time to reflect changes in Delaware law or for other reasons. No
supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
<PAGE> 13
13
17. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating
to any matter which may be subject to indemnification or advancement of
Expenses covered hereunder; provided, however, that the failure to give
any such notice shall not disqualify the indemnitee from
indemnification hereunder.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if (i) delivered by hand and receipted for by the party to whom
said notice or other communication shall have been directed, or (ii)
mailed by certified or registered mail with postage prepaid, on the
third business day after the date on which it is so mailed:
(a) If to Indemnitee, to: The address shown beneath
his or her signature on
the last page hereof
(b) If to the Company, to: ONIX Systems Inc.
c/o Thermo Electron
Corporation
81 Wyman Street
P.O. Box 9046
Waltham, MA 02254-9046
Attn: Corporate
Secretary
or to such other address as may have been furnished to Indemnitee by
the Company or to the Company by Indemnitee, as the case may be.
19. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of
the State of Delaware.
<PAGE> 14
14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
Attest: ONIX SYSTEMS INC.
<TABLE>
<CAPTION>
<S> <C>
By: By:
--------------------------------------------------- ---------------------------------------------------
Sandra L. Lambert William J. Zolner III
Secretary Chief Executive Officer
INDEMNITEE
--------------------------------------------------------
Address:
--------------------------------------------------------
</TABLE>
<PAGE> 1
Exhibit 10.11
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ONIX SYSTEMS INC.
Promissory Note Due July 31, 1998
Waltham, Massachusetts
January 29, 1998
For value received, ONIX Systems Inc., a Delaware corporation (the
"Company"), hereby promises to pay to Thermo Instrument Systems Inc.
(hereinafter referred to as the "Payee"), or registered assigns, on July 31,
1998, as described below, the principal sum of twelve million dollars
($12,000,000.00) or such part thereof as then remains unpaid, to pay interest
from the date hereof on the whole amount of said principal sum remaining from
time to time unpaid at a rate per annum equal to the rate of the Commercial
Paper Composite Rate for 90-day maturities as reported by Merrill Lynch Capital
Markets, as an average of the last five business days of the Company's latest
fiscal quarter then ended, plus twenty-five (25) basis points, which rate shall
be adjusted on the first business day of each fiscal quarter of the Company and
shall be in effect for the entirety of such fiscal quarter, such interest to be
payable in arrears on the first day of each fiscal quarter of the Company during
the term set forth herein, until the whole amount of the principal hereof
remaining unpaid shall become due and payable, and to pay interest on all
overdue principal and interest at a rate per annum equal to the rate of interest
announced from time to time by BankBoston Corporation at its head office in
Boston, Massachusetts as its "base rate" plus one percent (1%). Principal and
all accrued but unpaid interest shall be repaid on July 31, 1998. Principal and
interest shall be payable in lawful money of the United States of America, in
immediately available funds, at the principal office of the Payee or at such
other place as the legal holder may designate from time to time in writing to
the Company. Interest shall be computed on an actual 360-day basis.
This Note may be prepaid at any time or from time to time, in whole or
in part, without any premium or penalty. All prepayments shall be applied first
to accrued interest and then to principal.
1
<PAGE> 2
The then unpaid principal amount of, and interest outstanding on, this
Note shall be and become immediately due and payable without notice or demand,
at the option of the holder hereof, upon the occurrence of any of the following
events:
(a) the failure of the Company to pay any amount due hereunder
within ten (10) days of the date when due;
(b) any representation, warranty or statement made or furnished
to the Payee by the Company in connection with this Note or the
transaction from which it arises shall prove to have been false or
misleading in any material respect as of the date when made or
furnished;
(c) the failure of the Company to pay its debts as they become
due, the insolvency of the Company, the filing by or against the
Company of any petition under the U.S. Bankruptcy Code (or the filing
of any similar petition under the insolvency law of any jurisdiction),
or the making by the Company of an assignment or trust mortgage for the
benefit of creditors or the appointment of a receiver, custodian or
similar agent with respect to, or the taking by any such person of
possession of, any property of the Company;
(d) the sale by the Company of all or substantially all of its
assets;
(e) the merger or consolidation of the Company with or into any
other corporation in a transaction in which the Company is not the
surviving entity;
(f) the issuance of any writ of attachment, by trustee process
or otherwise, or any restraining order or injunction not removed,
repealed or dismissed within thirty (30) days of issuance, against or
affecting the person or property of the Company or any liability or
obligation of the Company to the holder hereof; and
(g) the suspension of the transaction of the usual business of
the Company.
Upon surrender of this Note for transfer or exchange, a new Note or new
Notes of the same tenor dated the date to which interest has been paid on the
surrendered Note and in an aggregate principal amount equal to the unpaid
principal amount of the Note so surrendered will be issued to, and registered in
the name of, the transferee or transferees. The Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all cost of collection, including all
reasonable attorneys' fees.
2
<PAGE> 3
No delay or omission on the part of the Payee in exercising any right
hereunder shall operate as a waiver of such right or of any other right of the
Payee, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. The
Company hereby waives presentment, demand, notice of prepayment, protest and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note. The undersigned hereby assents
to any indulgence and any extension of time for payment of any indebtedness
evidenced hereby granted or permitted by the Payee.
This Note shall be governed by and construed in accordance with, the
laws of the Commonwealth of Massachusetts and shall have the effect of a sealed
instrument.
ONIX SYSTEMS INC.
By: /s/ William J. Zolner
-------------------------------
Title: President & CEO
[Corporate Seal]
Attest:
/s/ Sandra L. Lambert
- ----------------------------
3
<PAGE> 1
Exhibit 10.12
STANDARD COMMERCIAL NET 2555 NO. IH 35
LEASE AGREEMENT Minimum of 100,000 gross sq.ft.
Round Rock, TX 78664
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into by and between CROW-GOTTESMAN-HILL
#43, hereinafter referred to as "Landlord" and TN TECHNOLOGIES, INC., A TEXAS
CORPORATION, hereinafter referred to as "Tenant";
WITNESSETH:
1. PREMISES AND TERM. In consideration of the obligation of Tenant to
pay rent herein provided, and in consideration of the other terms, provisions
and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby takes from Landlord certain premises situated within the County of
WILLIAMSON, State of TEXAS, more particularly described on Exhibit "A" attached
hereto and incorporated herein by reference, together with all rights,
privileges, easements, appurtenances, and immunities belonging to or in any way
pertaining to the premises and together with the buildings and other
improvements situated or to be situated upon said premises said real property,
buildings and improvements being hereinafter referred to as the "premises".
TO HAVE AND TO HOLD the same for a term commencing on the "commencement
date", as hereinafter defined, and ending ONE HUNDRED EIGHTY (180) months
thereafter, provided, however, that, in the event the "commencement date" is a
date other than the first day of a calendar month, said term shall extend for
said number of months in addition to the remainder of the calendar month
following the "commencement date".
A. The "commencement date" shall be the date Landlord acquires title to
the premises. Tenant acknowledges that as of the commencement date it will have
inspected and will accept the premises, and specifically the buildings and
improvements comprising the same, in their then condition as suitable for the
purpose for which the premises are leased. Taking of possession by Tenant shall
be deemed conclusively to establish that said buildings and other improvements
are in good and satisfactory condition as of when possession was taken. Tenant
further acknowledges that no representations as to the repair of the premises,
nor promises to alter, remodel or improve the premises have been made by
Landlord, unless such are expressly set forth in this lease. If this lease is
executed before the premises become vacant or otherwise available and ready for
occupancy, or if any present tenant or occupant of the premises holds ready for
occupancy, or if any present tenant or occupant of the premises holds over, and
Landlord cannot acquire possession of the premises prior to said "commencement
date", Landlord shall not be deemed to be in default hereunder, and Tenant
agrees to accept possession of the premises at such time as Landlord is able to
tender the same, which date shall thenceforth be deemed the "commencement date";
and Landlord hereby waives payment of rent covering any period prior to the
tendering of possession to Tenant hereunder. After the commencement date Tenant
shall, upon demand, execute and deliver to Landlord a letter of acceptance of
delivery of the premises.
<PAGE> 2
B. In the event this lease pertains to a building to be constructed, the
provisions of this subparagraph B shall apply in lieu of the provisions of
subparagraph A above and the "commencement date" shall be the date upon which
the buildings and other improvements erected and to be erected upon the premises
shall have been substantially completed in accordance with the Earnest Money
Contract dated June 8, 1989, by and between Baker Hughes Incorporated, as
Seller, and Landlord, as Purchaser, relating to the premises.
2. BASE RENT AND SECURITY DEPOSIT. Subject to possible adjustment up or
down on the commencement date, but not thereafter, in accordance with a letter
agreement between Landlord and Tenant, Tenant agrees to pay to Landlord as rent
for the premises in advance, without demand, deduction or setoff for the first
sixty (60) months of the lease term the sum of $49,166.67 per month and for the
second sixty (60) months of the term, the sum of $59,000.00 per month and for
the final sixty (60) months of the lease term, the sum of $68,833.33 per month.
One such monthly installment shall be due and payable on the date hereof and a
like monthly installment shall be due and payable, without demand, on or before
the first day of each calendar month succeeding the "commencement date" during
the hereby demised term, except that the rental payment for any fractional
calendar month at the commencement of the lease term shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date
hereof the sum of FORTY-EIGHT THOUSAND Dollars ($48,000.00), which sum shall be
held by Landlord, without obligation for interest, as security for the
performances of Tenant's covenants and obligations under this lease, it being
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Upon the
occurrence of any event of default by Tenant, Landlord may, from time to time,
without prejudice to any other remedy provided herein or provided by law, use
such fund to the extent necessary to make good any arrears of rent or other
payments due Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default; and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the security deposit to its
original amount. Although the security deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this lease that all of the Tenant's
obligations under this lease have been fulfilled.
3. USE. The premises shall be used only for the purpose of receiving,
storing, shipping, manufacturing and selling (other than retail) products,
materials and merchandise made and/or distributed by Tenant, and for such other
lawful purposes as may be incidental thereto. Outside storage is prohibited
without Landlord's prior written consent. Tenant shall, at its own cost and
expense, obtain any and all licenses and permits necessary for any such use.
Tenant shall comply with all applicable governmental laws, ordinances and
regulations applicable to the use of the premises, and shall promptly comply
with all governmental orders and directives for the correction, prevention and
abatement of nuisances caused or created by Tenant in or upon, or connected
with, the premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the premises, nor take any other action which would constitute a
nuisance or would disturb or
2
<PAGE> 3
endanger any other tenants of the building in which the premises are situated or
unreasonably interfere with their use of their respective premises.
4. TAXES.
A. Tenant agrees to pay before they become delinquent all taxes
assessments, and governmental charges of any kind and nature whatsoever
(hereinafter collectively referred to as the "taxes") lawfully levied or
assessed against the building and the grounds, parking areas, driveways and
alleys around the building and constituting part of the premises. Tenant shall
furnish to Landlord, not later than twenty (20) days before the date any such
taxes become delinquent, official receipts of the appropriate taxing authority
or other evidence satisfactory to Landlord evidencing payment thereof. If Tenant
should fail to pay any taxes, assessments, or governmental charges required to
be paid by Tenant hereunder, in addition to any other remedies provided herein,
Landlord may, if it so elects, pay such taxes, assessments, and governmental
charges. Any sums so paid by Landlord shall be deemed to be so much additional
rental owing by Tenant to Landlord and due and payable, on demand, by Landlord,
together with interest thereon, at the rate of ten percent (10%) per annum from
date paid by Landlord to date of repayment by Tenant.
B. In the event the premises constitute a portion of a multiple
occupancy building, in lieu of Tenant paying the "taxes" as above provided,
Landlord agrees to pay, before they become delinquent, all "taxes" lawfully
levied or assessed against such building and the grounds, parking areas,
driveways and alleys around the building, and Tenant agrees to pay to landlord,
as additional rental, upon demand, the amount of Tenant's "proportionate share"
of all such "taxes" paid by Landlord. Tenants' "proportionate share" of all such
"taxes" paid by Landlord. Tenant's "proportionate share", as used in this lease,
shall mean a fraction, the numerator of which is the space contained in the
premises and the denominator of which is the entire space contained in the
building.
C. If, at any time during the term of this lease, the present method of
taxation shall be changed to that in lieu of the whole or any part of any taxes,
assessments or governmental charges levied, assessed or imposed on real estate
and the improvements thereon, there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment levy or charge measured by or based, in whole
or in part, upon such rents for the present or any future building or buildings
on the premises, then all such taxes, assessments, levies or charges, or the
part thereof so measured or based, shall be deemed to be included within the
term "taxes" for the purposes hereof.
D. Tenant may, alone or along with any other tenants of said building,
at its or their sole cost and expense, in its or their own name(s) and/or in the
name of Landlord, dispute and contest any "taxes" by appropriate proceedings
diligently conducted in good faith, but only after Tenant and all other tenants,
if any, joining with Tenant in such contest, have deposited with Landlord the
amount so contested and unpaid (or otherwise secure the payment of such amount
in a manner satisfactory to Landlord) or their proportionate shares thereof, as
the case may be which shall be held by Landlord at interest equal to that then
being earned on 30 day certificates of deposit
3
<PAGE> 4
issued by a bank in Austin, Texas, until the termination of the proceedings, at
which time the amount(s) deposited shall be applied by Landlord toward the
payment of the items held valid (plus any court costs, interest, penalties, and
other liabilities associated with the proceedings), and Tenant's share of any
excess shall be returned to Tenant. Tenant further agrees to pay to Landlord,
upon demand, Tenant's share (as among all tenants who participated in the
contest) of all court costs, interest, penalties, and other liabilities relating
to such proceedings. Tenant hereby indemnifies and agrees to hold harmless the
Landlord from and against any cost, damage, or expense (including attorneys'
fees) in connection with any such proceedings.
E. Any payment to be made pursuant to this Paragraph 4, with respect to
the real estate tax year in which this lease commences or terminates shall be
prorated.
5. REPAIRS AND MAINTENANCE.
A. Tenant shall, at its own cost and expense, keep and maintain all
parts of the premises in good condition, promptly making all necessary repairs
and replacements, interior and exterior, structural and non-structural, ordinary
and extraordinary, including but not limited to, windows, glass and plate glass,
doors and any special office entry, walls and finish work, floors and floor
covering, roof, foundation, downspouts, gutters, heating and air conditioning
systems, dock boards, truck doors, dock bumpers, paving, plumbing work and
fixtures, termite and pest extermination, regular removal of trash and debris,
regular mowing of any grass, trimming, weed removal and general landscape
maintenance, including rail spur areas, keeping the parking areas, driveways,
alleys on the premises and the whole of the premises in a clean and sanitary
condition, and maintaining any spur track serving the premises (Tenant agrees to
sign a joint maintenance agreement with the railroad company servicing the
premises, if requested by the railroad company). Tenant shall at its own cost
and expense repaint exterior overhead doors, canopies, entries, handrails,
gutters, and other exposed parts of the building which reasonably require
periodic repainting to prevent deterioration or to maintain aesthetic standards,
but not more than once every 5 years and not at all in the last 2 years of the
lease term.
B. Tenant shall, at its own cost and expense, provide regularly
scheduled preventive maintenance for all heating and air conditioning systems
and equipment within the premises.
6. ALTERATIONS. Tenant shall not make any alterations, additions or
improvements to the premises without the prior written consent of Landlord.
Tenant may, without the consent of Landlord, but at its own cost and expense and
in a good workmanlike manner make such minor alterations, additions or
improvements or erect, remove or alter such partitions, or erect such shelves,
bins, machinery and trade fixtures as it may deem advisable, without altering
the basic character of the building or improvements, and in each case, complying
with all applicable governmental laws, ordinances, regulations and other
requirements. All alterations, additions, improvements and partitions erected by
Tenant shall be and remain the property of Tenant during the term of this lease.
Upon the termination of this lease, the alterations, additions or improvements
made to the premises prior to the commencement date shall be surrendered with
the premises in the condition the same were in at the commencement of the term,
subject to ordinary wear and tear and unrepaired casualty or condemnation
damage. If Landlord consents to
4
<PAGE> 5
any future alterations, additions or improvements to the premises which are
requested by Tenant, Landlord agrees in its consent to designate which, if any,
of the same must be removed by Tenant upon the termination of this lease, and
upon such termination Tenant shall be obligated to remove such designated
alterations, additions or improvements and restore the affected area of the
premises to the condition the same would have been in at the termination of the
lease has such alterations, additions, or improvements not been made. Tenant
shall not be required to remove at the termination of this lease any
alterations, additions or improvements which the Landlord did not designate for
removal at the time Landlord approved the same for installation. If Landlord so
elects prior to termination of this lease, such alterations, additions,
improvements, and partitions shall become the property of Landlord as of the
date of termination of this lease and shall be delivered up to the Landlord with
the premises. All shelves, bins, machinery and trade fixtures installed by
Tenant may be removed by Tenant prior to the termination of this lease if Tenant
so elects, and shall be removed if required by Landlord; upon any such removal
Tenant shall repair any damage caused by such removal. All such removals and
restoration shall be accomplished in a good workmanlike manner so as not to
damage the primary structure or structural qualities of the buildings and other
improvements situated on the premises.
7. SIGNS. Landlord approves existing Tenant signage for the premises.
Tenant shall have the right to install additional exterior signs upon the
premises only when first approved in writing by Landlord and subject to any
applicable governmental laws, ordinances, regulations and other requirements.
Tenants shall remove all such exterior signs by the termination of this lease.
Such installations and removals shall be made in such manner as to avoid injury
to or defacement of the building and other improvements, and Tenant shall repair
any damage caused by such installation or removal. Landlord's approval for
existing exterior Tenant signage refers to that existing on the commencement
date of the term of this lease.
8. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. Landlord and Landlord's agents and
representatives shall not exercise their rights under the immediately preceding
sentence without giving Tenant 48 hours prior notice of intention to enter the
premises; provided, however, no such prior notice shall be necessary if an
emergency exists at the premises which requires immediate action by the
Landlord. During the period that is six (6) months prior to the end of the term
hereof, Landlord and Landlord's agents and representatives shall have the right
to enter the premises at any reasonable time during business hours for the
purpose of showing the premises, and shall have the right to erect on the
premises a suitable sign indicating that the premises are available Tenant shall
give written notice to Landlord at least thirty (30) days prior to vacating the
premises and shall arrange to meet with Landlord for a joint inspection of the
premises at the time of vacating. In the event of Tenant's failure to give such
notice or arrange such joint inspection, Landlord's inspection at or after
Tenant's vacating the premises shall be conclusively deemed correct for purposes
of determining Tenant's responsibility for repairs and restorations.
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9. UTILITIES. Landlord agrees to provide, at its cost, appropriate
water, electricity, sewer, natural gas, and telephone service connections to the
premises; but Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges and other utilities and services used on or
from the premises, together with any taxes, penalties, surcharges or the like
pertaining thereto, and maintenance charges for utilities, and shall furnish all
electric light bulbs and tubes. Landlord shall in no event be liable for any
interruption or failure of utility services on the premises.
10. ASSIGNMENT AND SUBLETTING. Tenant shall have the right to assign
this lease or to sublet the whole or any part of the premises without the prior
written consent of Landlord. Notwithstanding any assignment or subletting,
Tenant shall at all times remain directly, primarily and fully responsible and
liable for the payment of the rent herein specified and for compliance with all
of Tenant's other obligations under the terms, provisions and covenants of this
lease. Upon the occurrence of an "event of default" as hereinafter defined, if
the premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided or provided by law, may at its
option collect directly from such assignee or subtenant all rents becoming due
to Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further performance of
Tenant's obligations hereunder.
11. INSURANCE, FIRE AND CASUALTY DAMAGE.
A. Tenant agrees to maintain replacement cost insurance on the
buildings, fixtures, equipment and other improvements which comprise a part of
the premises, which insurance shall be issued by an insurer acceptable to, and
in form reasonably required by, Landlord and its mortgagee. Subject to the
provisions of subparagraphs 11B and 11D below, such insurance shall be for the
sole benefit of Landlord and under its control. Such insurance shall contain
such "loss payee" and "mortgagee" clauses as may be required by Landlord or its
mortgagee or both. As between Landlord and Tenant the proceeds of such
replacement cost insurance shall be used by Landlord to satisfy its obligations
under subparagraph 11B below. Such insurance coverage may not be canceled or
amended in any respect without prior notice to and the consent of the Landlord.
Should the Tenant fail to obtain and maintain the insurance required hereby,
Landlord may obtain the same and Tenant shall immediately reimburse Landlord for
the cost thereof, together with interest at the rate of ten percent (10%) per
annum until repaid. During the term of this lease, Tenant shall furnish Landlord
and Landlord's mortgagee, if any, a certificate of insurance confirming that the
insurance required by this lease is in effect. Tenant may obtain casualty
insurance on its property as it may elect.
B. If the buildings situated upon the premises should be damaged or
destroyed by any peril covered by the insurance to be provided by Tenant under
subparagraph 11A above, Tenant shall give immediate notice thereof to Landlord
and Landlord shall at its sole cost and expense thereupon proceed with
reasonable diligence to rebuild and repair such building to substantially the
condition in which they existed prior to such damage or destruction. In the
event the premises have not been rebuilt and repaired as herein provided within
180 days after the occurrence of such damage, Tenant may terminate this lease
effective as of the date Tenant notified Landlord in
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writing. During the period required to rebuild or repair damage which was NOT
caused by the acts or omissions of Tenant or its employees or contractors, the
rent for such period shall be equitably abated taking into account the portion
of the premises which Tenant is unable to use and occupy in the manner in which
it used and occupied the same immediately prior to such damage. Landlord's
obligation to rebuild shall not extend to any property on which Tenant does not
maintain replacement cost insurance coverage.
C. Landlord shall bear the risk of any uninsured casualty damage to the
premises, provided Tenant has not failed to perform its obligations set out in
Subparagraph 11A above and Tenant has not violated the terms and conditions of
the insurance coverages required by said Subparagraph 11A to be maintained by
Tenant. Otherwise, the risk of any uninsured casualty shall be borne by Tenant.
D. Notwithstanding anything herein to the contrary, in the event the
holder of any indebtedness secured by a mortgage or deed of trust covering the
premises requires that all the insurance proceeds be applied to such
indebtedness, then Landlord shall have the right to terminate this lease by
delivering written notice of termination to Tenant within fifteen (15) days
after such requirement is made by any such holder, whereupon all rights and
obligations hereunder shall cease and terminate.
E. Each of Landlord and Tenant hereby releases the other and the
insurers of each from any and all liability or responsibility to the other or
any claiming through or under them by way of subrogation or otherwise for any
loss or damage to property caused by fire or any other perils insured in
policies of insurance covering such property, even if such loss or damage shall
have been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible, provided, however, that this release shall
be applicable and in force and effect only with respect to loss or damage
occurring during such times as the releasor's policies shall contain a clause or
endorsement to the effect that any such release shall not adversely affect or
impair said policies or prejudice the right of the releasor to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Each of Landlord and Tenant agrees that it will request its
insurance carriers to include in its policies such a clause or endorsement. If
extra cost shall be charged therefor, each party shall advise the other thereof
and of the amount of the extra cost, and the other party, at its election, may
pay the same, but shall not be obligated to do so.
12. LIABILITY. Landlord shall not be liable to Tenant or Tenant's
employees agents patrons or visitors, or to any other person whomsoever, for any
injury to person or damage to property on or about the premises, resulting from
and/or caused in part or whole by the negligence or misconduct of Tenant, its
agents, servants or employees, or of any other person entering upon the
premises, or caused by the buildings and improvements located on the premises
becoming out of repair, or caused by leakage of gas, oil, water or steam, or by
electricity emanating from the premises, or due to any cause whatsoever, and
Tenant hereby covenants and agrees that it will at all times indemnify and hold
safe and harmless the property, the Landlord (including without limitation the
trustee and beneficiaries if Landlord is a trust), Landlord's agents and
employees from any loss, liability, claims, suits, costs, expenses, including
without limitation
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attorney's fees and damages, both real and alleged, arising out of any such
damage or injury; except injury to persons or damage to property the cause of
which is the act or omission of Landlord, its agents and employees. Tenant shall
procure and maintain throughout the term of this lease a policy or policies of
insurance, at its sole cost and expense, insuring both Landlord and Tenant
against all claims, demands or actions arising out of or in connection with: (i)
the premises; (ii) the condition of the premises; (iii) Tenant's operations in
and maintenance and use of the premises; and (iv) Tenant's liability assumed
under this lease, the limits of such policy or policies to be in the amount of
not less than $300,000 per occurrence in respect of injury to persons (including
death), and in the amount of not less than $50,000 per occurrence in respect of
property damage or destruction, including loss of use thereof. All such policies
shall be procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt evidencing
payment of premiums therefor, shall be delivered to Landlord prior to the
commencement date of this lease. Not less than fifteen (15) days prior to the
expiration date of any such policies, certified copies of the renewals thereof
(bearing notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. Such policies shall further provide that not less than
thirty (30) days, written notice shall be given to Landlord before such policy
may be canceled or changed to reduce insurance provided thereby.
13 CONDEMNATION.
A. If the whole or any substantial part of the premises should be taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the use of
the premises for the purpose for which they are then being used, this lease
shall terminate and the rent shall be abated during the unexpired portion of
this lease, effective when the physical taking of said premises shall occur.
B. If part of the premises shall be taken for any public or quasi-public
use under governmental law, ordinance or regulation, or by right of eminent
domain, or by private purchase in lieu thereof, and this lease is not terminated
as provided in the subparagraph above, this lease shall not terminate, but the
rent payable hereunder during the unexpired portion of the lease shall be
reduced to such extent as may be fair and reasonable under all of the
circumstances.
C. In the event of any such taking or private purchase in lieu thereof,
Landlord and Tenant shall each be entitled to receive and retain such separate
awards and/or portion of lump sum awards as may be allocated to their respective
interests in any condemnation proceedings.
14. HOLDING OVER. Tenant will, at the termination of this lease by lapse
of time or otherwise, yield up immediate possession to Landlord. In the event of
any holding over by Tenant or any of its successors in interest after the
expiration or termination of this lease, unless the parties hereto otherwise
agree in writing, the hold over tenancy shall be subject to termination by
Landlord at any time upon not less than five (5) days advance written notice, or
by Tenant at any time upon not less than thirty (30) days advance written
notice, and all of the other terms and provisions of this lease shall be
applicable during that period, except that Tenant shall pay Landlord from time
to time upon demand as rental for the period of any hold over, an
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amount equal to one and one-half (1 1/2) the rent in effect on the termination
date, computed on a daily basis for each day of the holdover period. No holding
over by Tenant, whether with or without consent of Landlord, shall operate to
extend this lease except as otherwise expressly provided.
15. QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire
before Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms of
this lease, zoning ordinances, and other building and fire ordinances and
governmental regulations relating to the use of such property, and easements,
restrictions, and other conditions of record. In the event this lease is a
sublease, then Tenant agrees to take the premises subject to the provisions of
the prior leases. Landlord represents and warrants that it has full right and
authority to enter into this lease and that Tenant, upon paying the rental
herein set forth and performing its other covenants and agreements herein set
forth, shall peaceably and quietly have, hold, and enjoy the premises for the
term hereof without hindrance or molestation from Landlord, subject to the terms
and provisions of this lease.
16 EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent hereby reserved
when due, or any payment with respect to taxes hereunder when due, or any other
payment or reimbursement to Landlord required herein when due, and such failure
shall continue for a period of five (5) days from the date such payment was due.
(b) Tenant shall become insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of the
National Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof; or Tenant shall be adjudged bankrupt or
insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or substantially
all of the assets of Tenant.
(e) Tenant shall fail to comply with any term, provision, or covenant of
this lease (other than the foregoing in this Paragraph 16), and shall not cure
such failure within sixty (60) days, or twenty (20) days for monies owed to
Landlord, after written notice thereof to Tenant.
17 REMEDIES. Upon the occurrence of any such events of default described
in Paragraph 16 hereof, Landlord shall have the option to pursue any one or more
of the following remedies without any notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately
surrender the premises to Landlord, and if Tenant fails so to do, Landlord may,
without prejudice to any other
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remedy which it may have for possession or arrearages in rent, lawfully enter
upon and take possession of the premises and expel or remove Tenant and any
other person who may be occupying such premises or any part thereof, lawfully,
and Tenant agrees to pay to Landlord on demand the amount of any loss and damage
which Landlord may suffer by reason of such termination, whether through
inability to relet the premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the premises and lawfully expel or
remove Tenant and any other person who may be occupying such premises or any
part thereof, by force if necessary, and relet the premises and receive the rent
therefor; and Tenant agrees to pay to the Landlord on demand any deficiency that
may rise by reason of such reletting. In the event Landlord is successful in
reletting the premises at a rental in excess of that agreed to be paid by Tenant
pursuant to the terms of this Agreement, Landlord and Tenant each mutually agree
that Tenant shall not be entitled, under any circumstances, to such excess
rental, and Tenant does hereby specifically waive any claim to such excess
rental.
(c) Lawfully enter upon the premises,and do whatever Tenant is obligated
to do under the terms of this lease; and Tenant agrees to reimburse Landlord,
on demand, for any reasonable expenses which Landlord may incur in thus
effecting compliance with Tenant's obligations under this lease.
In the event Tenant fails to pay any installment of rent hereunder as
and when such installment is due, to help defray the additional cost to Landlord
for processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five percent (5%) of such installment; and the
failure to pay such amount within ten (10) days after demand therefor shall be
an event of default hereunder. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord's remedies
in any manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by law,
nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of any rent due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violation of any of the terms, provisions and
covenants herein contained. No act or thing done by the Landlord or its agents
during the term hereby granted shall be deemed a termination of this lease or an
acceptance of the surrender of the premises, and no agreement to terminate this
lease or to accept a surrender of said premises shall be valid unless in writing
signed by Landlord. No waiver by Landlord or any violation or breach of any of
the terms, provisions and covenants herein contained shall be deemed or
construed to constitute a waiver of any other violation or breach of any of the
terms, provisions and covenants herein contained. Landlord's acceptance of the
payment of rental or other payments hereunder after the occurrence of an event
of default shall not be construed as a waiver of such default, unless Landlord
so notifies Tenant in writing. Forbearance by Landlord to enforce one or more of
the remedies herein provided upon an event of default shall not be deemed or
construed to constitute a waiver of such default or of Landlord's right to
enforce any such remedies with respect to such default or any subsequent
default. If, on account of any breach or default by Tenant in Tenant's
obligations under the terms and conditions of this lease, it shall become
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necessary or appropriate for Landlord to employ or consult with an attorney
concerning or to enforce or defend any of Landlord's rights or remedies
hereunder, Tenant agrees to pay any reasonable attorneys' fees so incurred.
18. LANDLORD'S LIEN. Landlord waives all statutory and contractual liens
against any of the property of Tenant to secure the payment of rent and other
sums due and payable under this lease.
19. MORTGAGES. Tenant accepts this lease subject and subordinate to any
mortgage(s) and/or deed(s) of trust now or at any time hereafter constituting a
lien or charge upon the premises or the improvements situated thereon which is
held by a mortgagee who has entered into a written subordination, recognition,
nondisturbance and attornment agreement with Tenant, provided, however, that if
the mortgagee, trustees, or holder of any such mortgage or deed of trust elects
to have Tenant's interest in this lease superior to any such instrument, then by
notice to Tenant from such mortgagee, trustee or holder, this lease shall be
deemed superior to such lien, whether this lease was executed before or after
said mortgage or deed of trust. Tenant shall at any time hereafter, on demand,
execute any instruments, releases or other documents which may be required by
any mortgagee for the purpose of subjecting and subordinating this lease to the
lien of any mortgage which is held by a mortgagee who has entered into a written
subordination, recognition, nondisturbance and attornment agreement with
Tenant.
20 LANDLORD'S DEFAULT. In the event Landlord should become in default in
any payments due on any such mortgage described in Paragraph 19 hereof, Tenant
is authorized and empowered, after giving Landlord five (5) days prior written
notice of such default and Landlord's failure to cure such default, to pay any
such items for and on behalf of Landlord, and the amount of any item so paid by
Tenant for or on behalf of Landlord, together with any interest or penalty
required to be paid in connection therewith, shall be payable on demand by
Landlord to Tenant; provided, however, that Tenant shall not be authorized and
empowered to make any payment under the terms of this Paragraph 20, unless the
item paid shall be superior to Tenant's interest hereunder. In the event Tenant
pays any mortgage debt in full, in accordance with this paragraph, it shall, at
its election, be entitled to the mortgage security by assignment or subrogation.
21. MECHANIC'S LIENS. Tenant shall have no authority, express or
implied, to create or place any lien or encumbrance, of any kind or nature
whatsoever upon, or in any manner to bind, the interest of Landlord in the
premises or to charge the rentals payable hereunder for any claim in favor of
any person dealing with Tenant, including those who may furnish materials or
perform labor for any construction or repairs, and each such claim shall affect
and each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it will
pay or cause to be paid all sums legally due and payable by it on account of any
labor performed or materials furnished in connection with any work performed on
the premises on which any lien is or can be validly and legally asserted against
its leasehold interest in the premises or the improvements thereon and that it
will save and hold Landlord harmless from any and all loss, cost or expense
based on or arising out of asserted claims or liens against the leasehold estate
or against the right, title and interest of the Landlord in the premises or
under the terms of this lease.
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22. NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivery of any notice or the making of any payment
by Landlord to Tenant or with reference to the sending, mailing, or delivery of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address hereinbelow set
forth or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay rent
and any other amounts to Landlord under the terms of this lease shall not be
deemed satisfied until such rent and other amounts have been actually received
by Landlord.
(b) All payment required to be made by Landlord to Tenant hereunder
shall be payable to Tenant at the address hereinbelow set forth, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith:
Landlord: Tenant:
Crow-Gottesman-Hill #43 TN Technologies, Inc., a Texas Corporation
301 Congress Avenue, Suite 1300 c/o Baker Hughes, Inc.
P.O. Box 2176 (78768-2176) 3900 Essex Lande, Suite 1000
Austin, Texas 78701 P.O. Box 4740
Houston, Texas 77210-4740
Attn: Director of Real Estate
President:
TN Technologies, Inc.
P.O. Box 800
Round Rock, Texas 78680
If and when included within the term "Landlord", as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord; if and when included within the term "Tenant", as used
in this instrument, there are more than one person, firm or corporation, all
shall jointly arrange
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among themselves for their joint execution of such a notice specifying some
individual at some specific address within the continental United States for the
receipt of notices and payments to Tenant. All parties included within the terms
"Landlord" and "Tenant", respectively, shall be bound by notices given in
accordance with the provisions of this paragraph to the same effect as if each
had received such notice.
23. MISCELLANEOUS.
A. Words of any gender used in this lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
B. The terms, provisions, covenants, and conditions contained in this
lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, legal representatives, successors and
permitted assigns except as otherwise herein expressly provided. Each party
agrees to furnish the other, promptly upon demand, a corporate resolution, proof
of due authorization by partners, or other appropriate documentation evidencing
the due authorization of such party to enter into this lease.
C. The captions inserted in this lease are for convenience only and in
no way define, limit or otherwise describe the scope or intent of this lease, or
any provision hereof, or in any way affect interpretation of this lease.
D. Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, and estoppel
certificate stating that this lease is in full force and effect, the date to
which rent has been paid, the unexpired term of this lease and such other
matters pertaining to this lease as may be reasonably requested by Landlord. It
is understood and agreed that Tenant's obligation to furnish such estoppel
certificates in a timely fashion is a material inducement for Landlord's
execution of this lease.
E. This lease may not be altered, changed or amended except by an
instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payment obligations with respect to taxes and insurance and all
obligations concerning the condition of the premises. Upon the expiration or
earlier termination of the term hereof, and prior to Tenant vacating the
premises, Tenant shall pay to Landlord any amount reasonably estimated by
Landlord as necessary to put the premises, including without limitation all
heating and air conditioning systems and equipment therein, in good condition
and repair. Tenant shall also, prior to vacating the premises, pay to Landlord
the amount, as estimated by Landlord, of Tenant's obligation hereunder for real
estate taxes and insurance premiums for the year in which the lease expires or
terminates. All such amounts shall be used and held by Landlord for payment of
such obligations of Tenant hereunder, with Tenant being liable for any
additional costs therefor upon demand by Landlord, or with any excess to be
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returned to Tenant after all such obligations have been determined and
satisfied, as the case may be. Any security deposit held by Landlord shall be
credited against the amount payable by Tenant under this Paragraph 23(F). Upon
the expiration or early termination of the term hereof and prior to Tenant
vacating the premises, Tenant shall pay to Landlord an amount reasonably
estimated by Landlord as necessary to restore to good operating condition any
system, fixture or equipment in the premises which is not then in good operating
condition and to repair any damage to the premises for which Tenant is liable
under other provisions of this lease.
G. If any clause or provision of this lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
lease, then and in that event, it is the intention of the parties hereto that
the remainder of this lease shall not be affected thereby, and it is also the
intention of the parties of this lease that in lieu of each clause or provision
of this lease that is illegal, invalid or unenforceable, there be added as a
part of this lease contract a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
H. All references in this lease to "the date hereof" or similar
references shall be deemed to refer to the last date, in point of time, on which
all parties hereto have executed this lease.
I. So long as no uncured event of default by Tenant shall exist
hereunder, and to the extent not prohibited by applicable law now or hereafter
in effect, Landlord agrees that Tenant may (but shall not be obligated to) close
after 5:00 P.M. on days other than holidays, Saturdays and Sundays, and at
anytime on holidays, Saturdays and Sundays, the access easement from Lot 2 in
Block A of Amanda Subdivision across Lot 1 in Block A of said Amanda Subdivision
providing access to Interstate Highway 35 and to said Block 2. Such closures may
be affected by gates, barriers or similar devices installed, operated, opened
and closed at the sole cost and expense of Tenant. Any such gates, barriers or
closure devices shall be marked with signs or other devices as necessary to make
them clearly visible when closed or in place.
24. ADDITIONAL PROVISIONS. In addition to Tenant's rights under
paragraph 6 above, Tenant shall have the right to cause the area of the
premises to be expanded to include additional improvements. All such additional
improvements shall be subject to the requirements of paragraph 6 above and shall
be constructed in accordance with plans and specifications approved by Landlord.
Upon the completion of such additional improvements, Landlord shall purchase the
same from Tenant for a sum of money equal to the cost of constructing the same.
Once Landlord has purchased such additional improvements from Tenant, Tenant
shall pay to a Landlord as rental for the same for each year of the remainder of
the term of this lease a sum of money equal to said purchase price multiplied by
a percentage which is equal to the interest rate being paid on the date of such
purchase on U.S. Treasury bills with a 26 week maturity, plus three hundred
(300) basis points. From and after the purchase of such additional improvements,
the same shall be deemed a part of the premises and subject to all the terms
hereof. If at the time of such purchase the unexpired term of this lease is less
than 10 years, Landlord and Tenant will enter into a modification of this lease
to extend the term hereof to the date which is 10 years after the date of the
purchase of such improvements. If the lease term is extended by operation of the
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immediately preceding sentence, the annual rent for the original premises leased
hereunder shall be increased (but never decreased) on the anniversary date of
this lease in each lease year beginning after the 15th year of the lease term by
an amount equal to the lesser of (x) four percent (4%) per annum or (y) the
percentage increase (if any) in the average of the monthly Consumer Price Index
(hereafter defined) for the twelve (12) consecutive calendar months next
preceding such anniversary date for which a Consumer Price Index has been
published over the average of the monthly Consumer Price Index for the twelve
(12) calendar months which are the 13th through the 24th months both inclusive,
prior to such anniversary date. The term "Consumer Price Index" shall mean the
Consumer Price Index, All Urban Consumers, All Items published for the area
which is nearest Austin, Texas (1982-84 = 100) published by the Bureau of Labor
Statistics, U.S. Department of Labor. In the event the Consumer Price Index
ceases to be based on 1982-84 = 100, or if a substantial change is made in the
terms or number of items contained in the Consumer Price Index, then the
Consumer Price Index for any particular period shall be adjusted appropriately
by Landlord. In the event the Consumer Price Index or a successor or substitute
Index is no longer published, a reliable governmental or other non-partisan
publication evaluating information used in determining the Consumer Price Index
shall be the basis for adjusting said rent.
Provided Tenant installs adequate screening from view in a manner
reasonably acceptable to Landlord, and provided further that applicable building
codes and zoning ordinances (including, without limitation, those establishing
on-site parking requirements) are not violated, Tenant may maintain outside
storage areas behind and east of the buildings on the premises.
Tenant has the right, and Landlord has the right to require Tenant, to
place a barrier in Tenant's east parking lot to mark the boundary between the
premises and Lot 2 of Amanda Subdivision. Any such barrier shall be installed,
repaired, replaced and maintained at Tenant's expense.
25 HAZARDOUS SUBSTANCES AND ACTIVITIES. The term "Hazardous Substances,"
as used in this lease, shall mean pollutants, contaminants, toxic or hazardous
wastes, radioactive material or any other substances, the use and/or the removal
of which is now or hereafter required or the use of which is now or hereafter
restricted, prohibited or penalized by an "Environmental Law," which term shall
mean any applicable present or future federal, state or local statute,
ordinance, regulation or other law of a governmental or quasi-governmental
authority relating to pollution or protection of the environment or the
regulation of the use, storage or handling of Hazardous Substances. Tenant will
use and store ("Permitted Activities") Hazardous Substances in the course of its
business in and at the premises and Landlord acknowledges such use and storage,
subject to Tenant's compliance with all provisions of this Lease. All Permitted
Activities shall be conducted in accordance with all Environmental Laws and, in
connection therewith, Tenant shall be responsible for obtaining any required
permits or authorizations and paying any fees and providing any testing required
by any governmental agency incident to the Permitted Activities by Tenant; and
Hazardous Substances on the premises as a result of Permitted Activities by
Tenant shall be properly stored in a manner and location meeting all
Environmental Laws, and in connection therewith, Tenant shall be responsible for
obtaining any required permits or authorizations and paying any fees and
providing any testing required by any governmental
15
<PAGE> 16
agency incident to the Permitted Activities by Tenant. If at any time during or
after the term of this Lease and as a result of Tenant's Permitted Activities on
or at the premises, the premises are found to be contaminated with Hazardous
Substances or in violation of any Environmental Laws, Tenant shall diligently
institute proper and thorough clean-up procedures for such contamination or
violation, at Tenant's sole cost. Upon the termination or expiration of this
Lease, Tenant further agrees to remove from the premises and properly dispose of
all Hazardous Substances on the premises as a result of Permitted Activities by
Tenant and all soil, equipment, fixtures, personal property or appurtenances
contaminated with any Hazardous Substances as a result of Permitted Activities
by Tenant, which removal and disposal shall be performed to the satisfaction of
the governmental authorities having jurisdiction of the same. Tenant agrees to
indemnify and hold Landlord harmless from all claims, demands, actions,
liabilities, costs, expenses, penalties, damages and obligations of any nature
arising from or as a result of any breach by Tenant of its covenants contained
in this paragraph or any contamination of the premises with Hazardous Substances
caused by Tenant's Permitted Activities at the premises, including without
limitation any decrease in the market value of the premises after the
termination or expiration of this Lease and resulting from Tenant not removing
from the premises and properly disposing of all Hazardous Substances and all
soil, equipment, fixtures, personal property or appurtenances contaminated with
Hazardous Substances. The foregoing indemnification and responsibilities of
Tenant shall survive the termination or expiration of this Lease for the
applicable period of limitations commencing upon the earlier of the discovery by
Landlord of the event or condition triggering such indemnification or
responsibility or the date on which Landlord should have reasonably discovered
such event or condition.
EXECUTED BY LANDLORD, this 4th day of June, 1990
LANDLORD:
Attest/Witness: Crow-Gottesman-Hill #43
-----------------------
/s/ (illegible) By: /s/ (illegible)
- ------------------------------------ --------------------------------------
Title: Project Partner Title:
----------------------------- -----------------------------------
EXECUTED BY TENANT, this ____________ day of _______________, 1990
TENANT:
Attest/Witness: TN Technologies, Inc., a Texas Corporation
------------------------------------------
/s/ Andrew E. Organ By: /s/ John Nelson
- ------------------------------------ --------------------------------------
Title: VP, Marketing & Sales Title: President
----------------------------- -----------------------------------
16
<PAGE> 17
EXHIBIT A
PROPERTY DESCRIPTION
Lot 1 in Block A of AMANDA SUBDIVISION in the City of Round Rock,
Williamson County, Texas, being the most easterly 9.38 acres of land out of a
55.55 acre tract of land in the David Curry Survey, A-130 in Williamson County,
Texas, described in deed recorded in Volume 1672, Page 819, Official Records of
Williamson County, Texas.
17
<PAGE> 1
Exhibit 10.13
ONIX SYSTEMS INC.
EQUITY INCENTIVE PLAN
1. Purpose
The purpose of this Equity Incentive Plan (the "Plan") is to secure for
ONIX Systems Inc. (the "Company") and its Stockholders the benefits arising from
capital stock ownership by employees and Directors of, and consultants to, the
Company and its subsidiaries or other persons who are expected to make
significant contributions to the future growth and success of the Company and
its subsidiaries. The Plan is intended to accomplish these goals by enabling the
Company to offer such persons equity-based interests, equity-based incentives or
performance-based stock incentives in the Company, or any combination thereof
("Awards").
2. Administration
The Plan will be administered by the Board of Directors of the Company
(the "Board"). The Board shall have full power to interpret and administer the
Plan, to prescribe, amend and rescind rules and regulations relating to the Plan
and Awards, and full authority to select the persons to whom Awards will be
granted ("Participants"), determine the type and amount of Awards to be granted
to Participants (including any combination of Awards), determine the terms and
conditions of Awards granted under the Plan (including terms and conditions
relating to events of merger, consolidation, dissolution and liquidation, change
of control, vesting, forfeiture, restrictions, dividends and interest, if any,
on deferred amounts), waive compliance by a participant with any obligation to
be performed by him or her under an Award, waive any term or condition of an
Award, cancel an existing Award in whole or in part with the consent of a
Participant, grant replacement Awards, accelerate the vesting or lapse of any
restrictions of any Award and adopt the form of instruments evidencing Awards
under the Plan and change such forms from time to time. Any interpretation by
the Board of the terms and provisions of the Plan or any Award thereunder and
the administration thereof, and all action taken by the Board, shall be final,
binding and conclusive on all parties and any person claiming under or through
any party. No Director shall be liable
<PAGE> 2
2
for any action or determination made in good faith. The Board may, to the full
extent permitted by law, delegate any or all of its responsibilities under the
Plan to a committee (the "Committee") appointed by the Board and consisting of
two or more members of the Board, each of whom shall be deemed a "disinterested
person" within the meaning of Rule 16b-3 (or any successor rule) of the
Securities Exchange Act of 1934 (the "Exchange Act").
3. Effective Date
The Plan shall be effective as of the date first approved by the Board
of Directors, subject to the approval of the Plan by the Corporation's
Stockholders. Grants of Awards under the Plan made prior to such approval shall
be effective when made (unless otherwise specified by the Board at the time of
grant), but shall be conditioned on and subject to such approval of the Plan.
4. Shares Subject to the Plan
Subject to adjustment as provided in Section 10.6, the total number of
shares of Common Stock reserved and available for distribution under the Plan
shall be 1,600,000 shares. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
If any Award of shares of Common Stock requiring exercise by the
Participant for delivery of such shares terminates without having been exercised
in full, is forfeited or is otherwise terminated without a payment being made to
the Participant in the form of Common Stock, or if any shares of Common Stock
subject to restrictions are repurchased by the Company pursuant to the terms of
any Award or are otherwise reacquired by the Company to satisfy obligations
arising by virtue of any Award, such shares shall be available for distribution
in connection with future Awards under the Plan.
5. Eligibility
Employees and Directors of, and consultants to, the Company and its
subsidiaries, or other persons who are expected to make significant
contributions to the future growth and success of the Company and its
subsidiaries shall be eligible to receive Awards under the Plan. The Board, or
other appropriate committee or person to the extent permitted pursuant to the
last sentence of
<PAGE> 3
3
Section 2, shall from time to time select from among such eligible persons those
who will receive Awards under the Plan.
6. Types of Awards
The Board may offer Awards under the Plan in any form of equity-based
interest, equity-based incentive or performance-based stock incentive in Common
Stock of the Company or any combination thereof. The type, terms and conditions
and restrictions of an Award shall be determined by the Board at the time such
Award is made to a Participant.
An Award shall be made at the time specified by the Board and shall be
subject to such conditions or restrictions as may be imposed by the Board and
shall conform to the general rules applicable under the Plan as well as any
special rules then applicable under federal tax laws or regulations or the
federal securities laws relating to the type of Award granted.
Without limiting the foregoing, Awards may take the following forms and
shall be subject to the following rules and conditions:
6.1 Options
An option is an Award that entitles the holder on exercise thereof to
purchase Common Stock at a specified exercise price. Options granted under the
Plan may be either incentive stock options ("incentive stock options") that meet
the requirements of Section 422A of the Internal Revenue Code of 1986, as
amended (the "Code"), or options that are not intended to meet the requirements
of Section 422A ("non-statutory options").
6.1.1 Option Price. The price at which Common Stock may be purchased
upon exercise of an option shall be determined by the Board, provided however,
the exercise price shall not be less than the par value per share of Common
Stock.
6.1.2 Option Grants. The granting of an option shall take place at the
time specified by the Board. Options shall be evidenced by option agreements.
Such agreements shall conform to the requirements of the Plan, and may contain
such other provisions (including but not limited to vesting and forfeiture
provisions, acceleration, change of control, protection in the event of merger,
consolidations, dissolutions and liquidations)
<PAGE> 4
4
as the Board shall deem advisable. Option agreements shall expressly state
whether an option grant is intended to qualify as an incentive stock option or
non-statutory option.
6.1.3 Option Period. An option will become exercisable at such time or
times (which may be immediately or in such installments as the Board shall
determine) and on such terms and conditions as the Board shall specify. The
option agreements shall specify the terms and conditions applicable in the event
of an option holder's termination of employment during the option's term.
Any exercise of an option must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by (1) any additional
documents required by the Board and (2) payment in full in accordance with
Section 6.1.4 for the number of shares for which the option is exercised.
6.1.4 Payment of Exercise Price. Stock purchased on exercise of an
option shall be paid for as follows: (1) in cash or by check (subject to such
guidelines as the Company may establish for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing the option (or in the case of a non-statutory option, by
the Board at or after grant of the option), (i) through the delivery of shares
of Common Stock that have been outstanding for at least six months (unless the
Board expressly approves a shorter period) and that have a fair market value
(determined in accordance with procedures prescribed by the Board) equal to the
exercise price, (ii) by delivery of a promissory note of the option holder to
the Company, payable on such terms as are specified by the Board, (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or (iv) by
any combination of the permissible forms of payment.
6.1.5 Buyout Provision. The Board may at any time offer to buy out for
a payment in cash, shares of Common Stock, deferred stock or restricted stock,
an option previously granted, based on such terms and conditions as the Board
shall establish and communicate to the option holder at the time that such offer
is made.
6.1.6 Special Rules for Incentive Stock Options. Each provision of the
Plan and each option agreement evidencing an
<PAGE> 5
5
incentive stock option shall be construed so that each incentive stock option
shall be an incentive stock option as defined in Section 422A of the Code or any
statutory provision that may replace such Section, and any provisions thereof
that cannot be so construed shall be disregarded. Instruments evidencing
incentive stock options must contain such provisions as are required under
applicable provisions of the Code. Incentive stock options may be granted only
to employees of the Company and its subsidiaries. The exercise price of an
incentive stock option shall not be less than 100% (110% in the case of an
incentive stock option granted to a more than ten percent Stockholder of the
Company) of the fair market value of the Common Stock on the date of grant, as
determined by the Board. An incentive stock option may not be granted after the
tenth anniversary of the date on which the Plan was adopted by the Board and the
latest date on which an incentive stock option may be exercised shall be the
tenth anniversary (fifth anniversary, in the case of any incentive stock option
granted to a more than ten percent Stockholder of the Company) of the date of
grant, as determined by the Board.
6.2 Restricted and Unrestricted Stock
An Award of restricted stock entitles the recipient thereof to acquire
shares of Common Stock upon payment of the purchase price subject to
restrictions specified in the instrument evidencing the Award.
6.2.1 Restricted Stock Awards. Awards of restricted stock shall be
evidenced by restricted stock agreements. Such agreements shall conform to the
requirements of the Plan, and may contain such other provisions (including
restriction and forfeiture provisions, change of control, protection in the
event of mergers, consolidations, dissolutions and liquidations) as the Board
shall deem advisable.
6.2.2 Restrictions. Until the restrictions specified in a restricted
stock agreement shall lapse, restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of, and upon certain
conditions specified in the restricted stock agreement, must be resold to the
Company for the price, if any, specified in such agreement. The restrictions
shall lapse at such time or times, and on such conditions, as the Board may
specify. The Board may at any time
<PAGE> 6
6
accelerate the time at which the restrictions on all or any part of the shares
shall lapse.
6.2.3 Rights as a Stockholder. A Participant who acquires shares of
restricted stock will have all of the rights of a Stockholder with respect to
such shares including the right to receive dividends and to vote such shares.
Unless the Board otherwise determines, certificates evidencing shares of
restricted stock will remain in the possession of the Company until such shares
are free of all restrictions under the Plan.
6.2.4 Purchase Price. The purchase price of shares of restricted stock
shall be determined by the Board, in its sole discretion, but such price may not
be less than the par value of such shares.
6.2.5 Other Awards Settled With Restricted Stock. The Board may provide
that any or all the Common Stock delivered pursuant to an Award will be
restricted stock.
6.2.6 Unrestricted Stock. The Board may, in its sole discretion, sell
to any Participant shares of Common Stock free of restrictions under the Plan
for a price determined by the Board, but which may not be less than the par
value per share of the Common Stock.
6.3 Deferred Stock
6.3.1 Deferred Stock Award. A deferred stock Award entitles the
recipient to receive shares of deferred stock which is Common Stock to be
delivered in the future. Delivery of the Common Stock will take place at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which delivery of all or any part of the
Common Stock will take place.
6.3.2 Other Awards Settled with Deferred Stock. The Board may, at the
time any Award described in this Section 6 is granted, provide that, at the time
Common Stock would otherwise be delivered pursuant to the Award, the Participant
will instead receive an instrument evidencing the right to future delivery of
deferred stock.
6.4 Performance Awards
<PAGE> 7
7
6.4.1 Performance Awards. A performance Award entitles the recipient to
receive, without payment, an Amount, in cash or Common Stock or a combination
thereof (such form to be determined by the Board), following the attainment of
performance goals. Performance goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the performance goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
6.4.2 Other Awards Subject to Performance Conditions. The Board may, at
the time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 of the
Plan) that performance goals be met prior to the Participant's realization of
any payment or benefit under the Award.
7. Purchase Price and Payment
Except as otherwise provided in the Plan, the purchase price of Common
Stock to be acquired pursuant to an Award shall be the price determined by the
Board, provided that such price shall not be less than the par value of the
Common Stock. Except as otherwise provided in the Plan, the Board may determine
the method of payment of the exercise price or purchase price of an Award
granted under the Plan and the form of payment. The Board may determine that all
or any part of the purchase price of Common Stock pursuant to an Award has been
satisfied by past services rendered by the Participant. The Board may agree at
any time, upon request of the Participant, to defer the date on which any
payment under an Award will be made.
8. Loans and Supplemental Grants
The Company may make a loan to a Participant, either on or after the
grant to the Participant of any Award, in connection with the purchase of Common
Stock under the Award or with the payment of any obligation incurred or
recognized as a result of the Award. The Board will have full authority to
decide whether the loan is to be secured or unsecured or with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which it may be forgiven.
<PAGE> 8
8
In connection with any Award, the Board may at the time such Award is
made or at a later date, provide for and make a cash payment to the participant
not to exceed an amount equal to (a) the amount of any federal, state and local
income tax or ordinary income for which the Participant will be liable with
respect to the Award, plus (b) an additional amount on a grossed-up basis
necessary to make him or her whole after tax, discharging all the participant's
income tax liabilities arising from all payments under the Plan.
9. Change in Control
9.1 Impact of Event
In the event of a "Change in Control" as defined in Section 9.2, the
following provisions shall apply, unless the agreement evidencing the Award
otherwise provides:
(a) Any stock options or other stock-based Awards awarded under the
Plan that were not previously exercisable and vested shall become fully
exercisable and vested.
(b) Awards of restricted stock and other stock-based Awards subject to
restrictions and to the extent not fully vested, shall become fully vested and
all such restrictions shall lapse so that shares issued pursuant to such Awards
shall be free of restrictions.
(c) Deferral limitations and conditions that relate solely to the
passage of time, continued employment or affiliation, will be waived and removed
as to deferred stock Awards and performance Awards. Performance of other
conditions (other than conditions relating solely to the passage of time,
continued employment or affiliation) will continue to apply unless otherwise
provided in the agreement evidencing the Awards or in any other agreement
between the Participant and the Company or unless otherwise agreed by the Board.
9.2 Definition of "Change in Control"
"Change in Control" means any one of the following events: (i) when,
any Person is or becomes the beneficial owner (as defined in Section 13(d) of
the Exchange Act and the Rules and Regulations thereunder), together with all
Affiliates and
<PAGE> 9
9
Associates (as such terms are used in Rule 12b-2 of the General Rules and
Regulations of the Exchange Act) of such Person, directly or indirectly, of 50%
or more of the outstanding Common Stock of the Company or its parent
corporation, Thermo Instrument Systems Inc. ("Thermo Instrument"), or the
beneficial owner of 25% or more of the outstanding common stock of Thermo
Electron Corporation ("Thermo Electron"), without the prior approval of the
Prior Directors of the applicable issuer, (ii) the failure of the Prior
Directors to constitute a majority of the Board of Directors of the Company,
Thermo Instrument or Thermo Electron, as the case may be, at any time within two
years following any Electoral Event, or (iii) any other event that the Prior
Directors shall determine constitutes an effective change in the control of the
Company, Thermo Instrument or Thermo Electron. As used in the preceding
sentence, the following capitalized terms shall have the respective meanings set
forth below:
(a) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(b) "Prior Directors" shall mean the persons sitting on the Company's,
Thermo Instrument's or Thermo Electron's Board of Directors, as the case may be,
immediately prior to any Electoral Event (or, if there has been no Electoral
Event, those persons sitting on the applicable Board of Directors on the date of
this Agreement) and any future director of the Company, Thermo Instrument or
Thermo Electron who has been nominated or elected by a majority of the Prior
Directors who are then members of the Board of Directors of the Company, Thermo
Instrument or Thermo Electron, as the case may be; and
(c) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's, Thermo Instrument's or Thermo
Electron's Common Stock, not approved by the Prior Directors, by any Person
other than the Company, Thermo Instrument, Thermo Electron or a majority-owned
subsidiary of Thermo Electron.
10. General Provisions
10.1 Documentation of Awards
<PAGE> 10
10
Awards will be evidenced by written instruments, which may differ among
Participants, prescribed by the Board from time to time. Such instruments may be
in the form of agreements to be executed by both the Participant and the Company
or certificates, letters or similar instruments which need not be executed by
the participant but acceptance of which will evidence agreement to the terms
thereof. Such instruments shall conform to the requirements of the Plan and may
contain such other provisions (including provisions relating to events of
merger, consolidation, dissolution and liquidations, change of control and
restrictions affecting either the agreement or the Common Stock issued
thereunder), as the Board deems advisable.
10.2 Rights as a Stockholder
Except as specifically provided by the Plan or the instrument
evidencing the Award, the receipt of an Award will not give a Participant rights
as a Stockholder with respect to any shares covered by an Award until the date
of issue of a stock certificate to the participant for such shares.
10.3 Conditions on Delivery of Stock
The Company will not be obligated to deliver any shares of Common Stock
pursuant to the Plan or to remove any restriction from shares previously
delivered under the Plan (a) until all conditions of the Award have been
satisfied or removed, (b) until, in the opinion of the Company's counsel, all
applicable federal and state laws and regulations have been complied with, (c)
if the outstanding Common Stock is at the time listed on any stock exchange,
until the shares have been listed or authorized to be listed on such exchange
upon official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Common Stock has not been registered under
the Securities Act of 1933, as amended, the Company may require, as a condition
to exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such act and may require
that the certificates evidencing such Common Stock bear an appropriate legend
restricting transfer.
If an Award is exercised by the participant's legal representative, the
Company will be under no obligation to
<PAGE> 11
11
deliver Common Stock pursuant to such exercise until the Company is satisfied as
to the authority of such representative.
10.4 Tax Withholding
The Company will withhold from any cash payment made pursuant to an
Award an amount sufficient to satisfy all federal, state and local withholding
tax requirements (the "withholding requirements").
In the case of an Award pursuant to which Common Stock may be
delivered, the Board will have the right to require that the participant or
other appropriate person remit to the Company an amount sufficient to satisfy
the withholding requirements, or make other arrangements satisfactory to the
Board with regard to such requirements, prior to the delivery of any Common
Stock. If and to the extent that such withholding is required, the Board may
permit the participant or such other person to elect at such time and in such
manner as the Board provides to have the Company hold back from the shares to be
delivered, or to deliver to the Company, Common Stock having a value calculated
to satisfy the withholding requirement.
10.5 Nontransferability of Awards
Except as may be authorized by the Board, in its sole discretion, no
Award (other than an Award in the form of an outright transfer of cash or Common
Stock not subject to any restrictions) may be transferred other than by will or
the laws of descent and distribution, and during a Participant's lifetime an
Award requiring exercise may be exercised only by him or her (or in the event of
incapacity, the person or persons properly appointed to act on his or her
behalf). The Board may, in its discretion, determine the extent to which Awards
granted to a Participant shall be transferable, and such provisions permitting
or acknowledging transfer shall be set forth in the written agreement evidencing
the Award executed and delivered by or on behalf of the Company and the
Participant.
10.6 Adjustments in the Event of Certain Transactions
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or other change in the Company's capitalization, or
other distribution with respect to common Stockholders other than normal cash
dividends, the Board
<PAGE> 12
12
will make (i) appropriate adjustments to the maximum number of shares that may
be delivered under the Plan under Section 4 above, and (ii) appropriate
adjustments to the number and kind of shares of stock or securities subject to
Awards then outstanding or subsequently granted, any exercise prices relating to
Awards and any other provisions of Awards affected by such change.
(b) The Board may also make appropriate adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions, repurchases or similar
corporate transactions, or any other event, if it is determined by the Board
that adjustments are appropriate to avoid distortion in the operation of the
Plan, but no such adjustments other than those required by law may adversely
affect the rights of any Participant (without the Participant's consent) under
any Award previously granted.
10.7 Employment Rights
Neither the adoption of the Plan nor the grant of Awards will confer
upon any person any right to continued employment with the Company or any
subsidiary or interfere in any way with the right of the Company or subsidiary
to terminate any employment relationship at any time or to increase or decrease
the compensation of such person. Except as specifically provided by the Board in
any particular case, the loss of existing or potential profit in Awards granted
under the Plan will not constitute an element of damages in the event of
termination of an employment relationship even if the termination is in
violation of an obligation of the Company to the employee.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall be
determined by the Board at the time. For purposes of this Plan, transfer of
employment between the Company and its subsidiaries shall not be deemed
termination of employment.
10.8 Other Employee Benefits
The value of an Award granted to a Participant who is an employee, and
the amount of any compensation deemed to be received by an employee as a result
of any exercise or purchase of Common Stock pursuant to an Award or sale of
shares received under the Plan, will not constitute "earnings" or "compensation"
<PAGE> 13
13
with respect to which any other employee benefits of such employee are
determined, including without limitation benefits under any pension, stock
ownership, stock purchase, life insurance, medical, health, disability or salary
continuation plan.
10.9 Legal Holidays
If any day on or before which action under the Plan must be taken falls
on a Saturday, Sunday or legal holiday, such action may be taken on the next
succeeding day not a Saturday, Sunday or legal holiday.
10.10 Foreign Nationals
Without amending the Plan, Awards may be granted to persons who are
foreign nationals or employed outside the United States or both, on such terms
and conditions different from those specified in the Plan, as may, in the
judgment of the Board, be necessary or desirable to further the purpose of the
Plan.
11. Termination and Amendment
The Plan shall remain in full force and effect until terminated by the
Board. Subject to the last sentence of this Section 11, the Board may at any
time or times amend the Plan or any outstanding Award for any purpose that may
at the time be permitted by law, or may at any time terminate the Plan as to any
further grants of Awards. No amendment, unless approved by the Stockholders,
shall be effective if it would cause the Plan to fail to satisfy the
requirements of the federal tax law or regulation relating to incentive stock
options or the requirements of Rule 16b-3 (or any successor rule) of the
Exchange Act. No amendment of the Plan or any agreement evidencing Awards under
the Plan may adversely affect the rights of any participant under any Award
previously granted without such participant's consent.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF ONIX SYSTEMS INC.
<TABLE>
<CAPTION>
State or Jurisdiction Other Names under
Name of Incorporation Ownership Which Doing Business
- ---- --------------------- --------- --------------------
<S> <C> <C> <C>
CAC Inc. Delaware 100%
Flow Automation Inc. Texas 100%
Thermo Instrument Controls
de Mexico, S.A. de C.V. Mexico 100%(1)
VG Gas Analysis Systems Inc. Massachusetts 100%
ONIX Holding Limited United Kingdom 100%
Flow Automation (UK) Limited United Kingdom 100%
CAC UK Limited United Kingdom 100%
VG Gas Analysis Limited United Kingdom 100%
Houston Atlas Inc. Texas 100% Galaxy Instruments(2)
TN Technologies Inc. Texas 100%
Kay-Ray/Sensall, Inc. Delaware 100%
TN Technologies Canada Inc. Canada 100%
TN Spectrace Europe B.V. Netherlands 100%
Westronics Inc. Texas 100%
Brandt Instruments, Inc. Delaware 100%
Peek Measurement, Inc. Texas 100%
Peek Measurement Limited United Kingdom 100%
</TABLE>
- ------------
(1) 1% owned directly by ONIX Systems Inc.
(2) South Carolina d/b/a.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ONIX Systems Inc.:
As independent public accountants, we hereby consent to the use of our
reports dated January 28, 1998 (and to all references to our Firm) included in
or made a part of this Registration Statement on Form S-1 and related Prospectus
of ONIX Systems Inc.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ONIX SYSTEMS
INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 24,960
<SECURITIES> 0
<RECEIVABLES> 34,738
<ALLOWANCES> 2,155
<INVENTORY> 32,932
<CURRENT-ASSETS> 95,038
<PP&E> 14,413
<DEPRECIATION> 5,268
<TOTAL-ASSETS> 159,709
<CURRENT-LIABILITIES> 53,091
<BONDS> 0
0
0
<COMMON> 123
<OTHER-SE> 104,815
<TOTAL-LIABILITY-AND-EQUITY> 159,709
<SALES> 121,525
<TOTAL-REVENUES> 121,525
<CGS> 72,006
<TOTAL-COSTS> 72,006
<OTHER-EXPENSES> 6,830
<LOSS-PROVISION> 674
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> 14,719
<INCOME-TAX> 5,920
<INCOME-CONTINUING> 8,799
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,799
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
