<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 5, 1998
REGISTRATION NO. 333-45333
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
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>
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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>
------------------------
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
<TABLE>
<CAPTION>
=======================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value........... 3,450,000 $15.50 $53,475,000 $15,776
=======================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) The Registrant previously paid a fee of $16,234 in connection with the
filing of the Registration Statement on Form S-1 on January 30, 1998.
------------------------
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, MARCH 5, 1998
PROSPECTUS
, 1998
3,000,000 SHARES
[ONIX SYSTEMS INC. LOGO]
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 70% 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 $13.50 and $15.50 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>
<CAPTION>
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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)............................... $ $ $
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</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 $1,000,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 450,000 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's data acquisition and display systems, including paper and
paperless strip chart recorders, 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
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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 derived from both 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 offerings, including expanding the scope of its addressed markets,
through internal development, acquisitions
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3
<PAGE> 5
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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 annual
revenue growth rates were 16.2%, 32.2% and 27.5% for each of 1995, 1996 and
1997, respectively. Revenues increased $45.9 million from 1994 to 1997 due to
acquisitions. 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%.
The Company's annual net income growth rate was 187.0%, 34.0% and 81.1% for each
of 1995, 1996 and 1997, respectively. Operating income as a percentage of sales
was 3.2%, 8.5%, 8.5% and 11.9% in each of 1994, 1995, 1996 and 1997,
respectively. 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
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<S> <C>
Common Stock Offered by the Company.................. 3,000,000 shares
Common Stock to be Outstanding after the
Offering(1)........................................ 15,306,337 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 1,091,667 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans. As of March 3, 1998,
options to purchase 531,891 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.
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4
<PAGE> 6
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
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)............ $ .21 $ .34 $ .46 $ .79
Basic and Diluted Weighted
Average Shares(7)....... 10,667 10,667 10,667 11,083
</TABLE>
<TABLE>
<CAPTION>
JANUARY 3, 1998
----------------------
AS
ACTUAL ADJUSTED(9)
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<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and Cash Equivalents................................... $ 24,960 $ 45,098
Debt Payable to Affiliate for Acquisition................... 19,117 --
Working Capital............................................. 41,947 81,202
Total Assets................................................ 159,709 179,847
Shareholders' Investment.................................... 104,938 144,193
</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.
(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 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $14.50
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. Acquisitions completed by the Company
may be made at substantial premiums over the fair value of the net assets of the
acquired companies. For example, the Company's acquisitions completed in 1997
resulted in an aggregate cost in excess of net assets acquired of $18,925,000.
Establishment of this intangible asset will result in charges to operating
income of approximately $473,000 per year for amortization. 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
6
<PAGE> 8
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 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, five former
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 actual damages of between $27 million and $46 million, punitive damages
of twice the actual 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 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. See
"Business -- Legal Proceedings."
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."
7
<PAGE> 9
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 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. The Company believes that
it conducts its operations prudently and the Company maintains both general
liability insurance and nuclear liability insurance in amounts it believes to be
commercially reasonable. However, there can be no assurance that this insurance
will be sufficient to protect the Company from liability claims, or that
liability insurance will continue to be available to the Company at a reasonable
cost, or at all. In addition, the manufacture 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. See " -- Government Regulations and Approvals."
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
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 does not have
8
<PAGE> 10
employment contracts with any of its key employees and it has not obtained, and
does not intend to obtain, key-man life insurance policies for any key employee.
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 enforceable patents or are
maintained in confidence as trade secrets. The Company has 44 issued U.S.
patents that have expiration dates ranging from 1998 through 2018 and the
Company has two 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 demand 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 these 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. See "Business -- Industry Background." In addition, the manufacture
and sale of products that utilize gamma technology is subject to certain
federal, state, local and foreign regulations including licensing and other
regulatory approvals. In particular, the Company is required, and has obtained,
licenses from the Nuclear Regulatory Commission ("NRC") and the State of Texas
for the storage and handling of the nuclear sources used in its gamma
measurement instruments at its Round Rock, Texas facility. These licenses are
subject to periodic review and renewal and the facility is subject to periodic
inspection. Failure of the Company to maintain such licenses or to comply with
applicable regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, new or more
stringent regulations may be adopted or imposed by the NRC or other applicable
regulatory authorities and there can be no assurance that the Company will be
9
<PAGE> 11
able to comply with such changes, the result of which could have a material
adverse effect on the Company's business, financial condition and results of
operation.
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."
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will incur an immediate and substantial dilution of $8.71 per share 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. Certain officers of the
Company, including John N. Hatsopoulos, Paul F. Kelleher and Earl R. Lewis are
also officers and Directors of Thermo Instrument, Thermo Electron and/or other
subsidiaries of Thermo Electron. These officers will devote only a small portion
of their working time (anticipated to be less than 5% in the case of Messrs.
Hatsopoulos and Kelleher and less than 10% in the case of Mr. Lewis) to the
affairs of the Company. All other members of management of the Company are
full-time employees of the Company. Since the members of the Board of Directors
of the Company who are also affiliated with Thermo Electron or Thermo Instrument
have fiduciary duties to the stockholders of the Company and to the stockholders
of Thermo Electron and/or Thermo Instrument, as applicable, such individuals
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. For example, conflicts may arise with
respect to possible future acquisitions by the Company of assets or businesses
of Thermo Instrument or another Thermo Electron affiliated company in which the
purchase price to be paid by the Company is subject to negotiation between the
Company and Thermo Instrument or such other Thermo Electron affiliated company.
These negotiations will be subject to the potential conflicts associated with
related-party transactions. 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. There can be no
assurance that these factors will not
10
<PAGE> 12
have a material adverse effect on the Company's business, financial condition or
results of operations. 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 approximately 70% 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."
USE OF PROCEEDS
The net proceeds to be received by the Company from this offering are
estimated to be $39,255,000 (approximately $45,323,250 if the Underwriters'
over-allotment option is exercised in full) assuming an initial offering price
of $14.50 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 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
recently signed a letter of intent to acquire a privately-held company that
manufactures and services certain products used primarily in the oil and gas
industry, for approximately $12.5 million. The letter of intent is non-binding
and is subject to certain conditions, including the completion of due diligence,
and there can be no assurance that the Company will successfully complete this
proposed acquisition. The Company is in discussions with respect to other
potential acquisitions; however, it currently has no commitment or agreement
with respect to any other potential acquisition. The Company pursues
acquisitions of companies or businesses that have products, technologies and/or
market presence that complement or augment its existing technological base and
current market presence. See "Business -- Strategy."
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 3,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $14.50 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 15,306,337 shares as adjusted (1).................. $ 123 $ 153
Capital in excess of par value............................ 100,966 140,191
Retained earnings......................................... 3,150 3,150
Cumulative translation adjustment......................... 699 699
-------- --------
Total Shareholders' Investment.................... $104,938 $144,193
======== ========
</TABLE>
- ---------------
(1) Does not include 1,091,667 shares of Common Stock reserved for issuance
under the Company's stock-based compensation plans. As of March 3, 1998,
options to purchase 531,891 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 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $14.50 per
share and 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 $88,667,000, or $5.79 per share. This
represents an immediate increase in net tangible book value of $1.77 per share
to the existing shareholders and an immediate dilution in net tangible book
value of $8.71 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..................................... $14.50
------
Net tangible book value per share as of January 3, 1998,
before this offering................................... $4.02
Increase per share attributable to this offering.......... 1.77
-----
Pro forma net tangible book value per share as of January 3,
1998, after this offering(1).............................. 5.79
------
Dilution per share to new investors(1)...................... $ 8.71
======
</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 $6.01,
resulting in an immediate dilution of $8.49 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 69.7% $ 79,134,000 54.2% $ 7.42
Other existing investors(2).......... 1,639,670 10.7 23,365,000 16.0 14.25
New investors........................ 3,000,000 19.6 43,500,000 29.8 14.50
---------- ----- ------------ -----
Total...................... 15,306,337 100.0% $145,999,000 100.0%
========== ===== ============ =====
</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>
THE
PREDECESSOR(1) COMPANY(1) TOTAL THE COMPANY(1)
----------------------------- ------------- ------------- -------------------------------
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).............. $ .21 $ .34 $ .46 $ .79
======= ======= ======== ========
Basic and Diluted Weighted
Average Shares(5)......... 10,667 10,667 10,667 11,083
======= ======= ======== ========
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.
(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 derived from both 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 the United States and export revenues from
the United States accounted for approximately 25% and 18%, respectively, of
total revenues in 1997. Export sales in 1997 were made primarily to the United
Kingdom, Japan and South Korea. During 1997, the Company had exports from the
Company's U.S. and foreign operations to the Far East of approximately 8% of
total revenues. The Far East is experiencing a severe economic crisis, which has
been characterized by sharply reduced economic activity and liquidity, highly
volatile foreign-currency-exchange and interest rates, and unstable stock
markets. The Company's export sales to the Far East could be adversely affected
by the unstable economic conditions there. 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. This consisted
primarily of $8.1 million from Kay-Ray/Sensall, $4.2 million from the Peek
Measurement Business, $3.3 million from VG Gas, $3.1 million from Angus and $1.0
million from other 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. The inclusion of higher-margin revenues at Kay-
16
<PAGE> 18
Ray/Sensall, acquired in October 1996, also contributed to the improved overall
margin. In addition, the gross profit margin from sales of flow instruments
increased as a result of the introduction of certain new, higher-margin
products.
Selling, general and administrative expenses as a percentage of revenues
remained consistent at 23% in both 1997 and 1996.
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. Thermo Electron, Thermo Instrument and
certain affiliates of Thermo Instrument, including TN Technologies, a wholly
owned subsidiary of the Company, are joint defendants in this matter in which
the plaintiffs seek actual damages of between $27 million and $46 million,
punitive damages of twice actual damages, attorneys' fees and expenses and
pre-judgment and post-judgment interest. Should an unfavorable decision in the
arbitration include a component of damages based on actions of TN Technologies,
that portion of such total award would be allocated to the Company and would be
charged to the Company's future results of operations, although the Company
would be reimbursed by Thermo Instrument in the form of a capital contribution
for any damages resulting from alleged actions of the Company prior to its
capitalization in August 1997. Thermo Instrument has agreed to bear the cost of
the defense of this matter.
The Company is currently assessing the potential impact of the year 2000 on
the processing of date-sensitive information by the Company's computerized
information systems and on product purchases as well as products sold by the
Company. While there can be no assurance that all problems arising from the year
2000 will be identified and resolved satisfactorily prior to the end of 1999,
the Company presently believes that the year 2000 problem will not pose
significant operational problems for the Company or have a material effect on
future results of operations.
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 acquisitions. The increase consisted
primarily of $9.7 million from VG Gas, $7.5 million from Flow Automation and
$2.3 million from Kay-Ray/Sensall. 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
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<PAGE> 19
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 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 plus 25 basis points, set at the beginning of
each quarter and is due on July 31, 1998.
The Company has signed a letter of intent to purchase a business for
approximately $12.5 million. The letter of intent is non-binding and is subject
to certain conditions, including the completion of due diligence, and there can
be no assurance that the Company will successfully complete this proposed
acquisition. The Company would finance the acquisition with a portion of the
proceeds from its proposed initial public offering.
The Company and Thermo Instrument are involved in an arbitration proceeding
discussed in Note 5 to the consolidated financial statements. Thermo Instrument
has agreed to indemnify the Company for any portion of damages arising from an
unfavorable decision in this matter that relate to alleged actions of the
Company prior to its capitalization in August 1997. Accordingly, the Company
does not expect that an unfavorable decision in this matter would materially
affect its liquidity. The Company also believes that an unfavorable decision
would not materially affect its ability to use Thermo Instrument as a source of
capital, as discussed below, based on the relative size of the damages sought
and the current liquidity of Thermo Instrument.
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.
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<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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<PAGE> 21
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 designs products, using its extensive proprietary application
database, that are intended to meet or exceed the customer's increasingly
sophisticated requirements in light of industry trends. For example, the
Company's on-line flow meters, which incorporate sophisticated microprocessor-
based technology, enable customers to collect volumetric flow data automatically
and in real time, whereas traditional methods involved manually collecting data
from paper chart recordings, which is labor-intensive and time-consuming. 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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<PAGE> 22
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.
Sales and related service of the Company's flow instruments accounted for
approximately 17% of the Company's total revenues for 1997.
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, pharmaceutical, semiconductor,
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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<PAGE> 24
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. Sales and related service of the
Company's level and density instruments accounted for approximately 29% of the
Company's total revenues for 1997.
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 XRF-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. Sales and related service of the Company's composition
analysis instruments accounted for approximately 16% of the Company's total
revenues for 1997.
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, pharmaceutical, 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
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<PAGE> 25
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. Sales and
related service of the Company's industry-specific instruments accounted for
approximately 38% of the Company's total revenues for 1997.
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.
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 generation, 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
24
<PAGE> 26
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 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.
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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 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 derived from both the production segment and the
refining and petrochemical segments of the industry. In 1997, no single customer
accounted for more than 3% 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. See Note 8 to the
consolidated financial statements for financial information relating to foreign
and domestic operations and export sales.
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.
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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. 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
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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
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 44 issued United States patents expiring at
various dates ranging from 1998 to 2018. The Company also has two 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
On December 11, 1996, five former employees of Thermo Instrument's Epsilon
subsidiary commenced an arbitration proceeding with the American Arbitration
Association 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. The arbitration
proceeding is being conducted in Austin, Texas before an arbitration panel of
three individuals. The employees are alleging that the joint defendants 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 actual damages of
between $27 million and $46 million, punitive damages of twice the actual
damages, attorneys' fees and expenses, and pre-judgment and post-judgment
interest, resulting from the alleged failure of the joint defendants to, among
other things, use their best efforts to develop and promote certain products at
the time. The joint 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. See "Risk Factors -- Risks Associated
with Pending Arbitration."
Except as described above, 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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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.
See "Risk Factors -- Potential Conflict of Interest."
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. The cost of the services
provided by Thermo Electron to the Thermo Subsidiaries is
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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
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<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 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 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, and Thermo BioAnalysis
Corporation ("Thermo BioAnalysis"), Thermo Optek Corporation ("Thermo Optek")
and ThermoQuest Corporation ("ThermoQuest"), majority-owned subsidiaries 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.
In October 1997, Crescent International Holdings Limited purchased from the
Company 16,666 shares of Common Stock in a private placement at a price per
share of $14.25, the same price per share paid by unaffiliated buyers. Crescent
International Holdings Limited is indirectly controlled by Suliman S. Olayan,
the father of Ms. Hutham S. Olayan, a Director of the Company. Ms. Olayan
disclaims beneficial ownership of the shares owned by Crescent International
Holdings Limited.
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 a rate
based on the 90-day Commercial Paper Composite Rate 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.
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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................................. 43 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
Hutham S. Olayan............................. 43 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 since August 1995 and President of Thermo Optek 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, ThermoQuest, ThermoSpectra Corporation
and Thermo Vision Corporation and he is Chairman of the Board of Thermo
BioAnalysis, Thermo Optek, ThermoQuest, 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., KEM Associates 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, as Vice President of CAC since 1995 and as President of Flow
Automation since 1992. 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, Automation
Systems. 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, as President of Kay-Ray/Sensall since 1996 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
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Senior for Baker International Inc. in 1981. He was an Audit Senior with Ernst &
Whinney from 1975 to 1981.
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, 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, Thermo Optek, Thermo Power, ThermoQuest, ThermoSpectra
Corporation and Thermo Vision Corporation.
Hutham S. Olayan has been a Director of the Company since March 1998. She
has served since 1995 as president and a director of Olayan America Corporation,
a member of the Olayan Group, and as president and a director of Competrol Real
Estate Limited, another member of the Olayan Group, until its merger into Olayan
America Corporation in 1997. The surviving company is engaged in private
investments, including real estate, and advisory services. In addition, from
1985 to 1994, Ms. Olayan served as president and a director of Crescent
Diversified Limited, another member of the Olayan Group engaged in private
investments. Ms. Olayan is also a director of Thermo Electron and Trex Medical
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
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<PAGE> 35
Stock accumulated under the Deferred Compensation Plan. As of March 3, 1998, the
Company has reserved 25,000 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 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) 50,000(ONX) $7,200
President and Chief
Executive 10,000(TMO)
Officer
Mark Whitman................. 1997 $141,600 $ 40,500(3) 13,333(ONX) $7,200
Vice President
C.R. (Neil) Duarte........... 1997 $112,791 $ (4) 10,000(ONX) $5,344
Vice President
William C. Holstead.......... 1997 $ 97,213 $ (4) 13,333(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 Company 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 SHARES % OF TOTAL STOCK PRICE 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.... 50,000(ONX) 11.3% $14.25 01/21/10 $567,150 $1,523,500
10,000(TMO) 0.7%(3) 39.39 09/24/09 $313,500 $ 842,300
Mark Whitman......... 13,333(ONX) 3.0% 14.25 01/21/10 $151,196 $ 406,257
C.R. (Neil) Duarte... 10,000(ONX) 2.3% 14.25 01/21/10 $113,400 $ 304,700
William C.
Holstead........... 13,333(ONX) 3.0% 14.25 01/21/05 $ 77,331 $ 180,262
</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 that the options
to purchase shares of the Common Stock of the Company 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, as amended (the "Exchange Act") 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 -- -- 0/50,000 --/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 -- -- 0/13,333 --/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 -- -- 0/10,000 --/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 -- -- 0/13,333 --/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 that the options to
purchase shares of the Common Stock of the Company 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 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 March 3, 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 March 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
March 3, 1998 through its ownership of 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 70% of the
outstanding Common Stock (approximately 68% 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 100,000
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 31, 1998 as well as information
regarding the beneficial ownership of the common stock of Thermo Instrument and
Thermo Electron, as of January 31, 1998, 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
10,666,667 shares of Common Stock owned by Thermo Instrument.
<TABLE>
<CAPTION>
ONIX SYSTEMS THERMO INSTRUMENT THERMO ELECTRON
NAME(1) INC.(2) SYSTEMS INC.(3) CORPORATION(4)
<S> <C> <C> <C>
C.R. (Neil) Duarte....................... -- 10,328 584
John N. Hatsopoulos...................... -- 84,226 681,072
William C. Holstead...................... -- 7,356 92
Earl R. Lewis............................ 333 203,726 84,037
Hutham S. Olayan......................... -- 2,343 25,852
Arvin H. Smith........................... 4,000 539,583 519,038
Mark Whitman............................. -- 29,582 719
William J. Zolner........................ -- 62,114 28,639
All Directors and executive officers as a
group (9 persons)...................... 4,333 962,623 1,471,788
</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 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. Shares beneficially owned by Ms. Olayan do not include 16,666 shares
owned by Crescent International Holdings Limited, a member of the Olayan
Group. Crescent International Holdings Limited is indirectly controlled by
Suliman S. Olayan, Ms. Olayan's father. Ms. Olayan disclaims beneficial
ownership of the shares owned by Crescent International Holdings Limited. As
of January 31, 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.
Duarte, Mr. Hatsopoulos, Mr. Holstead, Mr. Lewis, Ms. Olayan, Mr. Smith, Mr.
Whitman, Dr. Zolner and all Directors and executive officers as a group
include 10,000; 70,312; 7,265; 172,085; 2,343; 292,968; 28,750; 61,718; and
664,191 shares, respectively that such person or group has the right to
acquire within 60 days after January 31, 1998, through the exercise of stock
options. Shares of the common stock of Thermo Instrument beneficially owned
by Mr. Hatsopoulos, Mr. Smith and all Directors and executive officers as a
group include 661, 663 and 1,819 full shares, respectively, allocated
through January 31, 1998, to their respective accounts maintained pursuant
to Thermo Electron's employee stock ownership plan (the "ESOP"), of which
the trustees, who have investment power over its assets are executive
officers of Thermo Electron. Shares beneficially owned by Mr. Lewis include
2,987 shares held by Mr. Lewis' spouse. No Director or executive officer
beneficially owned more than 1% of the common stock of Thermo Instrument
outstanding as of January 31, 1998; all Directors and executive officers as
a group beneficially owned less than 1% of such common stock outstanding as
of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by Mr.
Hatsopoulos, Mr. Lewis, Ms. Olayan, Mr. Smith, Dr. Zolner and all Directors
and executive officers as a group include 615,435; 84,037; 10,375; 228,411;
28,375; and 1,056,670 shares that such person or group has the right to
acquire within 60 days after January 31, 1998, through the exercise of stock
options. Shares of the common stock of Thermo Electron beneficially owned by
Mr. Hatsopoulos, Mr. Smith and all Directors and executive officers as a
group include 2,036, 1,717 and 5,179 full shares, respectively, allocated to
accounts maintained pursuant to the ESOP. Shares beneficially owned by Ms.
Olayan and all Directors and executive officers as a group include 15,477
full shares allocated to Ms. Olayan's account maintained pursuant to Thermo
Electron's deferred compensation plan for directors. Shares beneficially
owned by Ms. Olayan do not include 4,865,300 shares owned by Crescent
Holding GmbH, a member of the Olayan Group. Crescent Holding GmbH is
indirectly controlled by Suliman S. Olayan, Ms. Olayan's father. Ms. Olayan
disclaims beneficial ownership of the shares owned by Crescent Holding GmbH.
No Director or executive officer beneficially owned more than 1% of the
common stock of Thermo Electron outstanding as of January 31, 1998; all
Directors and executive officers as a group beneficially owned less than 1%
of such common stock outstanding as of such date.
38
<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
As of March 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 own approximately 70% 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 15,306,337 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 15,306,337 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 1,091,667 shares for grants under its existing
stock-based compensation plans. As of March 3, 1998, the Company had options
outstanding to purchase up to 531,891 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 March 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.................................................. 3,000,000
=========
</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 450,000 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.
The Company and Thermo Electron have agreed (and Thermo Electron has agreed
to cause Thermo Instrument), 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 or sale of shares
41
<PAGE> 43
of Common Stock pursuant to existing stock option, purchase and compensation
plans of the Company, Thermo Instrument or Thermo Electron, or upon conversion
of any currently outstanding convertible securities described in the Prospectus,
or the issuance or sale 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 the
issuance or sale of shares of Common Stock by the Company to Thermo Instrument
and except for the grant of options by the Company, Thermo Instrument or Thermo
Electron 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 3,333
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).............. $ .34 $ .46 $ .79
======= ======= ========
Basic and Diluted Weighted Average Shares (Note 9)......... 10,667 10,667 11,083
======= ======= ========
</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
Deferred tax asset (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........................................... $ 1,740 $ 1,938 $ 6,341
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 prior to
capitalization of the 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. The transfer of assets from
Thermo Instrument was recorded at historical cost. 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. Deferred revenue in the accompanying 1997 balance sheet
includes $3.1 million for products that were shipped pending customer
acceptance. Customer acceptance was not received as of year end; therefore, as
of January 3, 1998, the Company has deferred recognition of such revenue and the
associated costs are included in inventories as of January 3, 1998.
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.
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 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.
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>
F-8
<PAGE> 53
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
F-9
<PAGE> 54
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
The methodology used to determine the purchase price for Peek Measurement
and VG Gas and the accounting used, which includes the results of operations
from the date the respective businesses became owned by Thermo Electron
subsidiaries, is consistent with the methodology used to account for the
transfer of other operating units of newly acquired businesses among
majority-owned subsidiaries of Thermo Electron.
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 May 1997, Thermo Instrument acquired the Angus Electronics division of
Esterline Technologies Corporation for $1,913,000 in cash and the assumption of
certain liabilities totaling $823,000, primarily consisting of trade payables
and other accrued expenses. Angus manufactures and distributes analog and
digital data acquisition and recorder products and power measurement
instruments. In December 1997, the Company acquired the assets comprising the
Rustrak Ranger Logger product line (Ranger) for $1,803,000 and the assumption of
certain liabilities totaling $91,000, primarily consisting of trade payables and
other accrued expenses. Also, 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 totaling $2,661,000, primarily
consisting of trade payables and other accrued expenses. 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.
In October 1996, Thermo Instrument acquired Kay-Ray/Sensall from Rosemount
Inc., a division of Emerson Electric Co., Inc., for $6,000,000 in cash.
Kay-Ray/Sensall 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 totaling $2,423,000, primarily consisting of trade payables and
other accrued expenses. 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 40 years. Allocation of the purchase price for
these acquisitions was based on estimates of the fair value of the
F-10
<PAGE> 55
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 although the Company expects to
undertake an analysis to determine whether any intangible assets other than cost
in excess of net assets acquired exist for its recent acquisitions of Fluid Data
and Peek Measurement. Existence of such intangibles would result in a change in
the preliminary estimate of the purchase price allocation to an increase in
assets with shorter economic lives than cost in excess of net assets acquired
and higher annual amortization expense. Based upon a preliminary review, the
Company does not expect that any such adjustment will materially affect its
future results of operations.
The assets and liabilities were recorded at their estimated fair values as
follows:
<TABLE>
<CAPTION>
PEEK KAY-RAY/ FLOW
MEASUREMENT VG GAS FLUID DATA SENSALL AUTOMATION OTHER
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Purchase price....... $19,117,000 $ 6,345,000 $ 8,500,000 $ 6,000,000 $ 7,800,000 $3,716,000
----------- ----------- ----------- ----------- ----------- ----------
Allocation to:
Current assets..... 7,080,000 4,072,000 7,570,000 3,393,000 6,129,000 1,913,000
Property, plant and
equipment....... 1,100,000 404,000 627,000 589,000 703,000 1,356,000
Current
liabilities..... (3,460,000) (2,222,000) (2,661,000) (2,626,000) (2,423,000) (914,000)
Cost in excess of
net assets
acquired........ 14,397,000 4,091,000 2,964,000 4,644,000 3,391,000 1,361,000
</TABLE>
Based on unaudited data, the following table presents selected financial
information for the Company, Peek Measurement, Fluid Data, VG Gas and
Kay-Ray/Sensall on a pro forma basis, assuming that the Company, Peek
Measurement and Fluid Data had been combined since the beginning of 1996 and the
Company, VG Gas and Kay-Ray/Sensall had been combined since the beginning of
1995. The effect of the acquisitions not included in the pro forma data was not
material to the Company's results of operations.
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues................................. $95,899 $142,206 $153,877
Net income............................... 2,988 3,679 6,087
Basic and diluted earnings per share..... .28 .34 .55
</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, or the
acquisitions of VG Gas and Kay-Ray/Sensall been made at the beginning of 1995.
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
F-11
<PAGE> 56
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. Participation in these plans is accounted for in accordance
with APB No. 25.
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.
Pro Forma Stock-based Compensation Expense
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-based Compensation," which sets forth a fair-value
based method of recognizing stock-based compensation expense. As permitted by
SFAS No. 123, the Company has elected to continue to apply APB No. 25 to account
for stock-based compensation plans. Had compensation cost for awards in 1997,
1996 and 1995 under stock-based compensation plans been determined based on the
fair value at the grant dates consistent with the method set forth under SFAS
No. 123, the effect on the Company's net income and earnings per share would
have been as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Net income:
As reported............................................... $3,627 $4,858 $8,799
Pro forma................................................. 3,623 4,721 8,484
Basic and diluted earnings per share:
As reported............................................... .34 .46 .79
Pro forma................................................. .34 .44 .77
</TABLE>
Because the method prescribed by SFAS No. 123 has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
expense may not be representative of the amount to be expected in future years.
Compensation expense for options granted is expected in future years.
Compensation expense for options granted is reflected over the vesting period;
therefore, future pro forma compensation expense may be greater as additional
options are granted.
The fair value of each option grant was estimated on the grant date using
the Black-Scholes option-pricing model. The Black-Scholes option-pricing model
was developed for use in estimating the fair value of traded options which have
no vesting restrictions and are fully transferable. In addition, option-pricing
models require the input of highly subjective assumptions including expected
stock price volatility. Because employee stock options have characteristics
significantly different from those of traded options, and because changes in
F-12
<PAGE> 57
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
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-13
<PAGE> 58
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax asset and deferred income taxes in the accompanying balance
sheet consist of the following:
<TABLE>
<CAPTION>
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset:
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, five former 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 actual damages of between
$27 million and $46 million, punitive damages of twice the actual 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 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 operations, any such
resolution would not have a material adverse effect on the Company's financial
position. The Company does not expect that any such resolution will have a
material effect on the Company's future cash flows, either as a result of
damages assessed to the
F-14
<PAGE> 59
ONIX SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company, which are generally indemnified by Thermo Instrument, or as a result of
damages assessed to Thermo Instrument and the effect such damages might have on
Thermo Instrument's ability to periodically lend funds to the Company for
acquisitions or other cash requirements, due to the relative size of the claim
and Thermo Instrument's current liquidity. The arbitration proceeding is
expected to conclude in the second 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 September and October 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-15
<PAGE> 60
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-16
<PAGE> 61
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
------- ------- -------
Basic and diluted earnings per share........................ $ .34 $ .46 $ .79
======= ======= =======
</TABLE>
10. SUBSEQUENT EVENTS
STOCK OPTIONS
In January 1998, the Board Committee granted options to purchase 531,891
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 1,091,667 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
plus 25 points, set at the beginning of each quarter and is due on July 31,
1998.
F-17
<PAGE> 62
[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
for custody transfer measurement in 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 products of the Company's recently acquired Peek Measurement Business
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> 63
================================================================================
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
PAGE
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.
================================================================================
================================================================================
3,000,000 SHARES
[ONIX SYSTEMS INC. LOGO]
COMMON STOCK
----------
PROSPECTUS
----------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
GRUNTAL & CO., L.L.C.
, 1998
================================================================================
<PAGE> 64
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.
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................................ 500,000
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............................................. $1,000,000
==========
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> 65
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> 66
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Waltham,
Commonwealth of Massachusetts, on this 4th day of March, 1998.
ONIX SYSTEMS INC.
By: /s/ WILLIAM J. ZOLNER
-----------------------------------
William J. Zolner
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
EARL R. LEWIS* Chairman of the Board and March 4, 1998
- ----------------------------------------------------- Director
Earl R. Lewis
/s/ WILLIAM J. ZOLNER President, Chief Executive March 4, 1998
- ----------------------------------------------------- Officer & Director
William J. Zolner
JOHN N. HATSOPOULOS* Senior Vice President, March 4, 1998
- ----------------------------------------------------- Chief Financial Officer
John N. Hatsopoulos & Director
PAUL F. KELLEHER* Chief Accounting Officer March 4, 1998
- -----------------------------------------------------
Paul F. Kelleher
ARVIN H. SMITH* Director March 4, 1998
- -----------------------------------------------------
Arvin H. Smith
Director March 4, 1998
- -----------------------------------------------------
Hutham S. Olayan
</TABLE>
* The undersigned Sandra L. Lambert, by signing her name hereto, does hereby
execute this Amendment No. 1 to Registration Statement on behalf of each of the
above-named persons pursuant to powers of attorney executed by such persons and
filed with the Securities and Exchange Commission.
/s/ SANDRA L. LAMBERT
--------------------------------------
Sandra L. Lambert
Attorney-in-Fact
II-3
<PAGE> 67
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> 68
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> 69
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
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)
<PAGE> 70
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
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
27 Financial Data Schedule
- ---------------
* Previously filed.
<PAGE> 1
Exhibit 1
DRAFT 3/4/98
3,000,000 Shares
ONIX SYSTEMS INC.
Common Stock
UNDERWRITING AGREEMENT
__________, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
GRUNTAL & CO., L.L.C.
As representatives of the
several Underwriters named
in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
ONIX Systems Inc., a Delaware corporation (the "COMPANY"), proposes to
issue and sell 3,000,000 shares of its Common Stock, $.01 par value (the "FIRM
SHARES"), to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS"). The Company also proposes to issue and sell to the several
Underwriters not more than an additional 450,000 shares of its Common Stock (the
"ADDITIONAL SHARES") if requested by the Underwriters as provided in Section 2
hereof. The Firm Shares and the Additional Shares are hereinafter referred to
collectively as the "SHARES". The shares of common stock of the Company to be
outstanding after giving effect to the sales contemplated hereby are hereinafter
referred to as the "COMMON STOCK".
The Company currently is a majority-owned subsidiary of Thermo Instrument
Systems Inc., a Delaware corporation ("THERMO INSTRUMENT"), which is in turn a
majority-owned subsidiary of Thermo Electron Corporation, a Delaware corporation
("THERMO ELECTRON"). To the extent provided herein and for good and valuable
consideration, Thermo Electron has become
<PAGE> 2
a party to this Agreement.
SECTION 1. Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "COMMISSION") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"ACT"), a registration statement on Form S-1, including a prospectus, relating
to the Shares. The registration statement, as amended at the time it became
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Act, is hereinafter referred to as the "REGISTRATION STATEMENT"; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred to as the "PROSPECTUS". If the Company has filed or is required
pursuant to the terms hereof to file a registration statement pursuant to Rule
462(b) under the Act registering additional shares of Common Stock (a "RULE
462(b) REGISTRATION STATEMENT"), then, unless otherwise specified, any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462(b) Registration Statement.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "PURCHASE PRICE") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to 450,000 Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
The Company and Thermo Electron each hereby agrees, and Thermo Electron
shall cause Thermo Instrument, 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
2
<PAGE> 3
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)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company, Thermo Electron and Thermo
Instrument may issue or sell, shares of Common Stock pursuant to existing stock
option, purchase and compensation plans, or upon conversion of any currently
outstanding convertible securities described in the Prospectus, (ii) the Company
may issue or sell 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, (iii) the Company may
issue or sell shares of Common Stock to Thermo Instrument and (iv) the Company,
Thermo Instrument and Thermo Electron may grant stock options with respect to
the Common Stock pursuant to existing stock option, purchase and compensation
plans. The Company also agrees that during such 180-day period, it will not file
any registration statement with respect to any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
until the last day it is permitted to do so under the applicable agreement or
stock option, purchase or compensation plan. The Company and Thermo Electron
will not, and Thermo Electron will cause Thermo Instrument not to, permit any
employee or director thereof to sell, transfer or otherwise dispose of any
shares of Common Stock issued by it pursuant to any stock option, purchase or
compensation plan prior to the expiration of the 180-day period following the
date of this Prospectus, without the prior written consent of Donaldson, Lufkin
& Jenrette Securities Corporation.
SECTION 3. Terms of Public Offering. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. Delivery and Payment. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations and
registered in such names as Donaldson, Lufkin & Jenrette Securities Corporation
shall request no later than two business days prior to the Closing Date or the
applicable Option Closing Date (as defined below), as the case may be. The
Company shall deliver the Shares, with any transfer taxes thereon duly paid by
the Company, to Donaldson, Lufkin & Jenrette Securities Corporation through the
facilities of The Depository Trust Company ("DTC") for the respective accounts
of the several Underwriters, against payment to the Company of the Purchase
Price therefor by wire transfer of Federal or other funds immediately available
in New York City. The certificates representing the Shares shall be made
available for inspection not later than 9:30 A.M., Eastern time, on the business
day prior to the Closing Date or the applicable Option Closing Date (as defined
below), as the case may be, at the office of DTC or its designated custodian
(the "DESIGNATED OFFICE"). The time and date of delivery and payment for the
Firm Shares shall be 9:00 A.M., Eastern time, on ________, 1998 or such other
time on the same or such other date as Donaldson, Lufkin &
3
<PAGE> 4
Jenrette Securities Corporation and the Company shall agree in writing. The time
and date of delivery for the Firm Shares are hereinafter referred to as the
"CLOSING DATE". The time and date of delivery and payment for any Additional
Shares to be purchased by the Underwriters shall be 9:00 A.M., Eastern time, on
the date specified in the applicable exercise notice given by you pursuant to
Section 2 or such other time on the same or such other date as Donaldson, Lufkin
& Jenrette Securities Corporation and the Company shall agree in writing. The
time and date of delivery for the Option Shares are hereinafter referred to as
an "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Testa, Hurwitz & Thibeault, LLP, 125 High
Street, Boston, Massachusetts 02110, and the Shares shall be delivered at the
Designated Office, all on the Closing Date or such Option Closing Date, as the
case may be.
SECTION 5. Agreements of the Company. The Company and Thermo Electron
jointly and severally agree with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in Section 5(d)
below as a result of which the Prospectus would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading or if it shall be necessary to amend the Registration Statement
or supplement the Prospectus to comply with applicable law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will use its best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
reasonably satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the Act;
during the period specified in Section 5(d) below, not to file any further
amendment to the Registration Statement and not to make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
4
<PAGE> 5
or to which you shall reasonably object after being so advised; and, during such
period, to prepare and file with the Commission, promptly upon your reasonable
request, any amendment to the Registration Statement or amendment or supplement
to the Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause any such
amendment to the Registration Statement to become promptly effective.
(d) Prior to 10:00 A.M., Eastern time, on the second business day after
the date of this Agreement and from time to time thereafter for such period as
in the opinion of counsel for the Underwriters a prospectus is required by law
to be delivered in connection with sales by an Underwriter or a dealer, to
furnish in New York City to each Underwriter and any dealer as many copies of
the Prospectus (and of any amendment or supplement to the Prospectus) as such
Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of counsel
for the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if, in the
opinion of counsel for the Underwriters, it is necessary to amend or supplement
the Prospectus to comply with applicable law, forthwith to prepare and file with
the Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with applicable law, and to furnish to each
Underwriter and to any dealer as many copies thereof as such Underwriter or
dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such registration or qualification in effect so
long as required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to effect
such registration or qualification; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation in
any jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other than
as to matters and transactions relating to the Prospectus, the Registration
Statement, any Preliminary Prospectus or the offering or sale of the Shares, in
any jurisdiction in which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending on the
last day of the Company's first fiscal quarter in its 1999 fiscal year that
shall satisfy the provisions of Section 11(a) of the Act.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished generally to the
5
<PAGE> 6
record holders of Common Stock or furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the Company
is listed and such other publicly available information concerning the Company
and its subsidiaries as you may reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel and
the Company's accountants in connection with the registration and delivery of
the Shares under the Act and all other fees and expenses in connection with the
preparation, printing, filing and distribution of the Registration Statement
(including financial statements and exhibits), any Preliminary Prospectus, the
Prospectus and all amendments and supplements to any of the foregoing, including
the mailing and delivering of copies thereof to the Underwriters and dealers in
the quantities specified herein, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) all costs of printing or producing this
Agreement and any other agreements or documents in connection with the offering,
purchase, sale or delivery of the Shares, (iv) all expenses in connection with
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing or
producing any Preliminary and Supplemental Blue Sky Memoranda in connection
therewith (including the filing fees and fees and disbursements of counsel for
the Underwriters in connection with such registration or qualification and
memoranda relating thereto), (v) the filing fees and disbursements of counsel
for the Underwriters in connection with the review and clearance of the offering
of the Shares by the National Association of Securities Dealers, Inc., (vi) all
fees and expenses in connection with the preparation and filing of the
registration statement on Form 8-A relating to the Common Stock and all costs
and expenses incident to the listing of the Shares on the American Stock
Exchange, (vii) the cost of printing certificates representing the Shares,
(viii) the costs and charges of any transfer agent, registrar and/or depositary,
and (ix) all other costs and expenses incident to the performance of the
obligations of the Company hereunder for which provision is not otherwise made
in this Section.
(j) To use its best efforts to list, subject to notice of issuance, the
Shares on the American Stock Exchange and to maintain the listing of the Shares
on the American Stock Exchange for a period of at least three years after the
date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so covered
in compliance with Rule 462(b) by 10:00 P.M., Eastern time, on the date of this
Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions
6
<PAGE> 7
for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company and
Thermo Electron jointly and severally represent and warrant to, and agree with,
each Underwriter as follows.
(a) The Registration Statement (i) has been prepared by the Company in
material conformity with the requirements of the Act, (ii) has been filed with
the Commission under the Act and (iii) has become effective under the Act. If
any post-effective amendment to such registration statement has been filed with
the Commission prior to the execution and delivery of this Agreement, the most
recent such amendment has been declared effective by the Commission. Copies of
such registration statement as amended to date have been delivered by the
Company to you and, to the extent applicable, were identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
the Commission's Electronic Data Gathering, Analysis and Retrieval System
("EDGAR"), except to the extent permitted by Regulation S-T. For purposes of
this Agreement, "EFFECTIVE TIME" means the date and the time as of which such
registration statement, or the most recent post-effective amendment thereto, if
any, was declared effective by the Commission; "EFFECTIVE DATE" means the date
of the Effective Time; "PRELIMINARY PROSPECTUS" means each prospectus included
in such registration statement, or amendments thereof, before it became
effective under the Act and any prospectus filed with the Commission by the
Company pursuant to Rule 424(a) under the Act. The Commission has not issued any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus. For purposes of this Agreement, all references to the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement to any of the foregoing, shall be deemed to include the respective
copies thereof filed with the Commission pursuant to EDGAR.
(b) The Registration Statement complies in all material respects with
the Act, and any post-effective amendment to the Registration Statement filed
with the Commission after the Effective Time, the Prospectus and the Prospectus
as amended or supplemented will comply in all material respects with the Act
(except that the Company and Thermo Electron make no representation as to
information furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use therein); at the time of filing
thereof, any Preliminary Prospectus did not, and on the Effective Date, the
Registration Statement did not, and any post-effective amendment to the
Registration Statement filed with the Commission after the Effective Time, the
Prospectus and the Prospectus as amended or supplemented will not, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided that the Company and Thermo Electron make no representation or warranty
as to information contained in or omitted from the Registration Statement, the
Preliminary Prospectus, the Prospectus, any amendment to the Registration
Statement or any amendment or supplement to the Prospectus in reliance upon, and
in conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for inclusion therein. There is no
contract or document required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement which
is not described or filed as required.
7
<PAGE> 8
(c) The accounting firm(s) whose reports appear in the Prospectus are
independent certified public accountants as required by the Act. The financial
statements and schedules (including the related notes) included in the
Registration Statement, any Preliminary Prospectus or the Prospectus present
fairly, in all material respects, the financial condition, results of operations
and cash flows of the entities purported to be shown thereby at the dates and
for the periods indicated and have been prepared in accordance with generally
accepted accounting principles.
(d) The Company and each of its subsidiaries has been duly organized and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority to
own or lease its properties and conduct its business as described in the
Prospectus, and is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by it makes such qualification
necessary except where the failure to so qualify or be in good standing would
not have a material adverse effect on the Company and its subsidiaries taken as
a whole; and, except as described in the Prospectus, the Company and each of its
subsidiaries holds all material licenses, certificates and permits from
governmental authorities necessary for the conduct of its business as described
in the Prospectus.
(e) All of the outstanding shares of Common Stock have been, and the
Shares, upon issuance and delivery and payment therefor in the manner herein
described, will be, duly authorized, validly issued, fully paid and
nonassessable. Other than as described in the Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock pursuant
to the Company's corporate charter, by-laws or other governing documents or any
agreement or other instrument to which the Company is a party or by which it may
be bound. Neither the filing of the Registration Statement nor the offering or
sale of the Shares as contemplated by this Agreement, gives rise to any rights,
other than those which have been waived or satisfied and other than as described
in the Prospectus, for or relating to the registration of any shares of Common
Stock or other securities of the Company. The capitalization of the Company, on
an actual and as adjusted basis, is as set forth in the Prospectus as of the
date so set forth, and since such date the Company has not issued any shares of
Common Stock except pursuant to exercises, if any, or conversions, if any, of
options or convertible securities outstanding on such date. The Common Stock
conforms, in all material respects, to the description thereof contained in the
Prospectus. Except as set forth in or contemplated by the Prospectus, no
options, warrants or other rights to purchase, agreements or other obligations
to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock or ownership interests in the Company that are
issuable by the Company are outstanding. All of the outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and are owned directly or
indirectly by the Company (or by Thermo Electron or another subsidiary of Thermo
Electron), free and clear of any claim, lien, encumbrance, security interest,
restriction upon voting or transfer or any other claim of any third party.
8
<PAGE> 9
(f) Except as described in or contemplated by the Registration Statement
and the Prospectus, there has not been any material adverse change in, or any
adverse development which materially affects, the condition (financial or
other), results of operations, business or prospects of the Company and its
subsidiaries taken as a whole from the date as of which information is given in
the Prospectus.
(g) The Company and each of its subsidiaries is not, and would not be
with the giving of notice or lapse of time or both, in violation of or in
default under, nor will the execution or delivery hereof or consummation of the
transactions contemplated hereby, result in a violation of, or constitute a
default under, the corporate charter, by-laws or other governing documents of
the Company or such subsidiary, or any material agreement, indenture or other
instrument to which the Company or such subsidiary is a party or by which it is
bound, or to which any of its properties is subject, nor will the performance by
the Company of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
its or their respective properties, or result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or asset of the Company
or any subsidiary of the Company, which would be material to the Company and its
subsidiaries taken as a whole. The consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action, and, except
for permits and similar authorizations required under the Act and the securities
or "Blue Sky" laws of certain jurisdictions, for clearance of the underwriting
arrangements with the National Association of Securities Dealers, Inc. (the
"NASD"), and for other such permits and authorizations as have been obtained, no
consent, approval, authorization or order of any U.S. court, governmental agency
or body or any financial institution is required in connection with the
consummation by the Company of the transactions contemplated by this Agreement.
(h) This Agreement has been duly authorized, executed and delivered by
the Company.
(i) Except as described in the Prospectus, the Company and each of its
subsidiaries owns, or has valid rights to use, all items of real and personal
property which are material to the business of the Company and its subsidiaries
taken as a whole, free and clear of all liens, encumbrances and claims which
would materially interfere with the business, properties, financial condition or
results of operations of the Company and its subsidiaries taken as a whole.
(j) There is no litigation or governmental proceeding to which the
Company or any of its subsidiaries is a party or to which any property of the
Company or any of its subsidiaries is subject or which is pending or, to the
knowledge of the Company or Thermo Electron, contemplated against the Company or
any or its subsidiaries that is required to be disclosed in the Prospectus and
that is not so disclosed.
(k) The Company and each of its subsidiaries is not in violation of any
law, ordinance, governmental rule or regulation or court decree to which it is
subject, which violation could reasonably be expected to have a material adverse
effect on the condition (financial or other), results of operations, business or
prospects of the Company and its subsidiaries taken as a whole.
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<PAGE> 10
(l) Except as described in the Prospectus, the Company and each of its
subsidiaries owns or possesses adequate licenses or other rights to use all
intellectual property rights, including patents and trademarks, service marks,
trade names, copyrights or know-how, necessary to conduct its business as
described in the Prospectus, except where such failure, singularly or in the
aggregate would not have a material adverse effect on the Company and its
subsidiaries taken as a whole, and, except as described in the Prospectus,
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with (or knows of any such infringement of or
conflict with) rights or claims of others with respect to any patents, patent
applications, trademarks, service marks, trade names, copyrights or know-how,
that is reasonably likely to result in a material adverse effect upon the
Company and its subsidiaries taken as a whole.
(m) Each of the agreements between the Company and Thermo Instrument or
Thermo Electron described in the Prospectus (collectively, the "INTER-CORPORATE
AGREEMENTS") has been duly and validly authorized, executed and delivered by the
Company and is the valid and binding agreement of the Company enforceable in
accordance with its terms, except as provided by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer, or other similar
laws now or hereafter in effect affecting creditors' rights generally and
subject to general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) (collectively, "APPLICABLE
BANKRUPTCY LAWS"). The execution, delivery and performance of the
Inter-corporate Agreements by the Company, the consummation of the transactions
therein contemplated and compliance with the terms thereof do not and will not
result in a violation of, or constitute a default under, the corporate charter,
by-laws or other governing documents of the Company, or any agreement, indenture
or other instrument to which the Company is a party or by which it is bound, or
to which any of its properties is subject, and do not and will not violate any
existing law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over the Company or any of its
properties, or result in the creation or imposition of any lien, charge, claim
or encumbrance upon any property or asset of the Company, which would be
material to the Company and its subsidiaries taken as a whole. No consent,
approval, authorization or order of any court, governmental agency or body or
financial institution is required in connection with the consummation by the
Company of the transactions contemplated by such Inter-corporate Agreements.
(n) The Company and each of its subsidiaries has not taken and shall not
take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which would constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
(o) The Shares have been approved for listing on the American Stock
Exchange, subject only to official notice of issuance.
SECTION 6A. Representations and Warranties of Thermo Electron. Thermo
Electron represents and warrants to, and agrees with, each Underwriter that:
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(a) Thermo Electron has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, with full corporate power and authority to own or lease its
properties and conduct its business, and is duly qualified to do business and is
in good standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it makes
such qualification necessary, except where the failure to so qualify or be in
good standing would not have a material adverse effect on Thermo Electron and
its subsidiaries taken as a whole.
(b) There has not been any material adverse change in, or any adverse
development which materially affects, the condition (financial or other),
results of operations, business or prospects of Thermo Electron and its
subsidiaries taken as a whole, from the date as of which information is given in
the most recent quarterly or annual report filed by Thermo Electron pursuant to
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), except any
as may have been disclosed to the public.
(c) Except as described in its filings with the Commission under the
Exchange Act, Thermo Electron is not, nor with the giving of notice or lapse of
time or both would be, in violation of or in default under, nor will the
execution or delivery hereof or consummation of the transactions contemplated
hereby, result in a violation of, or constitute a default under, the corporate
charter, by-laws or other governing documents of Thermo Electron, or any
material agreement, indenture or other instrument to which Thermo Electron is a
party or by it is bound, or to which any of its properties is subject, nor will
the performance by Thermo Electron of its obligations hereunder violate any
existing law, rule, administrative regulation or decree of any court or any
governmental agency or body having jurisdiction over Thermo Electron or any of
its properties, or result in the creation or imposition of any lien, charge,
claim or encumbrance upon any property or asset of Thermo Electron, which would
be material to Thermo Electron and its subsidiaries taken as a whole. The
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action, and except for permits and similar
authorizations required under the Act and the securities or "Blue Sky" laws of
certain jurisdictions, for clearance of the underwriting arrangements with the
NASD and for such other permits and authorizations as have been obtained, no
consent, approval, authorization or order of any U.S. court, governmental agency
or body or financial institution is required in connection with the consummation
by Thermo Electron of the transactions contemplated by this Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
Thermo Electron.
(e) Thermo Instrument owns the number of shares of Common Stock of the
Company set forth in the Prospectus, free and clear of any liens, encumbrances,
claims or restrictions, except as set forth in the Prospectus and except that
certain of such shares are reserved for issuance pursuant to stock option and
other benefit plans under which options to purchase Common Stock of the Company
owned by Thermo Instrument are granted to certain employees, directors or
consultants of Thermo Electron and its subsidiaries.
(f) The most recent Annual Report on Form 10-K of Thermo Electron and
any
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<PAGE> 12
subsequent reports filed pursuant to the Exchange Act complied as of the date
thereof in all material respects with the Exchange Act and the rules and
regulations thereunder.
(g) Each of the Inter-corporate Agreements to which Thermo Instrument or
Thermo Electron is a party has been duly and validly authorized, executed and
delivered by Thermo Instrument or Thermo Electron, as the case may be, and is
the valid and binding agreement of Thermo Instrument or Thermo Electron, as the
case may be, enforceable in accordance with its terms, except as provided by
applicable bankruptcy laws. The execution, delivery and performance of each of
the Inter-corporate Agreements to which Thermo Instrument or Thermo Electron is
a party by such corporation, the consummation of the transactions therein
contemplated and compliance with the terms thereof do not and will not result in
a violation of, or constitute a default under, the corporate charter, by-laws or
other governing documents of any such corporation, or any agreement, indenture
or other instrument to which any such corporation is a party or by which it is
bound, or to which any of its properties is subject, and do not and will not
violate any existing law, rule, administrative regulation or decree of any court
or any governmental agency or body having jurisdiction over any such corporation
or any of its properties, or result in the creation or imposition of any lien,
charge, claim or encumbrance upon any property or asset of any such corporation
which would be material to any such corporation and its subsidiaries taken as a
whole. No consent, approval, authorization or order of any court, governmental
agency or body or financial institution is required in connection with the
consummation by Thermo Instrument or Thermo Electron of the transactions
contemplated by the Inter-corporate Agreements to which it is a party, except
such as have been obtained.
(h) Each of Thermo Electron and its subsidiaries has not taken and shall
not take, directly or indirectly, any action designed to cause or result in, or
which has constituted or which would constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the sale
or resale of the Shares.
SECTION 7. Indemnification. (a) The Company and Thermo Electron, jointly
and severally, agree to indemnify and hold harmless each Underwriter, its
directors, its officers and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
Preliminary Prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by or on behalf of any Underwriter through
you expressly for use therein; provided, however, that the foregoing indemnity
agreement with respect to any Preliminary Prospectus shall not inure to the
benefit of any Underwriter (and the directors, officers and controlling persons
of such Underwriter) who failed to deliver a Prospectus (as then
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<PAGE> 13
amended or supplemented, provided by the Company to the several Underwriters in
the requisite quantity and on a timely basis, as required by this Agreement) to
the person asserting any losses, claims, damages and liabilities and judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in such Prospectus and such Prospectus was required by law to be delivered at or
prior to the written confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, Thermo Electron, Thermo Instrument and their
respective directors and officers, and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
Thermo Electron to such Underwriter but only with reference to information
relating to such Underwriter furnished in writing to the Company by such
Underwriter through you expressly for use in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto) or
any Preliminary Prospectus. The Company and Thermo Electron acknowledge that the
statements set forth in the last paragraph of the cover page, the paragraph
containing stabilization information on the inside front cover page and the
sentences related to concessions and reallowances and the paragraph relating to
stabilization, syndicate covering transactions and penalty bids under the
heading "Underwriting" in any Preliminary Prospectus and the Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters for inclusion in any Preliminary Prospectus or the
Prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 7(a) and 7(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 7(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
such Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of
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the indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions arising out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by Donaldson, Lufkin & Jenrette Securities Corporation, in the case
of parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action effected with its written consent. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Thermo Electron on the one hand and the Underwriters on the other
hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company and Thermo Electron on
the one hand and the Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and Thermo
Electron on the one hand and the Underwriters on the other hand shall be deemed
to be in the same proportion as the total net proceeds from the offering (after
deducting underwriting discounts and commissions, but before deducting expenses)
received by the Company, and the total underwriting discounts and commissions
received by the Underwriters, bear to the total price to the public of the
Shares, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault of the Company and Thermo Electron on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, Thermo Electron and the Underwriters agree that it would not
be just and
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<PAGE> 15
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective number
of Shares purchased by each of the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares under this Agreement
are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and Thermo
Electron contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., Eastern time,
on the date of this Agreement; and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the President or the chief executive officer of the
Company and by the treasurer or secretary of the Company, in their capacities as
such, confirming the matters set forth in Sections 6(f), 8(a) (with respect to
representations and warranties of the Company) and 8(b) and that the Company has
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company on or
prior to the Closing Date.
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<PAGE> 16
(d) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by the president or any vice president of Thermo Electron
and by the treasurer or secretary of Thermo Electron, in their capacities as
such, confirming the matters set forth in Sections 6A(b) and 8(a) and that
Thermo Electron has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
Thermo Electron on or prior to the Closing Date.
(e) Since the respective dates as of which information is given in the
prospectus in the last form included in the Registration Statement at the
Effective Time, other than as set forth in such prospectus, (i) there shall not
have occurred any change or any development involving a prospective change in
the condition, financial or otherwise, or the earnings, business, management or
operations of the Company and its subsidiaries taken as a whole, (ii) there
shall not have been any material change or any development involving a
prospective change in the capital stock or in the long-term debt of the Company
or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 8(e)(i),
8(e)(ii) or 8(e)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
(f) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel for the Underwriters), dated the Closing Date, of Seth H.
Hoogasian, Esq., General Counsel of the Company, Thermo Instrument and Thermo
Electron, to the effect that:
(i) Each of the Company and its Significant Subsidiaries (as
defined in Regulation S-X under the Act) has been duly organized and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power and authority
to own or lease its properties and conduct its business as described in
the Prospectus, and is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the business
conducted by it or the location of the properties owned or leased by it
makes such qualification necessary, except where the failure to so qualify
or be in good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(ii) Each of Thermo Electron and its Significant Subsidiaries has
been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with
full corporate power and authority to own or lease its properties and
conduct its business as described in the Prospectus.
(iii) The Company's authorized capital stock and outstanding capital
stock as of the date of such opinion shall be as specified therein. All of
the outstanding shares of Common Stock have been duly authorized and
validly issued, and to the best of such counsel's knowledge, fully paid
and nonassessable. The Shares, upon issuance and delivery and payment
therefor in the manner herein described, will be duly authorized,
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<PAGE> 17
validly issued, fully paid and nonassessable. There are no preemptive or
other rights to subscribe for or to purchase, or any restriction upon the
voting or transfer of, any of the Shares pursuant to the Company's
corporate charter, by-laws, other governing documents, or any agreement or
other instrument known to such counsel to which the Company or a
subsidiary thereof is a party or by which the Company or a subsidiary
thereof may be bound or to which any of their respective properties is
subject; and, to the best of such counsel's knowledge, neither the filing
of the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights for or relating to
the registration of any shares of Common Stock except such as have been
waived or satisfied or as described in the Prospectus. The Common Stock
conforms, as to legal matters, in all material respects to the description
thereof contained in the Prospectus. To the best of such counsel's
knowledge, except as set forth in such opinion, no options, warrants or
other rights to purchase, agreements or other obligations to issue, or
rights to convert any obligations into or exchange any securities for,
shares of capital stock of or ownership interests in the Company that are
issuable by the Company are outstanding. All of the outstanding shares of
capital stock of each subsidiary of the Company have been duly authorized
and validly issued, and to the best of such counsel's knowledge,are fully
paid and nonassessable, and are owned directly or indirectly by the
Company free and clear of any claim, lien, encumbrance or security
interest known to such counsel.
(iv) Neither the execution or delivery hereof nor consummation of
the transactions contemplated hereby will result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of the Company or any of its Significant Subsidiaries
or, to the best knowledge of such counsel, any material agreement,
indenture or other instrument to which the Company or any of its
Significant Subsidiaries is a party or by which the Company or any of its
Significant Subsidiaries may be bound, or to which any of the properties
of the Company or any of its Significant Subsidiaries is subject, nor, to
the best of such counsel's knowledge, will the performance by the Company
of its obligations hereunder violate any existing law, rule,
administrative regulation or decree of any court or any governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or the properties of the Company or any of its subsidiaries
(no opinion being given as to statutes, laws, rules and regulation
relating to securities laws matters, which are addressed in paragraph
(viii) below), nor, to the best knowledge of such counsel, result in the
creation or imposition of any lien, charge, claim or encumbrance upon the
properties or assets of the Company or any of its Significant Subsidiaries
which would be material to the Company and its subsidiaries taken as a
whole. The consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the
Company, Thermo Instrument and Thermo Electron, and, except for permits
and similar authorizations required under the Act, and except for permits
and similar authorizations under the securities or "Blue Sky" laws of
certain jurisdictions or the NASD, and for such other permits and
authorizations as have been obtained, no consent, approval, authorization
or order of any court, governmental agency or body or financial
institution is required in connection with the consummation by the
Company, Thermo Instrument or Thermo
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Electron of the transactions contemplated by this Agreement.
(v) Neither the execution or delivery hereof nor consummation of
the transactions contemplated hereby, will result in a violation of, or
constitute a default under, the corporate charter, by-laws or other
governing documents of Thermo Instrument or Thermo Electron or to the best
knowledge of such counsel, any material agreement, indenture, or other
instrument to which Thermo Instrument or Thermo Electron is a party or by
which Thermo Instrument or Thermo Electron may be bound, or to which any
of the properties of Thermo Instrument or Thermo Electron is subject, nor,
to the best of such counsel's knowledge, will the performance by Thermo
Instrument or Thermo Electron of its obligations hereunder violate any
existing law, rule, administrative regulation or decree of any court or
any governmental agency or body having jurisdiction over Thermo Instrument
or Thermo Electron or the properties of Thermo Instrument or Thermo
Electron (no opinion being given as to statutes, laws, rules and
regulation relating to securities laws matters, which are addressed in
paragraph (viii) below), nor, to the best of such counsel's knowledge,
result in the creation or imposition of any lien, charge, claim or
encumbrance upon the properties or assets of Thermo Instrument or Thermo
Electron, which would be material to any of such corporations taken as a
whole.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and Thermo Electron.
(vii) Each of the Corporate Services Agreement, the Tax Allocation
Agreement and the Master Guarantee Reimbursement and Loan Agreement
between the Company and Thermo Electron has been duly authorized, executed
and delivered by Thermo Electron, and is the valid and binding agreement
of Thermo Electron enforceable in accordance with its terms except as
provided by applicable bankruptcy laws. The execution, delivery and
performance of each of such agreements by each of the parties thereto, the
consummation of the transactions therein contemplated and compliance with
the terms thereof do not and will not result in a violation of, or
constitute a default under the corporate charter, by-laws or other
governing documents of Thermo Electron, or any material agreement,
indenture or other instrument known to such counsel to which Thermo
Electron is a party or by which it is bound, or to which any of its
properties is subject and do not and will not violate any existing law,
rule, administrative regulation or, to the best of such counsel's
knowledge, decree of any court or any governmental agency or body having
jurisdiction over Thermo Electron or any of its properties, or, to the
best of such counsel's knowledge, result in the creation or imposition of
any lien, charge, claim or encumbrance upon any property or asset of
Thermo Electron, which would be material to Thermo Electron and its
subsidiaries taken as a whole.
(viii) The Registration Statement and all post-effective amendments
thereto have become effective under the Act and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending before or contemplated by the
Commission. All filings required by Rule 424 and Rule 430A under
18
<PAGE> 19
the Act have been made; the Registration Statement as of the Effective
Date, and the Prospectus and any amendment or supplement thereto as of
their respective dates, complied as to form in all material respects with
the requirements of the Act (it being understood that such counsel need
express no opinion on the financial statements or other financial and
statistical data included therein).
(ix) Such counsel does not know of any contracts or documents of a
character required to be summarized or described in the Registration
Statement or to be filed as exhibits thereto that are not so summarized,
described or filed, nor does such counsel know of any pending or
threatened legal proceedings required to be described in the Prospectus
that are not so described.
Such counsel shall also state that he has no reason to believe that (i)
the Registration Statement, as of its Effective Date, or any amendment thereto,
at the time it became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, or (ii) the
Prospectus, or any supplement or amendment thereto, on such Closing Date or at
the time such Prospectus or supplement or amendment thereto was issued contains
or contained any untrue statement of a material fact or omits or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading (it being understood that such counsel need express no
belief with respect to the financial statements or other financial and
statistical data included in the Registration Statement and the Prospectus).
In rendering the foregoing opinion, counsel may rely, as to matters of
fact, upon certificates of officers of the Company, Thermo Instrument and Thermo
Electron and certificates of public officials. Certificates so relied upon shall
be furnished to you and shall be satisfactory to you and your counsel.
The opinion of Seth H. Hoogasian described in Section 8(f) above shall be
rendered to you at the request of the Company and shall so state therein.
(g) You shall have received on the Closing Date an opinion, dated
the Closing Date, of Testa, Hurwitz & Thibeault, LLP, counsel for the
Underwriters, to the same effect as is set forth in Section 8(f)(iii)(first and
second sentences), Section 8(f)(vi), Section 8(f)(viii) and the paragraph
following paragraph (ix).
In giving such opinions with respect to the matters covered by the
paragraph following paragraph (ix), Seth H. Hoogasian and Testa, Hurwitz &
Thibeault, LLP may state that their belief is based upon their participation in
the preparation of the Registration Statement and Prospectus and any amendments
or supplements thereto and review and discussion of the contents thereof, but
are without independent check or verification except as specified.
(h) You shall have received, on each of the date hereof and the
Closing Date, a letter dated the date hereof or the Closing Date, as the case
may be, in form and substance
19
<PAGE> 20
satisfactory to you, from Arthur Andersen LLP, independent public accountants,
containing the information and statements of the type ordinarily included in
accountants' "comfort letters" to Underwriters with respect to the financial
statements and certain financial information contained in the Registration
Statement and the Prospectus.
(i) The Shares shall have been duly listed, subject to notice of
issuance, on the American Stock Exchange.
(j) The Company and Thermo Electron shall not have failed on or
prior to the Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company or Thermo
Electron on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company and Thermo Electron, the due authorization and
issuance of such Additional Shares and other matters related to the issuance of
such Additional Shares.
SECTION 9. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National Market or limitation on prices for securities or other instruments on
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of the Company on any exchange or in the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or other
governmental authority which in your opinion materially and adversely affects,
or will materially and adversely affect, the business, prospects, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the financial markets in the
United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such
20
<PAGE> 21
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the total number of Firm Shares or Additional
Shares, as the case may be, to be purchased on such date by all Underwriters,
each non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I bears
to the total number of Firm Shares which all the non-defaulting Underwriters
have agreed to purchase, or in such other proportion as you may specify, to
purchase the Firm Shares or Additional Shares, as the case may be, which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
on such date; provided that in no event shall the number of Firm Shares or
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter, the Company and Thermo Electron. In any such
case which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected. If, on an Option Closing Date, any Underwriter or Underwriters
shall fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
SECTION 10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company, to ONIX Systems
Inc., 22001 North Park Drive, Kingwood, Texas 77339-3804, Attention: President,
with a copy to Seth H. Hoogasian, Esq., General Counsel, Thermo Electron
Corporation, 81 Wyman Street, Waltham, Massachusetts 02254-9056 and (ii) if to
any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention: Syndicate
Department, or in any case to such other address as the person to be notified
may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, Thermo Electron and the several
Underwriters set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Shares, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the officers or
directors of any
21
<PAGE> 22
Underwriter, any person controlling any Underwriter, the Company, Thermo
Electron, Thermo Instrument, the respective officers or directors of the
Company, Thermo Electron or Thermo Instrument, or other any person controlling
the Company, (ii) acceptance of the Shares and payment for them hereunder and
(iii) termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination of
this Agreement, the Company shall be liable for all expenses which it has agreed
to pay pursuant to Section 5(i) hereof. The Company also agrees to reimburse the
several Underwriters, their directors and officers and any persons controlling
any of the Underwriters for any and all fees and expenses (including, without
limitation, the fees and disbursements of counsel) incurred by them in
connection with enforcing their rights hereunder (including, without limitation,
pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, Thermo Electron,
Thermo Instrument, the Underwriters, the Underwriters' directors and officers,
any controlling persons referred to herein, the directors and officers of the
Company, Thermo Electron and Thermo Instrument, and their respective successors
and assigns, all as and to the extent provided in this Agreement, and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of the Shares
from any of the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
[Remainder of page intentionally left blank]
22
<PAGE> 23
Please confirm that the foregoing correctly sets forth the agreement among
the Company, Thermo Electron and the several Underwriters.
Very truly yours,
ONIX SYSTEMS INC.
By:
--------------------------------------
Title:
THERMO ELECTRON CORPORATION
By:
--------------------------------------
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
GRUNTAL & CO., L.L.C.
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-----------------------------------
23
<PAGE> 24
SCHEDULE I
Number of Firm
Shares To Be
Underwriter Purchased
----------- ---------
Donaldson, Lufkin & Jenrette Securities Corporation............
Lazard Freres & Co. LLC........................................
Gruntal & Co., L.L.C...........................................
---------
Total................................................. 3,000,000
=========
24
<PAGE> 1
Exhibit 4
[FRONT OF STOCK CERTIFICATE]
ONIX SYSTEMS INC.
ONX
COMMON STOCK Incorporated under the laws of the COMMON STOCK
PAR VALUE $.01 State of Delaware CUSIP 67088G 10 8
See Reverse Side
for Certain
Definitions
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
ONIX SYSTEMS INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. The Certificate and the shares represented hereby are issued and shall
be held subject to the laws of the State of Delaware and all the provisions of
the Certificate of Incorporation and the By-Laws of the Corporation, and all the
amendments from time to time made thereto. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
[ ONIX SYSTEMS INC. ]
[ Corporate Seal ]
Secretary President
Countersigned and Registered:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
TRANSFER AGENT & REGISTRAR
(New York, N.Y.)
By:
-----------------------------------
Authorized Signature
<PAGE> 2
[BACK OF STOCK CERTIFICATE]
ONIX SYSTEMS INC.
This Corporation will furnish without charge to each stockholder who so
requests, a copy of the designations, powers, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Any such requests may be addressed to the Secretary of the
Corporation.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian ___________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act
survivorship and not as ---------------------------
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------
Shares of the Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
----------------------------------------------
- --------------------------------------------------------------------------------
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
--------------------- -----------------------------------------
Signature
-----------------------------------------
THE SIGNATURES TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
Exhibit 5
March 4, 1998
ONIX Systems Inc.
22001 North Park Drive
Kingwood, TX 77339
Re: Registration Statement on Form S-1 (File No. 333-45333)
Relating to the Common Stock, $.01 Par Value, of ONIX Systems Inc.
Ladies and Gentlemen:
I am General Counsel to ONIX Systems Inc., a Delaware corporation (the
"Company"), and have acted as counsel in connection with the registration under
the Securities Act of 1933, as amended (the "Securities Act") on Form S-1 (the
"Registration Statement"), of shares of the Company's common stock, $.01 par
value per share (the "Common Stock") with a proposed maximum aggregate offering
price of $53,475,000. Such shares, together with any shares of Common Stock
registered under a registration statement related to the offering contemplated
by the Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act (a "462(b) Registration Statement"), are
collectively referred to herein as the "Shares."
I or a member of my legal staff have reviewed the corporate proceedings
taken by the Company with respect to the authorization of the issuance of the
Shares. I or a member of my legal staff have also examined and relied upon
originals or copies, certified or otherwise authenticated to my satisfaction, of
all corporate records, documents, agreements or other instruments of the Company
and have made all investigations of law and have discussed with the Company's
representatives all questions of fact that I have deemed necessary or
appropriate.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware.
<PAGE> 2
2. The issuance and sale of the Shares registered pursuant to the
Registration Statement and the 462(b) Registration Statement have been duly
authorized by the Company.
3. The Shares, when issued and sold in accordance with the provisions of the
Underwriting Agreement between the Company and the several Underwriters named on
Schedule I thereto (in the form of Exhibit 1 to the Registration Statement) will
be validly issued, fully paid and non-assessable.
I hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement or any 462(b) Registration Statement and to being named
in the related Prospectus.
Very truly yours,
/s/ Seth H. Hoogasian
Seth H. Hoogasian
General Counsel
<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 Holdings Limited England and Wales 100%
Flow Automation (UK) Limited United Kingdom 100%
CAC UK Limited United Kingdom 100%
VG Gas Analysis Limited United Kingdom 100%
Peek Measurement Limited England 100%
Peek Environmental Limited England 100%
Sarasota Data Products Limited England 100%
Sarasota Instrumentation Limited England 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%
</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
March 3, 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> .79
<EPS-DILUTED> .79
</TABLE>
