<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
[X] Definitive Proxy Statement by Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ONIX Systems Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ONIX Systems Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[ONIX SYSTEMS LOGO APPEARS HERE]
22001 North Park Drive
Kingwood, Texas 77339-3804
April 15, 1999
Dear Stockholder:
The enclosed Notice calls the 1999 Annual Meeting of the Stockholders of
ONIX Systems Inc. I respectfully request that all Stockholders attend this
meeting, if possible.
Our Annual Report for the year ended January 2, 1999 is enclosed. I hope
you will read it carefully. Feel free to forward any questions you may have if
you are unable to be present at the meeting.
Enclosed with this letter is a proxy authorizing three officers of the
Corporation to vote your shares for you if you do not attend the meeting.
Whether or not you are able to attend the meeting, I urge you to complete your
proxy and return it to our transfer agent, American Stock Transfer & Trust
Company, in the enclosed addressed, postage-paid envelope, as a quorum of the
Stockholders must be present at the meeting, either in person or by proxy.
I would appreciate your immediate attention to the mailing of this proxy.
Yours very truly,
WILLIAM J. ZOLNER III
President and Chief Executive Officer
<PAGE>
[ONIX SYSTEMS LOGO APPEARS HERE]
22001 North Park Drive
Kingwood, Texas 77339-3804
April 15, 1999
To the Holders of the Common Stock of
ONIX SYSTEMS INC.
NOTICE OF ANNUAL MEETING
The 1999 Annual Meeting of the Stockholders of ONIX Systems Inc. (the
"Corporation") will be held on Thursday, May 27, 1999 at 11:00 a.m. at The
Westin Hotel, 70 Third Avenue, Waltham, Massachusetts. The purpose of the
meeting is to consider and take action upon the following matters:
1. Election of five directors.
2. Such other business as may properly be brought before the meeting and
any adjournment thereof.
The transfer books of the Corporation will not be closed prior to the
meeting, but, pursuant to appropriate action by the board of directors, the
record date for the determination of the Stockholders entitled to receive notice
of and to vote at the meeting is March 30, 1999.
The By-laws require that the holders of a majority of the stock issued and
outstanding and entitled to vote be present or represented by proxy at the
meeting in order to constitute a quorum for the transaction of business. It is
important that your shares be represented at the meeting regardless of the
number of shares you may hold. Whether or not you are able to be present in
person, please sign and return promptly the enclosed proxy in the accompanying
envelope, which requires no postage if mailed in the United States.
This Notice, the proxy and proxy statement enclosed herewith are sent to
you by order of the board of directors.
SANDRA L. LAMBERT
Secretary
<PAGE>
PROXY STATEMENT
The enclosed proxy is solicited by the board of directors of ONIX Systems
Inc. (the "Corporation") for use at the 1999 Annual Meeting of the Stockholders
to be held on Thursday, May 27, 1999 at 11:00 a.m. at The Westin Hotel,
70 Third Avenue, Waltham, Massachusetts, and any adjournment thereof. The
mailing address of the executive office of the Corporation is 22001 North Park
Drive, Kingwood, Texas 77339-3804. This proxy statement and the enclosed proxy
were first furnished to Stockholders of the Corporation on or about April 19,
1999.
VOTING PROCEDURES
The board of directors intends to present to the meeting the election of
five directors, constituting the entire board of directors.
The representation in person or by proxy of a majority of the outstanding
shares of the common stock, $.01 par value, of the Corporation ("Common Stock")
entitled to vote at the meeting is necessary to provide a quorum for the
transaction of business at the meeting. Shares can only be voted if the
Stockholder is present in person or is represented by returning a properly
signed proxy. Each Stockholder's vote is very important. Whether or not you plan
to attend the meeting in person, please sign and promptly return the enclosed
proxy card, which requires no postage if mailed in the United States. Votes of
Stockholders of record who are present at the meeting in person or by proxy,
abstentions and broker non-votes (as defined below) are counted as present or
represented at the meeting for purposes of determining whether a quorum exists.
Shares represented by proxy will be voted in accordance with your
instructions. You may specify your choice by marking the appropriate box on the
proxy card. If your proxy card is signed and returned without specifying
choices, your shares will be voted FOR the management nominees for directors and
as the individuals named as proxy holders on the proxy deem advisable on all
other matters as may properly come before the meeting.
Nominees for election as directors at the meeting will be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting. If you hold your shares of Common Stock through a broker, bank
or other nominee, generally the nominee may only vote the Common Stock that it
holds for you in accordance with your instructions. However, if it has not
timely received your instructions, the nominee may vote on certain matters for
which it has discretionary voting authority. If a nominee cannot vote on a
particular matter because it does not have discretionary voting authority, this
is a "broker non-vote" on that matter. With respect to the election of
directors, "broker non-votes" and withholdings of authority to vote will have no
effect on the outcome of the vote.
A Stockholder who returns a proxy may revoke it at any time before the
Stockholder's shares are voted at the meeting by written notice to the Secretary
of the Corporation received prior to the meeting, by executing and returning a
later-dated proxy or by voting by ballot at the meeting.
The outstanding stock of the Corporation entitled to vote (excluding shares
held in treasury by the Corporation) as of March 30, 1999 consisted of
14,357,524 shares of Common Stock. Only Stockholders of record at the close of
business on March 30, 1999, are entitled to vote at the Meeting. Each share is
entitled to one vote.
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--PROPOSAL 1--
ELECTION OF DIRECTORS
Five directors are to be elected at the meeting, each to hold office until
his successor is elected and qualified or until his earlier resignation, death
or removal.
Nominees for Directors
Set forth below are the names of the persons nominated as directors, their
ages, their offices in the Corporation, if any, their principal occupation or
employment for the past five years, the length of their tenure as directors and
the names of other public corporations in which such persons hold directorships.
Information regarding their beneficial ownership of the Corporation's Common
Stock, and of the common stock of its parent company, Thermo Instrument Systems
Inc. ("Thermo Instrument"), a manufacturer of measurement and detection
instruments, and Thermo Instrument's parent company, Thermo Electron Corporation
("Thermo Electron"), a provider of products and services in measurement
instrumentation, biomedical devices, energy resource recovery, and emerging
technologies, is reported under the caption "Stock Ownership." All of the
nominees are currently directors of the Corporation.
- --------------------------------------------------------------------------------
David J. Beaubien Mr. Beaubien, 64, has been a director of the
Corporation since June 1998. Mr. Beaubien has
been the chairman of Yankee Environmental
Systems Inc., a manufacturer of solar radiation
monitoring instruments, since 1990. He also
served as a director of the Kidder Peabody
Family of Mutual Funds from 1983 to 1995 and of
Oriel Instruments Corporation from 1990 to 1996.
Mr. Beaubien is also a director of IEC
Electronics, Inc., Paine Webber Pace Mutual
Funds and ThermoSpectra Corporation.
- --------------------------------------------------------------------------------
Frank Jungers Mr. Jungers, 72, has been a director of the
Corporation since June 1998. Mr. Jungers has
been a consultant on business and energy matters
since 1977. He was employed by the Arabian
American Oil Company from 1974 through 1977 as
chairman and chief executive officer.
Mr. Jungers is also a director of The AES
Corporation, Donaldson, Lufkin & Jenrette
Securities Corporation, Georgia-Pacific
Corporation, Statia Terminals Group N.V., Thermo
Ecotek Corporation, Thermo Electron and
ThemoQuest Corporation.
- --------------------------------------------------------------------------------
Earl R. Lewis Mr. Lewis, 55, has been a director and chairman
of the Corporation since its inception in August
1997. Mr. Lewis has been president and chief
executive officer of Thermo Instrument since
March 1997 and January 1998, respectively, and
was chief operating officer of Thermo Instrument
from January 1996 to January 1998. Prior to that
time, he was executive vice president of Thermo
Instrument from January 1996 to March 1997,
senior vice president of Thermo Instrument from
January 1994 to January 1996, and vice president
of Thermo Instrument from March 1992 to January
1994. Mr. Lewis has been chief operating
officer, measurement and detection, of Thermo
Electron since September 1998. Prior to his
appointment as chief operating officer,
Mr. Lewis served as senior vice president of
Thermo Electron from June 1998 to September 1998
and vice president from September 1996 to June
1998. Mr. Lewis served as chief executive
officer of Thermo Optek Corporation, a majority-
owned subsidiary of Thermo Instrument and a
manufacturer of analytical instruments that
measure energy and light for purposes of
materials analysis, characterization and
preparation, from its inception in August 1995
to January 1998, and served as president of its
predecessor, Thermo Jarrell Ash Corporation, for
more than five years prior to 1995. Mr. Lewis is
also a director of Metrika Systems Corporation,
SpectRx Inc., Thermo BioAnalysis Corporation,
Thermo Instrument, Thermo Optek Corporation,
ThermoQuest Corporation, ThermoSpectra
Corporation and Thermo Vision Corporation.
2
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Arvin H. Smith Mr. Smith, 69, has been a director of the
Corporation since March 1999. Mr. Smith
previously served as a director of the
Corporation from its inception in August 1997
until his resignation in September 1998, when he
was appointed president of Thermo Electron. He
was executive vice president of Thermo Electron
from 1991 until September 1998 and a senior vice
president of Thermo Electron from 1986 to 1991.
He was also president and chief executive
officer of Thermo Instrument from 1986 to March
1997 and January 1998, respectively. Mr. Smith
is also a director of Thermo Instrument.
- --------------------------------------------------------------------------------
William J. Zolner III Dr. Zolner, 56, has been the president, chief
executive officer and a director of the
Corporation since its inception in August 1997.
From 1995 to 1997, Dr. Zolner served as
president of CAC Inc., formerly known as Thermo
Instrument Controls, a wholly owned subsidiary
of Thermo Instrument and one of the predecessor
businesses comprising the Corporation.
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Committees of the Board of Directors and Meetings
The board of directors has established an audit committee and a human
resources committee, each consisting solely of directors who are not employees
of the Corporation, of Thermo Electron or of any other companies affiliated with
Thermo Electron (also referred to as "outside directors"). The present members
of the audit committee are Mr. Beaubien (Chairman) and Mr. Jungers. The audit
committee reviews the scope of the audit with the Corporation's independent
public accountants and meets with them for the purpose of reviewing the results
of the audit subsequent to its completion. The present members of the human
resources committee are Mr. Jungers (Chairman) and Mr. Beaubien. The human
resources committee reviews the performance of senior members of management,
approves executive compensation and administers the Corporation's stock option
and other stock-based compensation plans. The Corporation does not have a
nominating committee of the board of directors. The board of directors met four
times, the audit committee met once and the human resources committee met four
times during fiscal 1998. Each director attended at least 75% of all meetings of
the board of directors and committees on which he served that were held during
fiscal 1998.
Compensation of Directors
Cash Compensation
Outside directors receive an annual retainer of $2,000 and a fee of $1,000
per meeting for attending regular meetings of the board of directors and $500
per meeting 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. Mr. Lewis, Mr. Smith and Dr. Zolner are all employees of Thermo
Electron or its subsidiaries and do not receive any cash compensation from the
Corporation for their services as directors. Directors are also reimbursed for
out-of-pocket expenses incurred in attending such meetings.
Deferred Compensation Plan
Under the Corporation's deferred compensation plan for directors (the
"Deferred Compensation Plan"), a director has the right to defer receipt of his
cash fees until he ceases to serve as a director, dies or retires from his
principal occupation. In the event of a change of control or proposed change of
control of the Corporation that is not approved by the board of directors,
deferred amounts become payable immediately. Either of the following is deemed
to be a change of control: (a) the acquisition, without the prior approval of
the board of directors, directly or indirectly, by any person of 50% or more of
the outstanding Common Stock or 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 the
Corporation's Common Stock. When payable, amounts deferred may be disbursed
solely in shares of Common Stock accumulated under the Deferred Compensation
Plan. A total of 25,000 shares of Common Stock has been
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reserved for issuance under the Deferred Compensation Plan. As of January 2,
1999, no units had accumulated under the Deferred Compensation Plan.
Stock-based Compensation
Directors of the Corporation are also eligible for the grant of stock
options under the Corporation's stock-based compensation plans. These plans are
administered by the human resources committee of the board of directors, which
determines the form and terms of stock-based awards to be granted. To date,
only nonqualified stock options have been granted to directors under this plan.
In 1998, options to purchase 30,000 shares of Common Stock were granted to each
of the non-executive directors of the Corporation at an exercise price of $12.45
per share. These options may be exercised at any time prior to the expiration
of the option on the seventh anniversary of the grant date. Shares acquired
upon exercise of the options are subject to restrictions on transfer and the
right of the Corporation to repurchase such shares at the exercise price if the
director ceases to serve as a director of the Corporation or any other Thermo
Electron company. The restrictions and repurchase rights lapse or are deemed to
have lapsed 20% per year, starting with the first anniversary of the grant date,
provided the director has continuously served as a director of the Corporation
or any other Thermo Electron company since the grant date.
Stock Ownership Policies for Directors
The human resources committee of the board of directors (the "Committee")
has established a stock holding policy for directors. The stock holding policy
requires each director to hold a minimum of 1,000 shares of Common Stock.
Directors are requested to achieve this ownership within a three-year period.
In addition, the Committee has a policy requiring directors to hold shares
of Common Stock equal to one-half of their net option exercises over a period of
five years. The net option exercise is determined by calculating the number of
shares acquired upon exercise of a stock option, after deducting the number of
shares that could have been traded to exercise the option and the number of
shares that could have been surrendered to satisfy tax withholding obligations
attributable to the exercise of the option. This policy is also applicable to
executive officers and is described in "Committee Report on Executive
Compensation - Stock Ownership Policies."
STOCK OWNERSHIP
The following table sets forth the beneficial ownership of Common Stock, as
well as the common stock of Thermo Instrument, the Corporation's parent company,
and of Thermo Electron, Thermo Instrument's parent company, as of January 31,
1999, with respect to (i) each director, (ii) each executive officer named in
the summary compensation table set forth below under the heading "Executive
Compensation" (the "named executive officers") and (iii) all directors and
current executive officers as a group. In addition, the following table sets
forth the beneficial ownership of Common Stock, as of January 31, 1999, with
respect to each person who was known by the Corporation to own beneficially more
than 5% of the outstanding shares of Common Stock.
While certain directors and executive officers of the Corporation are also
directors and executive officers of Thermo Electron or its subsidiaries other
than the Corporation, all such persons disclaim beneficial ownership of the
shares of Common Stock beneficially owned by Thermo Electron.
4
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<TABLE>
<CAPTION>
ONIX Systems Thermo Instrument Thermo Electron
Name (1) Inc. (2) Systems Inc. (3) Corporation (4)
- -------- -------- --------------- ---------------
<S> <C> <C> <C>
Thermo Electron Corporation(5).. 11,819,167 N/A N/A
David J. Beaubien............... 30,000 0 0
C. R. Duarte.................... 13,000 10,328 584
B.C. Holstead................... 17,033 7,356 92
Frank Jungers................... 40,000 19,993 175,754
Earl R. Lewis................... 35,666 338,250 204,878
Arvin H. Smith.................. 24,000 539,583 931,378
Mark Whitman.................... 16,333 29,582 2,119
William J. Zolner III........... 136,100 77,114 35,839
All directors and current
executive officers as a group
(10 persons)................... 315,465 1,083,917 1,882,394
</TABLE>
(1) Except as reflected in the footnotes to this table, shares beneficially
owned consist of shares owned by the indicated person or by that person for
the benefit of minor children, and all share ownership includes sole voting
and investment power.
(2) Shares of Common Stock beneficially owned by Mr. Beaubien, Mr. Duarte,
Mr. Holstead, Mr. Jungers, Mr. Lewis, Mr. Smith, Mr. Whitman, Dr. Zolner
and all directors and current executive officers as a group include 30,000,
13,000, 16,333, 30,000, 33,333, 20,000, 16,333, 135,000 and 297,332 shares,
respectively, that such person or group had the right to acquire within 60
days of January 31, 1999, through the exercise of stock options. 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 Dr. Zolner include 100 shares held by his
spouse. No director or named executive officer beneficially owned more than
1% of the Common Stock outstanding as of January 31, 1999; all directors
and current executive officers as a group beneficially owned 2.19% of the
Common Stock outstanding as of such date.
(3) Shares of the common stock of Thermo Instrument beneficially owned by
Mr. Duarte, Mr. Holstead, Mr. Jungers, Mr. Lewis, Mr. Smith, Mr. Whitman,
Dr. Zolner and all directors and current executive officers as a group
include 10,000, 7,265, 13,587, 322,085, 292,968, 28,750, 76,718 and 806,449
shares, respectively, that such person or group had the right to acquire
within 60 days of January 31, 1999, through the exercise of stock options.
Shares beneficially owned by Mr. Smith and all directors and current
executive officers as a group include 663 and 1,626 shares allocated
through January 31, 1999, 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 his spouse. No director or named executive officer
beneficially owned more than 1% of the common stock of Thermo Instrument
outstanding as of January 31, 1999; all directors and current executive
officers as a group did not beneficially own more than 1% of the common
stock of Thermo Instrument outstanding as of such date.
(4) Shares of the common stock of Thermo Electron beneficially owned by
Mr. Jungers, Mr. Lewis, Mr. Smith, Mr. Whitman, Dr. Zolner and all
directors and current executive officers as a group include 9,125, 202,350,
622,249, 1,400, 35,575, and 1,333,471 shares, respectively, that such
person or group had the right to acquire within 60 days of January 31,
1999, through the exercise of stock options. Shares beneficially owned by
Mr. Smith and all directors and current executive officers as a group
include 1,717 and 4,214 shares, respectively, allocated through January 31,
1999, to accounts maintained pursuant to the ESOP. Shares beneficially
owned by Mr. Jungers include 4,500 shares held by his spouse. Shares
beneficially owned by Mr. Jungers and all directors and current executive
officers as a group include 80,427 shares allocated through January 2,
1999, to Mr. Jungers' account maintained pursuant to Thermo Electron's
deferred compensation plan for directors. No director or named executive
officer beneficially owned more than 1% of the common stock of Thermo
Electron outstanding as of January 31, 1999; all directors and
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current executive officers as a group beneficially owned 1.19% of the
common stock of Thermo Electron outstanding as of such date.
(5) As of January 31, 1999, Thermo Electron, primarily through its majority-
owned subsidiary, Thermo Instrument, beneficially owned 82.36% of the
outstanding Common Stock. Thermo Electron's address is 81 Wyman Street,
Waltham, Massachusetts 02454-9046. As of January 31, 1999, Thermo Electron
had the power to elect all of the members of the Corporation's board of
directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's directors and executive officers,
and beneficial owners of more than 10% of the Common Stock, such as Thermo
Electron, to file with the Securities and Exchange Commission initial reports of
ownership and periodic reports of changes in ownership of the Corporation's
securities. Based upon a review of such filings, all Section 16(a) filing
requirements applicable to such persons were compiled with during 1998, except
in the following instances. Mr. Holstead filed three Form 4s late, reporting
three open market purchases of Common Stock. Dr. Zolner filed one Form 4 late,
reporting one open market purchase of Common Stock. Thermo Electron filed one
Form 4 late, reporting two transactions associated with the grant to employees
of options to purchase Common Stock under its stock option program.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes compensation during the last two fiscal
years for services to the Corporation in all capacities awarded to, earned by or
paid to the Corporation's chief executive officer and its three other most
highly compensated executive officers. These executive officers are
collectively referred to herein as the "named executive officers." No other
executive officer of the Corporation met the definition of "highly compensated"
within the meaning of the Securities and Exchange Commission's executive
compensation disclosure rules.
The Corporation is required to appoint certain executive officers and full-
time employees of Thermo Electron as executive officers of the Corporation, in
accordance with the Thermo Electron Corporate Charter. The compensation for
these executive officers is determined and paid entirely by Thermo Electron. The
time and effort devoted by these individuals to the Corporation's affairs is
provided to the Corporation under the corporate services agreement between the
Corporation and Thermo Electron. See "Relationship with Affiliates."
Accordingly, the compensation for these individuals is not reported in the
following table.
6
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Summary Compensation Table
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<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Securities Underlying
Name and Fiscal --------------------- Options (No. of Shares All Other
Principal Position Year Salary Bonus and Company)(1) Compensation (2)
------------------ ---- ------ ----- --------------- ----------------
<S> <C> <C> <C> <C> <C>
William J. Zolner III (3) 1998 $160,000 $40,000 135,000(ONX) $7,200
President and Chief 7,200(TMO)
Executive Officer 7,500(MKA)
4,000(RGI)
2,000(TDX)
1,000(TISI)
15,000(THI)
2,000(TRIL)
7,500(VIZ)
2,000(TRCC)
1997 $150,000 $95,000 10,000(TMO) $7,200
- -------------------------------------------------------------------------------------------------------
Mark Whitman (3) 1998 $146,600 $62,100 16,333(ONX) $7,200
Vice President 1,400(TMO)
1997 $141,600 $40,160 -- $7,200
- -------------------------------------------------------------------------------------------------------
C. R. Duarte (3) 1998 $122,708 $49,000 13,000(ONX) $5,625
Vice President 1997 $112,791 $25,000 -- $5,344
- -------------------------------------------------------------------------------------------------------
B.C. Holstead (3) 1998 $120,375 $48,800 16,333(ONX) $6,941
Vice President 1997 $ 97,213 $30,000 -- $4,802
</TABLE>
- --------------------------------------------------------------------------------
(1) Options granted by the Corporation are designated in the table as "ONX."
In addition, the named executive officers also have been granted options to
purchase shares of the common stock of the following Thermo Electron
companies, during the last two fiscal years as part of Thermo Electron's
stock option program: Thermo Electron (designated in the table as TMO),
Metrika Systems Corporation (designated in the table as MKA), The Randers
Killam Group Inc. (designated in the table as RGI), Thermedics Detection
Inc. (designated in the table as TDX), Thermo Information Solutions Inc.
(designated in the table as TISI), Thermo Instrument (designated in the
table as THI), Thermo Trilogy Corporation (designated in the table as
TRIL), Thermo Vision Corporation (designated in the table as VIZ) and Trex
Communications Corporation (designated in the table as TRCC).
(2) Represents the amount of matching contributions made by the individual's
employer on behalf of the named executive officers participating in the
Thermo Electron 401(k) plan.
(3) Compensation amounts for the named executive officers in 1997 include
compensation received by each from Thermo Instrument prior to the
Corporation's inception in August 1997.
Stock Options Granted During Fiscal 1998
The following table sets forth information concerning individual grants of
stock options made during fiscal 1998 to the Corporation's named executive
officers. It has not been the Corporation's policy in the past to grant stock
appreciation rights, and no such rights were granted during fiscal 1998.
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Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Total Options Price Appreciation for
Number of Securities Granted to Exercise Option Term (2)
Underlying Options Employees in Price Per Expiration ---------------
Name Granted and Company(1) Fiscal Year Share Date 5% 10%
---- ---------------------- ----------- ----- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Zolner III 50,000 (ONX) 6.62% (3) $14.25 01/21/10 $567,000 $1,523,500
85,000 (ONX) 11.26% $ 8.94 09/25/03 $209,950 $ 464,100
7,200 (TMO) 0.22% (4) $16.20 09/23/03 $ 32,256 $ 71,208
7,500 (MKA) 2.64% (4) $15.86 03/10/05 $ 48,450 $ 112,875
4,000 (RGI) 0.75% (4) $ 4.00 01/21/05 $ 6,520 $ 15,160
2,000 (TDX) 0.22% (4) $ 9.56 01/21/05 $ 7,780 $ 18,140
1,000 (TISI) 1.67% (4) $10.00 01/21/08 $ 6,290 $ 15,940
15,000 (THI) 1.99% (4) $13.54 09/25/03 $ 56,100 $ 124,050
2,000 (TRIL) 1.11% (4) $ 8.25 01/21/08 $ 10,380 $ 26,300
7,500 (VIZ) 1.83% (4) $ 7.15 03/10/05 $ 21,825 $ 50,850
2,000 (TRCC) 0.16% (4) $ 4.00 01/21/08 $ 5,040 $ 12,740
- ----------------------------------------------------------------------------------------------------------------
Mark Whitman 13,333 (ONX) 1.77% (3) $14.25 01/21/10 $151,196 $ 406,257
3,000 (ONX) 0.40% $ 8.94 09/25/03 $ 7,410 $ 16,380
1,400 (TMO) 0.04% (4) $16.20 09/23/03 $ 6,272 $ 13,846
- ----------------------------------------------------------------------------------------------------------------
C. R. Duarte 10,000 (ONX) 1.32% (3) $14.25 01/21/10 $113,400 $ 304,700
3,000 (ONX) 0.40% $ 8.94 09/25/03 $ 7,410 $ 16,380
- ----------------------------------------------------------------------------------------------------------------
B. C. Holstead 13,333 (ONX) 1.77% $14.25 01/21/05 $ 77,331 $ 180,262
3,000 (ONX) 0.40% $ 8.94 09/25/03 $ 7,410 $ 16,380
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the options granted during the fiscal year are immediately
exercisable as of the end of the fiscal year, except options to purchase
shares of the common stock of Thermo Information Solutions Inc., Thermo
Trilogy Corporation and Trex Communications Corporation, which are not
exercisable until the earlier of (i) 90 days after the effective date of
the registration of that company's common stock under Section 12 of the
Exchange Act or (ii) nine years after the grant date. In all cases, the
shares acquired upon exercise are subject to repurchase by the granting
company at the exercise price if the optionee ceases to be employed by, or
serve as a director of, such company or any other Thermo Electron company.
The granting company may exercise its repurchase rights within six months
after the termination of the optionee's employment or cessation of
directorship, as the case may be. For publicly-traded companies, the
repurchase rights generally lapse ratably over a one- to ten-year period,
depending on the option term, which may vary from five to twelve years,
provided that the optionee continues to be employed by or serve as a
director of the granting company 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
company may permit the holders of options to exercise options and to
satisfy tax withholding obligations by surrendering shares equal in fair
market value to the exercise price or withholding obligation. Please see
footnote (1) on page 7 for the abbreviations used in this table.
(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 of the
granting company, the optionee's continued employment or service as a
director through the option period and the date on which the options are
exercised.
8
<PAGE>
(3) Options to purchase 50,000, 13,333 and 10,000 shares of Common Stock
granted to Dr. Zolner, Mr. Whitman and Mr. Duarte, respectively, are
subject to the same terms as described in footnote (1) above, except that
the repurchase rights are deemed to lapse 20% per year commencing on the
fifth anniversary of the grant date.
(4) These options were granted under stock option plans maintained by Thermo
Electron or a subsidiary other than the Corporation and, accordingly, are
reported as a percentage of total options granted to employees of Thermo
Electron and its subsidiaries.
Stock Options Exercised During Fiscal 1998
The following table reports certain information regarding stock option
exercises during fiscal 1998 and outstanding stock options held at the end of
fiscal 1998 by the Corporation's named executive officers. No stock appreciation
rights were exercised or were outstanding during fiscal 1998.
Aggregated Option Exercises in Fiscal 1998
and Fiscal 1998 Year-End Option Values
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of
Unexercised Unexercised
Shares Options at Fiscal In-the-Money
Acquired Year-End Options at Fiscal
on Value (Exercisable/ Year-End (Exercisable/
Name Company (1) Exercise Realized Unexercisable)(1) Unexercisable)
---- ----------- -------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
William J. Zolner III (ONX) -- -- 135,000/0(2) $ 0/--
(TMO) -- -- 35,575/0 $ 3,514/--
(MKA) -- -- 7,500/0 $ 0/--
(RGI) -- -- 4,000/0 $ 0/--
(TDX) -- -- 2,000/0 $ 0/--
(TBA) -- -- 2,000/0 $ 5,376/--
(TIS) -- -- 0/1,000 --/$0(3)
(THI) -- -- 76,718/0 $39,695/--
(TOC) -- -- 15,000/0 $ 0/--
(TMQ) -- -- 10,000/0 $ 3,130/--
(THS) -- -- 2,500/0 $ 3,438/--
(TRIL) -- -- 0/2,000 --/$0(3)
(VIZ) -- -- 7,500/0 $ 0/--
(TRCC) -- -- 0/2,000 --/$0(3)
- ------------------------------------------------------------------------------------------------------
Mark Whitman (ONX) -- -- 16,333/0(2) $ 0/--
(TMO) -- -- 1,400/0 $ 683/--
(THI) -- -- 28,750/0 $47,213/--
(TOC) -- -- 7,500/0 $ 0/--
(TMQ) -- -- 5,000/0 $ 1,565/--
(THS) -- -- 800/0 $ 1,100/--
- ------------------------------------------------------------------------------------------------------
C. R. Duarte (ONX) -- -- 13,000/0(2) $ 0/--
(THI) -- -- 10,000/0 $ 0/--
(TOC) -- -- 6,000/0 $ 0/--
(TMQ) -- -- 4,000/0 $ 1,252/--
- ------------------------------------------------------------------------------------------------------
B. C. Holstead (ONX) -- -- 16,333/0 $ 0/--
(THI) -- -- 7,265/0 $ 8,851/--
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
(1) All of the options reported outstanding at the end of the fiscal year were
immediately exercisable as of the end of the fiscal year, except options to
purchase shares of the common stock of Thermo Information Solutions Inc.,
Thermo Trilogy Corporation and Trex Communications Corporation, which are
not exercisable until the earlier of (i) 90 days after the effective date
of the registration of that company's common stock under Section 12 of the
Exchange Act or (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 company at the exercise price if the
optionee ceases to be employed by, or serve as a director of, such
corporation or any other Thermo Electron company. The granting company may
exercise its repurchase rights within six months after the termination of
the optionee's employment or cessation of directorship, as the case may be.
For publicly-traded companies, the repurchase rights generally lapse
ratably over a one- to ten-year period, depending on the option term, which
may vary from five to twelve years, provided that the optionee continues to
be employed by or serve as a director of the granting company 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. The granting company may permit the holders
of options to exercise options and to satisfy tax withholding obligations
by surrendering shares equal in fair market value to the exercise price or
withholding obligation. Please see footnote (1) on page 7 for the
abbreviations used in this table.
(2) Options to purchase 50,000, 13,333 and 10,000 shares of the Common Stock
granted to Dr. Zolner, Mr. Whitman and Mr. Duarte, respectively, are
subject to the same terms as described in footnote (1) above, except that
the repurchase rights are deemed to lapse 20% per year commencing on the
fifth anniversary of the grant date.
(3) No public market existed for the shares underlying these options as of
January 2, 1999. Accordingly, no value in excess of the exercise price has
been attributed to these options.
Executive Retention Agreements
Thermo Electron has entered into agreements with certain executive officers
and key employees of Thermo Electron and its subsidiaries that provide severance
benefits if there is a change in control of Thermo Electron and their employment
is terminated by Thermo Electron "without cause" or by the individual for "good
reason," as those terms are defined therein, within 18 months thereafter. For
purposes of these agreements, a change in control exists upon (i) the
acquisition by any person of 40% or more of the outstanding common stock or
voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to include a majority of directors who are "continuing
directors", which term is defined to include directors who were members of
Thermo Electron's board on the date of the agreement or who subsequent to the
date of the agreement were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election;
(iii) the consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving Thermo Electron or the
sale or other disposition of all or substantially all of the assets of Thermo
Electron unless immediately after such transaction (a) all holders of Thermo
Electron common stock immediately prior to such transaction own more than 60% of
the outstanding voting securities of the resulting or acquiring corporation in
substantially the same proportions as their ownership immediately prior to such
transaction and (b) no person after the transaction owns 40% or more of the
outstanding voting securities of the resulting or acquiring corporation; or
(iv) approval by stockholders of a complete liquidation or dissolution of Thermo
Electron.
In 1998, Thermo Electron authorized an executive retention agreement with
Dr. Zolner. This agreement provides that in the event Dr. Zolner's employment
is terminated under the circumstances described above, he would be entitled to a
lump sum payment equal to the sum of (a) one times his highest annual base
salary in any 12 month period during the prior five-year period, plus (b) one
times his highest annual bonus in any 12 month period during the prior five-year
period. In addition, Dr. Zolner would be provided benefits for a period of one
year after such termination substantially equivalent to the benefits package he
would have been otherwise entitled to receive if he was not terminated.
Further, all repurchase rights of Thermo Electron and its subsidiaries shall
lapse in their entirety with respect to all options that Dr. Zolner holds in
Thermo Electron and its subsidiaries, including the Corporation, as of the date
of the change in control. Finally, Dr. Zolner would be entitled to a cash
payment equal to $15,000, to be used toward outplacement services.
10
<PAGE>
Assuming that the severance benefits would have been payable as of
January 1, 1999, the lump sum salary and bonus payment under such agreement to
Dr. Zolner would have been approximately $265,000. In the event that payments
under these agreements are deemed to be so called "excess parachute payments"
under the applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), Dr. Zolner would be entitled to receive a gross-
up payment equal to the amount of any excise tax payable by him with respect to
such payment, plus the amount of all other additional taxes imposed on him
attributable to the receipt of such gross-up payment.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
Decisions on compensation for the Corporation's executive officers are made
by the human resources committee of the board of directors (the "Committee").
The Committee follows guidelines established by the human resources committee of
the board of directors of its ultimate parent company, Thermo Electron. The
compensation policies followed by the Committee are designed to reward and
motivate executives in achieving long-term value for Stockholders and other
business objectives, to attract and retain dedicated, talented individuals to
accomplish the Corporation's objectives, to recognize individual contributions
as well as the performance of the Corporation and its subsidiaries, and to
encourage stock ownership by executives through stock-based compensation and
stock retention programs in order to link executive and Stockholder interests.
The Committee evaluates the competitiveness of its compensation practices
through the use of market surveys and competitive analyses prepared by its
outside compensation consultants and by participating in annual compensation
surveys, primarily "Project 777", an executive compensation survey prepared by
Management Compensation Services, a division of Hewitt Associates. The majority
of firms represented in the Project 777 survey are included in the Standard &
Poor's 500 Index but do not necessarily correspond to the companies included in
the Corporation's peer group index, the Dow Jones Total Return Index for the
Diversified Technology Industry Group. Internal fairness of compensation within
the organization is also an important element of the Committee's compensation
philosophy. Compensation of executives is evaluated by comparing it to the
compensation of other executives within the Thermo Electron organization who
have responsibility to manage businesses of comparable size and complexity.
The compensation program of the Corporation consists of annual cash
compensation and long-term incentive compensation. Annual cash compensation is
composed of base salary and performance-based incentive compensation, which is
reviewed and determined annually. Long-term incentive compensation is in the
form of stock-based compensation such as stock options and restricted stock
awards. The process for determining the components of executive compensation
for the executive officers is described below.
Components of Executive Compensation
Annual Cash Compensation
Annual cash compensation consists of base salary and performance-based
incentive compensation. The cash incentive compensation paid to an executive
varies from year to year based on the performance of the Corporation and the
executive.
The Committee assesses the competitiveness of annual cash compensation by
establishing for each executive position at the beginning of each fiscal year a
salary and reference incentive compensation for the position that together are
intended to approximate the mid-point of competitive total annual cash
compensation for organizations that are of comparable size and complexity as the
Corporation.
Base Salary. Generally, executive salaries are adjusted gradually over
time to reflect competitive salary levels or other considerations, such as
geographic or regional market data, industry trends or internal fairness within
the Corporation. The Committee may also adjust individual salaries to reflect
the assumption of increased responsibilities. The salary increases in fiscal
1998 for the named executive officers generally reflect this practice of gradual
adjustment and moderation.
11
<PAGE>
Performance-based Incentive Compensation. The amount of incentive
compensation actually earned by an executive from year to year varies with the
performance of the Corporation and the executive. The Committee evaluates
performance (1) by formula using financial measures of profitability and
contribution to Stockholder value and (2) by subjectively evaluating the
executive's contribution to the achievement of the Corporation's long-term
objectives. In fiscal 1998, the formula used by the Committee measured return
on net assets, return on sales, earnings improvement over a three-year period
for the Corporation and, to a lesser extent, the Corporation's parent companies,
and three-year growth in earnings per share for the same companies. The
financial measures are not financial targets that are met, not met or exceeded,
but assess the financial performance relative to the financial performance of
comparable companies and are designed to penalize below-average performance and
reward above-average performance. The relative weighting of the financial
measures and subjective evaluation varies depending on the executive's role and
responsibilities within the organization.
The incentive compensation awarded to the named executive officers (other
than the chief executive officer, which is discussed below under the caption
"1998 CEO Compensation") reflected the financial performance in fiscal 1998 of
businesses of the Corporation for which the executive was responsible.
Long-term Incentive Compensation
The primary goal of the Corporation and its parent companies is to excel in
the creation of long-term value for the Stockholders. The principal incentive
tool used to achieve this goal is the periodic award to key employees of stock-
based compensation in shares of Common Stock and the common stock of other
Thermo Electron companies.
The Committee and management believe that awards of stock-based
compensation in both the Corporation and other companies within the Thermo
Electron group of companies accomplish many objectives. The grant of stock-based
compensation to key employees encourages equity ownership in the Corporation,
and closely aligns management's interests to the interests of all the
Stockholders. The emphasis on stock-based compensation also results in
management's compensation being closely linked to stock performance. In
addition, because the employee's rights in stock-based compensation vest over
periods of varying durations and are subject to forfeiture if the employee
leaves the Corporation prematurely, stock-based compensation is an incentive for
key employees to remain with the Corporation long-term. The Committee believes
stock-based compensation awards in its parent companies, Thermo Electron and
Thermo Instrument, and the other majority-owned subsidiaries of Thermo Electron
and Thermo Instrument, are an important tool in providing incentives for
performance within the entire organization.
In determining awards, the Committee considers for each executive officer
the annual value of stock-based compensation in the Corporation and other
companies within the Thermo Electron organization that vest in the next year and
compares the individual's total compensation using this value to competitive
data. The Committee uses a modified Black-Scholes option pricing model to
determine the value of an award. In addition, the Committee considers the
aggregate amount of outstanding awards granted to all employees to monitor the
number of outstanding awards under the Corporation's stock-based compensation
programs. In determining the appropriate number of outstanding awards, the
Committee considers such factors as the size of the company, its stage of
development, and its growth strategy, as well as the aggregate awards and
compensation practices of comparable companies.
The Committee periodically awards stock-based compensation in the form of
stock options or restricted stock based on an assessment of the total
compensation of the executive, the actual and anticipated contributions of the
executive (which includes a subjective assessment by the Committee of the
executive's future potential within the organization), as well as the value of
previously awarded stock-based compensation, as described above. Such stock-
based compensation awards were made to the named executive officers in 1998.
Stock Ownership Policies
The Corporation's compensation program is also designed to encourage
executives to own shares of Common Stock. The Committee believes that
encouraging executives to own and retain stock acquired through its stock-based
compensation program or otherwise provides additional incentive for executive
officers to follow strategies designed to maximize long-term value to
Stockholders.
12
<PAGE>
The Committee has a policy requiring its executive officers to hold shares
of the Corporation's Common Stock equal to one-half of their net option
exercises for a period of five years. The net option exercise is determined by
calculating the number of shares acquired upon exercise of a stock option, after
deducting the number of shares that could have been traded to exercise the
option and the number of shares that could have been surrendered to satisfy tax
withholding obligations attributable to the exercise of the option.
Policy on Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the tax deduction
available to public companies for annual compensation paid to executive officers
in excess of $1 million unless the compensation qualifies as "performance-based"
or is otherwise exempt under Section 162(m). The Committee considers the
potential effect of Section 162(m) in designing its compensation program, but
reserves the right to use its independent judgment to approve nondeductible
compensation, while taking into account the financial effects such action may
have on the Corporation. From time to time, the Committee reexamines the
Corporation's compensation practices and the potential effect of Section 162(m).
1998 CEO Compensation
The compensation of Dr. Zolner is established using the same criteria as
described above for all executive officers. The Committee approved a salary
increase for Dr. Zolner for fiscal 1998 that reflected its practice of gradual
adjustment, taking into account the factors described above under "Components of
Executive Compensation - Annual Cash Compensation - Base Salary". In
determining Dr. Zolner's performance-based incentive compensation for fiscal
1998, the Committee considered the financial performance of the Corporation and,
to a lesser extent, its parent company, Thermo Instrument, using the measures
described above for all executive officers under "Components of Executive
Compensation - Annual Cash Compensation - Performance-based Incentive
Compensation." The Committee's subjective evaluation of Dr. Zolner's
performance considered, among other things, his effectiveness in furthering the
Corporation's business and financial objectives.
Awards to Dr. Zolner of stock-based compensation in Common Stock are
reviewed and determined periodically by the Committee using the criteria
described above under the caption "Components of Executive Compensation--
Long-term Incentive Compensation." Awards of stock options to purchase 135,000
shares of Common Stock were made by the Committee to Dr. Zolner in fiscal 1998
based on the Committee's assessment of Dr. Zolner's total compensation. The
awards to Dr. Zolner in fiscal 1998 of options to purchase 7,200 shares of the
common stock of Thermo Electron, 15,000 shares of the common stock of Thermo
Instrument, 7,500 shares of the common stock of Metrika Systems Corporation and
7,500 shares of the common stock of Thermo Vision Corporation were made by the
human resources committees of the board of directors of the granting companies
using a methodology similar to that described for the Corporation.
Due to Dr. Zolner's position as a chief executive officer of a majority-
owned subsidiary of Thermo Electron, from time to time he may receive awards to
purchase shares of the common stock of majority-owned subsidiaries of Thermo
Electron as part of Thermo Electron's stock option program. Awards of stock
options to purchase 4,000 shares of common stock of The Randers Killam Group
Inc., 2,000 shares of common stock of Thermedics Detection Inc., 1,000 shares
of common stock of Thermo Information Solutions Inc., 2,000 shares of common
stock of Thermo Trilogy Corporation and 2,000 shares of common stock of Trex
Communications Corporation, were made to Dr. Zolner under this program in
fiscal 1998.
Mr. Frank Jungers (Chairman)
Mr. David J. Beaubien
COMPARATIVE PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Corporation
include in this proxy statement a line-graph presentation comparing cumulative,
five-year shareholder returns for the Corporation's Common Stock with a broad-
based market index and either a nationally recognized industry standard or an
index of peer companies selected by the Corporation. The Corporation's Common
Stock has been publicly traded only since March 25, 1998 and, as a result, the
following graph commences as of such date. The Corporation has compared its
13
<PAGE>
performance with the American Stock Exchange Market Value Index and the Dow
Jones Total Return Index for the Diversified Technology Industry Group, as of
the last trading day of the Corporation's fiscal year.
Comparison of Total Return Among ONIX Systems Inc.,
the American Stock Exchange Market Value Index and the
Dow Jones Total Return Index for the Diversified Technology Industry Group
From March 25, 1998 to December 31, 1998
[GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C>
03/25/98 12/31/98
---------------------------------------
ONX 100 44
---------------------------------------
AMEX 100 94
---------------------------------------
DJDTC 100 89
---------------------------------------
</TABLE>
The total return for the Corporation's Common Stock (ONX), the American
Stock Exchange Market Value Index (AMEX) and the Dow Jones Total Return Index
for the Diversified Technology Industry Group (DJDTC) assumes the reinvestment
of dividends, although dividends have not been declared on the Corporation's
Common Stock. The American Stock Exchange Market Value Index tracks the
aggregate performance of equity securities of companies listed on the American
Stock Exchange. The Corporation's Common Stock is traded on the American Stock
Exchange under the ticker symbol "ONX."
RELATIONSHIP WITH AFFILIATES
Thermo Electron has, from time to time, caused certain subsidiaries to sell
minority interests to investors, resulting in several majority-owned private and
publicly-held subsidiaries. Thermo Instrument has created the Corporation as a
majority-owned publicly-held subsidiary. The Corporation and such other
majority-owned Thermo Electron subsidiaries are hereinafter referred to as the
"Thermo Subsidiaries."
Thermo Electron and each of the Thermo Subsidiaries recognize that the
benefits and support that derive from their affiliation are essential elements
of their individual performance. Accordingly, Thermo Electron and each of the
Thermo Subsidiaries, including the Corporation, have adopted the Thermo Electron
Corporate Charter (the "Charter") to define the relationships and delineate the
nature of such cooperation among themselves. The purpose of the Charter is to
ensure that (1) all of the companies and their stockholders are treated
consistently and fairly, (2) the scope and nature of the cooperation among the
companies, and each company's responsibilities, are adequately defined, (3) each
company has access to the combined resources and financial, managerial and
technological strengths of the others, and (4) Thermo Electron and the Thermo
Subsidiaries, in the aggregate, are able to obtain the most favorable terms from
outside parties.
14
<PAGE>
To achieve these ends, the Charter identifies the general principles to be
followed by the companies, addresses the role and responsibilities of the
management of each company, provides for the sharing of group resources by the
companies and provides for centralized administrative, banking and credit
services to be performed by Thermo Electron. The services provided by Thermo
Electron include collecting and managing cash generated by members, coordinating
the access of Thermo Electron and the Thermo Subsidiaries (the "Thermo Group")
to external financing sources, ensuring compliance with external financial
covenants and internal financial policies, assisting in the formulation of long-
range planning and providing other banking and credit services. Pursuant to the
Charter, Thermo Electron may also provide guarantees of debt or other
obligations of the Thermo Subsidiaries or may obtain external financing at the
parent level for the benefit of the Thermo Subsidiaries. In certain instances,
the Thermo Subsidiaries may provide credit support to, or on behalf of, the
consolidated entity or may obtain financing directly from external financing
sources. Under the Charter, Thermo Electron is responsible for determining that
the Thermo Group remains in compliance with all covenants imposed by external
financing sources, including covenants related to borrowings of Thermo Electron
or other members of the Thermo Group, and for apportioning such constraints
within the Thermo Group. In addition, Thermo Electron establishes certain
internal policies and procedures applicable to members of the Thermo Group. The
cost of the services provided by Thermo Electron to the Thermo Subsidiaries is
covered under existing corporate services agreements between Thermo Electron and
the Thermo Subsidiaries.
The Charter currently provides that it shall continue in effect so long as
Thermo Electron and at least one Thermo Subsidiary participate. The Charter may
be amended at any time by agreement of the participants. Any Thermo Subsidiary,
including the Corporation, can withdraw from participation in the Charter upon
30 days' prior notice. In addition, Thermo Electron may terminate a subsidiary's
participation in the Charter in the event the subsidiary ceases to be controlled
by Thermo Electron or ceases to comply with the Charter or the policies and
procedures applicable to the Thermo Group. A withdrawal from the Charter
automatically terminates the corporate services agreement and tax allocation
agreement (if any) in effect between the withdrawing company and Thermo
Electron. The withdrawal from participation does not terminate outstanding
commitments to third parties made by the withdrawing company, or by Thermo
Electron or other members of the Thermo Group, prior to the withdrawal.
In addition, a withdrawing company is required to continue to comply with all
policies and procedures applicable to the Thermo Group and to provide certain
administrative functions mandated by Thermo Electron so long as the withdrawing
company is controlled by or affiliated with Thermo Electron.
As provided in the Charter, the Corporation and Thermo Electron have
entered into a Corporate Services Agreement (the "Services Agreement") under
which Thermo Electron's corporate staff provides certain administrative
services, including general legal advice and services, risk management, employee
benefit administration, tax advice and preparation of tax returns, centralized
cash management and certain financial and other services to the Corporation.
The Corporation was assessed an annual fee equal to 0.8% of the Corporation's
revenues for these services in fiscal 1998. The annual fee will remain at 0.8%
of the Corporation's total revenues for fiscal 1999. The fee is reviewed
annually and may be changed by mutual agreement of the Corporation and Thermo
Electron. During fiscal 1998, Thermo Electron assessed the Corporation
$1,229,000 in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms of the
Services Agreement are fair to the Corporation. In 1998, the Corporation paid
Thermo Electron an additional $140,000 for certain administrative services
required by the Corporation that were not covered by the Services Agreement.
The Services Agreement automatically renews for successive one-year terms,
unless canceled by the Corporation upon 30 days' prior notice. In addition, the
Services Agreement terminates automatically in the event the Corporation ceases
to be a member of the Thermo Group or ceases to be a participant in the Charter.
In the event of a termination of the Services Agreement, the Corporation will be
required to pay a termination fee equal to the fee that was paid by the
Corporation for services under the Services Agreement for the nine-month period
prior to termination. Following termination, Thermo Electron may provide certain
administrative services on an as-requested basis by the Corporation or as
required in order to meet the Corporation's obligations under Thermo Electron's
policies and procedures. Thermo Electron will charge the Corporation a fee equal
to the market rate for comparable services if such services are provided to the
Corporation following termination.
The Corporation has entered into a Tax Allocation Agreement with Thermo
Electron that outlines the terms under which the Corporation will be included in
Thermo Electron's consolidated Federal and state income tax returns. Under
current law, the Corporation will be included in such tax returns so long as
Thermo Electron owns at least 80% of the outstanding common stock of Thermo
Instrument and Thermo Instrument and Thermo Electron
15
<PAGE>
collectively own at least 80% of the outstanding Common Stock of the
Corporation. In years in which the Corporation has taxable income, it will pay
to Thermo Electron amounts comparable to the taxes the Corporation would have
paid if it had filed its own separate company tax returns. If Thermo
Instrument's and Thermo Electron's equity ownership of the Corporation were to
drop below 80%, the Corporation would file its own tax returns. In 1999, because
Thermo Instrument's and Thermo Electron's combined equity ownership of the
Corporation now exceeds 80%, the Corporation will be included in Thermo
Electron's consolidated tax returns and will be assessed for amounts due to
Thermo Electron in accordance with the Tax Allocation Agreement.
From time to time, the Corporation may transact business with other
companies in the Thermo Group.
The Corporation leases on a month-to-month basis approximately 147,000
square fee of office and manufacturing space from Thermo Instrument in Kingwood,
Texas. In 1998, the Corporation paid Thermo Instrument approximately $202,000
for rent and its pro rata share of certain occupancy costs, including utilities
and taxes, under this arrangement.
In January 1998, the Corporation acquired certain businesses comprising the
Peek Measurement Business of Peek plc from Thermo Power Corporation ("Thermo
Power") for approximately $19,100,000, 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 of Peek
plc in November 1997, 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 incurred by Thermo Power as a result of the transfer of the Peek Measurement
Business to the Corporation. In addition, the Corporation 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.
The methodology used to determine the purchase price was approved by the boards
of directors of the Corporation and Thermo Power.
In January 1998, the Corporation borrowed $12,000,000 from
Thermo Instrument to partially fund the Corporation's acquisition of the Peek
Measurement Business from Thermo Power. This loan, which had an interest rate
equal to the 90-day Commercial Paper Composite Rate plus 25 basis points, set at
the beginning of each quarter, was repaid in April 1998.
The Corporation leases approximately 24,000 square feet of office and
manufacturing space in Winchester, England on a month-to-month basis from
Thermo Power. The Corporation pays Thermo Power rent in an amount that is
approximately equal to the pro rata share of Thermo Power's occupancy costs,
including utilities and taxes, which payments in 1998 were approximately
$220,000.
The Corporation sells products in the ordinary course of business to other
subsidiaries of Thermo Electron. Sales of such products to affiliated companies
totaled approximately $1,858,000 in 1998.
The Corporation, along with certain other Thermo Subsidiaries, participates
in a notional pool arrangement with Barclays Bank, which includes a $71,017,000
credit facility. The Corporation has access to $3,007,000 under this credit
facility. Only U.K.-based Thermo Subsidiaries participate in this arrangement.
Under this arrangement the Bank notionally combines the positive and negative
cash balances held by the participants to calculate the net interest
yield/expense for the group. The benefit derived from this arrangement is then
allocated based on balances attributable to the respective participants.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. As of January 2, 1999, the Corporation had a negative cash balance
of approximately $1,017,000, based on an exchange rate of $1.6708/GBP 1.00 as of
January 2, 1999. For 1998, the average annual interest rate earned on GBP
deposits by participants in this credit arrangement was approximately 7.7225%
and the average annual interest rate paid on overdrafts was approximately
7.485%.
Until mid-December 1998, the Corporation, along with certain other Thermo
Subsidiaries, participated in a notional pool arrangement with ABN AMRO, which
included a $29,719,000 credit facility. Only European-based Thermo Subsidiaries
participated in this arrangement. Under this arrangement the Bank notionally
combined the positive and negative cash balances held by the participants to
calculate the net interest yield/expense for the group. The benefit derived
from this arrangement was then allocated based on balances attributable to the
respective
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participants. Thermo Electron guaranteed all of the obligations of each
participant in this arrangement. For 1998, the average annual interest rate
earned on NLG deposits by participants in this credit arrangement was
approximately 5.00% and the average annual interest rate paid on overdrafts was
approximately 5.00%.
As of mid-December 1998, the Corporation, along with certain other Thermo
Subsidiaries, has entered into a modification of the above-described arrangement
with ABN AMRO. Only European-based Thermo Subsidiaries participate in this
arrangement. The new arrangement with ABN AMRO consists of a zero balance
arrangement, which includes a $29,719,000 credit facility. Funds borrowed by
the Corporation under this arrangement pay interest at a rate set by Thermo
Finance B.V., a wholly-owned subsidiary of Thermo Electron, at the beginning of
each month, based on Netherlands market rates. Funds invested by the
Corporation under the arrangement earn a rate set by Thermo Finance B.V. at the
beginning of each month, based on Netherlands market rates, Such invested funds
are collateralized with investments principally consisting of corporate notes,
U.S. government-agency securities, commercial paper, money market funds, and
other marketable securities, in the amount of at least 103% of such obligation.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. As of January 2, 1999, the Corporation had a positive cash balance
of approximately $289,000, based on an exchange rate of $0.5307/NLG 1.00. As of
January 2, 1999, the average annual interest rate earned on NLG deposits by
participants in this credit arrangement was approximately 3.63% and the average
annual interest rate paid on overdrafts was approximately 4.50%.
As of January 2, 1999, an additional $30,454,000 of the Corporation's cash
equivalents were invested in a repurchase agreement with Thermo Electron. Under
this agreement, the Corporation in effect lends excess cash to Thermo Electron,
which Thermo Electron collateralizes with investments principally consisting of
corporate notes, U.S. government agency securities, money market funds,
commercial paper and other marketable securities, in the amount of at least 103%
of such obligation. Thermo Electron maintains possession of the underlying
securities and has the right of substitution at its discretion. The
Corporation's funds subject to the repurchase agreement will be readily
convertible on demand into cash by the Corporation and have an original maturity
of three months or less. 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 2, 1999, the Corporation owed Thermo Electron and its other
subsidiaries an aggregate of $1,281,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services
and for miscellaneous items, net of amounts owed to the Corporation by Thermo
Electron and its other subsidiaries for products, services and for miscellaneous
items. The largest amount of net indebtedness owed by the Corporation to Thermo
Electron and its other subsidiaries since January 3, 1998, was $7,508,000,
excluding the $12,000,000 loan from Thermo Instrument described above. These
amounts do not bear interest and are expected to be paid in the normal course of
business.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Arthur Andersen LLP as independent
public accountants for fiscal 1999. Arthur Andersen LLP has acted as independent
public accountants for the Corporation since its inception in 1997.
Representatives of that firm are expected to be present at the meeting, will
have the opportunity to make a statement if they desire to do so and will be
available to respond to questions.
OTHER ACTION
Management is not aware at this time of any other matters that will be
presented for action at the meeting. Should any such matters be presented, the
proxies grant power to the proxy holders to vote shares represented by the
proxies in the discretion of such proxy holders.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be included in the proxy statement
and form of proxy relating to the 2000 Annual Meeting of the Stockholders of the
Corporation and to be presented at such meeting must be received by the
Corporation for inclusion in the proxy statement and form of proxy no later than
December 16, 1999. Notices of Stockholder proposals submitted outside the
processes of Rule 14a-8 of the Exchange Act (relating to proposals
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<PAGE>
to be presented at the meeting but not included in the Corporation's proxy
statement and form of proxy), will be considered untimely, and thus the
Corporation's proxy may confer discretionary voting authority on the persons
named in the proxy with regard to such proposals, if received after March 5,
2000.
SOLICITATION STATEMENT
The cost of the solicitation of proxies will be borne by the Corporation.
Solicitation will be made primarily by mail, but regular employees of the
Corporation may solicit proxies personally or by telephone, by facsimile
transmission or telegram. Brokers, nominees, custodians and fiduciaries are
requested to forward solicitation materials to obtain voting instructions from
beneficial owners of stock registered in their names, and the Corporation will
reimburse such parties for their reasonable charges and expenses in connection
therewith.
Kingwood, Texas
April 15, 1999
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FORM OF PROXY
ONIX SYSTEMS INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Earl R. Lewis, Theo Melas-Kyriazi and
William J. Zolner III, or any one of them in the absence of the others, as
attorneys and proxies of the undersigned, with full power of substitution, for
and in the name of the undersigned, to represent the undersigned at the Annual
Meeting of the Stockholders of ONIX Systems Inc., a Delaware corporation (the
"Company"), to be held on Thursday, May 27, 1999 at 11:00 a.m. at The Westin
Hotel, 70 Third Avenue, Waltham, Massachusetts, and at any adjournment or
postponement thereof, and to vote all shares of common stock of the Company
standing in the name of the undersigned on March 30, 1999, with all of the
powers the undersigned would possess if personally present at such meeting:
(IMPORTANT - TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
<PAGE>
Please mark your
[ X ] votes as in this
example.
1. ELECTION OF DIRECTORS OF THE COMPANY (see reverse).
FOR [ ] WITHHELD [ ]
______________________________________
FOR all nominees listed at right, except authority to vote withheld for the
following nominees (if any)
Nominees: David J. Beaubien, Frank Jungers, Earl R. Lewis, Arvin H. Smith and
William J. Zolner III.
2. In their discretion on such other matters as may properly come before the
Meeting.
The shares represented by this Proxy will be voted "FOR" the proposals set forth
above if no instruction to the contrary is indicated or if no instruction is
given.
Copies of the Notice of Meeting and of the Proxy Statement have been received
by the undersigned.
SIGNATURE(S) DATE
--------------------------------------- -----------------
Note: This proxy should be dated, signed by the shareholder(s) exactly as his
or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.
